Supplement to the Annual Report
Fiscal Year 2022-2023
Prepared by the City of Palo Alto
February 8, 2024
Background and Purpose
On June 6, 2011, the Council approved Comprehensive Plan amendments, zoning changes, a conditional use permit, SUMC design guidelines, annexation, and architectural review applications for the Stanford University Medical Center Facilities Renewal and Replacement Project (the “Projects”). The Projects include the construction of the new Stanford Hospital and Clinics buildings, an expansion of the Lucile Packard Children’s Hospital (LPCH), construction of new School of Medicine (SOM) buildings, renovation of the existing Hoover Pavilion, construction of a new medical office building and parking garage at Hoover Pavilion, and roadway improvements along Welch Road and Durand Way. The SUMC Development Agreement vesting these approvals became effective on June 6, 2011 and continues for thirty (30) years from the effective date.
Per the requirements of Sections 12(a) and 12(d) of the Agreement, the City of Palo Alto is to prepare a Supplement to the Annual Report. This Supplement is to contain an accounting of the funds received from SUMC, including:
•a description of the account balances for each of the funds maintained by the City under Section 5 of the Agreement;
•the expenditures from each of the funds; and
•the purposes for which the expenditures were used.
Fund Accounting
This SUMC Annual Report Supplement covers the period during the 12th year of the Agreement: June 6, 2022 through June 6, 2023. Accounting for the funds outlined extends through the end of the City’s FY 2022-2023.
The specific fund accounts reported in this Supplement are consistent with Section 5 and Sections 12(a), 12(c), and 12(d) of the Agreement. Each fund has been assigned a unique cost center number for accounting purposes. Along with expenditures, this Supplement also shows investment earnings and the allocation of earnings across funds.
Attachment E
In summary, SUMC has paid approximately $44.3 million in public benefit fees to the City since June 6, 2011 through the FY 2022-2023 reporting period. There were no required new payments from the SUMC Parties during the FY 2022-2023 reporting period.
The first payment of $20,800,333 on August 11, 2011 was for the following funds:
•Fund for Community Health and Safety Programs, Project Safety Net (Section 5(a)(iii)); •Fund for Expansion Cost Mitigation (Section 5(b)(iii)); •Fund for Pedestrian and Bicycle Connections from Intermodal Transit Center to El Camino Real/Quarry Road Intersection (Section 5(d)(i)); •Fund for Public Right of Way Improvements to Enhance Pedestrian and Bicycle Connections on Quarry Road (Section 5(d)(ii));
•Fund for Infrastructure, Sustainable Neighborhoods and Communities and Affordable Housing (Section 5(e)), and
•Fund for Climate Change - Sustainable Programs Benefit (Section 5(f)(i)).
The second payment of $11,733,333 payment on December 5, 2012 was for the following funds:
• Fund for Infrastructure, Sustainable Neighborhoods and Communities and Affordable Housing (Section 5(e)) and
• Fund for Climate Change - Sustainable Programs Benefit (Section 5(f)(i)).
The third payment and final payment of $11,744,533 on December 12, 2017 was for the following funds:
• Fund for Infrastructure, Sustainable Neighborhoods and Communities and Affordable Housing (Section 5(e));
•Fund for Climate Change -Sustainable Programs Benefit (Section 5(f)(i)); and •Fund for Community Health and Safety, Project Safety Net (Section 5(a)(iii)).
Fund Expenditures
Regarding use of SUMC funds during the Fiscal Year 2022-2023 reporting period, the City authorized the following transfer:
•$2,400,000 under the “Climate Change and Sustainability” fund for Bicycle and Pedestrian Transportation Plan Implementation (PL-04010).
Agreement Section 5(a)(iii) requires that a joint committee make annual recommendations to the City Council regarding proposed disbursements from the Community Health and Safety Program Fund, and the City Council may use reasonable discretion to accept, reject, or modify these recommendations. The joint committee includes SUMC representatives and City staff from the City Manager’s Office, Office of Transportation, Administrative Services, and Public Works departments. Projects using Community Health and Safety funds must gain mutual support from members of the joint committee and approval from the City Council. The joint committee met in FY 2022-2023 and supported use of the Community Health and Safety funds toward the City’s Psychiatric Emergency Response Team (PERT). Given that PERT was currently funded by a Santa Clara County grant through June 2023, no Community Health and Safety funds were disbursed in the FY 2022-2023 reporting period.
The Infrastructure, Sustainable Neighborhoods and Communities, and Affordable Housing Fund contained an original contribution of $1,720,488 for support of affordable housing. SUMC funding supported the Stevenson House project in FY 2013 and the remaining affordable housing funds were fully exhausted in FY 2020 to support the Wilton Court Housing Project.
City of Palo Alto AUDITED BALANCESStanford Medical Center Development Agreement (Fund 260)Fiscal Year Ended June 30, 2023 Expansion Cost Intermodal Transit Quarry Road Infrastructure &Climate Change Community Total FY 2023 FY 2023Mitigation Improvements Afford Housing & Sustainability Health & Safety Actuals Budget cost centers 26000000 60260010 60260020 60260030 60260040 80260010 Beginnig Fund Balances, 7/1/2022 1,720,190 1,172,897 - 8,244,724 2,702,007 1,081,756 14,921,573 Revenues:Revenues From Stanford - - - - - - - -Investment Earnings / Unrealized gain (loss) 154,668 154,668 275,300Allocate to categories (154,668) (154,668)Allocated Investment Earnings 21,248 14,488 - 101,840 3,730 13,362 154,668 - Total Revenues 21,248 14,488 - 101,840 3,730 13,362 154,668 275,300 Expenditures:Transfer to Capital Projects - (2,400,000) (2,400,000)(2,400,000) Total Expenditures - - - - (2,400,000) - (2,400,000)(2,400,000) FY 2023 Revenues less Exp 21,248 14,488 - 101,840 (2,396,270) 13,362 (2,245,332)(2,124,700) Ending Fund Balances, 6/30/2023 1,741,438 1,187,384 - 8,346,564 305,737 1,095,118 12,676,241 Past and Future Use of Funds
The SUMC funds received by the City are utilized for Operations, as well as support implementation of the City’s Capital Infrastructure Plan. For additional information about the recent past, current, and future use of SUMC funds, please refer to the following:
•Fiscal Year 2023 Adopted Operating Budget document, Special Revenue Funds section; •Fiscal Year 2023 Adopted Capital Improvement Budget document; •Fiscal Year 2024 Adopted Operating Budget Document, Special Revenue Funds section; and the
•Fiscal Year 2024 Capital Improvement Budget document. 1 As outlined above, the SUMC Parties have already paid approximately $44.3 million in public benefit fees to the City since June 6, 2011 through the FY 2022-2023 reporting period. Future fund contributions are not anticipated at this time. However, the City is to receive no less than $8.1 million in Construction Sales & Use Tax revenue by December 31, 2025. Revenues for calendar years 2011 through 2022 have totaled $5,467,628. Section 5(b)(ii) of the Agreement discusses how SUMC and the City should address any surplus or shortfall in the amount of construction sales and use tax received by the City. Discussion and final reconciliation of any surplus or shortfall in the revenue amount that the City received would occur in and after August 2026. Given the annual decline in construction sales and use tax revenue since calendar year 2020 to present, it is possible that there might be a shortfall relative to the $8.1 million required. In that case, SUMC would make a payment to relieve that shortfall in FY 2026-2027 from the Fund for Healthcare Services, as discussed under Development Agreement Section 5(a)(ii). After this reconciliation, SUMC would commence activity in the Fund for Healthcare Services for 10 years from 2026 to 2036. This activity would be reported in the SUMC Annual Report for each fiscal year.
1 Fiscal Year 2023 Adopted Operating Budget document, Special Revenue Funds section:
https://www.cityofpaloalto.org/files/assets/public/v/1/administrative-services/city-budgets/fy-2023-city- budget/adopted-fy23/operating-budget_final-4.pdf.
Fiscal Year 2023 Adopted Capital Improvement Budget document:
https://www.cityofpaloalto.org/files/assets/public/v/1/administrative-services/city-budgets/fy-2023-city- budget/adopted-fy23/operating-budget_final-4.pdf.
Fiscal Year 2024 Adopted Operating Budget Document, Special Revenue Funds section:
https://www.cityofpaloalto.org/files/assets/public/v/1/administrative-services/city-budgets/fy-2024-city- budget/adopted/fy-24-palo-alto-adopted-operating-budget-book.pdf.
Fiscal Year 2024 Capital Improvement Budget document:
https://www.cityofpaloalto.org/files/assets/public/v/1/administrative-services/city-budgets/fy-2024-city- budget/adopted/palo-alto-adopted-capital-budget-book.pdf.