Palo Alto City Council
January 16, 2024

Item 5
Attachment C - Ordinance
No. 5420

Item 5: Staff Report
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DocuSign Envelope ID: 11C079F5-A091-4431-945D-37A5DB90C8E7 Exhibit 1
Section 6. Fee or Rate Stabilization
DSDRF may be added to the Development Services Department revenue projections by action of the City Council and held to manage the trajectory of future year rate increases.

Section 7. Reappropriation of DSDRF
At the end of each fiscal year the DSDRF will be reappropriated to the following fiscal year in accordance with Palo Alto Municipal Code Section 2.28.090.

Section 8. Relationship to Other Policies
The City Manager maintains City Council approved policies, which may contain provisions that affect the creation, sufficiency, and management of the DSDRF. It will be the responsibility of the City Manager and Director of Administrative Services Officer to notify the Director of Development Services if changes to city-wide policies impact the DSDRF. These policies may be City Council approved policies such as the Investment Policy or administrative policies within the confines of the Municipal Code.

Section 9. Reporting, Monitoring and Review of Policy
The Director of Development Services is responsible for ensuring that the DSDRF is maintained and used only as described in this policy. Upon approval of the use of DSDRF, the Director of Development Services and the Director of Administrative Services will maintain records of the use of funds and plan for replenishment. Staff will provide reports to the City Council within the annual budget process, or sooner if warranted by internal or external events.

Item 5
Attachment C - Ordinance
No. 5420

Item 5: Staff Report
Pg.
28 Packet Pg. 158 of 553

DocuSign Envelope ID: 11C079F5-A091-4431-945D-37A5DB90C8E7 Municipal Fee Schedule Exhibit 2

DEVELOPMENT SERVICES
Building
Current Fee
$50.00 per business

1.8% of each transaction
Proposed Fee
$50.00
Business Registry
Business Registry Fee
Miscellaneous
Technology Surcharge 1.8% per fee
Note: This surcharge will be added to all fees in Development Services.

Building Permit Fees
A. $1.00 - $1,000.00 $73.00 Base Fee Delete
DeleteB. $1,000.01 - $2,000.00 $73.00 for the first $1,000.00 plus $5.80 for each additional $100.00 or fraction thereof, to and including $2,000.00 C. $2,000.01 - $25,000.00 $131.00 for the first $2,000.00 plus $26.53 for each additional $1,000.00 or fraction thereof, to and including
Delete
Delete
Delete
Delete
Delete
Delete
$25,000.00
D. $25,000.01 - $50,000.00
E. $50,000.01 - $100,000.00
F. $100,000.01 - $500,000.00
G. $500,000.01 - $1,000,000.00
$741.19 for the first $25,000.00 plus $19.69 for each additional $1,000.00 or fraction thereof, to and including
$50,000.00
$1,233.44 for the first $50,000.00 plus $13.25 for each additional $1,000.00 or fraction thereof, to and including
$100,000.00
$1,895.94 for the first $100,000.00 plus $10.63 for each additional $1,000.00 or fraction thereof, to and including
$500,000.00
$6147.94 for the first $500,000.00 plus $9.03 for each additional $1,000.00 or fraction thereof, to and including
$1,000,000.00
$10,662.94 for the first $1,000,000.00 plus $7.12 for each additional $1,000.00 or fraction thereof
H. $1,000,000.01 and Up
Building Permit Fee
If valuation exceeds $5,000,000.00, an alternative fee arrangement may be established by the Chief Building Official to achieve full cost recovery.

Restructured to be 1.44% of Construction
Valuation based on the ICC TableSee Above
I. Building Demolition Permit $431.00 (does not include C&D fees) per permit $196.00 (does not include C&D fees) per permit
$498.00
J. Commercial Interior Non-Structural Demolition Permit Construction & Demolition
$179.00
Commercial and Multi-Family Projects greater than or equal to $25,000.00 in $412.00 per permit $305.00 Valuation
Item 5
Attachment C - Ordinance No. 5420

Item 5: Staff Report
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DocuSign Envelope ID: 11C079F5-A091-4431-945D-37A5DB90C8E7 Municipal Fee Schedule Exhibit 2

DEVELOPMENT SERVICES
Single Family and Two Family Projects greater than
$25,000.00 and less than $75,000.00 in Valuations 1
$172.00 per permit
$252.00 per permit
$163.00
$210.00Single Family and Two Family Projects greater than $75,000.00 in Valuation 1
Electrical Permits
A. Base Fee $92.00 per permit
$0.02 per square foot per square foot
$91.00 per unit
$115.00
DeleteB. New or Remodeled Square Footage
Air Conditioners $70.00
$58.00
$236.00
$153.00
$58.00
$70.00
Busway, Power Duct, or Floor Duct Per Foot
Conditional Utility Agreement
$75.00 each
$265.00 each
Each Additional Meter $75.00 each
Fixtures, Switches, and Outlets
Lighting, Power and/or Control Panel Board, Switchboard Cabinet or Panel $75.00 each
$75.00 each
Motor $75.00 each
$75.00 each
$75.00 each
$272.00 each
$136.00 each
$181.00 each
$75.00 each
$75.00 each
$75.00 each
$58.00
$441.00
$58.00
$209.00
Delete
Motor Generator
Range, Electric Clothes Dryer, or Water Heater
Service Conductor/Switch - Greater than 800 amp
Service Conductor/Switch - Less than 200 amp
Service Conductor/Switch - Less than 800 amp
Special Circuit (Not Listed Herein)
Temporary Power Pole
$367.00
$58.00
$58.00
$58.00Temporary Wiring for Construction
Electrical Permits ‐ Electrical Vehicle Charging Stations Commercial (Level 1 and 2) $427.00 plus $83.00 for each additional station $357.00 plus $67.00 for each additional station
Commercial (Level 3 and 4) $518.00 plus $102.00 for each additional station each $426.00 plus $83 for each additional station
Residential (Level 1 and 2) $188.00 per station
$264.00 per station
$154.00
Residential (Level 3) $235.00
Electrical Permits ‐ Photovoltaic Systems
Commercial System (less than 10 kW)
Commercial System (10kW - 49kW)
Commercial System (greater than 49kW)
Residential Systems (greater than 10kW)
$600.00 each
$901.00 each
$976.00 each
$340.00 each
$557.00
$557.00
$748.00
$357.00
Item 5
Attachment C - Ordinance No. 5420

Item 5: Staff Report
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DocuSign Envelope ID: 11C079F5-A091-4431-945D-37A5DB90C8E7 Municipal Fee Schedule Exhibit 2
Residential Systems (less than 10kW)
General & Miscellaneous Fees
Address Change
$91.00 each $165.00
$399.00 single address; $192.00 each additional address $505.00 single; $244.00 each additional

DEVELOPMENT SERVICES
All Other Publications $18.00 each $16.00
$80.00Construction/Maintenance Vehicles $81.00 per space per week. This includes FY 18 adjustment rate of 6%.

Electric Service and Safety Inspection $169.00 per hour $95.00 per application
$197.00
$79.00Extension of Building Permit or Building Permit Application Inspections and Investigations - Outside Normal Business Hours Note: Inspections and investigations outside normal business hours (2‐ hour minimum). $408.00 per 1.5x OT Hour; $544.00 per 2.0x OT hour $369.00 per 1.5x OT Hour; $492.00 per

2.0x OT hour
Inspections and Investigations - Unclassified
Note: Inspections and investigations for which no fee is specifically indicated (2‐hour minimum).
$254.00 per hour $246.00
$222.00Reactivation of Expired Building Permit - All Others 50% of original Building Permit Fee not to exceed the full cost to perform remaining inspections as determined by the Chief Building Official Reactivation of Expired Building Permit - Final Inspection Only $283.00 or 50% of original Building Permit Fee, whichever is less $211.00 per permit plus Plan Check Fees as applicable per permit $256.00
$156.00Reactivation of Expired Building Permit Application Real Property Research Fee (1-hour minimum)
Records Retention
$271.00 per hour
$6.00 per plan sheet
$315.00 each
$229.00
$6.00 per plan sheet
$137.00Reinspection Fee - Multi-Family Residential and Non- Residential Reinspection Fee - Single Family Residential $247.00 each secondary inspection type; $315.00 each primary inspection type per $76.00 each secondary inspection type; inspection $141.00 each primary inspection type per
$77.00Request for Release of Building Plans $85.00 each Residential Inspection Guidelines $37.00 each No Change Note: Available free online
Green Building
Alterations and additions for single and multifamily > 1,000 sq ft $708.00 per review $429.00 per review
$140.00 per review
$728.00
$441.00
$144.00
Alterations and additions for single family and multifamily < 1,000 sq ft and increases conditioned space
If the project is over $100,000 Energy Star is required after 12 months of occupancy
Item 5
Attachment C - Ordinance No. 5420

Item 5: Staff Report
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DocuSign Envelope ID: 11C079F5-A091-4431-945D-37A5DB90C8E7 Municipal Fee Schedule Exhibit 2
Landscape Inspection $185.00 per inspection $190.00
$1,939.00
$1,193.00
$949.00
Landscape Plan Review - Non-Residential & Multi-Family
Landscape Plan Review - Single Family Residential
Multi Family New Construction of 1-3 (attached) units
Multi Family New Construction of 4 or More
New Commercial >50,000 SF
$1886.00 per review
$1161.00 per review
$923.00 per review
$1481.00 per review
$1761.00 per review
$1202.00 per review
$1,523.00
$1,810.00
$1,236.00New Commercial 1,000 - 25,000 SF

DEVELOPMENT SERVICES
New Commercial 25,001 - 50,000 SF $1481.00 per review
$923.00 per review
$644.00 per review
$1,523.00
$949.00
$662.00
New Single Family
Tenant improvements, renovations or alterations > $200,000 in valuation (and not triggered by a Calgreen Tier)
Tenant improvements, renovations or alterations > 5,000 SF Note: includes replacement or alteration of at least two of the following: HVAC systems, building envelope, hot water system, or lighting system and project greater than $200,000 $644.00 per review $662.00
Mechanical Permits
A. Base Fee $92.00 per permit
$0.02 per square foot
$60.00 each
$115.00
Delete
$47.00
$93.00
B. New or Remodeled Square Footage
Air Handlers up to and including 10,000 cfm
Boilers, Compressors and Absorption Systems: For the installation or reloacation of each boiler or compressor up to 30 hp or each absorption system up to and including 1,000,000 Btu/h
$122.00 each
Boilers, Compressors, and Absorption Systems: For the installation or relocation of each boiler or compressor exceeding 30 hp, or each absorption system exceeding 1,000,000 Btu/h
$182.00 each $93.00
Furnace, Flue and Associated Ducts $182.00 each
$60.00 each
$93.00
$47.00Miscellaneous
Note: For each appliance or piece of equipment regulated by this code, but not classed in other appliance categories, or for which no other fee is listed.

Process Piping System $60.00 per permit
$145.00 per permit
$72.00 per permit
$60.00 each
$46.00
$47.00
$56.00
$47.00
Process Piping System - Hazardous
Swimming Pool Heater
Ventilation and Exhaust
Plan Review Fees
Item 5
Attachment C - Ordinance No. 5420

Item 5: Staff Report
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DocuSign Envelope ID: 11C079F5-A091-4431-945D-37A5DB90C8E7 Municipal Fee Schedule Exhibit 2
Additional Plan Review $225.00 per hour $191.00
Note: Required by changes, additions, or revisions to plans including Alternative Means and Methods (2‐hour minimum). For Elective (3rd party) and over‐the‐counter reviews (half hour minimum).

Building Plan Check 80% of Building Permit fee
Actual cost of CASp Consultant plus 15% per hour. Restructured to a flat fee. 35% of Building Plan Check fee
75%
$367.00
35%
Certified Access Specialist (CASp) Review/Consultation
Elective Plan Check
Fire and Life Safety Plan Check
Public Works Plan Check
45% of Building Permit fee 54%
12% of Building Permit fee 44%
Zoning Plan Check 30% of Building Permit fee 35%
Plumbing Permits
A. Base Fee $92.00 per permit per permit
$0.02 per square foot
$115.00
DeleteB. New or Remodeled Square Footage

DEVELOPMENT SERVICES
Atomospheric-type vaccum Breakers
Backflow protective device other than atomospheric-type Gas Piping System
$109.00 each
$217.00 each
$217.00 each
$217.00 each
$115.00
$167.00
$167.00
$167.00Industrial Waste Pretreatment Interceptor
Note: Including trap and vent, except kitchen‐type grease interceptors functioning as fixture traps
Medical Gas Piping System $217.00 each
$91.00 each
$167.00
$116.00Plumbing Fixtures
Note: For each plumbing fixture on one trap or a set of fixtures on one trap (including water, drainage piping, and backflow protection).

Plumbing Fixtures: For each building sewer $145.00 each $91.00 each
$217.00 each
$112.00
DeleteRain Water Systems
Solar Hot Water System $167.00
Note: Does not include Plan Check fee.

Storm Drain System
Swimming Pool
$217.00 each
$72.00 each
$109.00 each
$109.00 each
$167.00
$56.00
$84.00
$84.00
Water Heater, Vent or Other
Water Piping
Note: Installation, alteration or repair of water piping, water treatment equipment or both
Plumbing Permits ‐ Graywater Systems
Clotheswasher System
Complex System
$91.00 each $70.00
$167.00
$70.00
$217.00 plus plan review at cost
$91.00 plus plan review at costSimple System
SB 1473 Fee
Item 5
Attachment C - Ordinance No. 5420

Item 5: Staff Report
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DocuSign Envelope ID: 11C079F5-A091-4431-945D-37A5DB90C8E7 Municipal Fee Schedule Exhibit 2
A. $1.00 - $25,000.00 Permit Valuation $1.00 per valuation increment No change No change
No change
No change
No change
B. $25,001.00 - $50,000.00 Permit Valuation
C. $50,001.00 - $75,000.00 Permit Valuation
D. $75,001.00 - $100,000.00 Permit Valuation
$2.00 per valuation increment
$3.00 per valuation increment
$4.00 per valuation increment
Add $1.00 per valuation incrementE. Each $25,000.00 Increment or Fraction Thereof Above $100,000.00
F. Minimum $1.00 minimum No change
Strong Motion Instrument Program
Commercial $28.00 per $100,000.00 permit valuation ($0.50 minimum) $13.00 per $100,000.00 permit valuation ($0.50 minimum) No change
No changeResidential
Use & Occupancy Permits
Certificate of Use and Occupancy $287.00 each
$123.00 each
$1,095.00
$228.00Certificate of Use and Occupancy - Replacement

DEVELOPMENT SERVICES
SB 1186 Mandated Fee
Note: Does not include fees collected by the Fire Department. $1.00 each No change
$826.00Temporary Occupancy Permit - Multi-Family Residential, Non-Residential, and $673.00 each Other Commercial
Temporary Occupancy Permit - Single Family Residential and Commercial $498.00 each $606.00 Tenant Improvement less than 10,000 sq. ft.

Public Works
Encroachment Permit
Additional Non-Residential Long-Term (More than 5 days) Monthly $746.00 per month No Change Dumpster, Container $310.00 each
$1,249.00 each
$2,039.00 each
$1,466.00 each
No Change
No Change
No Change
No Change
Non-Residential - Single Day
Non-Residential Long-Term (More than 5 days)
Non-Residential Short-Term (Less than 5 days)
Engineering
A. 101 - 1,000 cubic yards $197.00 for the first 100 cubic yards, plus $197.00 for each additional 100 cubic yards or fraction thereof
No Change
No ChangeB. 1,001 - 10,000 cubic yards $1970.00 for the first 1,000 cubic yards plus $186.00 for each additional 1,000 cubic yards or fraction thereof
Item 5
Attachment C - Ordinance No. 5420

Item 5: Staff Report
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DocuSign Envelope ID: 11C079F5-A091-4431-945D-37A5DB90C8E7 Municipal Fee Schedule Exhibit 2
C. 10,001 or more cubic yards $3830.00 for the first 10,000 cubic yards plus $711.00 for each additional 10,000 cubic yard or fraction thereof
No Change
No Change
Inspection Fees
Tree Inspection for Private Development
Permit Fees
$139.00 per inspection
Construction in Public Right-of-Way ($1.00 - $5,999)
Note: Including public or private subdivision streets
$712.00 per occurrence No Change
No Change
No Change
No Change
Construction in Public Right-of-Way ($6,000 - $25,999)
Note: Including public or private subdivision streets
$712.00 + 8.8% of value greater than $6,000.00
$2472.00 + 10.8% of value greater than $26,000.00
10,572.00 + 9% of value greater than $100,000.00
Construction in Public Right-of-Way ($26,000 - $100,999) Note: Including public or private subdivision streets
Construction in Public Right-of-Way ($101,000 +)
Note: Including public or private subdivision streets
Storm Drain Plan Check Fee $743.00 per project No Change No ChangeTemporary Discharge to Storm Drain from Construction Site Dewatering $4,093 per request to discharge Additional Temporary Discharge to Storm Drain from Construction Site Dewatering
$313.00 per week for the duration of dewatering activities $287.00 per month, charge monthly October through April No Change
No Change

DEVELOPMENT SERVICES
Wet Season Construction Site Stormwater Inspection Note: MRP requirement for sites >1 acre and/or high priority (hillside, near creek, prior violation) Fire
Compliance Fees
Emergency Response Fee - Hazmat (PAMC 17.24.050) Up to $1,212.00 for each incident up to 100% cost recovery $350.00 Installation or Closure Without Approved Plans and/or Permits $275.00 - $813.00 average fee range No Change Documents
Emergency Planning Guide
Long-term Offsite Document Storage
Microfilm Copy/Print
$253.00 each
$0.25 per page
No Change
No Change
No Change$3.25 per blueprint page; $0.30 per specification/ calculation page Photographs $30.00 first print; $0.55 each additional print No Change Hazardous Materials Classification Permits
Item 5
Attachment C - Ordinance No. 5420

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DocuSign Envelope ID: 11C079F5-A091-4431-945D-37A5DB90C8E7 Municipal Fee Schedule Exhibit 2
Compressed Gas $391.00 annually
$391.00 annually
$391.00 annually
$391.00 annually
$391.00 annually
$391.00 annually
$391.00 annually
$391.00 annually
$391.00 annually
$391.00 annually
$391.00 annually
$351.00
$351.00
$351.00
$351.00
$351.00
$351.00
$351.00
$351.00
$351.00
$351.00
$351.00
Corrosives
Cryogenic Fluid
Flammable and Combustible Liquids
Flammable Gas
Flammable Solids
Health Hazard (Liquids & Solids)
Liquefied Petroleum Gases
Organic Coatings
Organic Peroxides
Other Hazardous Materials - Unclassified
Note: Inspections and investigations for which no fee is specifically indicated (1‐hour maximum)
Ovens - Industrial Baking or Drying
Oxidizers (Liquids & Solids)
Oxidizing Gas
$391.00 annually
$391.00 annually
$391.00 annually
$391.00 annually
$391.00 annually
$391.00 annually
$351.00
$351.00
$351.00
$351.00
$351.00
$351.00
Pyrophoric Gas
Pyrophoric Materials (Liquids & Solids)
Pyrotechnical Special Effects Material

DEVELOPMENT SERVICES
Radioactive Materials
Refrigeration Equipment
Spraying/Dipping
$391.00 annually
$391.00 annually
$391.00 annually
$1,561.00 annually
$391.00 annually
$351.00
$351.00
$351.00
$1,397.00
$351.00
Tire Recapping/Tire Storage
Toxic, Highly Toxic, Moderately Toxic, Health Hazard Gas Note: Includes pesticides, fumigants, and etiologic agents.

Toxic, Highly Toxic, Moderately Toxic, Health Hazard Materials Unstable Reactive Gas
$391.00 annually
$391.00 annually
$391.00 annually
$391.00 annually
$351.00
$351.00
$351.00
$351.00
Unstable Reactive Materials (Liquids & Solids)
Water Reactive Materials (Liquids & Solids)
Hazardous Materials Storage Permits
Additional Approvals for Hazardous Materials Storage Permit Note: Additional approval for permit to construct, temporary closure, permanent closure, otherwise modify a hazardous materials storage facility. See CEQA for additional fees. $848.00 per occurrence plus $554.00 per hour for time above two hours per occurrence
$761.00 per occurrence plus $498.00 per
hour for time above two hours per
occurrence
Business Plan (HMBP) $554.00 per location annually $498.00 Late Fee for Hazardous Materials Storage Permit 25% of total Hazardous Material permit fee No Change Item 5
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DocuSign Envelope ID: 11C079F5-A091-4431-945D-37A5DB90C8E7 Municipal Fee Schedule Exhibit 2
Level I Facility $391.00 annually per location. Includes 1 hr inspection time. $351.00 $703.00
Note: Minimal storage as defined by having no hazardous materials over CFC permit amounts as specified in CFC section 105.

Level II Facility $782.00 annually per location plus other hazardous materials classification permit if applicable. Includes 2 hrs inspection time.Note: Quantities exceeding CFC permit threshold, but less than 50 gal., 500lbs or 200 cu. ft. Category also includes dry cleaning, fixed medical gas, auto or aircraft repair, and service stations.

Level III Facility $1565.00 annually per location plus other hazardous materials classification permit if applicable. Includes 4 hrs inspection time.
$1,406.00
Note: Quantities exceed 50 gal. 500lbs, or 200 cu. ft. and not categorized as Level II.

Petroleum Aboveground Storage Tank
Note: Includes 2 hrs inspection time.
$782.00 annually $703.00
$703.00Provisional (6 Month) $782.00 plus other hazardous materials classification permit fees if applicable.

Includes 2 hrs inspection time.

Inspection Fees
Additional Inspection or Reinspection Fee $781.00 for up to 2 hours reinspection plus $390.00 per hour (during business $699.00 for up to 2 hours reinspection plus hours) per inspection $349.00 per hour (during business hours) $524.00After Hours Inspection Fee
Note: Fee for before or after normal business hours; weekends and holidays included.

Fee is to be paid in advance of inspection.
$585.00 per hour; 4 hour minimum
As-Built Plan Check and Additional Work $780.00 per review $699.00 Care Facility Inspection Including Fire Clearance $390.00 for facilities with 7-25 clients; $780.00 for facilities with more than 25 $349.00 for facilities with 7-25 clients; $699.00 for facilities with more than 25
$349.00
clients per inspection
Christmas Tree Lot/Pumpkin Patch $391.00 each

DEVELOPMENT SERVICES
High Rise Building - Certificate of Compliance $1626.00 annually for up to 4 hours; $391.00 for each additional hour $1456.00 annually for up to 4 hours; $349.00 for each additional hourNote: Certificate of compliance inspection for each high rise building which is required by state law to be inspected and certified annually as meeting minimum compliance with applicable state of California fire and life safety standards for existing high rise Outside Cooking Booths $210.00 each $524.00
$349.00Standby Fire Watch $391.00 per hour
Note: Per person.

Use and Occupancy Fire Inspection $148.00 per inspection $349.00 Investigations & Consultations
Additional Hours Over Plan Review/Inspection $308.00 per hour $249.00 $746.00Alternate Means and Methods Application $735.00 per application Note: 2 hr maximum.

Appeals to Decisions
Consultation Fee
$391.00 per hour
$391.00 per hour
$349.00
$349.00
$349.00Hydrant Flow Fee $391.00 per occurrence
Life Safety & Fire Protection
Item 5
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DocuSign Envelope ID: 11C079F5-A091-4431-945D-37A5DB90C8E7 Municipal Fee Schedule Exhibit 2
Hydrant Installation/Modification - Private $195.00 per device $175.00 Automatic Fire Sprinkler Installation/Modification
Note: Includes hydrostatic test
$780.00 for 1-19 Sprinkler Heads; $1,724.00 plus $4.80 per head for 20 or more $1543.00 for 1-19 Sprinkler Heads; $1,724.00 plus $3.00 per head for 20 or
No Change
Sprinkler Heads
Express Fire Protection Plan Check Fee $173.00 per occurrence Fire Alarm System Installation and Modification $1090.00 plus $23.00 a device or contract point $948.00 plus $21.00 a device or contract point
$0.54Fire and Life Safety Plan Check - Commercial
Note: Includes one inspection and reinspection.

The Fire and Life Safety Plan Review Fee is 45% of the Building Plan Check Fee and is collected by the Building Division at the time an application of a Building Permit is submitted.

Fire Prevention Inspection of Private Schools $780.00 annually $894.00 each
$699.00
$773.00Fire Protection and Fire Access Plan Review for New Single Family Dwellings or Additions
Multifamily dwellings, hotels & motels 51-100 units
Multifamily dwellings, hotels & motels greater than 100 units Multifamily dwellings, hotels, motels 4-50 Units
$780.00 annually
$1,170.00 annually
$391.00 annually
$699.00
$1,048.00
$349.00
$948.00Other Automatic Fire Extinguishing System $1,090.00 per occurrence Note: Includes hood and duct, FM 200, Inergen, and C02. If a system has a release panel, Fire Alarm fees apply as well.

Site Disaster Planning $390.00 per hour
$780.00 per riser
$349.00
$699.00
$757.00
$1,647.00
Standpipe System - Wet, Dry, or Combination
Temporary Certificate of Occupancy $377.00 per occurrence $1,870.00 per occurrenceUnderground Fire Service Line
Note: Includes 4 hrs of inspection and 1 hr of plan check Verification of Fire Protection System Maintenance and Certification $88.00 annually $64.00

DEVELOPMENT SERVICES
Specific Hazard Permits
Aerosol Products $488.00 annually
$1,138.00 each
$437.00
Bowling Alley and Pin Refinishing Involving the use of Flammable Liquids $1,019.00 Candles and Open Flames in Assembly Areas
Carnivals and Fairs
$391.00 annually
$189.00 each
$349.00
$1,456.00
$102.00
No Change
$349.00
$699.00
$349.00
$349.00
Cellulose Nitrate Storage/Nitrate Film
Hot Work (Welding) Operations
Liquid or Gas-Fueled Powered Equipment/Generator
Malls - Covered
$113.00 annually
$391.00 each
$391.00 each
$782.00 annually
$391.00 eachOccupant Load Increase - Temporary Public Assembly Open Burning $391.00 each
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Item 5: Staff Report
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DocuSign Envelope ID: 11C079F5-A091-4431-945D-37A5DB90C8E7 Municipal Fee Schedule Exhibit 2
Open Flame/Flame Producing Devices $391.00 each $349.00 $495.00Operate a Tank Vehicle to Transport Flammable/Combustible Liquids $553.00 per vehicle Parade Float $122.00 per hour
$782.00 per occurrence
$391.00 each
$351.00
$703.00
$349.00
$734.00
Place of Assembly
Place of Public Assembly - Temporary
Tent or Air Supported Structure $307.00 each
Note: Tent or air‐supported structure having an area in excess of 200 sq. ft. or canopies in excess of 400 sq. ft. Fee includes a public assembly permit of $125.00 for all tents.

Building New Fees
Commercial & Residential windows, skylights and doors, New and alteration (structural) (per 5)
$279.00
$140.00Commercial & Residential windows, skylights and doors, New and alteration (structural) (per 10)
Residential Reroof $279.00
$70.00Residential Reroof (overlay)
Commercial and multifamily reroof (first 5000 sf) $279.00 $70.00commercial and multifamily reroof (each additional 2500 sf) Kitchen (non structural) per each $210.00
$279.00
$140.00
$210.00
Bathroom (non structural) per each
Commercial & Residential Siding replacement or repair
commercial & Residential Stucco replacement or repair
Commercial doors, new and alteration (structural) per 5 doors Commercial doors, new and alteration (structural) per 10 doors Residential dry rot repair and replacement
$210.00
$140.00
$70.00
Deck, new or repair up to 1000 sf $210.00
$70.00Deck, new or repair each additional 1000 SF
Sign permit $116.00
$70.00Residential and commercial window awnings (group of 5) Cell Tower Equip $210.00
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Item 5: Staff Report
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DocuSign Envelope ID: 11C079F5-A091-4431-945D-37A5DB90C8E7 Municipal Fee Schedule Exhibit 2
Utilities Handling Fee $116.00
$56.00Progress and partial inspections
Certifications
Green Building - Special Inspector applications and qualifications (internal review)
$395.00
$197.00Green Building - Special Inspector applications and qualifications (renewal update)
Special Inspections - materials testing lab certification (up to 4 hours) $1,579.00 $115.00Miscellananeous Building - base fee
Retaining Walls - first 100 LF $93.00
$46.00Retaining Walls - each additional 100 LF
Fees not listed above will either be based on an applicable hourly rate or at the given valuation
Fire New Fee
TCO fee for Vendors/Stock Occupancy (requires at least one additional inspection
$1,125.00
$492.00Emergency Responder Radio Coverage (testing) fee Item 5
Attachment C - Ordinance No. 5420

Item 5: Staff Report
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Certificate Of Completion
Envelope Id: 11C079F5A0914431945D37A5DB90C8E7 Status: Completed Subject: Please DocuSign: ORD 5420 Amending DSD Municipal Fees (Phase II) 2017-11-13 - FINAL.docx, ORD 5...

Source Envelope:

Document Pages: 16 Signatures: 6
Initials: 0
Envelope Originator:

Irma MoraCertificate Pages: 5
AutoNav: Enabled 250 Hamilton Ave
EnvelopeId Stamping: Enabled
Time Zone: (UTC-08:00) Pacific Time (US & Canada)
Palo Alto , CA 94301
[email protected]
IP Address: 12.220.157.20
Record Tracking
Status: Original Holder: Irma Mora Location: DocuSign
12/20/2017 12:48:50 PM [email protected]
Signer Events Signature Timestamp
Albert Yang Sent: 12/20/2017 12:59:05 PM
Resent: 12/21/2017 10:36:10 AM
Resent: 12/22/2017 9:57:01 AM
Viewed: 1/2/2018 8:33:27 AM
Signed: 1/2/2018 8:34:10 AM
[email protected]
Senior Deputy City Attorney
City of Palo Alto
Using IP Address: 73.254.101.222Security Level: Email, Account Authentication (None)
Electronic Record and Signature Disclosure:

Not Offered via DocuSign
Lalo Perez Sent: 1/2/2018 8:34:11 AM
Viewed: 1/2/2018 8:35:49 AM
Signed: 1/2/2018 8:35:58 AM
[email protected]
Chief Financial Officer
City of Palo Alto
Using IP Address: 12.220.157.20Security Level: Email, Account Authentication (None)
Electronic Record and Signature Disclosure:

Not Offered via DocuSign
Peter Pirnejad Sent: 1/2/2018 8:35:59 AM
Viewed: 1/2/2018 10:08:06 AM
Signed: 1/2/2018 11:14:17 AM
[email protected]
Development Services Director
Security Level: Email, Account Authentication
(None) Using IP Address: 12.220.157.20
Electronic Record and Signature Disclosure:

Not Offered via DocuSign
James Keene Sent: 1/2/2018 11:14:18 AM
Viewed: 1/4/2018 12:20:45 PM
Signed: 1/4/2018 12:20:50 PM
[email protected]
City Manager
City of Palo Alto
Using IP Address: 12.220.157.20Security Level: Email, Account Authentication (None)
Electronic Record and Signature Disclosure:

Accepted: 4/14/2015 5:40:07 PM
ID: 44fe333a-6a81-4cb7-b7d4-925473ac82e3
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Signer Events Signature Timestamp
H. Gregory Scharff
[email protected]
Mayor
Sent: 1/4/2018 12:20:52 PM
Viewed: 1/4/2018 12:26:37 PM
Signed: 1/4/2018 12:26:53 PM
City of Palo Alto
Using IP Address: 174.215.2.216
Signed using mobile
Security Level: Email, Account Authentication
(None)
Electronic Record and Signature Disclosure:

Not Offered via DocuSign
Beth Minor Sent: 1/4/2018 12:26:55 PM
Viewed: 1/4/2018 1:16:09 PM
Signed: 1/4/2018 1:16:41 PM
[email protected]
City Clerk
City of Palo Alto
Using IP Address: 12.220.157.20Security Level: Email, Account Authentication (None)
Electronic Record and Signature Disclosure:

Not Offered via DocuSign
In Person Signer Events
Editor Delivery Events
Agent Delivery Events
Intermediary Delivery Events
Certified Delivery Events
Carbon Copy Events
Signature
Status
Timestamp
Timestamp
Timestamp
Timestamp
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Timestamps
Status
Status
Status
Status
Notary Events Signature
StatusEnvelope Summary Events
Envelope Sent
Certified Delivered
Signing Complete
Completed
Hashed/Encrypted
Security Checked
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Security Checked
1/4/2018 12:26:55 PM
1/4/2018 1:16:09 PM
1/4/2018 1:16:41 PM
1/4/2018 1:16:41 PM
Payment Events Status Timestamps
Electronic Record and Signature Disclosure
Item 5
Attachment C - Ordinance
No. 5420

Item 5: Staff Report
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Electronic Record and Signature Disclosure created on: 10/1/2013 8:33:53 AM Parties agreed to: James Keene

CONSUMER DISCLOSURE
From time to time, City of Palo Alto (we, us or Company) may be required by law to provide to you certain written notices or disclosures. Described below are the terms and conditions for providing to you such notices and disclosures electronically through your DocuSign, Inc. (DocuSign) Express user account. Please read the information below carefully and thoroughly, and if you can access this information electronically to your satisfaction and agree to these terms and conditions, please confirm your agreement by clicking the 'I agree' button at the bottom of this document.

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All notices and disclosures will be sent to you electronically Unless you tell us otherwise in accordance with the procedures described herein, we will provide electronically to you through your DocuSign user account all required notices, disclosures, authorizations, acknowledgements, and other documents that are required to be provided or made available to you during the course of our relationship with you. To reduce the chance of you inadvertently not receiving any notice or disclosure, we prefer to provide all of the required notices and disclosures to you by the same method and to the same address that you have given us. Thus, you can receive all the disclosures and notices electronically or in paper format through the paper mail delivery system. If you do not agree with this process, please let us know as described below. Please also see the paragraph immediately above that describes the consequences of your electing not to receive delivery of the notices and disclosures electronically from us.

Item 5
Attachment C - Ordinance
No. 5420

Item 5: Staff Report
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How to contact City of Palo Alto:

You may contact us to let us know of your changes as to how we may contact you electronically, to request paper copies of certain information from us, and to withdraw your prior consent to receive notices and disclosures electronically as follows:

To contact us by email send messages to: [email protected] To advise City of Palo Alto of your new e-mail address
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In addition, you must notify DocuSign, Inc to arrange for your new email address to be reflected in your DocuSign account by following the process for changing e-mail in DocuSign.

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To request delivery from us of paper copies of the notices and disclosures previously provided by us to you electronically, you must send us an e-mail to [email protected] and in the body of such request you must state your e-mail address, full name, US Postal address, and telephone number. We will bill you for any fees at that time, if any.

To withdraw your consent with City of Palo Alto
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i. decline to sign a document from within your DocuSign account, and on the subsequent page, select the check-box indicating you wish to withdraw your consent, or you may; ii. send us an e-mail to [email protected] and in the body of such request you must state your e-mail, full name, IS Postal Address, telephone number, and account number. We do not need any other information from you to withdraw consent.. The consequences of your withdrawing consent for online documents will be that transactions may take a longer time to process..

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** These minimum requirements are subject to change. If these requirements change, we will provide you with an email message at the email address we have on file for you at that time providing you with the revised hardware and software requirements, at which time you will Item 5
Attachment C - Ordinance
No. 5420

Item 5: Staff Report
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have the right to withdraw your consent.

Acknowledging your access and consent to receive materials electronically To confirm to us that you can access this information electronically, which will be similar to other electronic notices and disclosures that we will provide to you, please verify that you were able to read this electronic disclosure and that you also were able to print on paper or electronically save this page for your future reference and access or that you were able to e-mail this disclosure and consent to an address where you will be able to print on paper or save it for your future reference and access. Further, if you consent to receiving notices and disclosures exclusively in electronic format on the terms and conditions described above, please let us know by clicking the 'I agree' button below.

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Until or unless I notify City of Palo Alto as described above, I consent to receive from exclusively through electronic means all notices, disclosures, authorizations, acknowledgements, and other documents that are required to be provided or made available to me by City of Palo Alto during the course of my relationship with you.

Item 5
Attachment C - Ordinance
No. 5420

Item 5: Staff Report
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City Council
Staff Report
From: City Manager
Report Type: CONSENT CALENDAR
Lead Department: Community Services
Meeting Date: January 16, 2024
Report #:2312-2462
TITLE
Approval of Amendment No. 2 with Pets in Need Contract (C19174493) to extend the term through March 2024 and increase the compensation by $342,501 for operations of the Palo Alto Animal Shelter, for a Not-to-Exceed Amount of $4,431,872; CEQA status – not a project.

RECOMMENDATION
Staff recommends that the City Council approve and authorize the City Manager to execute Amendment No. 2 to Contract No. C19174493 with Pets in Need (Attachment A) in the amount of $342,501 to continue operations of the Palo Alto Animal Shelter for an additional three-month term or until a new Agreement is finalized, whichever is sooner.

BACKGROUND
Since 2019, animal sheltering services at the Palo Alto Animal Shelter have been provided by Pets in Need. The current Agreement has a five-year term ending January 17, 2024 (Attachment B).

On November 15, 2021, Pets in Need (PIN) provided formal notification to the City that it would exercise its right to terminate the Agreement without cause in 12 months’ time as allowed in Section 19.2 of the Agreement. PIN has extended the termination date several times while the City and PIN negotiate a new contract Agreement. Staff from the City and PIN have discussed progress with the Council on several occasions1,2,3. On August 14, 2023, the City Council approved a proposed Term Sheet with Pets in Need for continued operations of the Palo Alto Animal Shelter. The Council directed staff to return for approval of a new Agreement reflecting the terms and approved an interim payment to Pets in Need in the amount of $55,535 per month beginning June 2023 and each month until a new Agreement is executed. Amendment No. 1 (Attachment C) to the Agreement was approved by the City Manager and increased the not-to-exceed amount of the contract by $444,280, which reflects the addition of the interim payment for the eight- month period beginning June 1, 2023, through January 31, 2024. 1 City Council, March 27, 2023, Agenda Item #3, SR#2302-0940; https://portal.laserfiche.com/Portal/DocView.aspx?id=65785&repo=r-704298fc 2 City Council, June 12, 2023, Agenda Item #3, SR#2302-1313; https://cityofpaloalto.primegov.com/Portal/viewer?id=2049&type=0 3 City Council, August 14, 2023; Agenda Item #6, SR#2306-1712; https://cityofpaloalto.primegov.com/Portal/viewer?id=2632&type=0 Item 6
Item 6 Staff Report

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Additional background information on the Pets in Need Agreement and approved Term Sheet can be found in the previous staff reports included as footnotes to this report.

ANALYSIS
Staff from both the City and PIN have been working to finalize a new Agreement and expect to return to Council before March 31, 2024 with a final Agreement. In the interim, the City Council must approve the attached Amendment to continue payment of compensation to PIN and extend the term. This Amendment will bridge the gap between the current termination date by providing PIN with monthly compensation equal to the amount in the Term Sheet that the City Council approved on August 14, 2023. Staff expects to return to Council with a new Agreement in the first quarter of 2024.

PIN and City staff continue to work collaboratively to develop a new Agreement and as partners to deliver high quality animal care and sheltering services to residents of Palo Alto, Los Altos and Los Altos Hills. The delay in finalizing the new Agreement is related to finalizing contract language and is not a result of revisions to the Term Sheet.

FISCAL/RESOURCE IMPACT
Amendment No. 2 to the Agreement increases the total not-to-exceed amount by $342,501 for a total contract amount of $4,431,872. This amount represents monthly compensation of $114,167 for the three-month period of January through March 2024 and is calculated using the annual compensation amount of $1.4 million included in the Term Sheet that the Council approved on August 14, 2023. The Term Sheet will be used to develop key terms in the new Agreement.

The FY 2024 Adopted Operating Budget includes $1.2 million for contract costs to operate the Animal Shelter and there is sufficient funding remaining for this amendment. When staff returns with a new agreement, staff will include any necessary budget amendments to align with the agreement for the remainder of FY24. Staff will also bring forward funding recommendations to adjust the FY 2025 budget as part of the annual budget development process.

STAKEHOLDER ENGAGEMENT
Previous Council discussions related to this topic provided opportunities for public comment.

ENVIRONMENTAL REVIEW
Council action on this item is not considered a Project within the requirements of CEQA.

ATTACHMENTS
Attachment A: Amendment No. 2 to Contract No. C19174493 with Pets in Need Attachment B: Contract No. C19174493 between the City of Palo Alto and Pets in Need Attachment C: Amendment No. 1 to Contract No. C19174493 with Pets in Need APPROVED BY:

Kristen O'Kane, Community Services Director
Item 6
Item 6 Staff Report

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Vers.: Aug. 5, 2019

AMENDMENT NO. 2 TO CONTRACT NO. C19174493

BETWEEN THE CITY OF PALO ALTO AND

PETS IN NEED

This Amendment No. 2 (this “Amendment”) to Contract No. C19174493 (the “Contract” as defined below) is entered into as of January 1, 2024 by and between the CITY OF PALO ALTO, a California chartered municipal corporation (“CITY”), and PETS IN NEED, a California non-profit public benefit corporation, located at 871 Fifth Ave., Redwood City, CA 94063 (“CONSULTANT or Pets in Need ”). CITY and C ONSULTANT are referred to collectively as the “Parties” in this Amendment.

R E C I T A L S

A. The Contract (as defined below) was entered into by and between the Parties hereto for the provision of animal sheltering and veterinary care as detailed therein.

B. The Parties acknowledge that PIN has terminated the Agreement effective March 31, 2024, and that they are negotiating a new agreement in good faith.

C. T he Parties now wish to amend the Contract in order to extend the term to March 31, 2024, and to add compensation.

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 C ontract No. C19174493 between CONSULTANT and CITY, dated January 17, 2019, as amended by:

• Amendment No.1, dated August 20, 2023

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 4 “NOT TO EXCEED COMPENSATION ” of the Contract is hereb y amended to read as follows:

“SECTION 4. NOT TO EXCEED COMPENSATION . The compensation to be paid to CONSULTANT for performance of the Services shall be in the amount of, and shall not exceed Four Million Two Hundred Twenty-Seven Thousand Four Hundred Seven Dollars and Ten Cents ($4,171,872.10) as detailed in Exhibit “B” (Compensation). CONSULTANT agrees to complete all Services within this amount. Any work performed or expenses incurred for which payment would result in a total exceeding the maximum amount of compensation set forth herein shall be at no cost to the CITY.

DocuSign Envelope ID: 145B3CF8-FBB2-4A27-A870-6A4040807FC0 Item 6
Attachment A -
Amendment No. 2 to
Contract No. C19174493
with Pets in Need

Item 6: Staff Report
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Vers.: Aug. 5, 2019

Notwithstanding the foregoing, a contingency fund of two-hundred thousand dollars ($200,000) (the “Contingency Fund”) shall be available-, as well as a fund for the compensation of renovation delays (“Compensation of Renovation Delays Fund”) of sixty thousand dollars ($ 60,000), as detailed in Exhibit “B” (Compensation). In the event the Contingency Fund and the Compensation of Renovations Delays Fund are utilized as provided for herein, the total compensation for Services, reimbursable expenses and the costs payable by CITY to CONSULTANT under this Agreement, shall be and shall not exceed F our million Four Hundred Eighty-Seven Thousand Four Hundred Seven Dollars and Ten cents ($4,431,872.10) as detailed in Exhibit “B” (Compensation), subject to Section 19 (“ TERMINATION OR SUSPENSION OF AGREEMENT OR SERVICES”).”

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

“SECTION 2. TERM The term of this Agreement shall be from the date of its full execution (the "Effective Date) and continuing until March 31, 2024 . The term of this Agreement may be renewed or extended upon the mutual written agreement of the parties. One year prior to the expiration of the term (or other such timeline as may be mutually agreed upon by the parties), either party may request the parties to begin negotiating in good faith a renewal or extension of this Agreement.

SECTION 3. The following exhibit to the Contract is hereby amended as indicated below, to read as set forth in the attachment to this Amendment, and is hereby incorporated in full into this Amendment and into the Contract by this reference:

a. Exhibit “B” entitled “COMPENSATION , AMENDMENT NO. 2”, AMENDED, REPLACES PREVIOUS.”

SECTION 4. Legal Effect. Except as modified by this Amendment, all other provisions of the Contract, including any exhibits thereto, shall remain in full force and effect.

SECTION 5. Incorporation of Recitals . The recitals set forth above are terms of this Amendment and are fully incorporated herein by this reference.

DocuSign Envelope ID: 145B3CF8-FBB2-4A27-A870-6A4040807FC0 Item 6
Attachment A -
Amendment No. 2 to
Contract No. C19174493
with Pets in Need

Item 6: Staff Report
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Vers.: Aug. 5, 2019

SIGNATURES OF THE PARTIES

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

CITY OF PALO ALTO

_________________________
City Manager

APPROVED:

__________________________
Director, Community Services

APPROVED AS TO FORM:

__________________________
City Attorney or Designee

PETS IN NEED

Officer 1

By:___________________________

Name:________________________

Title:_________________________

Officer 2

By:___________________________

Name:________________________

Title:_________________________

Attachment:

Exhibit “B” entitled “EXHIBIT B COMPENSATION, AMENDMENT NO. 2 , AMENDED, REPLACES

PREVIOUS
DocuSign Envelope ID: 145B3CF8-FBB2-4A27-A870-6A4040807FC0 Chair, Board of Directors
Rob Kalman
CEO
Laura Toller Gardner
Item 6
Attachment A -
Amendment No. 2 to
Contract No. C19174493
with Pets in Need

Item 6: Staff Report
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Vers.: Aug. 5, 2019

EXHIBIT “B”
COMPENSATION, AMENDMENT NO. 2
(AMENDED, REPLACES PREVIOUS)

CITY agrees to compensate CONSULTANT for professional services performed in accordance with the terms and conditions of this Agreement, and as set forth in the schedule below.

SCHEDULE TO EQUAL AND NOT TO EXCEED
(SUBJECT TO SECTION 19 “TERMINATION

OR SUSPENSION OF AGREEMENT OR
SERVICES”)
Year 1 $ 708,000.00
Year 2 $ 663,000.00
Year 3 $ 676,260.00
Year 4 $689,785.20
Year 5 $703,580.90

Additional monthly payment from
June 1, 2023 – December 31, 2023 $ 388,745.00
($55,535 per month)

January 1, 2024 – March 31, 2024 $342,501.00
($114,167 per month BASED ON $1.37M for Yr 6)

Sub-total Basic Services $ 4,171,872.10

Reimbursable Expenses $ 0.00

Sub-Total Basic Services and
Reimbursable expenses $ 4,171,872.10

Contingency Funds $200,000.00
(not to exceed $40,000 per year)

Additional Compensation for Renovation Delays $60,000.00 (not to exceed 5,000 per month; see Exhibit D, Section 15.7) DocuSign Envelope ID: 145B3CF8-FBB2-4A27-A870-6A4040807FC0 Item 6
Attachment A -
Amendment No. 2 to
Contract No. C19174493
with Pets in Need

Item 6: Staff Report
Pg.
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Vers.: Aug. 5, 2019

Maximum Total Compensation $ 4,431,872.10

ONE-TIME ADVANCE
Simultaneous with the execution of this Agreement, CITY shall pay to CONSULTANT One Hundred Seventy-Eight Thousand dollars ($178,000) as an advance against the first three months of CONSULTANT’s fee. CONSULTANT shall not submit an invoice for the remainder of its fee for the third month until the end of such third month.

CONTINGENCY FUNDS
CITY shall provide contingency funds to CONSULTANT in the following circumstances, subject to written approval by the CITY’s project manager, and to equal and not to exceed the amount in this Exhibit B:

1. CITY shall provide contingency funds for after-hours and emergency veterinary care if:
a. CONSULTANT has already spent at least $10,000 in the past 12 months on a rolling basis on after-hours or emergency veterinary care that was reasonable based on AVMA guidelines; and
b. The emergency or after -hours treatment being sought is reasonable based on AVMA guidelines.

2. CITY shall provide contingency funds for hoarding cases if:
a. CONSULTANT has already served more than 600 animals from the CITY or the Contract Cities in the past 12 months; and
b. The hoarding case involves a minimum of 12 animals brought at once that are expected to stay in the facility for at least 30 days each.

3. CITY shall provide contingency funds for the actual costs of wildlife intake at the Peninsula Humane Society if:
a. The Peninsula Humane Society begins charging for the costs of wildlife services; and,
b. This Agreement has not yet been amended to reflect the additional costs of such services.

4. CONSULTANT may also request contingency funds in other unforeseen circumstances.

To request con tingency funds, the CONSULTANT shall submit a detailed written proposal including a description of the scope of services, schedule, level of effort, and CONSULTANT’s proposed maximum compensation, for such services. In addition to the factors above, CITY may consider whether contingency funds are appropriate within existing funding and workload, and contingency funds shall not be released if CONSULTANT has not exhausted unused or unallocated funds.

The CITY shall notify CONSULTANT in writing of its approval or lack thereof within ten (10) days after the date of CONSULTANT’s proposal. If CITY’s project manager does not approve CONSULTANT’s request, CONSULTANT may appeal that decision to the City Manager.

DocuSign Envelope ID: 145B3CF8-FBB2-4A27-A870-6A4040807FC0 Item 6
Attachment A -
Amendment No. 2 to
Contract No. C19174493
with Pets in Need

Item 6: Staff Report
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Vers.: Aug. 5, 2019

If authorized by CITY, the contingency services scope, schedule and maximum compensation shall be negotiated and agreed to in writing by the CITY’s project manager and CONSULTANT, and payment shall be made to CONSULTANT, no later than ten (10) days a fter the date of CITY’s authorization. Contingency funds are subject to all requirements and restrictions in this Agreement.

ADDITIONAL COMPENSATION FOR RENOVATION DELAYS
The City shall pay Consultant up to $5,000 monthly for up to twelve consecutive months pursuant to the terms of Exhibit D, Section 15.7 (“Additional Compensation for Renovation Delays”) of this Agreement.

REIMBURSABLE EXPENSES
No Reimbursable Expenses are authorized by CITY through this Agreement, unless pursuant to a written amendment to this Agreement as provided for herein.

ADDITIONAL SERVICES
No Additional Services are authorized by the CITY through this Agreement, unless pursuant to a written amendment to this Agreement as provided for herein.

DocuSign Envelope ID: 145B3CF8-FBB2-4A27-A870-6A4040807FC0 Item 6
Attachment A -
Amendment No. 2 to
Contract No. C19174493
with Pets in Need

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CITY OF PALO ALTO CONTRACT NO. _C_1_9_17_4_4_9_3 __ _

AGREEMENT BETWEEN THE CITY OF PALO ALTO AND PETS IN NEED

FOR PROFESSIONAL SERVICES
This Professional Services Agreement ("Agreement") is entered into on this ..1.L day of January .~by and between the CITY OF PALO ALTO, a California chartered municipal corporation ("CITY'' or "City of Palo Alto"), and PETS IN NEED, a California non-profit public benefit corporation, located at 871 Fifth Ave, Redwood City, CA 94063 C'CONSULTANT' or "Pets In Need").

RECITALS
The following recitals are a substantive portion of this Agreement and are hereby incorporated herein by this reference.

A. CITY intends to provide animal sheltering and veterinary care, as more fully described in Exhibit "A" (Scope of Services), attached to and made a part of this Agreement, for the City of Palo Alto, and for the City of Los Altos and the Town of Los Altos Hills (the "Contract Cities"), at the Palo Alto Animal Shelter, 3281 East Bayshore Road, Palo Alto, CA 94303 (the "Palo Alto Animal Shelter" or the "Premises").

B. CITY and CONSULTANT desire for CONSULTANT to perform the Services {as defined below) at the Palo Alto Animal Shelter pursuant to the terms and conditions set forth in this Agreement.

C. CITY acknowledges that CONSUL TANT is entering into this Agreement in furtherance of its no-kill mission, and that, to the extent permitted by law, CONSUL TANT will operate the Palo Alto Animal Shelter as a no-kill shelter.

D. CITY and CONSUL TANT are entering into this Agreement with the intention of establishing a long -term partnership to offer exceptional shelter services for Palo Alto and its partner cities of Los Altos and Los Altos Hills, while working together towards building a new Pets in Need Palo Alto animal shelter facility.

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

AGREEMENT
SECTION 1. SCOPE OF SERVICES. CONSUL TANT shall perform the services described at Exhibit "A· ("Services") in accordance with the terms and conditions contained in this Agreement.

SECTION 2. TERM. The term of this Agreement shall be from the date of its full execution (the "Effective Date") and continuing for five (5) years from the Effective Date, unless terminated earlier pursuant to Section 19 of this Agreement. The term of this Agreement may be renewed or extended upon the mutual written agreement of the parties. One year prior to the expiration of the term (or other such timeline as may be mutually agreed upon by the parties), either party may request the parties to begin negotiating in good faith a renewal or extension of this Agreement.

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SECTION 3. USE OF PREMISES. CONSUL TANT's use of the premises shall be subject to the additional terms set forth on Exhibit "D" (Use of Premises) attached hereto.

SECTION 4. NOT TO EXCEED COMPENSATION. The compensation to be paid to CONSULTANT for performance of the Services shall be in the amount of, and shall not exceed three-million, four-hundred forty thousand six-hundred twenty six dollars and ten cents ($3,440,626.1 O) as detailed in Exhibit "B" (Compensation). CONSUL TANT agrees to complete all Services within this amount. Any work performed or expenses incurred for which payment would result in a total exceeding the maximum amount of compensation set forth herein shall be at no cost to the CITY. Notwithstanding the foregoing, a contingency fund of two-hundred thousand dollars ($200,000) (the "Contingency Fund") shall be available; as well as a fund for the compensation of renovation delays ("Compensation of Renovation Delays Fund") of sixty thousand dollars ($60,000) shall be available, as detailed in Exhibit "B" (Compensation). In the event the Contingency Fund and the Compensation of Renovations Delays Fund are utilized as provided for herein, the total compensation for Services, reimbursable expenses and the costs payable by CITY to CONSULTANT under this Agreement, shall be and shall not exceed three million, seven­ hundred thousand, six-hundred twenty-six dollars and ten cents ($3,700,626.10) as detailed in Exhibit "B" (Compensation), subject to Section 19 ("TERMINATION OR SUSPENSION OF AGREEMENT OR SERVICES").

SECTION 5. INVOICES. In order to request payment, CONSULTANT shall invoice the CITY for payment on a monthly basis. Invoices shall describe the services performed and, if reasonably requested by CITY, supporting documentation. CONSULTANT's invoice shall be submitted to the City's project manager for payment at which point the CITY has 30 business days from the date of the submission to render payment to the CONSUL TANT. Invoices must also include CONSUL TANT name, address, contract number, description of services, date of services, and compensation amount.

SECTION 6. QUALIFICATIONS/STANDARD OF CARE. All of the Services shall be performed by CONSUL TANT or under CONSUL TANT's supervision. CONSUL TANT represents that it possesses the professional and technical personnel necessary to perform or supervise, as applicable, the Services required by this Agreement and that its personnel have sufficient skill and experience to perform the Services assigned to them.

CONSULTANT represents that it, and its employees have and shall maintain (and that it shall require its subcontractors, if any, to have and maintain) during the term of this Agreement all licenses, permits, qualifications, insurance and approvals of whatever nature that are legally required to perform the Services.

Notwithstanding anything to the contrary in this Agreement, the representations and warranties in this Section 6 are exclusive and are in lieu of all other warranties of any kind, whether express or implied (including, without limitation, the implied warranties of merchantability, fitness for a particular purpose and noninfringement, and all warranties that may arise from course of dealing, course of performance or usage of trade), all of which are hereby expressly disclaimed.

SECTION 7. COMPLIANCE WITH LAWS. CONSUL TANT shall keep itself informed of and in compliance with all federal, state and local laws, ordinances, regulations, and orders that are applicable to the performance of the Services or those engaged to perform Services under this Agreement. CONSUL TANT shall procure all permits and licenses, pay all charges and fees, and give all notices required by law in the performance of the Services.

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

SECTION 9. [RESERVED].

SECTION 10. INDEPENDENT CONTRACTOR . It is understood and agreed that in performing the Services under this Agreement CONSULTANT, any person employed by CONSULTANT, and any subcontractor retained by CONSULTANT to perform any of CONSULTANT'S obligations under this Agreement, shall act as and be an independent contractor and not an agent or employee of CITY.

SECTION 11. ASSIGNMENT. The parties agree that the expertise and experience of CONSULTANT are material considerations for this Agreement. CONSUL TANT shall not assign or transfer any interest in this Agreement nor the performance of any of CONSULTANT's obligations without the prior written consent of the City Manager. The City Manager shall have sixty (60) days from receipt of Consultant's notice of proposed assignment to accept or decline the proposed assignment in writing. If the City Manager declines the proposed assignment, he or she shall state the basis for the decision in the written notice to CONSULTANT. Consent to one assignment shall not be deemed to be consent to any subsequent assignment. Any assignment not expressly contemplated ui:,der this Agreement, or made without the approval of the City Manager shall be void.

SECTION 12. SUBCONTRACTING. Notwithstanding Section 11 above, CITY agrees that subcontractors may be used to perform CONSULTANT'S obligations under this Agreement. The subcontractors authorized by CITY to perform work on this Project are:
a. Sage Veterinary Center; and
b. Pets Rest Cemetery, and
c. Any other subcontractors retained by CONSUL TANT to perform CONSULTANT'S obligations under this Agreement.

CONSULTANT shall be responsible for directing the work of any subcontractor and for any compensation due to subcontractors. CITY assumes no responsibility whatsoever concerning subcontractor compensation.

CONSULTANT shall be fully responsible to CITY for all acts and omissions of a subcontractor as more fully set forth in Section 16 of this Agreement.

CONSULTANT shall change or add a subcontractor to perform the Services set forth on Exhibit A hereto only with the prior approval of the City Manager or his designee (such approval not to be unreasonably withheld, delayed or conditioned). The City Manager shall have thirty (30) days from receipt of CONSULTANT's request to approve or decline in writing CONSULTANT's request to change or add subcontractors.

SECTION 13. PROJECT MANAGEMENT. CONSULTANT shall assign its executive director, who currently is Al Mollica, as the project manager to have supervisory responsibility for the performance, progress, and execution of the Services and as the project coordinator to represent CONSULTANT during the day-to-day performance of the Services. If circumstances cause the substitution of the project manager (including if, at

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any time, Al Mollica no longer serves as executive director of CONSULTANT).

CONSUL TANT shall promptly notify the CITY's project manager of such substitution and consider in good faith CITY's requests with respect to such substitution.

The parties agree that during the term of this Agreement and for all purposes of this Agreement, CONSULTANT'S project manager shall be authorized to act as the "Superintendent" of the City's animal services division pursuant to Section 6.04.100 of the Palo Alto Municipal Code, for purposes of [Sections 6.12.010, 6.12.030, 6.12.050,

6.16.050, and 6.32.040 of the Palo Alto Municipal Code.

CITY's project manager is the Director of Community Services, Community Services Department, 1305 Middlefield Road, Palo Alto, CA 94303, Telephone (650) 463-4900, who is currently Monique leConge Ziesenhenne. The project manager shall be CONSULTANT's point of contact with respect to performance, progress and execution of the Services. CITY may designate an alternate project manager from time to time with prompt written notice to CONSUL TANT.

SECTION 14. INTELLECTUAL PROPERTY RIGHTS.

14.1 Definition of Intellectual Property Rights. "Intellectual Property Rights" means patents of any type, design rights, utility models or other similar invention rights, copyrights, mask work rights, trade secret or confidentiality rights, trademarks, goodwill, trade names, logos and service marks and any other intangible property rights, including applications and registrations for any of the foregoing, in any country, arising under statutory or common law or by contract and whether or not perfected, now existing or hereafter filed, issued, or acquired.

14.2 "Pets In Need" Ownership. The parties acknowledge and agree that, as between the parties, Pets In Need owns all Intellectual Property Rights in its name ("Pets In Need"), logos and marks, as may be amended from time to time by Pets In Need.

14.3 "City of Palo Alto" Ownership. The parties acknowledge and agree that, as between the parties, the City of Palo Alto owns all Intellectual Property Rights in its name ("City of Palo Alto"), logos and marks, as may be amended from time to time by the City of Palo Alto, and in accordance with Palo Alto Municipal Code as may be amended from time to time.

14.4 "Palo Alto Animal Shelter" Ownership. The parties
acknowledge and agree that, as between the parties, the City of Palo Alto owns all Intellectual Property Rights in the name "Palo Alto Animal Shelter".

14.5 Grant of License by City of Palo Alto. The City of Palo Alto hereby grants to Pets In Need a royalty-free, non-transferable term license, for the term of this Agreement, to use, reproduce, make derivative works, display, and perform publicly the name "Palo Alto Animal Shelter" solely in conjunction with "Pets in Need", for example, and without limitation, "Pets in Need Palo Alto Animal Shelter" and "Palo Alto Animal Shelter, operated by Pets in Need," for purposes of the performance of this Agreement, as provided for herein.

14.6 Name Changes; Development of Logos or Marks. Any
name changes, derivative works, or logos or marks as may be developed by Pets In Need with regard to such animal shelter are required to be approved in writing by the City of

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Palo Alto City Manager or designee prior to any publication, or any other public use, in any form or media. The City Manager shall approve or deny such requests in writing within 45 days of receipt of CONSULTANT's complete written proposal, and shall set forth its basis for any denial in writing. During the term of this Agreement, the City of Palo Alto shall not change such name of such animal shelter, nor develop any derivative works, or logos or marks, with regard to such animal shelter, except as is mutually agreed in writing with the Pets In Need Executive Director or designee prior to any publication, or any other public use, in any form or media. The City Manager shall approve or deny such requests within 45 days of Consultant's complete written proposal, and shall set forth its basis for any denial in writing. Notwithstanding anything to the contrary in this Agreement, CITY agrees that CONSULTANT may offer naming rights for any wing, room, kennel, or other area within the shelter in compliance with the City's Naming Policy and Procedure. · 14.7 Limitations on uPets In Need Palo Alto Animal Shelter".

The City of Palo Alto agrees that its use of the name "Pets In Need Palo Alto Animal Shelter", and as may be changed as provided for herein, with regard to the animal shelter that is the subject of this Agreement, as well as any logos or marks that may be developed and approved as provided for herein with regard to such shelter, are strictly limited to the term of this Agreement, and that, unless otherwise agreed by the parties in writing, upon expiration or termination of this Agreement, the City of Palo Alto shall cease and desist all use of such names, logos and marks with regard to such animal shelter in relation to the ongoing operation of such shelter as of the date of such termination or expiration.

14.8 Use of City of Palo Alto Seal or Logo. Any use by Pets In Need of any City of Palo Alto seal or logo is required to be approved in writing by the City of Palo Alto City Manager or designee prior to any publication or any other public use, in any form or media, and in accordance with Palo Alto Municipal Code as may be amended from time to time, provided that the City Manager or his designee shall approve or deny in writing a written request by Pets in Need within ten (10) days of the date of the request, and shall set forth his or her basis for any denial in writing.

14.9 Use of Pets in Need Seal or logo. Any use by the City of Palo Alto of any Pets In Need seal or logo is required to be approved in writing by the Pets In Need Executive Director or designee prior to any publication, or any other public use, in any form or media, provided that the Executive Director of PIN or designee shall approve or deny in writing a written request by CITY within twenty (20) days of the date of the request.

14.10 Reservation of Rights. All Pets In Need Intellectual Property Rights not expressly granted under this Agreement are reserved to and retained by Pets In Need. All City of Palo Alto Intellectual Property Rights not expressly granted under this Agreement are reserved to and retained by the City of Palo Alto.

SECTION 15. AUDITS. CONSUL TANT shall permit CITY to audit, at any reasonable time during the term of this Agreement and for three (3) years thereafter, CONSULTANT's records pertaining to CONSULTANT'S performance of the Services under this Agreement.

CONSUL TANT further agrees to maintain and retain such records for at least three (3) years after the expiration or earlier termination of this Agreement.

SECTION 16. INDEMNITY; LIMITATION OF LIABILITY.

16.1. To the fullest extent permitted by law, CONSULTANT shall indemnify, defend and hold harmless CITY, its Council members, officers, employees and

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agents (each a "CITY Indemnified Party") from and against any and all third party demands, claims, or liability of any nature, including death or injury to any person, property damage or any other loss, including all costs and expenses of whatever nature including reasonable attorneys' fees, experts fees, court costs and disbursements ("Claims") to the extent resulting from, or arising out of (i) any act or omission of CONSULTANT that is outside the scope of CONSULTANT's authority under this Agreement and/or (ii) the negligence or willful misconduct of CONSULTANT or its officers, employees, agents or subcontractors in the performance of this Agreement. To the fullest extent permitted by law, CITY shall indemnify, defend and hold harmless CONSUL TANT, its directors, officers, employees and agents (each a "CONSULTANT Indemnified Party") from a·nd against any and all third party Claims to the extent resulting from or arising out of (i) the negligence or willful misconduct of CITY or its officers, employees, agents or subcontractors in the performance of this Agreement , (ii) any condition in or about the Premises, except to the extent caused by the negligence or willful misconduct of CONSULTANT or a CONSUL TANT Indemnified Party. or (iii) CITY's decision to transition to a consultant-provided service delivery model and City's decision, based on CONSULT ANT's representations contained in its proposal to the City and herein, to contract with CONSULTANT to provide the Services.

16.2. In the event of concurrent negligence of more than one party, its Council members (or directors), officers, employees, agents or subcontractors, the liability for any and all Claims shall be apportioned under the California theory of comparative negligence as presently established or as may hereafter be modified.

Nothing in this Agreement shall constitute a waiver or limitation of any rights that a party may have under applicable law in the event of concurrent negligence of persons or entities other than the parties to this Agreement.

16.3. The parties agree to cooperate with each other in the investigation and disposition of third-party Claims hereunder. It is the intention of the parties to reasonably cooperate in the disposition of all such Claims. Such cooperation may include joint investigation, defense and disposition of claims of third parties hereunder. The parties agree to promptly inform one another whenever an incident report, claim or complaint is filed or when an investigation is initiated concerning this Agreement.

Notwithstanding the foregoing, in the event of a conflict in interest, each party may conduct its own investigation and engage its own counsel.

16.4. Each party agrees to mitigate any loss or damage which it may suffer in consequence of any breach by the other party of the terms of this Agreement. or any fact, matter, event or circumstance giving rise to a Claim.

16.5. LIMITATION OF LIABILITY. N01WITHSTAND1NG

ANYTHING TO THE CONTRARY CONTAINED HEREIN OR ELSEWHERE, NEITHER

PARTY SHALL BE LIABLE TO THE OTHER PARTY FOR ANY SPECIAL,

CONSEQUENTIAL, INDIRECT, INCIDENTAL, PUNITIVE OR EXEMPLARY DAMAGES,

INCLUDING BUT NOT LIMITED TO LOST PROFITS IN CONNECTION WITH THIS

AGREEMENT, EVEN IF THE PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF ANY SUCH POTENTIAL CLAIM, LOSS OR DAMAGE.

16.6. LIMITATION OF LIABILITY OF CITY. EXCEPT WITH

REGARD TO CITY'S OBLIGATIONS TO INDEMNIFY AND HOLD HARMLESS THE CONSULTANT PURSUANT TO THIS SECTION 16, CITY'S PAYMENT OBLIGATIONS

UNDER THIS AGREEMENT SHALL BE LIMITED TO THE PAYMENT PROVIDED FOR IN SECTION 4 (NOT TO EXCEED COMPENSATION) OF THIS AGREEMENT.

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16.7. LIMITATION OF LIABILITY OF CONSULTANT. IN NO

EVENT SHALL THE TOTAL AGGREGATE LIABILITY UNDER THIS AGREEMENT OF CONSULTANT TO CITY EXCEED FIVE MILLION DOLLARS.

16.8. CITY represents and warrants that (i) it has complied with Section 2.30.250 of the Palo Alto Municipal Code and (ii) the CITY's indemnification obligations contained in this is Section 16 represent the valid and enforceable obligations of CITY.

SECTION 17. WAIVERS. The waiver by either party of any breach or violation of any covenant, term, condition or provision of this Agreement, or of the provisions of any ordinance or law, shall not be deemed to be a waiver of any other term, covenant, condition, provisions, ordinance or law, or of any subsequent breach or violation of the same or of any other term, covenant, condition, provision, ordinance or law. No waiver of a condition or nonperformance of an obligation hereunder is effective unless it is in writing signed by the authorized representatives of the parties hereto and, as applicable, approved as required under the Palo Alto Municipal Code or Charter.

SECTION 18. INSURANCE. CONSULTANT, at its sole cost and expense, shall obtain, as soon as practicable following the date of this Agreement, and maintain, in full force and effect during the term of this Agreement, the insurance coverage described in Exhibit "C".

CONSULTANT shall be responsible for ensuring that its subcontractors retained to perform Services under this Agreement, if any, shall obtain and maintain in full force and effect during the term of the subcontractor's engagement, the insurance coverage described in Exhibit "C," as well as a policy endorsement naming CITY as an additional insured under any policies required in this Section 18.

18.1. All insurance coverage required hereunder shall be provided through carriers with AM Best's Key Rating Guide ratings of A-VII or higher which are licensed or authorized to transact insurance business in the State of California.

18.2. CONSUL TANT shall file with CITY certificates evidencing such insurance as soon as practicable following the date of execution of this Agreement but in any event prior to the first day any of CONSULTANT'S obligations are performed hereunder. The certificates shall be subject to the approval of CITY's Risk Manager and shall contain an endorsement stating that the insurance is primary coverage and shall not be canceled, or materially reduced in coverage or limits, by the insurer except after filing with the Purchasing Manager thirty (30) days' prior written notice of the cancellation or modification. If the insurer cancels or modifies the insurance and provides less than thirty (30) days' notice to CONSULTANT, CONSULTANT shall provide the Purchasing Manager written notice of the cancellation or modification within five (5) business days of the CONSULTANT's receipt of such notice. CONSULTANT shall be responsible for ensuring that current certificates evidencing the insurance are provided to CITY's Chief Procurement Officer during the entire term of this Agreement.

18.3. The procuring of such required policy or policies of insurance will not be construed to limit either party's liability hereunder nor to fulfill the indemnification provisions of this Agreement.

SECTION 19. TERMINATION OR SUSPENSION OF AGREEMENT OR SERVICES.

19.1. The City Manager may terminate this Agreement or suspend

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the performance of the Services, in whole or in part, in the event of a material breach of CONSULTANT's obligations to CITY under this Agreement, which breach is not cured by CONSULTANT within (60) days of receipt of written notice from CITY to CONSULTANT detailing the nature of such failure. The City Manager may terminate this Agreement without cause by giving one-year prior written notice thereof to CONSUL TANT.

19.2. CONSUL TANT may terminate this Agreement or suspend its performance of the Services, in whole or in part, in the event of a material breach of CITY's obligations to CONSULTANT under this Agreement, which breach is not cured by CITY (i) with respect to material breach of CITY's payment obligations herein, within thirty (30) days of receipt of written notice from CONSULTANT to CITY, or (ii) with respect to material breach of all other CITY obligations hereunder, within sixty (60} days of receipt of written notice from CONSUL TANT to CITY detailing the nature of such breach.

CONSULTANT may terminate this Agreement without cause by giving one-year prior . written notice thereof to CITY.

19.3. In the event of any suspension or termination hereunder, CITY shall pay CONSULTANT for the Services rendered and materials delivered to CITY (i) on or before the effective date of such suspension or termination and (ii) in accordance with this Agreement. CITY shall pay such amounts to CONSULTANT within thirty (30) days after receipt of CONSULTANT's invoice. To the extent that CITY has prepaid any fees, CONSULTANT shall fund to CITY any prepaid fees on a pro-rata basis to the extent such fees are attributable to the period after the termination date, and CITY shall have no obligation to pay unpaid fees that would have become due during the remaining Term had this Agreement not been terminated.

19.4 The following Sections shall survive any expiration or termination of this Agreement: 14, 15, 16, 17, 19.3, this 19.4, 20, 25, and 27.

SECTION 20. NOTICES. Any notice provided for in this Agreement shall be in writing and shall be either (i} personally delivered, (ii) received by certified mail, return receipt requested, or (iii) sent by reput~ble overnight courier service (charges prepaid) to the recipient at the address indicated below.

To CITY: City of Palo Alto, City Manager's Office
250 Hamilton Ave., Palo Alto, CA 94301
With a copy also to the CITY's Project Manager.

To CONSULTANT: Attention of the project director at the address of CONSULTANT recited above.

Notices will be deemed to have been given hereunder {i) when delivered personally to the recipient, (ii) one (1) business day after being sent to the recipient by reputable overnight courier service (charges prepaid) or (iii) five (5) business days after being mailed to the recipient by certified or registered mail, return receipt requested and postage prepaid.

SECTION 21. CONFLICT OF INTEREST

21.1. In accepting this Agreement, CONSUL TANT covenants that it presently has no interest, and shall not acquire any interest, direct or indirect, financial or otherwise, which would conflict in any manner or degree with the performance of the Services.

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21.2. CONSUL TANT further covenants that, in the performance of this Agreement, it shall not employ subcontractors or other persons or entities having such an interest. CONSULTANT celtifies that no person who has or will have any financial interest under this Agreement is an officer or employee of CITY; this provision shall be interpreted in accordance with the applicable provisions of the Palo Alto Municipal Code and the Government Code of the State of California.

21.3. CITY agrees and acknowledges that, as of the date of hereof, CONSULTANT is not a "Consultant" as that term is defined by the Regulations of the Fair Political Practices Commission, and that therefore CONSULTANT shall not be required to file the financial disclosure documents required by the Palo Alto Municipal Code and the Political Reform Act.

SECTION 22. NONDISCRIMINATION. As set forth in Palo Alto Municipal Code section

2.30.510, CONSULTANT certifies that in the performance of this Agreement, it shall not discriminate in the employment of any person because of the race, skin color, gender, age, religion, disability, national origin, ancestry, sexual orientation, housing status, marital status, familial status, weight or height of such person. CONSUL TANT acknowledges that it has read and understands the provisions of Section 2.30.51 O of the Palo Alto Municipal Code relating to Nondiscrimination Requirements and the penalties for violation thereof, and agrees to meet all requirements of Section 2.30.510 pertaining to nondiscrimination in employment.

SECTION 23. ENVIRONMENTALLY PREFERRED PURCHASING AND ZERO WASTE REQUIREMENTS. CONSULTANT shall comply with the CITY's Environmentally Preferred Purchasing policies which are available at CITY's Purchasing Department (and copies of which have been provided to CONSULTANT by CITY), incorporated by reference and may be amended from time to time. CONSULTANT shall comply with waste reduction, reuse, recycling and disposal requirements of CITY's Zero Waste Program.

Zero Waste best practices include first minimizing and reducing waste; second, reusing waste and third, recycling or composting waste. In particular, CONSULTANT shall comply with the following zero waste requirements:
(a) All printed materials provided by CONSUL TANT to CITY generated from a personal computer and printer including but not limited to, proposals, quotes, invoices, reports, and public education materials, shall be double-sided and printed on a minimum of 30% or greater post-consumer content paper, unless otherwise approved by CITY's project manager. Any submitted materials printed by a professional printing company shall be a minimum of 30% or greater post­ consumer material and printed with vegetable based inks. (b) Goods purchased by CONSULTANT on behalf of CITY shall be purchased in accordance with CITY's Environmental Purchasing Policy including but not limited to Extended Producer Responsibility requirements for products and packaging. A copy of this policy is on file at the Purchasing Division's office, and a copy of the current policy has been provided to CONSULTANT by CITY. (c) Reusable/returnable pallets shall be taken back by CONSULTANT, at no additional cost to CITY, for reuse or recycling. CONSULTANT shall provide documentation from the facility accepting the pallets to verify that pallets are not being disposed.

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SECTION 24. COMPLIANCE WITH PALO ALTO MINIMUM WAGE ORDINANCE.

CONSUL TANT shall comply with all requirements of the Palo Alto Municipal Code Chapter 4.62 (Citywide Minimum Wage), as it may be amended from time to time. In particular, for any employee otherwise entitled to the State minimum wage, who performs at least two (2) hours of work in a calendar week within the geographic boundaries of the CITY, CONSUL TANT shall pay such employees no less than the minimum wage set forth in Palo Alto Municipal Code section 4.62.30 for each hour worked within the geographic boundaries of the City of Palo Alto. In addition, CONSULTANT shall post notices regarding the Palo Alto Minimum Wage Ordinance in accordance with Palo Alto Municipal Code section4.62.060.

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

SECTION 26. PREVAILING WAGES AND DIR REGISTRATION FOR PUBLIC WORKS CONTRACTS. The Services are not subject to prevailing wages. CONSULTANT is not - required to pay prevailing wages in the performance of the Services in accordance with applicable law including without limitation SB 7.

SECTION 27. MISCELLANEOUS PROVISIONS.
27 .1. This Agreement shall be governed by the laws of the State of California without regard to its conflict of laws provisions.

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

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

27.4. This document represents the entire and integrated agreement between the parties and supersedes all prior negotiations , representations, and contracts, either written or oral. This document may be amended only by a written instrument, which is signed by the parties.

27.5. The covenants, terms, conditions and provrsrons of this Agreement shall apply to, and shall bind, the heirs, successors, executors, administrators, assignees, and consultants of the parties.

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

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27.7. All exhibits referred to in this Agreement and any addenda, appendices, attachments, and schedules to this Agreement which, from time to time, may be referred to in any duly executed amendment hereto are by such reference incorporated in this Agreement and shall be deemed to be a part of this Agreement.

27.8. In the event of a conflict between the terms of this Agreement and the exhibits hereto or CONSULTANT's proposal (if any), this Agreement shall control. In the case of any conflict between the exhibits hereto and CONSULTANT's proposal, the exhibits shall control.

27.9. If, pursuant to this contract with CONSULTANT, CITY shares with CONSULTANT personal information as defined in California Civil Code section 1798.81.S(d) about a California resident ("Personal Information"}, CONSULTANT shall maintain reasonable and appropriate security procedures to protect that Personal Information, and shall inform CITY as soon as practicable, but no later than 24 hours after learning that there has been a breach in the security of the system or in the security of the Personal Information. CONSULTANT shall not use Personal Information for direct marketing purposes without CITY's express written consent. 27 .10. All unchecked boxes do not apply to this Agreement. 27 .11. 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.

27.12. This Agreement may be signed in multiple counterparts, which, when executed and delivered by the parties hereto, shall together constitute a single binding agreement. This Agreement may be signed using the City's Docusign platform.
{signature page follows]

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CONTRACT No. Cl9174493 SIGNATURE PAGE
IN WITNESS WHEREOF, the parties hereto have by their duly authorized representatives executed this Agreement on the date first above written.

CITY OF PALO AL TO PETS IN NEED
City Manager
Officer 2
APPROVED AS TO FORM:

By~
Attachments:

EXHIBIT "A":

EXHIBIT "B":

EXHIBIT "C":

EXHIBIT "D":
.. .

Name: ,. ;-A
Title~ ·,#'/c0~

SCOPE OF SERVICES

COMPENSATION

INSURANCE REQUIREMENTS

USE OF PREMISES

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EXHIBIT 11A"

SCOPE OF SERVICES
PETS IN NEED ("CONSULTANT") agrees to provide Animal Shelter Services as described in Section II below at the Palo Alto Animal Shelter, 3281 East Bayshore Road, Palo Alto, CA, for the City of Palo Alto ("CITY") and the Contract Cities. CITY agrees to perform the obligations as described in Section Ill below.

I. DEFINITIONS The following terms as used in this Exhibit "A" Scope of Services shall have the meaning provided below:

A. "Diseased and crippled animal" means those animals which are known or believed to be infected with a~y dangerous or
communicable disease, or which have an incurable , crippled condition or which are afflicted with any painful disease which is believed to be incurable.

B. "Dangerous animal" means any dog or other animal which demonstrates a propensity to assault, bite, scratch or harass people or other animals without provocation. There shall be a rebuttable presumption that any animal that bites a person is a dangerous animal.

Capitalized terms used but undefined herein shall have the meanings set forth in the Agreement for Professional Services (this "Agreement") to which this Exhibit is attached and of which it forms a part.

II. PETS IN NEED RESPONSIBILITIES:

1. Animal Shelter Services. CONSUL TANT shall perform the following sheltering services and shall provide shelter supplies, animal attendants, supervisors and administrative personnel, and any other personnel, supplies and equipment, reasonably required to perform the following services ("Shelter Services"):
a) Shelter of abandoned, surrendered, impounded, lost or stray domestic animals brought to the shelter by CITY or its Contract Cities, its residents, or personnel.
b) CONSULTANT may shelter and provide services to
animals outside the scope of paragraph (a) above rnon-City animals") including moving animals between the Palo Alto Animal Shelter and Pets In Need Redwood City facility on a space-available basis and at CONSULTANT's sole expense
for all costs, including labor, equipment, supplies, food, and medication. At no time shall animals within the scope of paragraph (a) above be denied services due to services
provided to non-City animals at the Pets in Need Palo Alto Animal Shelter.
c) For the avoidance of doubt, to the maximum extent

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permissible by law, CONSUL TANT shall have exclusive
discretion over how long an animal is sheltered, including exclusive discretion to shelter an animal for a longer period than the statutory minimum number of days This section shall not be interpreted to authorize funds in addition to those specified in this Agreement, and CONSULTANT shall be
responsible for managing the length of animal sheltering within the funds and resources authorized by this Agreement.
d) Quarantine of biting animals.
e) Rabies testing of suspect animals.
f) Provision for reclaim of abandoned, lost or stray domestic animals during established business hours.
g) Shelter staff shall make every effort to identify lost animals (through ID tags and microchips) and to contact owners. h) Be CITY's and Contract Cities' main point of contact (by phone, in-person, and electronic means) regarding animal shelter services, including inquiries regarding missing pets. i) Provide medical evaluation and treatment, if necessary, to all incoming animals. This includes vaccinations, and spay and neuter surgeries to domestic animals.
j) Euthanasia and disposal of abandoned, lost, impounded, or stray domestic animals that are unclaimed by their owners and found to be diseased and crippled and/or dangerous as defined by Palo Alto Municipal Code and California State Law. k) For purposes of clarity, CONSUL TANT shall not be
required to provide owner-requested euthanasia at any time, and CITY acknowledges that CONSUL TANT has elected not
to provide or subcontract this service.

I} CONSULTANT shall maintain a public website, separate from the CITY's website, with information including without
limitation: shelter hours, volunteer opportunities, adoption information, medical services offered and information about those services and contact information.
m} Consultant shall allow CITY Animal Control Officers
access to the shelter at all times for purposes of dropping off animals and provide reasonable accommodation for
Animal Control Officers to begin and end their shifts, and complete administrative work in the shelter.
n) CONSULTANT shall maintain, repair and replace all
surgical room equipment, cages, hoses, and other
equipment at the facility.
o) CONSULTANT shall comply with all federal, state, and local laws in effect applicable to the Services upon
commencement of the provision of the Services, and shall be subject to inspection by the CITY and other duly
authorized federal, state, and local authorities to insure

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such compliance. This includes the applicable provisions of Palo Alto Municipal Code Title 6, as amended from time to time. For the avoidance of doubt, this provision shall not be construed to expand the scope of the Services as
expressly set forth in this Exhibit "A".
p) CONSULTANT shall use commercially reasonable efforts to offer comprehensive volunteer and educational programs which may include, without limitation: animal fostering programs, dog walker programs, and animal care trainings.
q} When appropriate, in CONSULTANT'S sole discretion,
CONSULTANT may partner and/or coordinate with adoption
programs, rescue groups, and other no-kill shelters to maximize the shelter's adoption rate and/or place animals in suitable foster care. CONSULTANT shall seek CITY's approval for
partnerships in which CONSUL TANT pays or receives money or other financial consideration, solely to the extent that such partnership relates to CONSULTANT's performance of the
Services. CITY shall approve or deny in writing any such request within thirty (30) days after receipt of such request. r) Develop and maintain communication with CITY by:

1. Responding in a timely.manner to emails and phone
calls.

2. Communicating and resolving issues and concerns
promptly.
s} Develop, in cooperation with CITY, a feral cat plan.

The plan shall include how PIN handles feral cats, spay/neuter provisions, and release of feral cats. CONSULTANT shall not release feral cats within the City of Palo Alto or any of its Partner Cites.
t) Develop, in cooperation with CITY, a disaster preparedness plan.

2. Medical Services
a) CONSUL TANT shall provide supplies, and professional and trained personnel, employed or under subcontract or
contract, necessary to perform the following services
("Medical Services"): Provision of veterinarian services twenty-four (24} hours per day to treat and provide
veterinarian care for impounded animals, including for
animals picked-up by Animal Control Officers.

CONSULTANT may, in its sole discretion and at its sole
expense, arrange after-hours emergency care through any veterinary subcontractor.
b) Monitor quarantined animals.
c) For a fee, conduct vaccination clinics and have available, free of charge to the public, rabies control information. d) Conduct microchipping.
e) For a fee, which shall be posted on CONSULTANT's website,

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at the same rate established for City residents and Contract Cities, provide access to the CONSULTANT's low cost spay and neuter clinic.
f) The City's Animal Control Officers shall be licensed through CONSULTANT'S medical authority to administer euthanasia as necessary for animals that are unclaimed by their owners and found to be diseased and crippled and/or dq11gerous as defined by Palo Alto Municipal Code.
g) Comply with all laws requiring reporting of animal-borne diseases, including rabies. This includes Municipal Code section 6.32.020, as amended from time to time.

3. Operating Schedules
a) CONSUL TANT shall provide Shelter Services for the animals twenty-four (24) hours a day, seven (7) days a week.
b) CONSULTANT shall provide emergency veterinary services in accordance with Section 597(f) of the California Penal Code. c) CONSULTANT shall have shelter staff on site for care of shelter animals seven (7) days per week, 365 days per year.
d) CONSULTANT shall have business offices and public access areas of shelter to be open to the public on a schedule designed to benefit the public and facilitate the services established in this Agreement, provided that the public hours and access be a minimum of six (6) days per week and forty (40) hours per week.

CONSULTANT shall post the public hours on its website, and inform CITY and Contract Cities in writing of any change in hours. e) CITY acknowledges and agrees that, until the renovations described in Exhibit Dare completed, CONSUL TANT may be unable to be fully staffed and operational in accordance with this Paragraph 3, and may request to operate at a reduced schedule at its reasonable discretion. Consultant's project manager shall make any such request to City's project manager, whose consent shall not be unreasonably denied, delayed, or conditioned.
f) CONSUL TANT shall observe the following holiday closures for public hours:

January 1 (New Year's Day)
Martin Luther King's birthday
Memorial Day
July 4th (Independence Day)
Labor Day
Thanksgiving Day
Day after Thanksgiving
Christmas Eve (1/2 Day)
Christmas Day

4. Dead Animal Services
a) CONSULTANT shall provide storage facilities, disposal

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mechanisms, administrative personnel, and any other personnel, supplies and equipment reasonably required to perform the following services ("Dead Animal Services"):
i. Identification of and notification to the owner of the dead animal, whenever possible; and
ii. Disposal of the body of the dead animal. CONSUL TANT shall offer animal owners the option to pay for cremation services, in which case, CONSUL TANT shall arrange for cremation with the appropriate subcontractor.
b) CONSULTANT shall subcontract with one or more
subcontractors for the maintenance of a dead animal storage facility as well as collection of dead animals and maintenance of the facility and equipment, all at CONSULTANT's sole expense.

5. Wildlife
a) The impoundment of wildlife shall be managed by CONSUL TANT staff. An assessment of wildlife shall be done by medical staff, if necessary. If the animal is severely injured or sick, a licensed veterinarian shall be consulted, and the case shall be fully documented in accordance with AVMA guidelines. This
Agreement assumes that all wildlife animals will continue to be transferred to the Peninsula Humane Society at no cost to the CITY or to CONSUL TANT, as set forth in the Memorandum of Understanding between CONSUL TANT and Peninsula Humane
Society dated November 17, 2017. Should Peninsula Humane Society request fees for wildlife intake, CONSULTANT and the CITY shall negotiate in good faith to amend this Agreement per Section 27 .4 herein, to provide for the reimbursement by CITY to CONSULTANT of such fees (upon documentation of such fees by CONSULTANT reasonably satisfactory to CITY).

6. Records Management
a) CONSUL TANT and CITY's Animal Control shall maintain joint access to the Chameleon database, as provided for in this section.

CONSUL TANT is responsible for keeping the Chameleon
database updated in a timely fa~hion. Chameleon data is designated "For Official Use Only," meaning, CONSUL TANT may only use such data for the performance of this Agreement, and not for marketing or any other purposes without the prior written consent of the CITY's City Manager or designee. Annual
maintenance fees for the Chameleon software shall be paid by CITY. Repair and replacement cost of the server and supporting hardware, if any, shall also be paid by CITY. CONSUL TANT shall not have access to certain areas of the database, such as saved criminal information (as required by law). CITY shall work with the database programmer/vendor to ensure that such areas of the

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database are not accessible by CONSULTANT. All data entered into the Chameleon database by any party shall be property of CITY.
b) Monthly Report
i. CONSUL TANT shall deliver to CITY during the term of this AGREEMENT, and within thirty (30) days of the end
of each month, a monthly Animal Shelter and Impound
Report summarizing monthly and year-to-date services
provided by CONSULTANT for CITY. This report shall
include, but not be limited to, the following information:
( 1) Licensing statistics
(2) Medical statistics including spay and neuter,
microchips, and vaccinations
(3) Volume of animals in and out of facility by type of animal and type of outcome.
(4) For each animal, which city in which it was picked up (if known).
c) Financial Reporting
i. CONSULTANT shall deliver to CITY during the term of this Agreement, and within ninety (90) days of the end of each May, an audited financial report covering CONSULTANT's
operation of the Palo Alto Animal Shelter.
d) Retention of Records, Right to Monitor and Audit
i. CONSUL TANT shall maintain records relating to
CONSUL TANT's operation of the Palo Alto Animal Shelter for a period of four (4) years after the expiration or
termination of this Agreement or until any audits or reviews are completed, whichever comes later, and such records
shall be subject to examination and/or audit of CITY, a Federal granter agency, and the State of California for a period of four (4) years after the expiration or termination of this Agreement or until any audits or reviews are completed, whichever comes later.
ii. Records/accounts relating to CONSULTANT's operation of the Palo Alto Animal Shelter shall be open and accessible to inspection upon reasonable notice during normal
business hours throughout the term of this Agreement and for a period of four (4) years thereafter or until any audits or reviews are completed, whichever comes later.
iii. Parties, upon request by either party to the other, shall meet on occasion to consider revisions which may be needed to the reporting forms created to document performance of the Services provided.

7. Fundraising, Marketing and Branding
a) CONSULTANT shall create and manage fundraising, marketing, volunteer development and education programs. Local volunteer

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groups shall be integrated into fundraising and other activities and events when reasonably possible. The "Pets In Need Palo Alto Animal Shelter" shall be the initial brand name of the shelter to be operated by CONSULTANT pursuant to this Agreement, and any logo or name change shall be approved in writing by
CONSUL TANT and the CITY's City Manager or designee prior to use.

8. Licensing and other fee collection
a) CONSULTANT shall charge fees for services according to the CITY's municipal fee schedule or according to state or local laws.

Fees for any services not covered by CITY's municipal fee schedule or state or local laws shall be set by CONSUL TANT.

CONSUL TANT shall take CITY's comments into consideration when setting such fees. CITY shall take CONSUL TANT's
comments into considefation when setting its municipal fee schedule.
b) CONSUL TANT shall manage dog licensing including processing, issuance, and renewals on behalf of CITY and Contract Cities.

Licensing information shall be included on all Incident Reports and, additionally, provided to CITY on an as requested basis.

CONSULTANT shall collect all associated license fees on behalf of CITY, at the fee amounts set by CITY. Licensing includes the licensing of dogs as defined in Municipal Code Chapter 6.16 as amended from time to time.
c) CONSUL TANT shall process citation fees, and shall remit 100% of these fees to the CITY on a quarterly basis. PETS IN NEED shall process and retain all other fees and revenues, including without limitation adoption fees, spay, neuter, impoundment, permit, license, and other fees as listed in the municipal fee schedule.

9. Contract Cities; WeCare Alliance
a) CITY and CONSULTANT shall provide services to the City of Los Altos and the Town of Los Altos Hills (the "Contract Cities0 ) pursuant to the CITY's amended Regional Animal Care and Control contracts approved by City Council on June 2, 2014.

These contracts are valid through June 30, 2019 with an option for an additional five-year extension . The Parties agree that this Agreement assumes that the Contract Cities' contracts will be in effect during the entire term of this Agreement.
b) CITY shall consult with CONSUL TANT should the contracts with the Contract Cities be amended or terminated, provided that if any such amendment or termination is reasonably expected to result in increased costs to CONSULTANT, such amendment or
termination (if initiated by CITY) shall be subject to

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CONSUL TANT's prior written consent. CONSUL TANT shall notify CITY in writing of its consent or lack thereof within forty-five (45) days after receipt of CITY's written request, which request shall include the precise language of such amendment or all relevant details of such termination (whichever applies}. If CONSULTANT consents, the parties shall amend this Agreement (i} to adjust the scope of Services accordingly and (ii) to cover any reasonable cost increases to CONSUL TANT.
c) CITY may contract with additional cities, subject to CONSULTANT's prior written consent. CONSULTANT shall
notify CITY in writing of its consent or lack thereof within forty­ five (45) days after receipt of CITY's written request, which request shall include the text of such proposed contracts. If CONSUL TANT consents, CONSUL TANT and CITY shall
amend this Agreement (i) to adjust the scope of Services accordingly and (ii) to cover any reasonable cost increases to CONSULTANT.
d) CONSUL TANT shall continue membership in
the WeCare Alliance (www.sheltersfirst.org} .

10. Cost Overruns or Changes
a) If CITY or state laws are passed during the term of this Agreement that require a greater level of service, CITY and CONSUL TANT agree to negotiate in good faith regarding the reimbursement of CONSULTANT for additional costs associated with implementing the new laws. If Parties are unable to agree on reimbursement costs, CONSUL TANT shall document the increased costs and submit to the City Auditor. The City Auditor shall conduct an independent audit. Parties agree to accept the City Auditor's determination of any increased costs.
b) If current state laws are amended, repealed, otherwise changed or suspended during the term of this Agreement that reduce, alter, or remove existing relevant mandates, either party may require the other party to meet to discuss possible financial and operational impacts of levels of service per the change in law, including but not limited to any decrease in contract amounts paid to CONSULTANT, provided that no such decrease shall be
effective unless agreed by CONSULTANT.
111. CITY RESPONSIBILITIES. CITY shall:

1. Provide an adequate and safe facility for CONSULTANT to perform the Services.

2. Provide Animal Control Officers (ACOs) and their services for CITY and Contract Cities. This shall include maintenance of ACO vehicles

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and equipment. Establish fees for dog licensing and animal impounding.

3. With regard to the shelter facility, provide and/or pay for utilities, taxes, electricity, water, gas, waste water, recycling, waste (not animal disposal), internet, Chameleon software/database and associated support, and Chameleon server hardware and support (if any), which collectively is estimated to cost approximately $55,000 peryear.

4. Develop and maintain proactive and consistent communication and rapport with CONSUL TANT
a) Respond in a timely manner to emails and phone calls b) Communicate and resolve issues and concerns immediately c) Provide excellent customer service to CONSUL TANT staff and customers

5. Develop, in cooperation with CONSULTANT, a disaster preparedness plan

6. Administer the agreements between the CITY and the Contract Cities regarding animal shelter services.

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EXHIBIT "B11

COMPENSATION
CITY agrees to compensate CONSULTANT for professional services performed in accordance with the terms and conditions of this Agreement, and as set forth in the schedule below.

SCHEDULE
Year1
Year2
Year3
Year4
Years
Sub-total Basic Services
Reimbursable Expenses

TO EQUAL AND NOT TO EXCEED
(SUBJECT TO SECTION 19 "TERMINATION OR
SUSPENSION OF AGREEMENT OR SERVICES")
$708,000.00
$663,000.00
$676,260.00
$689,785.20
$703,580.90
$3,440,626.10
$0.00
Total Basic Services and Reimbursable expenses $3,440,626.10 Contingency Funds $200,000.00
(not to exceed $40,000 per year)
Additional Compensation for Renovation Delays $60,000.00 Maximum Total Compensation

ONE-TIME ADVANCE
(not to exceed $5,000 per month; see
Exhibit D, Section 15.7)
$3,700,626.10
Simultaneous with the execution of this Agreement, CITY shall pay to CONSULTANT One Hundred Seventy Eight Thousand dollars ($178,000) as an advance against the first three months of CONSULTANT's fee. CONSULTANT shall not submit an invoice for the remainder of its fee for the third month until the end of such third month.

CONTINGENCY FUNDS
CITY shall provide contingency funds to CONSUL TANT in the following circumstances, subject to written approval by the CITY's project manager, and to equal and not to exceed the amount in this Exhibit C:

1. CITY shall provide contingency funds for after-hours and emergency veterinary care if:
a. CONSULTANT has already spent at least $10,000 in the past 12 months on a rolling basis on after-hours or emergency veterinary care that was reasonable based on AVMA guidelines; and
b. The emergency or after hours treatment being sought is reasonable based

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on AVMA guidelines.

2. CITY shall provide contingency funds for hoarding cases if:
a. CONSUL TANT has already served more than 600 animals from the CITY or the Contract Cities in the past 12 months; and
b. The hoarding case involves a minimum of 12 animals brought at once that are expected to stay in the facility for at least 30 days each.

3. CITY shall provide contingency funds for the actual costs of wildlife intake at the Peninsula Humane Society if:
a. The Peninsula Humane Society begins charging for the costs of wildlife services; and,
b. This Agreement has not yet been amended to reflect the additional costs of such services.

4. CONSULTANT may also request contingency funds in other unforeseen circumstances.

To request contingency funds, the CONSULTANT shall submit a detailed written proposal including a description of the scope of services, schedule, level of effort, and CONSULTANT's proposed maximum compensation, for such services. In addition to the factors above, CITY may consider whether contingency funds are appropriate within existing funding and workload, and contingency funds shall not be released if CONSULTANT has not exhausted unused or unallocated funds.

The CITY shall notify CONSULTANT in writing of its approval or lack thereof within ten (10) days after the date of CONSUL TANT's proposal. If CITY's project manager does not approve CONSUL TANT's request, CONSUL TANT may appeal that decision to the City Manager.

If authorized by CITY, the contingency services scope, schedule and maximum compensation shall be negotiated and agreed to in writing by the CITY's project manager and CONSULTANT, and payment shall be made to CONSUL TANT, no later than ten (10) days after the date of CITY's authorization. Contingency funds are subject to all requirements and restrictions in this Agreement.

ADDITIONAL COMPENSATION FOR RENOVATION DELAYS
The City shall pay Consultant up to $5,000 monthly for up to twelve consecutive months pursuant to the terms of Exhibit D, Section 15.7 ("Additional Compensation for Renovation Delaysa) of this Agreement.

REIMBURSABLE EXPENSES
No Reimbursable Expenses are authorized by CITY through this Agreement, unless pursuant to a written amendment to this Agreement as provided for herein.

ADDITIONAL SERVICES
No Additional Services are authorized by the CITY through this Agreement, unless pursuant to a written amendment to this Agreement as provided for herein.

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REQUIRED
YES
YES
YES
YES
YES
YES

INSURANCE
YES
YES
EXHIBIT 11C"

INSURANCE REQUIREMENTS

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

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

AWARD IS CONTINGENT ON COMPLIANCE WITH CITY'S INSURANCE REQUIREMENTS, AS SPECIFIED, BELOW:

MINIMUM LIMITS

TYPE OF COVERAGE REQUIREMENT EACH

OCCURRENCE AGGREGATE

WORKER'S COMPENSATION STATUTORY

EMPLOYER'S LIABILITY
BODILY INJURY $5,000,000 $5,000,000
GENERAL LIABILITY. INCLUDING
PERSONAL INJURY, BROAD FORM PROPERTY DAMAGE $5,000,000 $5,000,000

PROPERTY DAMAGE BLANKET

CONTRACTUAL, AND FIRE LEGAL

LIABILITY
BODILY INJURY $1,000,000 $1,000 ,000
- EACH PERSON $1,000,000 $1,000,000
- EACH OCCURRENCE $1,000,000 $1,000,000

AUTOMOBILE LIABILITY, INCLUDING
ALL OWNED, HIRED, NON-OWNED PROPERTY DAMAGE $1,000,000 $1,000 ,000 BODILY INJURY AND PROPERTY $1.000,000 $1,000,000

DAMAGE, COMBINED

PROPERTY INSURANCE ALL RISK, FULL REPLACEMENT INSURANCE \/.II.I I I&:

BUSINESS INTERRUPTION

PROFESSIONAL LIABILITY,

INCLUDING, ERRORS AND
OMISSIONS, MALPRACTICE (WHEN ALL DAMAGES $2,000,000

APPLICABLE), AND NEGLIGENT

PERFORMANCE
THE CITY OF PALO AL TO IS TO BE NAMED AS AN ADDITIONAL INSURED: CONTRACTOR , AT ITS SOLE COST AND EXPENSE, SHALL OBTAIN AND MAINTAIN. IN FULL FORCE AND EFFECT THROUGHOUT THE ENTIRE TERM OF ANY

RESULTANT AGREEMENT, THE INSURANCE COVERAGE HEREIN DESCRIBED, INSURING NOT ONLY CONTRACTOR AND

ITS SUBCONTRACTORS, IF ANY, BUT ALSO, WITH THE EXCEPTION OF WORKERS' COMPENSATION, EMPLOYER 'S

LIABILITY AND PROFESSIONAL INSURANCE, NAMING AS ADDITIONAL INSUREDS CITY, ITS COUNCIL MEMBERS, OFFICERS, AGENTS, AND EMPLOYEES.

I. INSURANCE COVERAGE MUST INCLUDE:

A PRIMARY COVERAGE

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

INSURED, INSURANCE AS AFFORDED BY THIS POLICY IS PRIMARY AND IS NOT

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

B. CROSS LIABILITY

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

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

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

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

C. NOTICE OF CANCELLATION

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

ANY REASON OTHER THAN THE NON-PAYMENT OF PREMIUM,
CONSULTANT SHALL PROVIDE CITY AT LEAST A THIRTY (30)

DAY WRITIEN NOTICE BEFORE THE EFFECTIVE DATE OF
CANCELLATION.

2. IF THE POLICY IS CANCELED BEFORE ITS EXPIRATION DATE

FOR THE NON-PAYMENT OF PREMIUM, CONSULTANT SHALL
PROVIDE CITY AT LEAST A TEN (10) DAY WRITIEN NOTICE
BEFORE THE EFFECTIVE DATE OF CANCELLATION.

II. INSURANCE COVERAGE MUST INCLUDE:

1. A PROVISION FOR AWRITIEN THIRTY (30) DAY ADVANCE NOTICE

TO CITY OF CHANGE IN COVERAGE OR OF COVERAGE
CANCELLATION; AND

2. A CONTRACTUAL LIABILITY ENDORSEMENT PROVIDING

INSURANCE COVERAGE FOR CONSULTANT'S AGREEMENT TO
INDEMNIFY CITY.

3. DEDUCTIBLE AMOUNTS IN EXCESS OF $5,000 REQUIRE CITY'S PRIOR APPROVAL.

Vendors are required to file their evidence of insurance and any other related notices with the City of Palo Alto at the following URL:
https://www .planetbids.com/portal/portal.cfm?Company1D=25569 OR
http://www .cityofpaloalto.org/qov/depts/asd/planet bids how to.as Q

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. EXlllBITD

USE OF PREMISES
SECTION 1. USE OF PREMISES. Consultant shall have the exclusive right to enter and use the Premises during the tenn of this Agreement for the sole purposes of perfonning the Services and fulfilling Consultant's obligations under the Agreement, as detailed in this Section 1 ("Use of Premises") of this Exhibit D. Consultant shall have the right to pennit Consultant's employees, agents and subcontractors to enter and access the Premises for the sole purposes of perfonning the Services and fulfilling Consultant's obligations under this Agreement. Consultant shall have the right to exclude third parties and trespassers onto the Premises. Notwithstanding the foregoing, City's Animal Control Officers and their supervisors have the right to enter the Premises at any time. In addition, City has the right to enter Premises at any time for the purposes of inspection, emergency response and the perfonnance of City obligations under this Agreement. Consultant shall, at City's request, promptly remove any of Consultant's property or Consultant-installed improvements on the Premises to allow City access to the utilities or other City owned facilities/property. In the event City deems it necessary, for purposes of health, safety or building code requirements, in City's sole discretion, City shall have the right to move, alter or remove any such property or improvements and City shall be responsible for promptly restoring or returning the same to its prior condition.

SECTION 2. CONDITION OF PREMISES, CLEANING AND MAINTENANCE.

2.1 Condition of Premises, Routine Interior Cleaning and Janitorial Activities. In connection with its use, Consultant shall maintain the Premises in a clean, safe, secure, orderly, and sanitary condition, consistent with a commercially reasonable standard for a well-run animal shelter facility, so far as the Premises may be affected by Consultant's activities under this Agreement.

Specifically, Consultant shall undertake routine cleaning and janitorial activities as necessary to maintain the interior of the Premises in an orderly condition, as above, provided that nothing in this section shall obligate Consultant to make any alterations or capital improvements to the Premises. Consultant shall maintain all of its own equipment, furnishings and trade fixtures upon the Premises which are required for the maintenance and operation of the Palo Alto Animal Shelter.

2.2 Maintenance and Utilities. Outside of Consultant's responsibilities for routine interior cleaning and janitorial activities in Section 2.1 of this Exhibit, City shall be responsible for the maintenance of the interior and exterior of the Premises and the surrounding grounds, including (without limitation) the maintenance, repair, and replacement of the roof, building structure, improvements, and the HV AC, electrical, plumbing, and other building systems. City shall perfonn any alterations to the Premises (1) required by applicable laws or laws of general application (i.e. ADA, seismic regulations, and building codes) and (2) to ensure that utilities (including, without limitation, water, gas, and electricity) are available to the Premises, in amounts sufficient for Consultant to perform the Services. In the event of a utilities outage, the City will work diligently to restore availability as quickly as possible.

City shall promptly perform its obligations under this Section 2.2 ("Maintenance and Utilities"). In the event of a maintenance issue that impacts the health and safety of the operations, the City shall respond within 24 hours of receipt of notice from Consultant to develop an action plan to address the issue in an expedited timeframe.

SECTION 3. HAZARDOUS MATERIALS.

3.1 Environmental Laws. "Environmental Laws" means any applicable federal, state or local laws and regulations relating to Hazardous Material (including, without limitation, its use, handling, transportation, production, disposal, discharge or storage) or to human health and safety, industrial hygiene or environmental conditions in, on, under or adjacent to the Premises, including without limitation soil, air and groundwater conditions.

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3.2 Hazardous Materials. "Hazardous Materials" means any substance, material, waste, pollutant or contaminant which is regulated by applicable Environmental Laws as being hazardous, toxic, flammable, carcinogenic, explosive or radioactive, or is potentially injurious to the public health, safety or welfare or the environment.

3.3 Release. "Release," when used with respect to Hazardous Materials, means any actual or imminent spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping, depositing, or disposing on, in, under or adjacent to the Premises, or any improvements constructed hereunder by or on behalf of the Consultant, or in, on, under or adjacent to the Premises or any portion thereof in violation of Environmental Laws.

3.4 Remediation. "Remediation" (and derivatives thereof such as an without limitation "remediate"), when used with reference to Hazardous Materials, means any activities undertaken to clean up, remove, contain, treat, stabilize, monitor or otherwise control Hazardous Materials located in, on or under or adjacent to the Premises, or which have been or are being, or risk of being Released into the environment. Remediation includes, without limitation, those actions included within the definition of "remedy" or "remedial action" in California Health and Safety Code Section 25322 and "remove" or "removal" in California Health and Safety Code Section 25323, and as may be amended from time to time.

3.5 No Hazardous Materials. Consultant covenants and agrees that Consultant shall not, nor shall Consultant permit any of Consultant's officers, employees, agents, or subcontractors, to cause or pe1mit any Hazardous Material to be brought upon, kept, used, stored, generated, deposited or disposed of in, on, under or adjacent to the Premises in violation of Environmental Laws, provided that Consultant may store and use such substances in and on the Premises in such limited amounts as are customarily used in the operation of an animal shelter such as the Premises so long as such storage and use is at all limes in full compliance with all applicable Environmental Laws and permits. Consultant shall notify the City as soon as possible within 24 hours if and when it learns or has reason to believe that there has been any Release of Hazardous Material in, on, under or adjacent to the Premises. The City may request Consultant to provide adequate information for City to determine that any Hazardous Material permitted hereunder is being handled in compliance with all applicable Environmental Laws, and Consultant shall promptly provide all such information. In the event that any Hazardous Material is Released in, on, under or adjacent to the Premises by Consultant or any of Consultant's officers, agents, employees, or subcontractors, Consultant shall promptly undertake all necessary actions to Remediate the contaminating Hazardous Material from the Premises and to return the Premises and other City property affected thereby, to the condition existing prior to such Release, or its reasonable equivalent or better, and otherwise investigate and Remediate the Release in accordance with applicable Environmental Laws, at no cost to City. Notwithstanding the foregoing, and excluding Consultant's notice obligations under this Section, Consultant shall have no Remediation obligations under this Section for (i} the mere discovery of any preexisting condition, or (ii) any conditions arising out of any action or inaction of City, its Council members, officers, employees, agents or subcontractors, and not contributed to by any action or inaction of Consultant or Consultant's officers, employees, agents, or subcontractors, (iii) any conditions arising out of any action or inaction of third party vendors that are not an agent or subcontractor of Consultant, and not contributed to by any action or inaction of Consultant or Consultant's officers, employees, agents, or subcontractors, (iv) any conditions arising out of any action or inaction of a third party, not an agent or subcontractor of Consultant, and not contributed to by any action or inaction of Consultant or Consultant's officers, employees, agents, or subcontractors.

3.6 Hazardous Material Indemnity. Consultant shall, on behalf of itself and its successors and assigns, indemnify, defend and hold harmless City, its Council members, officers, employees and agents ( each a "City Indemnified Party"} from and against any and all claims, liabilities, penalties, forfeitures, losses and/or expenses (including, without limitation, diminution in value of the Premise, damages for the loss or restriction on use of the rentable or usable space or of any amenity of the Premise, Item 6
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damages arising from any adverse impact or marketing of the Premises and sums paid in settlement of claims, response costs, cleanup costs, site assessment costs, reasonable attorneys' fees, reasonable expert fees, judgments, administrative rulings or orders, fines, penalties, costs of death of or injury), to any person or damage to any property whatsoever (including, without limitation, groundwater, sewer systems and atmosphere), arising from, or caused or resulting, in whole or in part, directly or indirectly, by the presence or discharge in, on, under or adjacent to the Premises by Consultant, or Consultant's officers, employees, agents or subcontractors, of Hazardous Material, or by any such party's failure to comply with any applicable Environmental Law, whether knowingly or by strict liability. Such Consultant indemnity obligations include, without limitation, and whether foreseeable or unforeseeable, all costs of any Hazardous Materials management plan, closure, investigat.ion, repairs, and Remediation and restoration of the Premises to its prior condition. For purposes of such indemnity obligations, any acts or omissions of Consultant, its officers, employees, agents, or subcontractors (whether or not they are negligent, intentional, willful or unlawful) shall be strictly attributable to Consultant. Consultant shall provide the City with written notice of and afford City a full opportunity to participate in any discussions with governmental regulatory agencies regarding any settlement agreement, Remediation or abatement agreement, consent decree, permit, approvals, or other compromise or proceeding involving a Release of Hazardous Materials in, on, under, or adjacent to the Premises by Consultant or Consultant's officers, employees, agents, or subcontractors as detailed in this Section. Notwithstanding the foregoing, Consultant shall have no obligation to indemnify the City or any City Indemnified Party for (i) the mere discovery of any preexisting condition, or (ii) any conditions arising out of any action or inaction of City, its Council members, officers, employees, agents or subcontractors and not contributed to by any action or inaction of Consultant or Consultant's officers, employees, agents, or subcontractors, (iii) any conditions arising out of any action or inaction of third party vendors that are not an agent or subcontractor of Consultant, and not contributed to by any action or inaction of Consultant or Consultant's officers, employees, agents, or subcontractors, (iv) any conditions arising out of any action or inaction of a third party, not an agent or subcontractor of Consultant, and not contributed to by any action or inaction of Consultant or Consultant's officers, employees, agents, or subcontractors.

SECTION 4. DAMAGE TO UTILITIES. Consultant shall exercise reasonable care to not do anything in, on, under or adjacent to the Premises that damages any City utilities (e.g. gas, water, wastewater, fiber, electric) located in, on, under or about the Premises. Consultant agrees to reimburse City within thirty (30) calendar days of City's written request for any damages caused to City owned utilities caused by a failure of PIN to exercise reasonable care the Premises.

SECTION 5. [RESERVED BY AGREEMENT OF THE PARTIES]
SECTION 6. SURRENDER; DUTIES UPON TERMINATION OR EXPIRATION. Upon the expiration or earlier termination of this Agreement, Consultant shall immediately surrender the Premises in the same condition as received upon completion of the improvements detailed in this Agreement and any other improvements completed by City during the term of this Agreement (excepting reasonable wear and tear; casualty not caused or contributed to by Consultant or its officials, employees, agents or subcontractors; or condemnation not caused or contributed to by Consultant or its empl9yees, agents or subcontractors), broom cleaned, walk-through with City staff completed, and free from hazards that are not pre-existing and were not introduced by the City or its officials employees, agents or subcontractors and clear of all debris that is not pre-existing and was not introduced by the City or its officials, employees, agents or subcontractors. At such time, Consultant shall remove all of its property from the Premises hereunder, and shall repair, at its cost, any damage to the Premises caused by such removal.

Consultant's obligations under this Section shall survive any termination of this Agreement. Consultant shall deliver to the City the originals of all books, permits, plans, records, licenses, contracts, and other documents pertaining to the Premises and its operation, any insurance policies, bills of sale or other documents evidencing title or rights of the City, and any and all other records or documents pertaining to the Premise, whether or not enumerated herein, which are requested by the City or necessary or desirable for the ownership and operation of the Premise, which are in the Consultant's possession. Consultant shall also deliver to City all keys, alarm codes, passwords, and other items used to secure the Premise.

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Consultant further agrees to do all other reasonable things reasonably necessary to cause an orderly transition of the management and operation of the Premises. The provisions of this Section shall survive the expiration or earlier termination of this Agreement until the obligations of the Consultant under this Section are fulfilled to the reasonable satisfaction of the City.

SECTION 7. REPAIR OF DAMAGE. If any portion of the Premises or any property of City located in, on, under or adjacent to the Premises is damaged or at risk of damage by any of the activities conducted by Consultant or anyone acting by or through Consultant, Consultant shall immediately notify City in writing of such damage or risk of damage. City may remedy, but shall not be obligated to remedy, such damage or risk of damage at Consultant's sole cost, or City may elect to witness Consultant's repair work. In the event City elects not to remedy such damage or threat, Consultant shall repair any and all such damage and restore the Premises or such property to its previous condition subject to City's inspection, review and approval.

SECTION 8. CITY'S RIGHT TO CURE DEFAULTS BY CONSULTANT. If Consultant fails to perform any of its obligations under this Exhibit D to restore the Premise, remove or alter improvements or repair damage, or if Consultant defaults in the performance of any of its other obligations under this Exhibit D within a reasonable time after demand by City, then City may, at its sole option, remedy such failure at Consultant's expense; within ten ( I 0) days of receipt of a bill, Consultant shall promptly reimburse the City's actual reasonable costs (including without limitation all costs, damages, expenses or liabilities incurred by City, reasonable attorneys', experts' and Consultants' fees) in remedying or attempting to remedy such failure, or City may reduce any outstanding amount due to Consultant under the Agreement by the cost to City of such remedial action. In the alternative, the cost thereof may be made a lien on Consultant's property as provided in section 12.12.010 of the Palo Alto Municipal Code.

Any such remedial action by City shall not be construed as a waiver of any rights or remedies of City under this Exhibit D or the Agreement, and nothing herein shall imply any duty of City to do any act that Consultant is obligated to perform. Consultant's obligations under this Section shall survive the expiration or earlier tennination of this EKhibit D.

SECTION 9. GENERAL PROVISIONS. (a) If Consultant consists of more than one person, the obligations of each person shall be joint and several. (b) Consultant may not record this Exhibit Dor any memorandum hereof. ( c) Any sale or conveyance by City of the Premises, the provisions of Section 19 ("Termination or Suspension of Agreement or Services") of this Agreement shall govern.

SECTION 10. HOLDING OVER. If Consultant remains in possession of the Premises or any part thereof after the expiration of the term of this Agreement, or any renewal option thereto, such occupancy shall be a revocable license from month to month with all the obligations of this Exhibit D applicable to Consultant. Nothing contained Exhibit D or in the Agreement shall give to Consultant the right to occupy the Premises after the expiration of the term of this Agreement, or any renewal option thereto, or upon any earlier termination.

SECTION 11. WAIVER OF CML CODE. Consultant expressly waives. the benefit ofany statute now or hereinafter in effect, including the provisions of sections 1941 and 1942 of the Civil Code of California, to the extent applicable, which would otherwise afford Consultant the right to make repairs at City's expense or to terminate this Agreement because of City's failure to keep Premises in good order, condition and repair.

SECTION 12. ALTERATIONS BY CONSULTANT. Consultant shall not make any alterations or improvements to the Premises without obtaining the prior written consent of the City Manager, except for alterations or improvements that cost less than Ten Thousand Dollars ($10,000 .00) and which do not affect any building systems or the structural integrity or any structural components of the Premises.

12.1 Ownership of Improvements. All improvements constructed, erected, or installed upon the Premises by Consultant must be free and clear of all liens, claims, or liability for labor or material and Item 6
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shall become the property of City, at its election, upon expiration or earlier tennination of the term, and shall remain upon the Premises upon expiration or earlier termination of this Agreement. Any furniture, trade fixtures installed by Consultant, equipment or other property of Consultant (whether obtained prior to or during the term of this Agreement) shall remain the property of Consultant. Consultant shall restore the Premises to the condition prior to Consultant's installation of such trade fixtures, consistent with Section 6 ("Surrender; Duties Upon Termination or Expiration") . .

12.2 Indemnity for Claims Arising Out of Construction. For the avoidance of doubt, included in Consultant's obligations under Section 16 ("Indemnity; Limitation of Liability") of the Agreement to which this is an exhibit, is Consultant's obligation to indemnify, defend and hold hannless City Indemnified Parties against all Claims arising out of construction and maintenance work perfonned on the Premises by Consultant or caused to be performed on the Premises by Consultant.

12.3 Certificate of Inspection. In the event Consultant will perform, or cause to be performed, any construction, improvement or alteration or any other work on or to the Premises for which City requires a certificate of completion, then upon completion of any such construction, improvement or alteration, Consultant shall submit to the City Manager a Certificate of Inspection, verifying that such construction, improvement or alteration was completed in conformance with Title 20 of the California Code of Regulations for residential construction, or in conformance with Title 24 of the California Code of Regulations for non-residential construction, as applicable.

12.4 As Built Plans. Consultant shall provide the City Manager with a complete set of reproducible "as built plans" reflecting actual construction within or upon the Premises upon completion of any: (i) new construction or (ii) structural alterations.

SECTION 13. ASBESTOS NOTIFICATION. Consultant acknowledges that City has advised Consultant that the Premises contains, or because of its age, is likely to contain asbestos-containing materials ("ACMs"). If Consultant undertakes any alterations, additions, or improvements to the Premises, Consultant shall do so in a manner that avoids disturbing any ACMs present on the Premises .

If ACMs are likely to be disturbed in the course of such work, Consultant shall encapsulate or remove the ACMs in accordance with an asbestos-removal plan approved by the City and otherwise in accordance with all applicable laws, including giving all notices required, if any, by California Health and Safety Code§§ 25915-25919.7, as may be amended.

SECTION 14. MATERIAL CASUALTY

14.1 Damage and Repair. If a Material Casualty (as defined herein) occurs, then the City shall detennine, in its sole and absolute discretion, whether it wishes to continue to operate the Premises as an animal shelter. The City's failure to provide written notice to Consultant of such election within thirty (30) days after the occurrence of a Material Casualty or other damage or destruction of the Premises shall constitute the City's election to continue the operation of the Premises as an animal shelter. If the City elects (or is deemed to elect) to continue the operation of the Premises as an animal shelter after a Material Casualty, or if the Premises is damaged but such damage does not constitute a Material Casualty, then the City shall promptly reconstruct or repair the destroyed or damaged portion of the Premises. City shall pay all costs of repairing and reconstructing the Premises. A "Material Casualty" is a total destruction of the Premises or any damage to the Premises the repair of which would exceed the City Manager's Council-delegated contracting authority under Palo Alto Municipal Code section 2.30.210, depending on the applicable contract types in relation to the repairs required.

14.2 Termination. If City notifies Consultant in writing within thirty (30) days after the occurrence of a Material Casualty that the City elects to not continue the operation of the Premises as an animal shelter after such Material Casualty, then the Agreement shall immediately terminate as of the date such notice is delivered to Consultant. In the event of such termination, (i) City shall pay Consultant's reasonable costs in winding down the operations at the Premises, including, but not limited to, any costs Item 6
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associated with the tennination of employees by Consultant and (ii) Consultant shall be entitled to retain its prorated compensation amount for the quarter in which termination occurs (prorated for the number of days in such quarter that elapsed up to the date of termination).

14.3 Continuation. If the City elects (or is deemed to elect) or is obligated to reconstruct or repair the damaged portions of the Premises because such damage does not constitute a Material Casualty pursuant to Section 14. l ("Damage and Repair"), the City and Consultant shall make a determination as to whether the Premises will continue to operate during the reconstruction/repair period. If the parties mutually determine (in their respective reasonable discretion) that the Premises will operate during such period, this Agreement shall remain in full force and effect. Otherwise, Consultant's obligations to provide animal shelter services under this Agreement shall be suspended during such period. In the event of such suspension, (i) City shall pay Consultant's reasonable costs incurred by Consultant during any such suspension of operations and (ii) Consultant shall be entitled to retain its prorated compensation amount for the quarter in which suspension occurs (prorated for the number of days in such quarter that elapsed up to the date of suspension). City shall further pay all reasonable costs incurred by Consultant due to such suspension. If the parties desire, during the suspension period, the parties may negotiate in good faith to try to provide for animal shelter services to the best of the parties' reasonable abilities under the circumstances of such a suspension.

SECTION 15. CITY IMPROVEMENTS TO PREMISES. The City has worked with Consultant to identify improvements to the Premises. The City shall improve the Premises as follows, subject to the Contingencies described in this section:

15.1 Expansion of Existing Medical Suite. The City shall expand the medical suite at the Premises to accommodate more animals and offer more privacy to customers. The remodeled medical suite shall expand into the office area for the shelter and shall offer separate entrances for medical customers, separate treatment, recovery, and preparation areas, as well as a lobby for medical customers.

The expansion will not be inconsistent with the plans entitled "Floor Plan - New Medical Area" that Consultant provided to City, attached as (Exhibit D-1 ), to the extent practicable and feasible based on site requirements and architectural- or engineering-based considerations. The City shall abate asbestos and lead paint within the medical suite area of the Premises.

Expected Timeline:

Design and Review Timelines:

A/E Consultant Procurement: November 8 - December 30, 2018 Schematic Design/ Design Development: January 2, 2019 - February 25, 2019 Construction Documents: February 28- March 22, 2019
Building Permit: April 4-May 5, 2019
Procurement and Construction Timelines:

General Contract Bidding/Procurement: April 25 - July 7, 2019 Construction: July 24 - November 14, 2019
Note: During construction, the building will be closed, and staff will need alternative worksites. All other parts of the building should still be open.

15.2 Addition of New Modular Building. The City shall place a modular building on the site to supplement the existing building. The building shall be used for offices as well as for meetings and educational programs for the public. The modular building shall be connected to utilities and will likely require a concrete pad. The modular building will not be inconsistent with Exhibit D-2, to the extent practicable and feasible based on site requirements and architectural- or engineering-based considerations.

The City will place one (1) construction-type trailer within sixty (60) days as temporary accommodations until the modular building is installed and operational.

Expected Timeline:

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Design and Review Timelines:

Design: November 8, 2018 - February 25, 2019
ARB Review: January IO, 2019- February 8, 2019
Building Pennit (concurrent): January I I, 2019 - May 4,2019 Procurement and Construction Timelines:

Procurement (9 steps): February 28 - May 12, 2019
Construction (4 major steps): May l, 2019 - July 28, 2019

15.3 Renovation of Existing Dog Kennels. The City shall renovate the existing dog kennels located at the Premises to ensure that all kennels are operable and expected that this work shall be done by March 15, 2019. The renovation shall be as described in Exhibit D-3, to the extent practicable and feasible based on site requirements and architectural- or engineering-based considerations.

15.4 Construction of New Dog Kennels. The City shall construct 16 new kennels on the Premises. Construction is expected to be complete by July 30, 2020. The new kennels will be constructed of galvanized steel, will be air-conditioned and heated, and located as close as possible to the existing dog kennels and medical area, to the extent practicable and feasible based on site requirements and architectural- or engineering-based considerations. Interior and exterior runs shall be of material size and quality not inconsistent with the applicable items as set forth on Exhibit D-4, to the extent practicable and feasible based on site requirements, architectural- or engineering-based considerations, and procurement requirements applicable to the City as a public entity.

15.5 Total Cost. The total cost of these improvements above is expected to be approximately $3.4 million, not including staff time, as estimated at the time as of the execution of this Agreement, and shall be fully paid for by the City of Palo Alto.

15.6 Contingencies. The Parties acknowledge that the improvements in this Section are subject to conditions which may alter the scope of the aforementioned improvements and could prevent one, some, or all of them from being constructed . These conditions include, but are not limited to:
(a) Permitting and architectural review;
(b) Appropriation of sufficient funds, as decided by the City Council; (c) Compliance with all laws, regulations, permits, and conditions, including CEQA; and (d) Changes in the prices for construction and materials.

15.7 Additional Compensation for Renovation Delays. Due to facility inadequacies, that would be remedied by the completion of the renovations outlined in sections 15.1, 15.2, and 15.3, the City will provide additional compensation to Consultant up to five-thousand dollars ($5,000) per month, should the City be unable to substantially complete the renovations in the time periods outlined in sections 15.1, 15.2, and 15.3. The additional compensation must be specifically documented and related to costs Consultant incurs as a result of facility inadequacies that would be remedied by the completion of renovations.

15.8 All work perfonned by the City shall be performed in a workmanlike manner, in compliance with all applicable laws., City shall take reasonable steps to perfonn such work in a manner which results in minimal disruption to Consultant's activities in the Premises. Consultant will take reasonable steps to accommodate City's work. The City shall enforce all applicable third party warranties at the request of Consultant. City shall promptly obtain final certificates of occupancy for all applicable portions of the Premises.

15.9 Renovation Timeline Updates. City shall provide renovation timeline updates to Consultant on a quarterly basis or more frequently upon request. Six months after the commencement of the construction of the improvements detailed in this Agreement, the parties will meet to review whether the renovation timelines stated herein are on track. City shall provide renovation timeline updates to Item 6
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Consultant on a quarterly basis or more frequently upon request. If, in Consultant's reasonable determination, there is excessive delay in any renovation timelines stated herein, and City is not diligently pursuing completion of the improvements detailed in Section 15.1, 15.2, or 15.3, Consultant may terminate this Agreement upon sixty (60) days' written notice to City.

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Palo Alto Animal Shelter
3281 East Bayshore Rd., Palo Alto, CA
Legend
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C19174493 between the City of Palo
Alto and Pets in Need

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DocuSign Envelope ID: 67EE6E23-85D4-4502-8854-30BAD16134CA Item 6
Attachment C -
Amendment No. 1 to
Contract No. C19174493
with Pets in Need

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DocuSign Envelope ID: 67EE6E23-85D4-4502-8854-30BAD16134CA Ed Shikada
Robert Kalman
Chair, Board of Directors
Kristen O'Kane
Tim Shimizu
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Amendment No. 1 to
Contract No. C19174493
with Pets in Need

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DocuSign Envelope ID: 67EE6E23-85D4-4502-8854-30BAD16134CA Item 6
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Amendment No. 1 to
Contract No. C19174493
with Pets in Need

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DocuSign Envelope ID: 67EE6E23-85D4-4502-8854-30BAD16134CA Item 6
Attachment C -
Amendment No. 1 to
Contract No. C19174493
with Pets in Need

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Certificate Of Completion
Envelope Id: 67EE6E2385D44502885430BAD16134CA
Subject: Complete with DocuSign: Executed PA Amendment RK and LTG 9 6 23 FINAL.pdf Source Envelope:

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Cayla KogaCertificate Pages: 2
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Palo Alto , CA 94301
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Amendment No. 1 to
Contract No. C19174493
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Item 6
Attachment C -
Amendment No. 1 to
Contract No. C19174493
with Pets in Need

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City Council
Staff Report
From: City Manager
Report Type: CONSENT CALENDAR
Lead Department: Utilities
Meeting Date: January 16, 2024
Staff Report: 2306-1634
TITLE
Adopt a Resolution Approving an Amendment to the City’s 2009 California-Oregon Transmission Project Long-Term Layoff Agreement to Extend the City’s Layoff of its Share of the California Oregon Transmission Project (COTP) until 2034 and to Receive Annual Market Payments as Recommended by the Utilities Advisory Commission (UAC); CEQA Status – Not a Project

RECOMMENDATION
The Utilities Advisory Commission (UAC) and staff recommend the City Council adopt a Resolution approving Amendment No. 3 to the City’s 2009 California-Oregon Transmission Project Long-Term Layoff Agreement to extend the term for 10 years until 2034 and to receive annual market payments, as shown in Exhibit A to the attached Resolution.

EXECUTIVE SUMMARY
The UAC and staff recommend the City extend the current 2009 Long-Term Layoff Agreement (2009 LTLA) for ten years until February 1, 2034 and add an annual market payment to the City of $550k in years 2024-2028 and $800k in 2029-2033. Amendment No. 3, approved by the TANC Commission on November 15, 2023, is included for review as Exhibit A to the Resolution in Attachment A. In parallel with approval by TID, MID and SMUD’s governing boards, Amendment No. 3 will be considered by Palo Alto’s City Council on January 16, 2024.

In 2009 Palo Alto entered into a 15-year temporary ownership agreement (or “layoff”) of its share of California Oregon Transmission Project (COTP) with three of these utilities who had not joined the ISO: Turlock Irrigation District (TID), Modesto Irrigation District (MID), and the Sacramento Municipal Utilities District (SMUD). The 2009 layoff term ends February 1, 2024 unless extended or replaced. Upon expiration in 2024 the City would be required to pay the TID, MID, and SMUD approximately $1M (which is the value of the remaining useful life of existing capital replacements). The UAC reviewed the history and options for Palo Alto’s share of the COTP in Item 7
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May 2023 (Staff Report: 2301-07951). The current 2009 Long-Term Layoff Agreement (2009 LTLA) and both of its amendments are included as Attachments B, C, and D.

The proposed amendment and extension was reviewed by the UAC on December 6, 2023. The UAC discussion focused on why staff recommended the ten-year extension rather than another term; why staff recommended a layoff rather than a permanent sale; and understanding the net financial impact. A longer period layoff was preferable for cost certainty for Palo Alto, but ten years was negotiated. Regarding a permanent sale of the asset, the process of giving TANC members right of first refusal for a sale would have taken longer than the remaining duration of the layoff, at which point several benefits would have been lost to Palo Alto. Staff clarified that although the annual market payments will total up to $6.75M over the next ten years, staff also expects about $3.9M in accumulated capital replacement costs to be due to the layoff recipients in 2034, so the net financial impact will be saving approximately $7M in costs over the next ten years, plus a net collection of approximately $2.85M in market payments. The UAC voted unanimously to recommend to Council adopt the Resolution to approve the contract extension.

BACKGROUND
In 1984 the City of Palo Alto was a founding member of the Transmission Agency of Northern California (TANC), a joint powers agency formed in 1984 to facilitate the construction and joint ownership of transmission projects. TANC invested in construction the California Oregon Transmission Project, a high-voltage transmission extending from just north of the California- Oregon border to Tracy in the Central Valley. The purpose of this line was to ensure publicly owned utilities had sufficient transmission capacity outside of the PG&E-owned transmission system. With the formation of the California Integrated System Operator (ISO), the City of Palo Alto Utilities and several other publicly owned utilities joined the ISO. However, there were other publicly owned electric utilities, along with the federal hydroelectric project the Western Area Power Authority, which elected to not join the ISO and instead jointly decided to keep the COTP outside of the ISO market and transmission planning process. This decision stranded Palo Alto’s share of the COTP in a different balancing authority and limited the value of the asset to Palo Alto.

The COTP is a 340-mile, 500-kV AC transmission line between Southern Oregon and Central California. The COTP became operational in March 1993, and has a total rated capacity of 1,600 MW.
1 Staff Report 2301-0795 https://www.cityofpaloalto.org/files/assets/public/v/1/agendas-minutes- reports/agendas-minutes/utilities-advisory-commission/archived-agenda-and-minutes/agendas-and-minutes- 2023/05-may-2023/05-03-2023-2301-0795-info.pdf
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From its northern end at the Bonneville Power
Administration's Captain Jack Substation in
Southern Oregon, the COTP continues south to the
Western Area Power Administration's Tracy
Substation and on towards the Tesla Substation
(owned and operated by PG&E) in the CAISO
balancing area.

The Transmission Agency of Northern California
(TANC) is a California Joint Powers Agency, formed
in 1984 to facilitate the construction and joint
ownership of transmission projects. Palo Alto was
a founding member of TANC. Other members
include MID, TID, SMUD and the Cities of Alameda,
Biggs, Gridley, Healdsburg, Lodi, Lompoc, Redding,
Roseville, Santa Clara, and Ukiah.

TANC currently owns and operates approximately
87 percent of the COTP. Palo Alto is a signatory to
TANC’s 1990 Project Agreement No. 3 (PA3)
(Resolution No. 6877, adopted March 26, 1990),
which provides the City a 3.6815%, or
approximately 50 MW, share of TANC’s current entitlement to transfer capability on the COTP.

That line is expected to be increased in rating in 2025, increasing Palo Alto’s share to 54 MW for north to south transmission.

Palo Alto decided to lay off its share of the line in 2009 to MID, SMUD, and TID, and that layoff will come to end February 1, 2024 if not extended.

DISCUSSION
Analysis
In 2009 laying off the COTP at cost to non-ISO public utilities was a reasonable choice; however, several fundamental policy and market changes have occurred in the last 15 years. These market changes have made transmission both more expensive and more valuable.

Some of the market changes include high renewable electricity mandates, large increases in transmission costs to deliver renewable electricity, greater electricity market integration with neighboring states, and the California ISO’s 2020 creation of a revenue stream for ISO utilities who make their portion of the COTP available to the ISO. Overall these changes increased the value of the COTP to both Palo Alto and the utilities who currently operate Palo Alto’s share of the COTP under the 2009 layoff agreement.

Figure 1. Map of COTP as part of the California-Oregon Intertie.

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There are also substantial upcoming capital and operating expenses planned for the COTP to which Palo Alto would need to contribute if it took back its share, and uncertainties around future value streams which could make value of the City’s share of the COTP lower than the City’s cost of ownership, as shown in Table 1.

Changes to the Current Layoff in the Amendment
Terms for an amendment to the current were negotiated with MID, TID and SMUD resulting in a 10-year amendment and extension of the 2009 layoff agreement as recommended to the Council for approval. Specifically, this amendment extends the layoff term until 2034, includes an annual market payment of $550k in years 2024-2028 and $800k in 2029-2033 from MID, TID and SMUD to Palo Alto. In addition, extending the layoff term would ensure that all the operating costs and a large percentage of the capital costs for the next 10 years would continue to be allocated to MID, TID and SMUD.

Over the course of the current 15-year layoff PA3 participants have approved many required capital projects to the COTP, which have mostly been replacements to existing facilities. As detailed in the 2009 LTLA (Attachment B), the portion of the useful life of the capital replacements that extend beyond the duration of the current layoff will be the responsibility of the layoff entities, including Palo Alto. To date, approximately $1M of these capital obligations would be payable by the City at the end of the layoff term in February 2024. Again, this $1M represents the City’s share of the capital replacements whose life exceeds the duration of the layoff, were the City to end the current layoff in 2024. If the City amends the layoff agreement in accord with the terms in Amendment No. 3, then these previously accrued capital obligations would be reduced substantially and be due in 2034 instead. This reduction is shown in Table 1.

The annual payments to the City from the Districts receiving the layoff of $550k will start in 2024, changing to $800k in 2029 through 2033.

Comparison of Amended Layoff Agreement and Bringing COTP Back A summary table with approximation of the annual costs and value streams is below, for the 10- year layoff agreement, from February 1, 2024 to January 31, 2034. This table compares the different costs and values of bringing the COTP back to Palo Alto’s electric portfolio versus amending and extending the layoff agreement. The terms of the current layoff are shown as a comparison, although an extension of the current layoff without the annual payments to Palo Alto is not being considered.

Table 1. Financial comparison of current estimates of value for bringing COTP Back versus the proposed terms for the Amended Layoff. The “Current Layoff Terms” are shown for comparison only, if the current layoff were extended, which is not under Item 7
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consideration, but simply shown for comparison purposes. All numbers are presented on an annual basis for the ten-year term covered by the proposed Amendment.

Annual Cost or Revenue
Bring COTP Back
to Portfolio
(2024-2034)

RECOMMENDED
Layoff Extension
(2024-2034)
Current
Layoff Terms
(2009-2024)
O&M Obligations -$1,400,000 - -
New Capital Obligations -$600,000 -$350,000 -$350,000
Prior Capital Obligations -$100,000 -$40,000 -$40,000
CRR Options Revenue $920,000 - -
Energy Transfer System Resources Revenue $480,000 - -
Average Layoff Payment - $675,000 -
Low Cost Renewables Value unclear - -
Total Cost (-) or Value (+) per year -$700,000 $285,000 -$390,000 Detailed Estimates of Costs and Values
The prior capital obligation for repayment of about $1M (accrued from 2009 to 2024) is shown on an annual basis for different options for the duration. If the City were to bring the resource back rather than amend and extend the current layoff agreement, the City would be required to pay roughly $1M in prior capital obligations (shown in the table above as $100k per year over 10 years), effective February 1, 2024.

The City is exempt from all operation and maintenance obligations related to PA3 during the current layoff, and that will continue with this layoff extension. Under the current 2009 LTLA Section 3.g. which remains unchanged via the potential extension, the City will be responsible for paying the Districts back at the end of the layoff for the percentage of the useful life of that capital replacement that extends beyond the term of the layoff agreement (in other words, when the COTP share returns to the City).

There are substantial capital replacements planned for the next ten years, which TANC has preliminarily decided to finance. Staff projects that the expected capital costs to the City without a layoff extension will be approximately $600k per year for the 10 years covered by the proposed extension. Approximately $1M of that total of $6M over ten years is anticipated to be funded by TID, MID, and SMUD under a long-term layoff. Of the remaining $5M in capital expenditures from 2024-2034, Utilities staff, TANC staff, and NCPA staff are estimating approximately 70% of the capital replacements will need to be paid back to Districts in 2034, which is roughly $3.5M. This is estimated from the anticipated expenditures based on the timing of the expenditures and the lifetime of the actual equipment. These capital expenditures are shown in Table 1. These are for planned capital expenditures, and actual capital expenditures could potentially be higher.

Under the 2009 layoff agreement, Palo Alto relinquishes “all of Palo Alto’s use of its interests, rights, and obligations under TANC Project Agreement No. 3” unless TID, MID, and SMUD default, and this would remain so under the amendment extending the current agreement.

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Two revenue streams which are both volatile and uncertain are Congestion Revenue Rights (CRR) Options, and Energy Transfer System Resources (ETSRs). The ISO made CRR options available to Palo Alto in 2020 2; they are available to COTP owners so that entities can turn over their percentage of the COTP on a monthly or annual basis to the ISO and collect both CRR value for north to south and south to north throughout the year. This is essentially allowing the ISO to optimize that portion of the COTP within the ISO full network model to minimize costs for all, and then pass the value of the cost minimization to the respective COTP rights-holders.

ETSRs are the difference between the energy component of the locational marginal price at different locations between Balancing Authorities beyond ISO, but within the Western Energy Imbalance Market (WEIM) and the Extended Day Ahead Market (EDAM). EDAM is under development and is expected to launch with PacifiCorp in 2025, and SMUD in approximately 2026. ETSRs essentially pass on the energy value to transmission owners who are connecting lower cost resources to higher cost generation areas.

The COTP CRR options for public utilities like Palo Alto have averaged about $17k/MW per year.

Palo Alto’s current 51MW share will likely increase to 54MW by 2025, which staff estimates will generate approximately $920k/yr in CRR Options revenue. The revenue from ETSRs is harder to estimate and requires both that Palo Alto put its share of the COTP in the EDAM and that transmission owners to the north do the same with their transmission. The City’s consultants have also advised that there are additional nuances regarding how ETSRs are collected and distributed that may impact these estimates. CAISO has not yet finalized the EDAM rules.

The potential value from lower cost renewable resources comes from the fact that there might be high-quality wind resources able to directly connect on the COTP, which would be of value to Palo Alto if the City opted to bring the asset back. However, securing transmission rights from the COTP’s northern end at Captain Jack to further north where the resources are located is very difficult. In addition, the COTP process for direct interconnection is only now being developed and is likely to take years and require expensive power flow studies.

Alternatives
Staff explored bringing the COTP share back and issued an RFP for renewables with preference for interconnection at Captain Jack intertie. The City did not receive any offers, although there was some potential for projects which would take several years to develop.

Alternatively, an outright sale of the City’s share of the COTP was explored, the regulatory uncertainty with EDAM and other issues greatly diminished the value. There is also long-term interest in maintaining the City’s share of the COTP to maintain flexibility of resources into the 2 Explanation of the CRR Options developed for the COTP in 2020 https://www.youtube.com/watch?v=Io2ig60i9wo&t=146s
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future given the uncertain regulatory environment and the difficulty in siting and constructing new transmission lines.

FISCAL/RESOURCE IMPACT
The recommended action to amend and extend the 2009 Layoff will not require payments from Palo Alto until 2034, and Palo Alto will receive annual payments May 1st of $550k each year from 2024 to 2028 and then $800k from 2029 to 2033. The terms are the same as current cost obligations meaning that PA3-related operations and maintenance costs during the layoff will not be Palo Alto’s responsibility, while capital replacements made during the layoff will continue to be allocated as described in Section 3.g. of the 2009 LTLA (Attachment B). In 2034 Palo Alto will need to pay the City’s portion of capital costs and obligations that were prefunded by TID, MID, and SMUD during the layoff, if applicable. As shown in Table 1 these capital costs which are being prefunded by TID, MID, and SMUD from 2024-2034 can be tracked annually and funds can be set aside for that repayment.

STAKEHOLDER ENGAGEMENT
This proposed layoff amendment is consistent with the Utilities Strategic Plan, the Utilities Electric Integrated Resources Plan, Sustainability Implementation Plans, and the City’s Sustainability and Climate Action Plan (S/CAP).

ENVIRONMENTAL REVIEW
Staff’s recommendation does not require California Environmental Quality Act review, because it does not meet the definition of a project under Public Resources Code Section 21065 and CEQA Guidelines Section 15378(b)(5), as an administrative governmental activity which will not cause a direct or indirect physical change in the environment. TANC certified the Final Environmental Impact Report for the COTP in 1988.

ATTACHMENTS
Attachment A: Resolution with Amendment No. 3 as Exhibit A Attachment B: Current 2009 Long-Term Layoff Agreement
Attachment C: Amendment No. 1 to the 2009 LTA
Attachment D: Amendment No. 2. to the 2009 LTA
APPROVED BY:

Dean Batchelor, Director Utilities
Staff: Lena Perkins, PhD, Senior Resource Planner
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*NOT YET APPROVED*
6056795 UAC

Resolution No.

Resolution of the Council of the City of Palo Alto Approving Amendment No. 3 to the 2009 California-Oregon Transmission Project Long-Term Layoff Agreement with Certain Other Members of the Transmission Agency of Northern California to Extend the Term for 10 Years Until 2034 and to Receive Annual Market Payments

R E C I T A L S

A. The City of Palo Alto (“City”), a municipal utility and a chartered city, became a founding member of the Transmission Agency of Northern California (“TANC”) in 1984, to facilitate construction and joint ownership of transmission projects.

B. The City of Palo Alto, the California cities of Alameda, Biggs, Gridley, Healdsburg, Lodi, Lompoc, Redding, Roseville, Santa Clara, and Ukiah; the Modesto Irrigation District (“MID”); the Turlock Irrigation District (“TID”); and the Sacramento Municipal Utility District (“SMUD”) are also members of TANC.

C. TANC currently owns approximately 87 percent of the California-Oregon Transmission Project (“COTP”), a 500-kV transmission line that interconnects with the Bonneville Power Administration at the Captain Jack Substation in Southern Oregon and with Pacific Gas & Electric Company in California at the Tesla Substation.

D. The City became a participant in the COTP in 1990, by executing Project Agreement No. 3 (PA3) and has a 3.6815%, or approximately 50 MW, share of TANC’s current entitlement to transfer capability on the COTP.

E. Due to changes in the value of the COTP to the City’s electric portfolio in 2009 the City, along with the City of Roseville, executed the Long-Term Lay-off Agreement (“2009 LTLA”) to transfer each party’s full COTP entitlement and obligations to MID, TID and SMUD for fifteen years (Resolution No. 8900).

F. Amendment No. 1 to the 2009 LTLA returned Roseville’s COTP interests, rights, and obligations from MID, TID, and SMUD back to Roseville, and clarified the City’s voting rights under TANC PA 3.

G. At TANC’s January 27, 2016 meeting, TANC approved a resolution authorizing the issuance of California-Oregon Transmission Project Revenue Refunding Bonds, 2016 Series, (“the 2016 COTP Bonds”). On March 9, 2016 TANC issued and sold its $173,920,000 California- Oregon Transmission Project Revenue Refunding Bonds, 2016 Series A (the “2016A Bonds”), which have a maturity date of May 1, 2039.

H. Amendment No. 2 to the 2009 LTLA provided that in the absence of a default by MIDTID, and SMUD, Debt Service for the 2016A Bonds and any extension thereof associated with City’s 3.6815 Participation Percentage in TANC’s entitlement to Transfer Capability on the COTP would be paid by MID, TID, and SMUD.

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Attachment A -
Resolution with
Amendment No. 3 as
Exhibit A

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*NOT YET APPROVED*
6056795 UAC

I. The Parties have agreed to execute this Amendment No. 3 to the 2009 LTLA, attached as Exhibit A, to extend the 2009 LTLA for approximately an additional ten years to January 31, 2034 to ensure that all of City’s interests, rights, and obligations associated with its Participation Percentage under TANC PA 3 continue to be laid off to MID, TID, and SMUD for the extended term of the 2009 LTLA in the absence of a default by MID, TID, and SMUD, and to add an annual market payment to City from MID, TID, and SMUD. This Amendment No. 3, by modifying the term of the 2009 LTLA, will also extend the term of ROSEVILLE’s layoff of its South of Tesla (“SOT”) allocation, originally described in Section 4 of the 2009 LTLA.

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

SECTION 1. The Council approves Amendment No. 3 to the 2009 Long Term Layoff Agreement by and Among the Transmission Agency of Northern California and Certain of its Members, attached as Exhibit A to this resolution.

SECTION 2. As permitted by Section 2.30.290 of the City’s Municipal Code, the Council delegates authority to the City Manager, or his designee, to execute further amendments to the 2009 Long Term Layoff Agreement as needed to maintain the value of the City’s laid-off COTP share through the remaining term of the 2009 Long Term Layoff Agreement. Any further amendments shall be in writing, accomplished in accordance with the terms of the 2009 Long Term Layoff Agreement, as amended, and shall not exceed the limits of the authority granted by the Council. Further amendments shall also require approval by the City Attorney’s Office, TANC and the other 2009 Long Term Layoff Agreement participants.

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Resolution with
Amendment No. 3 as
Exhibit A

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*NOT YET APPROVED*
6056795 UAC

SECTION 3. The Council finds that the adoption of this resolution does not constitute a project under Public Resources Code Section 21065 and CEQA Guidelines Section 15378(b)(5), as an administrative governmental activity which will not cause a direct or indirect phy sical change in the environment. TANC certified the Final Environmental Impact Report for the COTP in 1988.

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
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Resolution with
Amendment No. 3 as
Exhibit A

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83112.00002\41775073.2

Exhibit A
6056786

Amendment No. 3
Long-Term Layoff Agreement
By and Among
the
Transmission Agency of Northern California
and certain
of its Members
namely
The City of Palo Alto
The City of Roseville
The Modesto Irrigation District
The Turlock Irrigation District
and
The Sacramento Municipal Utility District

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Resolution with
Amendment No. 3 as
Exhibit A

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83112.00002\41775073.2

Exhibit A
6056786

TABLE OF CONTENTS
RECITALS ....................................................................................................................................................... 2 AGREEMENT .................................................................................................................................................. 3 Section 1. Effective Date ........................................................................................................................... 3 Section 2. Modification of Section 2, “Term” ........................................................................................... 3 Section 3. Addition of Section 3.k, “Annual Market Payment” ............................................................... 4 Section 4. Integration ................................................................................................................................ 4 SIGNATURES .................................................................................................................................................. 4

This Amendment No. 3 of the February 1, 2009 Long Term Layoff Agreement By and Among the Transmission Agency of Northern California and certain of its members (“LTLA”), is entered into as of the Effective Date defined in Section 1 of this Amendment No. 3, by and among the Transmission Agency of Northern California (“TANC”) and certain of its members, namely the City of Palo Alto, referred to as “PALO ALTO”, and, the City of Roseville (“ROSEVILLE”), the Modesto Irrigation District (“MODESTO”), the Turlock Irrigation District (“TURLOCK”), and the Sacramento Municipal Utility District (“SMUD”), with references to each entity individually and collectively as “Party” or “Parties”. Capitalized terms used in this Amendment No. 3 are defined in TANC Project Agreement No. 3, unless otherwise specifically defined in this Amendment No.

3. RECITALS:

A. PALO ALTO, MODESTO, ROSEVILLE, TURLOCK, and SMUD are each Participants in and parties to TANC Project Agreement No. 3 (“TANC PA 3”), entered into March 1, 1990.

B. In the LTLA, PALO ALTO and ROSEVILLE laid off their entitlement to TANC’s Transfer Capability on the California-Oregon Transmission Project (“COTP”) associated with their Participation Percentages under TANC PA 3 to MODESTO, TURLOCK, and SMUD for the fifteen-year term of the LTLA.

C. In the LTLA, MODESTO, ROSEVILLE, TURLOCK, and SMUD accepted and assumed all of PALO ALTO and ROSEVILLE’s Participation Percentages under TANC PA 3 for the term of the LTLA.

D. Amendment No. 1 to the LTLA returned ROSEVILLE’s COTP interests, rights, and obligations from MODESTO, TURLOCK, and SMUD back to ROSEVILLE, and clarified PALO ALTO’s voting rights under TANC PA 3.

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Amendment No. 3 as
Exhibit A

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83112.00002\41775073.2

Exhibit A
6056786

E. At TANC’s January 27, 2016 meeting, TANC approved a resolution authorizing the issuance of California-Oregon Transmission Project Revenue Refunding Bonds, 2016 Series, (“the 2016 COTP Bonds”). On March 9, 2016 TANC issued and sold its $173,920,000 California-Oregon Transmission Project Revenue Refunding Bonds, 2016 Series A (the “2016A Bonds”), which have a maturity date of May 1, 2039.

F. Amendment No. 2 to the LTLA provided that in the absence of a default by MODESTO, TURLOCK, and SMUD, Debt Service for the 2016A Bonds and any extension thereof associated with PALO ALTO’s 3.6815 Participation Percentage in TANC’s entitlement to Transfer Capability on the COTP would be paid by MODESTO, TURLOCK, and SMUD.

G. The Parties have agreed to execute this Amendment No. 3 to the LTLA to extend the LTLA for approximately an additional ten years to January 31, 2034 to ensure that all of PALO ALTO’s interests, rights, and obligations associated with its Participation Percentage under TANC PA 3 continue to be laid off to MODESTO, TURLOCK, and SMUD for the extended term of the LTLA in the absence of a default by MODESTO, TURLOCK, and SMUD, and to add an annual market payment to PALO ALTO from MODESTO, TURLOCK, and SMUD. This Amendment No. 3, by modifying the term of the LTLA, will also extend the term of ROSEVILLE’s layoff of its South of Tesla (“SOT”) allocation, originally described in Section 4 of the LTLA.

H. The Parties agree that except as amended and modified by Amendment No. 1 and Amendment No. 2, which remain in effect, and this Amendment No. 3, the LTLA remains in full force and effect, without any other changes to any of its provisions.

NOW THEREFORE, in consideration of the premises described in the Recitals, and in consideration of the terms, covenants, and conditions that are set out below, the Parties have entered into this Amendment No. 3 to the LTLA.

AGREEMENT:

Section 1. Effective Date.

This Amendment No. 3 shall become effective and enforceable on January 30, 2024 at 0001 hours Pacific Prevailing Time following the due execution and delivery of this Amendment No. 3 to TANC, or the date on which this Amendment No. 3 is duly executed by all of the Parties and delivered to TANC, if January 30, 2024 passes without such execution and delivery (hereinafter “Effective Date”).

Section 2. Modification of Section 2, “Term”.

Section 2 of the LTLA, entitled “Term”, is hereby modified as follows:

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83112.00002\41775073.2

Exhibit A
6056786

“The term of this Agreement shall be approximately twenty five (25) years commencing on the Effective Date and terminating at 0000 hours Pacific Prevailing Time on January 31, 2034, unless the Parties mutually agree in writing to extend the term of the Agreement for another five (5) years (hereinafter “Term”).

Section 3. Addition of Section 3.k, “Annual Market Payment”.

Section 3.k., “Annual Market Payment.” is hereby added:

“Starting May 1, 2024, and on each May 1 thereafter for the term of the LTLA, MODESTO, TURLOCK, and SMUD, in aggregate, will pay PALO ALTO an annual fixed payment of $550,000 per year to PALO ALTO for the 5 years from 2024 through 2028 ($61,820 from MODESTO or

11.24%%, $244,090 from TURLOCK or 44.38%, and $244,090 from SMUD or 44.38%), and $800,000 per year for the 5 years from 2029 through 2033 ($89,920 from MODESTO or 11.24%, $355,040 from TURLOCK or 44.38%, and $355,040 from SMUD or 44.38%). While this payment will be administered by TANC in accordance with section 3.f of the LTLA, MODESTO, TURLOCK and SMUD shall be jointly and severally liable to make the payment annually.”

Section 4. Integration.

Except as amended and modified by Amendment No. 1 and Amendment No. 2, which remain in effect, and this Amendment No. 3, the LTLA remains in full force and effect, without change to any of its provisions other than the text expressly altered by this Amendment No.3.

On the Effective Date this Amendment No. 3 and the LTLA shall be one, integrated Agreement.

The Parties have duly executed and delivered this Amendment via their authorized representatives set forth below.

SIGNATURES:

TRANSMISSION AGENCY OF

NORTHERN CALIFORNIA
By:

Its:

Dated:

CITY OF PALO ALTO
By:

Its:

Dated:

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83112.00002\41775073.2

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6056786

TURLOCK IRRIGATION DISTRICT
By:

Its:

Dated:

SACRAMENTO MUNICIPAL

UTLITY DISTRICT
By:

Its:

Dated:

MODESTO IRRIGATION DISTRICT
By:

Its:

Dated:

CITY OF ROSEVILLE
By:

Its:

Dated:

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RESOLUTION 2016-XX

A RESOLUTION OF THE

TRANSMISSION AGENCY OF NORTHERN CALIFORNIA
APPROVING AMENDMENT NO. 2
TO THE 2009 LONG-TERM LAYOFF AGREEMENT

WHEREAS, the Transmission Agency of Northern California (TANC) is a joint exercise of powers agency organized under the laws of the State of California; and WHEREAS, the TANC Procedures for Long-Term Layoffs of Transmission Capacity govern TANC Member layoffs of their California-Orego n Transmission Project (COTP) entitlements; and
WHEREAS, pursuant to Resolution 2009-01, th e Cities of Palo Alto and Roseville entered into a Long-Term Layoff Agreement By and Among the Transmission Agency of Northern California and certain of its Members (2009 LTLA) to lay off their COTP Entitlements; and WHEREAS, pursuant to Resolution 2014-04, the City of Roseville ’s COTP Entitlement rights were restored and the affected cost sharing percentages associated with TANC Project Agreements No. 3 (PA-3) and No. 5 (PA-5) were modified by Amendment No. 1 to the Long-Term Layoff Agreement By and Among the Transmission Ag ency of Northern California and certain of its Members; and
WHEREAS, the City of Palo Alto’s COTP Entitlement associated with PA-3 remains laid off to certain TANC Members; and
WHEREAS, parties to the 2009 LTLA as amended seek certainty regarding the remaining cost sharing obligations associated with COTP; and Item 7
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Resolution 2016-__
2 WHEREAS, TANC’s General Counsel has drafted Amendment No. 2 to the Long-Term Layoff Agreement By and Among TANC and certain of its Members (Amendment No. 2) to affirm the duration of the existing cost sharing obligations; and
WHEREAS, draft Amendment No. 2 will not re sult in any changes to the cost sharing percentages associated with PA-3 or PA-5; and
WHEREAS, the draft Amendment No. 2 to the Long-Term Layoff Agreement By and Among TANC and certain of its Members (Amendment No. 2), has been reviewed and approved by the Parties of the 2009 LTLA.

NOW, THEREFORE, BE IT HEREBY RESO LVED by the Commission of the Transmission Agency of Northern California that the proposed Amendment No. 2 Long-Term Layoff Agreement By and Among TANC and certain TANC Members is approved in the form presented today, with such additional changes in form as the General Manager and General Counsel agree and subsequently present to this Commission.

PASSED AND ADOPTED this 20
h day of July, 2016 on a motion by _______________,
seconded by _______________.

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Resolution 2016-__
3 AYES NOES ABSTAIN ABSENT

City of Alameda
City of Biggs
City of Gridley
City of Healdsburg
City of Lodi
City of Lompoc
Modesto Irrigation District
City of Palo Alto
Plumas-Sierra Rural Electric Cooperative
City of Redding
City of Roseville
Sacramento Municipal Utility District
City of Santa Clara
Turlock Irrigation District
City of Ukiah

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Amendment No. 2
Long-Term Layoff Agreement
By and Among
the
Transmission Agency of Northern California
and certain
of its Members
namely
The City of Palo Alto
The City of Roseville
The Modesto Irrigation District
The Turlock Irrigation District
and
The Sacramento Municipal Utility District
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i

TABLE OF CONTENTS
RECITALS ............................................................................................................1 AGREEMENT .......................................................................................................3 Section 1. Effective Date......................................................................................3 Section 2. Addition of Section 3.j, “Treatment of Project Agreement No.3 Debt”....................................................................................................3 Section 3. Integration...........................................................................................4 SIGNATURES.......................................................................................................4 Item 7
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1 This Amendment No. 2 of the January 28, 2009 Long Term Layoff Agreement (“LTLA”), is entered into by and among the Transmission Agency of Northern California (“TANC”) and certain of its members, namely the City of Palo Alto (“PALO ALTO”), the City of Roseville (“ROSEVILLE”), the Modesto Irrigation District (“MODESTO”), the Turlock Irrigation District (“TURLOCK”), and the Sacramento Municipal Utility District (“SMUD”), referred to as “Party” or “Parties,” as of the Effective Date defined in Section 1 of this Amendment No. 2, with regard to the following:

RECITALS:

A. In the LTLA, PALO ALTO laid off its interests, rights, and obligations to TANC’s Transfer Capability on th e California-Oregon Transmission Project (“COTP”), associated wi th PALO ALTO’s Participation Percentage, for the fifteen year term of the LTLA, which terminates on January 28, 2024.

B. In the LTLA, MODESTO, TURLOCK, and SMUD accepted and assumed all of the use of PALO ALTO’s interests, rights, and obligations transferred to TANC, and by TANC to MODESTO, TURLOCK, and SMUD, for the term of the LTLA.

C. Amendment No. 1 to the LTLA returned Roseville’s COTP interests, rights, and obligations from MODESTO, TURLOCK, and SMUD back to Roseville, and clarified PALO ALTO’s voting rights under Project Agreement No. 3.

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2 D. At TANC’s January 27, 2016 meetin g, TANC approved a resolution authorizing the issuance of California-Oregon Transmission Project Revenue Refunding Bonds, 2016 Series, (“the 2016 COTP Bonds”). On March 9, 2016 TANC issued and sold its $173,920,000 California-Oregon Transmission Project Revenue Refunding Bonds, 2016 Series A (the “2016A Bonds”).

E. The Parties have agreed to execute this Amendment No. 2 to the LTLA, to provide that in the absence of a default by MODESTO, TURLOCK, or SMUD, the Debt Service for the 2016A Bonds associated with PALO ALTO’s 3.6815 Participation Percentage in TANC’s entitlement to Transfer Capability on the COTP will be paid by MODESTO, TURLOCK, and SMUD, as provided in this Amendment No. 2.

NOW THEREFORE, in consideration of the premises described in the Recitals, and in consideration of the terms, covenants, and conditions that are set out below, the Parties have entered into this Amendment No. 2 to the LTLA.

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3 AGREEMENT:

Section 1. Effective Date.

This Amendment No. 2 shall become effective and enforceable on May 26, 2016 at 0001 hours Pacific Prevailing Time following the due execution and delivery of this Amendment No. 2 to TANC, or the date on which this Amendment No. 2 is duly executed and delivered to TANC, if May 26, 2016 passes without such execution and delivery (hereinafter “Effective Date”).

Section 2. Addition of Section 3.j, “Treatment of Project Agreement No.3 Debt”.

Section 3.j, “Treatment of Project Agreement No.3 Debt”, is hereby added:

MODESTO, TURLOCK, and SMUD accept and assume the obligation to pay PALO ALTO’s 3.6815 Participation Percentage of the Debt Service on the 2016A Bonds in accordance with their respective Participation Percentages of the layoff shares transferred in section 3.c of the LTLA from and after the end of the Term of the LTLA until the last maturity date of the 2016A Bonds, currently May 1, 2039, and any extension thereof. Nothing in this Amendment No. 2 shall affect or limit the underlying obligations of PALO ALTO under TANC Project Agreement No. 3, such as, by way of example and not as a limitation, the obligation of PALO ALTO, in the event of a default by MODESTO, TURLOCK, or SMUD, to pay to TANC an amount equal to its Participation Percentage of all Debt Service on the TANC Project Indebtedness and to pay to TANC an amount equal to PALO ALTO’s Participation Percentage of TANC Project Costs, TANC Project O&M Item 7
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4 Costs, and TANC Capital Improvement Costs, as provided in section 4.1.3.2 of TANC Project Agreement No. 3. Nothing in this Amendment No. 2 shall affect or limit the other obligations of PALO ALTO under TANC Project Agreement No. 3, such as, by way of example and not as a limitation, the obligations of PALO ALTO to pay to TANC an amount equal to PALO ALTO’s Participation Percentage of TANC Project Indebtedness issued and sold for certain future Additions under section 3.1.2.2.2, and Replacements under section 3.1.2.2.3 of TANC Project Agreement No. 3.

Section 3. Integration.

Except as amended and modified by Amendment No. 1 and this Amendment No. 2, the LTLA remains in full force and effect, without change to any of its provisions other than the text expressly altered by this Amendment No. 2. On the Effective Date this Amendment No. 2 and the LTLA shall be one, integrated agreement.

The Parties have duly executed and delivered this Amendment via their authorized representatives set forth below.

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5 TRANSMISSION AGENCY OF TURLOCK IRRIGATION DISTRICT

NORTHERN CALIFORNIA
By: By:

Its: Its:

Dated: Dated:

CITY OF PALO ALTO SACRAMENTO MUNICIPAL

UTLITY DISTRICT
By: By:

Its: Its:

Dated: Dated:

MODESTO IRRIGATION DISTRICT CITY OF ROSEVILLE
By: By:

Its: Its:

Dated: Dated:

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City Council
Staff Report
From: City Manager
Report Type: CONSENT CALENDAR
Lead Department: City Manager
Meeting Date: January 16, 2024
Report #:2312-2398
TITLE
Approval of Recommendations on Process for 2024 Council Priority Setting Retreat as Recommended by Policy & Services Committee (CEQA Status – Not a Project)

RECOMMENDATION
Policy Services Committee and Staff recommends that the Council approve the recommended process for the Council 2024 priority setting retreat.

BACKGROUND
In October 2012, the City Council approved the Priority Setting Guidelines1 and outlined the role of the Policy and Services Committee in this activity. The Guidelines state:

If needed, the Policy and Services Committee, each year at its December meeting, shall make recommendations about the process that will be used at the Annual Retreat paying particular attention to the number of priorities suggested by Council members. The recommended process is to be forwarded to Council for adoption in advance of the Council retreat.

This report outlines the recommended process at a general level. The current Council Priorities are:
•Economic Recovery and Transition
•Climate Change and the Natural Environment: Protection and Adaptation •Housing for Social and Economic Balance
•Community Health and Safety

1 City Council Meeting October 2012: https://www.cityofpaloalto.org/files/assets/public/v/1/agendas-minutes- reports/reports/city-manager-reports-cmrs/year-archive/2012/mini-packet-3156.pdf Item 8
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ANALYSIS
At its December 12, 20232 meeting, the Policy and Services Committee (P&S) reviewed the 2023 Council Priorities and proposed 2024 priority setting process for reviewing and selecting Council priorities. In response to Council comments at its previous retreat regarding retreat format and length of Priorities, staff presented three options for consideration: 1. Follow the traditional process of selecting priorities; 2. Explore a strategic planning process; or 3. Add a strategic element to the traditional process of selecting priorities. The P&S Committee selected Option 3.

In the recommended Option 3, staff continues to solicit from the community, the priorities that Council should focus on for the coming year. However, this option allows the Council to enable a deeper discussion of the strategies required to advance each priority area. The retreat would use the current four Priorities as a baseline, poll the Council for edits or additions, and discuss key strategic questions that can help ensure that the City is appropriately organized and focused to advance the priorities, such as:

1. How does the Council envision its engagement in advancing each Priority area? If involving ad hoc committees, are there specific goals to be assigned to each committee?

2. What are the key community engagement needs to support and enhance the City’s progress toward these goals?

3. What resources (staff and Council time, financial, partner, other) are needed to achieve Council’s vision for each priority?
The P&S Committee supported the recommended option and requested that the Council be provided with the above questions in advance of the retreat to prepare for thoughtful discussion.

Further, the P&S Committee discussed extending the priorities and strategies to a two-year cycle with progress indicators, which would allow more time to achieve Council goals. If the Council focuses on a two-year strategy during the retreat, then appropriate edits to the Council’s Procedures and Protocols Handbook would be recommended in February 2024.

The Council Objectives would also be part of the retreat process, with 2023 highlights of the 72 projects presented during the retreat. The proposed 2024 Objectives discussion will be presented at a subsequent meeting once the Priorities and strategies are confirmed based on the retreat discussion. Committee workplans could be considered at this time as well.

The City Council 2024 priority setting retreat is scheduled for Monday, January 29, 2024, location to be finalized.

FISCAL/RESOURCE IMPACT
The Council’s annual priority setting process is included within the City’s annual work program. 2 Policy & Services Committee, December 12, 2023, Item #2, 2024 City Council Priority Setting Process Discussion and Recommendations, https://portal.laserfiche.com/Portal/DocView.aspx?id=69276&repo=r- 704298fc&searchid=9f04319a-66b9-4540-8d13-de0f40b38b1c
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STAKEHOLDER ENGAGEMENT
The Policy and Services Committee discussed the 2024 priority setting retreat process at its December 12, 2023, meeting, there was no public comment pertaining to the process.

Councilmembers were solicited feedback on desired priorities in advance of the December P&S conversation for consideration by the Committee. Further community engagement and feedback on Council Priorities, solicited through the City’s portal ( https://www.cityofpaloalto.org/News- Articles/City-Manager/What-Would-You-Like-to-See-the-City-Council-Prioritize-in-2024), will be summarized in the January 29, 2024, retreat report to Council.

ENVIRONMENTAL REVIEW
Council action on this item is not a project as defined by CEQA because the process for the Council Priority Setting retreat is a continuing administrative or maintenance activity. CEQA Guidelines section 15378 (b)(2).

ATTACHMENTS
None
APPROVED BY:

Ed Shikada, City Manager
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City Council
Staff Report
From: City Manager
Report Type: CONSENT CALENDAR
Lead Department: City Auditor
Meeting Date: January 16, 2024
Report #:2312-2402
TITLE
Approval of the Office of the City Auditor's Investment Management Audit Report as Recommended by the Policy & Services Committee (CEQA Status - Not a Project)

RECOMMENDATION
The Policy and Services Committee and the City Auditor recommend that the City Council approve the Investment Management Audit 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 risks associated with Investment Management.

The council members approved the attached Investment Management Audit Report at the Policy and Services Committee meeting on December 12, 20232.

MOTION: Mayor Kou moved, seconded by Chair Tanaka, to approve the Investment Management Audit Report and recommend the City Council accept the report.

MOTION PASSED: 2-0

ANALYSIS
The objectives of this review were to:
1) Determine whether adequate controls are in place and working effectively to ensure that investments are properly managed in accordance with the investment policy. 1 https://www.cityofpaloalto.org/files/assets/public/v/8/agendas-minutes-reports/agendas-minutes/city-council- agendas-minutes/2022/20220404/20220404pccsmamendedlinked1.pdf 2 https://cityofpaloalto.primegov.com/Portal/Meeting?meetingTemplateId=12186 Item 9
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2) Assess the efficiency and the effectiveness of the investment portfolio management against the best practice.

The OCA evaluated the processes and controls that safeguard the City’s investment of pooled idle cash to which the City’s Investment Policy is applied to and tested the selected controls by reviewing a sample of investment activities between July 1, 2020, to March 26, 2023.

The OCA used the California Debt and Investment Advisory Commission (CDIAC) and the Government Finance Officers Association (GFOA) as best practices.

The attached report summarizes the analysis, audit findings, and recommendations.

FISCAL/RESOURCE IMPACT
The timeline and resource needs for implementation of management’s corrective action plans are identified by management within the attached report. The City management requires no additional resources to implement the recommended corrective actions identified in the report.

STAKEHOLDER ENGAGEMENT
The OCA worked primarily with Administrative Services Department and engaged with additional stakeholders, including the City Manager’s Office and the City Attorney’s Office, as necessary.

ENVIRONMENTAL REVIEW
Environmental review is not applicable to this activity.

ATTACHMENTS
Attachment A: OCA – Investment Management
APPROVED BY:

Adriane D. McCoy, City Auditor
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1 December 12, 2023
City of Palo Alto
Office of the City Auditor
Investment Management Audit
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Contents
Baker Tilly US, LLP, trading as Baker Tilly, is an independent member of Baker Tilly International. Baker Tilly International Limited is an English company. Baker Tilly International provides no professional services to clients. Each member firm is a separate and independent legal entity, and each describes itself as such.

Baker Tilly US, LLP is not Baker Tilly International’s agent and does not have the authority to bind Baker Tilly International or act on Baker Tilly International’s behalf. None of Baker Tilly International, Baker Tilly US, LLP nor any of the other member firms of Baker Tilly International has any liability for each other’s acts or omissions. The name Baker Tilly and its associated logo is used under license from Baker Tilly International Limited.

EXECUTIVE SUMMARY ................................................................................................. 1 INTRODUCTION ............................................................................................................. 3 DETAILED ANALYSIS ................................................................................................... 6 AUDIT RESULTS .......................................................................................................... 10 APPENDICES ............................................................................................................... 16

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1 Executive Summary
Purpose of the Audit
Baker Tilly US, LLP (Baker Tilly), in its capacity serving as the Office of the City Auditor (OCA) for the City of Palo Alto (the City), conducted an Investment Management Audit based on the approved Task Order 4.17. The objectives of this review were to:
1) Determine whether adequate controls are in place and working effectively to ensure that investments are properly managed in accordance with the investment policy. 2) Assess the efficiency and the effectiveness of the investment portfolio management against the best practice.

Report Highlights
Finding 1: Segregation of duties and oversight of investment activities (Page 10) The City’s Administrative Services Department (ASD)’s Treasury Division includes the investment function. The day-to-day operations of the investment function are performed by the Manager of Treasury, Debt, Investment (Manager). The Assistant Director of ASD (Assistant Director) oversees the function and has delegated the responsibility for managing the investment program to the Manager and authorized him to enter into the investment within the parameters set in the City’s Investment Policy.

The Manager performs all tasks to manage the investment program as well as initiating wire transactions among all responsibilities of the Treasury Division. While an approval is required prior to sales of investments, formal independent reviews of investment purchase decisions prior to purchases are not in place. When the Manager is out of office, there is no backup personnel to buy/sell securities. The limited staffing of the Treasury Division and untimely authorization of investment activities cause a concern for the inadequate segregation of duties in the investment function even through there are some segregations of duties: the purchased investments are required to be delivered to the City’s safekeeping custodian and recorded in the City’s accounting system by the Accounting team.

Without adequate segregation of duties, the City has a higher risk of not preventing and detecting errors and fraudulent transactions in a timely manner. As mitigating controls, increased monitoring and oversight of the investment function are required.

Key Recommendations
The City should implement a formal process for a review and approval of investment activities by the Assistant Director and, if required, the Director prior to placing an order to buy or sell securities. Approvals should be documented.

Additionally, the City should reassess the City’s Investment Policy to ensure that the City will comply with the requirement to perform a monthly performance review described in the City’s Investment Policy and address Section 53607 of California Government Code that requires submission of a monthly report of investment transactions to the City Council.

Furthermore, the City should continue the efforts to adjust the staffing of the investment function to assign responsibilities to ensure adequate internal controls are in place for prevention of the loss of public funds arising from errors, imprudent actions, and fraud.

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2 EXECUTIVE SUMMARY
Finding 2: Supporting documents for investment activities (Page 13) The OCA reviewed 58 out of 850 investment activities from July 1, 2020, to March 26, 2023, and noted inadequate or lack of supporting documents related to the following:
 Manager’s investment decisions
 Quotations from authorized brokers and dealers
 Qualification of brokers and dealers
 Broker’s acknowledgement of the applicable California Government Code sections and the City’s Investment Policy
Adequate supporting documents for investment decisions and transactions are important for transparency and accountability. The supporting documents provide the necessary information to demonstrate the validity, accuracy, and compliance to the approvers of the decisions and transactions and the oversight functions such as auditors and an oversight committee.

Key Recommendations
The City’s ASD should implement a procedure to assemble and maintain adequate supporting documents such as the cash flow forecasts and evaluation of quotations for each investment decision and transaction to enable the approvers to review and approve them prior to purchases/sales and to allow the oversight functions to evaluate the validity, accuracy, and compliance when needed.

Additionally, the City should update the City’s Investment Policy to require the brokers and dealers who wish to sell and buy securities to the City to provide documentation showing their financial condition and relevant registration. The City should also require them to certify in writing that they reviewed the applicable California Government Code sections and the City’s Investment Policy. An annual review should be also conducted to maintain the List of Authorized Brokers and Dealers with the recent status.

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3 Introduction

1 Section 53600.3: https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?sectionNum=53600.3.&lawCode=GOV Objective The objectives of this review were to:
1) Determine whether adequate controls are in place and working effectively to ensure that investments are properly managed in accordance with the investment policy.
2) Assess the efficiency and the effectiveness of the investment portfolio management against the best practice.

Background The City of Palo Alto (City) invests idle cash pooled from all sources and all funds in accordance with the California Government Code and the City’s Investment Policy.

California Government Code states that trustees who are governing bodies or individuals authorized to make investment decisions on behalf of local agencies investing public funds are subject to the prudent investor standard that requires a trustee to act with care, skill, prudence, and diligence under the circumstances then prevailing that a prudent person acting in a like capacity and familiarity with those matters would use in the conduct of funds of a like character and with like aims, to safeguard the principal and maintain the liquidity needs of the agency.1 The City follows the prudent investor standard and defines the following investment objectives in the City’s Investment Policy:

1. Ensure the safety of the public funds

2. Maintain the liquidity to meet the City’s financial obligations

3. Achieve a reasonable yield on the City’s investment portfolio The City’s Administrative Services Department (ASD) is responsible for cash management and investment activities. The Assistant Director of ASD who is authorized to make all investment transactions and responsible for managing the investment program oversees the activities while the Manager of Treasury, Debt, Investment (Manager) performs the day-to-day responsibilities, including purchasing and selling securities, recording investment transactions, maintaining the cash flow forecast, revenue analysis, and revenue projection spreadsheets.

The Note 3 in the City’s Annual Comprehensive Financial Report (ACFR) as of June 30, 2022, shows that cash and investments available for operations were $553M as shown in Table 1:

Table 1 – Cash and Investment Classification (in thousands)

Source: page 64, Note 3, City of Palo Alto FY2022 Annual Comprehensive Financial Report Item 9
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4 INTRODUCTION
The City’s investment Policy describes limitations on types, maturity periods, and amounts of investments in accordance with the Section 53601 of the California Government Code. These limitations are summarized in the Note 3 in the City’s ACFR as of June 30, 2022 (Table 2 below).

The ASD’s goals and key performance measures in the FY2023 Adopted Operating Budget include the following investment-related goal and key performance measure:

The ASD submits a quarterly report to the City Council that provides the information on the City’s investment portfolio (Appendix A) as required by the Section 53646 of the California Government Code.

Table 2 – Investments Authorized by the Investment Policy and Debt and Trust Agreements

Source: page 65, Note 3, City of Palo Alto FY2022 Annual Comprehensive Financial Report See the footnotes at
https://www.cityofpaloalto.org/files/assets/public/v/1/administrative-services/financial-reporting/comprehensive-annual-financial- reports-cafr/current-2011-cafrs/2022-acfr-final/city-of-palo-alto-acfr-fy2022-final-secured-2.pdf Goal: Ensure public funds and assets are invested prudently and are well-managed.

Objectives:
• Ensure sufficient cash is always available to meet current expenditures. • Maintain a reasonable rate of return on investments while prioritizing the safety and liquidity needs.
• Invest in sound Environmental, Social, and Governance (ESG) securities, which include green and sustainable bonds, when available and appropriate, in alignment with the Investment Policy.

Key Performance Measure:

FY2020 Actuals FY2021 Actual FY2022 Estimated FY2023 Adopted Budget Annual percentage yield on
investments 2.22% 1.72% 1.70% 1.80%

Source: page 208, City of Palo Alto FY2023 Adopted Operating Budget Item 9
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5 INTRODUCTION

2 The Investment Policy does not cover funds held by the California Public Employees Retirement System (CalPERS), the California Employers’ Retiree Benefit Trust (CERBT), Deferred Compensation program (ICMA, Hartford), the Authority for California Cities Excess Liability (ACCEL), and the Public Agency Retirement Services (PARS) Section 115 IRREVOCABLE Trust. 3 Judgmental sampling is a non-statistical sampling that involves selecting a sample based on auditors’ experience, knowledge, and professional judgment and is appropriate when auditors do not need to draw conclusions about the population. 4 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 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.

Scope The OCA evaluated the processes and controls that safeguard the City’s investment of pooled idle cash to which the City’s Investment Policy is applied to2 and tested the selected controls by reviewing a sample of investment activities between July 1, 2020, to March 26, 2023 (audit period).

Methodology To achieve the audit objectives, the OCA performed the following procedures:
 Reviewed the pertinent laws, policies, and guidelines related to investments.  Gathered the City’s financial and management reports related to investments.  Interviewed the appropriate individuals to understand the roles and responsibilities, processes, and controls related to investment activities.  Judgmentally3 selected a sample of investments purchased and sold during our audit period in order to cover all three fiscal years in our audit period, all brokers used, all types of investments, and all approval workflow types.  Reviewed supporting documents for controls performed and approvals for the selected investment activities.
 Used the California Debt and Investment Advisory Commission (CDIAC) and the Government Finance Officers Association (GFOA) as best practices.

Compliance
Statement
This audit activity was conducted from March 2023 to June 2023 in accordance with generally accepted government auditing standards, except for the requirement of an external peer review4. 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.

Organizational
Strengths
During this audit activity, we observed that the dedicated Manager of Treasury, Debt, Investment maintained the detailed spreadsheets to monitor the cash flow forecast and keep track of the compliance with the investment restrictions. We also observed the adequate supporting documents maintained by the detail- oriented Accounting team who posts the investment transactions in the City’s accounting system and reconciles the transactions.

The Office of the City Auditor greatly appreciates the support of the Treasury and Accounting Divisions of the Administrative Services Department in conducting this audit activity.

Thank you!
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6 Detailed Analysis

Investment
Policy
The City’s Investment Policy describes the following internal controls over the City’s investment activities:

Roles and Responsibilities
 The Director of ASD/Chief Financial Officer (Treasurer) o Must approve any sale of securities from the City’s portfolio  The Assistant Director of ASD
o Is charged with the responsibility to manage the investment portfolio o Needs to approve a transfer more than total of $10 million a day from the City’s general account to any one financial institution  Manager and Analyst
o Are directed and supervised by Assistant Director of ASD o Prepare the quarterly report and record investment transactions (type of investment, amount, yield, and maturity)
 Custodian
o All securities (with a few exceptions listed in the City’s Investment Policy) must be delivered to the City’s safekeeping custodian

List of Authorized and Prohibited Investments
 The investments authorized by Section 53601 of California Government Code are reflected in the City’s Investment Policy

List of Authorized Brokers and Dealers
 Brokers and dealers meeting the City’s two requirements must be approved by the Assistant Director before they are added to the City’s List of Authorized Brokers and Dealers
 Brokers and Dealers will be removed from the list if a history of problems is developed

Reporting
 On a monthly basis, the ASD reviews performance against the City’s Investment Policy
 On a quarterly basis, the ASD reports investment activities, including the portfolio’s performance and compliance with the City’s Investment Policy to the City Council, as well as a detailed list of all securities and the City’s ability to meet expenditure requirements over the next six months

Policy Review
 Annually, the ASD presents a proposed investment policy to the City Council during the annual budget process

The Appendix B is the flowchart showing the current processes and controls in place.

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7 DETAILED ANALYSIS

5 https://www.treasurer.ca.gov/cdiac/LAIG/guideline.pdf 6 For example, the Investment Advisory Committee is mentioned in the investment polices of City of San Diego and City of Burbank; The Investment Committee is mentioned in the investment policies of City of Riverside and City of Beverly Hills.

Best Practices
and
Benchmarking
The California Debt and Investment Advisory Commission (CDIAC) provides guidance to local governments in California to improve the public finance practice.

The CDIAC’s publication, Local Agency Investment Guidelines5, includes the following recommendations.

The Annual Investment Policy
Although the California Government Code does not specify the elements of an investment policy for local governments other than counties, it should include at least the following elements required of counties:
 List of authorized investments with percentages by type of security and the maximum terms
 The manner of calculating and apportioning the authorized costs of investing, etc.
 Limits on the receipt of honoraria, gifts, and gratuities  Criteria for selecting brokers and dealers
 A requirement that the treasurer provide an investment report

Reporting
The treasurer or designated official should provide the local government’s legislative body a quarterly investment report that provides the status of the current investment portfolio. The quarterly investment report should include the following:
 A listing of individual securities held at the end of the reporting period by authorized investment category
 Average life and final maturity of all investments listed  Coupon, discount, or earnings rate
 Par value, amortized book value and market value
 Percentage of the portfolio represented by each investment category  A description of the funds, investments, and programs managed by contracted parties
 A statement of compliance with the investment policy or an explanation for non-compliance
 A statement of the local agency’s ability to meet its pool’s expenditure requirements for the next six months
In addition to a quarterly investment report required by California Government Code 53646, the treasurer should submit a monthly report of investment transactions to the legislative body even though the California Government Code 53607 does not specify the contents of the monthly report of transactions.

Treasury Oversight Committee
Local governments should consider whether an oversight committee is appropriate. Some cities6 have treasury oversight committees even though the law does not require them to have such a committee. The more discretion the Item 9
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7 https://www.gfoa.org/materials/investment-policy
8 https://www.gfoa.org/materials/government-relationships-with-securities-dealers 9 https://gfoaorg.cdn.prismic.io/gfoaorg/76b137b8-17e3-42bd-ae9f-7f7be8be50bd_GFOA_sample_investment_policy.pdf 10 Based on the “Revenues broken down by City”, California State Controller’s Office https://cities.bythenumbers.sco.ca.gov/#!/year/2021/revenue/0/entity_name treasurer has in making investment decisions, the greater the need for oversight procedures. The role of the oversight committee should be clearly specified.

The Government Finance Officers Association (GFOA) Investment Policy Best Practices recommends that the investment policy include the following elements7:

A. Scope and investment objectives
B. Roles, responsibilities, and standards of care – “Standards of care should include language on prudence……. due diligence, ethics and conflicts of interest, delegation and authority, and knowledge and qualifications.” C. Suitable and authorized investments
D. Investment diversification
E. Safekeeping, custody, and internal controls – “Develop guidelines to enhance the separation of duties and reduce the risk of fraud.” F. Authorized financial institutions, depositories, and broker/dealers – See the additional information provided by the GFOA below.

G. Risks and performance standards
H. Reporting and disclosure standards

The GFOA provides recommendations pertaining to selecting securities dealers for an approved vendor list in its website8 and includes the following in its Sample Investment Policy9:
“All financial institutions and broker/dealers who desire to become qualified for investment transactions must supply the following as appropriate:
 Audited financial statements demonstrating compliance with state and federal capital adequacy guidelines
 Proof of Financial Industry Regulatory Authority (FINRA) certification (not applicable to Certificate of Deposit counterparties)
 Proof of state registration
 Completed broker/dealer questionnaire (not applicable to Certificate of Deposit counterparties)
 Certification of having read and understood and agreeing to comply with the [entity's] investment policy.
 Evidence of adequate insurance coverage.

An annual review of the financial condition and registration of all qualified financial institutions and broker/dealers will be conducted by the investment officer.”

The OCA compared the City’s Investment Policy as well as the investment policies of the six California cities that have relatively similar revenue amounts as the City10 to the GFOA Sample Investment Policy (using the elements A through H listed above) for the benchmarking purpose (see Table 1 below). The GFOA states that its Sample Investment Policy is presented as a model to help entities customize a Item 9
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9 DETAILED ANALYSIS
policy to fit their needs, constraints, and capabilities, not to supplant an existing policy.

Table 1: Comparison of Investment Policies
GFOA Recommended Elements Investment Policy for the City of:

Palo Alto Sacramento San Diego Riverside Burbank Berkeley Beverly Hills A. Scope & objectives √ √ √ √ √ √ √
B. Roles & standards of care ▲
Note 1 √ √ √ √ √ √
C. Authorized investments √ √ √ √ √ √ √
D. Investment diversification ▲
Note 2 √ ▲ ▲ √ √ ▲
E. Safekeeping & internal controls ▲
Note 3 √ √ √ √ √ √
F. Authorized broker/dealers ▲
Note 4 ▲ ▲ √ √ √ √
G. Riks & performance standards ▲
Note 5 √ √ ▲ √ √ ▲
H. Reporting standards ▲
Note 6 ▲ ▲ ▲ ▲ ▲ √

√ = All elements are covered in the policy
▲ = One or more elements are not covered

Note 1: Ethics and conflicts of interest is not discussed while other cities include a section Note 2: Although dollar and/or percentage limits on securities are listed, an overall diversification strategy/approach is not discussed.

Note 3: Although safekeeping and custody are discussed, some requirements related to "Delivery Versus Payment" and internal controls are not discussed.

Note 4: Although a list of authorized broker/dealers are maintained, the information and documentation required from them for authorization are limited.

Note 5: The benchmark(s) to be used for the portfolio performance measurement is not established.

Note 6: Two reporting requirements by California Government Code are not clearly addressed.

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10 Audit Results

11 The trade date is the day a trader/investor place an order to buy or sell a security. 12 According to the data provided by the management, during FY21, there were 18 settlement netting (totaling $24.3M purchase settlement) that were processed without approval and, during FY22, there were14 settlement netting (totaling $11.6M).

Finding 1:

Segregation of
duties and
oversight of
investment
activities
The City’s Administrative Services Department (ASD)’s Treasury Division includes the investment function. The day-to-day operations of the investment function are performed by the Manager of Treasury, Debt, Investment (Manager). The Assistant Director of ASD (Assistant Director) oversees the function and has delegated the responsibility for managing the investment program to the Manager and authorized him to enter into the investment within the parameters set in the City’s Investment Policy. The Manager also enters the investment transactions in the City’s investment management software, maintains the cash flow forecast, revenue analysis, and revenue projection spreadsheets, and executes wire transactions. At the time of this audit in FY2023, there was no Senior Management Analyst who performed any of these tasks under supervision of the Manager.

The OCA reviewed 58 out of 850 investment activities from July 1, 2020, to March 26, 2023, and noted the following:
 None of purchased investments (45 of 58 investment activities reviewed) had the evidence of approval by the Assistant Director or other authorized personnel prior to the trade dates11.
 Although the Assistant Director can check the reasonableness of investment activities using cash flow spreadsheets at the time the Manager notifies the custodian bank and the Assistant Director of an investment purchase (within a day or so of a purchase), there is no evidence of a review because a response from the Assistant Director is expected only when there is a question or an issue, which did not happen for the 45 purchased investments that were reviewed (or for the remaining investments in the audit period).
 The Manager prepares the final paperwork for each purchase (Memorandum) that requires a signature by the Assistant Director for securities under five years and by both the Assistant Director and the Director of ASD for securities over five years. The memorandums for all 45 purchased investments we reviewed were signed by the required authorized personnel four to 170 days (average 65 days) after the trade dates.
 Wire transfers to the custodian bank initiated by the Manager are approved by the Assistant Director after an order to buy a security is placed. However, three of 45 purchased investments we reviewed did not have any approval because there were no outgoing wire transfers for these purchases due to settlement netting12 that nets incoming security maturity and interest earnings against a security purchase. As an independent review of a wire transaction is the only documented review the City has formally implemented in the Item 9
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investment purchasing process, there was no independent review of these three purchased investments until the memorandums were signed 11 to 130 days (average 72 days) after the trade dates.  The proposed sale of investments made by the Manager in July 2022 was approved by a designee of the Director of ASD on July 7, 2022.

The detailed listing of the sold investments shows 13 securities totaling $10.7M (par value) were sold with a net gain of $3.5K on July 12, 13, and 14, 2022, which was accurately reported in a quarterly report (Investment Activity Report for the Fourth Quarter, Fiscal Year 2022). However, the approval e-mail dated July 7, 2022, from a designee of the Director of ASD listed only five of 13 securities sold.

According to the Manger, changes had to be made to the approved list of proposed securities to be sold due to the daily changes in market values of securities. The Manager sent e-mails to update a designee of the Director of ASD and the Director of ASD on July 7, 8, and 13, but there was no documentation of the final approval.

Additionally, a monthly review of performance has not been performed by the ASD as described in the City’s Investment Policy for many years, according to the Manager. The City does not have other oversight mechanism such as an investment advisory committee. Another reporting requirement is submission of a monthly report of investment transactions to the legislative body, which is required by Section 53607 of the California Government Code. However, this reporting requirement is not mentioned in the City’s Investment Policy.

As described above, the Manager performs all tasks to manage the investment program as well as initiating wire transactions among all responsibilities of the Treasury Division. While an approval is required prior to sales of investments, formal independent reviews of investment purchase decisions prior to purchases are not in place. When the Manager is out of office, there is no backup personnel to buy/sell securities. The limited staffing of the Treasury Division and untimely authorization of investment activities cause a concern for inadequate segregation of duties in the investment function even through there are some segregations of duties: the purchased investments are required to be delivered to the City’s safekeeping custodian and recorded in the City’s accounting system by the Accounting team.

Segregation of duties is a key internal control that disperses responsibilities of a process to more than one individual. Without adequate segregation of duties, the City has a higher risk of not preventing and detecting errors and fraudulent transactions in a timely manner. As mitigating controls, increased monitoring and oversight of the investment function are required.

According to the Assistant Director, the efforts to assign more employees to perform some of the cash management function tasks currently performed by the Manager were initiated at the end of our fieldwork of this audit.

Recommendation The City should implement a formal process for a review and approval of investment activities by the Assistant Director and, if required, the Director Item 9
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12 AUDIT RESULTS
prior to placing an order to buy or sell securities. Approvals should be documented.

Additionally, the City should reassess the City’s Investment Policy to ensure that the City will:
 Comply with the requirement to perform a monthly performance review described in the City’s Investment Policy. The City can take this opportunity to assess the suitability of an investment advisory committee to execute a monthly performance review to ensure appropriate investment decisions are made in compliance with the laws, regulations, and the City’s Investment Policy.
 Address the Section 53607 of the California Government Code that requires submission of a monthly report of investment transactions to the City Council.

Furthermore, the City should continue the efforts to adjust the staffing of the investment function to assign responsibilities to ensure adequate internal controls are in place for prevention of the loss of public funds arising from errors, imprudent actions, and fraud. The new staff members should receive adequate training and a procedure manual to perform their job responsibilities, and succession planning should be reviewed and updated for the key positions.

Management
Response
Responsible Department(s): Administrative Services Department Concurrence: Agree
Target Date: February 2024
Action Plan:

The City agrees that a formal process for review and approval of investment activities by the Assistant Director will provide oversight of investment activities and transactions. A workplan has been developed for the team and will be amended to include clear approval processes for the purchase or sale of securities in advance of the transaction, however, staff does anticipate some authority to continue to be granted for real time transactions within approved guidelines and limits. Expected implementation is targeted for January 2024.

The City concurs with the City Auditor’s recommendation that a monthly informational report of investment transactions be made available to the City Council, as required by California Government Code section 53607, and will implement this practice in January 2024.

The City agrees with segregation of duties in this function will provide adequate internal controls, additional oversight, and back fill for these activities when the key staff is on leave. A workplan for this was provided in early 2023 and under the guidance of an Assistant Director, has continuously worked on transitioning certain duties to ASD’s analytical staff and administrative support staff. The workplan will be reviewed and amended to ensure documented adequate training and a procedure manual Item 9
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13 AUDIT RESULTS

13 The General Investment Guidelines in the City’s Investment Policy states, “This rule will not apply to new issues, which are purchased at market no more than three (3) working days before pricing, as well as to LAIF, City of Palo Alto bonds, money market accounts and mutual funds, all of which shall be evaluated separately.”
for job responsibilities is available to other ASD staff. The targeted completion and transition of these duties is targeted for February 2024.

The analyst assigned to the Treasury Division has been tasked with creating a desk manual for certain treasury tasks. While full completion of this manual is not targeted for February 2024, it is continuously being worked on as the analyst increases exposure and knowledge of treasury operations.

Finding 2:

Supporting
documents for
investment
activities
The Manager maintains the cash flow forecast and revenue projection spreadsheets to monitor the City’s cash needs and make investment decisions. According to the Manager, when the City needs to purchase or sell securities, the Manager verbally communicates the City’s requirements and needs to the brokers/dealers who are listed on the City’s List of Authorized Brokers and Dealers (List) approved by the Assistant Director.

The City’s Investment Policy requires brokers and dealers to meet two conditions before they can be added to the List. The Manager reviews the information e-mailed by authorized brokers/dealers and decides a security to purchase/sell. After a purchase/sale of a security, the Manager enters the trade information in the investment management software and prepares a Memorandum that will be approved by the Assistant Director and, if necessary, the Director.

The OCA reviewed 58 out of 850 investment activities from July 1, 2020, to March 26, 2023, and noted the following:
 The printouts of the spreadsheets or the versions of the spreadsheets that supported the Manager’s investment decisions for the purchased investments (45 of 58 investment activities reviewed) are not available as they were not included in the supporting documents for the wire payments or in the Memorandums.
 The General Investment Guidelines in the City’s Investment Policy encourages the City to obtain three or more quotations on the purchase or sale of comparable securities13 and take the higher yield on purchase or higher price on sale whenever possible. However, no multiple quotations were obtained for any of the 45 purchased investments we reviewed. In the supporting documents for eight of 45 investment purchases we reviewed, a standard language “Not required to obtain three or more quotations” was included. For the remaining investment purchases we reviewed, a standard language, “No comparable security offering maturing within 30 days of the one purchased were available” was included. There were no other documents such as evaluation of securities and the information obtained from the authorized brokers and dealers to support the unavailability of a comparable security.
 The OCA verified that the brokers and dealers associated with the selected investment activities were listed in the List of Authorized Item 9
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Brokers and Dealers. During our audit period, there were two changes to the List: The List dated 10/27/2020 had a new broker; The List dated 11/16/2022 also had a new broker. Both changes were approved by the Assistant Director. However, there were no supporting documents showing that new brokers and dealers met the City’s criteria. Additionally, the two requirements in the City’s Investment Policy do not address Section 53601.5 of the California Government Code regarding authorized brokers and dealers.

Furthermore, there was no documentation showing the broker’s acknowledgement of the applicable California Government Code sections and the City’s Investment Policy.

Adequate supporting documents for investment decisions and transactions are important for transparency and accountability. The supporting documents provide the necessary information to demonstrate the validity, accuracy, and compliance to the approvers of the decisions and transactions and the oversight functions such as auditors and an oversight committee.

Recommendation The City’s ASD should implement a procedure to assemble and maintain adequate supporting documents such as the cash flow forecast and evaluation of quotations for each investment decision and transaction to enable the approvers to review and approve them prior to purchases/sales and to allow the oversight functions to evaluate the validity, accuracy, and compliance when needed.

The City should update the City’s Investment Policy to require the brokers and dealers who wish to sell and buy securities to the City to provide documentation showing their financial condition and relevant registration.

The City should also require them to certify in writing that they reviewed the applicable California Government Code sections and the City’s Investment Policy. An annual review should be also conducted to maintain the List of Authorized Brokers and Dealers with the recent status.

Management
Response
Responsible Department(s): Administrative Services Department Concurrence: Agree
Target Date: January and June 2024
Action Plan:

The City agrees that the evaluation of investment options that are available at the time of purchase should be performed and documented before an investment is purchased. Investment offerings are received by the Manager via email and can be attached to investment paperwork as documentation.

Furthermore, a workplan to formalize review and oversight of investment activities has been developed outlining expectations for routine reviews of cash flow and investment status. Expected implementation of this workplan is targeted for January 2024.

The City agrees that the Investment Policy should be updated to include the requirements that brokers and dealers who wish to buy or sell securities with the City must provide documentation of their financial condition and relevant Item 9
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15 AUDIT RESULTS

registration. ASD staff will consider these updates in the next Investment Policy review by the City Council in June 2024.

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16 Appendix A: Resumes

Appendices

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17 Appendix A: City of Palo Alto Investment Portfolio

The following information on the City’s investment portfolio was reported in the Investment Activity Report for the Second Quarter, Fiscal Year 2023.

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18 Appendix B: Palo Alto Investment Management Processes and Controls City of Palo Alto ASD Investment FunctionAdministrative Services Dept.Accounting Division Manager of Treasury Division Assistant Director of ASDSAP FIRecording of Investment Transactions Start(during budget process)
Monitor the City’s cash flowInvest? YesNo
Annually, prepare aProposed Statement of Investment PolicyObtain an approval by the CouncilApproved Investment PolicyAuthorize Treasury Manager to enter into investments within parameters specified by the PolicyMaintain Cash flow and daily investment spreadsheets Account for investments in financial statements (ACFR)Independent auditor provides reasonable assurance about the financial statements Report to Council Quarterly, prepare a report on investment activity, portfolio’s performance, etc.Approve updates to the list of acceptable dealersVerbally communicate to the dealers the City’s requirements and needsDaily, review the options received from brokers via emailSymProEnter the trade informationPlace the information on the investment in a temporary shared folderRespond to an email on an exception basisEmail paperwork with coversheet to custodian and Assistant DirectorPrepare wire paperworkReview and approve a quarterly report in the One Meeting systemUpload and submit a quarterly report in the One Meeting systemUS Bank PortalInitiate a wire transactionSend the wire paperwork via Docusign to the approver of the transactionCheck the reasonableness of investment activities using cash flow spreadsheetMemo for trade tickets to formalize paperworkApprove a memo via DocusignSuggest dealers to be added to/removed from the approved listInvestment over 5 years?Director of ASDApprove a memo via DocusignYesSave the approved memo and supporting documents in the shared driveNo Monthly reconciliation against SymPro
Approve wire paperwork via Docusign
Daily reconciliation against a daily bank statement, cash flow spreadsheet, and SymPro US Bank PortalApprove a wire transactionWire payment
Receive an automatic e-mail notification
Review by Director, City Manager, and City Attorney
Journal Entries Preparedmonthly and annuallySell before maturity?NoPropose investment to be sold before maturityYesApprove sales of investments before maturityApprove sales of investments before maturityContact a Broker to buy/sell the investmentNo Investment action needed.

MonthlyReview performance against the Investment Policy Is Incoming $ larger than purchase $ on the settlement day?NoYesSupporting documents (cash flow projection and evaluation of quotations):• are not assembled• are not submitted for approval• No supporting documents for qualifications• No broker’s acknowledgement of the applicable California Government Code sections and the City’s Investment PolicyThis is not a control as the evidence of review and approval is not maintainedReceive the netted amountThere is no approval of the transaction • This report is not prepared and reviewed as required by the policy• Advisory or oversight committee does not exist Formulas are used to meet various requirements listed in the Investment Policy.EndStartReportingMonthly Report of Investment TransactionsThis report is included in the Quarterly Report Needs ImprovementKey ControlUntimely
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19 Appendix C: Management Response

Findings and Recommendation Responsible
Department(s)
Agree, Partially Agree, or Do Not Agree and Target Date and Corrective Action Plan
Fining 1: Segregation of duties and oversight of investment activities The City should implement a formal process for a review and approval of investment activities by the Assistant Director and, if required, the Director prior to placing an order to buy or sell securities. Approvals should be documented.

Additionally, the City should reassess the City’s Investment Policy to ensure that the City will:
 Comply with the requirement to perform a monthly
performance review described in the City’s Investment Policy.

The City can take this opportunity to assess the suitability of an investment advisory committee to execute a monthly
performance review to ensure appropriate investment
decisions are made in compliance with the laws, regulations, and the City’s Investment Policy.
 Address the Section 53607 of the California Government Code that requires submission of a monthly report of
investment transactions to the City Council.

Administrative
Services Concurrence: Agree
Target Date: February 2024
Action Plan:

The City agrees that a formal process for review and approval of investment activities by the Assistant Director will provide oversight of investment activities and transactions. A workplan has been developed for the team and will be amended to include clear approval processes for the purchase or sale of securities in advance of the transaction, however, staff does anticipate some authority to continue to be granted for real time transactions within approved guidelines and limits. Expected implementation of this is targeted to be completed in January 2024.

The City concurs with the City Auditor’s recommendation that a monthly informational report of investment transactions be made available to the City Council, as required by California Government Code section 53607.

The City should continue the efforts to adjust the staffing of the investment function to assign responsibilities to ensure adequate internal controls are in place for prevention of the loss of public funds arising from errors, imprudent actions, and fraud. The new staff members should receive adequate training and a procedure manual to perform their job responsibilities, and succession planning should be reviewed and updated for the key positions.

Administrative
Services Concurrence: Agree
Target Date: February 2024
Action Plan:

The City agrees with segregation of duties in this function will provide adequate internal controls, additional oversight, and back fill for these activities when the key staff is on leave. A workplan for this was provided in early 2023 and under the guidance of an Assistant Director, has continuously worked on transitioning certain duties to ASD’s analytical staff and administrative support staff. The workplan will be reviewed and amended to ensure documented adequate training and a procedure manual for job responsibilities is available to Item 9
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20 Findings and Recommendation Responsible
Department(s)
Agree, Partially Agree, or Do Not Agree and Target Date and Corrective Action Plan
other ASD staff. The targeted completion and transition of these duties is targeted for February 2024.

The analyst assigned to the Treasury Division has been tasked with creating a desk manual for certain treasury tasks. While full completion of this manual is not targeted for February 2024, it is continuously being worked on as the analyst increases exposure and knowledge of treasury operations.

Finding 2: Supporting documents for investment activities The City’s ASD should implement a procedure to assemble and maintain adequate supporting documents such as the cash flow forecast and evaluation of quotations for each investment decision and transaction to enable the approvers to review and approve them prior to purchases/sales and to allow the oversight functions to evaluate the validity, accuracy, and compliance when needed Administrative
Services Concurrence: Agree
Target Date: January 2024
Action Plan:

The City agrees that the evaluation of investment options that are available at the time of purchase should be performed and documented before an investment is purchased. Investment offerings are received by the Manager via email and can be attached to investment paperwork as documentation. Furthermore, a workplan to formalize review and oversight of investment activities has been developed outlining expectations for routine reviews of cash flow and investment status. Expected implementation of this workplan is targeted for January 2024.

The City should update the City’s Investment Policy to require the brokers and dealers who wish to sell and buy securities to the City to provide documentation showing their financial condition and relevant registration. The City should also require them to certify in writing that they reviewed the applicable California Government Code sections and the City’s Investment Policy. An annual review should be also conducted to maintain the List of Authorized Brokers and Dealers with the recent status.

Administrative
Services Concurrence: Agree
Target Date: June 2024
Action Plan:

The City agrees that the Investment Policy should be updated to include the requirements that brokers and dealers who wish to buy or sell securities with the City must provide documentation of their financial condition and relevant registration. ASD staff will consider these updates in the next Investment Policy review by the City Council in June 2024.

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City Council
Staff Report
Report Type: CONSENT CALENDAR
Lead Department: City Clerk
Meeting Date: January 16, 2024
Report #:2312-2328
TITLE
SECOND READING: Adoption of an Ordinance Amending Palo Alto Municipal Code (PAMC) Section 18.42.160 (Safe Parking) to Permanently Establish the Congregation-Based Safe Parking Program and Establishing Regulations Related to Safe Parking, Including a Maximum Number of Vehicles Per Night on Each Site (FIRST READING: December 4, 2023 PASSED 6-1, Tanaka no)

BACKGROUND
This was heard by the City Council on December 4, 2023 for a first reading and was approved 6- 1, Tanaka no. The ordinance has been amended to reflect parts D. and E. of the Council’s motion. Specifically, a notice and appeal process was added to PAMC Section 18.42.160, subdivision (f)(2) and the ability to convert existing temporary permits as added as an uncodified provision in Section 3 of the ordinance. It is now before the Council for a second reading.

The additional directives in the motion are being undertaken by staff. Such directions include exploring expansion of parking at Geng Road, referring to PTC the consideration of allowing safe parking in commercial parking lots, and exploring clearer data regarding unhoused persons in Palo Alto. These items will return separately to Council for further consideration.

ATTACHMENTS
Attachment A: Ordinance Adopting Permanent Regulations for Safe Overnight Parking Programs
APPROVED BY:

Mahealani Ah Yun, Interim City Clerk
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Ordinance No. _____

Ordinance of the Council of the City of Palo Alto Adopting Permanent Regulations for Safe Overnight Parking Programs.

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

A. The number of households dwelling in vehicles has grown substantially in the past decade. The lack of stable, affordable housing and other life circumstances have contributed to this growth.

B. On thoroughfares throughout the city, individuals, families, and households of many kinds can be found dwelling in recreational vehicles, trucks, vans, cars, and other motorized vehicles.

C. The City must, for the health, safety, and welfare o f the community, identify and implement short -term and long -term solutions that support these households as they pursue and ultimately secure affordable, stable housing. Safe parking programs, which offer off-street, authorized parking spots in parking lots for households dwelling in their vehicles, represent a short-term solution.

D. Churches and other religious institutions have expressed a desire and willingness to make their parking areas available for safe parking programs. Allowing such legally operating churches and other religious institutions to host safe parking programs for up to eight vehicles in their parking lots overnight provides assistance to homeless households as they seek and follow a path towards stable housing. The provision of such assistance is a use consistent with the mission and purpose of many congregations and religious institutions.

E. The presence of up to eight vehicles in such parking lots overnight and the accompanying administration of assistance is a minor additional use that would not conflict with the primary use of the properties nor threaten the health, safety, or welfare of the community or its inhabitants. The administration of such programs serves to enhance the health, safety, and welfare of the community.

SECTION 2
. Section 18.42.160 (Safe Parking) of Chapter 18.42 (Standards for Special Uses) of Title 18 (Zoning) of the Palo Alto Municipal Code is amended to read as follows [additions are underlined and deletions struck-through].

18.42.160 Safe Parking.

The following regulations apply to zoning districts where safe parking use is permitted.

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(a) Purpose. The intent of this section is to establish regulations to govern the operation of safe parking programs at churches and religious institutions within the city of Palo Alto. The safe parking programs provide interim assistance to households using vehicles as their residence by providing a safe place to park, access to restroom facilities, connection to social service programs, and other support to transition households into permanent, stable housing. (b) Definitions
(1) "Safe parking" means the providing of shelter of homeless persons as an incidental use to an existing, legal church or religious institution use where the shelter is provided in vehicles located in designated paved safe parking areas. (2) "Safe parking area" means the paved area where the vehicles are parked for the safe parking use.
(3) "Safe parking program operator" means an agency or organization that facilitates, administers, oversees, and provides staffing for s afe parking uses in safe parking areas.
(c) Safe Parking Permit Required
(1) Permit required. No person shall operate, allow, permit or suffer a safe parking use without approval of a valid safe parking permit.
(2) Application requirements. All applications pursuant t o this section shall be filed with the director in a form prescribed by the director. The application form shall contain a list of information that must be submitted in order for the application to be deemed complete. (3) Receipt of application. No application shall be deemed received until the following have been provided to the director:
(i) An application fee as set forth in the municipal fee schedule; and (ii) All documents specified as part of the application in this section or on the application form.
(d) Decision and Appeal. Notwithstanding the provisions of Chapter 18.77, the procedures of this section shall apply to all safe parking permits. (1) Authority and findings. The director may approve a safe parking permit only after finding that:
(i) The proposed safe parking use complies with the standards listed in subsection (f) of this Section 18.42.160.
(ii) The proposed safe parking use at the location requested will not adversely affect the health, safety, or welfare of persons residing or working in the surrounding area.

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(iii) The proposed site is adequate in size and shape to accommodate the safe parking use.

The application shall be denied where the information which is either submitted by the applicant or presented at the public hearing fails to satisfactorily substantiate such findings. (2) Decision by director.
(i) The director shall prepare a written decision to approve, approve with conditions, or deny the application.
(ii) The Department may host a community meeting, held virtually or in - person, and send mailed notice to owners a nd residents of property within 600 feet of the subject property notifying them of the date, time, location of the meeting. Notices shall be [sent/postmarked] 14 days prior to the community meeting. (iii) Following a community meeting, if one is held, or after t he director has made a tentative decision to issue a permit, notice of the director's decision shall be given by mail to owners and residents of property within 600 feet of the subject property. The notice shall include the address of the property, a brief description of the proposed use, a brief description of the director's decision, and a description of how to appeal the decision. (iv) The director's decision shall become final fourteen (14) days after the date the notice is mailed unless an appeal is filed. The director may, for good cause, specify in writing a longer period for requesting a hearing at the time the director issues the decision. (3) Filing of appeal and withdrawal. Notwithstanding the provisions of Chapter

18.78, the process set forth in this subs ection (d)(3) and subsections (d)(4) -(d)(5) below of this section shall apply to appeals of the director's decision on safe parking permits. (i) The applicant or subject property owner, or owners or residents /tenants

of a property within 600 feet of the subject property, may file an appeal of the director's decision by filing a written request with the city clerk before the date the director's decision becomes final. The written request shall be filed in a manner pres cribed by the director and shall be accompanied by a fee, as set forth in the municipal fee schedule. (ii) At any time prior to the hearing, the person requesting the hearing may withdraw the request. If the hearing request is withdrawn and 14 days have lapsed from the mailing date of the notice under subsection (d)(2) above, the proposed director's decision shall be final.
(4) Decision by the city council on appeal. If a timely appeal is received by the city clerk, and not withdrawn, the director's decision shall be placed on the consent calendar of the city council within 45 days. The city council may:
(i) Adopt the findings and recommendation of the director; or Item 10
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(ii) Remove the recommendation from the consent calendar, which shall require three votes, following whic h the city council shall adopt findings and take action on the application.
(5) Decision by the city council final. The decision of the city council on appeal is final.
(e) Duration of Permits. Permits shall be valid as provided in Section 18.77.100. for a period of up to 18 months unless suspended or revoked sooner as set forth in this section. (1) Extension term. If the director does not find any violation of the permit conditions or this Section during the initial 90 -day period, the permit shall be automatically extended for up to an additional 270 calendar days.
(2) Renewal term. If the director does not find any violation of the permit conditions or this section during the 270 -day extension period, the permit shall be renewed and be valid for a period of up to one year or the expiration of this interim Ordinance No. 5490, whichever is earlier.
(3) Expiration of interim ordinance. In no event shall a permit be valid beyond the expiration date of interim Ordinance No. 5490.
(f) Standards and Con duct of Use. The following standards shall apply to all safe parking uses:
(1) Qualifying site. Safe parking may be allowed on a parcel with an existing, legal church or religious institution use.
(2) Number of vehicles. For the first twelve (12) months following permit issuance, the permit holder may host up to four vehicles for safe parking per evening. After twelve (12) months following permit issuance , the permit holder shall be eligible to host up to six vehicles for safe parking per evening. After twenty -four (24) months following permit issuance , the permit holder shall be eligible to host up to eight vehicles for safe parking per evening. The Planning Director shall mail notice of each s cheduled increase in capacity to the permit holder and all residents and owners of property within 600 feet of the subject property. The increase in capacity shall become effective fourteen (14) days after this notice is mailed unless an appeal is filed pu rsuant to subdivision ( d)(3) above. At no time shall more than 4 vehicles be used for safe parking.
(3) Hours of operation. A safe parking use may only occur between the hours of 6:00 p.m. and 8:00 a.m.
(4) Noise. Audio, video, generator, or other amplified sound that is audible outside the vehicles parked in the safe parking program is prohibited. Additionally, participants shall observe quiet hours from 10:00 p. m. to 7:00 a. m.
(5) Shelter in vehicles. All persons receiving safe parking shall shelter within the vehicles. No person shall be housed in tents, lean-tos, or other temporary facilities.

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(6) Required facilities. Accessible restroom facilities, including a toilet and handwashing sink, shall be available to persons utilizing the site for safe parking at all times during the hours of operation. These facilities may be the existing onsite facilities or mobile facilities brought onsite on a temporary basis to serve persons utilizing safe parking.

Whenever
feasible, portable restroom facilities shall be located at leas t 25 feet from neighboring residential buildings and 25 feet from street frontages. In the event the lot configuration does not allow such siting, the Director shall have discretion to determine the location of the portable restroom and/or handwashing facilities.
(7) Contact information. The following emergency contact information shall be posted on site in a place readily visible to persons utilizing safe parking: (i) a contact phone number for the safe parking program operator; (ii) the police non -emergency phone number; and (iii) 911. The safe parking program operator shall be available at all hours of operation at the posted phone number and shall be the first contact for non- emergency matters.

The
contact information described shall also be sent from the Ci ty by mail to the residents and owners within 600 feet of the program site.
(8) Connection to county case management system. The safe parking use shall be managed and operated by a safe parking program operator that participates in the federal Homeless Management Information System with Santa Clara County or other county. (9) Safe, clean, orderly premises. The safe parking area and other onsite areas accessed by persons utilizing safe parking shall be maintained in a safe, clean and orderly condition and manner.
(10) Compliance with laws. The safe parking use shall be operated in a manner that is fully in conformance with all state and local laws including regulations and permit requirements.
(11)
Annual Reporting. The safe parking program operator shall submit a report to the Director reflecting the prior calendar year’s activities. The report shall be submitted electronically in a format approved by the Director. The report shall include the number of individual participants in the calendar year, the number of nights each space was occupied each year, the disposition of each participant that exited the program during the calendar year (exit to housing, exit to homelessness, etc.), the city in which the person was last housed, and any complaints from neighbors communicated to the operator or permit holder along with the resolution of the complaints. Where a safe parking program operator operates multiple sites within the City of Palo Alto, the annual report may be combined. (12) Participant preferences. A safe parking program provider shall award available parking spaces with preference given to students , or households with students, enrolled in the Palo Alto Unified School District.
(13) Vehicle Idling. Vehicle idling is not allowed except as allowed under Chapter 10.62 of this code.

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(14) No temporary structures. No temporary structures shall be erected in relation to the safe parking program. Small amenities such as chairs may be utilized during program hours , pr ovided that they are stored in vehicles or within the permit holder’s building(s) during quiet hours.
(15) Personal property. All personal property shall be stored in participant vehicles.
(16) Fire. No open fires or open flames are allowed.
(17) Lot monitoring. The sa fe parking program operator shall deploy lot monitors to occupied safe parking lots. Lot monitors shall make at least three visits to the lots to ensure the safety of the participants and adherence to the operational conditions. Lot monitors are advised to be deployed in the early evening (lot opening – 10:00 p. m.), in the overnight hours (11 p. m. – 5 a. m.), and in the morning hours (6 a. m. – 8:00 a. m.). (g) No Assignment of Permit. No person shall assign or transfer a safe parking program permit issued under this section.
(h) Suspension, Revocation and Modification.
(1) Grounds for suspension, revocation or modification. The director may suspend, revoke or modify a permit, according to the procedures set forth in subsection (h)(2) below, if the director finds that:
(i) Operation of the safe parking program violates any provision of the permit, this section, other applicable provision of this code, or state law; or (ii) Operation of the safe parking program is detrimental to public health, safety or the general welfare.
(2) Procedure for suspension, revocation or modification of approval. (i) Public hearing by director
(a) Notice to permit holder. Whenever the director believes that grounds for the suspension, revocation, or modification of a permit exist, the director shall give the permit holder written notice of the date, time and place of a hearing to be held before the director on whether the permit should be suspended, revoked, or modified. The notice shall state the alleged grounds for the proposed revocation, suspension or modification of the permit, and the notice shall be served on the permit holder by mail at least 10 days prior to the hearing at the most recent home or business address on file with the planning and development services department.
(b) Notice to public. Notice of the hearing shall be given at least 10 days prior to the hearing by mailing to all residents and owners of property within 600 feet of the subject property.
(ii) Decision of the director.

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(a) Within 10 days following the hearing, the director shall prepa re a written decision to revoke, suspend, modify, or leave unchanged the permit. (b) Notice of the decision shall be provided by mail to the permit holder, by posting on the planning and development services' department's website and by email to other interested persons who requested notice to the planning and development services department.
(c) The director's decision shall become final 10 days after the notice is mailed to the permit holder unless a timely appeal is filed. (iii) Request for appeal hearing. The permit holder or subject property owner, or owners or residents of a property within 600 feet of the subject property may file an appeal of the director's decision with the city clerk. The appeal shall be filed in written form in a manner prescribed by the director.
(iv) Decision by the city council on appeal. If a timely appeal is received by the city clerk, and not withdrawn, the director's decision shall be placed on the consent calendar of the city council within 45 days. The city council may:
(a) Adopt the findings and recommendation of the director; or (b) Remove the recommendation from the consent calendar, which shall require three votes, following which the city council shall adopt findings and take action on the application.
(v) Effective date of revocation, suspension or modification. The decision of the city council is final. The revocation, suspension or modification will be effective 5 days after mailing of the decision addressed to the permit holder.

SECTION 3.

A t emporary safe parking permit issued under Ordi nance No. 5490 shall, upon written request of the permit holder, become subject to the rights and obligations provided in Palo Alto Municipal Code Section 18.42.160 as enacted by this ordinance and as may be amended from time to time. Specifically, the dur ation of such permit would not be limited by an expiration date or the expiration of Ordinance No. 5490 and the permit would be subject to the requirements of Section 18.42.160, subdivision (f).

SECTION 4.

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

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Adopting Permanent
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SECTION 5. The Council finds that the Ordinance is exempt from the California Environmental Quality Act pursuant to Section 15301 of the CEQA Guidelines, which applies to minor alterations of ex isting public or private structures, facilities, mechanical equipment, or topographical features involving negligible or no expansion of use. Adopting the Ordinance to allow the use of existing parking lots for temporary overnight safe parking would not co nstitute any significant expansion of use. CEQA Guidelines Section 15061(b)(3) also applies to the adoption of the Ordinance because it can be seen with certainty that there is no possibility that the activity of limited parking overnight in existing parking lots may have a significant effect on the environment. The Council further finds that the potential exceptions to the categorical exemption in CEQA Guidelines Section 15300.2 are not applicable. Use of existing parking lots in the operation of temporary safe parking does not impose a significant cumulative impact over time as the use as a parking lot is generally unchanged and the safe parking use is limited to a short duration; it is not an unusual circumstance to modify the hours of use of existing fac ilities, and there is nothing unusual about the size or location of the existing parking lots at which temporary overnight safe parking would be allowed; the use of existing parking lots does not adversely impact scenic or historical resources; and the Ord inance does not involve hazardous sites as it relates to existing parking lots and no ground disturbance would result from implementation of the Ordinance.

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

INTRODUCED:

PASSED:

AYES:

NOES:

ABSENT:

ABSTENTIONS:

ATTEST:

____________________________ ____________________________ City Clerk Mayor

APPROVED AS TO FORM: APPROVED:

____________________________ ____________________________ Assistant City Attorney City Manager

____________________________
Director of Planning and
Development Services
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City Council
Staff Report
Report Type: CONSENT CALENDAR
Lead Department: City Clerk
Meeting Date: January 16, 2024
Report #:2312-2464
TITLE
SECOND READING: Adoption of an Ordinance Amending Chapters 4.10 (Licenses Obtained by Application to Chief of Police), 4.30 (Soliciting Funds), and Chapter 4.32 (Soliciting Information for Commercial Purposes); and Adding Chapter 4.12 to Title 4 (Business Licenses and Regulations) of the Palo Alto Municipal Code to Comply With Updates to the Law, Including 2018 Senate Bill 946 (Sidewalk Vendors). CEQA status – categorically exempt. (FIRST READING:

December 11, 2023 PASSED 5-1-1, Kou no, Veenker absent)

BACKGROUND
This was heard by the City Council on December 11, 2023 for a first reading and was approved 5-1-1, Kou no, Veenker absent. No changes were made to the ordinance; it is now before you for a second reading.

ATTACHMENTS
Attachment A - Ordinance Amending Chapters 4.10 (Licenses Obtained by Applicatio.12 to Title 4 (Business Licenses and Regulations) of the Palo Alto Municipal Code APPROVED BY:

Mahealani Ah Yun, City Clerk
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Ordinance No. _____

Ordinance of the Council of the City of Palo Alto Amending Chapters 4.10 (Licenses Obtained by Application to Chief of Police), 4.30 (Soliciting Funds), and Chapter 4.32 (Soliciting Information for Commercial Purposes), and Adding Chapter 4.12 to Title 4 (Business Licenses and Regulations) of the Palo Alto Municipal Code to Regulate Sidewalk Vendors, Remove License Requirements for Solicitors and Peddlers, and Update Requirements for Secondhand Dealers

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

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

A. The City currently regulates various types of mobile and stationary vendors in Chapter

4.10 (Licenses Obtained by Application to Chief of Police), including solicitors, peddlers, and pushcart vendors;
B. In 2018, the State of California enacted SB 946, which regulates sidewalk vendors under state law (See Gov. Code section 51036 et seq.);
C. SB 946 permits local authorities, including charter cities like the City of Palo Alto, to regulate specific aspects of sidewalk vendors in accordance with the provisions of SB 946 (See Gov. Code section 51038(a));
D. SB 946 requires the City to allow sidewalk vendors to vend in City owned or operated parks unless the City has an exclusive concession agreement in that park (See Gov. Code section 51038(b)(2));
E. In order to protect the health, safety, and welfare of the City, the Council intends to regulate sidewalk vendors as detailed in this Ordinance.

F. In order to protect the health, safety, and welfare of the City, the Council intends to limit the operation of sidewalk vendors near schools during instructional hours to prevent distraction or interference with school instruction.

G. In addition, in order to comply with various other updates to the law, the City now intends to amend its requirements for solicitors, peddlers, and secondhand dealers.

SECTION 2. Chapter 4.10 (Licenses Obtained by Application to the Chief of Police) of Title 4 (Business Licenses and Regulations) is hereby amended as follows (additions are underlined, deletions are in strikethrough):

Chapter 4.10
Licenses Obtained by Application to Chief of Police
Solicitors, Peddlers, Pawnbrokers, Secondhand Dealers, and Other Businesses Regulated by Police

4.10.010 Application to chief of police.
(a) Applications for licenses for businesses described in this chapter shall be made to the chief of police and shall be sworn and in writing and shall contain be on a form designated by the Police Department. the following information:
(1) Name and description of the applicant;
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(2) Address (legal and local);
(3) A brief description of the nature of the business and the goods to be sold, and, in case of products of farm or orchard, whether produced or grown by the applicant; (4) If employed, the name and address of the employer, together with credentials establishing the exact relationship;
(5) The length of time for which the right to do business is desired; (6) If a vehicle is to be used, a description of the same, together with California state vehicle license number or other means of identification;
(7) Applicants for solicitors' and peddlers' permits shall be fingerprinted and shall supply the chief of police with two photographs of the applicant within sixty days prior to the date of the filing of the applications, which pictures shall be two inches by two inches, showing the head and shoulders of the applicant in a clear and distinguishing manner; (8) A statement as to whether or not the applicant has been convicted of any crime, misdemeanor or violation of any municipal ordinance, the nature of the offense and the punishment or penalty assessed therefor;
(9) Such other information as the chief of police may deem necessary for the proper police protection of the city.

4.10.020 Solicitor defined.

A "solicitor" is any person, whether a resident of the city or not, traveling either by foot, wagon, automobile, motor truck or any other type of conveyance, from place to place, from house to house, or from street to street, taking or attempting to take orders for sale of goods, wares and merchandise, personal property of any nature whatsoever, for future delivery, or for services, whether or not such individual has, carries or exposes for sale a sample of the subject of such sale or whether he is collecting advance payments on such sales or not.

4.10.025 Peddler defined.

A "peddler" is a person, whether a resident of the city or not, traveling by foot, wagon, automotive vehicle or any other type of conveyance, from place to place, from house to house, or from street to street, carrying, conveying or transporting goods, wares, merchandise, fruits, garden truck, farm products or provisions, offering and exposing the same for sale, or making sales and delivering articles to purchasers. The word "peddler" includes the words "hawker" and "huckster."

4.10.030 Pushcart defined. Reserved.

A "pushcart" is a wagon, cart or mobile stand, entitled under this chapter to a stationary location on a public sidewalk, and intended for the sale of flowers or food.

4.10.035 Pushcart vendor defined. Reserved.

A "pushcart vendor" is a person licensed pursuant to this chapter, who offers food intended for immediate consumption or flowers for sale from a wagon, cart or mobile stand from a stationary location on a public sidewalk.

4.10.040 License fees for solicitors and peddlers. Reserved.

A daily, quarterly, or annual fee for soliciting or peddling shall be levied. Additional licenses may be issued to employees of a license holder on the payment of an annual fee for each Item 11
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employee after approval and investigation by the chief of police. All fees shall be as set forth in the municipal fee schedule.

4.10.045 License fees for pushcart vendors. Reserved.

A daily or quarterly fee shall be levied upon the owner of a pushcart. The owner of multiple pushcarts shall pay a fee and obtain a license for each pushcart. Additional licenses shall be issued to employees or lessees of a pushcart owner on the payment of an annual fee for each employee, after approval and investigation by the chief of police, or designee. All fees shall be as set forth in the municipal fee schedule.

4.10.050 Regulations for solicitors Solicitors and peddlers - regulations. (a) No peddler or solicitor, nor any person in his behalf, shall shout, make an outcry, blow a horn, ring a bell or use any sound device or musical instrument, including any loud-speaking radio or sound-amplifying system, upon any of the streets, alleys, parks or other public places of the city or upon any private premises in the city where sound of sufficient volume is emitted or produced therefrom to be capable of being plainly heard upon the streets, avenues, alleys, parks or other public places, for the purpose of attracting attention to any goods, wares or merchandise which such licensee proposed to sell.
(b) No peddler or solicitor shall have any exclusive right to any location in the public streets, nor shall he be permitted a stationary location, nor shall he be permitted to operate in any congested area where his operations might impede or inconvenience the public. For the purpose of this title, the judgment of a police officer, exercised in good faith, shall be deemed conclusive as to whether the area is congested or the public impeded or inconvenienced. (c) No person shall sell or offer for sale goods, wares or merchandise from vehicles upon any of the public streets of the city; provided, however, that the prohibition contained in this section does not include the peddling from door to door from vehicles of fresh food products of farm or garden, nor bona fide deliveries of goods, wares, merchandise or food made on a regular route to regular customers.
(d) No person shall solicit or peddle from six p.m. to nine a.m., or at any time when a sign has been posted on a building stating: "No solicitors or peddlers," except that a licensed solicitor or peddler may call upon the occupant of a residence at other times when he has received express prior permission from such occupant to do so.
(e) While soliciting or peddling, no person shall repr esent that all or a portion of the
proceeds from such solicitation or peddling will be used for charitable, religious, educational, community, recreational, political or similar nonprofit purpose or are to be transmitted to any person, firm or corporation for any such purpose unless such person is licensed under Chapter

4.30 of this code.

4.10.051 Reserved.

4.10.052 Reserved.

4.10.055 Identification cards for solicitors and peddlers. Reserved. (a) Contents. The holder of any peddler or solicitor license shall furnish each person engaged in the licensed activity with a suitable identification card or badge. The cards or badges shall contain such information as the chief of police deems necessary, but shall include at least the following:

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Regulations) of the Palo
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(1) The name of the licensee;
(2) The name of the main license holder, if different; (3) The nature of the licensed activity;
(4) The product or service being peddled or solicited. (b) Acts Required. Such cards or badges shall be produced on demand of the chief of police or any member of the police department. Immediately prior to each peddling or solicitation activity, every person licensed as a peddler or solicitor shall do all of the following in the order prescribed:
(1) Present his identification card or badge to the potential customer; (2) Request that the potential customer read the identification card or badge; (3) Inform the potential customer in clear language of the nature and purpose of the visit.

4.10.057 Regulations for pushcart vendors. Reserved.

Subject also to the regulations and procedures contained in Chapter 4.04, licenses may be granted to pushcart vendors in accordance with the following criteria and procedures:
(a) Use. Pushcart vendors shall be restricted to the sale of food intended for immediate consumption or flowers.
(b) Location and Clearance.
(1) Pushcart vendors shall be permitted on public sidewalks except:
(A) Within residentially zoned districts;
(B) Within one hundred feet of school sites;
(C) At locations adjacent to city libraries, community centers, the Cultural Center, public safety facilities and city-owned utility facilities;
(D) At locations adjacent to dedicated parks, other than sidewalks adjacent to Lytton Plaza and Cogswell Plaza; and
(E) On designated bicycle paths.
(2) Pushcart vendors shall be permitted in the area on the west side of Embarcadero Road adjacent to the Palo Alto Airport.
(3) No pushcart vendor shall be located in a manner that:
(A) Impedes access to any city inspection, maintenance and operational devices or controls; (B) Blocks curbside access to a loading zone, as defined in Section 10.40.010; (C) Impedes pedestrian access from curbside vehicles to the adjacent sidewalk. (4) In areas zoned community commercial (CC), commercial downtown (CD) and in areas of the downtown zoned public facility (PF), no pushcart vendor shall be permitted within a minimum sidewalk clearance width of eight feet between fixed objects, planter wells and/or curbs. Other than in the above locations, the minimum sidewalk clearance width for a pushcart shall be at least half of the sidewalk but not less than three feet. (5) No pushcart vendor shall be permitted on a public sidewalk within a distance of ten feet from corner curb lines and corner crosswalks.
(6) No pushcart vendor shall be permitted to locate:
(A) Less than five feet from the nearest display window; or (B) Less than twenty-five feet from another pushcart vendor. (7) Except on sidewalks adjacent to Lytton Plaza, no food pushcart vendor shall be permitted to locate within one hundred feet of a restaurant or food market and no flower pushcart vendor shall be permitted to locate within one hundred feet of a flower or plant shop. On sidewalks adjacent to Lytton Plaza, a food pushcart vendor shall be located at least fifty feet Item 11
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from a restaurant or food market and a flower pushcart vendor shall be located at least fifty feet from a flower or plant shop.
(8) In nonpublic sidewalk locations, a pushcart vendor shall be situated in a manner that does not obstruct traffic and that assures safe vehicular and customer access. (c) Size and Signage.
(1) A pushcart structure shall not exceed five feet in height and eight feet in length. (2) Soft umbrellas or canopies which are open on four sides shall be permitted but shall not exceed eight feet in height, measured from ground level. (3) All signs shall be placed on the pushcart structure; no signs shall be permitted on ancillary umbrellas or canopies. Freestanding signs, illuminated signs or flashing lights shall be prohibited.
(d) Operations.
(1) No pushcart vendor shall sell food or flowers from eight p.m. to seven a.m. The pushcart shall be removed from its assigned location by eight p.m. (2) No fires and open flame heating equipment, incidental to the operations of the pushcart, shall be permitted.
(3) No pushcart vendor shall shout, blow a horn, ring a bell or use any sound device or musical instrument, including any loud-speaking radio or sound-amplifying system, for the purpose of attracting attention to any goods or merchandise on sale from the pushcart. (4) No pushcart vendor shall represent that all or a portion of the proceeds from the pushcart sales will be used for charitable, religious, educational, community, recreational, political or similar nonprofit purpose or are to be transmitted to any person, firm or corporation for any such purpose unless such vendor is licensed under Chapter 4.30 of this code. (5) A pushcart vendor shall comply with all applicable federal, state or local laws including the regulations of the Santa Clara County health department. (e) License Application Issuance and Revocation. Procedures for the application for issuance of and revocation of a pushcart vendor license shall be in accord with the provisions of Chapter

4.04; provided, that the following additional regulations shall apply:
(1) The application shall contain a statement of intended use, a map showing location and clearance distances, and a sketch of the proposed pushcart showing dimensions and intended colors.
(2) The application shall include a certificate of insurance in an amount and form satisfactory to the city loss-control manager and a hold harmless and indemnity agreement in favor of the city.
(3) A complete application for a pushcart vendor license shall be reviewed by the city staff for a determination as to whether such application complies with the regulations contained in this chapter. Such review shall include a referral to the design staff of the department of planning and development services for review and comment. The design of the pushcart shall be evaluated on its own merits rather than for its compatibility with the character of nearby building facades.
(4) Conditions of approval may be imposed on pushcart vendor licenses where they are required for the maintenance of the public health, safety and welfare. (5) The chief of police, or designee, may revoke the pushcart vendor license if he or she determines that the conditions of the license or any provisions of this chapter are being violated, or if municipal use of the sidewalk is required for reasons of public safety or convenience. In the case of a revocation, the licensee shall be notified.

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(Business Licenses and
Regulations) of the Palo
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(f) Penalty. Any person, firm or corporation violating any provision of this chapter is guilty of a misdemeanor and, upon conviction thereof, shall be punishable as provided by law. (g) Effect of Section. Pushcart vendors who have valid licenses on the effective date of this section, pursuant to prior regulations or guidelines applicable to peddlers, but whose pushcart structures exceed the size requirements contained in Section 4.10.057(c), shall be allowed to process license renewals and continue the use of the pushcart for a period not to exceed five years from the effective date of this section.

4.10.058 Reserved.

4.10.060 Reserved.

4.10.070 Circuses, carnivals and traveling shows– Fees. (a) Every person conducting a circus, carnival, traveling show, rodeo, or any other like or similar exhibition or amusement shall obtain a special event permit and pay a fee as set forth in the municipal fee schedule.
( b) The proprietor or manager of any circus, carnival or of any traveling show or device shall, in addition to the payment of the license fees required, deposit with the treasurer of the city either five thousand dollars in cash, lawful money of the United States, or a surety bond in the sum of five thousand dollars, issued by a surety company acceptable to the treasurer, to insure the payment to the city for any damage to city property occasioned by the operation of such circus, carnival or traveling show within the limits of the city, including damages occasioned by the entrance into or exit from the city by said circus, carnival or traveling show, and to insure the removal, within forty-eight hours after leaving the city, of any signs, placards or advertising matter placed upon any property within the city limits by the authority of any such persons.

4.10.080 Reserved.

4.10.090 License exemptions. Reserved.
(a) No license shall be required of the following:
(1) Any person who peddles to, or solicits orders from, a regularly established business in the city; provided, however, that the product or service sold must be for resale or use in the business;
(2) Any person who peddles or solicits orders for fresh food products of farm or garden grown by himself;
(3) Any person who solicits orders for newspapers to be delivered personally by himself on a regular route to customers or subscribers;
(4) Any person entitled to a license exemption under Chapter 4.04 of this title.

4.10.100 Fee exemptions under Business and Professions Code section 16001.

In order to claim a license fee exemption as a veteran, as specified in Sections 16001 and 16001.5 of the Business and Professions Code of the state, or any license fee exemption required by state or federal law, the applicant shall file with the city treasurer an affidavit or a declaration under penalty of perjury, on the form provided by him, establishing the facts entitling the applicant to such fee exemption. The treasurer City may require proof of such facts. The denial of the application and any appeal from such denial shall be governed by the procedures in Chapter 4.04 of this title.

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4.10.110 Mechanical amusement devices - Definitions. Reserved.

The following words and phrases, whenever used in this chapter, shall have the following definitions:
(a) "Arcade" means any establishment open to the public in which six or more mechanical amusement devices are located, or similar devices for which a consideration or admission fee is charged to play or operate, whether in conjunction with sales of goods, wares, merchandise, or services or otherwise, regardless of whether the use of such devices constitutes the principal or only business operated upon the premises involved.
(b) "Mechanical amusement device" means any machine or device which, upon the insertion of a coin, slug, or token in any slot or receptacle attached to said machine or connected therewith, operates or may be operated for use as a game, contest, or amusement, or which may be used for any such game, contest, or amusement. This term includes any similar device for which a fee or any consideration is charged to play, whether in conjunction with sales of other merchandise, goods, wares, or services, or otherwise. Machines which only play recorded music, provide a ride or dispense a uniform quantity of merchandise are not included under this definition.

4.10.120 Arcade prohibited - License required for mechanical amusement devices. Reserved.

No arcade shall be permitted in the city, except that any licensee may continue to install, operate or maintain the number of mechanical amusement devices located in such licensee's premises on May 8, 1977. The licensee or applicant therefor shall have the burden of establishing the precise number of mechanical amusement devices located in any premises on May 8, 1977, and any such license may be denied by the chief of police for failure to sustain such burden. No person shall install, operate, or maintain any mechanical amusement device, including those in existence or operation prior to May 8, 1977, without obtaining a license to do so on or before July 1, 1977, for the ensuing year. The provisions of Chapter 4.04 shall apply to all licenses required by this chapter and to the renewal, suspension, or revocation of licenses, and in all other respects, except as expressly provided herein to the contrary.

4.10.130 License application fee. Reserved.

Any application for any mechanical amusement device license required in this chapter, new or renewal, shall be accompanied by a nonrefundable fee as set in the municipal fee schedule. The application fee shall be used to defray, in part, the costs of investigation and report, and is not in lieu of any other fees or taxes required under this code. No fee shall be prorated for any reason.

4.10.140 License term - Nontransferability. Reserved.

Mechanical amusement device licenses required by this chapter shall be issued for one year, commencing July 1st of each year, and shall not be transferable.

4.10.150 Increased closing hours. Reserved.

In addition to any other remedy provided herein or by Chapter 4.04, the chief of police shall have the power, after hearing, for any violation of the duties of a licensee, to impose closing hours longer than otherwise provided for the business premises in which mechanical amusement devices are located. Such closing hours shall not constitute a penalty, and may be in addition to, or in whole or partial suspension of, any penalty provided elsewhere in this code.

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(Business Licenses and
Regulations) of the Palo
Alto Municipal Code

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4.10.160 Reserved.

4.10.170 Reserved.

4.10.180 Reserved.

4.10.190 Reserved.

4.10.200 Pawnbrokers prohibited.

It is unlawful for anyone to carry on the business of pawnbroker within the city. For the purpose of this section, a pawnbroker shall have the same meaning as defined in California Financial Code section 21000.

4.10.210 Secondhand dealer defined.
"Secondhand dealer" means any person principally engaged in conducting, managing or carrying on the business of buying, selling or otherwise dealing in secondhand goods, wares and merchandise as defined in this chapter. shall have the same meaning as defined in California Business and Professions Code section 21625 et seq.

4.10.220 Secondhand goods, wares and merchandise tangible personal property defined. "Secondhand goods, wares and merchandise tangible personal property" shall not include rags, bottles other than milk or cream bottles, sacks other than cement sacks, barrels, cans, shoes, books, lamps, stoves or household or office furniture, with the exception of sewing machines, musical instruments, typewriters, portable radios and televisions or any motor vehicle, trailer, or semitrailer which has been registered in California, as required by law. shall have the same meaning as defined in California Business and Professions Code section 21625 et seq.

4.10.225 Secondhand dealer – license required.

A license is required to operate as a secondhand dealer. Applications must be made the Chief of Police and are subject to all requirements in state and local law, including Business and Professions Code section 21625 et seq. and the provisions of this Chapter. Any fee authorized by the Municipal Fee Schedule and/or state law must be paid prior to issuance of the license.

4.10.230 Daily report of purchases by secondhand dealer Secondhand dealers - regulations.

Secondhand dealers must follow all applicable laws, including Business and Professions Code section 21625 et seq.
(a) Every secondhand dealer shall, on each day, except Sundays and legal holidays, before the hour of ten a.m., make and deliver to the chief of police in writing a full, true and complete report, in chronological order, of all dealings in secondhand goods, wares and merchandise by such secondhand dealer within the city during the twenty-four hours next preceding said report, together with the time of day when purchased or received, a complete description of each article purchased or received, and a description of the person or persons from whom purchased or received or with whom dealt, and also the true name of such person or persons as nearly as the same is known to or can be ascertained by the person making such report. If any such article purchased or received has engraved or stamped thereon any number, word or Item 11
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initial, or contains any setting of any kind, the description of such article shall contain such number, word or initial, and shall show the kind of setting or settings and the number of each kind.
(b) The report required in this section shall be made upon a form to be furnished free of charge by the chief of police. The chief of police shall cause blank forms to be printed containing spaces with the proper captions for the furnishing of the information required by this chapter.
(c) The chief of police, upon receipt of said report, shall file the same in some secure place in his office, and the reports shall be open to inspection only to members of the police department, or any other law enforcement agency, or by others upon an order of a court of competent jurisdiction made for that purpose.

4.10.240 Copies of report kept by dealer. Reserved.

Every secondhand dealer shall keep at his place of business a copy of every report required by Section 4.10.230 hereof, and such copy shall be open at all times during business hours to the inspection of the chief of police or any member of the police department or any officer authorized by law. The report shall be in book form, and each transaction shall be kept in chronological order.

4.10.250 Reports and records in English language. Reserved.

Every report and record required by the provisions of this chapter to be filed, kept or made shall be written or printed entirely in the English language in a clear and legible manner and shall be made out at the time the transaction is made.

4.10.260 Failure to make report. Reserved.

It is unlawful for any secondhand dealer or for any agent or employee of such secondhand dealer to fail, refuse, or neglect to file a report, as required herein, in the manner, form, at the time and in all respects in accordance with the requirements of this chapter, or to fail, refuse, or neglect to exhibit to the chief of police, or to any member of the police department, or to any officer authorized by law, immediately upon demand, any such record or report, or any goods, wares, and merchandise so purchased or received by such secondhand dealer, or by any agent or employee of such secondhand dealer.

4.10.270 Goods held for inspection. Reserved.

All goods, wares and merchandise purchased or received by any secondhand dealer shall be held for a period of at least twenty days after purchase or receipt before the same shall be sold or otherwise disposed of, and during such twenty-day period all such property shall be kept separate and apart from all other goods, wares and merchandise upon the premises in the possession of such secondhand dealer, and all such property shall, during said twenty-day period, be kept and exposed for police inspection during business hours.

4.10.280 Exemptions. Reserved.
(a) The provisions of this chapter shall not apply to secondhand goods, wares and merchandise:
(1) Purchased at a public sale or auction;
(2) Purchased from any person holding a State Board of Equalization permit number as a seller;
Item 11
Attachment A - Ordinance
Amending Chapters 4.10
(Licenses Obtained by
Applicatio.12 to Title 4
(Business Licenses and
Regulations) of the Palo
Alto Municipal Code

Item 11: Staff Report
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(3) Accepted in trade on the purchase of new merchandise; (4) Received or purchased by any religious, charitable, civic or fraternal organization for purposes of resale.

SECTION 3. Title 4 (Business Licenses and Regulations) is hereby amended to add a new Chapter 4.12 (Sidewalk Vendors) to read as follows:

4.12.010 Purpose
This Chapter 4.12 implements a sidewalk vendor program as permitted by Government Code Section 51306 et seq.

4.12.020 Definitions
(a) “Sidewalk vendor” means a person who sells food or merchandise from a pushcart, stand, display, pedal-driven cart, wagon, showcase, rack, or other nonmotorized conveyance, or from one’s person, upon a public sidewalk or other City-owned pedestrian path. (b) “Roaming sidewalk vendor” means a sidewalk vendor who moves from place to place and stops only to complete a transaction.
(c) “Stationary sidewalk vendor” means a sidewalk vendor who vends from a fixed location.

4.12.030 General
Sidewalk vendors are permitted except:
(a) Within 100 feet of the outer perimeter of a permitted certified farmers’ market or a permitted swap meet during the limited operating hours of that certified farmers’ market or swap meet. A “certified farmers’ market” means a location operated in accordance with Chapter 10.5 (commencing with Section 47000) of Division 17 of the Food and Agricultural Code and any regulations adopted pursuant to that chapter. A “swap meet” means a location operated in accordance with Article 6 (commencing with Section 21660) of Chapter 9 of Division 8 of the Business and Professions Code, and any regulations adopted pursuant to that article.
(b) Within 100 feet of the outer perimeter of an area designated for a temporary special permit issued by the City, provided that any notice, business interruption mitigation, or other rights provided to affected businesses or property owners under the City’s temporary special permit are also provided to any sidewalk vendors specifically permitted to operate in the area, if applicable. For purposes of this subsection, a temporary special permit is a permit issued by the City for the temporary use of, or encroachment on, the sidewalk or other public area, including, but not limited to, an encroachment permit, special event permit, or temporary event permit, for purposes including, but not limited to, filming, parades, or outdoor concerts. A prohibition of sidewalk vendors pursuant to this subsection shall only be effective for the limited duration of the temporary special permit. (c) Within 100 feet of the outer perimeter of a school during in-person instructional time. (d) Within zones that are exclusively residential as defined in Chapter 18 (Zoning) of the Palo Alto Municipal Code. This subsection (d) shall only apply to stationary sidewalk vendors. (e) In City owned or operated parks in which the City has signed an agreement for concessions that exclusively permits the sale of food or merchandise by the concessionaire.

Item 11
Attachment A - Ordinance
Amending Chapters 4.10
(Licenses Obtained by
Applicatio.12 to Title 4
(Business Licenses and
Regulations) of the Palo
Alto Municipal Code

Item 11: Staff Report
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4.12.040 Placement and Operation Requirements
(a) No sidewalk vendor shall be located in a manner that:
(1) Impedes access to any city inspection, maintenance and operational devices or controls; (2) Blocks curbside access to a loading zone, as defined in Section 10.40.010; (3) Impedes pedestrian access from curbside vehicles to the adjacent sidewalk; (4) Impedes the use of sidewalk bumps or other tactile paving by use of the visually impaired; (5) Impedes access to a driveway;
(6) Is situated between a duly permitted parklet or other on -street use and the adjacent storefront
(b) No sidewalk vendor shall be permitted on a public sidewalk within a distance of ten feet from corner curb lines and corner crosswalks.
(c) In areas zoned community commercial (CC), commercial downtown (CD) and in areas of the downtown zoned public facility (PF), no sidewalk vendor shall be permitted within a minimum sidewalk clearance width of eight feet between fixed objects, planter wells and/or curbs. Other than in the above locations, the minimum sidewalk clearance width for a sidewalk vendor shall be at least half of the sidewalk but not less than three feet. (d) Sidewalk vendors shall be considered “retail” businesses for the purpose of Sect ion

18.23.040 (Late Night Uses and Activities) and shall be subject to its provisions. Sidewalk vendors in violation of Section 18.23.040 shall be subject to the penalties in Section

4.12.060.
(e) Sidewalk vendors shall possess a valid California Department of Tax and Fee Administration seller’s permit and any other permit or license required by law , including a permit from the County of Santa Clara for mobile food facilities, if applicable. (f) Sidewalk vendors shall follow all other generally applicable laws. (g) The City Manager or designee may promulgate regulations regarding the size, placement, safety, and operational requirements or restrictions of sidewalk vendors.

4.12.050 Sidewalk Vendors in Parks
(a) Notwithstanding Section 22.04.160 (Commercial activities and solicitation), a sidewalk vendor may operate in City parks, including those dedicated in Chapter 22.08 (Park Dedications), unless specifically restricted pursuant to statute or regulation. (b) Following the procedure in Section 22.04.030 (Compliance Required), the City Manager may promulgate regulations regulating the time, place, and manner of sidewalk vending in parks owned or operated by the City if the requirements are any of the following:
(1) Directly related to objective health, safety, or welfare concerns; (2) Necessary to ensure the public’s use and enjoyment of natural resources and recreational opportunities; or
(3) Necessary to prevent an undue concentration of commercial activity that unreasonably interferes with the scenic and natural character of the park. (c) It shall be a violation for any person to violate any provision in the regulations authorized by subsection (b) of this section. Violators will be subject to the penalties in Section 4.12.060.

Item 11
Attachment A - Ordinance
Amending Chapters 4.10
(Licenses Obtained by
Applicatio.12 to Title 4
(Business Licenses and
Regulations) of the Palo
Alto Municipal Code

Item 11: Staff Report
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4.12.060 Violations and Penalties
(a) A person found to be in violation of any of the provisions of this Chapter 4.12 or any regulations authorized by this Chapter shall be subject to the following penalties:
(1) An administrative fine of one hundred dollars ($100) for a first violation. (2) An administrative fine of two hundred dollars ($200) for a second violation within one year of the first violation.
(3) An administrative fine of five hundred dollars ($500) for each additional violation within one year of the first violation.
(4) The City may prohibit a sidewalk vendor from operating in the City for one year upon the fourth violation or subsequent violations within one year of the first violation in addition to an administrative fine of five hundred dollars ($500).
(b) Failure to pay an administrative fine pursuant to subdivision (a) or (b) shall not be punishable as an infraction or misdemeanor. Additional fines, fees, assessments, or any other financial conditions beyond those authorized in subdivision (a) and (b) shall not be assessed. (c) When assessing an administrative fine pursuant to subdivision (a) and (b), the hearing officer shall take into consideration the person’s ability to pay the fine. The City shall provide the person with notice of his or her right to request an ability-to-pay determination and shall make available instructions or other materials for requesting an ability-to-pay determination.

The person may request an ability-to-pay determination at adjudication or while the judgment remains unpaid, including when a case is delinquent or has been referred to a comprehensive collection program.
(d) If the person meets the criteria described in subdivision (a) or (b) of California Government Code section 68632, the City shall accept, in full satisfaction, 20 percent of the administrative fine imposed pursuant to subdivisions (a) and (b). (e) The hearing officer may allow the person to complete community service in lieu of paying the total administrative fine, may waive the administrative fine, or may offer an alternative disposition.

SECTION 4. Chapter 4.30 (Soliciting Funds) of Title 4 (Business Licenses and Regulations) is hereby amended as follows (additions are underlined, deletions are in strikethrough):

4.30.010 Permit required. Reserved.

No person shall solicit within the city for a contribution of funds for a charitable, political, religious, educational, community, recreational or similar nonprofit purpose by means of calling upon places of residence or business, or by means of direct personal contact in public places or upon public property without obtaining a permit as provided in this chapter. Any peddling or soliciting as defined in Chapter 4.10, by means of representation that all or a portion of the proceeds thereof are to be used for a charitable or similar nonprofit purpose or are to be transmitted to any person, firm or corporation for any such purpose is unlawful unless a permit has been first obtained as provided in this chapter.

4.30.020 Exceptions to permit requirements. Reserved. (a) The provisions of this chapter, except for Section 4.30.100, shall not be applicable to:
(1) Solicitations by one member of an organization to another when the solicitation is conducted for that same organization;
(2) Political committees for which the Secretary of State has assigned an identification number pursuant to the Political Reform Act (California Government Code Section 84101).

Item 11
Attachment A - Ordinance
Amending Chapters 4.10
(Licenses Obtained by
Applicatio.12 to Title 4
(Business Licenses and
Regulations) of the Palo
Alto Municipal Code

Item 11: Staff Report
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4.30.030 Application. Reserved.
(a) Application for a permit to solicit shall be made to the chief of police at least ten business days prior to the time of the proposed effective date of the permit; provided, however, that the chief of police, for good cause shown, may allow the filing of an application less than ten business days before such date. The application shall contain the following information or, in lieu thereof, a detailed statement of the reason why such information cannot be furnished:
(1) The name and address or headquarters of the person applying for the permit, and of the organization on whose behalf the solicitation is conducted; (2) If the applicant is not an individual, the names and addresses of the applicant's principal officers and managers and a copy of the resolution, if any, authorizing such solicitation; (3) The purpose for which the solicitation is to be made; (4) The names, addresses and phone numbers of the persons who will be in direct charge of conducting the solicitation;
(5) The time when such solicitation shall be made, giving the preferred dates for the beginning and ending of such solicitation;
(6) A copy of the Franchise Tax Board determination exempting the organization from tax under California Revenue and Taxation Code Section 23701, or a statement indicating that the organization does not have tax-exempt status;
(7) A statement indicating whether any of the solicitors are salaried or commissioned. (b) If, while any application is pending or during the term of any permit granted thereon, there is any change in fact, policy, or method that would alter the information given in the application, the applicant shall notify the chief of police in writing thereof within twenty-four hours after such change.

4.30.040 Issuance of permits. Reserved.

Prior to the date on which the solicitation is to begin, the chief of police or a designee shall issue the permit unless the information required by Section 4.30.030 has not been provided. If the permit is denied for failure to comply with Section 4.30.030, the applicant shall be granted a permit immediately upon compliance with its requirements.

4.30.050 Suspension and revocation of permits. Reserved. (a) Definitions.
(1) "Suspension" means that the permit is temporarily withdrawn and is reinstated when the suspension period ends.
(2) "Revocation" means that the permit is terminated and that a new permit may not be obtained until the original permit period ends.
(b) Grounds for Suspension or Revocation. The permit may be suspended or revoked in accordance with the procedures specified in Section 4.30.060 for a violation of this chapter or for any one of the following reasons:
(1) Failure to comply with the requirements of California Business and Professions Code Section 17510.3 during the solicitation;
(2) The permit holder or any of the persons involved in the solicitation is found by a court to have engaged, during the solicitation, in fraudulent activity, violation of trespass statutes, or crimes of violence;
(3) The applicant has intentionally misrepresented a material fact on the application; Item 11
Attachment A - Ordinance
Amending Chapters 4.10
(Licenses Obtained by
Applicatio.12 to Title 4
(Business Licenses and
Regulations) of the Palo
Alto Municipal Code

Item 11: Staff Report
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(4) The solicitation is not authorized by the organization or its officers and managers as listed on the application.

4.30.060 Procedures for suspension or revocation of permit. Reserved. (a) Notice of Hearing. A notice of the hearing shall be given to the permittee by the city manager in writing, setting forth the time and place of the hearing, the ground or grounds upon which the hearing is based, the pertinent code section or sections, and a brief statement of the factual matters in support thereof. The notice shall be mailed, postage prepaid, addressed to the permittee at the address listed on the permit application, or it shall be delivered to the permittee personally, at least ten days prior to the hearing date. (b) Hearing Rules. All parties involved shall have the right to other testimonial, documentary, and tangible evidence bearing on the issues, to be represented by counsel, and to confront and cross-examine any witnesses against them. Any hearing under this title may be continued for a reasonable time for the convenience of a party or a witness. (c) Disposition of the Case.
(1) Disciplinary Action. If the city manager, after the hearing, finds that cause exists for disciplinary action, either a warning, or a suspension or revocation of the permit may be imposed.
(2) Transmittal of Decision. Within ten days of the hearing the city manager shall render an opinion in writing, stating findings and the action taken, if any. This opinion shall be mailed, postage prepaid, to the permittee or delivered to the permittee personally. (d) No Appeal. The decision of the city manager shall be final.

4.30.070 Permit time limit - Renewal. Reserved.

Permits issued pursuant to this chapter shall be valid a maximum of ninety days only, and no person shall solicit with an expired permit. The chief of police shall prescribe procedures and standards for the renewal of such permits, except that such standards and procedures shall not be stricter than those required for the original issuance of the permit. Each renewal period shall be for a maximum of ninety days.

4.30.080 Identification cards. Reserved.
(a) The permittee shall furnish each person engaged in the solicitation activity in question with a suitable identification card or badge. The cards or badges shall contain the following:
(1) The name of the individual solicitor;
(2) The name of the permittee, if different;
(3) The purpose of the solicitation activity.

4.30.090 Identification cards to be carried and produced. Reserved.

Any identification card or badge issued hereunder shall be kept on the person to whom it is issued at all times during such solicitation. Such card or badge shall be presented when any solicitation is made and shall be produced upon demand of the chief of police or any member of the police department.

4.30.100 Conduct of solicitations.
(a) No person shall solicit funds at any time at any building where there is a posted sign stating "No solicitors," or words to that effect, except that a licensed solicitor may call upon an Item 11
Attachment A - Ordinance
Amending Chapters 4.10
(Licenses Obtained by
Applicatio.12 to Title 4
(Business Licenses and
Regulations) of the Palo
Alto Municipal Code

Item 11: Staff Report
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occupant of a building when he has received express prior permission from such occupant to do so.
(b) No person shall solicit funds in any congested area where the solicitation activity impedes the public. For the purpose of this section, the judgment of a police officer, exercised in good faith, shall be deemed conclusive as to whether the area is congested or the public impeded.

4.30.110 Severability.

If any provision or clause of this chapter or the application thereof to any person or circumstance is held to be unconstitutional or to be otherwise invalid by any court of competent jurisdiction, such invalidity shall not affect other chapter provisions, and clauses of this chapter are declared to be severable.

SECTION 5. Chapter 4.32 (Soliciting Information for Commercial Purposes) of Title 4 (Business Licenses and Regulations) is hereby amended as follows (additions are underlined, deletions are in strikethrough):

4.32.010 Definitions.
(a) For the purpose of this chapter, unless it is plainly evident from the context that a different meaning is intended, certain terms used in this chapter are defined as follows:
(1) "Interviewee" means a person from whom information is requested by a solicitor as defined in this chapter.
(2) "Soliciting" means requesting information on the background, occupation, economic status, social status, religious status, political status, attitudes, viewpoints, occupants of a residence, telephone number, address, furnishings, or the like of another person for the purpose of compiling such information as raw data or refined data into a document, record, book, or directory to be sold, or to be used wholly or in part for a commercial purpose. (3) "Solicitor" means the person soliciting as defined in this chapter.

4.32.020 Permit required for solicitors. Reserved.

A permit is required for every person or organization which engages in soliciting information by means of calling upon places of residence or by means of direct personal contact in public places or upon public property. One permit may be obtained by an organization to cover the individual solicitors for the organization. Any peddling or soliciting, as defined in Chapter 4.10, which is carried on in connection with said solicitation of information is unlawful unless a permit also has been obtained as provided in Chapter 4.10.

4.32.030 Exceptions. Reserved.
(a) The provisions of this chapter shall not apply to the following:
(1) Any news-gathering activity for a bona fide news medium; (2) Any solicitation of information for a telephone book by a telephone company.

4.32.040 Application. Reserved.
(a) Application for a permit to solicit information shall be made to the chief of police at least fifteen days prior to the time of the proposed effective date of the permit; provided, however, that the chief of police, for good cause shown, may allow the filing of an application less than fifteen days before such date. The application shall contain the following information or, in lieu thereof, a detailed statement of reasons why such information cannot be furnished:

Item 11
Attachment A - Ordinance
Amending Chapters 4.10
(Licenses Obtained by
Applicatio.12 to Title 4
(Business Licenses and
Regulations) of the Palo
Alto Municipal Code

Item 11: Staff Report
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(1) The name, address, or headquarters of the person applying for the permit; (2) If the applicant is not an individual, the names and addresses of the applicant's principal officers and managers and a copy of the resolution, if any, authorizing such solicitation, certified to as a true and correct copy of the original by the officer having charge of the applicant's record;
(3) The purpose for which the solicitation is to be made and the use or disposition to be made of any information therefrom;
(4) The names and addresses of the persons to whom the information solicited will be sent; (5) The names and addresses of the persons who will be in direct charge of conducting this solicitation and the names of all promoters connected, or to be connected, with the proposed solicitation;
(6) An outline of the methods to be used in conducting the solicitation; (7) The time when such solicitation shall be made, giving the preferred dates for the beginning and ending of such solicitation;
(8) A statement to the effect that if a permit is granted, it will not be used or represented in any way as an endorsement by the city or by any department or officer thereof; (9) Such other information as may be reasonably required by the chief of police in order for him to determine the kind and character of the proposed solicitation and whether such solicitation is not inimical to the public welfare. If, while any application is pending or during the term of any permit grained thereon, there is any change in fact, policy, or method that would alter the information given in the application, the applicant shall notify the chief of police in writing thereof within twenty-four hours after such change.

4.32.050 Permit fees. Reserved.

A fee for a permit to solicit information shall be levied as set forth in the municipal fee schedule.

4.32.060 Investigation of books and records. Reserved.

Upon the request of the chief of police or his designee at any time before the permit is issued, during the time the permit is in effect, or after the permit has expired, the applicant shall make available at the Civic Center or at any other reasonable location specified by the chief of police or his designee such nonprivileged books, records, and papers as may be required to investigate the matters relevant to the permit.

4.32.070 Standards for issuance of permits. Reserved.

The chief of police or his designee shall issue the permit unless he has cause for denying the permit application or issuing a probationary permit as specified in Chapter 4.04.

4.32.080 Identification cards. Reserved.
(a) The permittee shall furnish each person engaged in the soliciting activity in question with a suitable identification card or badge. The cards or badges shall contain such information as the chief of police deems necessary, but shall include at least the following:
(1) The name of the individual solicitor;
(2) The name of the permittee, if different;
(3) The purpose of the solicitation activity;
(4) A statement that the interviewee is not required to provide any or all of the information solicited.

Item 11
Attachment A - Ordinance
Amending Chapters 4.10
(Licenses Obtained by
Applicatio.12 to Title 4
(Business Licenses and
Regulations) of the Palo
Alto Municipal Code

Item 11: Staff Report
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Such cards or badges shall be produced on demand of the chief of police or any member of the police department.

4.32.090 Acts required during each solicitation. Reserved. (a) Immediately prior to any request for information, each solicitor shall do all of the following in the order prescribed:
(1) Present his identification card or badge to the interviewee; (2) Request the interviewee to read the identification card or badge; (3) Inform the interviewee in clear language of the nature and purpose of the solicitation and whether he is representing a governmental entity or whether he is representing a private person or organization;
(4) Inform the interviewee that the interviewee need not provide any or all of the information the solicitor requests.

4.32.100 Restrictions on methods of solicitation.
(a) It shall be unlawful for a solicitor to do any of the following:
(1) Falsely represent, directly or by implication, that the information is being solicited on behalf of a governmental organization;
(2) Threaten, directly or by implication, that the information requested will be solicited from sources other than the interviewee if the interviewee does not provide the information; (3) Without the express prior permission of an occupant, solicit at any residence address or apartment complex where there is posted a sign stating: "No solicitors or peddlers."

4.32.110 Hours of solicitation.

No person shall solicit information from six p.m. to nine a.m.; provided, however, a solicitor may call upon the occupant of a residence during such hours when he has received express prior permission from such occupant to do so.

SECTION 6. If any section, subsection, sentence, clause, or phrase of this Ordinance is for any reason held to be invalid or unconstitutional by a decision of any court of competent jurisdiction, such decision shall not affect the validity of the remaining portions of this Ordinance. The City Council hereby declares that it would have passed this Ordinance and each and every section, subsection, sentence, clause, or phrase not declared invalid or unconstitutional without regard to whether any portion of the Ordinance would be subsequently declared invalid or unconstitutional.

SECTION 7. The Council finds that adoption of this Ordinance is exempt from the California Environmental Quality Act pursuant to CEQA Guidelines Sections 15301 (Existing Facilities) and 15323 (Normal Operations of Facilities for Public Gatherings).

//

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Item 11
Attachment A - Ordinance
Amending Chapters 4.10
(Licenses Obtained by
Applicatio.12 to Title 4
(Business Licenses and
Regulations) of the Palo
Alto Municipal Code

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SECTION 8. This Ordinance shall be effective on the thirty-first date after the date of its adoption.

INTRODUCED:

PASSED:

AYES:

NOES:

ABSENT:

ABSTENTIONS:

NOT PARTICIPATING:

ATTEST:

____________________________ ____________________________ City Clerk Mayor

APPROVED AS TO FORM: APPROVED:

____________________________ ____________________________ Assistant City Attorney City Manager

____________________________
Chief of Police

____________________________
Director of Community Services

Item 11
Attachment A - Ordinance
Amending Chapters 4.10
(Licenses Obtained by
Applicatio.12 to Title 4
(Business Licenses and
Regulations) of the Palo
Alto Municipal Code

Item 11: Staff Report
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City Council
Staff Report
Report Type: CONSENT CALENDAR
Lead Department: City Clerk
Meeting Date: January 16, 2024
Report #:2312-2465
TITLE
SECOND READING: Adoption of an Urgency Ordinance and an Interim Ordinance That Allows the Director of Planning and Development Services to Extend Planning Entitlements for Housing Development Projects up to an Additional 18 Months. Environmental Review: Exempt from CEQA in Accordance with CEQA Guidelines 15061(b)(3). (FIRST READING: December 11, 2023 PASSED 5-1-1, Kou no, Veenker absent)

BACKGROUND
This was heard by the City Council on December 11, 2023 for a first reading and was approved 5-1-1, Kou no, Veenker absent. No changes were made to the ordinance; it is now before you for a second reading.

ATTACHMENTS
Attachment A - Ordinance Authorizing Extensions for Housing Projects APPROVED BY:

Mahealani Ah Yun, City Clerk
Item 12
Item 12 Staff Report

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NOT YET ADOPTED Attachment B
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Ordinance No. _____
Interim Ordinance of the Council of the City of Palo Alto Temporarily Authorizing the Director of Planning and Development Services to Extend the Validity of Planning Entitlements for Housing Development Projects

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. Pursuant to state law, the City of Palo Alto (City) was assigned a regional housing need allocation (RHNA) of 6,086 housing units for the 2023 -2031 planning period , comprised of 1,556 very-low income units, 896 low-income units, 1,013 moderate-income units, and 2,621 above moderate-income units; and

B. In accordance with state law and to further the City’s goals of producing housing, the City Council adopted the City of Palo Alto 2023-2031 Housing Element on May 8, 2023.

C. Construction of housing units that have been previously approved is an essential factor in meeting the City’s RHNA and Housing Element goals.

D. Changes in economic conditions and other factors may result in a delay in construction of housing units following approval by the City.

E. Pursuant to Palo Alto Municipal Code section 18.77.090, planning permits and approvals shall expire within 12 months , or within the time provided in the permit or approval, unless the proposed use of the site or construction of buildings has commenced. In addition, the Planning Director is authorized to extend this time for up to 1 2 additional months.

F. In order to permit maximum flexibility for property owners who obtain or have obtained planning approvals that are in danger of expiration, the City Council desires to authorize the Planning Director to issue further extensions of time before a planning permit or approval will expire.

SECTION 2
. Notwithstanding Section 18.77.090 of the Palo Alto Municipal Code or the provisions of any planning permit or approval, the Director of Planning and Development Services is authorized, in his or her sole discretion, to extend the duration of a planning permit or approval for a Housing Development Project, as defined in Government Code Section 65589.5, by an additional eighteen (18) months beyond the expiration date that would otherwise apply. The authority granted herein shall be effective only until December 31, 2024.

Item 12
Attachment A - Ordinance
Authorizing Extensions
for Housing Projects

Item 12: Staff Report
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NOT YET ADOPTED Attachment B
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SECTION 3. The Council finds that the adoption of this ordinance is exempt from the provisions of the California Environmental Quality Act pursuant to CEQA Guideline sections 15061(b)(3) because it can be seen with certainty that that the extension of a planning entitlement will not have a significant impact on the environment.

SECTION 4. This ordinance shall be effective on the thirty-first date after the date of its adoption and shall expire on December 31, 2024.

INTRODUCED:

PASSED:

AYES:

NOES:

ABSENT:

ABSTENTIONS:

ATTEST:

____________________________ ____________________________ City Clerk Mayor

APPROVED AS TO FORM: APPROVED:

____________________________ ____________________________ Assistant City Attorney City Manager

____________________________
Director of Planning and
Development Services

Item 12
Attachment A - Ordinance
Authorizing Extensions
for Housing Projects

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City Council
Staff Report
From: City Manager
Report Type: ACTION ITEM
Lead Department: Public Works
Meeting Date: January 16, 2024
Report #:2310-2190
TITLE
Tree Protection Ordinance Year One Review and Recommendations; Adoption of an Ordinance Amending Chapter 8.04 (Street Trees, Shrubs, and Plants) and Chapter 8.10 (Tree Preservation and Management Regulations of the Palo Alto Municipal Code to Update the Allowable Reasons for Removal of Protected Trees, Make Clarifying Changes, and to Make Clerical Updates; and Adoption of a Resolution amending the Administrative Penalty Schedule to Increase the Penalties for Violations of Title 8 of the Palo Alto Municipal Code; CEQA Status – Not a Projects

RECOMMENDATION
Staff recommends that Council adopt the proposed changes to Palo Alto Municipal Code amending Chapter 8.04 and Chapter 8.10 of the Palo Alto Municipal Code and adopt a resolution amending the Administrative Penalty Schedule to increase the penalties for violations of Title 8 of the Palo Alto Municipal Code.

EXECUTIVE SUMMARY
Title 8 of Palo Alto Municipal Code (PAMC) regulates street trees, shrubs, and plants (Chapter

8.04), weed abatement (Chapter 8.08), and tree preservation and management (Chapter 8.10) and is often referred to as the “Tree Protection Ordinance”. Major updates were made to Title 8 in June 2022.

Implementation of the new Tree Protection Ordinance began in July 2022 and is still in progress. During the adoption of the updated Tree Protection Ordinance in June 2022, Council directed staff to review the ordinance with the Parks and Recreation Commission (PRC) and Planning and Transportation Commission (PTC) near the one-year mark, as adjustments might be needed1. On June 19, 2023, staff updated Council through a study session focused on 1 City Council Meeting Action Minutes, June 6, 2022;
https://portal.laserfiche.com/Portal/DocView.aspx?id=30291&repo=r-704298fc&searchid=96069bcf-54c3-4e14- 8c45-887e1146f56c
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implementation efforts.2 As directed by Council, staff evaluated the updated ordinance over the course of the first year and held study sessions with both PRC and PTC this past fall. The proposed changes to Title 8 included as Attachment A incorporate feedback received during those study sessions. Specific changes from those study sessions include modifications to

8.04.050 regarding trees as public nuisance, and the incorporation of right tree in the right place principles to the updated reasons for removal included in 8.10.050.

BACKGROUND
The updates to the Tree Protection Ordinance in 2022 focused on implementation of Council- approved policies in the 2030 Comprehensive Plan (Natural Environment Chapter), and the Urban Forest Master Plan. Additional code updates included changes prompted by State law, specifically Executive Order B-29-15, also known as the Model Water Efficient Landscape Ordinance. Amendments to the ordinance ranged from significant policy changes, like expanding the types of protected trees and revising allowances for tree removal, to more clerical updates, like updating authorized officers and accounting for recent changes in other development-related codes.

The amendments in the 2022 update were the result of a detailed multi-year effort. The staff report for the June 6, 2022 Council meeting3 included a detailed list of the public meetings included in the process, which included meetings with the Planning and Transportation Commission, the Policy and Services Committee, the Architectural Review Board, the Parks and Recreation Commission, the City Council and Community meetings.

During the first year of implementation of the updated ordinance, staff made note of code sections that caused confusion or did not work as originally intended. Many of the updates included in staff’s recommended changes focus on resolving those issues.

ANALYSIS
Proposed Ordinance Clarifications
During the first year of ordinance implementation, staff noted any areas of the updated code that might warrant edits to increase clarity. Many of the proposed updates that are included in the attached draft updates to PAMC Chapters 8.04 and 8.10 center around this goal.

The following areas have proposed changes to increase clarity or simplify the wording of the code.

1. 8.04.050(e) - Infested trees as public nuisance
2 City Council, June 19, 2023; Agenda Item #41, SR #2306-1599:
https://cityofpaloalto.primegov.com/Portal/Meeting?meetingTemplateId=1170 3 City Council, June 6, 2022; Agenda Item #13, SR #14355 https://portal.laserfiche.com/Portal/DocView.aspx?id=59517&repo=r-704298fc Item 13
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oIssue: Current text is vague as to what qualifies as an “infestation” which could lead to confusion and possibly inappropriate application of this code section. oResolution: Proposed text clarifies what types of infestations qualify. Pests now must be included in the California Department of Food and Agriculture’s detection and eradication programs or be injurious to trees.

2. 8.04.050(i) – Trees declared a public nuisance under State law and ordered removed by a court of competent jurisdiction
oIssue: The ordinance did not make clear that a tree declared a public nuisance under state law would qualify for a Tree Removal Permit. oResolution: State law public nuisance declaration was added as a reason for declaring a protected tree a nuisance.

3. 8.10.020(d) – Designated Arborist – Clarification as to when the applicant chooses the arborist and when the arborist is chosen by the City
oIssue: Existing text is unclear as to who selects and pays for the designated arborist.
oResolution: Proposed text clarifies that the project applicant pays for all arborist services and may select a designated arborist of their choice unless the project requires a public hearing as part of the approval process. In those cases, the City selects the arborist.

4. 8.10.020(l)(4) – Protected Trees - Designated Trees – Clarification of designated tree definition.
oIssue: Current text can be interpreted as referring only to trees on approved landscape plans for current projects.
oResolution: Proposed text specifies that designated trees are any trees that were planted as part of an approved landscape plan included in a development project, past or current.

5. 8.10.040(b) – Tree Disclosure Requirements – Reorganization of the types of trees that need to be disclosed for clarity and adding a formal exemption allowing disclosure to be completed by applicant instead of by a designated arborist for Section 18.09.030 Table 1 ADU projects
oIssue: Current text lists the categories of trees that must be disclosed in paragraph form and experience has shown that it can be misunderstood. oResolution: Proposed text separates each type of tree that must be disclosed into separate numbered items to clarify.
oIssue: Current exemption for Section 18.09.030 Table 1 ADU projects is only included in the instructions for the T1 Tree Protection Plan Sheet. oSolution: Proposed text formalizes this exemption in the code.

6. 8.10.050(a)(1) – Clarification on type of permits needed for tree removal oIssue: Applicants have applied for the incorrect type of tree removal permit. Tree removals outside of development on parcels other than single-family (R-1) or low density residential (RE, R-2, or RMD) require a staff level architectural review Item 13
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through planning, not a tree removal permit through public works (this requirement pre-dates the 2022 update).
oSolution: Included the clarification above in the code.

7. 8.10.050(a)(2) – Clarification on details of development moratoriums imposed as conditions of tree removal permits
oIssue: Current text is unclear regarding length of moratoriums and who specifically has the authority to issue a moratorium.
oResolution: Proposed text includes specific clarifications about who can issue a moratorium, the length of the moratorium and how a moratorium may be lifted early.

8. 8.10.050(d)(1) – Twenty-Five Percent Rule – clarification on method used to calculate the percentage impact of protected trees on buildable area oIssue: Current text does not include references to the fact that more than one protected tree may contribute to the impact on buildable area. oSolution: Proposed text specifies that the impact on buildable area for the 25% rule includes the tree protection zones of all trees whose tree protection zones include portions of the buildable area.

9. 8.10.140(c)(2) - Appeals of Tree Removal Decisions
oIssue: The intent of the 2022 update was that any appeals of a tree removal permit decision would go first to a director’s hearing, and then to a commission or Council. The Title 18 code referenced in this subsection does not include a director’s hearing as a first step.
oSolution: Text added to include a director’s hearing as a first appeal step before following procedures included in PAMC 18.78.

Proposed Ordinance Changes for Tree Removal and Pruning In addition to the areas listed above requiring clarification, other areas have more substantial proposed changes.

Some of the issues raised during the first year of the updated ordinance centered around the 2023 winter storm season. The series of storms the Bay Area saw last winter was very unusual.

The storms included high rainfall totals in very short time spans and strong winds from non- prevailing directions with little or no time for recovery in between events. Many citizen concerns centered around the permission to remove a hazardous tree. The ability of a tree owner to remove a hazardous tree is already contained in the ordinance. Staff created a new list of FAQs4 to address some of the concerns. These following changes are being proposed to address issues that arose during the first year of implementation. 4 Palo Alto Urban Forestry FAQs; https://www.cityofpaloalto.org/Departments/Public-Works/Public-Services/Palo- Altos-Urban-Forest/Frequently-Asked-Questions
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8.10.050 Removal of Protected Trees
Several changes are proposed to 8.10.050. Under 8.10.050(a)(1), item (ii) has been separated into (ii) and (iv). The proposed (ii) and (iv) now read:
(ii) It is a detriment to or is crowding an adjacent protected tree. (iv) It is impacting the foundation or eaves of a residence or any covered parking required under Title 18.

This change allows (ii) to be cited as a reason for removal during a development project, while isolating the use of (iv) to removal in the absence of development only.

A new reason for removal is being proposed as 8.10.050(a)(1)(iii). This reason for removal is intended to address some of the issues that presented during the first year of ordinance implementation. Occasionally, situations arise where removal and replacement of an existing protected tree would be appropriate, yet the existing code does not allow for its removal. The proposed (iii) would address most of these situations.
(iii) It is at risk for retrenchment or other tree decline coping processes or does not conform with right tree in the right place principles.

Retrenchment in trees is defined as the process by which over-mature trees in natural settings reconfigure as they age and deteriorate. This process is sometimes called ‘natural retrenchment’. The tree may continue to grow trunk diameter while branches die and fail— reducing overall height of the tree while maintaining or increasing stability.

Right tree in the right place principles means the set of principles that determine if a tree is located in an appropriate location for its specific species requirements and characteristics.

Factors to be considered when applying right tree in the right place principles include, but are not limited to local climate zone, micro-climates, soil type, rainfall, irrigation, available soil volume, existing landscape, existing hardscape, existing utilities, existing infrastructure and available above ground growing volume. Specific principles and additional details will be included in the forthcoming Tree and Landscape Technical Manual.

Staff intends to incorporate any ordinance changes approved by Council into the Tree and Landscape Technical Manual that will be published following its approval by the City Manager.

Ideally, this will coincide with the effective date of the ordinance changes following a second reading.

Some specific examples of where 8.10.050(a)(1)(iii) might be applied include the following:
A protected tree with a structure that negatively impacts its surroundings but does not qualify for removal under current code. This could be a tree that has a lopsided and unrepairable canopy that encroaches on a home but does not meet criteria as either a hazard tree or as directly damaging foundation or eaves.

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A protected tree that has entered end-of-life decline but does not qualify for removal under current code. This could be a tree species that is known to have a shorter life span in a landscape setting and may begin to drop limbs as a coping mechanism when in decline. The tree may not yet present as a hazard tree. As with all reasons listed under

8.10.50(a)(1), treatments and corrective practices must be infeasible to invoke (iii) as a reason for removal.

A new reason for removal is also being proposed under 8.10.050(b)(2). This involves the inclusion of the “25% Rule” to residential projects. This rule allows the removal of a protected tree if the tree protection zone of the tree occupies 25% or more of the parcel’s buildable area.

Historically, this reason has been applied to single family residential projects. Both versions of the ordinance, pre and post the 2022 update, did not include this rule in the single family residential category. This change is intended to recognize this and to correct the oversight.

Clarification to the language defining the “25% rule” has also been added, both in the proposed new location of 8.10.050(b)(2) and the existing location of 8.10.050(d)(1). The changes center around how the impact to the buildable area is calculated. The proposed changes to both codes now read:

Retention of one or more trees would result in reduction of the otherwise-permissible buildable area of the lot by more than twenty-five percent, and there is no financially feasible design alternative that would permit preservation of the tree(s), where financially feasible means an alternative that preserves the tree(s) unless retaining the tree(s) would increase project cost by more than twice the reproduction cost of the tree or ten percent of the given project valuation, whichever is greater. All tree protection zones impacting buildable area are included in the reduction of buildable area calculation.

The last new reason for removal being proposed is under 8.10.050(d)(3). This is intended to address concerns first raised by Stanford University staff during the review of the Tree Ordinance in May and June of 2022. The concern presented was that the ordinance as proposed in 2022 did not allow for discretion regarding tree removal and replacement on larger projects that were subject to the regular planning approval process.

During the 2022 ordinance review process, staff believed that a reading of the existing Title 18 code included the needed discretion surrounding protection and removal of trees on these larger projects. Further review of the code over the last year has determined that discretion regarding the protection and removal of trees on these types of projects is not explicitly granted under Title 18. Staff received specific feedback on this item during the PTC study session and has incorporated that feedback into the proposed changes. To resolve this, staff is proposing to add the following reason for removal under 8.10.050(d)(3):

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(3) Discretionary development review determines that the final project follows right tree in the right place principles and would result in a net tree canopy increase on the property within fifteen years, and replacement of trees, shrubs, and plants either:
(i) Is consistent with Urban Forest Master Plan Goal 2: "Re-generated native woodland and riparian landscapes as the key ecological basis of the urban forest with focus on native species and habitat," or
(ii) Uses climate adaptive, drought tolerant species.

This addition seeks to include the specific type of discretion that was already being applied to larger commercial projects under both versions of the Tree Protection Ordinance.

The final proposed change seeks to address the issue of exemptions to excessive pruning requirements. Some horticultural and arboricultural practices may exceed the maximum pruning limits outlined in 8.10.020(j). These may include trees that have been grown and maintained as a hedge, trees that are being purposefully reduced on a regular basis to fit a growing space, or trees subject to specific cultural practices such as pollarding or espalier training. The exemption language as proposed would be located under 8.10.070(c):
(c) No pruning that exceeds the limits set forth in Section 8.10.020(j)(1) or (2) shall take place without the approval of the urban forester. The property owner or their designee shall submit any requests to exceed the limits for pruning set forth in Section 8.10.020(j)(1) or (2) to the urban forester at least fourteen days prior to pruning a protected tree. Each request shall be accompanied by a statement explaining why exceeding the limits is warranted. Approval for pollarding, hedging or other approved annual practices that exceed limits for pruning need only be secured once every five years.

Updates to the Administrative Penalty Schedule
Included in this report as Attachment B are updates to the administrative penalty schedule. The updates seek to include corrected code references related to the 2022 Title 8 update that are not included in the current schedule. For example, the current administrative penalty schedule does not list 8.10.040 Failure to disclose protected trees or 8.10.055 Failure to comply with tree replacement as citable offenses.

Penalty amounts have also been adjusted to complement the civil penalty amounts included in the 2022 update. The current administrative penalty schedule has a maximum fine of only $500 for the unauthorized removal of a protected tree. This fine is being increased to $5000 per tree or reproduction cost up to $10,000, whichever is greater. For comparison, the civil penalty for the unauthorized removal of a protected tree under the current ordinance is $10,000 or twice the reproduction cost, whichever is greater.

Potential Additional Actions
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While staff has presented potential updates to Chapters 8.04 and 8.10 intended to address issues encountered during the first year of ordinance implementation, there are other actions that could be considered. These options were presented to the PRC and PTC during the fall study sessions. These options were presented as potential additional actions in response to concerns raised during the 2023 storm season, during the June 19, 2023 City Council study session on Tree Ordinance Implementation, and through feedback on the City’s housing element from the State Housing and Community Development department. Feedback from the fall study sessions indicated that the types of changes included in these potential additional actions would not be appropriate at this time.

1. Changes to Allowable Reasons for Removal
Staff could explore more substantial changes or additions to the allowable reasons for removal.

While staff believes the proposed changes included in Attachment A address many of the concerns raised by both staff and the public in the wake of this past winter’s storms, additional changes could be considered.

2. Changes to the Definition of Protected Trees
Staff could explore proposing changes to the definition of protected trees. This could potentially involve one or more of the following options:
Elimination of one or more specific protected native species Increasing the diameter threshold for protected native species (currently 11.5”) Increasing the diameter threshold for coastal redwood (currently 18”) Increasing the diameter threshold for all other species (currently 15”) Depending on the changes proposed, the total number of protected trees would decrease in differing amounts based on changes in protected species or protected diameters. Under the current ordinance, the definition of a Protected Tree includes the following:

Specific native species protected at 11.5” diameter at breast height (DBH):
Acer macrophyllum (Bigleaf Maple)
oCalocedrus decurrens (Incense Cedar)
oQuercus agrifolia (Coast Live Oak)*
oQuercus douglasii (Blue Oak)
oQuercus kelloggii (California Black Oak)
oQuercus lobata (Valley Oak)*
Species protected at 18” DBH:
oSequoia sempervirens (Coast Redwood)*
Protected Mature Trees at 15” DBH:
oincludes all species not listed above except:
▪Invasive species per Cal-IPC
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▪High Water Users per WUCOLS (Excluding Redwood)
Other protected tree categories:
oAny tree designated for protection during review and approval of a development project
oAny tree designated for carbon sequestration and storage and/or for environmental mitigation purposes
oAny replacement mitigation tree or other tree designated to be planted due to the conditions listed in this ordinance
* species protected prior to July 21, 2022
If changes to the definition of protected trees are explored, estimates of the impact to the total number of protected trees can be made using our existing representative sample data set for the composition of our urban forest.

3. Exemptions for Certain Housing Projects
The State Housing and Community Development department commented on the City’s housing element in its August 3, 2023 letter noting a need for further analysis related to, among other regulations, the impact of the City’s tree protection ordinance on housing. Specifically, the City’s updated housing element must analyze the tree ordinance as a potential constraint on a variety of housing types. While the City has previously taken measures to address concerns regarding ADUs and the contemplated changes referenced in this report would address single family homes and some commercial mixed-use projects, more work may be needed to ensure the City’s tree policies are not a constraint to qualifying housing accountability projects.

Accordingly, staff is exploring the appropriateness of additional regulations that would seek to balance the local and state interests for more housing production with the City’s desire to preserve and support tree health and expand the tree canopy. Some initial concepts staff are considering would apply to projects with four or more units with at least two-thirds of the project floor area dedicated toward housing. If a tree protected by the City’s ordinance would require a redesign of the project that triggers one or more of the following, the tree or trees would be approved for removal, including:
redesign to accommodate the tree costs two times the replacement cost of the tree (existing provision);
redesign to accommodate the tree costs more than 5% of the total project valuation (down from 10% currently in the code);
redesign requires a greater parking reduction than authorized by the code; or redesign requires a density reduction of 5% or greater.

Staff continues to evaluate the need for these additional regulations in the context of the other contemplated modifications. After feedback received during the PTC study session, staff Item 13
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believes more study of the issues involved is warranted before proposing any code changes to address these items.

Staff will bring any proposed housing exemption changes to Title 8 back to the PTC for review and recommendations.

FISCAL/RESOURCE IMPACT
The proposed changes to Chapters 8.04 and 8.10 should have no additional impact on staff resources.

STAKEHOLDER ENGAGEMENT
Public outreach regarding the updated ordinance has been ongoing since the adoption of the updated ordinance in June 2022. The majority of public outreach has been conducted by City staff and the City’s urban forestry non-profit partner Canopy. Below is a list of outreach efforts that have been completed or are currently in progress.
City Urban Forestry webpages have been updated to reflect new ordinance. oNew Tree Ordinance Information page created and expanded. New Tree FAQs created to address many questions about the tree ordinance and storm related tree issues.
Creation of a new general trees email address ( [email protected]) to simplify contacting the Urban Forestry Section.
Canopy webpages updated to mirror new information on City web pages. Canopy tree walk flyers updated to highlight tree ordinance updates. Canopy Tree-news has released 3 Issues (June 2022, January 2023, April 2023) that speak about the updated tree ordinance.
oTree news issues reach approximately 4500 subscribers. An email distribution list of arborists, tree care companies, and urban forestry advocates has been compiled by staff and informational updates are being sent periodically. These updates have been added to the Tree Ordinance Information webpage as PDFs5. Staff is in the process of translating these updates into Spanish language versions as well.

Anyone can be added to the list by email request sent to [email protected].

The following outreach components are still in development and will be put in place in the coming months.
A direct mailed postcard to all Palo Alto residences providing information about the updated tree ordinance.
Utility bill insert and email highlighting new ordinance information. 5 Tree Ordinance Information Update example: https://www.cityofpaloalto.org/files/assets/public/v/1/public- works/tree-section/new-folder/palo-alto-tree-ordinance-information-updates-2-excessive-pruning.pdf Item 13
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Informational ads in local printed and electronic press. Live webinar sessions targeted at local arborists and tree care companies to review new ordinance requirements. These will be recorded and posted to the City’s website.

Stakeholder feedback was also received through comments from councilmembers and commissioners as well as through public comment at the following public meetings:
City Council – June 19, 2023 – Tree Ordinance Implementation study session Parks and Recreation Commission – October 24, 2023 - Tree Protection Ordinance Year One Review and Recommendations Study Session
Planning and Transportation Commission – November 8, 2023 - Tree Protection Ordinance Year One Review and Recommendations Study Session Based on feedback received at the October 24, 2023 Parks and Recreation Commission meeting and the November 8, 2023 Planning and Transportation Commission meeting, staff plans to explore the possibility of adding the following additional outreach components. Webinars, workshops, or Utility bill inserts focused on how to prepare trees for storm season and how to care for them after storms.
Inclusion of more tree related information and resources into the City’s regular informational postings on electronic media.

ENVIRONMENTAL REVIEW
This proposed update to the Tree Protection Ordinance is not subject to the California Environmental Quality Act.

The proposed code amendments have been assessed in accordance with the authority and criteria contained in the California Environmental Quality Act (CEQA), the State CEQA Guidelines, and the environmental regulations of the City. Specifically, the proposed amendments have been determined to be exempt from further environmental review pursuant to CEQA Guidelines Section 15061(b)(3) because it can be seen with certainty that there is no possibility that the activity in question may have a significant effect on the environment. In the event Section 15061(b)(3) is found not to apply, the ordinance is also exempt under Section 15308 because it involves regulatory action for the protection of the environment.

ATTACHMENTS
Attachment A: Ordinance of the Council of the City of Palo Alto Amending Chapter 8.04 Street, Trees, Shrubs, and Plants and Chapter 8.10 Tree Preservation and Management Regulations Attachment B: Resolution Amending and Restating Administrative Penalty Schedule APPROVED BY:

Brad Eggleston, Director Public Works/City Engineer
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*NOT YET APPROVED* Attachment A
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Ordinance No. _____
Ordinance of the Council of the City of Palo Alto Amending Chapter 8.04 (Street, Trees, Shrubs, and Plants) and Chapter 8.10 (Tree Preservation and Management Regulations).

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

SECTION 1. Chapter 8.04 (Street Trees, Shrubs, and Plants) of Title 8 (Trees and Vegetation) of the Palo Alto Municipal Code is hereby amended to read as follows (additions underlined and deletions struck through):

Chapter 8.04

PUBLIC TREES, SHRUBS, HEDGES, AND PLANTS
Sections:

8.04.005 Purpose.

8.04.010 Definitions.

8.04.015 Authority of city.

8.04.020 Permit required for certain work.

8.04.030 Application for permit.

8.04.040 Issuance of permit.

8.04.050 Public nuisances.

8.04.070 Enforcement.

8.04.080 Interference with enforcement.

8.04.090 Adoption of regulations.

8.04.005 Purpose.

The purpose of this chapter is to protect and promote trees, shrubs, hedges, and plants located on public property within the city. In establishing these procedures and standards, the city recognizes that trees, shrubs, hedges, and plants are an essential part of the city's infrastructure, with benefits that include promoting the health, safety, welfare, and quality of life of the residents of the city; addressing climate change by sequestering carbon and providing a cooling effect; reducing air, water, and noise pollution; preventing soil erosion and Item 13
Attachment A - Ordinance
of the Council of the City
of Palo Alto Amending
Chapter 8.04 Street,
Trees, Shrubs, and Plants
and Chapter 8.10 Tree
Preservation and
Management Regulations

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*NOT YET APPROVED* Attachment A
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stormwater runoff; providing wildlife habitat; and enhancing the aesthetic environment. It is the city's intent to encourage the preservation of trees, shrubs, hedges, and plants.

8.04.010 Definitions.

For the purposes of this title, the following words shall have the meaning ascribed to them in this section:
(a) "Person" means individuals, firms, associations and corporations, and agents, employees or representatives thereof.
(b) "City" means the city of Palo Alto acting by and through its authorized representatives. (c) "Street" means and includes all land lying between the boundaries of property abutting on all public streets, boulevards, alleys, and walks.
(d) "Parks" means and includes all parks to which names have been given by action of the city council.
(e) "Public places" means and includes all grounds, other than streets or parks, owned by, leased to, or under the control of the city of Palo Alto. (f) "Tree" means and includes any woody perennial plant generally having a single main stem and commonly achieving ten feet in height.
(g) "Shrub" means and includes any woody perennial plant generally having multiple stems and commonly less than ten feet in height.
(h) "Hedge" means and includes any tree, shrub, or plant, when planted in a dense, continuous line or area, as to form a thicket or barrier. (i) "Plant" means and includes all vegetation other than trees and shrubs. (j) "Public trees, shrubs, hedges, and plants" means and includes any tree, shrub, hedge, or plant in any street, park, or public place in the city of Palo Alto. (k) "Urban forester" means public works department staff including the urban forester or their designee.
(l) "Tree permit" means a permit issued by the urban forester for one or more of the following purposes:
(1) To permit removal of a public tree.
(2) To permit public tree care, work, or treatment.
(3) To permit removal of a protected tree under 8.10.050. (4) To establish a tree preservation bond.
(5) For payment of "in-lieu" fees for required mitigation measures.

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Attachment A - Ordinance
of the Council of the City
of Palo Alto Amending
Chapter 8.04 Street,
Trees, Shrubs, and Plants
and Chapter 8.10 Tree
Preservation and
Management Regulations

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*NOT YET APPROVED* Attachment A
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8.04.015 Authority of city.

The city of Palo Alto shall have control of all public trees, shrubs, hedges, and plants now or hereafter in any street, park or public place within the city limits, and shall have the authority to plant, care for, remove, replace, and maintain such trees, shrubs, hedges, and plants.

8.04.020 Permit required for certain work.

Unless authorized by a tree permit or other city approval, no person shall do any of the following:
(a) Plant, prune, trim, shape, remove, top, or in any way damage, destroy, injure or mutilate a public tree, shrub, hedge, or plant. A tree permit is not required for a property owner, resident, or their agent to maintain shrubs, hedges, or plants located within the city right-of- way associated with their property.
(b) Fasten a sign, wire, or injurious material to any public tree, shrub, hedge, or plant. (c) Excavate any ditch or tunnel; or place concrete or other pavement within a distance of ten feet of the center of the trunk of any public tree.

8.04.030 Application for permit.

Any person desiring to do any of the work described in Section 8.04.020 may apply for a tree permit so to do. The applicant shall state the nature of the work and the location where it will be done.

8.04.040 Issuance of permit.

A tree permit shall be issued authorizing work that meets all the following conditions:
(a) Will not create, continue, or aggravate any hazardous condition, or public nuisance. (b) Will not prevent or interfere with the growth, location or planting of any approved public tree.
(c) Is consistent with the planting plan being followed by the city.

8.04.050 Public nuisances*.

Any of the following are, for the purposes hereof, defined to be public nuisances:
(a) Any dead, diseased, infested, or dying tree, shrub, hedge, or plant in any street or on any public or private property so near to any public tree, shrub, hedge, or plant as to constitute a danger to a public tree, shrub, hedge, or plant, or street, or portion thereof or public property. (b) Any tree, shrub, hedge, or plant on any private property or in any street, of a type or species that will destroy, impair, or otherwise interfere with any street improvement, sidewalk, curb, approved public tree, gutter, sewer, other public improvement, including utility mains and services, or a public tree, shrub, hedge, or plant.

Item 13
Attachment A - Ordinance
of the Council of the City
of Palo Alto Amending
Chapter 8.04 Street,
Trees, Shrubs, and Plants
and Chapter 8.10 Tree
Preservation and
Management Regulations

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(c) Any tree limb, shrub, hedge, or plant reaching a height more than three feet above the curb grade adjacent thereto, except a tree trunk having no limbs lower than nine feet above curb grade, within the thirty-five foot triangle of public or private property, measured from the projected curb lines, at the intersections of any street improved for vehicular traffic where either traffic signals, stop signs, or yield signs are not installed, or at any intersections which are determined by the chief transportation official to contain a tree limb, shrub, hedge, or plant that obscures or impairs the view of a passing motorist, cyclist or pedestrian so as to create a safety hazard.
(d) Vines or climbing plants growing into or over any public tree, shrub, hedge, or plant; or any public hydrant, pole or electrolier.
(e) Existence of any tree within the city limits that is infested or infected with objectionable insects, scale, fungus, or growths that are included in the California Department of Food and Agriculture’s detection and eradication programs or that are growth injurious to trees. (f) The existence of any branches or foliage which interfere with visibility on, free use of, access to, or obstruct public vehicular or pedestrian travel on any portion of any street improved for vehicular or pedestrian travel.
(g) Hedges or dense, thorny shrubs and plants on any street or part thereof. (h) Shrubs and plants more than two feet in height in any tree well or planting strip between the sidewalk and curb, measured above top of curb grade. (i) Any tree, shrub, hedge, or plant declared a public nuisance pursuant to state law and ordered removed by a court of competent jurisdiction.
* Abatement procedure - See Chapter 9.56 of this code.

8.04.070 Enforcement.
(a) Violation of any provision of this chapter is a misdemeanor, punishable as provided in this code. Each day of violation constitutes a separate offense and may be separately punished. (b) Persons employed in the following designated employee positions are authorized to exercise the authority provided in California Penal Code Section 836.5 and are authorized to issue citations for violations of this chapter, including but not limited to leveling fines under the city's administrative penalty authority: assistant director of public works public services division, urban forester, project manager in the urban forestry section, landscape architect, and code enforcement officer.
(c) Any person who damages a public tree, through any act or omission, whenever such act or omission is prohibited by or not authorized pursuant to this chapter, may be liable civilly in a sum not to exceed ten thousand dollars per tree, or the reproduction cost of each such tree, whichever amount is higher.

Item 13
Attachment A - Ordinance
of the Council of the City
of Palo Alto Amending
Chapter 8.04 Street,
Trees, Shrubs, and Plants
and Chapter 8.10 Tree
Preservation and
Management Regulations

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(d) Injunctive relief. A civil action may be commenced to abate, enjoin, or otherwise compel the cessation of such violation.
(e) Costs. In any civil action brought pursuant to this chapter in which the city prevails, the court shall award to the city all costs of investigation and preparation for trial, the costs of trial, reasonable expenses including overhead and administrative costs incurred in prosecuting the action, and reasonable attorney fees.
(f) The remedies and penalties provided in this section are cumulative and not exclusive.

8.04.080 Interference with enforcement.

No person shall interfere with or delay the authorized representatives of the city from the execution and enforcement of this chapter, except as provided by law.

8.04.090 Adoption of regulations.

The city may adopt regulations prescribing standards of landscaping and planting of streets, parks and public places, therein. A copy of such regulations shall be available for public inspection upon request, and all work performed in streets, parks or public places shall be performed in accordance therewith.

SECTION 2
. Chapter 8.10 (Tree and Landscape Preservation Management) of Title 8 (Trees and Vegetation) of the Palo Alto Municipal Code is hereby amended to read as follows (additions
underlined and deletions struck through):

Chapter 8.10
TREE AND LANDSCAPE PRESERVATION AND MANAGEMENT*
Sections:

8.10.010 Purpose.

8.10.020 Definitions.

8.10.030 Tree and Landscape Technical Manual.

8.10.040 Disclosure of information regarding existing trees.

8.10.050 Removal of protected trees.

8.10.055 Tree replacement.

8.10.060 No limitation of authority under Titles 16 and 18.

8.10.070 Care of protected trees.

8.10.080 Development conditions.

8.10.090 Designation of heritage trees.

Item 13
Attachment A - Ordinance
of the Council of the City
of Palo Alto Amending
Chapter 8.04 Street,
Trees, Shrubs, and Plants
and Chapter 8.10 Tree
Preservation and
Management Regulations

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8.10.092 Tree removal in wildland- urban interface area.

8.10.095 Tree removal in Hospital District Zone.

8.10.100 Enforcement.

8.10.110 Remedies for violation.

8.10.120 Fees.

8.10.130 Severability.

8.10.140 Applications, notice, and appeals.

8.10.010 Purpose.

The purpose of this chapter is to protect specified trees located on private property within the city, and establish standards for removal, maintenance, and planting of trees and landscaping.

In establishing these procedures and standards, the city recognizes that trees and landscaping are an essential part of the city's infrastructure. Their benefits include promoting the health, safety, welfare, and quality of life of the residents of the city; addressing climate change by sequestering carbon and providing a cooling effect; reducing air, water, and noise pollution; preventing soil erosion and stormwater runoff; providing wildlife habitat; and enhancing the aesthetic environment. It is the city's intent to encourage both the preservation of trees and the proactive incorporation of trees and their benefits within development.

8.10.020 Definitions.

For the purposes of this chapter, terms defined in Chapter 8.04 shall have the same meanings in this chapter, and the following terms shall have the meaning ascribed to them in this section:
(a) "Basal flare" means that portion of a tree where there is a rapid increase in diameter at the confluence of the root crowntrunk and trunkrootcrown. (b) "Buildable area" means that area of a parcel:
(1) Upon which, under applicable zoning regulations, a structure may be built without a variance, design enhancement exception, or home improvement exception; or (2) Necessary for construction of primary access to structures located on or to be constructed on the parcel, where there exists no feasible means of access which would avoid protected trees. On single-family residential parcels, the portion of the parcel deemed to be the buildable area for primary access shall not exceed ten feet in width. (c) "Building footprint" means the two-dimensional configuration of a building's perimeter boundaries as measured on a horizontal plane at ground level.

Item 13
Attachment A - Ordinance
of the Council of the City
of Palo Alto Amending
Chapter 8.04 Street,
Trees, Shrubs, and Plants
and Chapter 8.10 Tree
Preservation and
Management Regulations

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(d) "Designated arborist" means an arborist certified by the International Society of Arboriculture or another nationally recognized tree research, care, and preservation organization, selected by the urban forester for inclusion in a list of approved arborists to be:
hired by:
(1) Hired by anAn applicant at their own expense, or
(2) Chosen by theThe city at an applicant's expense, if a project includes a public hearing. (e) "Development" means any work upon any property in the city which requires a subdivision, planned community zone, variance, use permit, building permit, demolition permit, or other city approval or which involves excavation, landscaping or construction within the tree protection zonedripline area of a protected tree or is subject to requirements of the California Model Water Efficient Landscape Ordinance (MWELO).
(f) "Director of planning and development services" means the director of planning and development services or their designee.
(g) "Director of public works" means the director of public works or their designee. (h) "Discretionary development approval" means planned community zone, subdivision, use permit, variance, home improvement exception, design enhancement exception, architectural review board approval, or any proposal or application that requires the discretion of the authorizing person or entity.
(i) "Dripline area" means the area defined by the projection to the ground of the outer edge of the canopy or a circle with a radius ten times the diameter of the trunk as measured four and one-half feet (fifty-four inches) above natural grade, whichever is greater. (j) "Excessive pruning" of a protected tree means any of the following:
(1) Removal of more than twenty-five percentone-fourth of the functioning leaf, stem, or root area of a tree in any twenty-four-month period.
(2) Removal of more than fifteen percent of the functioning root area of any Quercus (oak) species in any thirty-six-month period.
(3) Any removal of the functioning leaf, stem, or root area of a tree so as to cause a significant decline in health, increased risk of failure, or the unbalancing of a tree. (jk) "Hazardous" means an imminent hazard which constitutes a high or extreme threat to the safety of persons or property as defined by American National Standards Institute A300, Part 9.
(kl) "Protected" tree means any of the following:
(1) Any locally native tree of the species Acer macrophyllum (Bigleaf Maple), Calocedrus decurrens (California Incense Cedar), Quercus agrifolia (Coast Live Oak), Quercus douglasii (Blue Oak), Quercus kelloggii (California Black Oak), or Quercus lobata (Valley Oak) which is eleven Item 13
Attachment A - Ordinance
of the Council of the City
of Palo Alto Amending
Chapter 8.04 Street,
Trees, Shrubs, and Plants
and Chapter 8.10 Tree
Preservation and
Management Regulations

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and one-half inches in diameter (thirty-six inches in circumference) or more when measured four and one-half feet (fifty-four inches) above natural grade. (2) Any Coast Redwood tree (species Sequoia sempervirens) that is eighteen inches in diameter (fifty-seven inches in circumference) or more when measured four and one-half feet (fifty-four inches) above natural grade.
(3) Any tree, other larger than a Coast Redwood Tree, fifteen inches in diameter (forty-seven inches in circumference) or more when measured four and one-half feet (fifty-four inches) above natural grade of any species except those invasive species described as weeds in Section

8.08.010 and those species classified as high water users by the Water Use Classificationwater use classification of Landscape Speciesthe landscape species list (WUCOLS) approved by the California Department of Water Resources.
(4) Any tree designated for protection during review and approval (with the exception of a current or previously completed development project. On parcels zoned other than single- family (R-1) or low density (RE, R-2, or RMD) residential, species exempted under subsection (3) of this Section may be designated as a protected tree.Coast Redwood). (4) Any tree designated for protection during review and approval of a development project. (5) Any tree designated for carbon sequestration and storage and/or environmental mitigation purposes as identified in an agreement between the property owner and a responsible government agency or recorded as a deed restriction. (6) Any heritage tree designated by the city council in accordance with the provisions of this chapter.
(7) Any replacement mitigation tree or other tree designated to be planted due to the conditions listed in Section 8.10.055.
(lm) "Protected tree removal permit" means a permit issued to allow a person to remove a protected tree.
(m) “Right tree in the right place principles” means the set of principles that determine if a tree is located in an appropriate location for its specific species requirements and characteristics, in accordance with the factors listed in the Tree and Landscape Technical Manual.
(n) "Remove" or "removal" means:
(1) Complete removal, such as cutting to the ground or extraction, of a tree; or (2) Taking any action foreseeably leading to the death of a tree or permanent damage to its health; including but not limited to excessive pruning, cutting, topping, girdling, poisoning, overwatering, underwatering, unauthorized relocation or transportation of a tree, or trenching, excavating, altering the grade, or paving within the tree protection zonedripline area of a tree.

Item 13
Attachment A - Ordinance
of the Council of the City
of Palo Alto Amending
Chapter 8.04 Street,
Trees, Shrubs, and Plants
and Chapter 8.10 Tree
Preservation and
Management Regulations

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(o) “Retrenchment” means the process in which trees may reconfigure as they age and deteriorate, often continuing to grow in trunk diameter while branches die and fail. (p) "Tree Protection Zone" means the area defined by a circle with a radius ten times the diameter of the trunk when measured four and one-half feet (fifty-four inches) above natural grade.
(q) "Tree Reportreport" means a report prepared by a designated arborist. (rp) "Tree and Landscape Technical Manual" means the regulations issued by the city manager to implement this chapter.

8.10.030 Tree and Landscape Technical Manual.

The city manager, through the urban forestry section, and public works and planning and development services departments, shall issue regulations necessary for implementation and enforcement of this chapter, which shall be known as the Tree and Landscape Technical Manual. In the event of a conflict between the provisions of this Title 8 and the Tree and Landscape Technical Manual, this Title 8 shall prevail. The Tree and Landscape Technical Manual will be made readily available to the public and shall include, but need not be limited to, standards and specifications regarding the following:
(a) Protection of trees during construction.
(b) Replacement of trees allowed to be removed pursuant to this chapter where such replacements:
(1) Prioritize the use of locally native species, as listed in Section 8.10.020(l)(1), consistent with Urban Forest Master Plan Goal 2: "Re-generated native woodland and riparian landscapes as the key ecological basis of the urban forest with focus on native species and habitat;" (2) Include climate adaptive, drought tolerant, non-native species as needed to satisfy right tree in the right place principles; and
(3) Incorporate a secondary goal of net tree canopy increase on the property within fifteen years.
(c) Maintenance of protected trees (including but not limited to pruning, irrigation, and protection from disease).
(d) The format and content of tree reports required to be submitted to the city pursuant to this chapter.
(e) The criteria for determining whether a tree is hazardous within the meaning of this chapter.
(f) Landscape design, irrigation, and installation standards consistent with the city's water efficient landscape regulations.

Item 13
Attachment A - Ordinance
of the Council of the City
of Palo Alto Amending
Chapter 8.04 Street,
Trees, Shrubs, and Plants
and Chapter 8.10 Tree
Preservation and
Management Regulations

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8.10.040 Disclosure of information regarding existing trees. (a) Any application for development or demolition shall be accompanied by a statement by a designated arborist which discloses whether any protected trees exist on the property which is the subject of the application, and describing each such tree, its species, size, tree protection zonedripline area, and location. This requirement shall be met by including the information on plans submitted in connection with the application.
(1) Notwithstanding subsection (a), applications involving only the development of an Accessory Dwelling Unit that conforms to Section 18.09.030, Table 1, require only a statement disclosing whether any protected trees are located on the property which is the subject of the application. This statement may be completed by the applicant. (b) In addition, the location and species of anyall other tree which is four inches in diameter (e.g., thirteen inches in circumference) or more when measured four and one-half feet (fifty- four inches) above natural grade shall be shown on the plans if the tree is:
(1) On the property or trees on the property and in the adjacent public right-of-way, and is which are within thirty feet of the building footprint proposed for development, or (2) Locatedand trees located on adjacent property within thirty feet of the proposed building footprint, or
(1)(3) Close enough that its canopy overhangswith canopies overhanging the project site, shall be shown on the plans, identified by species.
(c) The director of public works or urban forester may require submittal of such other information as is necessary to further the purposes of this chapter including but not limited to photographs.
(d) Disclosure of information regarding private protected trees pursuant to this section shall not be required when the development for which the approval or permit is sought does not involve any change in an existing building footprint nor any grading, trenching, paving, or any change in landscaping which could alter water availability to established plants, hedges, shrubs, or trees.
(e) The urban forester or the designated arborist for a project shall add identified protected trees into the city's tree inventory database, and in coordination with the planning and development services departments, into city parcel reports. (f) Knowingly or negligently providing false or misleading information in response to this disclosure requirement shall constitute a violation of this chapter.

8.10.050 Removal of protected trees.

It shall be a violation of this chapter for anyone to remove or cause to be removed a protected tree, except pursuant to a protected tree removal permit issued under Section

8.10.140 consistent with the following:

Item 13
Attachment A - Ordinance
of the Council of the City
of Palo Alto Amending
Chapter 8.04 Street,
Trees, Shrubs, and Plants
and Chapter 8.10 Tree
Preservation and
Management Regulations

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(a) In the absence of proposed development:
(1) A protected tree shall not be removed unless the urban forester grants a protected tree removal permit, or on parcels zoned other than single-family (R-1) or low density residential (RE, R-2, or RMD), the director of planning and development services authorizes the removal through staff level architectural review pursuant to Section 18.76.020(b)(3), having determined, on the basis of a tree report prepared by a designated arborist and other relevant information, that treatments or corrective practices are not feasible, and that the tree should be removed because any of the following apply:
(i) It is dead, is hazardous, or constitutes a public nuisance under Section 8.04.050 of this code.
(ii) It is a detriment to or is crowding an adjacent protected tree. , or is impacting the foundation or eaves of a residence or any covered parking required under Title 18. (iii) It is at risk for retrenchment or other tree decline coping processes or does not conform with right tree in the right place principles.
(iv) It is impacting the foundation or eaves of a residence, or any covered parking required under Title 18 of this code.
(2) In the event a protected tree is removed pursuant to a protected tree removal permit granted under this subsection (a), a temporary moratorium on development of the subject property may be issued by the urban forester for up to twenty-four months or by, the director of planning and development services, in consultation with the urban forester, for up tomay issue a temporary moratorium on development of the subject property not to exceed thirty-six months, from the date the tree removal occurred. Completion of requiredFor any moratorium less than thirty-six months, the urban forester shall determine appropriate mitigation measures included infor the tree removal permit does not remove or shorten any such moratorium. A moratorium may be terminated early with approval of the urban forester or director of planning, and development services, as applicable, and may require additional mitigationensure measures. are incorporated into any future development approvals for the property. Mitigation measures included in the protected tree removal permit and any additional mitigation measures required to shorten a moratoriumas determined by the urban forester shall be imposed as a condition of any subsequent permits for development on the subject property. (b) In the case of any development on a single-family (R-1) or low density (RE, R-2, or RMD) residential zoned parcel, other than in connection with a subdivision, a protected tree shall not be removed unless determined by the urban forester, on the basis of a tree report prepared by a designated arborist and other relevant information, that any of the following apply:
(1) The tree is so close to the proposed development that construction would result in the death of the tree, and there is no financially feasible design alternative that would permit preservation of the tree, where financially feasible means an alternative that preserves the tree unless retaining the tree would increase project cost by more than twice the reproduction cost of the tree or ten percent of the given project valuation, whichever is greater.

Item 13
Attachment A - Ordinance
of the Council of the City
of Palo Alto Amending
Chapter 8.04 Street,
Trees, Shrubs, and Plants
and Chapter 8.10 Tree
Preservation and
Management Regulations

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(2) Retention of one or more trees would result in reduction of the otherwise-permissible buildable area of the lot by more than twenty-five percent, and there is no financially feasible design alternative that would allow for preservation of the tree(s). For the purposes of this subsection (a)(2), a financially feasible design alternative means a design alternative that preserves the tree(s) and would not increase the project cost by more than twice the reproduction cost of the tree(s) or ten percent of the given project valuation, whichever is greater. All tree protection zones impacting buildable area are included in the reduction of buildable area calculation. (1)(3) The tree could be removed due to the conditions listed in Section 8.10.050(a)(1)(i), (ii) or (iii) (2) The tree could be removed due to the conditions listed in Section 8.10.050(a)(1) and treatments or corrective practices are not feasible. (c) In the case of development involving a proposed subdivision of land into two or more parcels, a protected tree shall not be removed unless determined by the urban forester, on the basis of a tree report prepared by a designated arborist and other relevant information, that either of the following apply:
(1) Removal is unavoidable due to restricted access to the property or deemed necessary to repair a geologic hazard (landslide, repairs, etc.), in which case only the protected tree or trees necessary to allow access to the property or repair the geologic hazard may be removed. (2) The tree could be removed due to the conditions listed in subsection (a)(1)(i), (ii), or (iii) and treatments or corrective practices are not feasible. (d) In the case of development requiring planning approval under Title 18, and not included under subsections (b) or (c), a protected tree shall not be removed unless determined by the urban forester, on the basis of a tree report prepared by a designated arborist and other relevant information, that anyeither of the following apply:
(1) Retention of one or more treesthe tree would result in reduction of the otherwise- permissible buildable area of the lot by more than twenty-five percent, and there is no financially feasible design alternative that would permit preservation of the tree(s),, where financially feasible means an alternative that preserves the tree(s) unless retaining the tree(s) would increase project cost by more than twice the reproduction cost of the tree or ten percent of the given project valuation, whichever is greater. All tree protection zones impacting buildable area are included in the reduction of buildable area calculation. (2) The tree should be removed because it is dead, hazardous, or constitutes a public nuisance under Section 8.04.050. In such cases, the tree protection zonedripline area of the removed tree, or an equivalent area on the site, shall be preserved for mitigation purposes from development of any structure.
(3) Discretionary development review determines that the final project follows right tree in the right place principles and would result in a net tree canopy increase on the property within fifteen years, and replacement of trees, shrubs, and plants either:

Item 13
Attachment A - Ordinance
of the Council of the City
of Palo Alto Amending
Chapter 8.04 Street,
Trees, Shrubs, and Plants
and Chapter 8.10 Tree
Preservation and
Management Regulations

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(i) Is consistent with Urban Forest Master Plan Goal 2: "Re-generated native woodland and riparian landscapes as the key ecological basis of the urban forest with focus on native species and habitat," or
(ii) Uses climate adaptive, drought tolerant species.
(e) In any circumstance other than those described in subsections (a), (b), (c), or (d), a protected tree shall not be removed unless determined by the urban forester, on the basis of a tree report prepared by a designated arborist and other relevant information, that the tree is dead, is hazardous, or constitutes a public nuisance under Section 8.04.050.

8.10.055 Tree replacement.
(a) In the event a protected tree is removed pursuant to Section 8.10.050(a)(1)(i), mitigation for the removed tree, replacement tree ratio, in lieu fees, or a combination thereof shall be determined by the urban forester, based on factors including but not limited to the species, size, location, and specific reason for removal of the protected tree, in accordance with the standards and specifications in the Tree and Landscape Technical Manual. (b) In the event a protected tree is removed pursuant to Section 8.10.050(a)(1)(ii), (iii) or (iv), (b), (c), (d), or (e), the tree removed shall be replaced in accordance with the standards and specifications in the Tree and Landscape Technical Manual, including but not limited to prioritization of locally native species, satisfaction of right tree in the right place principles, and incorporation of a secondary goal of net tree canopy increase on the property within fifteen years. The urban forester shall approve the number, species, size, and location of replacement trees.

8.10.060 No limitation of authority under Titles 16 and 18.

Nothing in this chapter limits or modifies the existing authority of the city under Title 18 to require trees, shrubs, hedges, and other plants not covered by this chapter to be identified, retained, protected, and/or planted as conditions of the approval of development. In the event of conflict between provisions of this chapter and conditions of any permit or other approval granted pursuant to Title 16 or Title 18, the more protective requirements shall prevail.

8.10.070 Care of protected trees.
(a) All owners of property containing protected trees shall follow the maintenance standards in the Tree and Landscape Technical Manual, including avoiding any action foreseeably leading to the death of a tree or permanent damage to its health; including but not limited to excessive pruning, cutting, topping, girdling, poisoning, overwatering, underwatering, unauthorized relocation or transportation of a tree, or trenching, excavating, altering the grade, or paving within the tree protection zonedripline area of a tree. (b) At least seven days prior to pruning a protected tree, other than that required to remove a dead, diseased, or broken branch or branches, the property owner or their designee shall prominently post a notice on the property, in one or more locations readily visible to the public, that includes standards for pruning and a description of the tree including tree species, size, Item 13
Attachment A - Ordinance
of the Council of the City
of Palo Alto Amending
Chapter 8.04 Street,
Trees, Shrubs, and Plants
and Chapter 8.10 Tree
Preservation and
Management Regulations

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location, the date of work, and a contact phone number. The form for such notice will be available on the city's website as a printable document. Protected trees less than five years old are exempt from this provision.
(c) The standards for protection of trees during construction contained in the Tree and Landscape Technical Manual shall be followed during any development on property containing trees.
(d) The urban forester shall add identified protected trees into the city's tree inventory database and, in coordination with the planning and development services departments, into city parcel reports.

8.10.080 Development conditions.
(a) Development approvals for property containing protected public trees shall include appropriate conditions as set forth in the Tree and Landscape Technical Manual, providing for the protection of such trees during construction and for maintenance of such trees thereafter.

Trees may be designated for protection that are significant visually or historically, provide screening, or are healthy and important to the nearby ecosystem. (b) It shall be a violation of this chapter for any property owner or agent of the owner to fail to comply with any development approval or building permit condition concerning preservation, protection, and maintenance of any tree, including but not limited to protected trees.

8.10.090 Designation of heritage trees.
(a) Upon nomination by any person and with the written consent of the property owner(s), the city council may designate a tree or trees as a heritage tree. (b) A tree may be designated as a heritage tree upon a finding that it is of importance to the community due to any of the following factors:
(1) It is an outstanding specimen of a desirable species. (2) It is one of the largest or oldest trees in Palo Alto. (3) It possesses distinctive form, size, age, location, and/or historical significance. (c) After council approval of a heritage tree designation, the city clerk shall notify the property owner(s) in writing. A listing of trees so designated, including the specific locations thereof, shall be kept by the departments of public works. (d) Once designated, a heritage tree shall be considered protected and subject to the provisions of this chapter unless removed from the list of heritage trees by action of the city council. The city council may remove a tree from the list upon its own motion or upon written request by the property owner. Request for such action must originate in the same manner as nomination for heritage tree designation.

Item 13
Attachment A - Ordinance
of the Council of the City
of Palo Alto Amending
Chapter 8.04 Street,
Trees, Shrubs, and Plants
and Chapter 8.10 Tree
Preservation and
Management Regulations

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8.10.092 Tree removal in wildland-urban interface area.

Tree removal and relocation in the wildland-urban interface (WUI) area, as defined in Section

15.04.190, shall be subject to the provisions in Chapter 15.04. To the extent Chapter 15.04 is inconsistent with this chapter, Chapter 15.04 shall control.

8.10.095 Tree removal in Hospital District Zone.

Tree removal and relocation in the Hospital District (HD) shall be subject to the provisions in Section 18.36.070. To the extent Section 18.36.070 is inconsistent with this chapter, Section

18.36.070 shall control.

8.10.100 Enforcement.
(a) Violation of this chapter is a misdemeanor, punishable as provided in this code. Each day of violation constitutes a separate offense and may be separately punished. (b) Persons employed in the following designated employee positions are authorized to exercise the authority provided in California Penal Code Section 836.5 and are authorized to issue citations for violations of this chapter, including but not limited to leveling fines under the city's administrative penalty authority: assistant director of public works public services division, urban forester, project manager in the urban forestry section, landscape architect, and code enforcement officer.

8.10.110 Remedies for violation.

In addition to all other remedies set forth in this code or otherwise provided by law, the following remedies shall be available to the city for violation of this chapter:
(a) Stop Work - Temporary Moratorium.
(1) If a violation occurs in the absence of proposed development pursuant to Section

8.10.050(a)(1), or while an application for a building permit or discretionary development approval for the lot upon which the tree is located is pending, the director of planning and development services in consultation with the urban forester shall issue a temporary moratorium on development of the subject property, not to exceed five years from the date the violation occurred. The purpose of the moratorium is to provide the city an opportunity to study and determine appropriate mitigation measures for the tree removal, and to ensure measures are incorporated into any future development approvals for the property. Mitigation measures as determined by the urban forester shall be imposed as a condition of any subsequent permits for development on the subject property. (2) If a violation occurs during development pursuant to Section 8.10.050(b), (c), (d), or (e), the city shall issue a stop work order suspending and prohibiting further activity on the property pursuant to the grading, demolition, and/or building permit(s) (including construction, inspection, and issuance of certificates of occupancy) until a mitigation plan has been filed with and approved by the director of planning and development services in consultation with the urban forester, agreed to in writing by the property owner(s), and either implemented or Item 13
Attachment A - Ordinance
of the Council of the City
of Palo Alto Amending
Chapter 8.04 Street,
Trees, Shrubs, and Plants
and Chapter 8.10 Tree
Preservation and
Management Regulations

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guaranteed by the posting of adequate security. The mitigation plan shall include measures for protection or repair of any remaining trees on the property, and shall provide for replacement of each tree removed on the property or at locations approved by the urban forester. The replacement ratio shall be in accordance with the standards set forth in the Tree and Landscape Technical Manual, and shall be at least twice the prescribed ratio required where tree removal is permitted pursuant to the provisions of this chapter. (b) Civil penalties.
(1) As part of a civil action brought by the city, a court may assess against any person who commits, allows, or maintains a violation of any provision of this chapter a civil penalty in the following amount:
(i) Ten thousand dollars per tree, or twice the reproduction cost of each tree, whichever amount is higher, for the complete removal of a tree, as defined in Section 8.10.020(n)(1). (ii) Ten thousand dollars per tree, or the reproduction cost of each tree, whichever amount is higher, for any of the actions set forth in Section 8.10.020(n)(2). (iii) Ten thousand dollars per tree, or twice the repair cost of each tree, whichever amount is higher, for damage to a tree protected or regulated by this chapter which can be rehabilitated. (2) Penalties shall be payable to the city.
(3) Reproduction or repair cost for the purposes of this chapter shall be determined utilizing the most recent edition of the Guide for Plant Appraisal, published by the Council of Tree and Landscape Appraisers.
(c) Administrative penalties. Persons listed in Section 8.10.100(b) may issue citations for violations of this chapter that level fines under the city's administrative penalty authority. (d) Injunctive relief. A civil action may be commenced to abate, enjoin, or otherwise compel the cessation of such violation.
(e) Costs. In any civil action brought pursuant to this chapter in which the city prevails, the court shall award to the city all costs of investigation and preparation for trial, the costs of trial, reasonable expenses including overhead and administrative costs incurred in prosecuting the action, and reasonable attorney fees.
(f) The remedies and penalties provided in this section are cumulative and not exclusive.

8.10.120 Fees.

Tree reports required to be submitted to the city for review and evaluation pursuant to this chapter shall be accompanied by the fee prescribed therefor in the municipal fee schedule.

8.10.130 Severability.

If any provision of this chapter or the application thereof to any person or circumstance is held to be invalid by a court of competent jurisdiction, such invalidity shall not affect any other Item 13
Attachment A - Ordinance
of the Council of the City
of Palo Alto Amending
Chapter 8.04 Street,
Trees, Shrubs, and Plants
and Chapter 8.10 Tree
Preservation and
Management Regulations

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provision of this chapter which can be given effect without the invalid provision or application, and to this end the provisions of this chapter are declared to be severable.

8.10.140 Applications, notice, and appeals.
(a) Applications.
(1) All applications for removal of a protected tree pursuant to Section 8.10.050 shall be filed in accordance with this section and any applicable provisions of Chapter 18.77. Applications for removal of protected trees on non-residential zoned properties will follow review guidelines set forth in Section 8.10.050(d) and Section 18.76.020 and will follow the process set forth in Section 18.77.070.
(2) The application form shall be prescribed by the urban forester and shall contain a list of information that must be submitted in order for the application to be deemed complete. (3) Each application must be signed by all owners of the real property containing the protected tree, or an agent of the owner of record of the real property on which the protected tree occurs, when duly authorized by the owner in writing. (4) No application shall be deemed received until all fees for the application as set forth in the municipal fees schedule have been paid, and all documents specified as part of the application in this chapter or on the application form have been filed. (5) Protected tree removal permits shall automatically expire after twelve months, unless otherwise provided in the permit, from the date of issuance of the permit if within such twelve- month period, the proposed tree has not been removed.
(b) Notice.
(1) All applications for removal of a protected tree pursuant to Section 8.10.050 shall give notice in accordance with this section, the Tree and Landscape Technical Manual, and any applicable provisions of Chapter 18.77.
(2) After submittal of an application to remove a protected tree, notice shall be given consistent with subsection (b)(4) and shall include the date of the proposed removal and the basis for the application.
(3) Upon determination of a protected tree removal application, notice shall be given consistent with subsection (b)(4) and shall include a description of the decision and how to appeal it.
(4) Notices required pursuant to this section shall include the address of the property, a description of the protected tree, including species, size, and location, and urban forestry contact information, and shall be given as follows:
(i) In writing to all owners and residents of property within 300 feet of the exterior boundary of the property containing the protected tree, and to all principal urban forestry partner organizations.

Item 13
Attachment A - Ordinance
of the Council of the City
of Palo Alto Amending
Chapter 8.04 Street,
Trees, Shrubs, and Plants
and Chapter 8.10 Tree
Preservation and
Management Regulations

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(ii) By posting on the property, in one or more locations visible to the public. (iii) By posting on the city's website.
(c) Appeals.
(1) Any person applying to remove a protected tree in the absence of proposed development pursuant to Section 8.10.050(a), and any owner or resident of property within 600 feet of the exterior boundary of the property containing the protected tree, may request a public hearing by the director of public works to review the urban forester's decision, and may appeal the director of public works' determination to the city council. Any such request or appeal shall be filed with the public works department in a manner prescribed by the urban forester. (2) Any person applying to remove a protected tree pursuant to Section 8.10.050(b), (c), (d), or (e), and any owner or resident of property within 600 feet of the exterior boundary of the property containing the protected tree may request a hearing by appeal the director of planning and development services to review the decision. The request for a hearing shall be filed with the planning division in in a manner prescribed by the director of planning and development services. An appeal of the director of planning and development services determination shall be conducted in accordance with the procedures set forth in Chapter 18.78. (3) All appeals must be filed within fourteen days of posting of notice on the property pursuant to subsection (b)(4)(ii).

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 ordinance 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. Alternatively, the ordinance is also exempt under CEQA Guidelines Section 15308 because it involves regulatory action for the protection of the environment.

//

//

//

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Item 13
Attachment A - Ordinance
of the Council of the City
of Palo Alto Amending
Chapter 8.04 Street,
Trees, Shrubs, and Plants
and Chapter 8.10 Tree
Preservation and
Management Regulations

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SECTION 5. This ordinance shall be effective on the thirty -first day after the date of its adoption. However, this ordinance shall not apply to any projects that have submitted a complete application as of the ordinance’s effective date. In addition, until such time as a list of designated arborists is established by the Urban Forester, the term “designated arborist” shall mean any arborist certified by the International Society of Arboriculture or another nationally recognized tree research, care, and preservation organization.

INTRODUCED:

PASSED:

AYES:

NOES:

ABSENT:

ABSTENTIONS:

ATTEST:

____________________________ ____________________________ City Clerk Mayor

APPROVED AS TO FORM: APPROVED:

____________________________ ____________________________ Assistant City Attorney City Manager

____________________________
Director of Public Works

Item 13
Attachment A - Ordinance
of the Council of the City
of Palo Alto Amending
Chapter 8.04 Street,
Trees, Shrubs, and Plants
and Chapter 8.10 Tree
Preservation and
Management Regulations

Item 13: Staff Report
Pg.
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*NOT YET APPROVED* Attachment B
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Resolution No. ______
Resolution of the Council of the City of Palo Alto Amending and Restating the Administrative Penalty Schedule and Civil Penalty Schedules for Certain Violations of the Palo Alto Municipal Code

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

SECTION 1
. Administrative Penalties. The administrative penalty schedule for violations of the Palo Alto Municipal Code established by Resolution No. 10122 is hereby amended and restated to read as follows:

Standard penalty unless otherwise indicated below. $50

Second violation within 36 month period 150% of listed penalty (unless otherwise specified)

Third & subsequent violations within 36 month period. 200% of listed penalty (unless otherwise specified)

Delinquency penalty. 10% per month, simple interest, on delinquent amount

4.04.020 License or permit required. 300

4.04.100 Display of license or permit. 300

4.10.045 License fees for pushcart vendors. 300

4.10.050 Regulations for solicitors and peddlers. 350

4.10.055 Identification cards for solicitors. 250

4.10.057 Regulations for pushcart vendors. 300

4.10.070 License required - circus etc. 300

4.10.120 Arcade prohibited. 250

4.10.200 Pawn brokers prohibited. 250

4.10.230 Daily report of second hand dealers. 250

4.10.240 Maintaining reports - second hand dealers. 250

4.10.260 Failure to make report - second hand dealers. 250

4.10.270 Second hand goods held for inspection. 250

4.18.040 Unlawful dog or cat kennel. 250

4.30.010 Soliciting without a permit. 250

4.30.100 Conduct of solicitations. 250

4.32.020 Soliciting without a permit. 250

4.32.060 Investigation of records of solicitor. 250

4.32.090 Acts required during solicitation. 250

4.32.100 Restriction of solicitation. 250

4.32.110 Hours of solicitation. 250

4.34.020 Permit required - closing out sale. 250

4.39.030 Audible alarms. 250

4.39.040 Limitation on automatic dialing devices. 250

4.39.060 Registration of alarm. 250

4.39.110 Alarm violations. 100

4.42.020 Certificate of public convenience. 1000
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Restating Administrative
Penalty Schedule

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4.42.085 Controlled substance and alcohol testing. 500

4.42.090 Taxi owners permit. 5000

4.42.100 Taxi drivers permit expired. 250

4.42.130(b) Taxi drivers permit not displayed. 250

4.42.190 Taximeters. 500

4.42.200 Taxi cab operating regulations. 250

4.42.210(a) Interference with inspection. 500

4.42.210(b) Inspection of vehicles. 500

4.42.220 Operating regulations. 500

4.42.230 Maintenance of vehicles. 500

4.51.030 License required - bingo. 250

4.51.050 Minors restricted - bingo. 50

4.51.080 Staffing and operations - bingo. 250

4.51.110 Physical presence required - bingo. 250

4.52.020 License required - billiards and bowling. 1000

4.52.040 Minors restricted - billiards and bowling. 250

4.52.060 Offensive conduct - billiards and bowling. 250

4.52.070 Interference w/emerg. Access -billiards/bowling. 250

4.54.030(a) Permit required - massage establishment. 1000

4.54.060(a) Permit required - massage tech. 250

4.54.110 Massage establishment facilities. 250

4.54.130 Business name - massage. 250

4.55.030 License required - adult entertainment. 1000

4.56.030 License required - hot tub and sauna. 1000

4.56.060 Employee permit required - hot tub and sauna. 250

4.56.100 Hot tub/sauna establishment and operations. 250

4.56.120 Business name - hot tub and sauna. 250

4.56.150 Display of permit - hot tub and sauna. 250

4.56.200 Employment of persons < 18 - hot tub and sauna. 250

4.57.020 Permit required - firearms sales. 1000

4.57.095 Firearms dealers – business and security. 500

4.58.020 Minors restricted - narcotics paraphernalia shop. 750

4.58.030 Regulations - narcotics paraphernalia shop. 750

4.59.010 Pet shop requirements. 250

4.59.020 Pet shop sanitation. 250

4.59.030 Pet shop food. 250

4.59.040 Pet shop notification. 250

4.59.050 Pet shop - sale of dangerous or wild animals. 250

4.59.070 Dead animals. 250

4.59.080 Permit required - pet shop and kennel. 250

4.59.090 Permit required - grooming shop. 250

4.59.095 Sales of kittens and puppies. 250

4.59.100 Sales of raccoons. 250

4.59.105 Sales of rabbits, chicks, ducklings. 250

4.60.030 Business registration required 250

4.60.060 Business registry application required 250

4.60.120(a) Business registry fee delinquency 50% of registry fee if 1-30 days late 100% of fee or 31+ days late

5.12.010 Permit required - refreshment stand. 250

5.20.030 Discarding solid waste. 250

5.20.040 Accumulation of garbage. 250

5.20.050 Unauthorized bins, boxes, containers-first violation. 500 Second and subsequent violations. 1000
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Resolution Amending and
Restating Administrative
Penalty Schedule

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5.20.080 Number of containers required. 250

5.20.090 Collection of recyclable materials. 250 for Commercial Premises 50 for Residential Premises

5.20.100 Collection of compostable materials. 250 for Commercial Premises 50 for Residential Premises

5.20.105 Contamination of containers. 250 for Commercial Premises 50 for Residential Premises

5.20.108 Multifamily properties/Commercial premises. 250

5.20.109 Requirements for special events. 100

5.20.111 Self-haul in violation of code 100

5.20.120 Improper container condition. 250

5.20.130 Maintenance of bins and boxes- first violation. 250 Second and subsequent violations. 500

5.20.160 Spillage or leakage of solid waste. 250

5.20.180 No accumulation of solid waste. 250

5.20.190 No burning, burial, or dumping of solid waste. 250

5.20.200 Hazardous waste. 500

5.20.220 Scavenging prohibited. 100

5.30.020 Polystyrene & Non-Recyclable Plastic. 500

5.30.025(a)-(d) Limitation on use of Disposable Foodware items 100 and other Disposable products.

5.30.025(e) Prohibition of third-party vendors providing utensils 350 or condiments unless requested by customer.

5.35.020 Bags at retail establishments. 500

5.35.030 Bags at supermarkets. 500

6.08.020(b) Interference with animal control officer. 250

6.16.010 No dog license. 50

6.16.080 Number of dogs allowed. 100

6.16.100 Leash Law. 100

6.20.010 Animals at large. 100

6.20.020 Animals on unenclosed premises. 100

6.20.030 Animals kept in enclosures. 100

6.20.035 Tying animals to bicycle racks or trees. 100

6.20.040 Nuisance on sidewalk. 100

6.20.045 Animal waste removal - first offense. 25

6.20.045 Animal waste removal - second offense. 50

6.20.045 Animal waste removal - third offense. 125

6.20.055 Animals in vehicles. 250

6.20.060 Bees close to property line. 100

6.20.080 Permit required - livestock. 100

6.20.090 Maintaining birds, goats, pigs and rabbits. 100

6.20.110 Number of cats kept. 100

6.20.120 Permit required - breeding animals. 100

6.20.130 Cat or dog in heat. 100

6.20.140 Barking dogs. 100

6.20.150 Vaccination required - animals. 100

6.20.160 Sanitary enclosures. 100

6.20.170 Slaughter of animals. 500

6.24.020 Permit required - construction of stable. 250

6.24.050 Maintenance of stable. 250

6.28.040 Possession of dangerous or wild animals. 500

6.32.010 Keeping diseased animals. 500

6.32.020 Confining animals with rabies. 500
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Resolution Amending and
Restating Administrative
Penalty Schedule

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6.32.050 Dead animals in public. 500

6.36.010 Sales of certain animals. 250

8.04.020 Permit required - tree work. 500

8.04.020 Unauthorized removal of public trees 5000 per tree or reproduction cost up to 10,000, whichever is greater

8.04.020(a) Failure to comply with permit 500 per tree for work on public trees.

8.04.020(a) Damage to public trees 150 per inch diameter of damaged tree part

8.04.020(b) Fasten a sign, wire, or injurious material 250 per tree to any public tree.

8.04.020(c) Excavate or pave near public trees 500 per tree

8.04.080 Interference with tree enforcement. 500

8.08.010 Weeds as public nuisance. 250

8.10.040 Failure to disclose protected tree 500 per tree

8.10.050 Protected trees. 500

8.10.050 Unauthorized removal of protected tree 5000 per tree or reproduction cost up to 10,000, whichever is greater

8.10.055 Failure to comply with tree replacement. 750 per tree

8.10.070 Failure to Ccare ofor protected trees. 500 per tree

8.10.080(b) Failure to comply with Ddevelopment conditions. 500 per condition

9.04.010 Open container in business district. 100

9.04.020 Open container in City parking lot. 100

9.04.030 Open container near liquor store. 100

9.04.040 Social host. First violation 250
Second violation 500
Third & subsequent violation 1000

9.07.020 Safe Storage of Firearms 1000

9.08.010 Discharge of firearms/fireworks. 1000

9.09.010(a) Urinating/defecating on street or public place. 250

9.09.010(b) Igniting or maintaining outdoor fire. 250

9.10.030 Residential property noise limits. 100

9.10.040 Commercial property noise limits. 100

9.10.050 Public property noise limits. 100

9.10.060(b) Construction noise signs. 250

9.10.060(c) Construction noise. 250

9.10.060(d) Construction equipment noise. 100

9.10.060(e) Residential power equipment noise. 100

9.10.060(f) Leaf blower noise- first violation. 250
Leaf blower noise- second violation 500
Leaf blower noise- third and subsequent violation 1000

9.10.060(g) Street sweeping noise. 100

9.10.060(h) Refuse collection noise. 100

9.10.060(i) Safety device noise. 100

9.10.060(k) Public parking lot cleaning noise. 100

9.10.060(l) Business district street cleaning noise. 100

9.12.010 Loudspeakers. 150

9.14.020 Smoking prohibited - enclosed places. 250 (2nd violation in 1 year: $300; 3rd and subsequent violations
in 1 year: $500)

9.14.025 Smoking prohibited – unenclosed areas. 250 (2nd violation in 1 year: $300; 3rd and subsequent violations
in 1 year: $500)
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Resolution Amending and
Restating Administrative
Penalty Schedule

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9.14.030 Smoking prohibited - city cars. 250 (2nd violation in 1 year: $300; 3rd and subsequent violations
in 1 year: $500)

9.14.035 Smoking prohibited – public parks and public events 250 (2nd violation in 1 year: $300; 3rd and subsequent violations
in 1 year: $500)

9.14.040 Smoking prohibited - child care facilities. 250 (2nd violation in 1 year: $300; 3rd and subsequent violations
in 1 year: $500)

9.14.050 Smoking prohibited – commercial areas
and public events. 250 (2nd violation in 1 year: $300; 3rd and subsequent violations
in 1 year: $500)

9.14.080 Location of tobacco vending machines. 1000

9.14.090 Display of tobacco products. 500

9.14.100 Failure to post “No Smoking” signs. 50

9.22.010 Impersonating public officials. 500

9.26.020 False representation as police officer. 250

9.28.010 Hotel guest register required. 250

9.28.020 Use of false name by hotel guest. 50

9.40.020 Landing aircraft at other than airport. 1000

9.44.010 Solicitation prohibited - public parking lot. 100

9.48.010 Displaying goods on sidewalk. 50

9.48.025 Sitting or lying on University Avenue sidewalks. 100

9.48.030 Operation of sidewalk elevator. 500

9.48.040 Throwing rubbish on streets. 250

9.48.050 Obligation to clean sidewalk. 200

9.50.010 Graffiti prohibited on public property. 500

9.56.030 Abatement of public nuisance. 500 unless otherwise specified

9.56.030(a)(5) Thirty-five foot site triangle. 200

9.56.030(a)(8) Foliage/branch obstruction. 200

9.56.030(a)(10) Excessive planting strip vegetation height. 150

9.60.030 Blocking entrances to City Hall. 500

9.60.050 Placing signs or climbing on City Hall. 500

9.60.060 Bicycles and skateboards at City Hall. 50

9.60.070 Alcoholic beverages prohibited - City Hall. 100

9.64.010 Overnight use of community facilities 250

9.74.030 Discrimination in housing. 250

9.78.020 Mosquito breeding places. 500

9.79.100 News rack violations. 100

12.08.010 Permit required - public right of way. 500

12.08.100 Removal of City Engineer monuments. 500

12.11.010 Building parklet on public right-of-way without 1000 permit

12.11.060 Violation of Chapter 12.11, permit, or regulations 500

12.12.010 Building on public easement without or in violation 1000 of encroachment permit

12.12.020 Failure to obtain or violation of commercial 500 sidewalk encroachment permit

12.16.030 Overhead wires in underground districts. 500

12.16.090 Property owner responsibility. 500

12.20.010 Utility rules and regulations 500 unless otherwise specified

12.20.010 Emergency water conservation regulations 100 (2nd violation in 1 year: $250; Item 13
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Restating Administrative
Penalty Schedule

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(Reso. Nos. 9509, 9460, 9449) 3rd and subsequent violations in 1 year: $500)

12.20.020 Providing false information to City Utilities. 500

12.32.010 Water use regulation. 100

15.04.070 Violations of Uniform Fire Code. 500 unless otherwise specified

16.04.050 Violations of California Building Code as amended. 500 unless otherwise specified

16.05.040 Violations of California Mechanical Code as amended500

16.06.050 Violations of California Residential Code as amended.500

16.08.040 Violations of California Plumbing Code as amended. 500

16.09.260 Violations of Sewer Use Ordinance 1000

16.10.020 Construction of private sewer system. 750

16.10.050 Permit required - private sewage system. 500

16.14.040 Violations of California Green Building 500 Standards Code as amended

16.14.260 Failure to meet diversion requirements. $150 per ton of waste not diverted or $3000, whichever is
greater

16.14.370 Failure to meet diversion requirements. $150 per ton of waste not diverted or $3000, whichever is
greater

16.16.060 Violations of California Electrical Code as amended. 500

16.17.020 Violations of California Energy Code as amended. 500

16.18.020 Violations of International Pool and Spa Code as 500 amended

16.20.020 Design review required - signs. 500

16.20.090 Prohibited signs. 250

16.20.100 Prohibited locations - signs. 250

16.20.110 Fuel price signs required. 250

16.20.210 Non-compliance with sign ordinance. 250

16.20.230 Abandoned signs. 250

16.20.250 Parking of advertising vehicles. 250

16.24.080 Fence violation. 250

16.28.060 Permit required - excavation and grading. 500

16.28.330 Protection of adjacent property. 500

16.28.340 Deposits of earth, rock, etc. 500

16.32.010 Permit required - moving a building. 250

16.36.050 Curb painting without a permit. 100

16.36.060 House numbering required. 100

16.38.020 Certificate of occupancy – community housing. 500

16.40.040 Dangerous and substandard buildings. 500

16.40.090 Non-compliance with order of building official. 500

16.40.180 Interference with repair or demolition work. 500

16.42.090 Failure to submit seismic report. 250

16.45.070 Failure to pay fee - Stanford Research Park. 250

16.46.060 Failure to pay fee - San Antonio - West Bayshore. 250

16.47.050 Failure to pay housing impact fee. 250

16.49.050 Exterior alteration of downtown historic structures 10000 or a significant structure outside the downtown
without or in violation of permit

16.49.060 Demolition of a significant downtown building 10000 without or in violation of permit

16.49.070 Demolition of a contributing downtown structure 10000 or significant structure outside the downtown
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Resolution Amending and
Restating Administrative
Penalty Schedule

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without or in violation of permit

16.49.080 Maintenance of downtown historic structure. 10000

16.49.090 Demolition of downtown historic structure. 10000

16.52.070 Construction - flood hazards. 500

16.59.090 Failure to pay fee- Citywide Transportation Impact. 250

16.60.090 Failure to pay fee- Charleston/Arastradero. 250

16.62.020 Maintenance of expired building permit 200 for 31st through 60th day 400 for 61st through 120th day
800 for 121st day and thereafter

17.04.020 Violations of hazardous materials storage. 500, unless otherwise specified

17.04.030 Specific obligation - hazardous materials. 500

17.10.010 General obligation - underground storage tanks. 750 unless otherwise specified

17.10.040 Permit required - underground storage. 500

17.10.140 Financial responsibility - underground storage. 500

17.10.150 Monitoring underground storage tanks. 1000

17.10.170 Unlawful abandonment - underground storage tanks.1000

17.12.010 Permit required - hazardous materials storage. 750

17.12.020 New hazardous materials storage facilities. 750

17.12.060 Hazardous materials storage facilities. 750

17.16.010 Hazardous materials management plan. 250

17.20.010 Hazardous materials inventory statement. 250

17.24.010 Hazardous materials discharge report. 750

17.32.010 Permit required - storage of hazardous materials. 1000

18.01.080 Violation of zoning laws. 500

18.16.060(d)Hotel stay in excess of 30 days. 200

18.38.020 Planned Community zoning (unless otherwise 500 specified in PC ordinance) 2500 beginning the 181st day following notice of violation

Violations of Ordinance 5069 shall
be subject to the penalties listed
above except that the penalty for
violations of Sections 4(b)(1), (2),
(6), and (7) of Ordinance 5069 shall
not be subject to the penalties
above or to the escalators for
second, third and subsequent
violations, but shall be $2157 per
day, for each and every day that a
grocery store is not in operation
within College Terrace Centre in
accordance with the terms of
Ordinance 5069. (The City Council
intends to adjust this penalty
amount periodically in future
updates to this administrative
penalty schedule to account for
periodic increases in the Consumer
Price Index for All Urban
Consumers.) In calculating the
penalties for such violations, the
City will allow for a grace period
for any daily violations that do not
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exceed six (6) cumulative months
in any five (5) year period.

However, this grace period was
previously applied to violations
from 1/10/18 through 7/10/18, so
there is no entitlement to any
further grace period prior to
1/10/23.

18.42.060(a)Incompatibility of home occupations. 200

18.42.060(b) Employees of home occupation. 200

18.42.060(c) On site advertising of home occupation. 200

18.42.060(d) Floor area of home occupation. 200

18.42.060(e) Traffic related to home occupation. 200

18.42.060(f) Home occupation as nuisance. 200

18.42.060(g) Outdoor storage related to home occupation. 200

18.42.070 Servicing vehicles in residential zone. 250

18.52.050 Transportation demand management conditions 1000 4000 beginning the 181st day
following notice of violation

18.84.200 Temporary uses. 250

22.04.030 Compliance with park regulations. 46 for violation of regulation R1-6 requiring payment of Foothills Park
entry fee; 250 for violation of all
other Park & Open Space
Regulations.

22.04.040 Failure to obtain use permit. 300

22.04.150(b) Entry at unapproved location - Foothills Park 50

22.04.150(c) Person in park after hours - Foothills Park. 250

22.04.150(d) Speed limit 20MPH - Foothills Park. 250

22.04.150(e) Vehicles in Foothills Park after hours. 100

22.04.150(f) Skateboards and motorcycles - Foothills Park. 250

22.04.150(g) Smoking on trails - Foothills Park. 1000

22.04.150(h) Fires in Foothills Park. 1000

22.04.150(i) Use of trails - Foothills Park. 100

22.04.150(l) Unleashed dog - Foothills Park. 250

22.04.155 Restraint of dogs in City parks. 250

22.04.160 Permit required - sales in parks. 250

22.04.170 Violation of park use permit. 250

22.04.180 Sound in parks. 250

22.04.190 Unauthorized golf and other games in parks. 250

22.04.200 Unauthorized models and kites in parks. 100

22.04.210 Parking in parks. 100

22.04.215 Launch and takeout from ramp or dock. 250

22.04.220 Bicycle not permitted on trails. 250

22.04.230 Dumping in park. 1000

22.04.240 Interference with park use permit. 250

22.04.250 Park regulations . 250 unless otherwise specified

22.04.260 Discharge of weapons in park. 500

22.04.270 Removal of flora or fauna. 500

22.04.280 Removal of turf or soil. 500

22.04.290(a) Damaging, defacing, etc., property. 1000

22.04.290(b) Marking, writing or printing on property. 1000

22.04.290(c) Attaching sign, etc., without permit. 500 Item 13
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22.04.290(d) Entering, etc., structure after posted hours. 250

22.04.290(e) Bringing portable tables without a permit. 100

22.04.300 Unlawful fire in city park. 1000

22.04.310 Enid Pearson Arastradero, Esther Park closure. 250

22.04.315 Byxbee Park and Baylands closed. 250

22.04.320 Parks closed. 250

22.04.321(a)Skateboarding in park after hours. 50

22.04.322 Trespass at Rinconada Park pool. 50

22.04.330 Alcohol in Cogswell Park. 250

22.04.331 Alcohol in Lytton Plaza. 250

22.04.332 Alcohol in Johnson Park. 250

22.04.333 Alcohol in Boulware Park. 250

22.04.334 Alcohol in Scott St. Minipark. 250

22.04.335 Alcohol in Greer Park. 250

22.04.336(a)Alcohol in Rinconada Park. 250

22.04.337 Alcohol in Mitchell Park. 250

22.04.338 Alcohol in Robles Park. 250

22.04.339 Alcohol in Hopkins Park. 250

22.04.340 Vehicles in park. 250

22.04.341 Alcohol in El Palo Alto Park. 250

22.04.342 Alcohol in Heritage Park. 250

22.04.343 Alcohol in Pardee Park. 250

22.04.350 Consumption of alcoholic beverage in vehicles. 250

22.04.360 Open container in park - alcoholic beverage. 250

22.04.370 Reckless driving in park. 250

22.04.380 Unlawful riding and towing in parks. 250

22.04.390 Duck pond. 100

SECTION 2. Municipal Code Civil Penalties. The civil penalty schedule for violations of the Palo Alto Municipal Code established by Resolution No. 10113 is hereby restated to read as follows*:

Standard penalty unless otherwise indicated below. $46

10.36.020 No parking in parkways. 46

10.36.030(a)Storage on the street (72 hours). 86

10.36.040(a)(1)Vehicle for sale on street. 46

10.36.040(a)(2)Repairing vehicle on street. 46

10.36.050 Not w/in 18” of left curb--One-way street. 46

10.36.090 Removal of chalk markings. 111

10.40.020(a)(1)Parking violation – red curb. 46

10.40.020(a)(4)Parking violation – green curb. 46

10.40.020(a)(5)Parking violation – blue curb. 308

10.40.020(b)Parking in violation of sign (except blue curb). 46

10.40.020(b)Unlawful disabled parking - signs (blue curb). 308

10.40.040(b)Commercial vehicle double parking. 46

10.40.050 Unlawful parking in yellow loading zone. 46

10.40.060 Unlawful parking in passenger loading zone. 46

10.40.070 Unlawful alley parking. 46

10.40.100(g)Parking in a bus zone. 46

10.44.010(b)Overtime parking (limited time zone). 41

10.44.010(c)Additional violation of time limited or no 44 parking zones.

10.44.020(a)Oversized vehicle parking in residential or 46 Item 13
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public facilities zones 2am-6am.

10.44.040(b)Not in space marking. 46

10.44.050(b)Parking violation--temporary sign. 46

10.44.060 Dealers--parking for sale or repair. 46

10.44.070(b)Parking in violation of posted sign. 46

10.44.080 Vehicle obstruction of roadway or lot. 46

10.44.090 Unattended vehicle, engine running. 111

10.45.110 Parking in on-street valet parking space. 46

10.46.110 Overtime residential parking permit (CT) 53

10.48.030 Truck route violation. 211

10.50.100(a)Violation of posted RPP permit sign 53

10.60.070(c)Permit not properly displayed. 41

10.60.070(d)Overtime permit parking in City lot. 41

10.60.070(e)Parking without permit in permit area. 46

22.04.150(e)In Foothills Park after hours. 111

22.04.210 Parking in parks. 111
Late payment penalty. 35
Collection cost penalty. 35% of listed penalty

*All penalties include state-mandated assessments pursuant to Gov’t. Code 76000, S.B 1407(2008), and Government Code 76000.3 (S.B. 857, 2008) totaling $12.50.

SECTION 3. Vehicle Code Civil Penalties. The civil penalty schedule for violations of the California Vehicle Code established by Resolution No. 10113 is hereby restated to read as follows*:

5200 No front license plate. $78
(If corrected within 31 days) 10 (state mandated)
5204(a) No registration tabs on license plate. 78
(If corrected within 31 days) 10 (state mandated)
21113(a) Parking on public grounds. 46
22500(a) Parking in an intersection. 46
22500(b) Parking in a crosswalk. 46
22500(d) Parking w/in 15 feet--fire station driveway. 46 22500(e) Blocking driveway. 46
22500(f) Parking on sidewalk. 46
22500(g) Parking or stopping--excavation site, etc. 46 22500(h) Double parking on roadway. 46
22500(i) Parking in a bus zone. 261
22500(l) Parking in front of accessible curb. 303
22500.1 Parking in a fire lane (public or private). 46 22502 Right hand wheels not w/in 18” of rt. curb. 46
22505(b) Parking on state highway violation. 46
22507.8(a-b)Unlawful parking in handicapped space. 303 22507.8(c)(1-2)Straddling Lines/Cross hatched, disabled. 303 22511.57(a) Parking/standing of vehicle in disabled parking $753 stall or space with invalid license/placard.
22511.57(b) Unauthorized use of license/placard for vehicle $753 parking/standing in disabled parking stall or space.
22511.57(c) Parking/standing of vehicle in disabled parking $753 stall or space with counterfeit, forged, altered or
mutilated license/placard for disabled.

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22514 Parking within 15 feet of fire hydrant. 46
22515 Unattended vehicle, engine running. 111
22516 Person locked in vehicle. 111
22521 Parking within 7 1/2 feet of railroad tracks. 46 22522 Parking near sidewalk access ramp. 303
22523(a) Unlawful abandonment of vehicle on highway. 131 22523(b) Abandoned vehicle--public/private property. 131 22526 Entering/blocking intersection – anti-gridlock. 131 22951 No street, alley parking--patron vehicles. 46

*All penalties include state-mandated assessments pursuant to Gov’t. Code 76000, S.B 1407(2008), and Government Code 76000.3 (S.B. 857, 2008) totaling $12.50.

SECTION 4. The Council finds that the adoption of this resolution does not meet the definition of a project under Public Resources Code Section 21065, thus, no environmental assessment under the California Environmental Quality Act is required.

SECTION 5
. This resolution shall become effective on the date that Ordinance No. _____ becomes effective.

INTRODUCED AND PASSED:

AYES:

NOES:

ABSTENTIONS:

ABSENT:

ATTEST: APPROVED:

________________________________ ________________________________ City Clerk Mayor

________________________________ ________________________________ Assistant City Attorney City Manager

________________________________
Director of Public Works

____________________________
Director of Administrative Services
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City Council
Staff Report
From: City Manager
Report Type: ACTION ITEMS
Lead Department: Utilities
Meeting Date: January 16, 2024
Staff Report:2303-1213
TITLE
Approval of a Substation Improvement Agreement With Tesla Inc. to Install Improvements and Reserve Capacity at Hanover Substation, and Approval of a Fiscal Year 2024 Budget Amendment in the Electric Fund to Establish the Hanover Substation Upgrade Project (EL- 24001); CEQA Status – Exempt under CEQA Guideline Sections 15301 and 15302

RECOMMENDATION
Staff recommends that Council:

1. Approve and authorize the City Manager or their designee to execute the Substation Improvement Agreement (SIA) and attached Capacity Reservation Agreement between the City of Palo Alto and Tesla for the design and construction of a substation improvements at the City of Palo Alto’s Hanover Substation (Attachment A).

2. Amend the Fiscal Year 2024 Budget Appropriation for the Electric Fund (requires a 2/3 vote) by:
a. Establish the Hanover Substation Upgrade Project (EL-24001) in the amount of $15,000,000; and
b. Decrease the Electric Fund Operations Reserve by $15,000,000.

EXECUTIVE SUMMARY
Tesla is moving its engineering headquarters to the former HP Headquarters at 1501 Page Mill Road where it will perform advanced research and development to support the vehicles and products it produces. The City is proposing to rebuild the existing Hanover Substation to replace the existing substation facilities, which are nearing the end of their useful life, and to accommodate Tesla’s power needs, via improvements designed and installed by Tesla. To best meet the needs of Tesla and the City, a public private partnership is being proposed and will be implemented through a Substation Improvement Agreement (SIA), including an associated Encroachment Permit, and Capacity Reservation Agreement.

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The maximum cost of the Hanover Substation project is estimated to be $24,000,000 with the cost being shared equally, subject to specified exceptions in the SIA (for an estimated $12,000,000 by each party). To facilitate the transfer of existing feeders not serving Tesla to the new transformers being installed and cover the costs of City inspections, the City will fund an additional $3,000,000. The total initial cost to the City for this project is $15,000,000. It should be noted that Tesla paid all costs to expedite materials needed for this project and the expediting fees have been excluded from the $24,000,000 total cost of the project.

At the end of construction, all assets meeting City requirements as specified in the SIA will become City property. The assets to be transferred to City ownership and control will be general use assets that can be used to serve other City customers. Tesla will reserve capacity in exchange for additional demand-based charges as outlined in the Capacity Reservation Agreement, which is attached to the SIA. Tesla will receive monthly credits upon completion of the facilities for up to 7 years, based on Tesla’s projected energy usage. Total credits will be no more than the estimated $12,000,000 to be invested by Tesla.

BACKGROUND
Tesla announced its engineering headquarters to 1501 Page Mill—formerly known as HP headquarters. It plans to install computers and charging facilities to support research into the electric vehicles it produces. The existing transformers at Hanover Substation, closest to the Tesla site, require upgrades to meet Tesla’s anticipated needs and to continue to serve the City’s other customers in the area. Tesla has indicated that it would like to be operational at the Page Mill site by the Spring of 2024.

The City’s Electric Utility staff have also determined that the existing HV 20 and HV 21 transformers at Hanover Substation need replacement. These transformers are undersized relative to the needs of customers in the Stanford Business Park, require a higher-than-normal level of maintenance, and are nearing or past their useful lives of 50 years.

ANALYSIS
The project proposes to install two 12 kV 50 MVA transformers to replace two 4kV transformers that served 1501 Page Mill Road and make all substation improvements necessary to accommodate the installations. Generally, three to four years are spent on a substation upgrade.

However, Tesla is requesting to finish all construction at the substation and energize their new building by April 2024. The City cannot meet this timeline under normal City processes due to insufficient staffing to coordinate the design and construction of all facilities and the time required to complete the City public procurement process. To meet the proposed installation timeline the use of a public private partnership 1 executed through a Substation Improvement Agreement (SIA) is recommended.
1 Public Private Partnership Policy https://www.cityofpaloalto.org/files/assets/public/v/1/agendas-minutes- reports/reports/city-manager-reports-cmrs/attachments/new-folder/public-private-partnership-policy.pdf Item 14
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Pursuant to the SIA, Tesla will design, procure, install, and commission two-50MVA transformers, three 60Kv substation breakers, a Power Distribution Center (12kV Switchgear), two 12 kV feeders, and will reroute 12 kV feeders from existing transformers to the new transformers.

These upgrades will serve Tesla, accommodate customers in the Stanford Research Park, replace outdated infrastructure, and modernize and reorganize the substation for greater efficiency. The design will be subject to CPAU approval and compliance with CPAU standards.

The SIA has been structured to provide infrastructure for the capacity needed by Tesla, replace City equipment at the end of its useful life, and limit the financial risk to the City and the electric rate payers. Since the work being done at Hanover Substation is a joint project with benefits for both parties the initial costs for the project have been split equally, subject to limited exceptions in the SIA. The total cost for the project is estimated to be $27,000,000, not including any expediting fees. Costs for the work inside the substation (approximately $24,000,000) will initially be split in half with each party providing approximately $12,000,000. The City will fund another $3,000,000 of improvements (separately from the SIA) to move feeder connections not related to service for Tesla from substation banks being retired to the new transformers in the Hanover Substation and to fund engineering review and inspection services that will occur prior to and during construction of the project. Tesla will be responsible for all additional costs associated with expediting of materials and services that resulted from the accelerated schedule it has proposed.

Tesla is providing the initial funding, design, and construction services for the improvements inside the substation, subject to partial City reimbursement. At the completion of the substation construction, the City will evaluate the installed systems for compliance with City-approved plans, specifications, and other requirements and providing the design and installation complies with the terms of the SIA, the City will accept the facilities. After acceptance, the actual costs for the project will be determined and the portion of the substation that was built solely for City distribution system use, (e.g., not related to the 1501 Page Mill Road project) will be reimbursed to Tesla.

The City will reserve up to 11,200 kVA of capacity to serve Tesla’s facilities, in exchange for Tesla’s payment of a monthly Capacity Reservation Fee calculated based on Tesla’s monthly demand.

The Monthly Capacity Reservation Fee is designed to compensate the City for reserving system capacity for Tesla’s future use and corresponds to the operation and maintenance costs of the facilities providing the capacity. It applies only if Tesla’s monthly demand falls below the levels specified in the Capacity Reservation Fee. Upon completion of the facilities, Tesla will receive a Monthly Capacity Usage Credit for up to 7 years based on Tesla’s projected energy usage and ramp up rate. Total credits will be capped at $12,000,000 and to protect the City against cost overruns, project costs subject to reimbursement under the SIA are limited to $12,000,000, subject only to any mutual agreement to amend the SIA. The Monthly Capacity Usage Credit is intended to reimburse Tesla for its financial contribution to general use facilities, i.e., that portion that is not already reimbursed by the City under the terms of the SIA, while reducing the risk of Item 14
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the City investing in assets that end up being underutilized. This credit is based on the expected revenue from energy sales to Tesla over the term of the agreement. The calculations for these payments and credits are outlined the Capacity Reservation Agreement (Exhibit D).

Due to the timeline for completion of this project the engineering design and the procurement of long-lead time materials have already been completed by Tesla, acting at its own risk. The City supplied specifications for the materials to be ordered and was consulted on the acceptability of the engineering design firm being used to prepare the plans. Since the award of the design contract, the City has been reviewing design drawings and materials to ensure that they comply with the City specifications and standards. Tesla has proceeded knowing that reimbursement for expenses from the City is contingent upon the completion of the SIA.

City staff also reviewed the construction bids for this project. Tesla received four bids for the construction of Hanover Substation and selected the lowest bid. Staff reviewed references for the selected contractor and agreed that the contractor had sufficient experience to construct the substation improvements.

FISCAL IMPACT
To fund this project a new Capital Improvement Project, EL-24001 (Hanover Substation Upgrade) has been created. Staff recommends increasing the Fiscal Year 2024 Electric Fund CIP and establishing EL-24001 in the amount of $15,000,000 to fund the $12,000,000 contribution for the City’s half of the substation rebuild and $3,000,000 for the rearrangement of the distribution feeders and city costs for engineering review and inspection services and decreasing the Electric Fund Operating Reserve by $15,000,000. The Electric Fund Distribution and Supply reserves has a balance of $38.5 million. The Electric Fund reserves will continue to stay within the minimum and maximum reserve guidelines after the transfer.

Staffing for the engineering review and inspection services will be provided by internal staff and outside consultants that are under contract. The expected total cost of these services is $400,000 and will be funded from the $3,000,000 funding being allocated to this project for City work on the site.

RESOURCE IMPACT
The approval of this agreement is consistent with existing City policies governing Public-Private Partnerships, and the Council approved 2018 Utilities Strategic Plan – Strategic Objectives, Priority 4 – Strategy 1 “Establish a proactive infrastructure replacement program, based on planned replacement before failure to support reliability and resiliency”. Facing an evolving utility business environment, aging infrastructure needs, and sustainability objectives, CPAU must maintain a competitive position in the market. Remaining financially sustainable and competitive in the market while optimizing our resources is key to maintaining and enhancing our value of City of Palo businesses and customers.

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STAKEHOLDER ENGAGEMENT
This project is located in an existing substation on Stanford lands. City staff has had discussions with Stanford informing them of the intention to upgrade Hanover Substation. Stanford indicated that they were supportive of this project to provide service to a lessee on their property. A City Encroachment Permit, which attaches and incorporates the Stanford lease terms, granting Tesla, its employees, and contractors a revocable privilege to enter and use the substation property during construction is attached as Exhibit B to the Substation Improvement Agreement.

ENVIRONMENTAL REVIEW
This project is categorically exempt from the California Environmental Quality Act (CEQA) pursuant to CEQA Guidelines 15301 (repair, maintenance, of existing facilities) and 15302 (replacement or reconstruction of existing facilities).

ATTACHMENTS
Attachment A: Tesla Substation Agreement
APPROVED BY:

Dean Batchelor, Director Utilities
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DocuSign Envelope ID: 57B09814-B982-4E69-BEF1-FFBFA17D269E

SUBSTATION IMPROVEMENT AGREEMENT

BETWEEN

CITY OF PALO ALTO
AND
TESLA, INC.

FOR THE HANOVER SUBSTATION
Dated January 16, 2024
1 Improvement Agreement
6056799 Hanover Substation
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TABLE OF CONTENTS
Recitals ................................................................................................................................3 Agreement

1. 2.

3. 4.

5. 6.

7. 8.

9. Definitions and Purposes ..............................................................................................4 Party Representatives and Relations.............................................................................7 Term .............................................................................................................................8 Site Access...................................................................................................................9 Project Funding...........................................................................................................10 Design Development...................................................................................................12 Conditions for Commencement of Project Construction...............................................14 Project Construction....................................................................................................17 Insurance....................................................................................................................23

10. Indemnity; Limitations on Liability................................................................................24

11. Assignment.................................................................................................................25

12. Force Majeure.............................................................................................................26

13. Project Records ..........................................................................................................27

14. Default ........................................................................................................................28

15. Notices........................................................................................................................30

16. Dispute Resolution......................................................................................................31

17. Miscellaneous Provisions............................................................................................32 Exhibit A
Exhibit B
Exhibit C
Exhibit D
Exhibit E
Exhibit F
Exhibit G
Exhibit H
Exhibit I
Project Description
Encroachment Permit
Project Budget
Capacity Reservation Agreement
Project Schedule
Insurance Requirements (Tesla)
Insurance Requirements (Engineer)
Insurance Requirements (General Contractor)
Construction Contract Form
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DocuSign Envelope ID: 57B09814-B982-4E69-BEF1-FFBFA17D269E

SUBSTATION IMPROVEMENT AGREEMENT

BETWEEN

THE CITY OF PALO ALTO
AND TESLA, INC.

FOR THE HANOVER SUBSTATION
This Substation Improvement Agreement (“Agreement”) is dated and effective as of January 16, 2024 (the “Effective Date”), and is made and entered into by and between the City of Palo Alto, a California chartered municipal corporation (“City”), and Tesla, Inc., a corporation organized under the laws of the State of Delaware (“Tesla”) (individually, a “Party” and, collectively, the “Parties”), in reference to the following facts and circumstances:

RECITALS:

A. The City owns and operates a municipal electrical utility operated by a division of the City known as City of Palo Alto Utilities (“CPAU”), which provides electricity to residential and commercial customers within the utility’s service area.

B. The City owns and CPAU operates the Hanover Street Substation (“Substation”), an electrical distribution substation located at 3350 Hanover Street, Palo Alto, California 94304.

C. The Substation is located on property that the City has leased from the Board of Trustees of the Leland Stanford Junior University since 1957 (the “Leased Premises”), subject to the terms of the 1957 Lease Agreement and subsequent amendments thereto (“Lease”).

D. The purpose of the Agreement is to establish a public-private partnership between the City and Tesla to expedite the installation of additional capacity on the CPAU’s distribution network for the expansion of Tesla’s electrical load at Tesla’s facilities at 1501 Page Mill Road, Palo Alto, California 94304 (the “Tesla Facility”) E. The Parties seek to jointly effectuate the design, installation and funding of a project to expand load capacity at the Substation to provide up to 30 MVA of capacity for the Tesla Facility pursuant to the terms of a separate Capacity Reservation Agreement between the Parties, which may include reserved capacity for other Tesla facilities served by the Substation (“Capacity Reservation Agreement”), and to expand the Substation, including switch gear improvements, for future use by the CPAU (collectively, the “Project”).

F. The Parties have agreed to fund the Project through their respective contributions, as set forth in this Agreement.

G. The Parties have agreed that Tesla will take the lead in design and construction of the Project subject to the terms of this Agreement and in consideration for the terms of the Capacity Reservation Agreement.
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DocuSign Envelope ID: 57B09814-B982-4E69-BEF1-FFBFA17D269E IN CONSIDERATION OF the foregoing and the following covenants, terms and conditions, the Parties agree:

AGREEMENT:

1. DEFINITIONS AND PURPOSES.

1.1 Recitals Incorporated. The foregoing Recitals are expressly incorporated into this Agreement.

1.2 Definitions. The following terms used in this Agreement, including the Recitals, have the meanings set forth in this Section 1.2:
“Agreement” means this Agreement.
“Capacity Reservation Agreement” means the agreement to be entered into by the Parties, in substantially the form attached as Exhibit D (Capacity Reservation Agreement).
“City” means the City of Palo Alto, a California chartered municipal corporation, acting by and through its City Council.
“City Agents” means individuals or entities acting within their capacity as duly authorized agents of the City for the Project or for the Substation. “City Reimbursement” means the City’s obligation to reimburse Tesla for Project costs as further specified in Section 5 and Exhibit C (Project Budget), the amount of which may be subject to adjustment as further specified in Section 5 and as expressly provided elsewhere in the Agreement. “City Improvements” means that portion of the Project intended to expand the Substation capacity for future City use, but excluding the Tesla Improvements, as further described in Exhibit A (Project Description). “City Representative” has the meaning set forth in Section 2.2. “Claims” means any claim, action, suit, proceedings, demand, investigation, assessment or liability of whatsoever kind or character made or brought by any third party.
“Construction Contract” means the contract between Tesla and the General Contractor for construction of the Project in accordance with the Construction Documents, as further specified in Section 7.4.
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DocuSign Envelope ID: 57B09814-B982-4E69-BEF1-FFBFA17D269E “Construction Cost” means the amount to be paid to the General Contractor to construct the Project based on the Construction Contract price. “Construction Documents” means the final Design Development Documents developed pursuant to Section 6, which have been approved by the City for construction of the Project and for which the City has issued a building permit, including any post-approval modifications pursuant to duly authorized change orders pursuant to this Agreement.
“Construction Period” means the period beginning from the commencement by the General Contractor of construction activities at the Site in accordance with the terms of the Construction Contract, and concluding upon the Project Acceptance Date.
“CPAU” means the City of Palo Alto’s Utilities division. “CPAU Rules and Regulations” means the rules and regulations relating to utility service approved and adopted by resolution of the City of Palo Alto City Council pursuant to Chapter 12.20 of the Palo Alto Municipal Code, as may be amended from time to time, and accessible online via the City’s website. “Day” means a calendar day, unless a “business day” is specified; for the purposes of this Agreement, “business day” excludes any “Regular Holiday” or “Other Special Day” referred to in PAMC Section 2.08.100 or any Friday that is considered a “9/80” day, when the City does not require employees, electing to work nine business days in a ten-business-days biweekly period, to work on such days.
“Design Development Documents” means the plans and specifications for the Project which are developed pursuant to Section 6 and prepared by the Engineer to become the Construction Documents upon mutual approval of the final design.
“Effective Date” means the date set forth in the preamble to this Agreement. “Encroachment Permit” means the Encroachment Permit required pursuant to Section 4.1, in the form attached as Exhibit B (Encroachment Permit). “Engineer” means either (i) the engineering firm identified in Section 6.2.A, or (ii) one or more Tesla employees who are fully licensed and qualified to design the Project.
“Force Majeure Event” has the meaning provided in Section 12.1. 5 Improvement Agreement
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DocuSign Envelope ID: 57B09814-B982-4E69-BEF1-FFBFA17D269E “General Contractor” means New River Electrical Corporation, being a duly licensed and qualified general contractor, or any replacement general contractor retained by Tesla and approved by the City pursuant to Section

7.4.A.
“Governmental Authority” means any national, regional or local government, any political subdivision thereof, or any governmental, quasi-governmental, regulatory, judicial or administrative agency, authority, commission, board or similar entity having jurisdiction over the performance of the Project, the Substation Improvements, the Substation or their operations, or the Site or otherwise over any Party, including any applicable independent system operator or regional transmission organization, the Federal Energy Regulatory Commission, and the North American Electric Reliability Corporation. “Laws” means all applicable local, state, and federal laws, regulations, rules, codes, ordinances, permits, orders, and the like enacted or imposed by or under the auspices of any Governmental Authority with jurisdiction over the Project, including labor, health and safety requirements, the PAMC, and the CPAU Rules and Regulations.
“Lease” has the meaning set forth in Recital C.
“Leased Premises” has the meaning set forth in Recital C. “PAMC” means the Palo Alto Municipal Code.
“Project” has the same meaning provided in Recital B, as further described and depicted in Exhibit A (Project Description), and includes both the City Improvements and the Tesla Improvements.
“Project Acceptance Date” means the date on which the City accepts the Project according to City procedure.
“Project Budget” means the budget that the Parties have agreed upon for design and construction of the Project pursuant to this Agreement based on estimated costs as of the Effective Date, including funds expended for Project- related expenses before the Effective Date, as further detailed in Exhibit C (Project Budget), which may be updated by mutual agreement of the Parties. “Project Schedule” means the most current schedule for completing the Project as set forth in Exhibit E (Project Schedule), which may be updated by mutual agreement of the Parties.
“Retention” has the meaning provided in Section 5.3 of this Agreement. 6 Improvement Agreement
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DocuSign Envelope ID: 57B09814-B982-4E69-BEF1-FFBFA17D269E “Site” means the physical location for construction of the Project, as further described and depicted in the Encroachment Permit.
“Substation Improvements” means, collectively, all of the physical improvements to and in connection with the Substation pursuant to the Project, Including the City Improvements and the Tesla Improvements. “Term” has the meaning provided in Section 3 of this Agreement. “Tesla” means Tesla, Inc., a corporation organized under the laws of the State of Delaware.
“Tesla Facility” has the meaning set forth in Recital D to this Agreement. “Tesla’s Agents” means individuals or entities acting within their capacity as duly authorized agents of Tesla to provide services for the design or construction of the Project, which includes Tesla’s employees, its Engineer and the General Contractor and its subcontractors.
“Tesla’s Contribution” means Tesla’s funding obligation for design and construction of the Project, subject to offset by the City Reimbursement as further specified in Section 5 and Exhibit C (Project Budget), the amount of which may be subject to adjustment as further specified in Section 7 and as expressly provided elsewhere in the Agreement.
“Tesla Improvements” means that portion of the Project that includes design and installation of two 50 MVA transformers, two 60 kV circuit breakers, a power distribution center, bus switches, buswork, wiring, feeder outlets, and feeders to Tesla’s switchgear at the Tesla Facility, but excluding the City Improvements, as further described in Exhibit A (Project Description). “Tesla Representative” has the meaning set forth in Section 2.3.

1.3 Purposes of Agreement. The purposes of this Agreement are to design and construct the Project as set forth in Recitals D and E, above, consistent with the Project Description attached hereto as Exhibit A (Project Description) and incorporated herein.

The Substation Improvements are intended to provide 30 MVA of capacity during normal operation of the City’s electric system.

2. PARTY REPRESENTATIVES AND RELATIONS

2.1 Communication and Coordination. In order to facilitate prompt communications and coordination between the Parties, each Party has designated a single point of contact with authority to make high level decisions and to coordinate approvals by each Party as needed for efficient design and construction of the Project. 7 Improvement Agreement
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2.2 City Representative. The City Representative is the individual authorized by the City to serve as the primary point of contact for routine communications with Tesla concerning the Project. The City’s Representative will not have independent authority to accept, reject, direct, or stop work on the Project; to modify the approved design; or to approve change order requests on behalf of the City. The City Representative has the right, but not the obligation to attend the pre-construction conference and weekly progress meetings, and may be present at the Substation during construction of the Project, subject to compliance with generally applicable health and safety requirements. The City Representative for the Project is Tomm Marshall, and contact information for the City Representative will be provided to Tesla within 10 days after the Effective Date. City reserves the right to replace the City Representative with another qualified individual upon written notice to the Tesla Representative, which will include contact information for the new City Representative.

2.3 Tesla Representative. Tesla’s authorized representative for administration and implementation of this Agreement, including coordination and direct communications with the Construction Liaison Team, is Andy Kim, and contact information for the Tesla Representative will be provided to the City within 3 days after the Effective Date. Tesla reserves the right to replace the Tesla Representative with another qualified individual upon written notice to the City Representative, which will include contact information for the new Tesla Representative.

2.4 Monthly Meetings and Weekly Reports to City. Designated representatives of each Party will meet monthly following the Effective Date, to ensure timely and effective communications on Project progress, including updates on design development, construction, schedule, budget, and other construction-related issues, such as changes in design, changed conditions, inspection, testing, and similar matters. In addition, Tesla will submit a weekly written report, sent by email to the City Representative, summarizing the progress made during the preceding week, providing schedule and budget updates, and identifying any significant issues or concerns relating to its performance relative to the Project.

3. TERM.

Unless this Agreement is terminated pursuant to Section 14, the Term of this Agreement will begin upon the Effective Date and will remain in effect until each of the following has occurred:

3.1 The Project has been completed, including all obligations set forth in Sections

8.11, 8.12, 8.13, and 8.14;

3.2 City has accepted the Project; and
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3.3 City has paid the full amount of City Reimbursement, including any Retention, if any, pursuant to Section 5.3.

For the avoidance of doubt, the City Representative and the Tesla Representative will confirm in writing the date upon which each of the actions identified in Sections 3.1 through 3.3 have been completed for purposes of establishing the effective date of the Capacity Reservation Agreement. Notwithstanding the foregoing, the following provisions will survive termination of the Agreement or expiration of the Term: Section 10 (Indemnity; Limitations on Liability), Section 13 (Project Records), Section 15 (Notices), and Section 16 (Dispute Resolution).

4. SITE ACCESS. The Tesla Agents will have reasonable access to the Substation for design and construction of the Project pursuant to an Encroachment Permit, as set forth below.

4.1 Encroachment Permit. Prior to commencement of the Construction Period, Tesla will obtain an Encroachment Permit from the City, in conformance with the applicable requirements of the PAMC and this Agreement and pursuant to terms and conditions of the Encroachment Permit form attached hereto as Exhibit B (Encroachment Permit) and incorporated herein. No other right, title or interest, including, but not limited to, any estate, ownership, leasehold, easement or other property interest, in the Site is granted or intended to be granted by the City to Tesla by this Agreement except as may be specified in the Encroachment Permit. The City will not take any action to revoke the Encroachment Permit, or take any action to compel Tesla or the General Contractor to vacate the Leased Premises or remove property there from, unless and until the Encroachment Permit is revoked as specified in Section 7 of the Encroachment Permit. In the event of any conflict or inconsistency between the terms of this Agreement and the terms of the Encroachment Permit, the terms of this Agreement will take precedence.

4.2 City Access. Subject to compliance at all times with applicable Laws and the Site safety requirements agreed by the Parties for the Construction Period, the City Representative and City Agents, including City inspectors will have unrestricted access to the Site during construction of the Project in order to perform their duties subject to generally applicable health and safety rules for the Site. Nothing in this Agreement will be construed to limit the City’s right to enforce contractual requirements or Laws protecting workers, the environment, or public or worker health, safety and welfare.

4.3 Coordination and Site Security. In order to avoid conflicts between the ongoing operations of the Substation and activities for the Project and to ensure Site security, before commencing work on the Project, the City Representative and Tesla Representative, or their respective authorized delegees, will meet with the General Contractor to identify which portion(s) of the “Permit Area” (as defined in the Encroachment Permit) will be designated for access and for other specified Project-related activities, and to establish mutually acceptable protocols for shared use of the single access gate for the Site. The areas designated for specified Project-related activities may be adjusted during the Project, if needed, to avoid interference with the operations, maintenance, or repair of the Substation. 9 Improvement Agreement
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DocuSign Envelope ID: 57B09814-B982-4E69-BEF1-FFBFA17D269E These area designations and any adjustments thereto will be memorialized in writing by City and provided to the Tesla Representative for delivery to the General Contractor. The City Representative will also inform the Tesla Representative and the General Contractor of the currently applicable security requirements for the Site. Tesla will be solely responsible for ensuring that the General Contractor and its subcontractors are contractually obligated to comply with the terms of the Encroachment Permit, including use of the Permit Area as designated pursuant to this paragraph, and compliance with all security requirements for the Substation.

5. PROJECT FUNDING.

5.1 Project Budget. The Project Budget is attached hereto as Exhibit C (Project Budget) and incorporated herein. The Project Budget is subject to further amendment by mutual agreement of the Parties following the conclusion of the design development process in Section 6, prior to commencement of construction pursuant to Section 7, and, as applicable, based on change orders pursuant to Section 8.

5.2 Allocation of Project Costs. Tesla will be responsible for funding design and construction of the Project in accordance with the Construction Documents developed pursuant to Section 6 (collectively, the “Tesla Contribution”), including procurement of equipment and materials, subject to partial reimbursement from the City for certain items as set forth below:

A. Tesla Costs. The Tesla Contribution includes 100% of the costs for the following items, with no contribution from the City Reimbursement:

1. Purchase, installation and connection of two 12 kV feeders which will be used to serve the Tesla Facilities;

2. Feeders and on-site switches installation needed to serve the Tesla 30 MVA load;

3. Costs that Tesla elected to pay to expedite delivery of equipment for the Project before the Effective Date;

4. Costs for generally required permits, including the building permit for the Project;

5. Costs to accelerate Project completion after construction has commenced if such acceleration is requested by Tesla for Tesla’s convenience, including labor overtime costs and additional Project overhead costs, e.g., additional inspection costs related to the accelerated construction schedule.
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DocuSign Envelope ID: 57B09814-B982-4E69-BEF1-FFBFA17D269E In addition, Tesla will reimburse the City for 50% of the premium paid by the City for course of construction or builder’s risk coverage pursuant to Section 9.3 (“COC Reimbursement”). The COC Reimbursement will be deducted from the City Reimbursement at the time of payment of the City Reimbursement pursuant to Section 5.3.

B. City Costs. The City will reimburse Tesla for 100% of the costs associated with the installation of substructure (conduit, vaults, pads, etc.) which are required solely for City Improvements outside of the Substation.

C. Shared Costs. Subject to a cumulative total cap of on the City’s payment obligations under this Agreement as set forth in Exhibit C, in addition to the substructure costs in Section 5.2(B), the City will reimburse Tesla for 50% of the costs for the following, except for costs which are solely Tesla’s responsibility, as stated in Section 5.1.A, above, or elsewhere in this Agreement (collectively, the “City Reimbursement”):

1. Grading and structural site improvements necessary for the new Substation improvements;

2. Design and installation of the two 50 MVA transformers, three 60 kV circuit breakers, a power distribution center, and related bus switches, buswork, wiring and feeder outlets;

3. Purchase, installation, and connection of two 60 kV transformer bank circuit breakers;

4. breaker;
Purchase, installation, and connection of a 60 kV bus tie

5. Purchase, installation and connection of two 50 MVA, 60 to 12 kV transformers;

6. Purchase, installation and connection of a 12 kV distribution load center; and

7. 8.

Testing and commissioning of all equipment and components, the COC Reimbursement.
minus
D. Change Order Costs. Each Party will be responsible for additional costs due to any approved additive change order, which is approved and issued in accordance with the change order approval terms in Section 8.7, below, consistent with the cost allocation provisions set forth in subsections A-C, inclusive, above; except that if (i) costs for a betterment change is sought by only one Party after the 11 Improvement Agreement
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DocuSign Envelope ID: 57B09814-B982-4E69-BEF1-FFBFA17D269E Construction Documents have been approved, or (ii) additional costs are incurred under the Construction Contract which are the responsibility of that Party as specified in this Agreement, that Party will be solely responsible for the added costs of such corresponding change order. Likewise, if the cost of the Construction Contract is reduced due to a deductive change order, which is approved and issued in accordance with the change order approval terms in Section 8.7 below, the City reimbursement obligations will be adjusted consistent with the cost allocation provisions set forth in subsections A-C, inclusive, above.

5.3 City Reimbursement. The Parties will update Exhibit C (Project Budget) to include the Construction Cost for the Project after Tesla has selected the General Contractor to construct the Project, and subject to mutual agreement will update the cap on the City Reimbursement. The City Reimbursement will be paid to Tesla within 60 days following City’s acceptance of the Project as specified in Section 8, with the exception of an amount equal to 50% of the amount retained by Tesla under the Construction Contract pending the achievement of “Final Completion” under and as defined in the Construction Contract (the “Retention”), which may be retained by the City until 30 days after all of the following have occurred: (i) final as-built and record drawings have been submitted pursuant to Section 8.11, (ii) final versions of equipment maintenance and operating manuals have been submitted pursuant to Section 8.12.A.3, (iii) all punch list items have been completed in accordance with the requirements of the Construction Contract pursuant to Section 8.12.A.5, (iv) the Contractor certification is received in accordance with Section 8.12.A.6, and (v) Site clearance and restoration is completed in accordance with Section 8.12.A.7.

5.4 Modification for Lack of Funds. The City Reimbursement is subject to the fiscal provisions of the Charter of the City of Palo Alto and the PAMC, including PAMC Section 2.30.260, pertaining to contracts with terms exceeding one year. If the amount appropriated for the City Reimbursement at the time this Agreement is approved by the City Council, the Agreement will be modified to exclude or reduce the City Reimbursement only under the following circumstances: at the end of any fiscal year, if any additional funds are needed for the City Reimbursement due to unforeseen cost increases, but those additional funds are not appropriated for the following fiscal year; or at any time within a fiscal year if funds are only appropriated for a portion of the fiscal year and funds for the City Reimbursement are no longer available. Notwithstanding the foregoing, if additional funds needed for the City Reimbursement obligation are not timely appropriated, the Parties will meet and confer regarding potential adjustments to the Capacity Usage Credit under and as defined in the Capacity Reservation Agreement to offset any shortfall caused thereby. This provision will take precedence in the event of a conflict with any other covenant, term or condition of this Agreement.

6. DESIGN DEVELOPMENT.

6.1 Responsibility. Tesla is responsible for creating the Design Development Documents, including the final Construction Documents for construction of the Project, consistent with the Project description in this Agreement, including Exhibit A. The final 12 Improvement Agreement
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DocuSign Envelope ID: 57B09814-B982-4E69-BEF1-FFBFA17D269E Construction Documents are subject to City approval to ensure compliance with the standards set forth in this Section 6.

6.2 Design Professional. All Design Development Documents for the Project will be signed by a qualified, registered, professional engineer, licensed in California, and with relevant substation design experience. City has the right to approve any other third-party engineer or engineering firm retained under contract with Tesla to serve as Engineer for the Project, including design development before construction and design consultation during construction. Tesla will work with and direct its Engineer, in consultation with City staff, to develop the Design Development Documents in order to complete the Project within the limits of the Project Budget, as set forth in Exhibit C.

A. Approved Engineer. The City hereby approves of Power Engineers, Inc., as the Engineer for the Project. If, for any reason, Tesla wish to substitute a different firm to serve as Engineer for the Project, the substitution will be subject to the City’s prior written approval of the proposed firm. Tesla will require the Engineer to provide and maintain insurance coverage, including professional liability insurance, that meets the City’s standard requirements for design professional insurance as further specified in Section 9, below.

6.3 Compliance. The Project will be designed and constructed in compliance with Laws, and in compliance with the most current version of the City Public Works Department’s Standard Drawings and Specifications; the City Utility Department’s Water, Gas, Wastewater, and Electric Utilities Standards, including City standard substation design layouts; current California General Safety Orders; and the current applicable National Electric Safety Code.

6.4 Design Development. The City will review and approve all Design Development Documents for conformance with City specifications and standards, including compliance with City-approved equipment specifications provided to Tesla for procurement of equipment to be incorporated into the Project. Tesla will seek the City’s approval of the final Design Development Documents, coordinating submittals and responses with the City Representative. The City’s Representative will promptly coordinate the City’s internal review of the Design Development Documents among all of the City departments that will have responsibilities pertaining to the operation or maintenance of the Substation. The City may provide written comments and directions to Tesla and its Engineer to apply to design development. The Engineer will consider the City’s comments and directions and if applicable will provide an updated estimate of the construction cost for the revised design for the Project. The Design Development Documents will include contractor submittal requirements for submittals that will be subject to City approval during the Construction Period, comparable to those submittal requirements required by the City’s current standards and specifications, including shop drawings, purchase submittals, e.g., cut sheets, and the like, to ensure that the Project and its components, including, but not limited to the components listed in Exhibit A (Project Description) conform to the City-approved design for the Project. The process for review and approval of the Design Development Documents is as follows:
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DocuSign Envelope ID: 57B09814-B982-4E69-BEF1-FFBFA17D269E A. Design Development Documents Review.

1. The final Design Development Documents will be submitted to CPAU for City review and comment.

2. The City may either approve the Design Development
Documents or may provide comments for further revisions necessary for the City’s approval, in which case Tesla will resubmit the Design Development Documents with revisions as directed by the City’s comments.

3. The City’s Representative will promptly notify the Tesla Representative in writing once the City has approved the Design Development Documents.

B. Cooperation. The City will provide reasonable staff support and other assistance to Tesla without charge, upon reasonable request, in connection with review and development of the Design Development Documents and submittal reviews, including cost estimate updates. City staff support may include program expertise, design suggestions or recommendations, and information, including information on City standards and City requirements and procedures.

C. Materials and Equipment Procurement. All material and equipment to be incorporated into the Substation as part of the Project are to be approved as part of the City approval of the Design Development Documents. Any subsequent changes to the materials and equipment shall require approval by the City prior to installation. The following items are subject to prior factory inspection and approval by the City as a condition precedent to delivery to the Site:

1. 2.

The transformers; and
The power distribution center.

D. Errors and Omissions. Notwithstanding the City’s assistance or the City’s approvals of the Design Development Documents in accordance with this Agreement, the City will not be liable in any way for the Engineer’s errors and omissions, nor any costs arising to correct such errors and omissions.

6.5 Budget Update. Subject to mutual agreement, the Parties may elect to update the Project Budget set forth in Exhibit C, including the estimated cost to construct the Project, upon conclusion of the design development process set forth in this Section 6.

7. CONDITIONS FOR COMMENCEMENT OF PROJECT CONSTRUCTION

7.1 Conditions Precedent to Construction. Tesla will not permit construction to begin on the Project, and will not be obligated to commence construction of the Project, until 14 Improvement Agreement
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DocuSign Envelope ID: 57B09814-B982-4E69-BEF1-FFBFA17D269E all of the conditions precedent to construction set forth in this Section 7 have been satisfied or waived.

A. Notification. Tesla’s Representative will notify the City Representative in writing when all of the conditions precedent to construction set forth in this Section have been satisfied or waived. Within 14 days thereafter, the City Representative will either (1) confirm that all of the conditions have been satisfied or waived, or (2) identify which conditions have not yet been satisfied or waived.

B. Commencement. Tesla will cause construction to commence on the Project within 90 days following notification from the City Representative that all conditions precedent to Construction have been satisfied or waived. The Parties may mutually agree to extend this time if necessary due to provisions outside the control of the Parties, including adverse weather or site conditions or a Force Majeure Event.

C. Deadline. If all of the conditions precedent to commencement of construction set forth in this Section 7 are not satisfied or waived by the commencement deadline in 7.1.B, unless the Parties mutually agree to extend the deadline for satisfying any such outstanding condition, this Agreement will terminate without further liability to either Party and neither Party shall have any further rights or obligations under this Agreement.

7.2 Design Development Documents. Approval of the final Design Development Documents by each Party is a condition precedent to the commencement of Project construction.

7.3 Permits and Authorizations. As a condition precedent to commencement of construction, Tesla will provide written proof to the City that all necessary permits and approvals from any and all agencies having jurisdiction over the Project, including the City, have been authorized, including, as applicable, building permits, street opening permits, encroachment permit, utility encroachment permits, and health permits. Subject to compliance by Tesla with applicable permitting requirements, the City will provide reasonable support to Tesla in connection with the timely granting of any permits or approvals necessary for the Project and which are issued by the City or any of its agencies or departments.

7.4 Construction Contract. As a condition precedent to commencement of construction, Tesla will provide written proof to the City that Tesla has entered into the Construction Contract with a General Contractor that is reasonably acceptable to the City, based on the form of agreement attached as Exhibit I, Construction Contract Form, as meeting the requirements in this Section 7.4, and that the General Contractor has submitted all bonds and proof of insurance required by the Construction Contract as specified below.

A. General Contractor. Tesla’s selection of any replacement General Contractor shall be subject to prior approval by the City, which shall not unreasonably delayed or withheld provided the proposed contractor (1) possesses the requisite 15 Improvement Agreement
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DocuSign Envelope ID: 57B09814-B982-4E69-BEF1-FFBFA17D269E California contractor’s license(s), and (2) is a “responsible bidder” as that term is defined PAMC section 2.30.440(c).

B. Construction Contract. The Construction Contract between Tesla and its General Contractor will include the following:

1. General Compliance. The Construction Contract will require that General Contractor and its subcontractors will not take any action or fail to take any action which would cause Tesla to be in default under this Agreement or the Encroachment Permit, including, but not limited to, compliance with requirements pertaining to Site security.

2. Compliance with Construction Documents. The Construction Contract will require the General Contractor to construct the Project as specified in the approved Construction Documents, which must be attached or incorporated therein, and in accordance with all applicable permits and authorizations. The Construction Contract must also include a traffic management plan, consistent with the City’s current traffic control requirements, that has been approved by the City.

3. Payment and Performance Bonds. The Construction Contract will require the General Contractor to submit a payment and a performance bond prior to commencement of construction and to remain in effect throughout the Construction Period, each for 100% of the Construction Cost, using bond forms provided or approved by the City and in compliance with Laws, including Civil Code section 9550 and PAMC section 2.30.500.

4. Insurance. The Construction Contract will require the General Contractor to maintain insurance coverage throughout the Construction Period as specified in Section 9, below.

5. As-Built Drawings. The Construction Contract will require the General Contractor to prepare and maintain as-built drawings showing any changes from or details not shown in the Construction Documents, suitable for preparation of record drawings.

6. Legal Compliance. The Construction Contract will require the General Contractor and its subcontractors to construct the Project in compliance with applicable Laws, including prevailing wage and Labor Code requirements and any conditions of approval required to be obtained from any Governmental Authority, to the extent any such Laws or conditions of approval are applicable to the General Contractor’s performance under the Construction Contract.
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7. Warranty. The Construction Contract will require a one-year warranty guaranteeing the work performed by the General Contractor and its subcontractors, consistent with the City’s requirements in its standard specifications, with the warranty period commencing on the Project Acceptance Date.

7.5 Condition Related to Project Costs. As a condition precedent to commencement of Project construction, the Parties will further revise the Project Budget, if needed, based on the cost of the Construction Contract, and subject to mutual agreement of the Parties.

7.6 Capacity Reservation Agreement. As a condition precedent to commencement of Project construction, the Parties will execute the Capacity Reservation Agreement based substantially on the form attached as Exhibit D (Capacity Reservation Agreement).

8. PROJECT CONSTRUCTION

8.1 Responsibility. Tesla will be responsible for construction of the Project and for directing its General Contractor to complete the Project within the Project Schedule, as set forth below.

8.2 Project Schedule. The Project will be completed within three years following commencement of construction (provided that such period shall be extended to account for any Force Majeure Event delaying completion of the Project, and/or any additional time granted pursuant to a change order under the Construction Contract which has been approved or deemed approved by the City). Unless the time for completion is extended by mutual agreement of the Parties. The Parties’ planned schedule for design and construction of the Project is set forth in the Project Schedule, attached as Exhibit E (Project Schedule) hereto. The Project Schedule will be refined by Tesla to reflect the as-planned construction schedule, within ten days following issuance of the building permit(s). Each Party will exercise its reasonable efforts to perform its respective obligations in a reasonably timely manner to complete the Project within the time set forth in the Project Schedule. Notwithstanding the foregoing, the Project Schedule may be amended at any time based on mutual agreement of the Parties.

8.3 General Standards. Construction of the Project will be executed so as to materially conform to the requirements of the approved Construction Documents, including the workmanship standards contained therein. The General Contractor and its subcontractors must be licensed in good standing as required by the State of California before performing any work on the Project.

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DocuSign Envelope ID: 57B09814-B982-4E69-BEF1-FFBFA17D269E constructed under the City’s jurisdiction in the City’s role as a Governmental Authority responsible for compliance with applicable permit(s) and Laws. No construction may be performed at the Site without a City inspector onsite. The City shall be liable for reasonable, documented costs incurred under the Construction Documents in respect of delays in the performance by Tesla or the General Contractor which is caused by the failure by or delay in such City inspector(s) to attend construction activities at the Site, when required during normal hours for Project construction and following reasonable notice for work to be performed outside of those hours, with the exception of failure or delay due to a Force Majeure Event for which relief is granted under the Construction Documents. At all times during the Construction Period, one or more City inspectors may be onsite to monitor and review construction of the Project to ensure compliance with the Construction Documents, the building permit, and applicable Laws. City inspection services will be scheduled based on the Project Schedule and approved working hours for the Project.

B. Special Inspections. Tesla will notify the City Representative in advance of any special inspection needs so that the City has the opportunity to have a qualified inspector available on a timely basis.

C. Submittals and Substitutions. The City reserves the right to review and approve any submittal or substitution request relating to the Project components listed in Exhibit A (Project Description).

D. Remedies. Subject to Section 8.7, the City will not bear the cost for unapproved deviations from the approved Construction Documents that negatively impact the City’s future operation of or the future capacity of the Substation.

Remedies for installation of Substation Improvements that do not comply with the approved Construction Documents may include one or more of the following, at the City’s election:

1. Removal and reinstallation of the deviating or defectively installed component;

2. Modifications to mitigate the deviation from the Construction Documents; or

3. Adjustment to the City Reimbursement obligation
commensurate with the City’s estimated cost to remedy the deviation, negative impacts on the City’s future operational costs, or negative impacts on the Substation capacity.

8.4 Project Commencement. The General Contractor will be required to commence construction of the Project in accordance with the Construction Documents within 18 Improvement Agreement
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DocuSign Envelope ID: 57B09814-B982-4E69-BEF1-FFBFA17D269E 90 days after the City has confirmed, pursuant to Section 7.1, that all of the conditions precedent to construction of the Project have been satisfied or waived.

8.5 Construction Meetings.

A. Pre-Construction Conference. The Parties will schedule a pre- construction conference to take place before any work begins on the Site the General Contractor’s designated project manager and superintendent(s); the Engineer; the designated inspector(s); and any other individuals whom the Parties mutually agree should be in attendance. The pre-construction conference will address relevant Project objectives and constraints, including communication protocols to ensure efficient and effective communications throughout the construction process; safety requirements; environmental considerations; scheduling; submittals; change order procedures; substitution procedures; the City-approved traffic control plan; noise management; City’s Site security requirements; parking; and compliance with the Encroachment Permit, including area designations established pursuant to Section

4.3. B. Weekly Meetings. In addition, Tesla will schedule weekly meetings for the duration of the Construction Period, which will be attended by the General Contractor, the Engineer, and other individuals whose participation is important to help ensure efficient construction of the Project consistent with the Construction Documents, the Encroachment Permit, and the terms of this Agreement. The City Representative and City officials with direct responsibility for the Project have the right, but not the obligation, to attend these weekly meetings.

C. Agendas and Minutes. Tesla will be responsible for preparing and distributing agendas and minutes for the pre-construction conference and the weekly meeting to all meeting participants with copies to the City Representative.

8.6 Prevailing Wages. Work on the Project will constitute a “public works” project as defined under Labor Code section 1720 set seq.

A. Prevailing Wage Requirements. All contractors and subcontractors performing work on the Project are required to pay general prevailing wages as defined in Subchapter 3, Title 8 of the California Code of Regulations and Section 16000 et seq. and Labor Code Section 1773.1. Before entering into the Construction Contract to perform work on the Project and at all times while performing work on the Project, the General Contractor and its subcontractors must be registered with the California Department of Industrial Relations (“DIR”) to perform public work under Labor Code Section 1725.5. Pursuant to Labor Code Section 1773, the general prevailing rate of per diem wages and the general rate for holiday and overtime work in this locality for each craft, classification, or type of worker needed to perform the work may be obtained at the Purchasing Office of the City of Palo Alto. All contractors and subcontractors for the Project must comply with the provisions of Labor Code 19 Improvement Agreement
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DocuSign Envelope ID: 57B09814-B982-4E69-BEF1-FFBFA17D269E Sections 1775, 1776, 1777.5, 1810, and 1813. The General Contractor must also comply with the provisions of Labor Code sections 1776 and 1812 and all implementing regulations, which are fully incorporated by this reference, including requirements for electronic submission of payroll records. The Construction Contract will be subject to compliance monitoring and enforcement by the DIR, pursuant to Labor Code section 1771.4.

B. Construction Contract. The Construction Contract must include the prevailing wage requirements set forth above, or as otherwise required by Labor Code provisions currently in effect when the Construction Contract is executed.

8.7 Change Orders. Any proposed changes to the City-approved Construction Documents are subject to prior mutual agreement between the Parties, except as set forth herein. Any change orders proposed by the City will be subject to prior approval by Tesla and subject to the City’s commitment to pay for any increased cost resulting from its proposed change order. Tesla may authorize change orders to the Construction Contract without prior approval from the City, except under any of the following circumstances, each of which requires prior written approval by the City Representative:

A. Cost Impact. The City’s share of the additional cost for a proposed change or its share of the costs for cumulative changes would increase the total of the City Reimbursement obligations by more than $50,000.00.

B Scope Alteration. The proposed change would materially alter the Project scope or purposes of this Agreement, including, but not limited to adverse impacts on normal operations and use of the Substation, including the City’s planned expansion of the Substation capacity.

C. Adverse Impacts. The proposed change would significantly reduce the quality, functionality, or life-expectancy of the improvements or constituent components.

D. Maintenance Impacts. The proposed change would materially increase the City’s costs to operate, repair, or maintain the improvements or constituent components of the Substation.

E. Conflict. The proposed change would conflict with or be inconsistent with the provisions or objectives of this Agreement.

F. Governmental Approval. The proposed change would require new or amended approval by a Governmental Authority, including amendments to any permit(s).

Provided that in no event shall the City have approval rights for change orders providing time or cost relief to the General Contractor in accordance with the Construction Documents 20 Improvement Agreement
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DocuSign Envelope ID: 57B09814-B982-4E69-BEF1-FFBFA17D269E where the General Contractor has an entitlement to relief (and Tesla does not have discretion in terms of relief awarded) for (i) Force Majeure Events or changes in Laws after the effective date of the Construction Contract, or (ii) delays to performance under the Construction Documents which are not caused by the General Contractor or its subcontractors. Tesla shall keep the City informed as to the relief determinations respect of such change orders, and shall consult the City and use its reasonable efforts to minimize the relief granted to the General Contractor in respect of item (ii) above.

8.8 Site Maintenance. During the Construction Period, Tesla and Tesla’s Agents, at their sole cost, will maintain the Site and the Project in a commercially reasonable, clean and safe manner and in compliance with the Agreement, the Encroachment Permit and Laws.

Tesla or Tesla’s Agents will provide approved containers for trash and garbage generated at the Site and arrange for their disposal. The City reserves the right, to enter and inspect the Site for compliance with this maintenance requirement and applicable safety requirements.

Tesla’s Site maintenance obligations will terminate upon City’s acceptance of the Project.

8.9 Utility Service. Tesla will be responsible for timely payment of all utility services required for the Project during the Construction Period, pursuant to applicable City and utility provider requirements, including electric, water, wastewater and garbage services, and fiber, and timely payment of all applicable utility connection charges, required to perform and complete the Project.

8.10 [Not Used]

8.11 Record Drawings. Upon completion of the Project, the Engineer will prepare the record drawings based on the General Contractor’s as-built drawings and provide the City Representative with a complete set of electronic AutoCAD drawings of the Design Documents, and one PDF of a red-lined set (i.e., not electronic AutoCAD drawings) reflecting the actual construction of the Project based on the Contractor’s as-built drawings. Submission of provisional copies of such complete and accurate record drawings and the as-built drawings is a condition precedent to City acceptance of the Project, with final versions of such record drawings and as-builts to be submitted within ninety (90) days of acceptance.

8.12 Completion and Acceptance. Tesla will use reasonable efforts to achieve completion of the Project within three (3) years of the commencement of construction (provided that such period shall be extended to account for any Force Majeure Event delaying completion of the Project, and/or any additional time granted pursuant to a change order under the Construction Contract which has been approved or deemed approved by the City).

A. Conditions for Acceptance. Once the Project has been completed in accordance with the Construction Documents, the Construction Contract, and the terms of this Agreement, the City will accept the Project as complete in accordance with standard City procedure, and will notify the Tesla of acceptance of the Project, subject to Tesla’s satisfaction of each of the following conditions 1 to 4 below for City 21 Improvement Agreement
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DocuSign Envelope ID: 57B09814-B982-4E69-BEF1-FFBFA17D269E acceptance (except to the extent that one or more of these conditions precedent to acceptance is expressly waived by the City, in whole or in part):

1. Project Completion. Substantial Completion of the Project is achieved pursuant to the Construction Documents and approved change orders.

2. As-Built and Record Drawings. City receipt of provisional as- builts and the record drawings pursuant to Section 8.11.

3. Manuals. City receipt of provisional equipment maintenance and operating manuals for the Substation Improvements.

4. Inspection. The City Representative has been provided with written confirmation that the Project has passed inspection for permit and code compliance.

5. Punch List Completion. Completion of all punch list items in accordance with the requirements of the Construction Contract, unless the City agrees to accept the Project subject to exceptions for any specified incomplete punch list item.

6. Contractor Certification. City receipt of the General Contractor’s signed certification that all subcontractors and suppliers have been paid and that there are no pending claims (including stop payment noticed or payment bond claims) against the General Contractor in relation to the Project.

7. Site Restoration. Tesla has caused all trash and garbage to be removed from the Site and those portions of the Site that have not been modified in connection with the Substation Improvements in accordance with the requirements of the Construction Documents have been restored to their pre-construction condition.

8. Warranty. Tesla has caused warranty rights and guarantees to be assigned (by direct or collateral assignment) or otherwise transferred to the City in accordance with Section 8.13.

For the avoidance of doubt, Tesla shall be obligated to complete all of the conditions 1-8 above, with conditions 4 to 8 to be completed (and the final as-built drawings and operation and maintenance manuals delivered to the City) as soon as reasonably possible following acceptance by the City.
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DocuSign Envelope ID: 57B09814-B982-4E69-BEF1-FFBFA17D269E B. Notice of Completion. Following acceptance, the City will record a notice of completion pursuant to Civil Code section 9204, within 15 days following the City’s acceptance of the Project.

8.13 Transfer Following Acceptance. Tesla covenants that the Project will transfer to the City free and clear of all liens, claims (including stop payment or payment bond claims), or liability for labor or materials upon acceptance of the Project by the City on the Project Acceptance Date, so that the City is the sole owner of all of the Substation Improvements. Subject to payment in full by the City of its reimbursement obligations under Section 5 of this Agreement, Tesla will execute a deed or other document reasonably acceptable to the City quitclaiming any and all right, title and interest in and to the Substation Improvements installed pursuant to the Project, effective as of the Project Acceptance Date.

Tesla will assign any remaining third-party warranties and workmanship guarantees in the Construction Contract, including the General Contractor’s minimum warranty therein, to the City effective as of the Project Acceptance Date. If City terminates this Agreement for Tesla’s default, Tesla will assign to City all third-party product warranties applicable to materials and equipment installed prior to termination, in each case to the extent such warranties are capable of being assigned.

8.14 Operation and Maintenance of the Substation Improvements. Following the Project Acceptance Date, the City shall be responsible for the maintenance and operation of the Substation Improvements and all other equipment located within the Leased Premises and all other cables and connections up to the point of service to Tesla. The City will bear all risk of loss associated with the Substation (including the Site) and Substation Improvements up to the Point of Delivery to Tesla (as defined in Rule and Regulation 2 of the CPAU Rules and Regulations) from and after the Project Acceptance Date.

8.15 Capacity Reservation Agreement. The Capacity Reservation Agreement will become effective in accordance with its terms.

9. INSURANCE.

9.1 Coverage Requirements.

A. Tesla will insure its obligations under this Agreement as specified in Exhibit F, Insurance Requirements (Tesla), either by (i) maintaining in effect with responsible insurance carriers with a Best Insurance Reports rating of “A-“ or better or (ii) through a formal self-insurance mechanism that has both: (a) a Best Insurance Reports rating of “A-“ or better; or (b) a financial size category of “VI” or higher; provided, that if such self-insurance program does not meet (a) and (b), then 23 Improvement Agreement
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DocuSign Envelope ID: 57B09814-B982-4E69-BEF1-FFBFA17D269E the Party’s use of self-insurance for the coverages herein shall be subject to the City’s approval, not to be unreasonably withheld, conditioned, or delayed.

B. Tesla must require its Engineer to obtain and maintain during the Term the insurance coverage described in Exhibit G, Insurance Requirements (Engineer).

C. Tesla must require the General Contractor to obtain prior to beginning and to maintain throughout construction of the Project, up to the date of Project acceptance, the insurance coverage described in Exhibit H, Insurance Requirements (General Contractor).

9.2 General Requirements. The insurance must remain in full force and effect during the Term, commencing on the Effective Date, except as otherwise specified for the General Contractor in Section 9.1, above.

9.3 COC Policy. City may obtain course of construction or builder’s risk coverage ("COC Insurance") for the Construction Period, covering the Site and the Project pursuant to this Section 9.3 and the terms of Section 5.3. The terms of such COC Insurance shall be subject to the reasonable advance approval of Tesla. Tesla and the General Contractor shall be named additional loss payees under the COC Insurance. The City will provide Tesla with a copy of the COC Insurance, together with a copy of the paid premium invoice, promptly following issuance of the policy. For any insured loss covered by the COC Insurance, the deductibles shall be borne equally by the Parties.

10. INDEMNITY; LIMITATIONS ON LIABILITY.

10.1 Indemnity. To the fullest extent permitted by law, Tesla will protect, defend, indemnify and hold harmless the City, its elected and appointed officials, officers, employees, City Agents and representatives, from any and all Claims for death of or injury to persons, property damage or any other loss, to the extent caused by or arising out of the negligent acts or omissions, or willful misconduct, of Tesla, Tesla’s Agents (individually or collectively), its employees, officers, agents, engineers, contractors or design professionals, in the performance of or failure to perform Tesla’s obligations under this Agreement.

10.2 Indemnification Procedures.

A. Notice. The City will give the Tesla prompt notice of any Claim for which indemnification is sought under this Section 10. Failure to give prompt notice will not diminish the Tesla’s obligations under this Section 10 to the extent such failure does not materially prejudice the Tesla’s ability to defend the Claim.

B. Defense. Tesla shall control the defense of the Claim, and the City may participate in the defense at its own expense with legal representation of its choice. If 24 Improvement Agreement
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DocuSign Envelope ID: 57B09814-B982-4E69-BEF1-FFBFA17D269E the Claim is one that cannot by its nature be defended solely by Tesla, then the City will make available information and assistance as Tesla may reasonably request, at Tesla’s expense.

C. Consent. Tesla may not, without the prior written consent of the City, consent to the entry of any judgment or enter into any settlement:

1. that provides for injunctive or other non-monetary relief affecting the City; and

2. unless such judgment or settlement provides for an
unconditional and full release of the City and does not diminish any rights of the City under this Agreement or result in additional fees or charges to the City.

D. Remedies. If Tesla fails to take reasonable steps to defend the City against a Claim in accordance with this Agreement within a reasonable time after receipt of a request for indemnification, the City may undertake the defense of such Claim without waiving its rights and remedies under this Agreement.

E. Limitation. Notwithstanding anything to the contrary, in no event will Tesla be obligated to the City, except on a proportionate basis, to the extent a Claim arises out of or is due to the negligence or willful misconduct of the City, the City’s Agents, or its employees, officers, agents, inspectors, engineers or contractors.

10.3 Waiver of Certain Damages. In no event shall either Party be liable to the other Party for any consequential, indirect, incidental, special, exemplary or punitive damages (including without limitation damages incurred by a financing) arising out of or relating to any breach of this Agreement, whether or not the possibility of such damages has been disclosed in advance or could have been reasonably foreseen and regardless of the legal or equitable theory (contract, tort or otherwise) upon which the Claim is based.

10.4 No Individual Liability. The City acknowledges and agrees that the liability of Tesla under this Agreement is limited to the assets of Tesla, and no officer, director, employee, agent or contractor of Tesla or other individual affiliated with Tesla will be responsible or liable for the obligations of Tesla under this Agreement.

11. ASSIGNMENT.

11.1 No Assignment Without Consent. Except as set forth in Section 11.2, neither Party will assign, transfer, encumber or convey this Agreement without the express written approval of the other Party, which such Party may give or withhold in its sole discretion, and any such assignment, transfer or conveyance without the approval of the other Party will be void and, in such event at the other Party’s option, this Agreement may be terminated upon thirty (30) days’ prior written notice to Party making such assignment, 25 Improvement Agreement
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DocuSign Envelope ID: 57B09814-B982-4E69-BEF1-FFBFA17D269E transfer or conveyance in breach of this provision. All of the terms and conditions of this Agreement will be binding on the assignee or transferee, its assigns, transferees, and successors in interest.

11.2 Collateral Assignment. Tesla may with prior written notice to the City, and with the City’s prior written consent, collaterally assign this Agreement as security to, or as part of any factoring arrangement with, any financing party, provided that financing party agrees, in an enforceable written instrument, to be fully bound by Tesla’s legal obligations under the terms of this Agreement, but no assignment of this Agreement under this Section

11.2 will release Tesla from its obligations and liabilities under this Agreement. A permitted assignee under this Section 11.2 will be bound by the obligations of this Agreement upon a foreclosure and upon the City’s request will deliver a written assumption of assignor’s rights and obligations under this Agreement to the City. Any written instrument used to effectuate the terms of this Section 11.2 is subject to prior approval by City, which approval will not be unreasonably withheld or delayed, with respect to conforming with the terms herein.

12. FORCE MAJEURE. A Party will be temporarily excused from the performance or further performance of any of its covenants or agreements or any terms or conditions that it is obligated to fulfill hereunder, and such Party’s nonperformance will not be deemed an event of default under this Agreement for any period, to the extent that such Party is reasonably unavoidably prevented, hindered or delayed for any period of time from performing any of its covenants or agreements, in whole or in part, or any term or condition it is required to perform or satisfy, as a result of a Force Majeure Event. The Parties agree to use reasonable efforts to avoid and mitigate the effects caused by the occurrence of the relevant Force Majeure Event.

12.1 Definition. “Force Majeure Event” means any act or circumstance beyond the reasonable control and not attributable to the fault or negligence of the Party seeking relief, including acts of God, epidemic, pandemic, flood, fire, earthquake, climatic conditions at the Site that are unusual for the time of year, explosion, action or inaction of a public authority (including delays caused by permitting authorities) for reasons other than the claiming Party’s fault, war, terrorist threats or acts or other civil unrest, piracy, lock-outs, strikes or other labor disputes, restraints or delays affecting carriers, and shall include the inability or delay in obtaining supplies of adequate or suitable materials to the extent caused by a Force Majeure Event. Force Majeure Events include any emergencies declarations by any Governmental Authority requiring shutdown or forced curtailment of the Project or the Substation, or imposing delays or other impacts on a Party’s performance (including those arising from shut-in, social distancing or other orders by Governmental Authorities, delays or non-availability of labor or materials, enhanced safety or monitoring requirements, or due to any epidemic or pandemic). However, financial cost alone or as the principal factor shall not constitute grounds for a claim of force majeure.

12.2 Notice. A Party will provide written notice promptly to the other Party to the extent that Party relies on the provisions of this Section to temporarily excuse its failure to 26 Improvement Agreement
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DocuSign Envelope ID: 57B09814-B982-4E69-BEF1-FFBFA17D269E perform any of its covenants or agreements or any duties under this Agreement due to a Force Majeure Event.

12.3 Damage to Project.

A. Responsibility for Damage. Tesla will be responsible for any damage to the Site or the Substation Improvements (other than damage expressly contemplated in the performance of the work under the Construction Contract) that arises due to acts or omissions of Tesla, Tesla’s Agents or the General Contractor during the Construction Period. Except as expressly set forth in this Agreement, including, but not limited to, the indemnity and insurance requirements set forth herein, the City will be responsible for any other loss or damage to the Site or the Substation Improvements that is not covered by the insurance required under this Agreement.

B. Damage Prior to Acceptance. If any part of the Project is damaged by fire, other peril, or any other cause, before the Project has been accepted by the City, Tesla will promptly direct its General Contractor to take appropriate measures to secure the Site to avoid further damage or unsafe conditions. Tesla will make reasonable efforts to complete the Project on schedule, if reasonably possible depending on the scope and nature of the damage. Construction of the Project will be suspended, in whole or in part, only to the extent necessary to ensure worker and public safety or to limit the cost to repair and complete the Project.

C. Insurance Claim. Tesla may, at its sole option prepare and submit a claim to its insurer(s) or rely on self-insurance, if applicable, for funds to repair and rebuild all insured loss pursuant to the applicable insurance coverage required under Section 9 and exhibits thereto. Both Parties will cooperate to expedite recovery of insurance proceeds for which Tesla elects to make submit a claim to cover the insured loss.

13. PROJECT RECORDS.

13.1 Maintenance of Project Records. Tesla will maintain or caused to be maintained by its Engineer, General Contractor and subcontractors, if any, in accordance with their respective standard practices books and records relating directly to design and construction of the Project (excluding for the avoidance of doubt any documents which are subject to confidentiality obligations to third parties, which are subject to attorney-client privilege or which constitute privileged work product) until the earlier of three (3) years from the Project Acceptance Date or any earlier termination of this Agreement. Tesla will retain such books and records at accessible locations during the record retention period.

13.2 Inspection of Records. The City may inspect and copy such books and records upon thirty (30) days’ prior written notice from the City at any reasonable time during the above-referenced record retention period.
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13.3 Survival. This Section will survive the termination of this Agreement.

14. DEFAULT.

14.1 Choice of Remedies.

A. Remedies for Tesla Default. Except as otherwise provided under this Agreement and subject to the dispute resolution provisions of Section 16, if Tesla defaults in the performance of any covenant, term or condition contained in this Agreement and such default is not corrected within 30 days of receipt of a written notice of default from the City, the City may elect to enforce any of the following rights and remedies:

1. In the case of a material default, such as abandonment of the work; uncorrected or repeated material violation of any Laws; or refusal or repeated, unexcused failure to construct the Project in material conformance with the requirements of the Construction Documents, City may elect to terminate this Agreement upon 30 days prior notice to Tesla.

2. The City may cure any default of Tesla by performance of any act, including payment of money, and the cost and expense thereof, plus all reasonable administrative costs actually incurred by the City in so curing, will become immediately due and payable by Tesla to the City.

3. The City may initiate an action or suit in law or equity to enjoin any acts which may be unlawful or in violation of the rights of the City hereunder.

4. The City may pursue any other right or remedy as may be provided at law or in this Agreement.

B. Remedies for City Default. Except as otherwise provided under this Agreement and subject to the dispute resolution provisions of Section 16, if the City defaults in the performance of any covenant, term or condition contained in this Agreement and such default is not corrected within 30 days of receipt of a written notice of default from Tesla, Tesla may elect to enforce any of the following rights and remedies:

1. In the case of a material default, Tesla may elect to terminate this Agreement upon 30 days prior notice to the City.
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2. Subject to the provisions of Section 16.3, Tesla may initiate an action or suit in law or equity to enjoin any acts which may be unlawful or in violation of the rights of Tesla hereunder.

3. Subject to the provisions of Section 16.3, Tesla may pursue any other right or remedy as may be provided at law or in this Agreement.

C. Wrongful Stoppage or Suspension of Project. If either Party wrongfully stops or suspends work on the Project, other than as authorized herein or pursuant to the lawful exercise of the City’s police powers; actions necessary to operate, maintain, or repair the Substation; or to comply with Laws, that Party will be responsible for all additional costs, reasonably incurred by the other Party to complete the Project as a result of such wrongful stoppage or suspension, provided the Party claiming entitlement to additional costs transmitted a timely notice objecting to the stoppage or suspension, and stating the grounds for such objections, and provided the Parties engage in the dispute resolution procedures in Section 16. As used in this paragraph, “wrongful” and “wrongfully” refer to actions that constitute a material breach of this Agreement but exclude City’s reasonable exercise of its police powers in accordance with Laws; actions necessary to operate, maintain, or repair the Substation; or to comply with Laws.

D. Additional Time for Cure. Except as otherwise provided in this Agreement, in the event of any material default by either Party that is not cured within 30 days of written notice of default from the aggrieved Party, or such additional period of time as is reasonably necessary to cure the default, not to exceed 60 additional days, the aggrieved Party may pursue any rights or remedies provided by law or equity to enforce the Agreement, subject to prior compliance with the dispute resolution procedures in Section 16.

14.2 Termination.

A. Failure to Timely Commence the Project. If Tesla fails to cause construction on the Project to commence within 90 days after City’s notification pursuant to Section 7.1 that all conditions precedent to construction have been met or waived, City may terminate this Agreement. If the Agreement is terminated pursuant to this paragraph, each Party will bear its own loss with respect to expenditures it has incurred for design and construction of the Project, and neither Party will be entitled to further contribution from the other Party for such expenditures.

B. Termination after Project Commencement. If this Agreement is terminated by either Party after work on the Project has already commenced by delivery of written notice of termination at least thirty (30) days prior to the effective date of the termination, Tesla is responsible for prompt removal of the personal property of Tesla or any Tesla Agents from the Site, including temporary facilities for Project construction, and restoring the Site back to its pre-construction condition, with 29 Improvement Agreement
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DocuSign Envelope ID: 57B09814-B982-4E69-BEF1-FFBFA17D269E the exception of Substation Improvements that have already been fully installed at the Site, or as otherwise specified by the City, no later than thirty (30) days after the notice of the termination, unless a longer period is specified in the notice of termination. City will have the right to dispose of any such personal property that is not timely removed, and the right to recover any costs it incurs to remedy any failure by Tesla to timely remove such personal property and restore the Site. Otherwise, each Party will bear its own loss with respect to expenditures it has incurred for design and construction of the Project, except that:

1. The City will compensate Tesla for Substation Improvements that have been fully installed and incorporated into the Substation, provided those Substation Improvements (a) have been installed in accordance with the Construction Documents to the City’s reasonable satisfaction, and (b) function as intended based on specified inspection, testing, or commissioning.

2. With respect to materials or equipment which are on Site, but which have not yet been fully installed or incorporated into the Substation, City will have the right, but not the obligation, to retain such materials or equipment for subsequent installation or incorporation, subject to payment to Tesla of an amount equal to the cost of such materials or equipment retained by the City.

The Parties mutually intend that disposition of and compensation for improvements, equipment, or materials upon termination after Project commencement should be fair and equitable in relation to the circumstances, and should not result in any unfair enrichment nor an unfair burden to pay for improvements, equipment, or materials that offer little or no benefit without a completed Project.

14.3 Enforcement. The remedies given to the Parties hereunder, or by any Laws now or hereafter enacted, are cumulative and the exercise of one right or remedy will not impair the right of a Party to exercise any or all other remedies. In case any suit, action or proceeding to enforce any right or exercise any remedy is brought or taken and then discontinued or abandoned, then, and in every such case, the Parties will be restored to their former positions, rights and remedies as if no such suit, action or proceedings had been brought or taken.

15. NOTICES. All notices, requests and approvals by a Party will be given, in writing, and delivered by personal service, the United States Postal Service, express delivery service, or electronic mail transmission, as follows:

To City: City of Palo Alto
City Clerk
P.O. Box 10250
250 Hamilton Avenue
Palo Alto, CA 94303
30 Improvement Agreement
6056799 Hanover Substation
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Attachment A - Tesla
Substation Agreement

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DocuSign Envelope ID: 57B09814-B982-4E69-BEF1-FFBFA17D269E With copies to each of:

Utilities Department
250 Hamilton Avenue
Palo Alto, CA 94303
ATTN: Tomm Marshall
To Tesla: Tesla, Inc.
1 Tesla Road
Austin, TX 78725
E-Mail: [email protected]
ATTN: Andy Kim
Any notice hereunder will be deemed to have been given upon receipt at the designated address, except that a notification delivered on a weekend, holiday, or other day that the recipient Party is not open for business, will be deemed received on the recipient Party’s first business day thereafter. For convenience of the Parties, copies of notices may also be given by email; however, neither Party may give official or binding notice by email.

16. DISPUTE RESOLUTION. Except as expressly provided in this Agreement, good faith compliance with the dispute resolution procedures herein, is a condition precedent to either Party initiating a legal action against the other Party.

16.1 Informal Resolution. If a dispute arises between the Parties from or in connection with this Agreement or any Exhibit hereto (a “Dispute”), the following procedure will govern the resolution of any such Dispute:

A. Informal Negotiation. Each Party will nominate a representative to be responsible for engaging in good faith efforts to resolve the Dispute on behalf of that Party for a 14-day resolution period, beginning with either Party’s written notice requesting Dispute resolution pursuant to this provision. Notwithstanding the foregoing, it is understood that under the terms of the PAMC, final authority to approve proposed resolution of a dispute on behalf of the City may be vested in the City Council, in which case the 14-day resolution period will be extended so that City Council approval may be requested in accordance with standard procedures for such matters.

B. Further Negotiations. If the Dispute remains unresolved within the 14- day period or due to failure to secure City Council approval, as applicable, before either Party initiates mediation under Section 16.2 and 16.3, either Party may refer the Dispute, in writing, for final settlement to Tesla’s General Counsel and the City Manager, or designee, who will jointly convene within ten days of receipt of the referral request and use reasonable efforts to consider and resolve the Dispute. The Parties will ensure that their respective representatives confer for a period of 14 days from the date of referral by either Party. Notwithstanding the foregoing, it is 31 Improvement Agreement
6056799 Hanover Substation
Item 14
Attachment A - Tesla
Substation Agreement

Item 14: Staff Report
Pg.
36 Packet Pg. 441 of 553

DocuSign Envelope ID: 57B09814-B982-4E69-BEF1-FFBFA17D269E understood that under the terms of the PAMC, final authority to approve proposed resolution of a dispute on behalf of the City may be vested in the City Council, in which case the 14-day resolution period will be extended so that City Council approval may be requested in accordance with standard procedures for such matters.

C. Impasse. If final resolution cannot be achieved, the Parties may follow the procedures described in Sections 16.2 and 16.3.

16.2 Mediation. In the event of an unresolved Dispute between the Parties with respect to this Agreement or the enforcement of rights hereunder, after reaching impasse pursuant to Section 16.1, either Party may, by notice to the other Party (the “Mediation Notice”), require such dispute to be submitted to non-binding mediation in Palo Alto, California, with a single mediator who is mutually acceptable to the Parties. The Parties will use reasonable efforts to cause such mediation to be convened, conducted and completed within a reasonable period of time, from the date of the Mediation Notice, subject to the availability of a mutually acceptable mediator and commensurate availability of the individuals that each Party, respectively, requires to represent it at mediation, including legal counsel, percipient witnesses, expert witnesses, sureties, and individuals authorized to negotiate a settlement. If such mediation does not result in a settlement of the Dispute or if one or more of the Parties does not in good faith participate in such mediation, either Party may pursue other available legal or equitable remedies. The cost of mediation, including the mediator’s fee, will be shared equally by the Parties, but each Party is solely responsible for its own legal costs and its own legal representation.

16.3 Remedies for Default. Subject to good faith compliance with the dispute resolution procedures in this Section, nothing contained in this Agreement will prevent or otherwise restrict either Party from pursuing its legal or equitable rights, including injunctive relief and specific performance, in the event of a default by the other Party. Notwithstanding the foregoing, Tesla must comply with the applicable provisions of the Government Claims Act and the PAMC, as a condition precedent to filing any lawsuit or claim relating to this Agreement.

16.4 Limitations. Notwithstanding anything to the contrary set forth herein, prior to any termination of this Agreement and for so long as the City does not default under this Agreement, Tesla will not terminate its construction of the Substation Improvements, unless authority to do so is granted by the City or conferred by a court of competent jurisdiction, or this Agreement has been validly terminated. To the full extent practicable, work on the Project will not be unilaterally suspended, delayed, or stopped by either Party solely because the Parties are engaged in dispute resolution pursuant to this Section 16.

17. MISCELLANEOUS PROVISIONS.

17.1 Governing Law. This Agreement will be governed by and construed in accordance with the laws of the State of California. The Parties will comply with all applicable 32 Improvement Agreement
6056799 Hanover Substation
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Attachment A - Tesla
Substation Agreement

Item 14: Staff Report
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DocuSign Envelope ID: 57B09814-B982-4E69-BEF1-FFBFA17D269E federal, state and local laws in the exercise of their rights and the performance of their obligations under this Agreement.

17.2 Covenants and Conditions. All provisions of this Agreement, whether covenants or conditions, will be deemed to be both covenants and conditions.

17.3 Entire Agreement; Amendment. This Agreement represents the entire agreement between the Parties and supersedes all prior negotiations, representations and contracts, whether written or oral. This Agreement may be amended by an instrument, in writing, signed by the Parties. This Agreement may be executed in any number of counterparts, each of which will be an original, but all of which together will constitute one and the same instrument.

17.4 Waiver. The waiver by either Party of any breach or violation of any covenant, term, or condition of this Agreement or of the provisions of any permit, approval, ordinance or other City Laws will not be deemed to be a waiver of any such covenant, term, or condition, or of any subsequent breach or violation of the same or any other covenant, term, or condition. The subsequent acceptance by either Party of any consideration which may become due or payable hereunder will not be deemed to be a waiver of any preceding breach or violation by the other Party of any other covenant, term, or condition of this Agreement. No waiver or consent will constitute a continuing waiver or consent.

17.5 Nondiscrimination. The PAMC prohibits discrimination in the employment of any individual under this Agreement because of race, skin color, gender, age, religion, disability, national origin, ancestry, sexual orientation, housing status, marital status, familial status, weight or height of that person. Tesla acknowledges that it has read and understands the provisions of PAMC Chapter 2.30 relating to nondiscrimination in employment and the penalties for violations thereof, and it agrees to comply with all requirements of PAMC Chapter 2.30 pertaining to nondiscrimination in employment.

17.6 Independent Contractor. In the construction of the Project or other duties imposed upon it by this Agreement, Tesla will act at all times as an independent contractor and not as an employee of the City. Nothing in this Agreement will be construed to establish a partnership, joint venture, group, pool, syndicate or agency between the Parties. No provision contained herein will be construed as authorizing or empowering either Party to assume or create any obligation or responsibility whatsoever, express or implied, on behalf, or in the name of, the other Party in any manner, or to make any representation, warranty or commitment on behalf of the other Party. In no event will either Party be liable for: (1) any loss caused by the other Party in the course of its performance hereunder, except as expressly provided herein; or (2) any debts, obligations or liabilities of the other Party, whether due or to become due.

17.7 Representations and Warranties. On the Effective Date, each Party represents and warrants to the other Party that: (1) it is duly organized, validly existing and in good standing under the laws of the jurisdiction of its formation; (2) to the best of the Party’s 33 Improvement Agreement
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Attachment A - Tesla
Substation Agreement

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DocuSign Envelope ID: 57B09814-B982-4E69-BEF1-FFBFA17D269E knowledge, the execution, delivery and performance of this Agreement, the exhibits incorporated herein and the Encroachment Permit are within its powers, have been duly authorized by all necessary action and do not violate any of its governing documents, any contracts to which it is a party or any law, rule, regulation, or order; (3) it has not filed and it is not now contemplating the filing for bankruptcy protection or, to its knowledge, threatened against it which would result in it being or becoming bankrupt; (4) there is not pending or, to its knowledge, threatened against it or any of its affiliates any legal proceedings that could materially adversely affect its ability to perform its obligations under this Agreement and the exhibits incorporated herein; and (5) it is unaware of any events or circumstances, currently existing or likely to arise, that would prevent it from performing its obligations under this Agreement.

17.8 Exhibits; Order of Priority. All exhibits referred to in this Agreement are by such references incorporated in this Agreement and made a part hereof. The following exhibits are made a part of this Agreement:

Exhibit A
Exhibit B
Exhibit C
Exhibit D
Exhibit E
Exhibit F
Exhibit G
Exhibit H
Exhibit I
Project Description
Encroachment Permit
Project Budget
Capacity Reservation Agreement
Project Schedule
Insurance Requirements (Tesla)
Insurance Requirements (General Contractor)
Insurance Requirements (Engineer)
Construction Contract Form
A. Order of Precedence. If any inconsistencies between this Agreement and the exhibits exist, the following order of precedence (in declining order of priority) in the interpretation hereof or resolution of such conflict hereunder shall prevail:

1. 2.

3. 3.

3. 4.

5. The body of this Agreement;
Exhibit D;
Exhibit B;
Exhibit A;
Exhibit C;
Exhibit E; and
All other exhibits.

17.9 Organizational Documents. Upon request of the City, Tesla will furnish to the City for its records copies of its articles of incorporation and bylaws and any other information reasonably requested by the City and relating to its organization status.

17.10 Publicity. The Parties acknowledge that the City is subject to California Laws governing charter cites, including public disclosure requirements which include, but are not 34 Improvement Agreement
6056799 Hanover Substation
Item 14
Attachment A - Tesla
Substation Agreement

Item 14: Staff Report
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39 Packet Pg. 444 of 553

DocuSign Envelope ID: 57B09814-B982-4E69-BEF1-FFBFA17D269E limited to, open meeting requirements pursuant to Government Code section 54950 et seq. and public record disclosure requirements pursuant to Government Code section 7920 et seq. Except as required for compliance with applicable Laws, neither Party shall advertise or issue any public announcement regarding the execution of this Agreement or its contents, or use the other Party’s mark, name or logo in any marketing literature, web sites, articles, press releases (including interviews with representatives of media organizations of any form), or any other document or electronic communication, without the prior written consent of the other Party. The foregoing shall not prohibit a Party from making any public disclosure or filing that it determines in good faith is required by Laws, including, but not limited to, in respect of Tesla, the rules of the stock exchange on which its shares, or the shares of its parent company, are listed.