City Council
Staff Report
From: City Manager
Report Type: CONSENT CALENDAR
Lead Department: Community Services
Meeting Date: March 18, 2024
Report #:2402-2596
TITLE
Approval of a Professional Services Agreement (Contract No. C24190819) Between the City of Palo Alto and Pets in Need for a Total Not-to-Exceed Amount of $7,373,516 for a Five-year Term; and Amend the FY2024 Budget in the General Fund; CEQA status – categorically exempt.
RECOMMENDATION
Staff recommends the City Council:
1. Approve and authorize the City Manager to execute Professional Services Agreement (Contract No. C24190819) Between the City of Palo Alto and Pets in Need for a Total Not-to-Exceed Amount of $7,373,516 for a Five-year Term (Attachment A),
2. Amend the Fiscal Year 2024 Budget Appropriation for the General Fund (requires a 2/3 vote) by:
a. Increasing the contract expense appropriation in the Community Services Department by $194,433; and
b. Decreasing the Budget Stabilization Reserve by $194,433.
EXECUTIVE SUMMARY
The Agreement recommended for approval reflects the actualization of previously stated commitments by both the City and PIN to work together as partners to provide high quality and timely animal care services to residents of Palo Alto, Los Altos, and Los Altos Hills.
In February 2022, the City Council directed staff to work with Pets in Need (PIN) toward development of a new Agreement that would result in a long-term partnership for shelter operations. City staff and PIN developed a Term Sheet that was approved by Council on August 14, 2023 1, and was the basis for a new five-year Agreement (Attachment A). The Agreement terms include an annual compensation amount to PIN in the amount of $1.4 million with an annual escalator equal to the higher of: three percent or the yearly percentage change in 1 City Council, August 14, 2023; Agenda Item #6; SR#2306-1712, https://cityofpaloalto.primegov.com/Portal/viewer?id=2632&type=0
Consumer Price Index (CPI) using the Bureau of Labor Statistics’ Consumer Price Index for the Bay Area plus a $100,000 contingency fund ($20,000 annually) for unforeseen costs, for a total compensation over five years equal to $7.37 million. All terms in the Council-approved Term Sheet (Attachment B) have been included in the new Agreement and no other significant terms have been added. Additional program costs for after-hours veterinary medical care will initially be absorbed by the Animal Control Division of the Police Department. A budget request will be brought forward in FY 2025, to include adding 0.5 FTE Administrative Associate for licensing and up to $20,000 annually for after-hours veterinarian costs and $5,000 annually for other general services costs associated with re-directed animal services.
BACKGROUND
California requires that cities and counties provide animal control and sheltering services for the purpose of ensuring the safety of people and animals, providing for the proper care, and sheltering of abandoned or neglected domestic animals, licensing domestic animals and providing humane disposal of animals when necessary. There are several ways local jurisdictions meet these requirements; some agencies manage their own animal shelters and animal control services, while others partner with other agencies to take advantage of economies of scale and to reduce costs. Palo Alto maintained its own shelter and provided animal services to other neighboring cities until 2019, when animal sheltering services for Palo Alto and two partner cities, Los Altos and Los Altos Hills, were provided through a public/private partnership with Pets in Need. Animal Control is provided by the Palo Alto Police Department’s Animal Control Officers (ACOs).
Summary of Current (2019-2023) Agreement
City Council approved a Professional Services Agreement (Agreement) with the nonprofit Pets in Need on November 26, 20182 to operate the Animal Shelter after a public solicitation process for potential operators. The term and compensation of the Agreement include:
•Five-year term commencing January 17, 2019 through January 17, 2024 •Compensation to be paid to PIN for performance of the Scope of Services in a not to exceed amount $3,440,626 over the five-year term
•A Contingency Fund of $200,000
•A Compensation for Renovation Delays Fund of $60,000
•Completion by City of capital improvement projects not to exceed $3.4 million Key responsibilities of Pets in Need include:
•Animal Shelter Services including sheltering stray, abandoned, and owner surrendered animals
2 City Council, November 26, 2018; Agenda Item #13, SR#9822, https://portal.laserfiche.com/Portal/DocView.aspx?id=39642&repo=r-704298fc •Medical Services including veterinarian services to shelter animals, vaccination clinics, micro-chipping, and a low cost spay and neuter clinic
•Animal adoptions and foster program
•Operating schedules for shelter services, emergency veterinary 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 stated delays in completing the capital improvement projects, particularly the new dog kennel building as the primary reason for terminating the Agreement.
Development of a new Agreement
City and PIN staff discussed how best to operate the Animal Shelter for the remaining term of the Agreement and began exploring how to continue the partnership beyond the termination date.
On February 14, 2022 3, the City Council unanimously passed a motion to extend the notice of termination for six months and to proceed with negotiations with Pets in Need for a long-term contract agreement for animal services in Palo Alto.
The PIN Board supported extending the termination date for six additional months to end on March 15, 2023. On March 27, 2023 4, a Council Study Session provided an update on the status of contract negotiations with PIN and an opportunity for the Council to provide feedback on a draft Term Sheet. City staff included a preliminary estimate of the cost and revenue associated with bringing operations of the Animal Shelter back to an in-house model. PIN and City staff continued to refine the Term Sheet and mutually agreed to extend the current agreement to terminate on September 30, 2023.
The City Council discussed and provided feedback on the draft term sheet during the study session on March 27, 2023. The Council requested information on the following:
•A breakdown of PIN’s costs showing the increased compensation from the original Agreement.
•The percentage of PIN’s operating budget that is for animals covered in Palo Alto, Los Altos and Los Altos Hills.
•A comparison chart of PIN’s fees with other municipal shelters’ fees. •A more detailed and accurate comparison of PINs services to the Peninsula Humane Society.
•PIN’s revenue over the previous five years.
•Consideration of a minimum and maximum number of surgeries and events. •A side-by-side comparison of PINs proposal and the in-house model. •A more defined capital plan identified in the Agreement. 3 City Council, February 14, 2022; Agenda Item #9; SR #13952, https://portal.laserfiche.com/Portal/DocView.aspx?id=59364&repo=r-704298fc 4 City Council, March 27, 2023; Agenda Item #3; SR #2302-0940, https://portal.laserfiche.com/Portal/DocView.aspx?id=65785&repo=r-704298fc •Additional information on feral cats, including the method by which they are handled, how many cats are in Palo Alto, where cats are released.
PIN prepared responses to the Council’s questions and presented them to Council on June 12, 20235. The responses are included as Attachment C to the June 12th staff report. During this meeting, an additional term was introduced that would provide PIN additional compensation of $55,535 for services rendered since June 1, 2023 and continuing until a new Agreement is executed. PIN calculates this as the difference between the monthly fee (1) specified for Year 5 in Exhibit B of the 2019 Agreement and (2) the monthly fee specified for Year 1 in the proposed new Agreement, effective June 1, 2023.
Staff and PIN received valuable feedback from Council at the June 12th meeting and Council passed the following motion unanimously:
Direct staff to negotiate an agreement with Pets in Need (PIN) and bring back to Council in August with the following amendments and review:
1. No Trap/Neuter/Return (TNR) changes, through language such as: “Both parties will work together to develop a transparent and humane feral cat program reflective of municipal best practices and the impact on public health and wildlife, and that maintains the current practice where PIN does not release feral cats or cause them to be released.”
2. Review on the number of surgeries
3. Higher revenue opportunities
4. Consider a possible 3-year contract
5. Level of service and termination clause
6. Reporting and oversight
7. Spayed and neutered metrics
The direction received from Council and additional input by the PIN Board of Directors resulted in a revised Term Sheet (Attachment B) that the Council reviewed and approved on August 14, 20236. On January 16, 2024 7, the City Council approved Amendment No. 2 to the current Agreement in the amount of $342,501 to continue operations of the animal shelter for an additional three-month term while the new Agreement was finalized. 5 City Council, June 12, 2023, Agenda Item #13,
https://cityofpaloalto.primegov.com/Portal/viewer?id=2049&type=0 6 City Council, August 14, 2023, Agenda Item #6; SR#2306-1712, https://cityofpaloalto.primegov.com/Portal/viewer?id=2632&type=0 7 City Council, January 16, 2024; Agenda Item #6; SR#2312-2462, https://cityofpaloalto.primegov.com/Portal/viewer?id=0&type=7&uid=0964a45a-8f20-48b9-b6e6-478b900942fd
ANALYSIS
The attached Agreement reflects the collaborative efforts of the City and PIN to provide quality and timely animal services to the residents of Palo Alto, Los Altos, and Los Altos Hills.
Within the past year, PIN has fulfilled their commitment to establish a stable leadership team by hiring a seasoned Chief Executive Officer, Laura Toller Gardner and a Director of Finance, Teri Dunwoody. Along with Dr. Barbara Laderman-Jones, Director of Shelter Medicine and Laura Birdsall, Director of Shelter Operations the team has improved efficiencies and services, including reduced wait times for spay/neuter surgeries, increased numbers of vaccinations, and expanded hours of operation (open 7 days a week). PIN has also provided deeply discounted and free outreach care to animals in Palo Alto, Los Altos and Los Altos Hills.
The collaboration between Police Department staff and PIN shelter staff has greatly improved, fostered by regular staff meetings and ongoing, open communication on issues of mutual concern. Both parties have continued to demonstrate their joint commitment to ensure the health and wellbeing of animals and wildlife in the community and have been working together to develop and refine policies that are acceptable to all shelter and animal control staff.
New Agreement Terms
The terms included in the Agreement are based on the Term Sheet (Attachment B) approved by the Council on August 14, 2023 and summarized below.
•Term: Five Years with ability to mutually extend an additional five years. •Annual Compensation: $1.37M increasing annually at a percentage equal to the higher of: (a) three percent or (b) the yearly percentage change in CPI using the Bureau of Labor Statistics’ Consumer Price Index for All Urban Consumers for all items for the San Francisco-Oakland-Hayward area.
•Contingency: $20,000 per year, a total of $100,000 over the initial five-year term •Improvements to Premises: City to budget $2.5M in one lump sum in Fiscal Year 2025 for capital improvements. Improvements, to be completed by the City, will be prioritized in the following order:
oNew cat and small animal area
oAdditional dog kennel improvements
oMedical suite retrofits to accommodate large animals
•Scope of Services:
PIN Responsibilities -
oMaintain public access hours to shelter seven days per week, for a minimum of 40 hours per week.
oProvide low-cost, high-quality spay/neuter services to dogs and cats to the best of its ability, prioritizing residents of Palo Alto, Los Altos, and Los Altos Hills. Wait times for surgery for in-jurisdiction animals will be no more than one month, except in the event of unexpected and exceptional circumstances. oProvide low-cost vaccination clinics in Palo Alto a minimum of one time per week and will work toward one after-hours or weekend clinic per month. oProvide veterinary care for live animals impounded as part of cruelty investigations.
oSubmit monthly activity reports.
oSubmit quarterly financial reports.
City Responsibilities –
oCosts for after-hours emergency veterinary services for animals on stray hold. oCost for additional services related to cruelty investigations, including after- hours emergency veterinary care, post-mortem examinations of animals that are deceased upon arrival at the Shelter, and off-site crime scene investigations. oCosts to dispose of dead wildlife.
oCapital improvements to shelter facilities.
oAnimal control services.
In addition, both parties agree to work together on a feral cat policy, review best animal welfare practices and keep policies up to date, and work collaboratively when revising or creating a new policy.
FISCAL/RESOURCE IMPACT
The FY 2024 Adopted Operating Budget includes $1.3 million for contract costs to manage the Animal Shelter. An additional $194,433 is requested to align with the new operating agreement at $1.4 million, plus an additional month of the supplemental payment for June 2023. The FY 2025 Proposed Budget will recognize additional revenue for licensing fees collected from pet owners residing in Palo Alto. The Animal Control Division of the Police Department will initially absorb the additional program costs and bring forward a budget request in FY 2025, including adding 0.5 FTE Administrative Associate for licensing and up to $20,000 annually for after-hours veterinarian costs and $5,000 annually for other general services costs associated with re- directed animal services. Staff are negotiating new animal service agreements with the partners cities of Los Altos and Los Altos Hills and any additional revenue recognized as part of these agreements will be brought forward to the Council at a future meeting.
The FY 2024 Adopted Capital Budget includes $2.8 million for the Animal Center Renovation Project (PE-19002), including $1.6 million for anticipated increases for the new PIN agreement.
To date, a total of $6.0 million has been allocated to this project and $2.9 million has been expended on shelter improvements. Staff will recommend a reappropriation of funding from FY 2024 to FY 2025 as part of the annual budget process and is subject to Council approval of the FY 2025 Proposed Capital Improvement Program (CIP).
STAKEHOLDER ENGAGEMENT
Staff from the City Manager’s Office, Community Services Department, and Police Department have worked closely with PIN staff and members of the Pets in Need Board of Directors to develop and revise the Term Sheet. Several Council discussions over the past 24 months have provided the community the opportunity to follow the negotiations and provide comments.
ENVIRONMENTAL REVIEW
The site improvements in this Agreement are categorically exempt under CEQA regulation 15301 (existing facilities).
ATTACHMENTS
Attachment A: Professional Services Agreement (Contract No. C24190819) Between the City of Palo Alto and Pets in Need
Attachment B: Term Sheet Approved by City Council on August 14, 2023 APPROVED BY:
Kristen O'Kane, Community Services Director