Palo Alto City Council
June 19, 2023

AMENDMENT NO. TWO TO CONTRACT NO. S20178065

BETWEEN THE CITY OF PALO ALTO AND

MICHAEL GENNACO DBA OIR GROUP
This Amendment No. 2 (this “Amendment”) to Contract No. S20178065 (the “Contract” as defined below) is entered into as of January 1, 2023, by and between the CITY OF PALO ALTO, a California chartered municipal corporation (“CITY”), and MICHAEL GENNACO DBA OIR GROUP, a sole proprietor, located at 7142 Trask Avenue, Playa Del Rey, CA, 90293 (“CONSULTANT”). CITY and CONSULTANT are referred to collectively as the “Parties” in this Amendment.

R E C I T A L S
A. The Contract (as defined below) was entered into by and between the Parties hereto for the provision professional services, as detailed therein.

B. The Parties now wish to amend the Contract in order to increase compensation by One Hundred Ten Thousand Dollars ($110,000) from One Hundred Seven Thousand Five Hundred Dollars($107,500) to a new not to exceed amount of Two Hundred SeventeenThousand Five Hundred Dollars ($217,500); extend the term for two (2) additional years, from January 1, 2023 through January 1, 2025; and correct a clerical omission regarding reimbursable expenses.

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

SECTION 1. Definitions. The following definitions shall apply to this Amendment:
a. Contract. The term “Contract” shall mean Contract No. C20178065 between CONSULTANT and CITY, dated December 16, 2019, as amended by:

Amendment No. 1, dated July 20, 2021
b. Other Terms. Capitalized terms used and not defined in this Amendment shall have the meanings assigned to such terms in the Contract.

SECTION 2. Section 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 January 1, 2025, unless terminated earlier pursuant to Section 19 of this Agreement.” SECTION 3. Section 4 “NOT TO EXCEED COMPENSATION” of the Contract is hereby amended to read as follows:

DocuSign Envelope ID: C037561D-DA65-4F83-913E-66310DBEA859 Item 19
Attachment A -
Amendment No. 2 with
OIR Group for IPA
Services
Item 19: Staff Report Pg. 4 Packet Pg. 268 of 911
Vers.: Aug. 5, 2019

The compensation to be paid to CONSULTANT for performance of the Services described in Exhibit “A” (also referred to herein as the “Basic Services”), and reimbursable expenses (if specified in Exhibit “C”), (“Basic Services”), and reimbursable expenses, shall not exceed One Hundred Ninety-Two Thousand Five Hundred Dollars ($192,500). In addition to the not-to-exceed compensation specified above, CITY has set aside the not-to-exceed compensation amount of Twenty Thousand Dollars ($20,000) for the performance of Additional Services. CONSULTANT agreesto complete all Basic Services, including specified reimbursable expenses,within this amount. In the event Additional Services(defined below) are authorized,the total compensation for Basic Services, Additional Services and specified reimbursable expenses shall not exceed TwoHundredTwelve ThousandFive HundredDollars ($212,500). The applicable rate schedule is set out at Exhibit “C-1”, entitled “SCHEDULE OF RATES.” Any work performed or expenses incurred for which payment would result in a total exceeding the maximum amounts of compensation set forth herein shall be at no cost to the CITY.

Additional Services, if any,shallbeauthorizedin accordancewithandsubjectto the provisions of Exhibit “C”. CONSULTANT shall not receive any compensation for Additional Services performed without the prior written authorization of CITY. Additional Services shall mean anywork that isdetermined byCITY tobenecessary for the proper completion of the Project, but which is not included within the Scope of Services described at Exhibit “A”.

SECTION 4. The following exhibit(s) to the Contract is/are hereby amended or added, as indicated below, to read as set forth in the attachment(s) to this Amendment, which is/are hereby incorporated in full into this Amendment and into the Contract by this reference:
a. Exhibit “B” entitled “SCHEDULE OF PERFORMANCE”, AMENDED, REPLACES PREVIOUS.
b. Exhibit “C” entitled “COMPENSATION”, AMENDED, REPLACES PREVIOUS.

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 Recitals. The recitals set forth above are terms of this Amendment and are fully incorporated herein by this reference. (SIGNATURE BLOCK FOLLOWS ON THE NEXT PAGE.)
DocuSign Envelope ID: C037561D-DA65-4F83-913E-66310DBEA859 Item 19
Attachment A -
Amendment No. 2 with
OIR Group for IPA
Services
Item 19: Staff Report Pg. 5 Packet Pg. 269 of 911
Vers.: Aug. 5, 2019

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

MICHAEL GENNACO DBA OIR GROUP
By:______________________________
Name:___________________________
Title:____________________________
Attachments:

EXHIBIT “B”: SCHEDULE OF PERFORMANCE (AMENDED, REPLACES PREVIOUS) EXHIBIT “C”: COMPENSATION (AMENDED, REPLACES PREVIOUS)
DocuSign Envelope ID: C037561D-DA65-4F83-913E-66310DBEA859 Michael Gennaco
Principal, OIR Group
Item 19
Attachment A -
Amendment No. 2 with
OIR Group for IPA
Services
Item 19: Staff Report Pg. 6 Packet Pg. 270 of 911
Vers.: Aug. 5, 2019

EXHIBIT “B”
SCHEDULE of PERFORMANCE (AMENDED, REPLACES PREVIOUS)
Consultant shall complete reports for calendar years 2020, 2021, 2022, 2023 and 2024.

Beginning in calendar year 2023, the following additional specific schedule shall apply:

In calendar year 2023, CONSULTANT shall complete two reports, for publication in approximately February/March and August 2023, containing all matters completed since the last published report.

In calendar year 2024, CONSULTANT shall complete two reports, for publication in approximately February/March and August 2024, containing all matters completed since the last published report.

DocuSign Envelope ID: C037561D-DA65-4F83-913E-66310DBEA859 Item 19
Attachment A -
Amendment No. 2 with
OIR Group for IPA
Services
Item 19: Staff Report Pg. 7 Packet Pg. 271 of 911
Vers.: Aug. 5, 2019

EXHIBIT “C”

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

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

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

Reimbursable expenses, if any are specified as reimbursable under this section, will be reimbursed at actual cost. The expenses (by type, e.g. travel) for which CONSULTANT will be reimbursed up to the not-to-exceed amount of: Fifteen Thousand Dollars ($15,000).

A. Travel from CONSULTANT’S office to Palo Alto City Hall, including transportation and meals, if specified as reimbursable, will be reimbursed at actual cost subject to the City of Palo Alto’s policy for reimbursement of travel and meal expenses.

All requests for reimbursement of expenses, if any are specified as reimbursable under this section, shall be accompanied by appropriate backup documentation and information.

ADDITIONAL SERVICES
The CONSULTANT shall provide additional services only by advanced, written authorization from the CITY. The CONSULTANT, at the CITY’s project manager’s request, shall submit a detailed written proposal including a description of the scope of services, schedule, level of effort, and CONSULTANT’s proposed maximum compensation, including reimbursable expenses, for such services based on the rates set forth in Exhibit C-1. The additional services scope, DocuSign Envelope ID: C037561D-DA65-4F83-913E-66310DBEA859 Item 19
Attachment A -
Amendment No. 2 with
OIR Group for IPA
Services
Item 19: Staff Report Pg. 8 Packet Pg. 272 of 911
Vers.: Aug. 5, 2019

schedule and maximum compensation shall be negotiated and agreed to in writing by the CITY’s Project Manager and CONSULTANT prior to commencement of the services. Payment for additional services is subject to all requirements and restrictions in this Agreement.

SCHEDULE OF EXPENDITURES
For the convenience of the Parties, the following identifies the historic and expected annual expenditures by type and amount under the Agreement, including Amendments One and Two.

All dates refer to calendar years:
2020
• Basic services compensated at rate of $25,000, resulting in $25,000 in compensation paid.
2021 (Amendment One effective approximately July 1, 2021) • January 1, 2021 through June 30, 2021, basic services compensated at rate of $25,000 annually, resulting in $12,500 in compensation paid for six months of services. • July 1, 2021 through December 31, 2021, basic services rate increased to $40,000 annually to reflect additional scope, resulting in $20,000 in compensation paid for six months of services.
2022
• Basic services compensated at rate of $40,000, resulting in $40,000 in compensation paid.
• Reimbursable travel – two in-person appearances at Council in spring and fall 2022 • Additional services – Consulting project #1 (Recruitment and Hiring) initiated, with task order budgeted at $10,000.
2023
• Basic services compensated at rate of $40,000, expected to result in $40,000 in compensation paid.
• Reimbursable travel – two in-person appearances at Council expected, in spring and fall 2023.
• Additional services – Consulting project #1 (Recruitment and Hiring) completed. $10,000 remaining for Additional Services if desired by City.
2024
• Basic services compensated at rate of $40,000, expected to result in $40,000 in compensation paid.
• Reimbursable travel – two in-person appearances at Council expected, in spring and fall 2024
DocuSign Envelope ID: C037561D-DA65-4F83-913E-66310DBEA859 Item 19
Attachment A -
Amendment No. 2 with
OIR Group for IPA
Services
Item 19: Staff Report Pg. 9 Packet Pg. 273 of 911
Certificate Of Completion
Envelope Id: C037561DDA654F83913E66310DBEA859 Status: Completed Subject: Complete with DocuSign: S20178065 Amendment no. 2 final approved.pdf Source Envelope:

Document Pages: 6 Signatures: 1 Envelope Originator:

Certificate Pages: 2 Initials: 0 Annmarie Romero
AutoNav: Enabled
EnvelopeId Stamping: Enabled
Time Zone: (UTC-08:00) Pacific Time (US & Canada)
250 Hamilton Ave
Palo Alto , CA 94301
[email protected]
IP Address: 199.33.32.254
Record Tracking
Status: Original
6/7/2023 11:51:25 AM
Holder: Annmarie Romero
[email protected]
Location: DocuSign
Security Appliance Status: Connected Pool: StateLocal
Storage Appliance Status: Connected Pool: City of Palo Alto Location: DocuSign Signer Events Signature Timestamp
Michael Gennaco
[email protected]
Principal, OIR Group
Security Level: Email, Account Authentication
(None) Signature Adoption: Pre-selected Style
Using IP Address: 104.174.143.23
Sent: 6/7/2023 11:53:31 AM
Viewed: 6/7/2023 11:58:32 AM
Signed: 6/7/2023 11:59:02 AM
Electronic Record and Signature Disclosure:

Not Offered via DocuSign
In Person Signer Events Signature Timestamp
Editor Delivery Events Status Timestamp
Agent Delivery Events Status Timestamp
Intermediary Delivery Events Status Timestamp
Certified Delivery Events Status Timestamp
Carbon Copy Events Status Timestamp
Chantal Gaines
[email protected]
Assistant to City Manager
City of Palo Alto
Security Level: Email, Account Authentication
(None)
Sent: 6/7/2023 11:59:03 AM
Electronic Record and Signature Disclosure:

Not Offered via DocuSign
Ingrid Velasquez
[email protected]
Administrative Assistant
City of Palo Alto
Security Level: Email, Account Authentication
(None)
Sent: 6/7/2023 11:59:03 AM
Viewed: 6/8/2023 9:01:33 AM
Electronic Record and Signature Disclosure:

Not Offered via DocuSign
Item 19
Attachment A -
Amendment No. 2 with
OIR Group for IPA
Services
Item 19: Staff Report Pg. 10 Packet Pg. 274 of 911
Witness Events Signature Timestamp
Notary Events Signature Timestamp
Envelope Summary Events Status Timestamps
Envelope Sent Hashed/Encrypted 6/7/2023 11:53:31 AM
Certified Delivered Security Checked 6/7/2023 11:58:32 AM Signing Complete Security Checked 6/7/2023 11:59:02 AM
Completed Security Checked 6/7/2023 11:59:03 AM
Payment Events Status Timestamps
Item 19
Attachment A -
Amendment No. 2 with
OIR Group for IPA
Services
Item 19: Staff Report Pg. 11 Packet Pg. 275 of 911
City Council
Staff Report
From: City Manager
Report Type: CONSENT CALENDAR
Lead Department: Community Services
Meeting Date: June 19, 2023
Report #:2306-1601
TITLE
Approval of Amendment Number 3 to the Agreement With Palo Alto Unified School District (PAUSD) for PAUSD Athletic Field Brokering and Maintenance Cost-sharing to Extend the Term to June 30, 2024, with an Optional Extension for an Additional Six Months; CEQA status – categorically exempt (Regulation 15301).

RECOMMENDATION
Staff recommends that City Council approve and authorize the City Manager to execute Amendment No. 3 (Attachment A) to the Agreement1 Between the City of Palo Alto and the Palo Alto Unified School District of Santa Clara County Concerning the Public Use, Brokering and Maintenance of District-Owned Athletic Fields, Tennis Courts, and Basketball Courts Jointly Used By School Students and the General Public (Agreement) to extend the term to cover the period July 1, 2022 through June 30, 2024, with an optional extension of an additional six months.

EXECUTIVE SUMMARY
The City and PAUSD have partnered since 1995 for the maintenance of select school athletic fields for joint school and community use of the fields through a cost sharing agreement. The initial agreement has been modified and renewed multiple times with revisions to capital improvements, revenue sharing of field brokering fees, and priority use dates and times. The partnership provides field maintenance and facilitates field use during school and athletic activity hours and community use during late afternoon, evenings, and weekends.

City and PAUSD staff have met several times over the past year to discuss extending the terms and prioritization of tennis court hours. Both parties have come to an agreement on Amendment No. 3 to extend the partnership through June 30, 2024, with an optional six-month extension 1 City Council June 25, 2018; SR 9278; Agreement as Attachment B https://www.cityofpaloalto.org/files/assets/public/agendas-minutes-reports/reports/city-manager-reportscmrs/year-archive/2018/id-9278.pdf Item 20
Item 20 Staff Report
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BACKGROUND
Beginning in 1993, the City and PAUSD staff met to discuss a possible partnership for the maintenance and public use of PAUSD athletic fields. In 1995, the City and PAUSD entered into an Agreement for the City to maintain select PAUSD athletic fields for both school and community use with both parties contributing an equal share of the costs. The Agreement also included an equal cost share for capital improvements to athletic fields. The agreement has since been revised several times and no longer includes a cost share for capital improvements. The cost of capital improvements is now fully incurred by PAUSD.

The Agreement encompasses the maintenance and brokering of the athletic fields at 13 elementary schools and three middle schools, and tennis courts at five PAUSD schools. The City manages the brokering of PAUSD athletic fields and tennis courts for public community use outside of school activity hours. Revenue received from renting PAUSD athletic fields and courts is shared between both parties with the City retaining 60% and PAUSD retaining 40% of revenue.

The Agreement provides for the continued maintenance of school district fields at all PAUSD elementary schools, as well as the fields at Jane Lathrop Stanford (JLS) and Frank S. Greene, Jr. (Greene) Middle Schools. The maintenance of turf areas includes mowing, edging, de-thatching, reseeding, aeration, and maintenance of irrigation heads, valves, and controllers. The fields at Ellen Fletcher (Fletcher) Middle School are not part of this agreement as these fields are dedicated parkland (Terman Park) and are maintained in a manner consistent with City Park maintenance standards.

The Agreement also provides for the maintenance of tennis courts and basketball courts at JLS, Greene, and Fletcher Middle Schools, and at Henry M. Gunn and Palo Alto High Schools. This work includes periodic sweeping of the court surfaces and washing during the summer months.

The City brokers the fields, tennis courts, and basketball courts in accordance with the Councilapproved Field Use Policy2 . This policy is intended to ensure residents, both youth and adults, have fair access to PAUSD and City-owned fields and athletic facilities. The criteria incorporated into the Field Use Policy helps ensure Palo Alto youth and non-profit sports clubs have top priority access to field space for practice and competition.

The City places a high priority on the maintenance and safety of school playing fields to ensure the community has access to athletic fields and courts for physical fitness and recreation. This Agreement will continue the City’s commitment to provide quality turf and court surfaces. 2 City of Palo Alto Field and Court Use Policy
https://www.cityofpaloalto.org/files/assets/public/community-services/facility-rentals/reservations-communitycenters-fields/field-and-tennis-court-reservations/field-court-policy-22.pdf Item 20
Item 20 Staff Report
Item 20: Staff Report Pg. 2 Packet Pg. 277 of 911

ANALYSIS
In the fall of 2019, City and PAUSD staff met to discuss renewing the Agreement (Amendment No. 13). City and PAUSD staff agreed to extend the Agreement through December 31, 2021, with an option for a two-year extension. On December 9, 2019, City Council approved an extension of the Agreement (Amendment No. 2). City staff later learned that PAUSD staff did not bring Amendment No. 2 to the PAUSD Board for approval. While this matter was being resolved, both the City and PAUSD honored the terms of the Agreement and Amendment No. 2.

PAUSD staff later agreed to update Amendment No. 2 to extend the term to cover the period July 1, 2019 through June 30, 2022, with an optional 24-month extension, and brought Amendment No. 2 to the PAUSD Board for their approval on February 8, 2022. City Council approved the updated Amendment No. 24 on February 14, 2022.

City and PAUSD staff met multiple times from March 2022 to May 2023 to discuss extending the Agreement. Though the Agreement expired on June 30, 2022, both the City and PAUSD honored the terms of the Agreement while negotiations continued. In May 2023, City and PAUSD staff came to mutually agreeable terms for an Amendment No. 3 to the Agreement. Amendment No. 3 retains the same scope of work and service level performed by City staff. The maintenance costs are shared equally between the City and PAUSD. The revenue share remains at 60% to City and 40% to PAUSD.

Amendment No. 3 extends designated hours and dates for PAUSD to have priority use of four of the seven tennis courts at Palo Alto High School. PAUSD priority use of courts number 1, 2, 3, and 4 extends from 4:00pm to 7:00pm weekdays during the following date periods. The select four courts are identified on the map attached to the Amendment:
• June 5, 2023 – August 4, 2023
• November 20, 2023 – November 24, 2023
• December 25, 2023 – January 5, 2024
• June 3, 2024 – June 28, 2024
The period covered by Amendment No. 3 is July 1, 2022 through June 30, 2024, with an optional six-month extension. PAUSD staff intends to bring Amendment No. 3 to the PAUSD Board for approval on June 6, 2023. If City Council approves Amendment No. 3 of the Agreement, staff will 3 City Council June 25, 2018; SR 9278; Amendment No. 1 as Attachment A https://www.cityofpaloalto.org/files/assets/public/agendas-minutes-reports/reports/city-manager-reportscmrs/year-archive/2018/id-9278.pdf 4 City Council February 14; 2022 SR 13899; Agenda Item #4; Amendment No. 2 as Attachment A https://www.cityofpaloalto.org/files/assets/public/agendas-minutes-reports/agendas-minutes/city-councilagendas-minutes/2022/20220214/20220214pccsm-amended-linked-final.pdf Item 20
Item 20 Staff Report
Item 20: Staff Report Pg. 3 Packet Pg. 278 of 911
collaborate with PAUSD and return to City Council in 2024 with a recommendation to extend the Agreement with an amendment or approve a new Agreement.

FISCAL/RESOURCE IMPACT
Amendment No. 3 extends the terms of the existing agreement for two years (July 1, 2022 to June 30, 2024). The annual maintenance cost is approximately $1.0 million, and the costs are split equally between the City and PAUSD. The revenue remains shared at 60% to the City and 40% to PAUSD. The total shared revenue varies and has been approximately $45,000 annually.

The amendment maintains the level and scope of services and cost share of actual expenses as established in the original contract. The only financial impacts to the City from this action are the result of updated labor costs for continuing these services, which are included in the FY 2024 Operating Budget of the Community Services Department. Funding for subsequent years of the agreement is subject to City Council approval and appropriation of funds through the annual budget process.

STAKEHOLDER ENGAGEMENT
City and PAUSD staff met multiple times to discuss Amendment No. 3 to the Agreement and have a mutual interest in continuing this partnership. If Council approves Amendment No. 3, staff will communicate with the tennis community the reduced access to certain courts at Palo Alto High School.

ENVIRONMENTAL REVIEW
This amendment is exempt from the provisions of the California Environmental Quality Act (CEQA) pursuant to section 15301 (existing facilities) of the CEQA guidelines.

ATTACHMENTS
Attachment A: PAUSD Athletic Field Brokering and Maintenance Cost-sharing Agreement Amendment No. 3
APPROVED BY:

Kristen O'Kane, Community Services Director
Item 20
Item 20 Staff Report
Item 20: Staff Report Pg. 4 Packet Pg. 279 of 911
AMENDMENT NO. 3 TO THE

AGREEMENT BETWEEN THE CITY OF PALO ALTO AND THE

PALO ALTO UNIFIED SCHOOL DISTRICT OF SANTA CLARA

COUNTY CONCERNING THE PUBLIC USE, BROKERING AND

MAINTENANCE OF DISTRICT-OWNED ATHLETIC FIELDS,

TENNIS COURTS AND BASKETBALL COURTS JOINTLY USED

BY SCHOOL STUDENTS AND THE GENERAL PUBLIC
This Amendment No. 3 to the “Agreement Between The City Of Palo Alto And The Palo Alto Unified School District Of Santa Clara County Concerning The Public Use, Brokering And Maintenance Of District-Owned Athletic Fields, Tennis Courts And Basketball Courts Jointly Used By School Students And The General Public” (“Contract”) is entered into June 20, 2023, by and between the CITY OF PALO ALTO, a California chartered municipal corporation (the “CITY”) and the PALO ALTO UNIFIED SCHOOL DISTRICT OF SANTA CLARA COUNTY, a unified school district organized and existing under the Laws of the State of California (the “DISTRICT”) (individually, a “Party” and, collectively, the “Parties”), in reference to the following facts and circumstances:

R E C I T A L S
A. The Contract was entered into between the Parties on or about January 1, 2014 for the use, maintenance, and related cost-sharing of District-owned athletic fields and courts. The Contract was amended in June 2018 [Amendment No. 1] and March 2022 [Amendment No. 2].

B. The Parties intend to extend the Contract to cover the period July 1, 2022 through June 30, 2024. The Parties also intend to designate specific tennis courts for priority use by the District as detailed below.

C. The Parties wish to amend the Contract for the purposes described herein.

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

SECTION 1. Definitions. The following definitions shall apply to this Amendment:
a. Contract. The term “Contract” shall mean Contract titled “Agreement Between The City Of Palo Alto And The Palo Alto Unified School District Of Santa Clara County Concerning The Public Use, Brokering And Maintenance Of District-Owned Athletic Fields, Tennis Courts And Basketball Courts Jointly Used By School Students And The General Public” between DISTRICT and CITY, dated January 1, 2014 as amended by:

I. Amendment No.1, dated June 25, 2018; and
II. Amendment No. 2, dated March 16, 2022
b. Other Terms. Capitalized terms used and not defined in this Amendment shall have the meanings assigned to such terms in the Contract. 1 of 4
006247.0014641
163498.1
Item 20
Attachment A - PAUSD
Athletic Field Brokering
and Maintenance Costsharing Agreement,
Amendment No. 3
Item 20: Staff Report Pg. 5 Packet Pg. 280 of 911
SECTION 2. Subsection 2.1 of Section 2 TERM AND TERMINATION of the Contract is hereby amended to read as follows:

2.1 The term of this Agreement pursuant to this Amendment 3 commences on July 1, 2022, and ends on June 30, 2024, subject to the earlier termination of this Agreement by any Party hereto upon ninety (90) days’ advance written notice. The preceding sentence notwithstanding, this Agreement is subject to the fiscal provisions of the Charter of the CITY and other Laws of the CITY and the DISTRICT, and this Agreement will terminate without any penalty (a) at the end of any fiscal year in the event that funds are not appropriated by the Council or Board of Education for the following fiscal year, or (b) at any time within a fiscal year in the event that funds are not appropriated by the Council or Board of Education for a portion of the fiscal year and funds for this Agreement are no longer available. The CITY or the DISTRICT will use reasonable efforts to give the other Party reasonable notice of termination in the event that funds will not be appropriated. No provision is made for the automatic extension or renewal of the term.

SECTION 3. Subsection 2.3 of Section 2 TERM AND TERMINATION of the Contract is hereby amended to read as follows:

2.3 The term of this Agreement may be extended for an additional six (6) months by written mutual agreement of the parties executed at least seven (7) calendar days before expiration of the term. Nothing in this Agreement requires either party to renew or extend this Agreement or to enter into negotiations regarding the renewal or extension of this Agreement.

SECTION 4. Section 7.2a is hereby added to read as follows:

7.2a District will have priority use of tennis courts numbered 1, 2 ,3 and 4 per Attachment H located at Palo Alto High School from 8 am to 7 pm, Monday through Friday during the following time periods:
a. June 5, 2023 through August 4, 2023 (“2023 Summer Period”), b. November 20, 2023 through November 24, 2023 (“2023 Fall Period”) c. December 25, 2023 through January 5, 2024 (“2023/24 Winter Period”); and d. June 3, 2024 through June 28, 2024 (“2024 Summer Period”).

SECTION 5. New Attachment H (as attached to this Amendment) is hereby incorporated into the Contract pursuant to Section 15.6 of the Contract. 2 of 4
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Attachment A - PAUSD
Athletic Field Brokering
and Maintenance Costsharing Agreement,
Amendment No. 3
Item 20: Staff Report Pg. 6 Packet Pg. 281 of 911
SECTION 6. Except as herein modified, all other provisions of the Contract, including any exhibits and subsequent amendments thereto, shall remain in full force and effect.

SECTION 7. The recitals set forth above are terms of this Amendment and are fully incorporated herein by this reference.

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

Dated: ____________________________ Dated: __________________________

CITY OF PALO ALTO PALO ALTO UNIFIED SCHOOL

DISTRICT
_________________________________
Ed Shikada, City Manager ________________________________ Carolyn Chow, Chief Business Officer
APPROVED AS TO FORM:
__________________________________
City Attorney or designee
3 of 4
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Attachment A - PAUSD
Athletic Field Brokering
and Maintenance Costsharing Agreement,
Amendment No. 3
Item 20: Staff Report Pg. 7 Packet Pg. 282 of 911
ATTACHMENT H - Palo Alto High School Tennis Courts
Palo Alto High School Tennis Courts
#7 #3
#2
#1 #6
#5
#4
Item 20
Attachment A - PAUSD Athletic Field
Brokering and Maintenance Costsharing Agreement, Amendment No. 3 Item 20: Staff Report Pg. 8 Packet Pg. 283 of 911
City Council
Staff Report
Report Type: CONSENT CALENDAR
Lead Department: City Clerk
Meeting Date: June 19, 2023
Report #:2305-1581
TITLE
Approval of the 2023-2024 Human Relations Commission Work Plan; CEQA Status – Not a Project

RECOMMENDATION
Staff recommends Council review and approve the 2023-2024 Human Relations Commission Work Plan.

BACKGROUND
On November 30, 2020, the City Council adopted the Boards, Commissions and Committees (BCC) Handbook, which implemented an annual review and approval of BCC work plans.

Each BCC is required to prepare an annual work plan for review and approval by the Council by second quarter of the calendar year. The annual report should include the results of the prior year’s plan and should consist of up to three priorities. When applicable, the City Council would like to see metrics of community involvement and participation in meetings and activities included in the work plan.

Council may refer additional items to the BCCs in response to new developments. BCCs should work on the items outlined in the approved workplans over the course of the year and should refrain from expending their time and staff resources on items that have not been approved by the City Council.

In the event a BCC would like to add an item to the workplan for review after an annual workplan has been approved by the City Council, a prompt request by the BCC Chair to the City Council is required and the item will then be addressed by the City Council as a whole.

At the June 12, 2023 meeting, Council will review the workplans for Architectural Review Board, Historic Resources Board, Parks and Recreation Commission, Planning and Transportation Commission, Public Art Commission, Stormwater Management Oversight Committee, and Utilities Advisory Commission. At this meeting, Council will review the workplan for the Human Relations Commission.

Item 21
Item 21 Staff Report
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FISCAL/RESOURCE IMPACT
There is no fiscal impact associated with the review and approval of the BCC workplans. Any fiscal resources that will be necessary for the implementation of these workplans can be incorporated into the FY 2024 budget discussions at the Council’s discretion.

ATTACHMENTS
Attachment A: Human Relations Commission Work Plan
APPROVED BY:

Mahealani Ah Yun, Interim City Clerk
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Human Relations Commission
2023-2024 Workplan
Staff Liaison: Minka van der Zwaag, Human Services Manager Lead Department: Community Services
About the Commission
This workplan covers portions of Fiscal Year 2023 and 2024 (June 1, 2023 – March 30, 2024) for the Human Relations Commission (HRC). The Commission is composed of 7 members who are residents of Palo Alto. Terms are for 3 years.

See Palo Alto Municipal Code (PAMC) Sections 2.16 and 2.22. For more information about the HRC please visit our webpage at http://www.cityofpaloalto.org/gov/boards/hrc Current Commissioners
• Kaloma Smith (Chair)
• Adriana Eberle (Vice Chair)
• Katie Causey
• Amy Hsieh
• Michelle Kraus
• Daryl Savage
• Mary Kate Stimmler
Mission Statement
HRC Mission: To promote the just and fair treatment of all people in Palo Alto, particularly our most vulnerable populations. By promoting awareness of issues and enabling conversations that enhance inclusion, the HRC strives to create a community where civility, respect and responsible actions are the norm.

HRC Jurisdiction: Muni Code 2.22.050
(a) The Human Relations Commission has the discretion to act with respect to any human relations matter when the commission finds that any person or group does not benefit fully from public or private opportunities or resources in the community or is unfairly or differently treated due to factors of concern to the commission. (1) Public or private opportunities or resources in the community include, but are not limited to, those associated with ownership and rental of housing, employment, education and governmental services and benefits. (2) Factors of concern to the commission include, but are not limited to, socioeconomic class or status, physical condition or handicap, married or unmarried state, emotional condition, intellectual ability, age, sex, sexual preference, gender identity, race, cultural characteristics, ethnic background, ancestry, citizenship, and religious, conscientious or philosophical belief. (b) The commission shall conduct such studies and undertake such responsibilities as the council may direct.

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Commission Work Plan
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Prior Year
Accomplishments
Goal #1 - Public Safety: Recommended to bring the FBI and community resources to Palo Alto to do community education on hate crimes. In addition, made a recommendation to City Council to increase public awareness and marketing on how to report a hate crime and hate incidents (March 2022). Hosted a Community Listening Session with City Manager Ed Shikada on key qualities of the next police chief and community priorities for the Palo Alto Police Department (March 2022). HRC members participated in the Police Chief interview panel and reported back to the full Commission (August 2022). Presentation on Hate Crimes by the Federal Bureau of Investigation (FBI) Civil Rights Unit (September 2022). Presentation by Palo Alto Police Chief Andrew Binder on his goals and visions for the Police Department and update on current issues (November 2022).

Goal #2 - Belonging: Joined the Public Art Commission in the selection process for the King Artist Residency at King Plaza to promote culture, identity, belonging, mental health and resilience in Palo Alto, with the special focus on amplifying voices of Latinx and BIPOC community members and mental health service providers (March 2022). Approval of HRC support of Multifaith Peace Picnic and Prayer Services on September 11, 2022, on King Plaza (August 2022). Created a draft Framework on Process for City Recognition of Events, Individuals, and Celebrations to develop recommendations to City Council, in response to the referral from the City Council on Recognizing Key Dates to Advance Race and Equity (September 2022). Formation of an ad-hoc committee for the Council Referral to research the lived experience of Asian American, Native Hawaiian and Pacific Islanders (AANHPI), and circulation of the AANHPI Lived Experience Survey (February 2023).

Goal #3 - Public Health: Recommendations passed in response to the City Council referral to the Commission on ways to improve implementation of current City renter protections (November 2022).

Goal #4 - Core Responsibilities: A subcommittee of HRC commissioners and city staff served as the review committee for the Emerging Needs Fund. In 2022, a total of 5 grants totaling $46,031 was approved (February, June, & September 2022).

Reviewed and made funding recommendations to the Finance Committee for 9 grants totaling $665,459 as part of the Community Development Block Grant (CDBG) Funding program for Fiscal Year 2022-23 (March 2022). Recommended to Adopt Amendments to the Community Block Grant (CDBG) Citizen Participation Plan (May 2022). Completed site visits with 16 Human Services Resource Allocation Process (HSRAP) Fiscal Year 2022-23 grantees (August 2022). Hosted a listening session with current Human Services Resource Allocation Process (HSRAP) grantees and past applicants to review the HSRAP application process and procedures (October 2022). Review of the 2022 Human Services Needs Assessment Survey results, and recommendations on the draft Fiscal Year 2024-25 Human Services Resource Allocation Process (HSRAP) Priority of Needs (October 2022).

Goal #5 - Climate Change: Presentation of the draft framework on Climate Impact on Vulnerable Communities in Palo Alto by the Palo Alto Student Climate Coalition. Formation of an ad-hoc subcommittee to work with the Palo Alto Student Climate Coalition to aid in the research phase of the framework (January 2023).

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Commission Work Plan
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PROJECT/GOAL 1:

Core Responsibilities
Funding Programs - Human Services Resource Allocation Process (HSRAP), Community Development Block Grant (CDBG) and Emerging Needs Fund. Continue to review and give input to funding decisions. Priority during this workplan cycle includes a professional Human Services Needs Assessment by a consultant in anticipation of the 2026-2027 HSRAP funding cycle. The Needs Assessment will assess the current human service needs of the Palo Alto community, the role of the program, the goals of the program, and how program impact is measured.

BENEFICIAL IMPACTS TIMELINE RESOURCES NEEDED MEASURE OF SUCCESS STATE MANDATED / LOCAL LAW /

COUNCIL-APPROVED
The funding programs provide
human services organizations
with essential monetary support
to serve vulnerable and
underserved residents of Palo
Alto.

Ongoing Adhoc HRC subcommittee and
staff time for the funding
decisions. Funds needed for the
hiring of a consultant to complete
a Human Services Needs
Assessment.

Moderate level of staff and adhoc
subcommittee time.

Results of Human Services
Needs Assessment will provide
the HRC, staff and Council with
updated and vital information on
current human needs in the
community, concrete
suggestions for
changes/additions to the
HSRAP priority of needs,
application and/or review
process, and increased ways in
which to measure the
effectiveness of the City’s
funding investment in Human
Services organizations.

N/A

HIGH PRIORITY LOWER PRIORITY COUNCIL-DIRECTED

POLICY UPDATE
The Human Services Needs Assessment is a high priority to ensure the HSRAP grant program is serving the Palo Alto community to the best of its ability.

Continue to provide funding recommendations for CDBG and the Emerging Needs Fund as needed.

N/A
PROJECT/GOAL 2:

Inclusion and Belonging
Inclusion & Belonging - Explore ways in which the Commission can continue to positively affect the sense of inclusion and belonging in the community. Projects include:
• The continuation of the AANHPI lived experience survey and the beginning of community outreach, interviews, and listening sessions.
• Equity work through partnering with the City on creating policy language and bias training for commissions. • Other projects as identified.

BENEFICIAL IMPACTS TIMELINE RESOURCES NEEDED MEASURE OF SUCCESS STATE MANDATED / LOCAL LAW /

COUNCIL-APPROVED
All individuals who live, work or
worship in Palo Alto have the
right to feel included and valued
as members of the community.

Spring-Fall 2023 Adhoc HRC subcommittee and
staff time
Moderate level of staff and adhoc
subcommittee time.

AANHPI Project – After review of
the survey, demographics and
interview data, the creation of a
series of a report and series of
recommendations for Council
consideration for increased
understanding and increased and
possible action to improve a sense
of inclusion and belonging in the
AANHPI community.

N/A
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HIGH PRIORITY LOWER PRIORITY COUNCIL-DIRECTED

POLICY UPDATE
Compile and report on the results of the AANHPI Survey and continue gathering perspectives from the community through outreach, interviews and listening sessions.

Begin work on partnering with the City to provide bias training for commission and to create equitable policy language and bias training for commissions.
-AANHPI Survey
- Council Referral
May 2022
PROJECT/GOAL 3:

Public Safety
Public Safety - Explore and implement avenues to decrease incidences of crimes in the community. Areas of priority include:
• Hate Crimes
• Human trafficking.
• Online targeting of youth.
• Community conversations.
• Training for local businesses and hotels on how to recognize and de-escalate hate crimes and incidents.

BENEFICIAL IMPACTS TIMELINE RESOURCES NEEDED MEASURE OF SUCCESS STATE MANDATED / LOCAL LAW /

COUNCIL-APPROVED
All individuals who live, work or
worship in Palo Alto have the
right to do so without fear of
verbal or physical abuse or
attack.

Summer-Fall 2023 Adhoc subcommittee and staff
time. Space and marketing for
educational programming.

Moderate level of staff and adhoc
subcommittee time.

Measures may include: How
many people attend educational
programming, specific actions
taken by members of the public
to combat hate crimes, and the
increased reporting of hate
crimes.

N/A

HIGH PRIORITY LOWER PRIORITY COUNCIL-DIRECTED

POLICY UPDATE
Continue partnering with the FBI Civil Rights Unit to create programming that will be used in educational programming.

Begin analysis and consideration of any actions beyond the Community meeting with the FBI.

Council Referral
May 2022
PROJECT/GOAL 4:

Climate Change
Climate Change - Explore ways in which climate change may disproportionately affect specific populations in the community, especially in the wake of recent flooding, extreme weather conditions, and power-outages. Areas of priority include:
• Possibility of City funds to help low-income and vulnerable populations transfer to electric and smart meters. • Continue partnership with the Palo Alto Student Climate Coalition research on the Climate Impact on Vulnerable Communities.

BENEFICIAL IMPACTS TIMELINE RESOURCES NEEDED MEASURE OF SUCCESS STATE MANDATED / LOCAL LAW /

COUNCIL-APPROVED
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Climate change is a priority for
the Sate of California and the
City of Palo Alto. Climate
awareness and changes in
habits help everyone thrive and
special attention should be paid
to vulnerable populations.

Project began in Spring 2023 and
will continue to Fall 2023.

Adhoc subcommittee to work
alongside student committee.

Lower level of staff and adhoc
subcommittee time.

A series of recommendations to
be presented to the Council
which will inform them of the
issues that face low income and
vulnerable members of the
community that are caused or
affected by Climate Change.

N/A

HIGH PRIORITY LOWER PRIORITY COUNCIL-DIRECTED

POLICY UPDATE
Completion and analysis of information presented by the community/student committee.

N/A
PROJECT/GOAL 5:

Learning Sessions
Learning Sessions - Engage in learning sessions to gain more understanding on the following topics:
• Public Health - Post-pandemic wellbeing (work, personal loss, mental health, physical health, job loss) of residents. A day of remembrance for those that lost their life to COVID-19 and their loved ones.
• The lack of community and walkability in South Palo Alto and other under-resourced communities with a focus on zoning, new housing elements, and a timeline for the rebuilding of the complex of business at 3163 Middlefield Road. • Issues faced by seniors including affordable housing, elder abuse, food security and access, the digital divide, and affordable and reliable transportation.

BENEFICIAL IMPACTS TIMELINE RESOURCES NEEDED MEASURE OF SUCCESS STATE MANDATED / LOCAL LAW /

COUNCIL-APPROVED
Listening sessions are utilized by
the HRC to explore an issue with
the help of subject matter
experts in order to 1) Become
informed on the topic(s); 2)
Explore whether there is a role
for the HRC in
addressing/recommending any
action.

During the term covered by this
workplan
Staff and HRC commissioner time
Lower level of staff and adhoc
subcommittee time.

HRC discussions, deliberations,
actions and recommendation
are all well served by the review
of information presented by
subject matter experts.

N/A

HIGH PRIORITY LOWER PRIORITY COUNCIL-DIRECTED

POLICY UPDATE
Priority level of the individual Listening Sessions will be determined by the HRC at their June, 8, 2023 meeting.

N/A
PROJECT/GOAL 6:

Emerging Needs
Emerging Needs - The HRC will identify emerging issues in the community, prioritize those that need further attention and bring any major initiatives, including those that involve significant staff time to the Council for approval. The Commission will also be responsive to future referrals by the Council.

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Commission Work Plan
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BENEFICIAL IMPACTS TIMELINE RESOURCES NEEDED MEASURE OF SUCCESS STATE MANDATED / LOCAL LAW /

COUNCIL-APPROVED
The HRC has the discretion to act
with respect to any human relations
matter when the commission finds
that any person or group does not
benefit fully from public or private
opportunities or resources in the
community, or is unfairly or
differently treated due to factors of
concern to the commission.

Ongoing TBD TBD N/A

HIGH PRIORITY LOWER PRIORITY COUNCIL-DIRECTED

POLICY UPDATE
Lower priority N/A
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City Council
Staff Report
From: City Manager
Report Type: CONSENT CALENDAR
Lead Department: City Auditor
Meeting Date: June 19, 2023
Report #:2305-1537
TITLE
Approval of Office of City Auditor Remote and Flexible Work Study Report; CEQA Status – Not a Project

RECOMMENDATION
The Policy and Services Committee, City Auditor, and Staff recommend that the City Council approve the Remote and Flexible Work Study Report.

BACKGROUND
Baker Tilly, in its capacity serving as the Office of the City Auditor (OCA), performed a citywide risk assessment that assessed a wide range of risk areas, including strategic, financial, operational, compliance, technological, and reputation risks. The purpose of the assessment was to identify and prioritize risks to develop the annual audit plan.

During the FY2022 risk assessment (ID#13914)
1 , the OCA identified recruitment and retention
challenges and need for a study of remote positions which affect recruitment and retention as many people prefer remote positions.

Baker Tilly presented the attached report during the Policy & Service Committee meeting on April 26, 2023, where the report was approved as follows:

MOTION: Council Member Veenker moved, seconded by Chair Tanaka to recommend the City Council:

A. Accept the Office of the City Auditor Remote and Flexible Work Study Audit Report, and; B. Request that the City Manager’s Office include in the staff report to Council an analysis of pre-Covid full onsite performance evaluations compared to current Hybrid/Remote work.

MOTION PASSED: 3-0
1 https://www.cityofpaloalto.org/files/assets/public/agendas-minutes-reports/agendas-minutes/city-councilagendas-minutes/2022/20220404/20220404pccsmamendedlinked1.pdf Item 22
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The Committee asked the City Attorney to provide follow-up information regarding the operation of State worker’s compensation law in the remote work context. The City Attorney’s response can be found at Attachment B.

DISCUSSION
The objectives of the review were to:
1) Evaluate the alignment of remote and flexible work policy and procedure to best practices.
2) Identify position eligibility criteria for remote and flexible work schedules.

Through conversations with the Human Resources management staff, analysis of current applicable remote work policies, and market research, Baker Tilly created a framework for the implementation of a remote and flexible work study program. This framework includes the use of a criteria tool and two potential options for the implementation of the framework. The tool can be used to objectively evaluate City positions for remote and flexible work eligibility.

The report provides market trend research to inform future implementation for this recommended framework and optional surveys to distribute to City employees for assistance in the determination of remote and flexible work eligibility.

The Policy & Services Committee motion included request for staff to provide a comparison of pre-Covid full onsite performance evaluations compared to current Hybrid/Remote Work.

HR staff reported that currently this data is collected in an electronic format only for Management and Professional employees. The following information compares pre-Covid full onsite performance rating results in comparison to most current performance ratings since eligible employees have been working a Hybrid/Remote work schedule. The performance ratings for pre-Covid FY19, in comparison to FY22 did not indicate performance rating decline or productivity decrease. In FY19 there were 177 managers and professionals who were evaluated: 117 exceeded expectations; 53 met expectations and 7 needed improvement. In FY 22, there were 176 managers and professionals who were evaluated: 118 exceed expectations; 57 met expectations and only 1 employee in this group was rated as needing improvement.

Overall, there were similar results in the performance ratings pre-Covid in FY19 in comparison to FY22 and improved ratings for employees who had been rated as “needing improvement” in FY19. As stated to the Policy & Services Committee, since there are between 80% - 90% of employees working on-site between Monday through Friday, it appears there is no impact to performance and productivity by allowing employees the option to work a hybrid schedule.

FISCAL/RESOURCE IMPACT
The corrective action plans and the timeline for implementation are identified within the attached report.

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STAKEHOLDER ENGAGEMENT
The Office of the City Auditor worked primarily with Human Resources Department and engaged with additional stakeholders, including the City Manager’s Office and the City Attorney’s Office, as necessary.

ENVIRONMENTAL REVIEW
This activity 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: OCA-Remote and Flexible Work Study
Attachment B: Response to PS Worker’s Comp Waiver Questions 05.31.23 APPROVED BY:

Adriane D. McCoy, City Auditor
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1 j
City of Palo Alto
Office of the City Auditor
FY21/22 Remote and Flexible
Work Study
March 14, 2023
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Work Study
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2 Executive Summary
Purpose of the Audit
The purpose of this audit was to:
1) Evaluate the alignment of remote and flexible work policy and procedure to best practices 2) Identify position eligibility criteria for remote and flexible work schedules Report Highlights
Category/Theme Page # Recommendation
Remote Work Policy Pg. 6
The City should revise the current policy to strengthen its teleworking risk mitigation and further clarify the remote work arrangement between its employees and departments. The City should also implement a periodic review of its telework policy in annual intervals to ensure content is current and still meeting department needs.

Remote Work
Procedures Pg. 7
The City should revise the current agreement form to include a more robust list of employee obligations to improve the clarity of responsibilities for remote workers and their departments. The City should also ensure that the agreement form reflects the content of the current teleworking policy.

Position Eligibility Pg. 7
We recommend the development of a standardized criteria for position remote and flex work eligibility. All positions should be evaluated for full remote, partial remote/flex schedule, and ineligible remote work. Once position eligibility is determined, the City should follow existing policy to review individual employee eligibility for all eligible positions.

Opportunities
Remote Work
Best Practices
Pg. 8
We provide context to consider for future implementation of a remote and flexible work policy to remain current and competitive in the hiring market and considerations for executing a position eligibility assessment. Summarized by:
- Early Covid-19 Pandemic Workforce Response
- Sustaining Remote Workforce Responses
- Future Workforce Challenges
Position Eligibility
Framework Pg. 9-11
We recommend a six-step framework for position eligibility implementation:
- Creation of a framework
- Creation of a communication plan
- Selection of pilot departments
- Pilot department evaluation with two approaches
- Modification of the implementation plan
- Implementation of position evaluation

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Work Study
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3 Table of Contents
Executive Summary ........................................................................................................................................................... 2 Purpose of the Audit ..................................................................................................................................................... 2 Report Highlights ........................................................................................................................................................... 2 Objective........................................................................................................................................................................... 4 Background ..................................................................................................................................................................... 4 Scope................................................................................................................................................................................. 4 Methodology .................................................................................................................................................................... 4 Compliance Statement.................................................................................................................................................. 4 Organizational Strengths ............................................................................................................................................. 5 Category/Theme ............................................................................................................................................................. 6 Analysis on the Future of Remote Work ...................................................................................................................... 8 Appendices ........................................................................................................................................................................ 12 Appendix A: Sample Policy Modifications ............................................................................................................ 12 DEFINITIONS ..................................................................................................................................................................... 15 POLICY ................................................................................................................................................................................ 15 PROCEDURE ..................................................................................................................................................................... 16 ELIGIBILITY ........................................................................................................................................................................ 17 CONDITIONS ..................................................................................................................................................................... 17 Information Security and Protection ................................................................................................................................ 19 Ad Hoc Arrangements ....................................................................................................................................................... 19 Exceptions ........................................................................................................................................................................... 19 Appendix B: Hybrid Work Agreement Form ......................................................................................................... 20 Appendix C: Position Eligibility Criteria ................................................................................................................ 23 Appendix D: Management Response ..................................................................................................................... 24

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4 Introduction

1 Government auditing standards require an external peer review at least once every three (3) years. The last peer review of the Palo Alto Office of the City Auditor was conducted in 2017. The Palo Alto City Council approved a contract from October 2020 through Objective
The purpose of this audit was to:
1) Evaluate the alignment of remote and flexible work policy and procedure to best practices.
2) Identify position eligibility criteria for remote and flexible work schedules.

Background
The City of Palo Alto’s Human Resources Department states they "strive to recruit, develop, and retain a diverse, well-qualified and professional workforce that reflects the high standards of the community we serve. The department’s key responsibilities are:

Employment Recruitment & Selection, Employee Benefit Administration, Employee Training & Development, Employee and Labor Relations, Compensation & Classification Administration, Risk Management, Safety and Workers Compensation and Volunteer Administration.

As part of the FY2022-2023 Audit Plan approved by the City Council, a Remote and Flexible Work Study audit was authorized. Through conversations with the Human Resources management staff, analysis of current applicable remote work policies, and market research, Baker Tilly created a framework for the implementation of a remote and Flexible Work Study Program. This framework includes the use of a criteria tool and two potential options for the implementation of the framework. The tool can be used to objectively evaluate City positions for remote and flexible work eligibility.

The report provides market trend research to inform future implementation for this recommended framework and optional surveys to distribute to City employees for assistance in the determination of remote and flexible work eligibility.

More details on this framework are included in the Methodology and Detailed Testing Results section.

Scope The scope of this engagement includes remote work policies, procedures, and eligibility effective as of June, 2021.

Methodology
The Baker Tilly team conducted the following audit activities to meet the engagement objectives:
 Interviewed Human Resources staff to understand the current state, benefits, and barriers of remote work,
 Reviewed relevant policies and procedures,
 Identified industry-relevant criteria to be used for evaluation,  Researched best practices, as well as remote work trends and challenges.

Compliance
Statement
This audit activity was conducted from May 2022 to July 2022 in accordance with generally accepted government auditing standards, except for the requirement of an external peer review1. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.

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5 June 2022 with Baker Tilly US, LLP (Baker Tilly) and appointed Kyle O’Rourke, Senior Consulting Manager in Baker Tilly's Public Sector practice, as City Auditor. Given the transition in the City Audit office, a peer review was not conducted in 2020 and will be conducted after the third year of Baker Tilly’s contract.

Organizational
Strengths
During this audit activity, we observed certain strengths of the City. Key strengths include:
­ Dedicated Human Resources staff committed to the organization. ­ A commitment to providing excellent service delivery in the community while balancing the needs and safety of City employees.
­ Staff awareness regarding the ever-changing landscape of the remote work environment in a post-covid workplace.

The Office of the City Auditor greatly appreciates the support of the Human Resources Department in conducting this audit activity.

Thank you!
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6 Testing Results
During our assessment, we identified three key documents of improvement for Palo Alto to implement related to remote work practices. The areas assessed, results of each assessment, and our recommendations for improvement are shown below.

Policy and procedure criteria were based upon Society for Human Resources best practice documents:
 SHRM Telecommuting Policy and Procedure
 SHRM Short Term Telecommuting Agreement
 International Public Management – Human Resources Association remote work best practices Category/Theme
Document name
Finding
# Finding Recommendation
Remote Work
Policy
2-38/HRD Remote
Work Policy
1 The City last updated the Remote Work
policy in June of 2021 in consultation with
City management, modifying the original
to accommodate telework modification
required as a result of the COVID-19
pandemic. The City's Remote Work
Policy is missing components that will
strengthen and clarify the remote work
arrangement between employees, their
departments, and the City. Some
components were recommended by
Human Resources during the most recent
revisions, but discussions with City
management resulted in their omission
from the final policy. The current policy
leaves the City susceptible to holding
employees accountable for attendance
and performance issues, City property
inventory discrepancies, and dependent
care responsibilities.

The City should revise the current
policy to strengthen its teleworking
risk mitigation and further clarify the
remote work arrangement between
its employees and departments. The
City should also implement a periodic
review of its telework policy in annual
intervals to ensure content is current
with best practices and meets
department needs.

A sample policy revision, based upon
The Society for Human Resources
Management and the International
Public Management – Human
Resources Association best practices
and sample policies, is provided in
Appendix A.

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7 Category/Theme
Document name
Finding
# Finding Recommendation
Remote Work
Procedures
Hybrid Work
Agreement Form
(FY23)
2 The City's Hybrid Work Agreement Form
omits obligations of a remote worker that,
if present, would better define employee
responsibilities and commitments. As is,
the form leaves the City susceptible to
employee attendance and performance
issues, unclear accountability standards
with regard to City property and policy,
and an inability to modify the remote work
agreement as needed. The City last
updated the teleworking agreement form
June 2021, modifying the original to
accommodate remote work modification
required as a result of the COVID-19
pandemic. However, the revised form
does not comprehensively reflect
components of the City’s teleworking
policy. The Society for Human Resources
Management, with a thorough sample
agreement form for teleworking, frames
content that addresses these common
remote work risks.

The City should revise the current
agreement form to include a more
robust list of employee obligations to
improve the clarity of responsibilities
for remote workers and their
departments. The City should also
ensure that the agreement form
reflects the content of the current
teleworking policy.

A sample revision of the form is
provided in Appendix B.

Remote Work
Position
Eligibility
n/a
3 The City does not have a standardized
approach to determine position eligibility
for remote or flex work schedules.

Department directors approve eligibility
on a case-by-case basis as employees
request it, with a strong consideration of
department norms and supervisor
preferences. This creates inconsistent
eligibility across departments for positions
with similar essential duties. Department
requirement of in-person work when
essential job duties do not require the
position to be on-site or in the office
damages the City’s ability to retain
employees and attract new talent.

The City should development
standardized criteria for position
remote and flex work eligibility. All
positions should be evaluated for full
remote, partial remote/flex schedule,
and ineligible remote work. Once
position eligibility is determined, The
City should follow existing policy to
review individual employee eligibility
for all eligible positions.

A sample criteria is provided in
Appendix C.

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8 Analysis on the Future of Remote Work
This section provides market and industry context to consider for future implementation to remain current and competitive in the hiring market and considerations for executing a position eligibility assessment.

2 Public Sector Telework Trends During the Coronavirus Pandemic | IPMA-HR 3 Public Sector Telework Trends During the Coronavirus Pandemic | IPMA-HR 4 Quick Steps to Prepare a Remote Work Policy for Your Local Government | icma.org 5 The Future of Remote Work in the Public Sector - Government Technology Insider Remote Work Best Practices and Research
Governments and public sector organizations have continued to leverage remote work as a necessary alternative to traditional in-person work. Forecast trends predict public sector reliance on remote work will continue and likely expand.

Standardized implementation of remote work will allow the City of Palo Alto to remain competitive as well as modernize and expand the quality services its residents expect.

Early Covid-19 Pandemic Workforce Response
Prior to the Covid-19 Pandemic and government issued shutdowns, remote work was uncommon within the public sector. The U.S. Bureau of Labor Statistics 2019 National Compensation Survey found flexible workplace benefits were available to 4 percent of state and local government workers and 5 percent of management level positions. An International Public Management Association for Human Resources (IPMA-HR) survey of local government members found that 70 percent of public sector organizations did not have established remote work programs in early 2020 when the Pandemic began.

During Covid, among the 30 percent of public sector organizations surveyed by IPMA-HR which already had remote work programs, the percentage of remote workers increased to 63 percent after closures began. Among organizations that did not have established programs, survey participants reported an average of 1 percent of their workforce worked remotely before the Pandemic. Their share of remote workers grew to 41 percent by April 2020, representing an increase of 4,000 percent and indicating industry-wide adoption of remote work flexibility.2 Sustaining Remote Workforce Responses
IPMA-HR reports 69 percent of the respondents at public sector organizations that already had established remote work policies prior to February 2020 reported plans to continue allowing more remote work after reopening their offices.

Maintained remote work programs were lower, at 45 percent, among survey respondents whose organizations lacked remote work programs prior to the Covid-19 Pandemic.3
Currently, local government policies and approaches address primarily four areas:
1) Employee eligibility for remote work,
2) Necessary forms and policy development,
3) Accessing communication channels, and
4) IT practices, procedures, and security.4
Government Technology Insider notes that investments made to enhance and maintain network architecture are needed for continued support of remote work. Services, such as streamlined support tickets and an IT service desk, are important to support remote end-users. Additionally, agencies should establish a business continuity plan (BCP) to train workers on secure network practices while remotely working.5 The reported ability to work remote varies widely depending on the industry. Government, public administration, and military organizations fall in the middle of this list with 46 percent of workers reporting most daily job functions can be performed remotely.

According to the FlexJobs online trends database, The State of California has the most remote job listings of any state.

In terms of remote worker populations, The City of Palo Alto is among the top five cities in the State, with 9.3% of their Item 22
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9 6 Remote Job Market Map - Trends, Companies, & Facts by State | FlexJobs 7 Amid public sector hiring challenges, researchers highlight telework, flexibility as path forward - American City and County 8 Public Sector Remote Work Challenges - Exisor, California Transportation Commission, 2021, “Effects of COVID-19-Related Telework Policies on the Transportation System”
9 Work remotely – Employees | telework.govops.ca.gov
total working population remote. Neighboring cities Mountain View, Sunnyvale, and Redwood, also make this list of the top 50 California cities for remote work with 6.2 percent, 5.3 percent, and 4.6 percent, remote populations, respectively.6
Future Workforce Challenges
As the public sector rebounds from the demands incurred from the Covid-19 Pandemic, hiring challenges, vacancies, and burnout are impeding return to pre-pandemic workforce levels. Approximately 90 percent of jobs lost in the private sector have returned as of April 2022, while only 53 percent of jobs lost have returned for the public sector. Pandemic job loss and pre-pandemic hiring challenges have made quality talent recruiting and succession planning the highest priority staffing challenges government organizations face.7 Burnout and stress have caused 44 percent of public sector employees to experience decline in mental-emotional health. In California, other remote work challenges include public sector work culture, high paper dependencies, and cybersecurity concerns according to the California Transportation Commission.8
Remote work is likely preceding a future of public service performed by a network of workers across integrated geographies, making “remoteability” a key metric for a public sector organization’s success. Addressing motivation and the intrinsic value of public sector work is one strategy to retain devoted public servants. Increasing resources through benefits and salary to match the increased demands placed on large City and County employees will further encourage public sector participation.

We anticipate California will continue various resources, programs, and benefits that enable employers and local governments to support their remote work segments. The California Government’s “telework.govops.ca.gov” is one resource providing best practices and helpful tips for governments like Palo Alto. We encourage use of these resources and others to achieve ideal remoteability.9
Position Eligibility Framework
Below is a sample framework to consider implementing for evaluating position eligibility for remote work and modifying the position eligibility in context of the remote work policy at the City of Palo Alto:

1. Human Resources makes a framework for position eligibility assessment deployment a. HR evaluates the positions first and solicits director feedback on potential eligible positions b. HR collaborates with department directors to evaluation eligibility for all positions

2. Human Resources creates a communication plan for the evaluation framework

3. Human Resources selects pilot departments to evaluation position eligibility

4. Human Resources runs the pilot department evaluation

5. Human Resources modifies implementation plan using lessons learned from the pilot

6. Human Resources implements position evaluation with remaining departments

1. Creation of framework
a. Human Resources evaluates the positions first to eliminate positions for department review that are ineligible to work remotely
The benefits of this method:

Creates a top-down efficient approach using the knowledge and expertise of the Human Resources staff and reducing the volume of department position review.

The negatives of this method:

Reduced position review transparency for department leadership and employees b. Department directors review all positions
The benefits of this method:

Illustrates to employees the desire to intimately understand positions when determining eligibility.

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10 Increases the volume of positions for department directors and employees to review.

The negatives of this method:

Increased review and implementation time-frame

2. Creation of a communication plan
Change management plan standards suggest the use of comprehensive and clear communications to all affected parties. Human Resources will need to identify the target audience for each communication and the intended purpose/goal of the communication. The City may consider a communication approach as follows:
- Notify all City employees of the position review. In the notification, state the pilot departments, phased approach for additional department position reviews, roles and responsibility for Human Resources, department supervisors, and employees.
- Provide regular updates during executive team meetings - Provide updates to department directors of when phases are complete and next steps - Provide written communication to all employee participants at each phase. Hold a townhall meeting introducing the project, communicating the purpose, approach and outcome - Communicate position eligibility to the executive team and directors when all positions are evaluated The methods and delivery for the communication plan should also be outlined, considering a formalized message to staff and informal channels. Human Resources should be prepared for the responses they will receive to the communication plan – both negative and positive - and appropriate response channels.

Human Resources should be clear and repeatedly communicate throughout the process that the assessment is to determine position eligibility to equitably apply consideration across the City. Individuals who hold eligible positions should continue to be assessed for approval and continued eligibility per the City’s policy.

3. Selection of pilot departments
When selecting the two departments for the pilot, consider the following:
- A department that performs administrative functions for the City (e.g. Legal, City Clerk and Information Technology)
- A department that has positions performing some elements of fieldwork/operations - Departments that are collaborative in nature and willing to adapt to changes in City policy - Departments that are well respected within the City as they will serve as advocates for the future rollout of the Remote and Flexible Work program
- Departments with a high volume of hard-to-fill positions or key positions with a high vacancy rate Running the pilot
- Human Resources should consider the length of the pilot program, any changing needs of the community and potential changes in service delivery requiring a stop or pause to the pilot, and any changing needs of the department that may require a stop or pause.
- Develop a re-start plan to continue the pilot to keep staff engaged and invested in the pilot program.

Feedback from piloted departments should be solicited and factored into future implementation for improved deployment. The pilot should be self-evaluated by all participants and ‘lessons learned’ documented when providing feedback to Human Resources. The feedback provided in this phase will inform steps 5 and 6.

4. Pilot department evaluation
Human Resources outlines the approach needed for the evaluation of the pilot department program. Steps may include:
- Department director meeting:
o Kick-off
o Project timeline/purpose
o Confirm approach and scope
- Employee kick-off meeting
o Kick-off
o Project timeline/purpose
o Confirm approach and scope
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11 The approach will differ and is dependent on if Human Resources will provide the first assessment of positions or initiate preliminary assessment at the employee level. 1a Approach. Human Resources evaluates positions using essential duties from the job descriptions and designates positions ineligible to work remotely. Human Resources reviews the assessment with department directors. For all remaining positions, employees self-evaluate their position eligibility, directors review the selfassessment and Human Resources analyzes the responses to find an average question score for each position. Human Resources should review all results with Managers/Directors for their input and approval of the results.
1b Approach. All employees self-evaluate their position eligibility, directors review the self-assessment and Human Resources analyzes the responses to find an average question score for each position. Human Resources should review all results with Managers/Directors for their input and approval of the results.

From this analysis, Human Resources can designate positions as eligible for options of fully remote, flexible hours/day schedules, or ineligible for remote work.

All results of the analysis should be shared with both Directors and Employees and include any next steps.

For Directors, considerations for next steps to accommodate employee requests going forward:
- Technology needs
- Scheduling needs
- Ebbs and flows of services in their department
For Employees, considerations for next steps going forward:
- A review of essential duties for similar positions would result in an equitable approach amongst all employees and improve program deployment

5. Modification of the implementation plan
Using the feedback received in Phase 3, Human Resources should adjustment the implementation plan.

Considerations of adjustments should include the ability to adapt the plan to a changing environment within the City (e.g. at different times of the year different needs may arise where staff may need a more frequent presence in the office)

6. Implementation of position evaluation
Human Resources will need to prioritize the remaining City departments. Considerations on prioritizing should include:
- High turnover or high vacancy rate departments
- Departments with a balance of administrative and non-administrative functions - Seasonality of work and City milestones (e.g. budget planning, Capital infrastructure planning, high volumes of outdoor functions for summer and spring activities) Consider developing a phased deployment. A potential implementation approach includes:
- Phase 1: common positions across all departments (e.g. administrative assistants, Directors, etc.) - Phase 2: Departments with common functionality (e.g. operations and fieldwork functions) - Phase 3: Departments with common functionality (e.g. administrative and internal shared services positions).

As mentioned in Phase 2, elements of a change management plan can assist Human Resources in this implementation. In addition to the communication plan, a Change Management Approach implementation strategy includes a training plan, business systems plan and resistance plan.

Having a plan to address any resistance from employees will assist with a successful program. A possible tool to consider is a Resistance Assessment Survey. This survey identifies areas of possible resistance, and provides a space for rating (1-5 from strongly disagree to strongly agree). Human Resources could deploy this survey and aggregate the scores as they did for the evaluation tool to find pockets of resistance and approval.

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12 Appendices
Appendix A: Sample Policy Modifications
SHRM Telecommuting Policy and Procedure
Blue highlighted text indicates content recommended to include in City Policy Objective
Telecommuting allows employees to work at home, on the road or in a satellite location for all or part of their workweek. [Organization Name] considers telecommuting to be a viable, flexible work option when both the employee and the job are suited to such an arrangement. Telecommuting may be appropriate for some employees and jobs but not for others.

Telecommuting is not an entitlement, it is not a companywide benefit, and it in no way changes the terms and conditions of employment with [Organization Name].

Procedures
Telecommuting can be informal, such as working from home for a short-term project or on the road during business travel, or a formal, set schedule of working away from the office as described below. Either an employee or a supervisor can suggest telecommuting as a possible work arrangement.

Any telecommuting arrangement made will be on a trial basis for the first three months and may be discontinued at will and at any time at the request of either the telecommuter or the organization. Every effort will be made to provide 30 days’ notice of such change to accommodate commuting, child care and other issues that may arise from the termination of a telecommuting arrangement. There may be instances, however, when no notice is possible.

Eligibility
Individuals requesting formal telecommuting arrangements must be employed with [Organization Name] for a minimum of 12 months of continuous, regular employment and must have a satisfactory performance record.

Before entering into any telecommuting agreement, the employee and manager, with the assistance of the human resource department, will evaluate the suitability of such an arrangement, reviewing the following areas:
 Employee suitability. The employee and manager will assess the needs and work habits of the employee, compared to traits customarily recognized as appropriate for successful telecommuters.  Job responsibilities. The employee and manager will discuss the job responsibilities and determine if the job is appropriate for a telecommuting arrangement.
 Equipment needs, workspace design considerations and scheduling issues. The employee and manager will review the physical workspace needs and the appropriate location for the telework.  Tax and other legal implications. The employee must determine any tax or legal implications under IRS, state and local government laws, and/or restrictions of working out of a home-based office. Responsibility for fulfilling all obligations in this area rests solely with the employee.

If the employee and manager agree, and the human resource department concurs, a draft telecommuting agreement will be prepared and signed by all parties, and a three-month trial period will commence.

Evaluation of telecommuter performance during the trial period will include regular interaction by phone and e-mail between the employee and the manager, and weekly face-to-face meetings to discuss work progress and problems. At the end of the trial period, the employee and manager will each complete an evaluation of the arrangement and make recommendations for continuance or modifications. Evaluation of telecommuter performance beyond the trial period will Item 22
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13 be consistent with that received by employees working at the office in both content and frequency but will focus on work output and completion of objectives rather than on time-based performance.

An appropriate level of communication between the telecommuter and supervisor will be agreed to as part of the discussion process and will be more formal during the trial period. After conclusion of the trial period, the manager and telecommuter will communicate at a level consistent with employees working at the office or in a manner and frequency that is appropriate for the job and the individuals involved.

Equipment
On a case-by-case basis, [Organization Name] will determine, with information supplied by the employee and the supervisor, the appropriate equipment needs (including hardware, software, modems, phone and data lines and other office equipment) for each telecommuting arrangement. The human resource and information system departments will serve as resources in this matter. Equipment supplied by the organization will be maintained by the organization.

Equipment supplied by the employee, if deemed appropriate by the organization, will be maintained by the employee. [Organization Name] accepts no responsibility for damage or repairs to employee-owned equipment. [Organization Name] reserves the right to make determinations as to appropriate equipment, subject to change at any time. Equipment supplied by the organization is to be used for business purposes only. The telecommuter must sign an inventory of all [Organization Name] property received and agree to take appropriate action to protect the items from damage or theft.

Upon termination of employment, all company property will be returned to the company, unless other arrangements have been made.
[Organization Name] will supply the employee with appropriate office supplies (pens, paper, etc.) as deemed necessary. [Organization Name] will also reimburse the employee for business-related expenses, such as phone calls and shipping costs, that are reasonably incurred in carrying out the employee’s job.

The employee will establish an appropriate work environment within his or her home for work purposes. [Organization Name] will not be responsible for costs associated with the setup of the employee’s home office, such as remodeling, furniture or lighting, nor for repairs or modifications to the home office space.

Security
Consistent with the organization’s expectations of information security for employees working at the office, telecommuting employees will be expected to ensure the protection of proprietary company and customer information accessible from their home office. Steps include the use of locked file cabinets and desks, regular password maintenance, and any other measures appropriate for the job and the environment.

Safety
Employees are expected to maintain their home workspace in a safe manner, free from safety hazards. [Organization Name] will provide each telecommuter with a safety checklist that must be completed at least twice per year. Injuries sustained by the employee in a home office location and in conjunction with his or her regular work duties are normally covered by the company’s workers’ compensation policy. Telecommuting employees are responsible for notifying the employer of such injuries as soon as practicable. The employee is liable for any injuries sustained by visitors to his or her home worksite.

Telecommuting is not designed to be a replacement for appropriate child care. Although an individual employee’s schedule may be modified to accommodate child care needs, the focus of the arrangement must remain on job performance and meeting business demands. Prospective telecommuters are encouraged to discuss expectations of telecommuting with family members prior to entering a trial period.

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14 Time Worked
Telecommuting employees who are not exempt from the overtime requirements of the Fair Labor Standards Act will be required to accurately record all hours worked using [Organization Name]’s time-keeping system. Hours worked in excess of those scheduled per day and per workweek require the advance approval of the telecommuter’s supervisor. Failure to comply with this requirement may result in the immediate termination of the telecommuting agreement.

Ad Hoc Arrangements
Temporary telecommuting arrangements may be approved for circumstances such as inclement weather, special projects or business travel. These arrangements are approved on an as-needed basis only, with no expectation of ongoing continuance.

Other informal, short-term arrangements may be made for employees on family or medical leave to the extent practical for the employee and the organization and with the consent of the employee’s health care provider, if appropriate.

All informal telecommuting arrangements are made on a case-by-case basis, focusing first on the business needs of the organization.

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15 POLICY AND PROCEDURE 2-38/HRD
Revised: June 2021
Blue highlighted text indicates content recommend to include from SHRM policy.

Green highlighted text indicates Baker Tilly language based upon review of current state and federal reimbursement requirements. Baker Tilly does not provide legal advice. We recommend the City consult with their employment law counsel prior to any sample form or policy adoption.

REMOTE WORK POLICY

PURPOSE

The purpose of this Policy is to provide guidance for administering remote work.

DEFINITIONS

Remote Work is the practice of working from an alternative worksite on either a voluntary (Remote Work Arrangement) or assigned (Remote Work Assignment) on a regular basis. Occasional remote work is when an employee is approved to work remotely on an infrequent or project basis. Occasional remote work does not require a formal remote work agreement.

Remote Work Agreement is the formal agreement between a supervisor and an employee which defines the employee’s regular remote work schedule and details any City-owned resources the employee will use in the alternative worksite.

Alternative Worksite is a location where the employee works other than at a City facility.

POLICY

It is the policy of the City of Palo Alto to allow and/or assign employees to work remotely when it is consistent with the City’s operational needs.

When the employee and their position are eligible and well-suited for remote work, Department Directors are strongly encouraged to allow remote work.

Remote work can be advantageous to the employee, department and the community. Research and numerous sources have identified that remote work:
• Reduces air pollutants and decreases traffic, parking congestion and overcrowding of public transportation. • Improves the City’s ability to maintain services during an emergency when the regular worksite is inaccessible. • Enhances the ability to recruit and retain quality employees, improves job satisfaction, supports work-life balance, and may increase productivity.

While remote work is typically a voluntary arrangement, the City may require work to be performed remotely based on operational needs or in emergency circumstances. Remote work is a service delivery model that can be used to meet operational needs, and is not to be viewed as an entitlement, reward or benefit. All City employees who are working remotely on a regular basis must have an approved Remote Work Agreement under this Policy. Occasional Remote Work must be documented and approved in advance by the employee’s supervisor, but no formal Remote Work Agreement is required.

Remote work does not alter duties, obligations, responsibilities and conditions of employment for the employee who is approved and/or assigned to work remotely. Employees working remotely remain obligated to comply with all City rules, regulations, policies, procedures, and state and federal laws.

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16 Remote Work is not designed to be a replacement for appropriate child care. Although an individual employee’s schedule may be modified to accommodate child care needs, the focus of the arrangement must remain on job performance and meeting business demands. Prospective remote workers are encouraged to discuss expectations of remote work with family members prior to entering a trial period

PROCEDURE

All employees must have a Remote Work Agreement in order to work remotely on a regular basis.

Any Remote Work arrangement made will be on a trial basis for the first three months and may be discontinued at will and at any time at the request of either the telecommuter or the organization. Every effort will be made to provide 30 days’ notice of such change to accommodate commuting, child care and other issues that may arise from the termination of a remote work arrangement. There may be instances, however, when no notice is possible.

Evaluation of telecommuter performance during the trial period will include regular interaction by phone and e-mail between the employee and the manager, with recommended bi-weekly meetings to discuss work progress and problems.

At the end of the trial period, the employee and manager will each complete an evaluation of the arrangement and make recommendations for continuance or modifications. Evaluation of telecommuter performance beyond the trial period will be consistent with that received by employees working at the office in both content and frequency but will focus on work output and completion of objectives rather than on time-based performance.

An appropriate level of communication between the telecommuter and supervisor will be agreed to as part of the discussion process and will be more formal during the trial period. After conclusion of the trial period, the manager and telecommuter will communicate at a level consistent with employees working at the office or in a manner and frequency that is appropriate for the job and the individuals involved.

Remote Work Request Initiated by Employee (Remote Work Arrangements) Employees who believe they may be eligible for Remote Work as defined in this Policy must first discuss their desire to work remotely with their direct supervisor. At that time, the supervisor and employee can discuss eligibility, schedule, equipment needs, work hours, and other items that are part of the Remote Work Agreement and this Policy.

The employee must then submit the Remote Work Agreement to their supervisor for approval. If the supervisor approves the Remote Work Agreement, they will submit the agreement to the Department Director or designee for consideration.

The Department Director or designee will either approve, deny, or modify the agreement. A copy of the final signed agreement must be provided to the employee, their supervisor, and submitted to Human Resources.

Should an employee’s remote work request be denied, the decision is final and not subject to the grievance procedure or any other appeal. The employee may request to meet with the Human Resources Director or their designee to discuss their denial.

As part of an employee’s annual performance appraisal, the Remote Work Agreement should be evaluated by the employee and supervisor to determine if the arrangement is successful and if it should continue. The Remote Work Agreement should be updated with any changes and submitted for approval by the Department Director or designee.

The Department Director or designee can suspend or cancel the Remote Work Agreement with at least five business days’ written notice when possible. In the event operational necessity does not allow for five business days’ notice, the Department Director or designee may suspend or cancel the Remote Work Agreement with less notice. General considerations for terminating the agreement include, but are not limited to, operational need, performance, conduct, safety, and violation of the Remote Work Policy and other City policies. Termination of the agreement is administrative and not considered discipline. The decision is not be subject to the grievance procedure nor can it be appealed.

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17 If operational needs require remote work for continuity of City services, or in cases of emergency, managers and the Department Director will evaluate each position for remote work. The requirement to perform work remotely will be assigned in consultation with the City Manager’s Office and Human Resources. Employees assigned to work remotely must complete a Remote Work Agreement. Remote Work Assignments may be discontinued at any time at the sole discretion of the City pursuant to the procedures outlined above.

ELIGIBILITY

Not all positions or employees are eligible for remote work. When determining whether an employee requesting remote work is eligible, employees must meet both the position eligibility criteria and performance eligibility criteria. When a position is being required to work remotely due to operational necessity and continuity of service or emergency circumstances, City management will evaluate the eligibility of the position and follow any local, state or federal guidance.

Individuals requesting Remote Work arrangements must maintain a satisfactory performance record. *** Eligibility requirements may need to be revised based on the final outcome of the Remote and Flexible Work Study*** Position Based Eligibility:

Criteria for establishing eligibility of a position:
 In-person interaction or physical presence on a daily basis is not essential to the performance of job duties and may be scheduled or conducted virtually to permit Remote Work.  Some or all the job duties are able to be performed from an alternative worksite without diminishing the quality and timeliness of the work.
 Appropriate equipment must be available or can be made available in the alternative worksite to perform job duties and assigned tasks.
 Remote Work must not unduly disrupt or create problems for projects, staff, the community or other stakeholders.  When performed remotely, job duties can be completed in compliance with all applicable IT, Security, Privacy and Confidentiality policies and procedures.

Performance Based Eligibility:

Criteria for establishing eligibility of an employee:
 Employee is adaptable, with a proven ability to work independently.  Employee demonstrates good time-management skills by completing quality assignments on time.  Employee communicates information efficiently with leadership, coworkers, support staff and customers.  Employee sets appropriate priorities, changes priorities as needed, and maintains a suitable workspace.  Employee possesses computer and other necessary skills sufficient to work independently at an alternate worksite.

CONDITIONS

Schedule and Work Hours:

The actual time worked by the employee, as established by the Remote Work Agreement, must be accurately recorded on the timesheet.
 Employees FLSA status as exempt or non-exempt will not be altered as a result of the employee working remotely.
 The number of hours worked by the employee will not change because the employee is working at an alternative worksite.

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18  Employees eligible for overtime may work overtime only when directed to do so and approved in advance by the supervisor.
 Employees must obtain approval to use vacation, sick, or other leave in the same manner as departmental employees who do not work remotely.
 Employees working remotely will maintain accessibility via email, phone, or as otherwise agreed to by their supervisor during agreed upon work hours.
 Employees must follow all regular timecoding requirements.

Employees working at an alternate worksite may be required to report to a City facility on a remote workday. Supervisors should give at least 24 hours’ notice of this change, unless an unforeseeable immediate need should arise. An employee who is required to report to a City facility instead of their alternative worksite is not eligible for travel reimbursement. When an employee is required to report to a City Facility on the same day, then travel time to the City facility shall be considered hours worked.

Occasional requests by employees to change their schedule should be accommodated by the supervisor if possible.

Occasional changes (such as working remotely on a different day in the same week) do not constitute a change in the underlying agreement. A permanent schedule change would require an employee to resubmit an approved Remote Work Agreement.

Remote Worksite & Equipment
It is the responsibility of the employee to create a safe and ergonomically suitable environment for work. Employees shall make all reasonable efforts to ensure their remote work area meets the ergonomic standards of the City. Upon request, the City will provide an ergonomic evaluation for the employee’s alternative worksite.

Employees working remotely must work in an environment that allows them to perform their duties safely and efficiently.

Employees are responsible for ensuring their work areas comply with health and safety requirements. Employees are covered by workers’ compensation laws when performing work duties at their designated alternate locations during their regular work hours. Employees who suffer a work-related injury or illness while remote working must notify their supervisor and complete any required forms immediately in accordance with the City’s Workers’ Compensation Policy.

In order to work remotely, employees and supervisors must identify the equipment, software, and supplies required to successfully work at an alternate location. The employee will not be eligible for Remote Work if the required equipment is not available. IT will serve as resources to assist employees and supervisors determine appropriate equipment needs.

The remote worker must sign an inventory of all City property received and agree to take appropriate action to protect the items from damage or theft
City Equipment:

Any equipment and software shall remain the property of the City and is limited to use for purposes relating to City business only. Employees working remotely must keep City-owned equipment in good working order, report any problems or malfunctions immediately, and must promptly return equipment upon completion or termination of their Remote Work Agreement, or separation from the City.

Basic office supplies that normally are available at the City worksite for the employee's use (e.g., pens, binders, notepads, Post-its, etc., but not including printer ink cartridges) may be used at the employee’s remote worksite in accordance with the same policies that govern their use at the City worksite. Employees working remotely will not be reimbursed for additional office supplies unless approval to purchase supplies is given in advance. City issued supplies must be used for City work purposes only. Any other costs may be incurred only with prior approval by the Department Director.

City-issued laptops or other required computer equipment and repairs will be provided based on need and availability. To ensure hardware and software security, all software used for remote work must be approved by the department and IT Item 22
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19 before installation. Networking can only be established using compatible hardware and software. All remote work must be done through the City VPN or approved applications.

Personal Equipment:

When not provided by the City, employees under a Remote Work Agreement are expected to use personal office equipment including, but not limited to, furniture, seating, internet access, scanners, calculators, ink cartridges, etc., used while working remotely.

Employees working remotely are responsible for the maintenance and repair of their office equipment and are required to install and maintain personal office equipment at no expense to the City. The employee is responsible for ensuring that software used on non-City premises is compatible with City standards.

Business-related Expenses:

Employees voluntarily working remotely are responsible for all business expenses incurred. Should the City require employees to work remotely, the City will supply the employee with “necessary” and “reasonable” expenses10. Employees may not incur expenses before receiving written approval from a department supervisor.

Information Security and Protection

Remote workers, like all City employees, are expected to protect confidential, proprietary, and business information from unauthorized or accidental access, destruction, or disclosure. Employees may not disclose confidential or private files, records, materials, or information, and may not allow access to City networks or databases to anyone who is not authorized to have access.

Employees who work remotely shall comply with the City’s Information Security Policy, Information Security Standards, Information Privacy Policy and ensure the protection of the City’s protected information.

Ad Hoc Arrangements
Temporary remote work arrangements may be approved for circumstances such as inclement weather, special projects or business travel. These arrangements are approved on an as-needed basis only, with no expectation of ongoing continuance.

Other informal, short-term arrangements may be made for employees on family or medical leave to the extent practical for the employee and the organization and with the consent of the employee’s health care provider, if appropriate.

All informal remote work arrangements are made on a case-by-case basis, focusing first on the business needs of the organization.

Exceptions

The City is not liable for loss or destruction of the employee’s home or personal property while working remotely. The City is not liable for injury to the employee that occurs outside of remote work hours or while not conducting City work. The City is not liable for injury to the employee’s family members, visitors, or invitees within or around the remote worker’s home.

10 California Labor Code 2802
Item 22
Attachment A - OCARemote and Flexible
Work Study
Item 22: Staff Report Pg. 22 Packet Pg. 313 of 911
20 Appendix B: Hybrid Work Agreement Form
Baker Tilly does not provide legal advice. We recommend the City consult with their employment law counsel prior to any sample form or policy adoption.

Hybrid Work Agreement
Sample teleworking agreement modified from the SHRM and other industry samples. Blue text indicates added content from SHRM template.

Definition
For purposes of this agreement, “telework” means an agreed-upon regular, modified work location outside of City premises or standard work location (e.g., home office, community workspace. etc.) Employee Information
Name: ____________________________________ Hire date: __________________ Employee ID: _________________________________________________________ Job title: _____________________________________________________________ Department: ___ ______________________________________________________ Supervisor’s Title: _____________________________________________________ Is your supervisor the Department Director (Y/N) ______________________________ Department Director’s email address: ______________________________________ FLSA status: Exempt Nonexempt
This telework agreement will begin and end on the following dates:

Start date: _______________ End date: _______________
Primary work location: ________________________________________________ Employee Telework Schedule - Mark “X” where applicable
Remote
Work
Onsite
Work
Remote/Onsite
Combination
Regular
Day Off
Monday
Tuesday
Wednesday
Thursday
Friday
Saturday
Sunday
The employee agrees to the following conditions:

The employee will remain accessible and productive during scheduled work hours.

Item 22
Attachment A - OCARemote and Flexible
Work Study
Item 22: Staff Report Pg. 23 Packet Pg. 314 of 911
21 Nonexempt employees will record all hours worked and meal periods taken in accordance with regular timekeeping practices.

Nonexempt employees will obtain supervisor approval prior to working unscheduled overtime hours.

The employee will report to the employer’s work location as necessary upon directive from his or her supervisor and notify the supervisor in advance of work location modifications.

The employee will communicate regularly with his or her supervisor and co-workers, with a cadence and format established by the supervisor.

The employee will comply with all City rules, policies, practices and instructions that would apply if the employee were working at the employer’s work location.

The employee will maintain satisfactory performance standards.

The employee will make arrangements for regular dependent care and understands that telework is not a substitute for dependent care. In pandemic or natural disaster circumstances, exceptions may be made for employees with caregiving responsibilities.

The employee will maintain a safe and secure work environment at all times.

The employee will allow the employer to have access to the telework location for purposes of assessing safety and security, upon reasonable notice by the City.

The employee will report work-related injuries to his or her supervisor as soon as practicable.

City will provide the following equipment: __________________________ ______________________________________________________________________ The employee will provide the following equipment: ____________________________ ______________________________________________________________________ The employee agrees that City equipment will not be used by anyone other than the employee and only for businessrelated work. The employee will not make any changes to security or administrative settings on City equipment. The employee agrees to promptly install all technology security upgrades to ensure network security. The employee understands that all tools and resources provided by the City shall remain the property of the City at all times.

The employee agrees to protect City tools and resources from theft or damage and to report theft or damage to his or her supervisor immediately.

The employee agrees to comply with City’s policies and expectations regarding information security. The employee will be expected to ensure the protection of confidential and customer information accessible from their home offices.

The employee understands that telework is a privilege, subject to position eligibility and performance review requirements.

The employee understands that reomote eligibility may be revoked based upon performance reviews, non-compliance of this agreement and/or position essential duty modifications.

Palo Alto will reimburse employee for the following expenses:
________________________________________________________________ Employee will submit expense reports with attached receipts in accordance with City expense reimbursement policy.

Item 22
Attachment A - OCARemote and Flexible
Work Study
Item 22: Staff Report Pg. 24 Packet Pg. 315 of 911
22 The employee understands that all terms and conditions of employment with the City remain unchanged, except those specifically addressed in this agreement.

The employee understands that management retains the right to modify this agreement on a temporary or permanent basis for any reason at any time.

The employee agrees to return City equipment and documents within five days of termination of employment.

Employee signature: ______________________________ Date: ____________________ Manager signature: _______________________________ Date:______________________ Human resources signature: ________________________ Date: ______________________ Hybrid Work Agreement Form (FY23)
All workers who are assigned to Telework, including those who partially Telework, should complete this form. Telework minimizes the number of employees at City facilities, while allowing essential work to continue.

By submitting this Telework Agreement you acknowledge and agree to the following: While on this telework arrangement, you are expected to fully engage in your job and to work in a manner that is safe, efficient and responsible. Telework requires that you take extra care to remain in close communication with your supervisor and co-workers. When you telework, you have the same responsibilities as when you work at your normal worksite. Responsibilities include being immediately available during work time, following work policies and protocols; protecting the confidentiality of sensitive data; maintaining a safe work area and reporting any injury; protecting government property; and reporting your absences accurately. In addition, if you are in a classification that allows for overtime or comp time you are required to obtain prior approval from your supervisor.

If you have any questions regarding telework arrangements please contact HR at (650)329-2376 or [email protected] (mailto:[email protected])

Item 22
Attachment A - OCARemote and Flexible
Work Study
Item 22: Staff Report Pg. 25 Packet Pg. 316 of 911
23 Appendix C: Position Eligibility Criteria
Key

Item 22
Attachment A - OCARemote and Flexible
Work Study
Item 22: Staff Report Pg. 26 Packet Pg. 317 of 911
24 Appendix D: Management Response
Summary Statement:

The Palo Alto City Administration thanks the City Auditor’s Office for their work on this important and timely topic. As requested by the Administration, this study provides an independent perspective on one of the most widely discussed and rapidly evolving contemporary workplace issues. The study affirms that the City’s efforts, initiated pre-pandemic, continue to reflect a progressive and balanced approach to ensuring worker productivity in delivering services to the community while continuing to model an “employer of choice.” This will continue to guide and inform future decision making and strategic opportunities for revision of hybrid working practices.

Item 22
Attachment A - OCA-Remote and
Flexible Work Study
Item 22: Staff Report Pg. 27 Packet Pg. 318 of 911
25 Recommendation Responsible
Department(s)
Agree, Partially Agree, or Do Not Agree and Target Date and Corrective Action Plan
Finding 1: Remote Work Policy
The City should revise the current policy to strengthen its teleworking risk mitigation and further clarify the remote work arrangement between its employees and departments. The City should also implement a periodic review of its telework policy in annual intervals to ensure content is current with best practices and meets department needs.

A sample policy revision, based upon The Society for Human Resources Management and the International Public Management – Human Resources Association best practices and sample policies, is provided in Appendix A.

Human
Resources
Concurrence: Partially agree
Target Date: March 2023
Completion Date: To be determined during the OCA’s follow-up review Action Plan:

Currently the City’s policy includes Position Based and Performance Based Eligibility criteria for the Department Director to consider their employee’s request for a hybrid work schedule. City equipment, is tracked by the Information Technology department therefore incorporating an additional equipment tracking component into the hybrid work policy would be duplicative and could lead to confusing and contradictory practices.

In regards to excluding employees on probation, the City did not include this provision as providing hybrid work as an option may offer flexibility candidates are seeking.

The City’s policy update has been updated to reflect the workforce transition to “hybrid work”, now titled the Hybrid Work Policy, and will be reviewed periodically or at minimum, annually as recommended.

Finding 2: Remote Work Procedures
The City should revise the current agreement form to include a more robust list of employee obligations to improve the clarity of responsibilities for remote workers and their departments. The City should also ensure that the agreement form reflects the content of the current teleworking policy.

A sample revision of the form is provided in Appendix B.

Human
Resources
Concurrence: Partially Agree
Target Date: March 2023
Completion To be determined during the OCA’s follow-up review Action Plan:

The City provides regular and consistent training to supervisors and managers on how to effectively communicate performance feedback, use progressive discipline, targeted development plans, and leave of absence tracking to ensure efficient and effective delivery of City services. Changes to the Hybrid Policy and agreement form that infer disciplinary results or actions would detract from the City’s established performance management processes and cause meet and discuss obligations with the City’s different impacted labor groups. Authority of managers and supervisors is clearly articulated in the City’s merit rules to document expectations of an employee to perform their assigned tasks. An employee performing their assigned tasks remotely does Item 22
Attachment A - OCA-Remote and
Flexible Work Study
Item 22: Staff Report Pg. 28 Packet Pg. 319 of 911
26 not impact the supervisor’s responsibility to complete the performance management process.

The City closely reviewed sample documents from the Society for Human Resources Management in developing the revision to the Remote Work Policy and Agreement form currently utilized. The City’s Hybrid Work agreement form has been updated to reference the Hybrid Work policy and include link.

Finding 3: Remote Work Position Eligibility
The City should development standardized criteria for position remote and flex work eligibility. All positions should be evaluated for full remote, partial remote/flex schedule, and ineligible remote work. Once position eligibility is determined, The City should follow existing policy to review individual employee eligibility for all eligible positions.

A sample criteria is provided in Appendix C.

Human
Resources
Concurrence: Partially Agree
Target Date: February 2023
Completion Date: February 28, 2023
Action Plan:

The Hybrid Work Policy clearly outlines and distinguishes the difference between position eligibility and employee eligibility creating a two-step process for approving hybrid work. Fully remote is not articulated as an option going forward as no longer mandated by public health conditions, except as a special exemption authorized by the City Manager’s Office. A survey tool such as discussed during the audit, using criteria tailored to City operational requirements, will be placed on the HR website as a resource that can be incorporated into future use by supervisors and managers when reviewing a new position for hybrid work eligibility.

Opportunities
We provide context to consider for future implementation of a remote and flexible work policy to remain current and competitive in the hiring market and considerations for executing a position eligibility assessment.

Summarized by:
- Early Covid-19 Pandemic Workforce Response
- Sustaining Remote Workforce Responses
- Future Workforce Challenges
We recommend a six-step framework for position eligibility implementation:
- Creation of a framework
- Creation of a communication plan
Human
Resources
The process outlined above was very similar to that utilized prior to the pandemic to test the revised changes to an earlier version of the City’s policy. Two city divisions were selected to pilot the new policy with surveys of employees being conducted at the beginning, middle, and end of the pilot process. This feedback was then incorporated into the final version of the policy adopted in June 2021.

We believe it is consistent with existing practice to follow this similar framework if/when significant additional changes are needed to the framework of the hybrid work policy. An additional pilot is not necessary to accomplish the minor updates being pursued at this time. However the critical position assessment suggested can be used when new positions are submitted for Annual Budget in support of providing flexible work options.

Item 22
Attachment A - OCA-Remote and
Flexible Work Study
Item 22: Staff Report Pg. 29 Packet Pg. 320 of 911
27 - Selection of pilot departments
- Pilot department evaluation with two approaches
- Modification of the implementation plan
- Implementation of position evaluation
Item 22
Attachment A - OCA-Remote and
Flexible Work Study
Item 22: Staff Report Pg. 30 Packet Pg. 321 of 911
Attachment B
City Attorney’s Response to Policy and Services’ Questions regarding the Potential for Waiver of Workers’ Compensation Coverage in the Context of Remote Work At Policy and Services, the Committee noted that both the SHRM remote work model policy and the City of Palo Alto’s remote work policy state that employees are covered by workers’ compensation laws when performing work duties at their designated alternate locations during their regular work hours.

Committee members expressed concern that alternative work environments are not entirely within the employer’s control, with the potential that these environments could carry increased risk of worker injury without the employer’s knowledge and ability to take corrective action. Committee members inquired whether it is possible for the City to require employees to waive workers’ compensation coverage under these circumstances.

The answer is no. California’s Workers’ Compensation Act is meant to apply to all workplace injuries, irrespective of the fault of any party.1 A waiver is a type of contract, and State law provides that no contract, rule, or regulation can exempt an employer from liability for workers’ compensation.2 Even if waivers were an option, which they are not, it would likely not be advisable to require waivers for remote work. This is because, in general, workers’ compensation liability is often preferable to the alternative, which is civil liability. While the Workers' Compensation Act expands employers’ liability for workplace injuries, it also strictly limits the amount recoverable3 and the types of damages available4 , as
compared to the civil litigation system where disputes over employee injuries would otherwise be adjudicated. When workers’ compensation applies, an employee may generally only seek damages within the framework of workers’ compensation.5 Broad application of workers’ compensation lowers an employer’s exposure to high dollar damage awards, while increasing the employees’ access to expeditious and reasonable relief.

As the audit recommends, an employer’s best tools to address concerns around the safety of alternative workspaces is to establish policies, educate remote workers, and conduct inspections as needed. 1 Farmers Bros. Coffee v. Workers' Comp. Appeals Bd. (App. 2 Dist. 2005) 35 Cal.Rptr.3d 23, 27. 2 Cal. Labor Code section 5000. 3 See e.g., Cal. Labor Code section 4653 (“If the injury causes temporary total disability, the disability payment is two-thirds of the average weekly earnings during the period of such disability”). 4 See West v. Industrial Acc. Com. (1947) 79 C.A.2d 711, 718; 82 Am.Jur.2d (2013 ed.), Workers' Compensation § 356 et seq.
5 See, e.g., Melendrez v. Ameron Int. Corp. (2015) 240 C.A.4th 632, 193 C.R.3d 23 (wrongful death action was barred by workers' compensation exclusive remedy rule, when employee exposed to employer’s asbestos at home as well as at the workplace); Walker v. San Francisco (1950) 97 C.A.2d 901, 904, 219 P.2d 487 (workers' compensation was exclusive remedy for family of fireman killed in collision with municipal railway car while responding to fire).

Item 22
Attachment B - Response
to PS Workers' Comp
Waiver Questions

05.31.23 Item 22: Staff Report Pg. 31 Packet Pg. 322 of 911 City Council
Staff Report
Report Type: CONSENT CALENDAR
Lead Department: City Auditor
Meeting Date: June 19, 2023
Report #:2306-1648
TITLE
Approval of Office of City Auditor Task Order Change - 04.16 ALPR Technology Contract Management; CEQA Status – Not a Project

BACKGROUND
This report will be a special late packet release on Thursday, June 15, 2023.

APPROVED BY:

Adriane McCoy, City Auditor
Item 23
Item 23 Late Packet
Report
Item 23: Staff Report Pg. 1 Packet Pg. 323 of 911
City Council
Staff Report
Report Type: CONSENT CALENDAR
Lead Department: City Auditor
Meeting Date: June 19, 2023
Report #:2306-1649
TITLE
Approval of Office of City Auditor Task Order Change - 04.19 Disaster Recovery Preparedness; CEQA Status – Not a Project

BACKGROUND
This report will be a special late packet release on Thursday, June 15, 2023.

APPROVED BY:

Adriane McCoy, City Auditor
Item 24
Item 24 Late Packet
Report
Item 24: Staff Report Pg. 1 Packet Pg. 324 of 911
City Council
Staff Report
Report Type: CONSENT CALENDAR
Lead Department: City Auditor
Meeting Date: June 19, 2023
Report #:2306-1650
TITLE
Approval of Office of City Auditor Task Order Change - FY23-01 Citywide Risk Assessment & FY23-02 Annual Audit Plan; CEQA Status – Not a Project

BACKGROUND
This report will be a special late packet release on Thursday, June 15, 2023.

APPROVED BY:

Adriane McCoy, City Auditor
Item 25
Item 25 Late Packet
Report
Item 25: Staff Report Pg. 1 Packet Pg. 325 of 911
City Council
Staff Report
Report Type: CONSENT CALENDAR
Lead Department: City Clerk
Meeting Date: June 19, 2023
Report #:2306-1621
TITLE
SECOND READING: Adoption of an Ordinance Amending Section 2.04.010 (Regular Meeting) of Chapter 2.04 (Council Organization and Procedure) of the Palo Alto Municipal Code to Change the City Council Meeting Start Time from Six p.m. to Five- Thirty p.m. (FIRST READING: June 5, 2023 PASSED 7-0)

BACKGROUND
This was heard by the City Council on June 5, 2023 for a first reading and was approved 7-0. No changes were made to the Ordinance; it is now before you for a second reading.

ATTACHMENTS
Attachment A: Ordinance Amending Section 2.04.010 (Regular Meeting) to Change the Council Meeting Start Time
APPROVED BY:

Mahealani Ah Yun, Interim City Clerk
Item 26
Item 26 Staff Report
Item 26: Staff Report Pg. 1 Packet Pg. 326 of 911
1 NOT YET APPROVED
Attachment A
Ordinance No.

Ordinance of the Council of the City of Palo Alto
Amending Section 2.04.010 (Regular Meeting) of Chapter 2.04 (Council Organization and Procedure) of the Palo Alto Municipal Code to Change the City Council Meeting Start Time from Six p.m. to Five- Thirty p.m.

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

SECTION 1. Findings and Declarations. The City Council finds and declares as follows:
(a) The Palo Alto Charter states that the Council shall set a time and place for its regular meetings. (Charter, Art. III, Section 5.) For many years, the Municipal Code has provided that the regular meeting time is the first three Mondays of each month beginning at six p.m. (Palo Alto Municipal Code section 2.04.010.);
(b) In recent years, it has been common for Council meetings to begin at five p.m. Such meetings are noticed as “special meetings” as required by state and local law. (Cal.

Govt. Code sections 54954, 54956; PAMC section 2.04.020; Palo Alto City Council Procedures and Protocols, section 2.1(a), p. 9.); and
(c) Council now wishes to amend the Municipal Code to provide that the regular meeting time be the first three Mondays of each month beginning at five- thirty p.m.

Meetings noticed for other times will be designated “special meetings.” SECTION 2. Section 2.04.010 (Regular Meeting) of Chapter 2.04 (Council Organization and Procedure) of the Palo Alto Municipal Code is hereby amended as follows (additions are in underline, deletions are in strikethrough):

2.04.010 Definitions
(a) The council of the city shall hold regular meetings on the first three Mondays of each month, at six five- thirty p.m. in the council chambers of the City Hall, 250 Hamilton Avenue, in said city unless the council chambers shall be determined by a majority vote of the council to be inadequate or unavailable for a meeting, in which event the council may designate some other suitable place in the city for the conduct of the meeting. The determination to hold the meeting at a place other than the council chambers may be made by the mayor prior to the regular meeting date; provided, that notice of the change in place for conduct of the meeting shall be published prior to the meeting in a newspaper of general circulation published in the city, setting forth the reasons for the change, and a copy of the notice shall be posted on the council chamber door for at least twenty-four hours prior to the time scheduled for the meeting and during the meeting. If the council adjourns its meeting from the council chambers to another place, notice to adjourn and the new place for holding the meeting shall be posted on the council chamber door during the time the meeting is being held.

Item 26
Attachment A - Ordinance
Amending Section 2 04
010 to Change the
Council Meeting
Item 26: Staff Report Pg. 2 Packet Pg. 327 of 911
2 NOT YET APPROVED
Attachment A
(b) Each year, no later than the third meeting in February, the council shall by resolution schedule its vacation for that year. The resolution shall designate the dates of this scheduled vacation and the city clerk will give notice thereof by whatever means are deemed appropriate. During said scheduled annual vacation, there shall be no regular meetings of the council nor of the council standing committees, unless it is an adjourned regular meeting. The mayor or a majority of the council may call a special meeting during the scheduled vacation if necessary.

SECTION 3. Council action on this item is not a project as defined by the California Environmental Quality Act (CEQA) because it is an organizational or administrative matter that will not result in direct or indirect physical changes in the environment. (CEQA Guidelines 15378(b)(5).)
SECTION 4. This ordinance shall be effective on the thirty-first day after the date of its adoption.

INTRODUCED:

PASSED:

AYES:

NOES:

ABSENT:

ABSTENTIONS:

ATTEST:
____________________________ ____________________________ City Clerk Mayor
APPROVED AS TO FORM: APPROVED:
____________________________ ____________________________ City Attorney City Manager
____________________________
Director of Administrative
Services
Item 26
Attachment A - Ordinance
Amending Section 2 04
010 to Change the
Council Meeting
Item 26: Staff Report Pg. 3 Packet Pg. 328 of 911
City Council
Staff Report
Report Type: CONSENT CALENDAR
Lead Department: City Clerk
Meeting Date: June 19, 2023
Report #:2306-1623
TITLE
SECOND READING: Adoption of an Ordinance Amending Section Palo Alto Municipal Code Chapter 9.68, Rental Housing Stabilization, to Clarify the Definitions of At-Fault and No-Fault Just Cause for Evictions, Extend Just Cause Eviction Protections and Tenant Relocation Assistance to More Rental Units in Palo Alto than Offered by State Law, and Adopt a Security Deposit Limit for Unfurnished Rental Units in Palo Alto. Environmental Assessment: Exempt under CEQA Guidelines Section 15061(b)(3). (FIRST READING: June 5, 2023 PASSED 6-1)

BACKGROUND
This was heard by the City Council on June 5, 2023 for a first reading and approved 6-1, Tanaka no. It is now before you for a second reading. In preparing the ordinance for a second reading, staff identified a minor subsection reference typo. This has been corrected in the attached ordinance.

ATTACHMENTS
Attachment A: Draft Ordinance - Just Cause Eviction and Security Deposit APPROVED BY:

Mahealani Ah Yun, Interim City Clerk
Item 27
Item 27 Staff Report
Item 27: Staff Report Pg. 1 Packet Pg. 329 of 911
Not Yet Approved
Ordinance No. _____
Ordinance of the Council of the City of Palo Alto Amending Chapter 9.68 (Rental Housing Stabilization) to Clarify the Definitions of At-Fault and No-Fault Just Cause for Evictions, Extend Just Cause Eviction Protections to More Rental Units in Palo Alto than Offered by State Law, and to Enact a Security Deposit Limit for Unfurnished Rental Units in Palo Alto
The Council of the City of Palo Alto ORDAINS as follows:

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

A. Renters represent a significant percentage of Palo Alto’s population; B. Landlords provide a significant community service by providing rental housing in the City of Palo Alto;
C. Palo Alto has great diversity in residential rental property and rental unit types, ranging from single-family homes, accessory and junior accessory dwelling units, to properties with multi-family apartment buildings containing a variety of rental units; D. There is a need to ensure that housing is provided for people of all income levels, and affirmatively further fair housing;
E. The Palo Alto rental market is one of the most expensive in the country, which is one factor that can lead to potential renters being unable to afford standard rental unit movein costs; F. The Palo Alto rental market is one of the most expensive in the country, which is one factor that can lead to renters at risk of displacement; G. The city desires to implement policies for certainty, stability, and fairness in the rental market for renters and landlords;
H. A significant number of renters in Palo Alto are low-income and cost-burdened; I. Move-in costs for unfurnished residential rental units commonly include first and last month's rent plus a security deposit of up to two months’ rent, leading to high initial move in costs ,
J. The State of California created eviction protections for some rental units in Palo Alto but not others through the enactment of California Assembly Bill 1482 (2019), which currently automatically sunsets in 2030,
Item 27
Attachment A - Draft
Ordinance - Just Cause
Eviction and Security
Deposit
Item 27: Staff Report Pg. 2 Packet Pg. 330 of 911
Not Yet Approved
230607 sm 010 2
K. The city is making significant investments on an ongoing basis regarding rental unit protection, preservation, and production and will also soon need to implement the 6th Cycle Housing Element policies and programs; and
L. On November 29, 2021, the City Council held a public meeting to discuss a variety of renter protection measures and directed staff to draft a Security Deposit Limit ordinance that caps the maximum allowed security deposit for unfurnished rental units in Palo Alto to one and one half times (1.5x) the monthly rent, whereas California Civil Code section 1950.5 allows for the maximum security deposit for unfurnished units to be two times (2x) the monthly rent,
M. On November 29, 2021, the City Council held a public meeting to discuss a variety of renter protection measures and directed staff to draft a response to California Assembly Bill 1482 (2019) by preparing an Eviction Reduction/Just Cause ordinance for Palo Alto to extend state eviction protections to properties built and receiving occupancy within the last fifteen (15) years, but does not include rental units occupied less than a year or single family homes not owned by a corporation or renters who live in a duplex when one unit is owner occupied,
N. On February 9, 2023, the Human Relations Commission held a public meeting to discuss the effectiveness of existing renter protections in Palo Alto and recommended that the City Council adopt the extensions described by the City Council on November 29, 2021 in addition to several other extensions,
O. The city, while still retaining local definitions in some cases, adjusted the previous Palo Alto definitions of at-fault and no-fault just cause eviction in order to be consistent with California Assembly Bill 1482 (2019) for the purposes of consistency, transparency, legal clarity,
P. The city finds that the Eviction Reduction/Just Cause and Security Deposit Limit ordinance is not in conflict with and is more protective than California Assembly Bill 1482 (2019) in regard to the number of rental units receiving eviction protections and relocation assistance, the limitations on security deposits for unfurnished residential rental units, and, in some circumstances, in regard to the Tenant Relocation Assistance (TRA) dollar amount required if a tenant received a no-fault just cause eviction, and because the ordinance is permanent and does not contain the California Assembly Bill 1482 (2019) automatic sunset in 2030,
Q. The City Council finds and determines that the Eviction Reduction/Just Cause and Security Deposit Limit ordinance codified in Palo Alto Municipal Code Chapter 9.68 (Rental Housing Stabilization) is adopted pursuant to the city’s authority to protect the public health, safety, and welfare.

SECTION 2. Chapter 9.68 (Rental Housing Stabilization) of Title 9 (Public Peace, Morals and Safety) is hereby amended as follows (new text underlined and deletions struck-through):

Item 27
Attachment A - Draft
Ordinance - Just Cause
Eviction and Security
Deposit
Item 27: Staff Report Pg. 3 Packet Pg. 331 of 911
Not Yet Approved
230607 sm 010 3

9.68.010. Purpose.
(a) It is found and declared that there is a growing shortage of, but increasing demand for, housing in the city of Palo Alto. Such shortage and increased demand, coupled with increasing inflation, have placed substantial pressure on those residents of Palo Alto seeking rental housing. This council finds that tenantrenters are entitled to a contractual relationship with a landlord that offers some assurance of stability and fair treatment under the terms of a written lease so as toto minimize displacement of tenantrenters into a rental housing market which affords them few and expensive options. (b) Council further finds that the provisions of California Assembly Bill 1482 (2019), as codified and later expanded in the Civil Code of the state of California, offers important protections from instability and displacement to renters. The provisions of that bill as they relate to eviction reduction are restated and expanded below, to make the protections permanent in the city of Palo Alto and extend them to renters living in qualified residential rental units that received a certificate of occupancy within the last fifteen years.

9.68.020. Definitions.

For purposes of this chapter, the following terms are defined as follows:
(a) “Landlord” means an owner, lessor, or sublessor, or the agent, representative, or successor of any of the foregoing persons who receives, or is entitled to receive, rent for the use and occupancy of any rental unit or portion thereof the owner or property manager exercising effective control over the terms and conditions of the tenancy of a residential rental unit, including a person with such control delegated through a durable power of attorney.
(b) "Rent" means the consideration, including any bonus, benefit, or gratuity demanded or received by a landlord, for or in connection with the use or occupancy of a residential rental unit.
(c) "Rent increase" means any additional rent demanded of or paid by a renter for a residential rental unit.
(d) "Residential rental unit" means any housing structure occupied as a dwelling or offered for rent or lease as a dwelling, whether attached, detached, single or multiple-family."Rental unit" means a dwelling unit in the city of Palo Alto with the land and appurtenant buildings thereto and all housing services, privileges, and facilities supplied in connection with the use or occupancy thereof, which unit is in a multiple-family dwelling (including a duplex), boardinghouse, lodginghouse, or mobilehome park. The term "rental unit" shall not include:
(0) A single-family dwelling;
(0) Rooms or accommodations in hotels, boardinghouses, or lodginghouses which are rented to transient guests for a period of less than thirty days; Item 27
Attachment A - Draft
Ordinance - Just Cause
Eviction and Security
Deposit
Item 27: Staff Report Pg. 4 Packet Pg. 332 of 911
Not Yet Approved
230607 sm 010 4
(0) Dwelling units in a condominium, community apartment, planned development or stock cooperative as defined in Chapter 21.40, or in a limited equity stock cooperative as defined in the California Business and Professions Code;
(0) Dwelling units in which housing accommodations are shared by landlord and tenant;
(0) Housing accommodations in any hospital, extended care facility, asylum, nonprofit home for the aged, or in dormitories owned and operated by an institution of higher education, a high school or an elementary school; (0) Housing accommodations rented by a medical institution which are then subleased to a patient or patient's family;
(0) Dwelling units whose rents are controlled or regulated by any government unit, agency, or authority, or whose rent is subsidized by any government unit, agency, or authority; or
(0) Dwelling units acquired by the city of Palo Alto or any other governmental unit, agency or authority and intended to be used for a public purpose.
(m)(e) “Tenant” "Renter" means a person or entity entitled by written or oral agreement to occupy a residential rental unit to the exclusion of others. (f) “Just cause” to terminate a tenancy means either of the following:
(1) “At-fault just cause”, which means any of the following:
(A) Default in the payment of rent.
(B) A breach of a material term of the lease, as described in paragraph (3) of Section 1161 of the California Code of Civil Procedure, including, but not limited to, violation of a provision of the lease after being issued a written notice to correct the violation. (C) Maintaining, committing, or permitting the maintenance or commission of a nuisance as described in paragraph (4) of Section 1161 of the California Code of Civil Procedure.
(D) Committing waste as described in paragraph (4) of Section 1161 of the California Code of Civil Procedure.
(E) The renter had a written lease that terminated on or after July 20, 2023, and after a written request or demand from the landlord, the renter has refused to execute a written extension or renewal of the lease for an additional term of similar duration with similar provisions, provided that those terms do not violate this chapter or any other provision of law.
(F) Criminal activity by the renter on the residential rental unit, including any common areas, or any criminal activity or criminal threat, as defined in subdivision (a) of Section 422 of the California Penal Code, on or off the residential rental unit, that is directed at any landlord or agent of the landlord.

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(G) Assigning or subletting the premises in violation of the renter’s lease, as described in paragraph (4) of Section 1161 of the California Code of Civil Procedure.
(H) The renter’s refusal to allow the landlord to enter the residential rental unit as authorized by Sections 1101.5 and 1954 of the California Civil Code, and Sections 13113.7 and 17926.1 of the California Health and Safety Code.
(I) Using the premises for an unlawful purpose as described in paragraph (4) of Section 1161 of the California Code of Civil Procedure.
(J) The employee, agent, or licensee’s failure to vacate after their termination as an employee, agent, or a licensee as described in paragraph (1) of Section 1161 of the California Code of Civil Procedure.
(K) When the renter fails to deliver possession of the residential rental unit after providing the landlord written notice as provided in Section 1946 of the California Civil Code of the renter’s intention to terminate the hiring of the real property, or makes a written offer to surrender that is accepted in writing by the landlord, but fails to deliver possession at the time specified in that written notice as described in paragraph (5) of Section 1161 of the California Code of Civil Procedure.
(2) “No-fault just cause,” which means any of the following:
(A) Intent to occupy the residential rental unit by the landlord or their sibling, spouse, domestic partner, children, grandchildren, parents, grandparents, father-in-law, mother-in-law, son-in-law, or daughter-in-law, provided the landlord is a natural person. (B) Permanent withdrawal of the residential rental unit from offer for rent or lease pursuant to California Government Code sections 7060-7060.7.
(C) The landlord complying with any of the following:
(i) An order issued by a government agency or court relating to habitability that necessitates vacating the residential rental unit.
(ii) An order issued by a government agency or court to vacate the residential rental unit.
(iii) A local ordinance that necessitates vacating the residential rental unit.
(D) Intent to demolish or to substantially remodel the residential rental unit. “Substantially remodel” means the replacement or
substantial modification of any structural, electrical, plumbing, or mechanical system that requires a permit from a governmental agency, or the abatement of hazardous materials, including leadbased paint, mold, or asbestos, in accordance with applicable Item 27
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federal, state, and local laws, that cannot be reasonably accomplished in a safe manner with the renter in place and that requires the renter to vacate the residential rental unit for at least 30 days. Cosmetic improvements alone, including painting, decorating, and minor repairs, or other work that can be performed safely without having the residential rental unit vacated, do not qualify as substantial rehabilitation.
(g) “Security” means any payment, fee, deposit, or charge, including, but not limited to, any payment, fee, deposit, or charge, except as provided in Section 1950.6 of the California Civil Code, that is imposed at the beginning of the tenancy to be used to reimburse the landlord for costs associated with processing a new renter or that is imposed as an advance payment of rent, used or to be used for any purpose, including, but not limited to, any of the following:
(1) The compensation of a landlord for a renter’s default in the payment of rent.
(2) The repair of damages to the premises, exclusive of ordinary wear and tear, caused by the renter or by a guest or licensee of the renter. (3) The cleaning of the premises upon termination of the tenancy necessary to return the unit to the same level of cleanliness it was in at the inception of the tenancy.
(1)(4) To remedy future defaults by the renter in any obligation under the rental agreement to restore, replace, or return personal property or appurtenances, exclusive of ordinary wear and tear, if the security deposit is authorized to be applied thereto by the rental agreement.

9.68.030. Requirement of offering one-year written leases. (a) Offer. If a tenant renter or prospective tenant renter wishes to rent a residential rental unit from a landlord and if said landlord wishes to rent said residential rental unit to said renter tenant or prospective rentertenant, the landlord must offer to the renter tenant or prospective renter tenant a written lease which has a minimum term of one year. Such offer must be made in writing. Signing of a lease which has a minimum term of one year shall be considered an offer in writing. (b) Acceptance. If the renter tenant or prospective renter tenant accepts the offer of a written lease which has a minimum term of one year, this acceptance must be in writing. Signing a lease which has a minimum term of one year will be considered an acceptance.
(c) Rejection. If the renter tenant or prospective renter tenant rejects the offer for a written lease which has a minimum term of one year, this rejection must be in writing, and the landlord and renter tenant or prospective renter tenant may then enter into an agreement, oral or written, that provides for a rental term of less than one year.

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(d) Rent. If the landlord and renter tenant enter into a written lease which has a minimum term of one year, such lease must set the rent for the residential rental unit at a rate or rates certain and these rates shall not be otherwise modified during the term of such lease.
(e) Renewal of Leases. If both the landlord and the renter tenant wish to continue the rental relationship, upon the expiration of the initial written lease which has a minimum term of one year, a lease shall be offered again in accordance with the procedures of Section 9.68.030(a) through (d):
(1) Leases with a term of one year shall be offered annually. (2) Leases with a term longer than one year shall be renewable at the expiration of each lease period for a minimum term of one year. (3) A landlord shall offer annually a written lease with a minimum term of one year to a renter tenant who rejected an initial offer of a written lease with a minimum term of one year but who has rented a unit from the landlord for a period of at least twelve months.
(f) Applicability. This section shall not apply to:
(1) A residential rental unit which is rented on the effective date of the ordinance codified in this chapter, provided, that (A) if the unit is rented subject to a written lease, when the lease in effect for such a unit expires, the ordinance codified in this chapter shall then apply; and (B) if the unit is rented without a written lease, within thirty days after the effective date of this section, the landlord shall offer a written lease to the renter tenant in accordance with this section;
(2) An owner-occupied unit that is rented to a renter tenant for less than one year;
(3) A residential rental unit occupied by a renter tenant who subleases that unit to another renter tenant for less than one year;
(3)(4) A single-family dwelling;
(5) Rooms or accommodations in hotels, boardinghouses, or lodginghouses which are rented to transient guests for a period of less than thirty days; (6) Dwelling units in a condominium, community apartment, planned development or stock cooperative as defined in Chapter 21.40, or in a limited equity stock cooperative as defined in the California Business and Professions Code;
(7) Dwelling units in which housing accommodations are shared by landlord and tenant;
(8) Housing accommodations in any hospital, extended care facility, asylum, nonprofit home for the aged, or in dormitories owned and operated by an institution of higher education, a high school or an elementary school; (9) Housing accommodations rented by a medical institution which are then subleased to a patient or patient's family;
(10) Dwelling units whose rents are controlled or regulated by any government unit, agency, or authority, or whose rent is subsidized by any government unit, agency, or authority;
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(11) Dwelling units acquired by the city of Palo Alto or any other governmental unit, agency or authority and intended to be used for a public purpose; (4)(12) A residential rental unit where tenancy is an express condition of, or consideration for employment under a written rental agreement or contract.

9.68.040. Just-cause evictions required.
(a) Applicability to residential rental units. This section shall apply to all residential rental units, except not any of the following:
(1) Transient and tourist hotel occupancy as defined in in subdivision (b) of Section 1940 of the California Civil Code.
(2) Housing accommodations in a nonprofit hospital, religious facility, extended care facility, licensed residential care facility for the elderly, as defined in Section 1569.2 of the California Health and Safety Code, or an adult residential facility, as defined in Chapter 6 of Division 6 of Title 22 of the Manual of Policies and Procedures published by California’s State Department of Social Services.
(3) Dormitories owned and operated by an institution of higher education or a kindergarten and grades 1 to 12, inclusive, school.
(4) Housing accommodations in which the renter shares bathroom or kitchen facilities with the owner who maintains their principal residence at the residential rental unit.
(5) Single-family owner-occupied residences.
(6) A property containing two separate dwelling units within a single structure in which the owner occupied one of the units as the owner’s principal place of residence at the beginning of the tenancy, so long as the owner continues in occupancy, and neither unit is an accessory dwelling unit or a junior accessory dwelling unit.
(7) A residential rental unit that is alienable separate from the title to any other dwelling unit, provided that both subparagraphs (A) and (B) below apply:
(A) The owner is not any of the following:
(i) A real estate investment trust, as defined in Section 856 of the California Internal Revenue Code.
(ii) A corporation.
(iii) A limited liability company in which at least one member is a corporation.
(iv) Management of a mobilehome park, as defined in Section 798.2 of the California Civil Code.
(B) The renters have been provided written notice that the residential property is exempt from this section.
(i) Notice must be given using the following statement:
“This property is not subject to the just cause eviction requirements of Chapter 9.68 of the Palo Alto
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Municipal Code. This property meets the
requirements of Section 9.68.040 (a)(7) of the Palo
Alto Municipal Code and the owner is not any of the
following: (1) a real estate investment trust, as
defined by Section 856 of the California Internal
Revenue Code; (2) a corporation; (3) a limited liability company in which at least one member is a
corporation; or (4) management of a mobilehome
park, as defined in Section 798.2 of the California Civil Code.”
(ii) The notice required under clause (i) may, but is not required to, be provided in the rental agreement.
(8) Housing restricted by deed, regulatory restriction contained in an agreement with a government agency, or other recorded document as affordable housing for persons and families of very low, low, or moderate income, as defined in Section 50093 of the California Health and Safety Code, or subject to an agreement that provides housing subsidies for affordable housing for persons and families of very low, low, or moderate income, as defined in Section 50093 of the California Health and Safety Code or comparable federal statutes.
(b) Protection for renters. Notwithstanding any other law, after a renter has continuously and lawfully occupied a residential rental unit for 12 months, the landlord of the residential rental unit shall not terminate the tenancy without just cause, which shall be stated with specificity in the written notice to terminate tenancy. If any additional adult renters are added to the lease before an existing renter has continuously and lawfully occupied the residential rental unit for 24 months, then this subdivision shall only apply if either of the following are satisfied:
(1) All of the renters have continuously and lawfully occupied the residential rental unit for 12 months or more.
(2) One or more renters have continuously and lawfully occupied the residential rental unit for 24 months or more.
(c) Opportunity to cure. Before a landlord issues a notice to terminate a tenancy for just cause that is a curable lease violation, the landlord shall first give notice of the violation to the renter with an opportunity to cure the violation pursuant to paragraph (3) of Section 1161 of the California Code of Civil Procedure. If the violation is not cured within the time period set forth in the notice, a three-day notice to quit without an opportunity to cure may thereafter be served to terminate the tenancy.
(d) Notice. A landlord subject to this section shall provide notice to the tenant, which may take the form of a lease provision or an addendum to a lease, and which shall include the following, in no less than 12-point type:
“California law limits the amount your rent can be increased. See Section 1947.12 of the Civil Code for more information. Local law also provides that after Item 27
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all of the tenants have continuously and lawfully occupied the property for 12 months or more or at least one of the tenants has continuously and lawfully occupied the property for 24 months or more, a landlord must provide a statement of cause in any notice to terminate a tenancy. See Chapter 9.68 of the Palo Alto Municipal Code for more information.”
(e) Dispute resolution. Nothing in this chapter abrogates the responsibility of landlords to comply with the requirements of Chapter 9.72 (Mandatory Response to Request for Discussion of Disputes between Landlords and Tenants) of the Palo Alto Municipal Code. As applicable, a renter may request mandatory discussion of rental housing disputes by filing a written request for dispute resolution according to section 9.72.040 (Dispute Resolution Process).

9.68.050. General relocation assistance or rent waiver for no-fault eviction. (a) Applicability. This section shall be applicable only to tenancies for which just cause is required to terminate the tenancy under section 9.68.040 (Just-cause evictions required), except it shall not apply to a tenancy when relocation assistance payment is available to the renter through section 9.68.060 (Relocation assistance for evictions without at-fault just cause in structures or lots containing 10 or more residential rental units) and the assistance available through section 9.68.060 is greater in value than the assistance available through this section.
(b) Relocation assistance for renters.
(1) Form of assistance. If a landlord issues a termination notice based on a nofault just cause described in section 9.68.020 (f)(2), the landlord shall, regardless of the renter’s income, at the landlord’s option, do one of the following:
(A) Assist the renter to relocate by providing a direct payment to the tenant as described in section 9.68.050 (b)(3).
(B) Waive in writing the payment of rent for the final month of the tenancy, prior to the rent becoming due.
(2) Notice required. If a landlord issues a notice to terminate a tenancy for nofault just cause, the landlord shall notify the renter of the renter’s right to relocation assistance or rent waiver pursuant to this chapter. If the landlord elects to waive the rent for the final month of the tenancy as provided in section 9.68.050 (b)(1), the notice shall state the amount of rent waived and that no rent is due for the final month of the tenancy. (3) Amount.
(A) The amount of relocation assistance or rent waiver shall be equal to one month of the renter’s rent that was in effect when the landlord issued the notice to terminate the tenancy. Any relocation assistance shall be provided within 15 calendar days of service of the notice.

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(B) If a renter fails to vacate after the expiration of the notice to terminate the tenancy, the actual amount of any relocation assistance or rent waiver provided pursuant to this section shall be recoverable as damages in an action to recover possession. (C) The relocation assistance or rent waiver required by this section shall be credited against any other relocation assistance required by any other law.
(4) Effect of noncompliance. A landlord’s failure to strictly comply with this subdivision shall render the notice of termination void.

9.68.035 9.68.060 Relocation assistance for no-fault evictions without at-fault just cause in structures or lots containing 10 or more residential rental units. (a) Applicability. This section shall be applicable only to structures or lots containing 10 or more residential rental units. This section shall not apply to any of the following:
(1) A single-family dwelling;
(2) Rooms or accommodations in hotels, boardinghouses, or lodginghouses which are rented to transient guests for a period of less than thirty days; (3) Dwelling units in a condominium, community apartment, planned development or stock cooperative as defined in Chapter 21.40, or in a limited equity stock cooperative as defined in the California Business and Professions Code;
(4) Dwelling units in which housing accommodations are shared by landlord and tenant;
(5) Housing accommodations in any hospital, extended care facility, asylum, nonprofit home for the aged, or in dormitories owned and operated by an institution of higher education, a high school or an elementary school; (6) Housing accommodations rented by a medical institution which are then subleased to a patient or patient's family;
(7) Dwelling units whose rents are controlled or regulated by any government unit, agency, or authority, or whose rent is subsidized by any government unit, agency, or authority; or
(8) Dwelling units acquired by the city of Palo Alto or any other governmental unit, agency or authority and intended to be used for a public purpose.

For purposes of this section , a "no-fault eviction" means an action by a landlord to recover possession of a rental unit for any reason other than the following:
(1) The tenant has failed to pay rent to which the landlord is legally entitled. (2) The tenant has violated a lawful obligation or covenant of the tenancy.

The tenant has refused the landlord reasonable access to the unit for the purposes of making repairs or improvements, for any reasonable purpose as permitted by law, or for the purpose of showing the rental unit to any prospective purchaser or tenant.

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(4) The tenant is permitting a nuisance to exist in, or is causing damage to, the rental unit.
(4) The tenant is using or permitting a rental unit to be used for any illegal purpose.
(4) The landlord seeks in good faith to recover possession of the rental unit in order to comply with regulations relating to the qualifications of tenancy established by a governmental entity, where the tenant is no longer qualified.

No fault evictions shall include, without limitation, actions in which the landlord seeks in good faith to recover possession of the rental unit:
(4) To demolish or otherwise permanently withdraw the rental unit from offer for rent or lease pursuant to California Government Code sections 7060-7060.7.
(4) To perform work on the building or buildings housing the rental unit that will render the rentable unit uninhabitable;
(4) For use and occupancy by the landlord or the landlord's spouse, grandparents, brother, sister, father-in-law, mother-in-law, son-in-law, daughter-in-law, children, or parents provided the landlord is a natural person.
(4) For no specified cause.
(a)(b) Amount required. Whenever a landlord seeks an eviction for any reason other than to comply with regulations relating to the qualifications of tenancy established by a governmental entity or at-fault just cause, as defined in this Chapter, other than temporary displacement of 31 days or fewer, the landlord shall provide a relocation assistance payment as follows:
(1) Unit Type Amount
0 bedrooms $7,000
1 bedroom $9,000
2 bedrooms $13,000
3 or more bedrooms $17,000
If the residential rental unit is occupied by two or more tenantrenters, the landlord shall provide each tenantrenter with a proportional share of the required payment. One half of the payment shall be paid at the time that the landlord provides notice of its intent to seek no-fault a qualifying eviction; the remainder of the payment shall be paid to each tenantrenter when that tenantrenter vacates the unit.
(2) Notwithstanding subsection (db)(1), each residential rental unit that, at the time the landlord provides notice of its intent to seek no-faultan eviction subject to this section, is occupied by a low-income household as defined in Chapter 16.65, a tenantrenter who is 60 years of age or older, a tenantrenter who is disabled within the meaning of Government Code section 12955.3, or a tenantrenter who is a minor, shall be entitled to a single additional relocation payment of $3,000. This amount shall be divided equally among the qualifying Item 27
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(i.e. low-income, elderly, disabled, or minor) tenantrenters. In order to receive this additional payment a qualifying tenantrenter must provide written notice to the landlord of his or her eligibility along with supporting evidence within 15 days of receiving the landlord's notice. The entirety of this additional payment shall be paid within 15 days of the tenantrenter's written notice to the landlord. (b)(c) Notice. Prior to or at the same time that the landlord provides notice of its intent to seek no-faultan eviction subject to this section, the landlord shall serve on the tenantrenter a written notice describing the rights described in this section. The failure to provide this notice shall not operate as a substantive defense to an eviction pursuant to California Government Code sections 7060- 7060.7.
(c)(d) Annual adjustment. Commencing July 1, 2019, the relocation payments specified in this section shall increase annually at the rate of increase in the "rent of primary residence" expenditure category of the Consumer Price Index (CPI) for all urban consumers in the San Francisco-Oakland-San JoseHayward Region, not seasonally adjusted, for the preceding calendar year. Current rates shall be published on the city's website.
(d)(e) Request for waiver. A landlord may request a waiver or adjustment of the relocation assistance payment required by this section only upon a showing that strict application of its requirements would effectuate an unconstitutional taking of property or otherwise have an unconstitutional application to the property.

Requests for waiver or adjustment must be submitted in writing to the director of planning and development services together with supporting documentation at least 90 days before the proposed termination of tenancy. Requests shall be acted on by the city council.
(e)(f) Authority to regulate. The director of planning and development services may issue regulations implementing this section.

9.68.070. Security deposit limit.
(a) Applicability. This section applies to security for leases of all residential rental units.
(b) Limits. A landlord may not demand or receive security, however denominated, in an amount or value in excess of an amount equal to one and a half months’ rent, in the case of unfurnished rental units, in addition to any rent for the first month paid on or before initial occupancy.
(c) Security deposit purposes. The landlord may claim of the security only those amounts as are reasonably necessary for the purposes specified in subdivision

9.68.020 (g). The landlord may not assert a claim against the renter or the security for damages to the premises or any defective conditions that preexisted the tenancy, for ordinary wear and tear or the effects thereof, whether the wear and tear preexisted the tenancy or occurred during the tenancy, or for the cumulative effects of ordinary wear and tear occurring during any one or more tenancies.

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9.68.040 9.68.080 TenantRenter's remedies.
(a) Defense to Action to Recover Possession. Failure of a landlord to comply with any of the provisions of this chapter shall provide the tenantrenter with a defense in any legal action brought by the landlord to recover possession of the residential rental unit.
(b) Defense to Action to Collect Rent. Failure of a landlord to comply with any of the provisions of this chapter shall provide the tenant renter with a defense in any legal action brought by the landlord to collect rent. (c) Injunctive Relief. A tenant renter may seek injunctive relief on his or her own behalf and on behalf of other affected tenants renters to enjoin the landlord's violation of this chapter.
(d) Remedies are Nonexclusive. Remedies provided in this section are in addition to any other existing legal remedies and are not intended to be exclusive.

9.68.050 9.68.090 Nonwaiver.

Any waiver or purported waiver by a tenantrenter of rights under this chapter prior to the time when such rights may be exercised, except a rejection of a one-year lease offered in accordance with Section 9.68.030, shall be void as contrary to public policy.

SECTION 3. If any section, subsection, clause or phrase of this Ordinance is for any reason held to be invalid, such decision shall not affect the validity of the remaining portion or sections of the Ordinance. The Council hereby declares that it should have adopted the Ordinance and each section, subsection, sentence, clause or phrase thereof irrespective of the fact that any one or more sections, subsections, sentences, clauses or phrases be declared invalid.

SECTION 4. The Council finds that this project is exempt from the provisions of the California Environmental Quality Act (“CEQA”), pursuant to Section 15061 of the CEQA Guidelines, because it can be seen with certainty that there is no possibility that the ordinance will have a significant effect on the environment.

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

INTRODUCED:

PASSED:

AYES:

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NOES:

ABSENT:

ABSTENTIONS:

ATTEST:
____________________________ ____________________________ City Clerk Mayor
APPROVED AS TO FORM: APPROVED:
____________________________ ____________________________ City Attorney City Manager
____________________________
Director of Planning and Development
Services
____________________________
Director of Community Services
____________________________
Director of Administrative
Services
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Item No. 28. Page 1 of 10

CITY COUNCIL

STAFF REPORT
From: City Manager
Report Type: Action
Lead Department: Utilities
Meeting Date: June 19, 2023
Staff Report: 2302-0939
TITLE
Finance Committee Recommends Adoption of Four Resolutions: 1) Approving the Fiscal Year 2024 Wastewater Collection Utility Financial Plan, Proposed Reserve Transfers, and Increasing Wastewater 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; 3) Amending Utility Rate Schedules EDF1 and EDF-2, to Increase Dark Fiber Rates by 4.9 Percent and amending Rate Schedule EDF-3 to make technical revisions with no rate change; and 4) Amending Utility Rate Schedule D-1 Increasing the Storm Water Management Fee by 4.9 Percent per Month per Equivalent Residential Unit for FY 2024; and CEQA Status: Not a project under CEQA Guidelines Section 15378(b)(4) and (5) and exempt under Public Resources Code Sec. 21080(b)(8) and CEQA Guidelines Section 15273(a)

RECOMMENDATION
Finance Committee, the Utilities Advisory Commission (UAC) and staff recommend that the City Council adopt the following:

1. For the Wastewater Collection Utility, a Resolution1:
a. Approving the Fiscal Year 2024 Wastewater Collection Financial Plan2, 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 Schedules3 1 Wastewater Resolution https://www.cityofpaloalto.org/files/assets/public/agendas-minutesreports/reports/city-manager-reports-cmrs/attachments/03-01-2023-id-2301-0798-ww-resolution.pdf 2 Fiscal Year 2024 Wastewater Financial Plan https://www.cityofpaloalto.org/files/assets/public/agendas-minutesreports/reports/city-manager-reports-cmrs/attachments/03-07-2023-id-2302-0944-ww-financial-plan-lisa.pdf 3 Wastewater Rate Schedules https://www.cityofpaloalto.org/files/assets/public/agendas-minutesreports/reports/city-manager-reports-cmrs/attachments/06-19-2023-id-2302-0939-wastewater-rate-schedulesfy24-combined.pdf Item 28
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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)

2. For the Water Utility, a Resolution4:
a. Approving the FY 2024 Water Utility Financial Plan5, including a 2% water distribution rate increase; and
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 Schedules6 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)

3. A Resolution Amending Utility Rate Schedules EDF-1 and EDF-27 to increase Dark Fiber Rates 4.9 percent, and amending Schedule EDF-3 to reflect minor edits with no rate change;

4. A Resolution Amending Utility Rate Schedule D-18 increasing the Storm Water Management Fee by

4.9 percent consistent with the applicable Consumer Price Index.

EXECUTIVE SUMMARY
In March and April 2023, the UAC, Finance Committee, and City Council reviewed the proposed rate changes recommended by Staff for Fiscal Year (FY) 2024. This report summarizes the meetings that occurred, including all staff recommendations. This utility rates report includes sections for wastewater collection, water, dark fiber, and storm water management. Estimates for retail revenue impacts are included in the FY 2024 budget assumptions. This report outlines the actions requested, transmits the resolutions from these reviews, and requests City Council approval and adoption. Approval of this item would result in implementation of the finalized rates for FY 2024, beginning July 1, 2023. 4 Water Resolution
https://cityofpaloalto.primegov.com/meeting/attachment/791.pdf?name=Attachment%20A,%20Water%20Resolu tion%20FY%202024
5 Fiscal Year 2024 Water Financial Plan https://www.cityofpaloalto.org/files/assets/public/agendas-minutesreports/reports/city-manager-reports-cmrs/attachments/06-19-2023-id-2302-0939-water-financial-plan-fy24- cc.pdf
6 Water Rate Schedules https://www.cityofpaloalto.org/files/assets/public/agendas-minutes-reports/reports/citymanager-reports-cmrs/attachments/06-19-2023-id-2302-0939-water-rate-schedules-fy24-combined.pdf 7 Dark Fiber Resolution https://www.cityofpaloalto.org/files/assets/public/agendas-minutes-reports/reports/citymanager-reports-cmrs/attachments/06-19-2023-id-2302-0939-dark-fiber-optic-resolution.pdf and Rate Schedules https://www.cityofpaloalto.org/files/assets/public/agendas-minutes-reports/reports/citymanager-reports-cmrs/attachments/06-19-2023-id-2302-0939-dark-fiber-rate-schedules-fy-24-combined.pdf 8 Storm Water Management Fee Resolution
https://cityofpaloalto.primegov.com/meeting/attachment/668.pdf?name=Attachment%20B%20- %20Resolution%20Amending%20Utility%20Rate%20Schedule%20D1%20(DRAFT%20Storm%20&%20Surface%20Water%20Drainage) and Rate Schedule
https://cityofpaloalto.primegov.com/meeting/attachment/667.pdf?name=Attachment%20A%20- %20Rate%20Schedule%20D-1%20(DRAFT)
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The overall system average proposed rate changes are below, with the expected average utility bill for residential service to increase 3% in FY 2024.
- 9% increase for wastewater,
- 5% increase for water,
- 4.9% increase for Dark Fiber rate schedules EDF-1 and EDF-2 and - 4.9% increase for the Storm Water Management Fee.
- 5% decrease for electric [approved by Council April 17th], and - 8% increase for gas [approved by Council April 17th].

Drivers of the water and wastewater 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 and reliability of the water and wastewater utilities.

On April 17, 2023, the Council held a study session9 and a Gas10 and Electric11 public hearing regarding rates for those utilities and approved the Gas and Electric rate changes. For this reason, this report does not address Gas and Electric utility rates. On the same day, the Council directed staff to proceed with Proposition 218 notification of Water and Wastewater rate changes recommended by Finance Committee on March 21, 2023, and agendize a public hearing for these rates on June 19, 2023. Staff completed the Proposition 218 customer notifications and revised the Water utility financial plan, and rate sheets consistent with the Council and Finance Committee’s direction (for a 2% water distribution rate increase).

BACKGROUND
Wastewater Collection & Water
For both Wastewater Collection and Water utilities, on April 17, to proceed with Proposition 218 notification of Water and Wastewater rate changes recommended by Finance Committee on March 21, 2023, and agendize a public hearing for these rates on June 19, 2023.12 Staff sent the Prop 218 notifications13 on April 27, 2023. The following are the reviews that culminated in the April 17th City Council review.
9 City Council Meeting April 17, 2023, Agenda Item 3 STUDY SESSION https://cityofpaloalto.primegov.com/meeting/document/1996.pdf?name=Item%203%20Staff%20Report 10 City Council Meeting April 17, 2023, Action Item 14 PUBLIC HEARING https://cityofpaloalto.primegov.com/meeting/document/1964.pdf?name=Item%2014%20Staff%20Report 11 City Council Meeting April 17,2023, Action Item 15 PUBLIC HEARING https://cityofpaloalto.primegov.com/meeting/document/1982.pdf?name=Item%2015%20Staff%20Report 12 April 17, 2023 City Council Item 10
https://cityofpaloalto.primegov.com/meeting/document/1963.pdf?name=Item%2010%20Staff%20Report 13 https://www.cityofpaloalto.org/files/assets/public/utilities/rates-schedules-for-utilities/final_prop218_w_graphic-design-2023.pdf Item 28
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Item 28: Staff Report Pg. 3 Packet Pg. 347 of 911
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Wastewater Collection
Utilities staff presented to the UAC on March 1, 2023,14 the Finance Committee on March 7, 202315 and March 21, 202316 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 Wastewater Collection and Disposal) and S-7 (Commercial Wastewater Collection and Disposal – Industrial Discharger) of 9% effective July 1, 2023
The UAC unanimously approved the staff recommendation. 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 the staff recommendation as written in Staff Report 2302-094417 after reviewing the additional information.

Water
Utilities staff presented a Water financial plan with a 3% water distribution rate increase to the UAC on March 1, 202318, and to the Finance Committee on March 7, 202319. On March 21, 202320 staff revised this recommendation to a 2% water distribution rate increase 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
14 Utilities Advisory Commission March 1, 2023 Meeting
https://www.cityofpaloalto.org/files/assets/public/agendas-minutes-reports/agendas-minutes/utilities-advisorycommission/archived-agenda-and-minutes/agendas-and-minutes-2023/03-mar-2023/03-01-2023-item-1.pdf 15 Finance Committee Staff Report 2302-0944
https://cityofpaloalto.primegov.com/meeting/document/1691.pdf?name=Staff%20Report 16 Finance Committee Staff Report 2302-1107
https://cityofpaloalto.primegov.com/meeting/document/1852.pdf?name=Item%202%20Staff%20Report 17 Utilities Advisory Commission Staff Report 2302-0944 https://www.cityofpaloalto.org/files/assets/public/agendas-minutes-reports/agendas-minutes/utilities-advisorycommission/archived-agenda-and-minutes/agendas-and-minutes-2023/03-mar-2023/03-01-2023-item-1.pdf 18 Utilities Advisory Commission March 1, 2023 Meeting
https://www.cityofpaloalto.org/files/assets/public/agendas-minutes-reports/agendas-minutes/utilities-advisorycommission/archived-agenda-and-minutes/agendas-and-minutes-2023/03-mar-2023/03-01-2023-agenda-andpacket.pdf 19 Finance Committee March 7, 2023 Staff Report 2302-1011 https://cityofpaloalto.primegov.com/meeting/document/1759.pdf?name=Staff%20Report 20 Finance Committee March 21, 2023 Staff Report 2302-1125 https://cityofpaloalto.primegov.com/meeting/document/1871.pdf?name=Item%201%20Staff%20Report Item 28
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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.

Storm Drain
On March 7, 2023, Public Works staff presented the Finance Committee with a recommendation that the City Council adopt a resolution amending Utility Rate Schedule D-1 (Storm and Surface Water Drainage) to implement a 4.9 percent rate increase consistent with the applicable Consumer Price Index, increasing the monthly charge per Equivalent Residential Unit (ERU) by $0.78, from $15.98 to $16.76 for FY 2024.

See Staff Report 2302-095721 for more information.

The Finance Committee unanimously recommended approval of this proposal on March 7, 2023.

ANALYSIS
Based upon feedback from the UAC, Finance Committee and City Council during March and April 2023, this report requests City Council adoption of the remaining proposed rate changes for Fiscal Year (FY) 2024. This report contains links to the documents referenced and links to the City’s website for all the staff reports presented through the review process to the UAC, Finance Committee and City Council.

Staff and the Finance Committee recommend that the City Council approve the utility financial plans, reserve transfers and proposed rate changes listed below. The City Council has already approved the rate changes and financial plans for both the Gas and Electric utilities on April 17, 2023.

Proposed Rate Changes and Financial Plans
Wastewater Collection Proposal
The City’s Wastewater Collection (sewer) system collects wastewater from Palo Alto residents and delivers it to the Regional Water Quality Control Plant (RWQCP) for treatment. The City of Palo Alto runs the RWQCP, which also treats wastewater for five other partner agencies (Stanford, East Palo Alto Sanitary District, Los Altos Hills, Los Altos, and Mountain View). Some of the wastewater for certain partner agencies is also transported across the City’s wastewater collection system. The Wastewater Collection Utility has two main costs: Palo Alto’s share of the cost of running the RWQCP (treatment costs) and the costs of operating and maintaining the collection system.

One of the main drivers for the increase in the Wastewater Collection Utility’s costs (and therefore rates) over the next several years is the cost for wastewater treatment, which is projected to increase by an average of 6.2% annually from FY 2022 to FY 2028 as the City makes several upgrades to the RWQCP.

Increases to capital expenses begin in FY 2024 with the Joint Intercepting Sewer Rehabilitation construction, funded on a pay-as-you-go basis. Additional debt service payments begin as estimated:
21 Finance Committee March 7, 2023 Staff Report 2302-0957 https://cityofpaloalto.primegov.com/meeting/document/1704.pdf?name=Staff%20Report Item 28
Item 28 Staff Report
Item 28: Staff Report Pg. 5 Packet Pg. 349 of 911
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- In FY 2025 for the Primary Sedimentation Tank,
- In FY 2028, for the construction of an Outfall Line, Lab/Technical Services building, and Operations building remodel, and
- In 2029 for Secondary Treatment Upgrades and Headworks.

Staff projects Wastewater Collection operations and CIP costs (excluding costs associated with treatment) to increase by approximately 3.7% annually from FY 2022 to FY 2028; operations costs are projected to grow an average of 1.4% annually over the same time period. The Wastewater Collection Utility undertakes a larger main replacement project every other year. Undertaking a larger main replacement project every other year allows staff to continue replacing wastewater mains that are in poor condition, while easing scheduling difficulties for inspection coverage due to shared staffing across Water, Wastewater, Gas, and large development services projects. Over the last few years, main replacement costs have been increasing for utilities due to economic activity in the Bay Area causing construction cost inflation. It is likely that this trend will continue in the short term.

The Finance Committee, UAC and staff recommend 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’s recommendation attempts to minimize rate impacts while also prudently managing the City’s infrastructure and maintaining an acceptable level of risk.

Staff proposes a 9% overall 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.

Water Proposal
The City’s water rate schedules currently 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 volumetric rate. Water rates are designed to recover the City’s costs of buying and distributing water while maintaining adequate financial reserves. The volumetric rate and the monthly service charge together are considered 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.

The FY 2024 Water Utility Financial Plan includes projections of the utility’s costs and revenues for FY 2023 through FY 2028. The Financial Plan projects costs to rise by about 2-3% per year over the next several years. California has experienced drought over the past 3 years and customer response to state, regional and local calls for water conservation reduced water sales revenue. In FY 2022, water sales revenue declined by 7% compared with FY 2021; the FY 2023 Financial Plan anticipated this level of reduction and there was adequate funding in the Operations Reserve as well as offsetting cost reductions due to lower water purchase costs.

On April 11, 2023, Palo Alto’s water supplier, the San Francisco Public Utilities Commission (SFPUC), rescinded the Water Shortage Emergency Declaration but kept the voluntary San Francisco Regional Water system-wide water use reduction of 11% in place until the State’s emergency regulation expires in June. Palo Alto’s water use restrictions track both the State’s regulation and SFPUC’s water use regulation.

Staff expects some rebound in water sales during FY 2024, while some water conservation is projected to be permanent. Other revenues also declined below prior forecast levels primarily due to reductions in Item 28
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Item No. 28. Page 7 of 10
water service connection and capacity fee revenue. These drought impacts put upward pressure on water rates. While these rate increases can be perceived as decreasing the benefit of conservation, bills for customers who conserve will be lower in the future than they would have been without conservation.

The Water Fund’s healthy reserve levels allowed the Water Utility to hold rates flat for two years (FY 2021 and FY 2022) and provide adequate funding for the first year of drought-related sales revenue reductions in FY 2022. Additionally, the Finance Committee and staff propose the Water Utility use remaining reserves to mitigate distribution rate increases (rates that cover the cost to deliver water within the City) to 2% in FY 2024 and to 7% annually from FY 2025 through FY 2028 while still funding essential capital investments.

Customers pay a separate commodity rate for purchased water from the SFPUC relative to the rest of the distribution-related portion of the volumetric rates. This commodity charge passes through SFPUC rate increases to customers (Resolution 9844).22 The pass-through commodity rate is currently $4.75 per hundred cubic feet (CCF). On May 9, 2023, SFPUC held a public hearing and adopted the FY 2024 wholesale water rate of $5.21 per CCF, effective July 1, 2023; this represents an increase of 9.7% from the current rate. Palo Alto will notify customers at least 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.

Dark Fiber Proposal
Since 2007, the EDF-1 and EDF-2 rates for Dark Fiber customers have increased annually by the annual December change in the Consumer Price Index for All Urban Consumers (CPI-U) in the San Francisco area, as stated in their dark fiber license agreements and rate schedules. Based on prior UAC and City Council direction, these rate changes are routinely included as part of the Budget adoption process rather than in a separate staff report. This year’s change in CPI-U was 4.9 percent, as reported by the Bureau of Labor Statistics. The City has five customers remaining on the EDF-1 rate schedule, which applies to customer accounts established before September 18, 2006. All other dark fiber customers are on the EDF-3 rate schedule, which has remained unchanged since its inception on September 18, 2006, and no rate change is recommended for this year. The attached rate schedules EDF-1, EDF-2 and EDF-3 include minor clarifications that are not substantive to synchronize the rate schedules with the defined terms in City of Palo Alto Utilities Rule and Regulation 2.

Storm Water and Surface Water Drainage Proposal
On April 11, 2017, a majority of Palo Alto property owners approved a ballot measure approving a monthly Storm Water Management Fee. This fee funds thirteen storm drainage capital improvement projects listed in the ballot measure, enhanced maintenance of the storm drainage system, and a variety of storm water quality protection programs. The approved ballot measure allows for an annual adjustment based on the Consumer Price Index (CPI) or six percent, whichever is less. The Storm Water and Surface Drainage Rate will increase 4.9 percent, increasing the monthly charge per Equivalent Residential Unit (ERU) by $0.78, from $15.98 to $16.76 for Fiscal Year 2024 effective July 1, 2023, to reflect the annual CPI change.

See Staff Report 2302-0957 for more information.23
22 Resolution 9844 https://www.cityofpaloalto.org/files/assets/public/city-clerk/resolutions/reso9844.pdf?t=69020.51 23 Finance Committee March 7, 2023 Meeting Stormwater Management Staff Report #2302-0957 https://cityofpaloalto.primegov.com/meeting/document/1704.pdf?name=Staff%20Report Item 28
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TIMELINE
Water and Wastewater Collection Rates
After the June 19th Public Hearing is opened and testimony from members of the public accepted, City Council may choose to:

1. Close the hearing and take action; or

2. Close the hearing and defer action until the close of the Budget Adoption Hearing on June 19th; Unless written protests are filed by a majority of affected Water and Wastewater customers, Council may vote on the proposed rate actions. If approved, the Water and Wastewater rates will become effective July 1, 2023.

Dark Fiber and Storm Water rates, as well as Utility Financial Plans The dark fiber and storm drainage rates will be considered at the June 19, 2023 public hearing. Should the City Council take action to approve any or all of these rates, they will become effective July 1, 2023. The City Council will also consider changes to Financial Plans and/or Reserve Management Policies for the Wastewater Collection and Water utilities, and should the Council take action to approve any or all of these plans and/or policies, they will also become effective July 1, 2023.

Additionally, for the water commodity pass-through rate, SFPUC voted to increase the wholesale water rate to $5.21 per CCF effective July 1, 2023. Staff provided Palo Alto customers with notice of the wholesale rate increase and will pass-through the increase.

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. Following are the estimated FY 2024 revenue impacts of the recommendations in this report:
• Staff projects estimated revenue for the Water Utility in FY 2024 to increase by $2.5 million or 5% compared to FY 2023 levels. This estimate includes the SFPUC wholesale rate increase of 9.7%. • 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 proposed 4.9% fee increase is expected to increase FY 2024 revenue to the Storm Water Management Fund by approximately $0.4 million.
• The Dark Fiber rate increase is the CPI index of 4.9% for rate schedules EDF-1 and EDF-2. Staff expects this to increase FY 2024 revenue for Dark Fiber by approximately $0.03 million. For those on the EDF-3 rate, there is no increase.

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.

POLICY IMPLICATIONS
Policy Implications related to the proposed Wastewater Collection, Water, and Storm Water Management fee rate actions are detailed fully in the linked Finance Committee reports. There are no policy changes contained in the adoption of the proposed new Dark Fiber rates.

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Item No. 28. Page 9 of 10

STAKEHOLDER ENGAGEMENT
On March 1, 202324 the UAC reviewed and approved the FY 2024 Water and Wastewater Collection Utility Financial Plans and Rate Proposals.
• Wastewater Collection Staff Report Action Item 125
• Water Staff Report Action Item 226
The UAC voted unanimously to approve staff’s proposals.

On March 7, 202327, the Finance Committee reviewed the FY 2024 Water, Wastewater Collection Utility Financial Plans and Rate Proposals and the Stormwater Management fee increase. • Wastewater Collection Staff Report # 2302-094428
• Water Staff Report # 2301-101129
• Storm Water Management Staff Report # 2302-095730
The Finance Committee approved the Water Utility proposals unanimously and continued the Wastewater item to March 21, 2023 and asked staff to return with additional information for further evaluation. The Finance Committee unanimously approved the Storm Water Management proposals.

On March 21, 202331, the Finance Committee reviewed the FY 2024 Water, and Wastewater Collection Financial Plans and Rate Proposals
• Wastewater Collection Staff Report # 2302-110732 and Supplemental Memo33 24 Utilities Advisory Commission Meeting of March 1, 2023 https://www.cityofpaloalto.org/files/assets/public/agendas-minutes-reports/agendas-minutes/utilities-advisorycommission/archived-agenda-and-minutes/agendas-and-minutes-2023/03-mar-2023/03-01-2023-agenda-andpacket.pdf 25 Utilities Advisory Commission Meeting March 1, 2023, Action item 1 https://www.cityofpaloalto.org/files/assets/public/agendas-minutes-reports/agendas-minutes/utilities-advisorycommission/archived-agenda-and-minutes/agendas-and-minutes-2023/03-mar-2023/03-01-2023-item-1.pdf 26 Utilities Advisory Commission Meeting March 1, 2023, Action item 2 https://www.cityofpaloalto.org/files/assets/public/agendas-minutes-reports/agendas-minutes/utilities-advisorycommission/archived-agenda-and-minutes/agendas-and-minutes-2023/03-mar-2023/03-01-2023-item-2.pdf 27 Finance Committee Meeting March 7, 2023
https://cityofpaloalto.primegov.com/Portal/Meeting?meetingTemplateId=11235 28 Finance Committee Meeting March 7, 2023, Action Item 2 https://cityofpaloalto.primegov.com/meeting/document/1691.pdf?name=Staff%20Report 29 Finance Committee Meeting March 7, 2023, Action Item 1 https://cityofpaloalto.primegov.com/meeting/document/1759.pdf?name=Staff%20Report 30 Finance Committee Meeting March 7, 2023, Action Item 3 https://cityofpaloalto.primegov.com/meeting/document/1704.pdf?name=Staff%20Report 31 Finance Committee Meeting March 21, 2023
https://cityofpaloalto.primegov.com/Portal/Meeting?meetingTemplateId=11228 32 Finance Committee Meeting March 21, 2023, Action Item 2 https://cityofpaloalto.primegov.com/meeting/document/1852.pdf?name=Item%202%20Staff%20Report 33 Finance Committee Meeting March 21, 2023, Action Item 2 https://cityofpaloalto.primegov.com/meeting/attachment/1081.pdf?name=Item%202%20Supplemental%20Mem o
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• Water Staff Report # 2303-112534 and Supplemental Memo35 The Finance Committee unanimously approved the Water and Wastewater Collection Proposals.

On April 17, 2023,
36 the City Council reviewed the FY 2024 Water, and Wastewater Collection Financial Plans and Rate Proposals and directed staff to proceed with Proposition 218 notification of Water and Wastewater rate changes recommended by Finance Committee on March 21, 2023, and agendize a public hearing for these rates on June 19, 2023. The City Council voted to approve this item 6-1 with Council Member Tanaka voting no.

ENVIRONMENTAL REVIEW
Adoption of the referenced Financial Plans and budgeted transfers does not meet the California Environmental Quality Act’s definition of a project, pursuant to CEQA Guidelines Section 15378(b)(4) and (5), because it is a governmental fiscal and administrative activity which will not cause a direct or indirect physical change in the environment. Adoption of the proposed Wastewater Collection, Water, Storm Water Management fee, and Dark Fiber rates to meet operating expenses, purchase supplies and materials, meet financial reserve needs and obtain funds for capital improvements necessary to maintain service is not subject to the California Environmental Quality Act (CEQA), pursuant to California Public Resources Code Sec. 21080(b)(8) and CEQA Guidelines Section 15273(a). After reviewing the staff report and all referenced financial plans, rate schedules, and resolutions presented to Council, the Council incorporates these documents herein and finds that sufficient evidence has been presented setting forth with specificity the basis for this claim of CEQA exemption.

ATTACHMENTS
Attachment A: Dark Fiber Optic Resolution
Attachment B: Storm Drain and Surface Resolution and Amending Utility Rate Schedule D-1 Attachment C: Wastewater FY24 Resolution
Attachment D: Water FY24 Resolution
Attachment E: Dark Fiber Rate Schedules
Attachment F: Wastewater Rate Schedules
Attachment G: Water Rate Schedules
APPROVED BY:

Dean Batchelor, Director of Utilities
Staff: Utility Rates Team
Lisa Bilir, Senior Resource Planner
Micah Babbitt, Senior Resource Planner
Eric Wong, Resource Planner
34 Finance Committee Meeting March 21, 2023, Action Item 1 https://cityofpaloalto.primegov.com/meeting/document/1871.pdf?name=Item%201%20Staff%20Report 35 Finance Committee Meeting March 21, 2023, Action item 1 https://cityofpaloalto.primegov.com/meeting/attachment/1078.pdf?name=Item%201%20Supplemental%20Mem o
36 April 17, 2023 City Council Item 10
https://cityofpaloalto.primegov.com/meeting/document/1963.pdf?name=Item%2010%20Staff%20Report Item 28
Item 28 Staff Report
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6056632 1
*Not Yet Passed*
Resolution No.____
Resolution of the Council of the City of Palo Alto Adopting a Dark Fiber Rate Increase and Amending Rate Schedules EDF-1 (Dark Fiber Licensing Services), EDF-2 (Dark Fiber Connection Fees), and EDF-3 (Dark Fiber Licensing Services)
The Council of the City of Palo Alto does hereby RESOLVE as follows:

SECTION 1. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility Rate Schedule EDF-1 (Dark Fiber Licensing Services) is hereby amended to read as attached and incorporated. Utility Rate Schedule EDF-1, as amended, shall become effective July 1, 2023.

SECTION 2. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility Rate Schedule EDF-2 (Dark Fiber Connection Fees) is hereby amended to read as attached and incorporated. Utility Rate Schedule EDF-2, as amended, shall become effective July 1, 2023.

SECTION 3. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility Rate Schedule EDF-3 (Dark Fiber Licensing Services) is hereby amended to read as attached and incorporated. Utility Rate Schedule EDF-3, as amended, shall become effective July 1, 2023.

SECTION 4. The Council finds that the revenue derived from the adoption of this resolution shall be used only for the purpose set forth in Article VII, Section 2, of the Charter of the City of Palo Alto.
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Optic Resolution
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6056632 2
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SECTION 4. The Council finds that the adoption of this resolution increasing Dark Fiber utility rates by the Consumer Price Index to meet operating expenses, purchase supplies and materials, meet financial reserve needs and obtain funds for capital improvements necessary to maintain service is not subject to the California Environmental Quality Act (CEQA), pursuant to California Public Resources Code Sec. 21080(b)(8) and Title 14 of the California Code of Regulations Sec. 15273(a). After reviewing the staff report and all attachments presented to Council, the Council incorporates these documents herein and finds that sufficient evidence has been presented setting forth with specificity the basis for this claim of CEQA exemption.

INTRODUCED AND PASSED:

AYES:

NOES:

ABSENT:

ABSTENTIONS:

ATTEST:
___________________________ ___________________________ City Clerk Mayor
APPROVED AS TO FORM: APPROVED:
___________________________ ___________________________ Assistant City Attorney City Manager
___________________________
Director of Utilities
___________________________
Director of Administrative Services
Item 28
Attachment A - Dark Fiber
Optic Resolution
Item 28: Staff Report Pg. 12 Packet Pg. 356 of 911
*YET TO BE PASSED*
Resolution No.

Resolution of the Council of the City of Palo Alto Amending Utility Rate Schedule D-1 (Storm and Surface Water Drainage) to Increase Storm Water Management Fee Rates by 4.9% Per Month Per Equivalent Residential Unit for Fiscal Year 2024
A. In April 2017, a majority of property owners approved a ballot measure adopting a monthly Storm Water Management Fee to fund storm drain capital improvements projects, enhanced maintenance of the storm drain system, storm water quality protection programs, and related activities.

B. The ballot measure allowed for annual increases to the fee based on lesser of the local rate of inflation (based on changes to the Consumer Price Index for the San Francisco-Oakland-San Jose region as published by the Bureau of Labor Statistics) or 6%.

C. According to the Bureau of Labor Statistics, the Consumer Price Index for the San Francisco-Oakland-San Jose region increased by 4.9% between December 2021 and December 2022.

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

SECTION 1. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility Rate Schedule D-1 (Storm and Surface Water Drainage) is hereby amended to read in accordance with sheet D-1-1, attached hereto and incorporated herein. The foregoing Utility Rate Schedule, as amended, shall become effective July 1, 2023.

SECTION 2. The Council finds that this rate increase is being imposed to offset the effects of inflation on labor and material costs pursuant to the annual inflationary fee escalator provision of the Storm Water Management Fee ballot measure, which was approved by a majority of Palo Alto property owners on April 11, 2017.

SECTION 3. The Council finds that the revenue derived from the authorized adoption enumerated herein shall be used only for the purpose set forth in Article VII, Section 2, of the Charter of the City of Palo Alto.
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/ /
/ /
/ /
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Item 28
Attachment B - Storm
Drain and Surface
Resolution and Amending
Utility Rate Schedule D-1
Item 28: Staff Report Pg. 13 Packet Pg. 357 of 911
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SECTION 4. The Council finds that the adoption of this resolution changing the Storm Water Management Fee to meet operating expenses, purchase supplies and materials, meet financial reserve needs and obtain fundsfor capital improvements necessary to maintain service is not subject to the California Environmental Quality Act (CEQA), pursuant to California Public Resources Code Sec. 21080(b)(8) and Title 14 of the California Code of Regulations Sec. 15378(b)(4). After reviewing the staff report and all attachments presented to Council, the Council incorporates these documents herein and finds that sufficient evidence has been presented setting forth with specificity the basis for this claim of CEQA exemption.

INTRODUCED AND PASSED:

AYES:

NOES:

ABSENT:

ABSTENTIONS:

ATTEST:

City Clerk Mayor
APPROVED AS TO FORM: APPROVED:

Assistant City Attorney City Manager
Director of Public Works
Director of Administrative Service
Item 28
Attachment B - Storm
Drain and Surface
Resolution and Amending
Utility Rate Schedule D-1
Item 28: Staff Report Pg. 14 Packet Pg. 358 of 911

GENERAL STORM AND SURFACE WATER DRAINAGE
UTILITY RATE SCHEDULE D-1
A. APPLICABILITY:

This schedule applies to all Storm and Surface Water Drainage Service, excepting only those users and to the extent that they are constitutionally exempt under the Constitution of the State of California or who are determined to be exempt pursuant to Rule and Regulation 25.

B. TERRITORY:

Inside the incorporated limits of the city of Palo Alto and land owned or leased by the City.

C. RATES:

Per Month:

Storm Water Management Fee per Equivalent Residential Unit (ERU).......................... $16.76 D. SPECIAL NOTES:

1. An Equivalent Residential Unit (ERU) is the basic unit for computation of storm drainage fees for residential and non-residential Customers. All single-family residential properties shall be billed the number of ERUs specified in the following table, based on an analysis of the relationship between impervious area and lot size for Palo Alto properties.

RESIDENTIAL RATES (Single-Family Residential Properties PARCEL SIZE (sq.ft.) ERU
<6,000 sq.ft. 0.8 ERU
6,000 - 11,000 sq.ft. 1.0 ERU
>11,000 sq.ft. 1.4 ERU
All other properties will have ERUs computed to the nearest 1/10 ERU using the following formula:

No. of ERU = Impervious Area (Sq. Ft.)
2,500 Sq. Ft.

2. For more details on the Storm Water Management Fee, refer to Utilities Rule and Regulation 25.
{End}

CITY OF PALO ALTO UTILITIES
Issued by the City Council
Effective 7-1-2023
Supersedes Sheet No.D-1-1 dated 7-1-2022 Sheet No. D-1-1 Item 28
Attachment B - Storm
Drain and Surface
Resolution and Amending
Utility Rate Schedule D-1
Item 28: Staff Report Pg. 15 Packet Pg. 359 of 911
Attachment A
027021423
* NOT YET APPROVED *
ResolutionNo.

Resolution of the Council of the City of Palo Alto Approving the FY 2024 Wastewater Collection Utility Financial Plan, Including Reserve Transfers, and Adjusting Wastewater Rates by Amending Rate Schedules 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)

R E C I T A L S
A. Each yearthe City of Palo Alto (“City”) assessesthe financial position of its utilities with the goal of ensuring adequate revenue to fund operations. This includes making long-term projections of market conditions, the physical condition of the system, and other factors that could affect utility costs, and setting rates adequate to recover these costs. The City does this with the goal of providing safe, reliable, and sustainable utility services at competitive rates. The City adopts Financial Plans to summarize theseprojections.

B. The City uses reserves to protect against contingencies and to manage other aspects of its operations, and regularly assesses the adequacy of these reserves and the management practices governing their operation. The status of utility reserves and their management practices are included in Reserves Management Practices attached to and made a part of the Financial Plans.

C. Pursuant to Chapter 12.20.010 of the Palo Alto Municipal Code, the Council of the City of Palo Alto may by resolution adopt rules and regulations governing utility services, fees and charges.

D. On , 2023, the City Council held a full and fair public hearing regarding the proposed rate increase and considered all protests against the proposals.

E. As required by Article XIII D, Section 6 of the California Constitution and applicable law, notice of the , 2023 public hearing was mailed to all City of Palo Alto Utilities wastewater customers by , 2023.

F. The City Clerk has tabulated the total number of written protests presented by the close of the public hearing, and determined that it was less than fifty percent (50%) of the total number of customers and property owners subject to the proposed wastewater rate amendments, therefore a majority protest does not exist against the proposal.

The Council of the City of Palo Alto does hereby RESOLVE as follows:

SECTION 1. The Council hereby adopts the FY 2024 Wastewater Collection Utility Financial Plan.

Item 28
Attachment C -
Wastewater FY24
Resolution
Item 28: Staff Report Pg. 16 Packet Pg. 360 of 911
Attachment A
027021423
* NOT YET APPROVED *
SECTION 2. The Council hereby approves the following transfers as described in the FY 2024 Wastewater Collection Utility Financial Plan:
a. Up to $3,178,000 in FY 2023 from the Capital Improvement Projects Reserve to the Operations Reserve.
b. Up to $342,000 in FY 2023 from the Rate Stabilization Reserve to the Operations Reserve.

SECTION 3. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility Rate Schedule S-1 (Residential Wastewater Collection and Disposal) is hereby amended to read as attached and incorporated. Utility Rate Schedule S-1, as amended, shall become effective July 1, 2023.

SECTION 4. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility Rate Schedule S-2 (Commercial Wastewater Collection and Disposal) is hereby amended to read as attached and incorporated. Utility Rate Schedule S-2, as amended, shall become effective July 1, 2023.

SECTION 5. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility Rate Schedule S-6 (Restaurant Wastewater Collection and Disposal) is hereby amended to read as attached and incorporated. Utility Rate Schedule S-6, as amended, shall become effective July 1, 2023.

SECTION 6. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility Rate Schedule S-7 (Commercial Wastewater Collection and Disposal – Industrial Discharger) is hereby amended to read as attached and incorporated. Utility Rate Schedule S-7, as amended, shall become effective July 1, 2023.

SECTION 7. The Council finds that the revenue derived from the wastewater rates approved by this resolution do not exceed the funds required to provide wastewater service, and the revenue derived from the adoption of this resolution shall be used only for the purposes set forth in Article VII, Section 2, of the Charter of the City of Palo Alto.

SECTION 8. The Council finds that the fees and charges adopted by this resolution are charges imposed for a specific government service or product provided directly to the payor that are not provided to those not charged, and do not exceed the reasonable costs to the City of providing the service or product.
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Item 28
Attachment C -
Wastewater FY24
Resolution
Item 28: Staff Report Pg. 17 Packet Pg. 361 of 911
Attachment A
027021423
* NOT YET APPROVED *
//
SECTION 9. The Council finds that the adoption of this resolution approving the FY 2024 Wastewater Financial Plan and Reserve transfers 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 itis an administrative governmental activitywhich will not cause a direct or indirect physical change in the environment, and therefore, no environmental review is required. The Council finds that the adoption of this resolution changing Wastewater collection rates to meet operating expenses, purchase supplies and materials, meet financial reserve needs and obtain funds for capital improvements necessary to maintain service is not subject to the California Environmental Quality Act (CEQA), pursuant to California Public Resources Code Sec. 21080(b)(8) and Title 14 of the California Code of Regulations Sec. 15273(a). After reviewing the staff report and all attachments presented to Council, the Council incorporates these documents herein and finds that sufficient evidence has been presented setting forth with specificity the basis for this claim of CEQAexemption.

INTRODUCED AND PASSED:

AYES:

NOES:

ABSENT:

ABSTENTIONS
ATTEST:

City Clerk Mayor
APPROVED AS TO FORM: APPROVED:

Assistant City Attorney City Manager
Director ofUtilities
Director of Administrative Services
Item 28
Attachment C -
Wastewater FY24
Resolution
Item 28: Staff Report Pg. 18 Packet Pg. 362 of 911
Attachment A
027021423
* NOT YET APPROVED *
Resolution No.

Resolution of the Council of the City of Palo Alto Approving the FY 2024 Water Utility Financial Plan and Reserve Transfers, and Increasing Water Rates by Amending Rate Schedules W-1
(General Residential Water Service), W-2 (Water Service from Fire Hydrants), W-3 (Fire Service Connections), W-4 (Residential Master-Metered and General Non- Residential Water Service), and W-7 (Non-Residential Irrigation Water Service)

R E C I T A L S
A. Each year the City of Palo Alto (“City”) assesses the financial position of its utilities with the goal of ensuring adequate revenue to fund operations. This includes making long-term projections of market conditions, the physical condition of the system, and other factors that could affect utility costs, and setting rates adequate to recover these costs. The City does this with the goal of providing safe, reliable, and sustainable utility services at competitive rates.

The City adopts Financial Plans to summarize these projections.

B. The City uses reserves to protect against contingencies and to manage other aspectsof its operations, and regularly assesses the adequacy of these reserves and the management practices governing their operation. The status of utility reserves and their management practices are included in Reserves Management Practices attached to and made part of the Financial Plans.

C. Pursuant to Chapter 12.20.010 of the Palo Alto Municipal Code, the Council of the City of Palo Alto may by resolution adopt rules and regulations governing utility services, fees and charges.

D. On , 2023, the City Council held a full and fair public hearing regarding the proposed rate increase and considered all protests against the proposals.

E. As required by Article XIII D, Section 6 of the California Constitution and applicable law, notice of the , 2023 public hearing was mailed to all City of Palo Alto Utilities water customers by , 2023.

F. The City Clerk has tabulated the total number of written protests presented by the close of the public hearing, and determined that it waslessthan fifty percent (50%) of the total number of customers and property owners subject to the proposed water rate amendments, therefore a majority protest does not exist against the proposal.

The Council of the City of Palo Alto does hereby RESOLVE, as follows:

Item 28
Attachment D - Water
FY24 Resolution
Item 28: Staff Report Pg. 19 Packet Pg. 363 of 911
Attachment A
027021423
SECTION 1. The Council hereby adopts the FY 2024 Water Utility Financial Plan.

SECTION 2. The Council hereby approves a transfer from the Capital Improvement Program Reserve to the Operations Reserve of up to $3,746,000 in FY 2023 as described in the FY 2024 Water Utility Financial Plan.

SECTION 3. The Council hereby approves a transfer from the Rate Stabilization Reserve to the Operations Reserve of up to $3,000,000 in FY 2023 as described in the FY 2024 Water Utility Financial Plan.

SECTION 4. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility Rate Schedule W-1 (General Residential Water Service) is hereby amended to read as attached and incorporated. Utility Rate Schedule W-1, as amended, shall become effective July 1, 2023.

SECTION 5. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility Rate Schedule W-2 (Water Service from Fire Hydrants) is hereby amended to read as attached and incorporated. Utility Rate Schedule W-2, as amended, shall become effective July 1, 2023.

SECTION 6. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility Rate Schedule W-3 (Fire Service Connections) is hereby amended to read as attached and incorporated. Utility Rate Schedule W-3, as amended,shall become effective July 1, 2023.

SECTION 7. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility Rate Schedule W-4 (Residential Master-Metered and GeneralNon-Residential Water Service) is hereby amended to read as attached and incorporated. Utility Rate Schedule W-4, as amended, shall become effective July 1, 2023.

SECTION 8. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility Rate Schedule W-7 (Non-Residential Irrigation Water Service) is hereby amended to read as attached and incorporated. Utility Rate Schedule W-7, as amended,shall become effective July 1, 2023.

SECTION 9. The City Council finds asfollows:
a. Revenues derived from the water rates approved by thisresolution do not exceed the funds required to provide waterservice.
b. Revenues derived from the water rates approved by thisresolution shall not be used for any purpose other than providing water service, and the purposes set forth in Article VII, Section 2, of the Charter of the City of Palo Alto. c. The amount of the water ratesimposed upon any parcel or person as an incident of Item 28
Attachment D - Water
FY24 Resolution
Item 28: Staff Report Pg. 20 Packet Pg. 364 of 911
Attachment A
027021423
property ownership shall not exceed the proportional cost of the water service attributable to the parcel.

SECTION 10. The Council finds that the fees and charges adopted by this resolution are charges imposed for a specific government service or product provided directly to the payor that are not provided to those not charged, and do not exceed the reasonable coststo the City of providing the service orproduct.
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Item 28
Attachment D - Water
FY24 Resolution
Item 28: Staff Report Pg. 21 Packet Pg. 365 of 911
Attachment A
027021423
//
SECTION 11. The Council finds that the adoption of this resolution approving the FY 2024 Water Financial Plan and Reserve transfers does not meet the California Environmental Quality Act’s (CEQA) 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 review is required. The Council finds that the adoption of this resolution changing water rates to meet operating expenses, purchase supplies and materials, meet financial reserve needs and obtain funds for capital improvements necessary to maintain service is not subject to the California Environmental Quality Act (CEQA), pursuant to California Public Resources Code Sec. 21080(b)(8) and Title 14 of the California Code of Regulations Sec. 15273(a). After reviewing the staff report and all attachments presented to Council, the Council incorporates these documents herein and finds that sufficient evidence has been presented setting forth with specificity the basis for this claim of CEQA exemption.

INTRODUCED AND PASSED:

AYES:

NOES:

ABSENT:

ABSTENTIONS:

ATTEST:

City Clerk Mayor
APPROVED AS TO FORM: APPROVED:

Assistant City Attorney City Manager
Director of Utilities
Director of Administrative Services
Item 28
Attachment D - Water
FY24 Resolution
Item 28: Staff Report Pg. 22 Packet Pg. 366 of 911

DARK FIBER LICENSING SERVICES
UTILITY RATE SCHEDULE EDF-1

CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No EDF-1-1 Effective 07-01-20232
dated 7-01-20221 Sheet No. EDF-1-1
A. APPLICABILITY:

This Rrate Sschedule applies to Ccustomer Aaccounts established prior to September 18, 2006, unless the Ccustomer elects to apply the EDF-3 rate to the entire Ccustomer Aaccount. This Rrate Schedule applies to Fiber Optic services Service from the City of Palo Alto Utilities (CPAU) pertaining to the City's network Dark Fiber Infrastructure and Fiber Optic (Backbone. and associated connections).

B. TERRITORY:

All territory wWithin the incorporated limits of the City of Palo Alto and land owned or leased by the City.

C. FEES:

1. DARK FIBER BACKBONE LICENSE FEES:

The values or ranges for each of these price components are shown below:
(1) Fiber Price………………………………………………………………. $432.32453.50/FMfiber mile/month
(2) Quantity discount ……………………………………………………… $0 to $59.84/fiber mileFM/month
(3) Buffer tube discount……………………………………………………….. $0 to $59.84/fiber mileFM/month
(4) Route length discount…………………………………………………….. $0 to $77.80/fiber mileFM/month
(5) Ring topology discount………………………………………………………$0 to $23.94/fiber mileFM/month
(6) Length of term discount…………………………………………………… $0 to $46.80/fiber mileFM/month
Minimum Backbone License Fee
$685.90653.86/month
Project Minimum Backbone License Fees apply to any project proposal signed after September 18, 2006 in which the project connects with the Fiber Optic Backbone.

Description for Discounts:

Quantity discount: based on an array of discounts for quantities of fiber licensed on a specific path.

Buffer tube discount: discount for numbers of full buffer tubes licensed on a specific path.

Route length discount: based on the route length licensed on a specific project.

Ring topology discount: The ring topology discount for customers Customers contracting for complete rings.

Term discount: based on an array of discounts for contracts Dark Optical Fiber Backbone License Agreement greater than one and less than ten years.

2. DARK FIBER LATERAL CONNECTION FEES:

Item 28
Attachment E - Dark Fiber
Rate Schedules
Item 28: Staff Report Pg. 23 Packet Pg. 367 of 911

DARK FIBER LICENSING SERVICES
UTILITY RATE SCHEDULE EDF-1

CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No EDF-1-2 Effective 07-01-20232
dated 7-01-20221 Sheet No. EDF-1-2
Customer responsibilities and fees for drop and custom cable construction are described in the CPAU Rules and Regulations, Rate Schedule EDF-2, project proposals and other associated documents. In all cases, the Licensee shall pay an annual Drop/Custom Cable Management Fee based on the follow per foot fees:
(1) Drop Cable Management Fees (for the first 12-Fibers) …………………………… $0.03- $0.098/ft/month
(2) Custom Cable Management Fees (for the first 12-Fibers) …………………….......... $0.442/ft/month (3) Fees for additional Drop or Custom Cable fibers (each additional set of 12-Fibers) . $0.098/ft/month Minimum Drop or Custom Cable Management Fees.................................................. $338.91323.08/month Minimum Drop Cable Management Fees apply to any project proposal signed after September 18, 2006.

Item 28
Attachment E - Dark Fiber
Rate Schedules
Item 28: Staff Report Pg. 24 Packet Pg. 368 of 911

DARK FIBER LICENSING SERVICES
UTILITY RATE SCHEDULE EDF-1

CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No EDF-1-3 Effective 07-01-20232
dated 7-01-20221 Sheet No. EDF-1-3

3. EARLY TERMINATION FEES:

If the Licensee chooses to terminate for convenience the Dark Fiber Licensinge Agreement (License Agreement) or the term of any project under the License Agreement, then the Licensee shall pay the applicable termination payment as specified in this schedule or in the License Agreement, as provided below.

Unless otherwise provided in the License Agreement, the Licensee shall pay a termination fee in one of the following amounts, whichever is less:
• Annual fee of the contract year that the Licensee chooses to terminates in full without term discounts, or
• Remaining fees of the project term as indicated in the License Agreement.

D. SPECIAL NOTES:

1. All fees must be paid to the City in accordance with the terms of the Dark Fiber Licensinge Agreement, the cCustomer’s project proposals and all the applicable Utilities Rates, Rules, and Regulations.

2. All fees and minimum charges are subject to Consumer Price Index (CPI) adjustments, to be applied annually, except as defined by Section D.3 of this Rate Schedule. Discounts will not be modified by changes to CPI.

3. The CPI adjustment will be based on the Consumer Price Index for All Urban Consumers (CPI-U) for the San Francisco-Oakland-San JoseHayward MSA, published by the U.S. Department of Labor, Bureau of Labor Statistics. The adjustment is calculated by dividing the most recent calendar year’s December CPI by the December CPI in the year rates last changed. In the event that the change between December CPI’s indicates an adjustment of less than 1% is required, a change to rate schedulechanges may not be made for the upcoming year. Future rate changes will take the last year of change as the new base year for purposes of calculation.
{End}
Item 28
Attachment E - Dark Fiber
Rate Schedules
Item 28: Staff Report Pg. 25 Packet Pg. 369 of 911

DARK FIBER SERVICE CONNECTION FEES
UTILITY RATE SCHEDULE EDF-2

CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No EDF-2-1 Effective 7-01-20232
dated 7-01-20221 Sheet No. EDF-2-1
A. APPLICABILITY:

This Rate Sschedule applies to all connections, expansions, and upgrades to the City's Dark Fiber Infrastructure and network (Fiber Optic Backbone).

B. TERRITORY:

All territory within the incorporated limits of the City of Palo Alto and land owned or leased by the City.

C. FEES:

1. ADVANCE ENGINEERING FEES:

Advance engineering (AER) fees must be paid to start the engineering process and are non-refundable. The fees will be credited against the estimated project cost prior to the collection of the project construction fees.
(1) Commercial/Industrial AER minimum fee..................................................................... $108332.00 (2) Special conditions (requiring expert assessment)........................................................... By Estimate

2. ESTIMATED SERVICE CONNECTION AND RECONFIGURATION FEES All estimated Sservice connection and reconfiguration fees must be paid prior to the scheduling of any construction or reconnections to the City's Dark Fiber Infrastructure and Fiber Optic Backbonenetwork. (1) Service connection (Interconnection) fee ...................................................... By Estimate (2) Reconfiguration Fees..................................................................................... By Estimate Labor rates are subject to change as stated in the Utility Rate Schedule C-1.

D. NOTES:

1. The Customer is responsible for the installation and maintenance of all ducts and pathways from the facility to the property line in compliance with City of Palo Alto Utilities Rules and Regulations and contract agreements.

2. The City shall not be held liable for delays or interruptions in service, but will make reasonable efforts to provide timely continuous Sservice.

3. All fees are subject to Consumer Price Index (CPI) adjustments, to be applied annually. The CPI adjustment will be based on the Consumer Price Index for All Urban Consumers (CPI-U) for the San Francisco-OaklandSan JoseHayward MSA, published by the U.S. Department of Labor, Bureau of Labor Statistics. The adjustment is calculated by dividing the most recent calendar year’s December CPI by the December CPI in the year rates last changed. In the event that the change between December CPI’s indicates an adjustment of less than 1% is required, a rate change to rate schedules may not be made for the upcoming year. Future rate changes will take the last year of change as the new base year for purposes of calculation.

3. {End}
Item 28
Attachment E - Dark Fiber
Rate Schedules
Item 28: Staff Report Pg. 26 Packet Pg. 370 of 911

DARK FIBER LICENSING SERVICES
UTILITY RATE SCHEDULE EDF-3

CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No EDF-3-1 Effective 9-18-20067-1-2023 dated 9-18-2006 Sheet No.EDF-3-1
A. APPLICABILITY:

This Rrate Sschedule applies to all Ccustomer Aaccounts created after September 18, 2006 and also may be elected at any time by Ccustomers with Dark Optical Fiber Backbone Licenseing Agreements in effect existing prior to that dateSeptember 18, 2006. This Rrate Sschedule applies to Fiber Optic Sservices from the City of Palo Alto Utilities (CPAU) pertaining to the City's Dark Fiber Infrastructure and Fiber Optic network (Backbone and associated connections).

B. TERRITORY:

All territory wWithin the incorporated limits of the City of Palo Alto and land owned or leased by the City.

C. FEES:

1. DARK FIBER BACKBONE LICENSE FEES:

The values or ranges for each of these price components are shown below:
(1) Price for first fiber on public agency project routes may range between……… $213-$362/fiber mile/month
a. Additional fibers used in the project on same route, per each .............. $142.00/fiber mile/month
(2) Price for first fiber on non-public agency project routes may range between…. $250-$425/fiber mile/month
a. Additional fibers used in the project on same route, per each .............. $166.67/fiber mile/month

2. DROP AND CUSTOM CABLE MANAGEMENT FEES:

Customer responsibilities and fees for drop and custom cable construction are described in the CPAU Rules and Regulations, Rate Schedule EDF-2, project proposals and other associated documents. In all cases, the Licensee shall also pay the applicable Drop or Custom Cable Management Fees based on the following:
(1) Drop Cable Management Fees for public agencies (per 12 fiber drop)………… $179-$213/fiber mile/month
(2) Drop Cable Management Fees for non-public agencies (per 12 fiber drop)…… $210-$250/fiber mile/month
(3) Custom Cable Management Fees (first 12 fiber cable on a project route) .................. $0.25/ft/month (4) Custom Cable Management Fees (per additional 12 fiber cable on a project route)…….. $0.05/ft/month D. SPECIAL NOTES:

1. All fees must be paid to the City according to the terms of specifics in the Dark Optical Fiber Backbone License Agreement, the Ccustomer’s project proposals and all the applicable Utilities Rates, Rules, and Regulations.

Item 28
Attachment E - Dark Fiber
Rate Schedules
Item 28: Staff Report Pg. 27 Packet Pg. 371 of 911

DARK FIBER LICENSING SERVICES
UTILITY RATE SCHEDULE EDF-3

CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No EDF-3-2 Effective 9-18-20067-1-2023 dated 9-18-2006 Sheet No.EDF-3-2

2. All fees are subject to change by the City of Palo Alto Council. {End}
Item 28
Attachment E - Dark Fiber
Rate Schedules
Item 28: Staff Report Pg. 28 Packet Pg. 372 of 911

RESIDENTIAL WASTEWATER COLLECTION AND DISPOSAL
UTILITY RATE SCHEDULE S-1

CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No S-1-1 Effective 7-1-20232
dated 79-1-20221 Sheet No S-1-1
A. APPLICABILITY:

This schedule applies to each Occupied Domestic Dwelling unit.

B. TERRITORY:

This schedule applies everywhere the City of Palo Alto provides Wastewater Service.

C. RATES:

Per Month
Each Occupied Domestic Dwelling unit................................................................................ $44.6248.64
D. SPECIAL NOTES:

1. Any dwelling unit being individually served by a Water, Gas, or Electric Meter will be considered continuously occupied.

2. For two or more Occupied Domestic Dwelling units served by one Water Meter, the monthly Wastewater charge will be calculated by multiplying the current Wastewater rate by the number of dwelling units.

3. Each developed separate lot shall have a separate service lateral to a sanitary main or manhole.
{End}
Item 28
Attachment F -
Wastewater Rate
Schedules
Item 28: Staff Report Pg. 29 Packet Pg. 373 of 911

COMMERCIAL WASTEWATER COLLECTION AND DISPOSAL
UTILITY RATE SCHEDULE S-2

CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No S-2-1 Effective 7-1-20232
dated 79-1-20221 Sheet No S-2-1
A. APPLICABILITY:

This schedule applies to all commercial establishments other than those served under Utility Rate Schedule S-1 (Residential Wastewater Collection and Disposal), Rate Schedule S-6 (Restaurant Wastewater Collection and Disposal) or Rate Schedule S-7 (Commercial Establishments Wastewater Disposal – Industrial Discharger).

B. TERRITORY:

This schedule applies everywhere the City of Palo Alto provides Wastewater Service.

C. RATES:

Quantity Rate, per 100 cubic feet (See Section D.1).......................................................... $9.088.33 D. SPECIAL NOTES:

1. The monthly charge for the quantity rate set forth in Section C of this rate schedule will be based upon the average Water usage for the months of January, February and March, and applied in the following July. If a Water Meter is identified as exclusively serving irrigation landscaping, such Meter will be exempted from Wastewater charge calculations.

Customers without an applicable usage history will be rebuttably presumed to have usage of 4.8 ccf per month until such time as such usage may reasonably be established by the City of Palo Alto Utilities Department.

2. The City of Palo Alto Utilities Department may require Wastewater Metering facilities, in which case Service will be governed by terms of a special agreement between the City and the Customer.
{End}
Item 28
Attachment F -
Wastewater Rate
Schedules
Item 28: Staff Report Pg. 30 Packet Pg. 374 of 911

RESTAURANT WASTEWATER COLLECTION AND DISPOSAL
UTILITY RATE SCHEDULE S-6

CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No S-6-1 Effective 7-1-20232
dated 79-1-20221 Sheet No S-6-1
A. APPLICABILITY:

This schedule applies to all restaurants.

B. TERRITORY:

This schedule applies everywhere the City of Palo Alto provides Wastewater Service.

C. RATES:

Quantity Rates, per 100 cubic feet of monthly metered Water usage ...................................$

13.5512.43
D. SPECIAL NOTES:

1. The City of Palo Alto Utilities Department may require Wastewater Metering facilities, in which case Service will be governed by terms of a special agreement between the City and the Customer.
{End}
Item 28
Attachment F -
Wastewater Rate
Schedules
Item 28: Staff Report Pg. 31 Packet Pg. 375 of 911

COMMERCIAL WASTEWATER COLLECTION AND DISPOSAL
– INDUSTRIAL DISCHARGER
UTILITY RATE SCHEDULE S-7

CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No S-7-1 Effective 7-1-20232
dated 79-1-20221 Sheet No S-7-1
A. APPLICABILITY:

This schedule applies to any establishment requiring sampling of industrial discharges in excess of 25,000 gallons per day, or special discharge monitoring, as defined in Rule 23, Section C.

B. TERRITORY:

This schedule applies everywhere the City of Palo Alto provides Wastewater Service.

C. RATES:

1. Collection System Operation, Maintenance, and Infiltration Inflow:
$ 4.144.51 per 100 cubic feet of metered water use.

2. Advanced Waste Treatment Operations and Maintenance Charge:
$ 1.651.80 per 100 cubic feet of metered water use

3. $220.43202.23 per 1000 pounds (lbs) of COD (Chemical Oxygen Demand)

4. $ 531.46 487.58 per 1000 lbs of SS (Suspended Solids)

5. $ 3,672.26 3,369.05 per 1000 lbs of NH 3 (Ammonia)

6. $ 16,111.5614,781.25 per 1000 lbs of toxics (chromium, copper, cyanide, lead, nickel, silver, and zinc)
D. SPECIAL NOTES:

1. Water usage will be determined as defined in Rule 23, Section C. If a Water Meter is identified as exclusively serving irrigation landscaping, such Meter will be exempted from Wastewater charge calculations.

2. The City of Palo Alto Utilities Department may require Wastewater Metering facilities, in which case Service will be governed by terms of a special agreement between the City of Palo Alto and the Customer.

3. Charges for large discharges will be determined on the basis of sampling as outlined in Utilities Rule 23, Section C. However, for purposes of arriving at an accurate flow estimate, discharge Meters, if installed, can be utilized to measure outflow for billing purposes. Annual charges will be determined and allocated monthly for billing purposes. {End}
Item 28
Attachment F -
Wastewater Rate
Schedules
Item 28: Staff Report Pg. 32 Packet Pg. 376 of 911

GENERAL RESIDENTIAL WATER SERVICE
UTILITY RATE SCHEDULE W-1

CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No W-1-1 Effective 7-1-20232
dated 7-1-202219 Sheet No W-1-1
A. APPLICABILITY:

This schedule applies to separately metered single-family residential dwellings receiving Water Service from the City of Palo Alto Utilities.

B. TERRITORY:

This schedule applies everywhere the City of Palo Alto provides Water Service.

C. RATES:

Per Meter
Monthly Service Charge: Per Month
For meters 5/8-inch to 1 inch .................................................................................... $ 21.4806 For 1 1/2 inch meter .................................................................................................. 69.388.02 For 2-inch meter ........................................................................................................ 107.325.22 For 3-inch meter ........................................................................................................ 227.483.02 For 4-inch meter ........................................................................................................ 404.56396.63 For 6-inch meter ........................................................................................................ 828.2712.03 For 8-inch meter ........................................................................................................1,523.92494.04 For 10-inch meter ......................................................................................................2,409.29362.05 For 12-inch meter....................................................................................................... 3,168.1906.07 Per Hundred
Cubic Feet
Volumetric Rates: (To be added to Service Charge, applicable to all pressure zones.) Per Month Commodity Rate:

Water Delivery Charge from SFPUC (through July 31, 2022) .................................. $4.10 Water Delivery Charge from SFPUC (effective August 1, 2022).............................. $ 5.214.75 Distribution Rate:

Tier 1 usage ........................................................................................................................$2.7267 Tier 2 usage (All usage over 100% of Tier 1) ....................................................................... 6.3321 Item 28
Attachment G - Water
Rate Schedules
Item 28: Staff Report Pg. 33 Packet Pg. 377 of 911

GENERAL RESIDENTIAL WATER SERVICE
UTILITY RATE SCHEDULE W-1

CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No W-1-2 Effective 7-1-20232
dated 7-1-202219 Sheet No W-1-2
Drought Surcharges (deactivated):

A drought surcharge will be added to the Customer’s applicable commodity rate for Tier 1 and Tier 2 Water usage when the City Council has determined that a Water reduction level is in effect for the City as described in Section D.4. The drought surcharges in the table below are measured in dollars per hundred cubic feet (ccf).

Water Usage
Reduction level Level 1 (10/15%) Level 2 (20%) Level 3 (25%) Tier 1 0.20 0.43 0.64
Tier 2 0.58 1.21 1.85
Temporary Service – Developers
Temporary unmetered service to residential
subdivision developers, per connection ........................................................................ $ 6.00 D. SPECIAL NOTES:

1. Calculation of Cost Components
The actual bill amount is calculated based on the applicable rates in Section C above and adjusted for any applicable discounts, surcharges and/or taxes. On a Customer’s bill statement, the bill amount may be broken down into appropriate components as calculated under Section C.

2. Commodity Rate
The Commodity Charge is based on the water delivery rate per the San Francisco Public Utility Commission (SFPUC) Water Rate Schedule W-25: Wholesale Use with Long-Term Contract. The Commodity Charge will be passed through automatically via periodic rate adjustments to account for increases in wholesale water charges, as well as inflation. The pass-through period will be effective for fiscal years 2020 through 2024, inclusive.

Customers will be provided notice of any adjustments via their billing statements or by any other mailing by CPAU to the customer’s regular billing address.

Item 28
Attachment G - Water
Rate Schedules
Item 28: Staff Report Pg. 34 Packet Pg. 378 of 911

GENERAL RESIDENTIAL WATER SERVICE
UTILITY RATE SCHEDULE W-1

CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No W-1-3 Effective 7-1-20232
dated 7-1-202219 Sheet No W-1-3

3. Calculation of Usage Tiers
Tier 1 Water usage shall be calculated and billed based upon a level of 0.2 ccf per day rounded to the nearest whole ccf, based on Meter reading days of Service. As an example, for a 30-day bill, the Tier 1 level would be 0 through 6 ccf. For further discussion of bill calculation and proration, refer to Rule and Regulation 11.

4. Drought Surcharge
During period of Water shortage or restrictions on local Water use, the City Council may, by resolution, declare the need for citywide Water conservation at the 10/15%, 20% or 25% level. While such a resolution is in effect, a drought surcharge will apply. The purpose of the drought surcharge is to recover revenues lost as a result of reduced consumption.
{End}
Item 28
Attachment G - Water
Rate Schedules
Item 28: Staff Report Pg. 35 Packet Pg. 379 of 911

WATER SERVICE FROM FIRE HYDRANTS
UTILITY RATE SCHEDULE W-2

CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No W-2-1 Effective 7-1-20232
dated 7-1-202219 Sheet No W-2-1
A. APPLICABILITY:

This schedule applies to all Water taken from fire hydrants for construction, maintenance, and other uses in conformance with provisions of a Hydrant Meter Permit.

B. TERRITORY:

This schedule applies everywhere the City of Palo Alto provides Water Service.

C. RATES:

1. Monthly Service Charge.

METER SIZE
5/8 inch ........................................................................................................................... $ 50.00 3 inch ........................................................................................................................... 125.00

2. Volumetric Rate: (per hundred cubic feet)
Commodity Rate:

Water Delivery Charge from SFPUC (through July 31, 2022) ......................... $ 5.24.101 Water Delivery Charge from SFPUC (effective August 1, 2022)..................... $4.75 Distribution Rate:.................................................................................................................$ 3.8376

4. Drought Surcharges (deactivated):

A drought surcharge will be added to the Customer’s applicable Commodity rate when the City Council has determined that a Water reduction level is in effect for the City as described in Section D.6. The drought surcharges in the table below are measured in dollars per hundred cubic feet (ccf).

Water Usage
Reduction level Level 1 (10/15%) Level 2 (20%) Level 3 (25%) Surcharge 0.26 0.53 0.77
Item 28
Attachment G - Water
Rate Schedules
Item 28: Staff Report Pg. 36 Packet Pg. 380 of 911

WATER SERVICE FROM FIRE HYDRANTS
UTILITY RATE SCHEDULE W-2

CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No W-2-2 Effective 7-1-20232
dated 7-1-202219 Sheet No W-2-2
D. SPECIAL NOTES:

1. Monthly charges shall include the applicable monthly Service Charge in addition to usage billed at the commodity rate.

2. The Commodity Charge is based on the water delivery rate per the San Francisco Public Utility Commission (SFPUC) Water Rate Schedule W-25: Wholesale Use with Long-Term Contract. The Commodity Charge will be passed through automatically via periodic rate adjustments to account for increases in wholesale water charges, as well as inflation. The pass-through period will be effective for fiscal years 2020 through 2024, inclusive. Customers will be provided notice of any adjustments via their billing statements or by any other mailing by CPAU to the customer’s regular billing address.

3. Any person or company using a hydrant without first obtaining a valid Hydrant Meter Permit shall pay a fee of $50.00 for each day of such use in addition to all other costs and fees provided in this schedule. A hydrant permit may be denied or revoked for failure to pay such fee.

4. A Meter deposit of $750.00 may be charged any applicant for a Hydrant Meter Permit as a prerequisite to the issuance of a permit and Meter(s). A charge of $50.00 per day will be added for delinquent return of hydrant Meters. A fee will be charged for any Meter returned with missing or damaged parts.

5. Any person or company using a fire hydrant improperly or without a permit, or who draws Water from a hydrant without a Meter installed and properly recording usage shall, in addition to all other applicable charges be subject to criminal prosecution pursuant to the Palo Alto Municipal Code.

6. During period of Water shortage or restrictions on local Water use, the City Council may, by resolution, declare the need for citywide Water conservation at the 10/15%, 20% or 25% level.

While such a resolution is in effect, a drought surcharge will apply. The purpose of the drought surcharge is to recover revenues lost as a result of reduced consumption. {End}
Item 28
Attachment G - Water
Rate Schedules
Item 28: Staff Report Pg. 37 Packet Pg. 381 of 911

FIRE SERVICE CONNECTIONS
UTILITY RATE SCHEDULE W-3

CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No W-3-1 Effective 7-1-202322
dated 7-1-202219 Sheet No W-3-1
A. APPLICABILITY:

This schedule applies to all public fire hydrants and private fire Service connections.

B. TERRITORY:

This schedule applies everywhere the City of Palo Alto provides Water Service.

C. RATES:

1. Monthly Service Charges
Public Fire Hydrant.................................................................................................... $ 5.00 Private Fire Service:
2-inch connection.......................................................................................................$ 4.42 4.34 4-inch connection.......................................................................................................27.38 26.85 6-inch connection....................................................................................................... 79.51 77.96 8-inch connection.......................................................................................................169.45 166.13 10-inch connection.....................................................................................................304.74 298.77 12-inch connection.....................................................................................................492.24 482.59

2. Commodity (To be added to Service Charge unless Water is used for fire extinguishing or testing purposes.)
Per Hundred Cubic Feet
All water usage ..........................................................................................................$ 10.00 D. SPECIAL NOTES:

1. Service under this schedule may be discontinued if Water is used for any purpose other than fire extinguishing or testing and repairing the fire extinguishing facilities. Using hydrants and fire Services for other purposes is illegal and will be subject to the commodity charge as noted above, fines, and criminal prosecution pursuant to the Palo Alto Municipal Code.

2. For a combination Water and fire Service, the Water Service schedule shall apply.

Item 28
Attachment G - Water
Rate Schedules
Item 28: Staff Report Pg. 38 Packet Pg. 382 of 911

FIRE SERVICE CONNECTIONS
UTILITY RATE SCHEDULE W-3

CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No W-3-2 Effective 7-1-202322
dated 7-1-202219 Sheet No W-3-2

3. Utilities Rule and Regulation No. 21 provides additional information on Automatic Fire Services.

4. Repairs and testing of fire extinguishing facilities are not considered unauthorized use of Water if records and documentation are supplied by the Customer. {End}
Item 28
Attachment G - Water
Rate Schedules
Item 28: Staff Report Pg. 39 Packet Pg. 383 of 911

RESIDENTIAL MASTER-METERED AND

GENERAL NON-RESIDENTIAL WATER SERVICE
UTILITY RATE SCHEDULE W-4

CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No W-4-1 Effective 7-1-20232
dated 7-1-202219 Sheet No W-4-1
A. APPLICABILITY:

This schedule applies to Water Services to non-residential buildings, and multi-family residential dwellings served through a Master-Meter.

B. TERRITORY:

This schedule applies everywhere the City of Palo Alto provides Water Service.

C. RATES:

Per Meter
Monthly Service Charge Per Month
For 5/8-inch meter .................................................................................... $ 18.78 18.42 For 3/4-inch meter .................................................................................... 25.11 24.62 For 1-inch meter .................................................................................... 37.76 37.02 For 1 ½-inch meter .................................................................................... 69.38 68.02 For 2-inch meter .................................................................................... 107.32 105.22 For 3-inch meter .................................................................................... 227.48 223.02 For 4-inch meter .................................................................................... 404.56 396.63 For 6-inch meter .................................................................................... 828.27 812.03 For 8-inch meter ....................................................................................1,523.92 1,494.04 For 10-inch meter ....................................................................................2,409.29 2,362.05 For 12-inch meter ....................................................................................3,168.19 3,106.07 Per Hundred
Cubic Feet
Volumetric Rates: (to be added to Service Charge, applicable to all pressure zones) Per Month Commodity Rate:

Water Delivery Charge from SFPUC (through July 31, 2022) ............... $ 5.214.10 Water Delivery Charge from SFPUC (effective August 1, 2022)........... 4.75 Distribution Rate:........................................................................................... 3.8376 Item 28
Attachment G - Water
Rate Schedules
Item 28: Staff Report Pg. 40 Packet Pg. 384 of 911

RESIDENTIAL MASTER-METERED AND

GENERAL NON-RESIDENTIAL WATER SERVICE
UTILITY RATE SCHEDULE W-4

CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No W-4-2 Effective 7-1-20232
dated 7-1-202219 Sheet No W-4-2
Drought Surcharges (deactivated):

A drought surcharge will be added to the Customer’s applicable commodity rate when the City Council has determined that a Water reduction level is in effect for the City as described in Section D.3. The drought surcharges in the table below are measured in dollars per hundred cubic feet (ccf).

Water Usage
Reduction level Level 1 (10/15%) Level 2 (20%) Level 3 (25%) Surcharge 0.26 0.53 0.77
D. SPECIAL NOTES:

1. Calculation of Cost Components
The actual bill amount is calculated based on the applicable rates in Section C above and adjusted for any applicable discounts, surcharges and/or taxes. On a Customer’s bill statement, the bill amount may be broken down into appropriate components as calculated under Section C.

2. Commodity Rate
The Commodity Charge is based on the water delivery rate per the San Francisco Public Utility Commission (SFPUC) Water Rate Schedule W-25: Wholesale Use with Long-Term Contract. The Commodity Charge will be passed through automatically via periodic rate adjustments to account for increases in wholesale water charges, as well as inflation. The pass-through period will be effective for fiscal years 2020 through 2024, inclusive.

Customers will be provided notice of any adjustments via their billing statements or by any other mailing by CPAU to the customer’s regular billing address.

3. Drought Surcharge
During period of Water shortage or restrictions on local Water use, the City Council may, by resolution, declare the need for citywide Water conservation at the 10/15%, 20% or 25% level. While such a resolution is in effect, a drought surcharge will apply. The purpose of the drought surcharge is to recover revenues lost as a result of reduced consumption.

Item 28
Attachment G - Water
Rate Schedules
Item 28: Staff Report Pg. 41 Packet Pg. 385 of 911

RESIDENTIAL MASTER-METERED AND

GENERAL NON-RESIDENTIAL WATER SERVICE
UTILITY RATE SCHEDULE W-4

CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No W-4-3 Effective 7-1-20232
dated 7-1-202219 Sheet No W-4-3
{End}
Item 28
Attachment G - Water
Rate Schedules
Item 28: Staff Report Pg. 42 Packet Pg. 386 of 911

NON-RESIDENTIAL IRRIGATION WATER SERVICE
UTILITY RATE SCHEDULE W-7

CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No W-7-1 Effective 7-1-20232
dated 7-1-202219 Sheet No W-7-1
A. APPLICABILITY:

This schedule applies to non-residential Water Service supplying dedicated irrigation Meters.

B. TERRITORY:

This schedule applies everywhere the City of Palo Alto provides Water Services.

C. RATES:

Per Meter
Monthly Service Charge Per Month
For 5/8-inch meter .................................................................................... $ 18.78 18.42 For 3/4-inch meter .................................................................................... 25.11 24.62 For 1-inch meter .................................................................................... 37.76 37.02 For 1 1/2 inch meter .................................................................................... 69.38 68.02 For 2-inch meter .................................................................................... 107.32 105.22 For 3-inch meter .................................................................................... 227.48 223.02 For 4-inch meter .................................................................................... 404.56 396.63 For 6-inch meter .................................................................................... 828.27 812.03 For 8-inch meter ....................................................................................1,523.92 1,494.04 For 10-inch meter ....................................................................................2,409.29 2,362.05 For 12-inch meter ....................................................................................3,168.19 3,106.07 Per Hundred
Cubic Feet
Volumetric Rates: (to be added to Service Charge, applicable to all pressure zones) Per Month Commodity Rate:

Water Delivery Charge from SFPUC (through July 31, 2022) ..................... $ 5.214.10 Water Delivery Charge from SFPUC (effective August 1, 2022)................. 4.75 Distribution Rate: ..................................................................................................... 5.8372 Item 28
Attachment G - Water
Rate Schedules
Item 28: Staff Report Pg. 43 Packet Pg. 387 of 911

NON-RESIDENTIAL IRRIGATION WATER SERVICE
UTILITY RATE SCHEDULE W-7

CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No W-7-2 Effective 7-1-20232
dated 7-1-202219 Sheet No W-7-2
Drought Surcharges (deactivated):

A drought surcharge will be added to the Customer’s applicable commodity rate when the City Council has determined that a Water reduction level is in effect for the City as described in Section D.3. The drought surcharges in the table below are measured in dollars per hundred cubic feet (ccf).

Water Usage
Reduction level Level 1 (10/15%) Level 2 (20%) Level 3 (25%) Surcharge 0.53 1.25 2.02
D. SPECIAL NOTES:

1. Calculation of Cost Components
The actual bill amount is calculated based on the applicable rates in Section C above and adjusted for any applicable discounts, surcharges and/or taxes. On a Customer’s bill statement, the bill amount may be broken down into appropriate components as calculated under Section C.

2. Commodity Rate
The Commodity Charge is based on the water delivery rate per the San Francisco Public Utility Commission (SFPUC) Water Rate Schedule W-25: Wholesale Use with Long-Term Contract. The Commodity Charge will be passed through automatically via periodic rate adjustments to account for increases in wholesale water charges, as well as inflation. The pass-through period will be effective for fiscal years 2020 through 2024, inclusive.

Customers will be provided notice of any adjustments via their billing statements or by any other mailing by CPAU to the customer’s regular billing address.

3. Drought Surcharge
During period of Water shortage or restrictions on local Water use, the City Council may, by resolution, declare the need for citywide Water conservation at the 10/15%, 20% or 25% level. While such a resolution is in effect, a drought surcharge will apply. The purpose of the drought surcharge is to recover revenues lost as a result of reduced consumption.
{End}
Item 28
Attachment G - Water
Rate Schedules
Item 28: Staff Report Pg. 44 Packet Pg. 388 of 911
City Council
Staff Report
Report Type: ACTION ITEMS
Lead Department: Administrative Services
Meeting Date: June 19, 2023
Report #:2306-1659
TITLE
PUBLIC HEARING: Adoption of the Budget Ordinance for Fiscal Year 2024, Including the Operating and Capital Budgets, Table of Organization, and Municipal Fee Schedule; Acceptance of Updates to the Capital Improvement Plan, and Acceptance of Updates to the Salary Schedule for the Management and Professionals Group; CEQA Status – Not a Project

BACKGROUND
This report will be a special late packet release on Thursday, June 15, 2023.

APPROVED BY:

Kiely Nose, Assistant City Manager
Item 29
Item 29 Late Packet
Report
Item 29: Staff Report Pg. 1 Packet Pg. 389 of 911
City Council
Staff Report
Report Type: CONSENT CALENDAR
Lead Department: Administrative Services
Meeting Date: June 19, 2023
Report #:2306-1656
TITLE
Adoption of a Resolution Proposing the Appropriations Limit for Fiscal Year 2024

BACKGROUND
1A preliminary Appropriations Limit Notice was posted to the City’s website based on the FY 2024 Proposed Budget. An updated Notice based on the recommended FY 2024 Adopted Budget will be released as part of the late packet memorandum on June 15, 2023.

APPROVED BY:

Kiely Nose, Assistant City Manager
1 https://www.cityofpaloalto.org/files/assets/public/administrative-services/city-budgets/fy-2024-city-budget/fy2024-gann-notice.pdf Item 30
Item 30 Late Packet
Report
Item 30: Staff Report Pg. 1 Packet Pg. 390 of 911
City Council
Staff Report
From: City Manager
Report Type: CONSENT CALENDAR
Lead Department: Utilities
Meeting Date: June 19, 2023
Staff Report: 2304-1380
TITLE
Approval of an Agreement Between Santa Clara Valley Water District and the City of Palo Alto for Administration and Funding of Water Conservation and Stormwater Rebate Programs and Advanced Metering Infrastructure for a Total Not-To-Exceed Amount of $1,575,000 Over a Seven-Year Term Ending June 30, 2030 ( This is not a project and therefore is exempt from California Environmental Quality Act (CEQA))

RECOMMENDATION
Staff recommends the Palo Alto City Council:
1) Approve and authorize the City Manager or designee to execute the agreement between Santa Clara Valley Water District (Valley Water) and the City of Palo Alto for administration and funding of Water Conservation and Stormwater Rebate Programs and Advanced Metering Infrastructure (Agreement), comprised of the City contribution of $1,400,000 for water conservation programs and $175,000 for stormwater programs over the seven-year contract term ending June 30, 2030, for a total-not-to-exceed amount of $1,575,000; and
2) Authorize the City Manager or designee to adjust the reimbursement amounts for the Programs, so long as the City’s total contribution does not exceed $1,400,000 for water conservation programs and $175,000 for stormwater programs over the seven-year contract term ending June 30, 2030.

EXECUTIVE SUMMARY
Staff recommends approval of the proposed Agreement with Valley Water for a new sevenyear term allowing Valley Water and the City to administer a variety of water conservation programs including Advanced Metering Infrastructure (AMI) and allow the City to match funding for rebate programs, effectively increasing incentives for Palo Alto residents and businesses to reduce water use. The Rain Barrel Distribution Events, AMI, and the Water Use Reports are administered by the City, and Valley Water will pay up to $1,435,000 to help fund these programs.

Item 31
Item 31 Staff Report
Item 31: Staff Report Pg. 1 Packet Pg. 391 of 911
To achieve state and local water conservation and efficiency objectives, the City of Palo Alto Utilities (CPAU) partners with Valley Water to offer a suite of conservation programs and services to Palo Alto’s water customers. Valley Water offers the programs in the City’s service area, and the City adds funding to some of the programs. This partnership enables Palo Alto to receive more benefits and cost savings than would be achieved through selfadministered water efficiency programs. The new agreement will replace the existing Agreement governing these programs to allow the City to receive funding from Valley Water for AMI.

BACKGROUND
State requirements and Council policies have resulted in aggressive water reduction goals which are largely achieved through conservation and efficiency programs. Valley Water and Palo Alto use innovative technologies and cost-effective programs to best utilize the annual water conservation operating budget.

The guiding document for water utility efficiency goals is the Urban Water Management Plan (UWMP) (Staff Report #12025)
1 . The UWMP is updated every five years and outlines the longterm supply and demand-side issues and policies impacting the water utility. The UWMP also details the measures CPAU will take to reach its water reduction goals, through a series of Demand Management Measures.

For over a decade Valley Water has delivered water conservation programs to residents and businesses throughout Santa Clara County. Valley Water and the City co-fund various programs and partner to promote residential and commercial sanitary fixtures, free conservation devices, indoor and outdoor water efficiency surveys, irrigation hardware upgrades, and residential educational workshops. Marketing for all water conservation programs is shared between Valley Water and the City. Implementation and administrative functions for these programs (e.g., scheduling, budget tracking and invoicing, contractor oversight, customer service, and project reporting associated with program implementation) is managed by City and/or Valley Water staff, depending on the program. The most recent agreement was approved by Council on June 20, 2022 (Staff Report #14384)
2 , for the delivery of water conservation and efficiency programs to the Palo Alto residents and businesses. This new agreement expands on the prior one to incorporate AMI programs.

On October 18, 2021, Council approved the AMI project with Sensus for the citywide AMI installation system (Staff Report #13665)
3 . The new and upgraded AMI water meters will be able
to provide near-real time data on water consumption. When the AMI system becomes fully 1 Staff Report 12025 https://www.cityofpaloalto.org/files/assets/public/agendas-minutes-reports/reports/citymanager-reports-cmrs/year-archive/2021/id-12025.pdf 2 Staff Report 14384 https://www.cityofpaloalto.org/files/assets/public/agendas-minutes-reports/reports/citymanager-reports-cmrs/attachments/06-20-2022-id-14384.pdf 3 Staff Report 13665 https://www.cityofpaloalto.org/files/assets/public/agendas-minutes-reports/reports/citymanager-reports-cmrs/year-archive/2021/10-18-2021-id-13665.pdf Item 31
Item 31 Staff Report
Item 31: Staff Report Pg. 2 Packet Pg. 392 of 911
operational, residents and businesses will be able to monitor ongoing water consumption data and be alerted about possible water leaks from high flow.

ANALYSIS
There is a need for a new agreement because the 2022 Agreement did not include funding from Valley Water for AMI. Cost-sharing for other water conservation programs remains the same.

Under this Agreement, most rebates will continue to be funded by Valley Water, with the City matching payments to customers for some programs. Palo Alto residents and businesses will be eligible to receive higher incentives than those from other water retailers in Santa Clara County for retrofits such as high-water use landscape conversion and custom facility process improvements for water efficiency. Mobile home parks and condominium complexes in Palo Alto will receive increased incentives for adding residential submeters. Rebates for laundry-tolandscape gray water systems will provide a financial incentive to residents to reduce potable water landscape irrigation. The Landscape Replacement Program provides rebates for residential and commercial customers to replace high water use landscapes with low water use landscape, and the rebate will be greater in Palo Alto due to the City’s contribution. Likewise, cost sharing will be implemented for rain barrels, cisterns, graywater systems, and rain gardens, all of which reduce reliance on potable water while keeping pollution out of the stormwater system and, thus, the San Francisco Bay.

Tables A-1, A-2 and A-3 summarize the proposed Agreement costs and reflect funding for the cost-sharing rebate amounts for the programs. Palo Alto will match Valley Water-funded rebates for landscape conversion rebates, graywater systems, submeters, rain barrels, cisterns, and rain gardens resulting in higher incentives for the Palo Alto community.

Table A-1 Water Conservation Program Rebate Matching Amounts from Palo Alto Program PALO ALTO's Reimbursement Rates
Landscape Conversion Rebate
(in addition to VALLEY WATER rebate)
$2.00 per square foot,
up to $2,000 per residential site and
$20,000 per commercial site
Large Landscape Lawn to Mulch Rebate
(in addition to VALLEY WATER rebate)
$1.00 per square foot,
up to $1,000 per residential site and
$10,000 per commercial site
Graywater Conversion Rebate
(in addition to VALLEY WATER rebate)
$200 per site
Submeter Rebate $150 per submeter
Item 31
Item 31 Staff Report
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Table A-2 Stormwater Program Rebate Matching Amounts from Palo Alto Program PALO ALTO's Reimbursement Rates
Rain Barrel Rebate (in
addition to VALLEY
WATER rebate)
Cost of the rain barrel minus
VALLEY WATER’s rebate amount,
up to a maximum of $35.

Cistern (in addition to
VALLEY WATER rebate)
$0.50 per gallon
Rain Garden (in addition
to VALLEY WATER rebate)
Rebate cap:
$1,000 per residential site;
$5,000 per commercial site.

Rebates may be applied to
any combination of rebate
types and amounts listed in
Tables A-2 or A-3.
$1 per square foot, up to $300
per site
Table A-3 Payments from Valley Water to Palo Alto for Rain Barrels Distributed by Palo Alto Program VALLEY WATER's Reimbursement Rates
Rain Barrel Distribution
Event Rebate (in addition
to CITY rebate)
Rebate caps do not apply $35.00 per rain barrel
Valley Water provides access to their online application portal to City of Palo Alto residents and businesses for all the programs listed above. Valley Water administers rebates for the programs listed in Table A-1 and A-2 on behalf of both agencies and then invoices the City. The City will administer rebates for the discounts on any rain barrels, cisterns or rain gardens (listed in Table A-3), and then invoice Valley Water. These discounts are offered at Rain Barrel Distribution Events which may occur yearly or biannually.

CPAU staff also administers several water conservation programs in-house. CPAU’s Water Reports provide information to residents including water use and tips and programs to improve water efficiency. CPAU’s AMI program will be able to provide near-real time data on water consumption and alert residents of possible leaks. Valley Water will pay the City up to $1,435,000 to help fund the City’s AMI and Water Use Reports program, and Rain Barrel Distribution program.

To ensure continued and aggressive water conservation efforts, staff recommends Council approve the proposed Agreement with a maximum City funding obligation total of $225,000 per year and $1,575,000 over the seven-year term. The additional funding will ensure continued momentum of the eight water efficiency programs administered by Valley Water and City though June 30, 2030. Table 2 shows funding amounts for the seven years of the proposed Agreement by department budget.

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Table 2: The City's Proposed Agreement Funding
Department FY2024 FY2025 FY2026 FY2027 FY2028 FY2029 FY2030 Total Utilities
(Water Fund)
$200,000 $200,000 $200,000 $200,000 $200,000 $200,000 $200,000 $1,400,000 Public Works
(Stormwater
Management Fund)
$25,000 $25,000 $25,000 $25,000 $25,000 $25,000 $25,000 $175,000 Total $225,000 $225,000 $225,000 $225,000 $225,000 $225,000 $225,000 $1,575,000

FISCAL/RESOURCE IMPACT
Palo Alto will match Valley Water-funded rebates for landscape conversion rebates, graywater systems, submeters, rain barrels, cisterns, and rain gardens resulting in higher incentives for the Palo Alto community.
- Rebates for landscape conversion rebates, graywater systems, and submeters programs will be funded from the Utilities Department budget while rebates for the remaining programs will be funded by the City’s Stormwater Management Fee for the first year of the contract subject to the approval of the FY 2024 Proposed Operating budget. Funding for FY 2025 and beyond is subject to City Council approval of the annual appropriation of funds through the annual budget process. - Valley Water will pay the City up to $1,435,000 to help fund the City’s AMI and Water Use Reports program, and Rain Barrel Distribution program.

Implementation of the proposed conservation programs will slightly reduce the City’s water consumption, and thus reduce water revenues to the Utility but will reduce water supply costs by a greater amount, reducing overall costs to the community. These water efficiency programs are expected to be cost-effective, meaning the cost of implementation will be lower than the water supply cost.

POLICY IMPLICATIONS
The proposed Agreement continues funding for water efficiency programs consistent with the 2020 Urban Water Management Plan (Staff Report #12025)
4 , the Utilities Strategic Plan, and the
City’s Sustainability and Climate Action Plan Goals and Key Draft Sustainability and Climate Action Plan Goals and Key Actions5. Stormwater-related programs support implementation of the Green Stormwater Infrastructure (GSI) Plan accepted by Council in May 2019 (Staff Report #9883) 6 .
4 Staff Report 12025 https://www.cityofpaloalto.org/files/assets/public/agendas-minutes-reports/reports/citymanager-reports-cmrs/year-archive/2021/id-12025.pdf 5 Draft Sustainability and Climate Action Plan Goals and Key Actions https://www.cityofpaloalto.org/files/assets/public/agendas-minutes-reports/reports/city-manager-reportscmrs/attachments/2020-sustainability-and-climate-action-plan-potential-goals-and-key-actions-draft.pdf 6 Staff Report 9883 https://www.cityofpaloalto.org/files/assets/public/agendas-minutes-reports/reports/citymanager-reports-cmrs/year-archive/2019/id-9883-acceptance-of-the-copa-green-stormwater-infrastructureplan.pdf Item 31
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In December 2018, the SWRCB adopted amendments to the Water Quality Control Plan for the San Francisco Bay/Sacramento-San Joaquin Delta Estuary (Bay Delta Plan Amendment) to establish water quality objectives to maintain the health of the Bay Delta ecosystem. Palo Alto Council expressed support for the Bay Delta Plan Amendment in its August 20, 2018 vote7. Water conservation programs are an important means for Palo Alto to reduce its dependence on the Tuolumne River.

STAKEHOLDER ENGAGEMENT
Palo Alto and Valley Water both actively market these programs though their websites, at community events, via bill inserts, other social media and newsletters.

ENVIRONMENTAL REVIEW
Approval of the proposed Agreement does not meet the definition of a project pursuant to Section 21065 of the California Public Resources Code, thus no environmental review under the California Environmental Quality Act (CEQA) is required and is categorically exempt from CEQA under Public Resources Code Sections 15307 (Actions by Regulatory Agencies for Protection of Natural Resources) and 15308 (Actions by Regulatory Agencies for Protection of the Environment). Valley Water is the lead agency with respect to Water Conservation and Stormwater programs covered by the Agreement. The City’s implementation and use of AMI water meters is categorically exempt under California Environmental Quality Act (CEQA) Guidelines section 15301(b) as a Project involving minor alteration of existing public utilities facilities and equipment.

ATTACHMENTS
Attachment A: Agreement for Water Conservation Programs and Advanced Metering Infrastructure
APPROVED BY:

Dean Batchelor, Director of Utilities
Staff, Linda Grand, Sustainability Programs Administrator 7 https://www.cityofpaloalto.org/files/assets/public/agendas-minutes-reports/agendas-minutes/city-councilagendas-minutes/00-archive/2018/08-20-2018-final-ccm-minutes.pdf Item 31
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Agreement Between Valley Water and Palo Alto for Water Conservation Programs, FY 23 1

AGREEMENT

BETWEEN THE SANTA CLARA VALLEY WATER DISTRICT AND

THE CITY OF PALO ALTO FOR WATER CONSERVATION PROGRAMS

AND ADVANCED METERING INFRASTRUCTURE
This Agreement (AGREEMENT), effective as of June 25, 2023, (EFFECTIVE DATE) between the Santa Clara Valley Water District, a special district created by the California Legislature (hereinafter referred to as VALLEY WATER) and the City of Palo Alto, a California chartered municipal corporation (hereinafter referred to as PALO ALTO), sets forth the respective roles of VALLEY WATER and PALO ALTO in regard to WATER CONSERVATION PROGRAMS (hereinafter referred to as PROGRAMS). VALLEY WATER and PALO ALTO may be referred to in this AGREEMENT individually as a "PARTY" or collectively as the "PARTIES."

RECITALS
WHEREAS, the PROGRAMS involve providing water conservation services and rebates, Advanced Metering Infrastructure (AMI) and Water Use Reports for properties located within PALO ALTO’s service area; and
WHEREAS, VALLEY WATER administers PROGRAMS as described in Exhibit A; and WHEREAS, PALO ALTO administers an AMI and WATER USE REPORTS PROGRAM per the AMI Guidelines specified in Exhibit B, and a RAIN BARREL DISTRIBUTION EVENT, during which PALO ALTO residents and businesses will have opportunity to purchase rain barrels at a discount funded by rebates from both PALO ALTO and VALLEY WATER without submitting a rebate application; and WHEREAS, the AMI and WATER USE REPORTS PROGRAM educates customers about water conservation, drought, and water demand management within Palo Alto’s service area; and WHEREAS, the PROGRAMS are consistent with VALLEY WATER’s and PALO ALTO’s Urban Water Management Planning Act requirements; and
WHEREAS, the PROGRAMS goals are to save water and provide information on how to use water most efficiently; and
WHEREAS, VALLEY WATER and PALO ALTO wish to collaborate to implement PROGRAMS, AMI and WATER USE REPORTS PROGRAM, and the RAIN BARREL DISTRIBUTION EVENT in the service area as described in this AGREEMENT; and WHEREAS, both PARTIES wish to cost share with each other on each of these PROGRAMS.

NOW, THEREFORE, in consideration of the recitals and mutual obligations of the PARTIES expressed in this Agreement, VALLEY WATER and PALO ALTO agree as follows:

1. PALO ALTO’s RESPONSIBILITIES
a. Administration of the AMI and WATER USE REPORTS PROGRAM per the AMI Guidelines, and any administrative updates implemented by Valley Water thereto (Exhibit B). b. Identify and provide data on PALO ALTO’s AMI Implementation plan, including timeline, number of active meters and their AMI status.
c. Collection and analysis of data to determine water savings. d. Administration of all funds for the AMI and WATER USE REPORTS PROGRAM.

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Conservation Programs
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Infrastructure
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Agreement Between Valley Water and Palo Alto for Water Conservation Programs, FY 23 2 e. Provide water usage records and other data to VALLEY WATER to determine savings and cost effectiveness of the AMI and WATER USE REPORTS PROGRAM , subject to the disclosure requirement outlined in 1.e.1. below. This includes number of Water Use Reports sent by month and additional requirements described in Exhibit B.

1. In accordance with Gov. Code 6254.16, customer name, home address and water usage records will only be made available to VALLEY WATER for those customer account holders from whom VALLEY WATER has obtained written authorization for the release of such information from PALO ALTO. In situations that release of such information as not been granted, then aggregate data will be provided.
f. Invoice VALLEY WATER, on a bi-annual basis, for fifty percent of the contract cost (net any grant funding received by PALO ALTO) for PALO ALTO to send Water Use Reports to PALO ALTO residents, up to $2.25 per connection. PALO ALTO shall not invoice VALLEY WATER for any amounts exceeding the annual cap set forth in Section 3.d. below. Only costs paid directly to Water Use Reports vendor shall be included in the bi-annual invoice. g. Invoice VALLEY WATER, on a bi-annual basis, $10 for each AMI water connection meeting all of the following criteria as reflected in Exhibit B per Section 1.a. above. PALO ALTO shall not invoice VALLEY WATER for any amounts exceeding the annual cap set forth in Section 3.e. below. h. Provide VALLEY WATER bi-annually information on the number of leak alerts sent, estimated leak volumes and duration, and estimated water savings associated with leak alerts for each month. i. Work cooperatively with VALLEY WATER in appropriately advertising the PROGRAMS to targeted customers.
j. Creation and distribution of outreach materials encouraging customer enrollment in leak alerts and active portal engagement.
k. Make payment to VALLEY WATER within thirty (30) days of receipt of a bi-annual invoice from VALLEY WATER. When submitting an invoice, VALLEY WATER shall provide PROGRAM participation information. Parties may mutually agree in writing to extend the deadline for payment sixty (60) days of receipt of an invoice.
l. Administer the RAIN BARREL DISTRIBUTION EVENT once annually or every other year.

1. At the RAIN BARREL DISTRIBUTION EVENT, PALO ALTO residents and businesses will have opportunity to purchase rain barrels at a discount funded by rebates from both PALO ALTO and VALLEY WATER without submitting a rebate application.

2. RAIN BARREL DISTRIBUTION EVENT rebates do not count toward the maximum rebate caps per site described in Exhibit A, Table A-2.

3. RAIN BARREL DISTRIBUTION EVENT will meet all of VALLEY WATER’s rain barrel rebate requirements as specified under the Landscape Rebate Program.

4. Notify VALLEY WATER within a minimum of 60 days before each RAIN BARREL DISTRIBUTION EVENT.

5. RAIN BARREL DISTRIBUTION EVENT’s outreach materials will acknowledge VALLEY WATER’s funding support and PROGRAMS.

6. Invoice Valley Water within a minimum of 30 days after each RAIN BARREL DISTRIBUTION EVENT in accordance with the amounts listed in Exhibit A, Table A-3. a. Include an attachment to the invoice with the following information: participating customer information, including customer name, site address, rain barrel purchase date, rain barrel quantity and size, total rebate amount in dollars, and total rebate amount owed by VALLEY WATER and PALO ALTO in dollars.

7. Confirm VALLEY WATER has provided written authorization for all customer account holders whose data will be shared under this Agreement.
2) VALLEY WATER’S RESPONSIBILITIES
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Agreement Between Valley Water and Palo Alto for Water Conservation Programs, FY 23 3 a. Administration of VALLEY WATER PROGRAMS as listed in Exhibit A, Tables A-1 and A-2 including, but not limited to,

1. Processing the payment of the amounts set forth in Section 3 below, to eligible persons residing in PALO ALTO (“ELIGIBLE RESIDENTS”). This supplemental rebate amount shall be in addition to the customary amounts paid by VALLEY WATER.

2. Payment of standard Landscape Rebate Program amounts to ELIGIBLE RESIDENTS within 8- 12 weeks of approval of PALO ALTO’s residential applicant’s request. b. At least once per fiscal year, collect and analyze data to determine VALLEY WATER PROGRAM water savings and provide the results to PALO ALTO with PALO ALTO customer participation data c. Administration of all funds for VALLEY WATER PROGRAMS. d. Invoicing PALO ALTO, on a bi-annual basis, in accordance with PALO ALTO’s REIMBURSEMENT RATES listed in Exhibit A.

1. Invoices shall include an attachment with VALLEY WATER PROGRAM customer information for those SERVICE AREA customers who received services during the dates of the invoice.

2. Customer information shall include the rebate number, invoice date, date of notice to proceed, rebate type, customer name, customer site type, customer address, area of converted landscape in square feet (if applicable), rainwater capture details (if applicable), including rain garden (roof square footage), rain barrel quantity, and cistern total gallonage, total rebate amount in dollars, total rebate amount owed by VALLEY WATER and PALO ALTO.

3. In accordance with Gov. Code 6254.16, VALLEY WATER shall ensure that customer names, home addresses and utility usage data will only be made available to PALO ALTO for those customer account holders from whom VALLEY WATER has obtained written authorization for the release of information.
e. Share in the cost of the AMI and WATER USE REPORTS PROGRAM. VALLEY WATER will pay 50 percent of the costs, up to $2.25 per connection. The annual cap for this program is listed in Section 3.d below.
f. Compensate PALO ALTO $10 for each qualifying AMI water connection meeting the specifications in Section 1.g. above and Section 3.e below. The annual cap for this program is listed in Section

3.e below.
g. Make payment to PALO ALTO within thirty (30) days of receipt of an invoice from PALO ALTO.

When submitting an invoice, PALO ALTO shall provide a copy of the corresponding Water Use Reports’ vendor invoice and program participation information to VALLEY WATER. Parties may mutually agree in writing to extend the deadline for payment sixty (60) days of receipt of an invoice. 3) NOT TO EXCEED COMPENSATION
a. The compensation to be paid to VALLEY WATER by PALO ALTO for PROGRAMS as described EXHIBIT A, Table A-1, shall not exceed $200,000 per year or $1,400,000 over the TERM. b. The compensation to be paid to VALLEY WATER by PALO ALTO for PROGRAMS as described EXHIBIT A, Table A-2, shall not exceed $25,000 per year or $175,000 over the TERM. c. The compensation to be paid to PALO ALTO by VALLEY WATER for the RAIN BARREL DISTRIBUTION EVENT program as described in EXHIBIT A, Table A-3 shall not exceed $5,000 per year or $35,000 over the TERM.
d. The compensation to be paid to PALO ALTO by VALLEY WATER for the WATER USE REPORTS PROGRAM shall not exceed $25,000 annually or $175,000 during the term of the agreement.
e. The compensation to be paid to PALO ALTO by VALLEY WATER for AMI shall not exceed $175,000 per year or $1,225,000 over the TERM.

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Agreement Between Valley Water and Palo Alto for Water Conservation Programs, FY 23 4 f. Either PARTY may adjust its contribution to any of the rebate amounts for any of the PROGRAMS described in EXHIBIT A, so long as that PARTY’s total contribution for any individual program does not exceed the amounts described in Sections 3.a-3.e, respectively. g. Pay VALLEY WATER the annual retail agency licensing fee of $1,000 for access to Droplet Landscape Rebate Program application portal.
4) HOLD HARMLESS AND LIABILITY
a. In lieu of and notwithstanding the pro rata risk allocation, which might otherwise be imposed between the PARTIES pursuant to Government Code Section 895.6, the PARTIES agree that all losses or liabilities incurred by a PARTY shall not be shared pro rata but, instead, VALLEY WATER and PALO ALTO agree that, pursuant to Government Code Section 895.4, each of the PARTIES hereto shall fully indemnify and hold each of the other PARTIES, their officers, Board members, Council members, employees, and agents, harmless from any claim, expense or cost, damage or liability imposed for injury (as defined in Government Code Section 810.8) occurring by reason of the negligent acts or omissions or willful misconduct of the indemnifying PARTY, its officers, employees or agents, under or in connection with or arising out of any work, authority or obligation delegated to such PARTY under this AGREEMENT. No PARTY, nor any officer, Board member, Council member, employee or agent thereof shall be responsible for any damage or liability occurring by reason of the negligent acts or omissions or willful misconduct of the other PARTIES hereto, their officers, Board members, Council members, employees, or agents, under or in connection with or arising out of any work authority or obligation delegated to such other PARTIES under this AGREEMENT.
b. The rights, duties, and obligations of the PARTIES as set forth above in this Hold Harmless and Liability section will survive termination, suspension, completion, and expiration of this AGREEMENT.
5) NO POWER TO INCUR ANY DEBT, OBLIGATION OR LIABILITY
PARTIES shall have no power to incur any debt, obligation, or liability on behalf of other PARTY or otherwise act as an agent of the other PARTY.
6) DOCUMENT REVIEW
VALLEY WATER and PALO ALTO will, upon reasonable advance written notice, make available for inspection to the other PARTY records, books and other documents relating to the PROGRAMS. 7) TERM
The term of the Agreement is from June 25, 2023 to June 30, 2030, or until funds are depleted, whichever occurs first. The term of the Agreement may be extended by mutual written consent of the PARTIES. This Agreement shall be contingent upon approval of program funding each fiscal year by both VALLEY WATER’s Board of Directors and by the City Council of PALO ALTO. 8) NOTICE
Any notice, payment, credit or instrument required or permitted to be given hereunder shall be deemed received upon personal delivery or five (5) days after deposit in any United States mail depository, first class postage prepaid and addressed to the PARTY for whom intended.

If to VALLEY WATER: Santa Clara Valley Water District
5750 Almaden Expressway
San Jose, CA 95118
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Agreement Between Valley Water and Palo Alto for Water Conservation Programs, FY 23 5 Attn: Conservation Programs
If to PALO ALTO: Office of the City Clerk
City of Palo Alto
Post Office Box 10250
Palo Alto, CA 94303
Either PARTY may change such address by notice given to the other PARTY as provided in this Section

8. 9) INSURANCE
Each PARTY shall adhere to the insurance requirements that are specified in Exhibit C of this AGREEMENT. Either PARTY to this AGREEMENT may submit a letter of self-insurance to satisfy the insurance requirements of Exhibit C.
10) ENTIRE AGREEMENT
This AGREEMENT contains the entire AGREEMENT between VALLEY WATER and PALO ALTO relating to the PROGRAMS. Any prior agreements, promises, negotiations, or representations not expressly set forth in this AGREEMENT are of no force or effect. 11) AMENDMENTS
The Agreement may only be amended by written agreement executed by both PARTIES. 12) ASSIGNMENT
Neither PARTY is allowed to assign, sublet, or transfer this AGREEMENT or any of the rights or interests in this AGREEMENT without the written consent of the other PARTY. 13) WAIVER
A PARTY’s waiver of any term, condition, covenant, or breach of any term, condition, or covenant shall not be construed as a waiver of any other term, condition, or covenant, or breach of any other term, condition, or covenant.
14) SEVERABILITY
The partial or total invalidity of one or more parts of this AGREEMENT will not affect the intent or validity or remaining parts of this AGREEMENT.
15) GOVERNING LAW
This AGREEMENT is a contract under the laws of the State of California and for all purposes must be interpreted in accordance with such laws. The federal and state courts within Santa Clara County, California shall have exclusive jurisdiction to adjudicate any dispute arising out of or related to this Agreement. Each PARTY expressly consents to the personal jurisdiction of and venue in such courts, and service of process effected upon it by registered mail sent to the address set forth herein for each PARTY.
16) TERMINATION OF AGREEMENT
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Conservation Programs
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Agreement Between Valley Water and Palo Alto for Water Conservation Programs, FY 23 6 This AGREEMENT may be terminated by either PARTY hereto for any reason upon thirty (30) days written notice to the other PARTY.
17) COUNTERPARTS
This AGREEMENT may be executed in counterparts, each of which, when executed and delivered, will be deemed to be an original, and which taken together will be deemed to be one and the same instrument, and will be binding as executed.
18) SIGNATURES
The individuals executing this AGREEMENT represent and warrant that they have the legal capacity and authority to do so on behalf of their respective legal entities. Unless otherwise prohibited by law or PALO ALTO policy, the PARTIES agree that an electronic copy of a signed contract, or an electronically signed contract, has the same force and legal effect as a contract executed with an original ink signature. The term “electronic copy of a signed contract” refers to a writing as set forth in Evidence Code Section 1550. The term “electronically signed contract” means a contract that is executed by applying an electronic signature using technology approved by the PARTIES. 19) CALIFORNIA ENVIRONMENTAL QUALITY ACT.

The PARTIES’ approval of this Agreement is categorically exempt from the California Environmental Quality Act (CEQA) pursuant to CEQA Guidelines Sections 15301 (Existing Facilities) and 15304 (Minor Alterations to Land).
20) COMPLIANCE WITH LAWS
Each PARTY shall at all times in the performance of its obligations under this Agreement comply with all applicable laws as each currently exists and as may hereafter be amended. 21) EQUAL OPPORTUNITY
a. Equal Opportunity Employer
Valley Water is an equal opportunity employer and requires its public agency partners to have and adhere to a policy of equal opportunity and non-discrimination. In the performance of the Agreement, both PARTIES will comply with all applicable federal, state, local laws and regulations, and will not discriminate against any subcontractor, employee, or applicant for employment in the recruitment, hiring, employment, utilization, promotion, classification or reclassification, transfer, recruitment advertising, evaluation, treatment, demotion, layoff, termination, rates of pay or other forms of compensation, and selection for professional development training (including apprenticeship), or against any other person, on the basis of sex (which includes pregnancy, childbirth, breastfeeding and medical conditions related to pregnancy, childbirth or breastfeeding), race, religion, color, national origin (including language use restrictions), ancestry, religious creed (including religious dress and grooming practices), political affiliation, disability (mental and physical, including HIV or AIDS), medical condition (cancer and genetic characteristics), genetic information, marital status, parental status, gender, age (40 and over), pregnancy, military and veteran status, sexual orientation, gender identity and gender expression, the exercise of family and medical care leave, the exercise of pregnancy disability leave, or the request, exercise, or need for reasonable accommodation. b. Compliance with Applicable Equal Opportunity Laws
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Infrastructure
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Agreement Between Valley Water and Palo Alto for Water Conservation Programs, FY 23 7 Each PARTY’s policy must be in conformance with applicable state and federal guidelines including the Federal Equal Opportunity Clause, 41 Code of Federal Regulations, Part 60-1, §60-

1.4; Title VII of the Civil Rights Act of 1964 as amended; the Americans with Disabilities Act of 1990; the Rehabilitation Act of 1973 (§503 and §504); the Age Discrimination Act of 1975 (42 U.S.C. §6101 et seq.); the California Fair Employment and Housing Act (Government Code §12900 et. seq.); and California Labor Code §1101 and §1102. c. Investigation of Claims
Each Party must designate a specific position within its organization to be responsible for investigating allegations of non-compliance with the anti-discrimination and anti-harassment provisions of this Agreement. Each Party must conduct a fair, prompt, and thorough investigation of all allegations directed to that Party. In cases where such investigation results in a finding of discrimination, harassment, or hostile work environment, the responding Party must take prompt, effective action against the offender.

In WITNESS WHEREOF, the PARTIES have executed this AGREEMENT as of the EFFECTIVE DATE set forth above.

CITY OF PALO ALTO
APPROVED AS TO FORM:

Aylin Bilir Ed Shikada
Assistant City Attorney City Manager
City of Palo Alto City of Palo Alto

SANTA CLARA VALLEY WATER DISTRICT
an independent special district created by the California Legislature _________________________
Rick L. Callender, Esq.

Chief Executive Officer
Santa Clara Valley Water District
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Agreement Between Valley Water and Palo Alto for Water Conservation Programs, FY 23 8

EXHIBIT A

WATER CONSERVATION PROGRAMS AND REIMBURSEMENT RATES
The reimbursement rates for the PROGRAMS administered by VALLEY WATER and PALO ALTO are specified below.

PARTIES will be reimbursed for the PROGRAMS listed below, up to a Not-To-Exceed Amount Specified in the AGREEMENT.

Table A-1 Water Conservation Program Rebate Matching Amounts from PALO ALTO Program PALO ALTO’S Reimbursement Rates
Landscape Conversion Rebate (in
addition to VALLEY WATER rebate)
$2.00 per square foot,
up to $2,000 per residential site and $20,000 per
commercial, industrial, institutional, and multi-family site (5+ units)
Large Landscape Lawn to Mulch
Rebate (in addition to VALLEY
WATER rebate)
$1.00 per square foot,
up $10,000 per commercial, industrial, institutional, and multi-family sites (5+ units)
Graywater Conversion Rebate (in
addition to VALLEY WATER rebate)
$200 per site
Submeter Rebate (in addition to
VALLEY WATER rebate)
$150 per submeter
Table A-2 Stormwater Program Rebate Matching Amounts from PALO ALTO Program PALO ALTO’S Reimbursement Rates
Rain Barrel Rebate (in
addition to VALLEY
WATER rebate)
Cost of the rain barrel minus
VALLEY WATER’s rebate
amount, up to a maximum of
$35.

Cistern (in addition to

VALLEY WATER
rebate)
$0.50 per gallon
Rain Garden (in
addition to VALLEY
WATER rebate)
Rebate cap:
$1,000 per residential site; $5,000
per commercial site, industrial,
institutional, and multi-family site.

Rebates may be applied to any
combination of rebate types and
amounts listed in Tables A-2 or A-3. $1 per square foot, up to $300 per site
Table A-3 Payments from VALLEY WATER for Rain Barrels Distributed by PALO ALTO Program VALLEY WATER's Reimbursement Rates
Rain Barrel

DISTRIBUTION EVENT
Rebate (in addition to
PALO ALTO rebate)
Rebate caps do not apply $35.00 per rain barrel.

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Conservation Programs
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Infrastructure
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Agreement Between Valley Water and Palo Alto for Water Conservation Programs, FY 23 9

EXHIBIT B

AMI AND WATER USE REPORT PROGRAM CRITERIA
2023
Valley Water offers a cost sharing program for Advanced Metering Infrastructure (AMI) meters and Water Use Reports, as described below. This cost sharing program is intended for both residential, and commercial, institutional, or industrial (CII) sites. Water use reports are intended for residential customers at a minimum but expansion to CII is encouraged.

General Administrative Requirements:

1. Water retailers must provide documentation of the total number of meters (AMI and non-AMI) by account type (e.g., single-family residential, commercial, etc.) in the service area. Water retailers must include in the documentation:
a. a description of the retailer’s account types, and
b. how they will provide Valley Water accurate and up-to-date meter counts once per fiscal year.

2. Water retailers must provide an approximate implementation plan for AMI deployment, including the anticipated schedule. An implementation plan could include relevant excerpts from planning documents such as Water Supply Master Plans, Urban Water Management Plans, etc.

3. Provide customers with Water Use Reports to provide a detailed and relevant account of their water usage. Water Use Reports must be sent to residential customers and are encouraged for CII customers. Water Use Reports may differ between water retailers, but there are some required criteria, as described below:
a. Their water usage history covering at least the most recent reporting and/or billing period;
b. A specific water-use comparison between the target property and water usage to similar properties in their service area;
c. Programmatic and behavioral recommendations to save water that are relevant to the property;
d. Easy access to an online water usage portal; and
e. Usage/leak alerts using industry best practices.

4. Water retailers must provide Valley Water with leak alert thresholds and report templates at least once per fiscal year unless no template changes occurred. The provision of other examples of program-related messaging (mailers and water-saving recommendations) is encouraged.

5. General administrative requirements affecting Water Use Reports, leak alert notifications, and leak alert thresholds may be adjusted for the purposes of conducting experiments to quantify water savings within specific service areas. Adjustments for this provision require written agreement between Valley Water and the water retailer. These adjustments are limited to a notto-exceed period of 24 months.

There are two options for water retailers to cost share with Valley Water on the AMI and Water Use Report Program (water retailers may only choose one option). Each option will have an annual not-toexceed cap relative to the full term of the agreement, and a budget for the full term of the agreement based on the number of qualifying meters. Valley Water funding will be available as Valley Water’s budget allows, which is subject to annual Board approval (approximately every Spring). Please inform Valley Water of intent to participate in the program as soon as possible.

Item 31
Attachment A -
Agreement for Water
Conservation Programs
and Advanced Metering
Infrastructure
Item 31: Staff Report Pg. 15 Packet Pg. 405 of 911
Agreement Between Valley Water and Palo Alto for Water Conservation Programs, FY 23 10 OPTION 1: AMI Conversion Combined with Water Use Reports1 Valley Water will rebate $10 per AMI conversion currently in operation annually for the next seven years and will fund 50 percent of the cost of the software linked to AMI, up to $2.25 per connection per year, when combined with Water Use Reports. Valley Water’s funding may be used for either capital and/or operations and maintenance costs. Funding for this option in years 2 through 7 will be contingent upon documentation of water savings achieved in the previous year(s).

Requirements for Option 1:

1. AMI meters eligible for funding must have been active for seven years or less;

2. AMI meters must be read at a minimum of once an hour;

3. AMI meters must be linked to a customer-accessible water usage portal with online access;

4. AMI Alerts:
a. Data on leak and high usage alerts by account and zip code are required for the most recent invoicing period. In lieu of identifying leaks by account number, a unique-identifier system for each record in the dataset can instead be provided to aid Valley Water with long-term data querying and tracking.
b. Leak alert settings for continuous leaks must not exceed 5 gallons per hour for singlefamily residential accounts with a duration not to exceed 72 hours; and duration of burst leaks is not to exceed 8 hours. Depending on metering technology advancements, these thresholds can be adjusted with mutual agreement between Valley Water and retailers. c. Leak alert settings (volume and duration thresholds) for continuous leaks or spikes in water use on CII properties must be set by the utility using industry best practices2 d. Utilities must have a plan in place for contacting customers with large leaks3 who cannot be contacted through standard procedures (letters, emails, SMS, or phone calls).

Retailers must have a process in place to contact customers whose irrigation does not comply with local restrictions.

5. If Water Use Reports through the online portal are optional, the water retailers shall provide an opt-out option, as opposed to requiring opt-in sign-ups to access Water Use Reports;

6. Water Use Reports must be sent out a minimum of four times per year indicated clearly in supporting documentation (Item 7);

7. Water retailers must coordinate with Valley Water to promote Valley Water’s conservation programs through Water Use Reports;

8. Water retailers must provide to Valley Water the number of Water Use Reports sent, number of sites Water Use Reports were sent to, number of leak alerts sent, estimated leak volumes and duration, and estimated water savings associated with leak alerts. Data must be sent semiannually, broken down by utility billing period, provide dates and durations of every leak alert, and include a total water savings estimate based on volume and duration of identified leaks. A data template may be provided by Valley Water.
a. Providing Valley Water access to an aggregated dashboard with the above content is preferred over reports or Excel files. Excel files are acceptable. 1 If a water retailer has previously received funding from Valley Water for AMI conversions, those conversions will not be eligible for additional funding.
2 Individual customers may modify their individual use baseline and reset their notifications at their discretion. CII water use is more varied, making it more complex to analyze and making leaks harder to identify. Water retailers may choose to rely on longterm usage averages and multiples thereof to assess CII leak alert notifications and thresholds. CII leak alert notifications and thresholds should align with current industry best practices as demonstrated by primary research or applicable case studies.

Custom CII leak alert notifications and thresholds should be provided to Valley Water in the water retailer’s supporting documentation.
3 “Large leaks” may be defined by the water retailer and defined in supporting documentation the water retailer provides Valley Water.

Item 31
Attachment A -
Agreement for Water
Conservation Programs
and Advanced Metering
Infrastructure
Item 31: Staff Report Pg. 16 Packet Pg. 406 of 911
Agreement Between Valley Water and Palo Alto for Water Conservation Programs, FY 23 11 i. If providing reports or Excel files, data must include the applicable cost-share agreement section reference that this requirement is fulfilling. ii. Data must cover the period from the effective date of the contract through the most recent invoicing period. If providing reports or Excel files, data redundancy between the reports/files of subsequent invoicing periods should be avoided.
b. Corresponding metadata describing variables, attributes, and analysis conducted to estimate water savings shall be provided or embedded within delivered data.

OPTION 2: Water Use Reports Only
Valley Water will rebate 50 percent of the cost of Water Use Reports, up to $4.50 per connection per year. No AMI or meter type requirement. Valley Water currently has this program in place.

Requirements for Option 2:

1. Customer accessible water usage portal, with mobile and online access;

2. If Water Use Reports through the online portal are optional, the water retailers shall provide an opt-out option, as opposed to requiring opt-in sign ups to access Water Use Reports;

3. Water Use Reports must be sent out a minimum of four times per year indicated clearly in supporting documentation (Item 5);

4. Water retailers must coordinate with Valley Water to promote Valley Water’s conservation programs through Water Use Reports;

5. Water retailers must provide to Valley Water the number of water use reports sent and the number of sites the reports were sent to. Data must be sent semi-annually, broken down by utility billing period. A data template may be provided by Valley Water. a. Providing Valley Water access to an aggregated dashboard with the above content is preferred over reports or Excel files.
i. If providing reports or Excel files, data must include the applicable cost-share agreement section reference that this requirement is fulfilling. ii. Data must cover the period from the effective date of the contract through the most recent invoicing period. If providing reports or Excel files, data redundancy between the reports/files of subsequent invoicing periods should be avoided. b. Corresponding metadata describing variables, attributes, and analysis conducted to estimate water savings shall be provided or embedded within delivered data.

Valley Water staff will work with water retailers to create new cost sharing agreements or amend existing agreements to include the AMI and Water Use Report Programs.

Item 31
Attachment A -
Agreement for Water
Conservation Programs
and Advanced Metering
Infrastructure
Item 31: Staff Report Pg. 17 Packet Pg. 407 of 911
Agreement Between Valley Water and Palo Alto for Water Conservation Programs, FY 23 12

EXHIBIT C

INSURANCE
Each PARTY represents and warrants that, at its sole cost and expense it will maintain for the duration of the AGREEMENT self-insurance against claims for injuries to persons or damages to property that may arise from, or in connection with its (and its agents, representatives’, employees’ or contractors)’ performance of the services and/or operations herein and the indemnity provisions of this AGREEMENT.

A. Types of Coverage
Coverage provided by said self-insurance programs shall apply to and be in lieu of maintaining General and Auto Liability and Workers’ Compensation insurance, as well as Professional Liability Errors and Omissions insurance, when applicable.

B. Minimum Limits of Coverage
Coverage for Commercial General and Auto Liability shall be for not less than $1,000,000 per occurrence and aggregate. Coverage for Professional Liability Errors and Omissions shall not be for less than $1,000,000 per claim and aggregate. Coverage for Workers’ Compensation coverage shall be as required by the California Labor Code and include Employers Liability limits of not less than $1,000,000 per accident.

C. Other Self-Insurance Provisions
Each PARTY’s self-insurance coverage applies to the other PARTY, its officers, employees, agents and contractors as respects: Liability arising out of activities performed by or on behalf of, the insuring PARTY; products and completed operations of the insuring PARTY; premises owned, leased or used by the insuring PARTY; and automobiles owned, hired or borrowed by the insurance PARTY. Said selfinsurance applies fully to any indemnity for the insured PARTY, its officers, employees, agents and contractors.

Each PARTY’s self-insurance coverage shall be primary as respects to insured PARTY, its officers, employees, agents and contractors. Any insurance or self-insurance maintained by insured PARTY, its officers, agents, or contractors shall be excess of insuring PARTY’s self-insurance and shall not contribute with it.

D. Verification of Coverage
Execution of this AGREEMENT shall constitute each PARTY’s representation and warranty as to the coverage required by this AGREEMENT, and authority of the person signing the AGREEMENT to bind coverage on its behalf.

E. Contractors
Each PARTY shall obtain separate evidence of insurance for each contractor/consultant hired to perform any services under this Agreement
Item 31
Attachment A -
Agreement for Water
Conservation Programs
and Advanced Metering
Infrastructure
Item 31: Staff Report Pg. 18 Packet Pg. 408 of 911
City Council
Staff Report
From: City Manager
Report Type: CONSENT CALENDAR
Lead Department: Public Works
Meeting Date: June 19, 2023
Report #:2304-1236
TITLE
Approval of a Blanket Purchase Order with Graniterock Company for the purchase of Sand, Rock, and Cutback-Cold Mix Asphalt Materials for the Public Works and Utilities Departments for a three-year term ending June 30, 2026; CEQA – Not a Project

RECOMMENDATION
Staff recommends that Council authorize the City Manager or their designee to execute a blanket purchase order with Graniterock Company for Sand, Rock, and Cutback-Cold Mix Asphalt Materials in the not-to-exceed amount of $315,075 for Fiscal Year 2024, $327,575 for Fiscal Year 2025 and $340,075 for Fiscal Year 2026, for a total not-to-exceed amount of $982,725 over a three-year term from July 1, 2023 to June 30, 2026.

BACKGROUND
Both the Public Works and Utilities Departments use Sand, Rock and Cutback-Cold Mix Asphalt regularly. Public Works uses for these materials include installing new sidewalks and/or replacing damaged sidewalks, patching potholes, and creating temporary ramps around metal plates located within the roadway. Utilities uses for these materials include pipe bedding and backfill of wastewater, gas, and water infrastructure. Utilities typically uses Cold Mix-Cut Back for temporarily backfilling trenches and ramping up metal plates. Hot Mix Asphalt, which is supplied through a separate blanket purchase order, is typically used for permanent trench restoration and roadway resurfacing.

ANALYSIS
Sand, Rock and Asphalt are essential for the Utilities and Public Works Departments to perform their day-to-day operations and enhancement projects. Without the use of these materials neither department would be able to fulfill the Public Works and Utilities Standards requirements (WGW-02, WGW-02B, PW Standards 4040 and 405) to replace sidewalks, bed pipes, and backfill various utility infrastructures.

Item 32
Item 32 Staff Report
Item 32: Staff Report Pg. 1 Packet Pg. 409 of 911
A Request for Quotation (RFQ) for Sand, Rock, and Cutback-Cold Mix Asphalt was sent to three potential vendors and posted on Planet Bids. Quotes were received from Graniterock Company (Graniterock) and two other bidders. One of the bidders was deemed non-responsive because they were unable to provide all the materials requested in the Scope of Work. Graniterock met all the requirements and was the lowest responsible bidder.

Table 1: Summary of Bid Process:

Bid Name/Number Sand, Rock and Cutback-Cold Mix Asphalt Materials RFQ #185983
Proposed Length of Project Three years
Total Days to Respond to Bid 30
Pre-Bid Meeting No
Number of Bids Received: 3
Base Bid Price Range $598,320 to $1,225,045
Link to Bid https://pbsystem.planetbids.com/portal/25569/bo/ bo-detail/102160#bidInformation
Under the recommended blanket purchase order, the cost of materials has increased by approximately 28% compared to the rates for Fiscal Year 2023. This price increase is attributed to inflation and the overall rise of cost in commodities. Table 2 displays the existing pricing for Fiscal Year 2023 in comparison to the bid price for Fiscal Year 2024.

Table 2: Pricing Comparison for Fiscal Years 2023 and 2024 Approx.

Qty (Tons) Description
FY23
Unit Price
FY23
Total Price
FY24
Unit Price
FY24
Total Price
2,000 Clean Sand, Salt Free and
Clay-Free
$40.35 $80,700 $60.75 $121,500
500 Class 3 Permeable ½”
Crushed Rock
$60.18 $30,090 $85.20 $42,600
3,500 Class 2 Aggregate Base
Rock
$19.64 $68,740 $18.00 $63,000
500 Cutback Asphalt, 3/8”
Cold Mix
$122.12 $66,060 $175.95 $87,975
TOTAL $245,590 $315,075
Staff recommends that Council approve and authorize the blanket purchase order for materials with Graniterock as the primary supplier. The City has had previous blanket purchase orders with Graniterock, and staff has consistently received product that met both the State of California and the City’s standards.

Item 32
Item 32 Staff Report
Item 32: Staff Report Pg. 2 Packet Pg. 410 of 911

FISCAL/RESOURCE IMPACT
Staff recommends that Council approve the not-to-exceed amount of $315,075 for Fiscal Year 2024; however, actual spending is dictated entirely by need and will be controlled by each department. Funding for the first year of this contract is included in the Fiscal Year 2024 budget, and execution of the recommended blanket purchase order is contingent on Council approval and adoption of the Fiscal Year 2024 budget. The bid table1 that Graniterock submitted represents a menu of available products with unit pricing that are required to install and repair sidewalks, pipe bedding, and backfill of wastewater, gas, and water infrastructure.

The Public Works and Utilities Departments estimate an annual need of $50,000 and $260,000, respectively. Staffing levels and planned work deferments may impact those estimates and will be considered before expending the funds. Funding for contract years two and three is contingent upon Council approval of each department’s budget for each subsequent year.

STAKEHOLDER ENGAGEMENT
Stakeholder engagement for the recommended blanket order was limited to the procurement process for reaching out to prospective bidders.

ENVIRONMENTAL REVIEW
Approval of the recommended blanket purchase order is not a project under the California Environmental Quality Act.

ATTACHMENTS
Attachment A: Bid from Granite Rock Company, RFQ185983
APPROVED BY:

Brad Eggleston, Director Public Works/City Engineer
1 Bid Table RFQ185983 Granite Rock Company, March 8, 2023 https://www.cityofpaloalto.org/files/assets/public/public-works/public-services/attachment-a-bid-rfq185983- granite-rock-company_1.pdf
Item 32
Item 32 Staff Report
Item 32: Staff Report Pg. 3 Packet Pg. 411 of 911
(Fill in name on each page) (Date on Each Page)
CITY OF PALO ALTO – RFQ185983
Form Revised: October 29, 2020