Agreement for Palo Alto Tobacco Retail Permit Program
pursuant to this Agreement.
11.2 Authority
Each individual executing this Agreement on behalf of a Party represents that he or she is duly authorized to execute and deliver this Agreement on that Party’s behalf.
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12. Assignment, Delegation, Subcontracting
Neither Party may assign any of its rights, delegate any of its duties or subcontract any portion of its work or business under this Agreement without the prior written consent of the other Party, which such other Party may withhold in its sole and absolute discretion.
No assignment, delegation or subcontracting will release a Party from any of its obligations or alter any of its obligations to be performed under the Agreement.
13. Governing Law, Jurisdiction and Venue
This Agreement shall be construed and its performance enforced under California law. In the event that suit shall be brought by either Party to this Agreement, the Parties agree that venue shall be exclusively vested in the state courts of the County of Santa Clara or, if federal jurisdiction is appropriate, exclusively in the United States District Court for the Northern District of California, in San Jose, California.
14. Waiver
No delay or failure to require performance of any provision of this Agreement shall constitute a waiver of that provision as to that or any other instance. Any waiver granted by a Party must be in writing, and shall apply to the specific instance expressly stated.
15. Notice
Any notice required to be given by either Party, or which either Party may wish to give, shall be in writing and served either by electronic mail or be delivered personally,personal delivery or sent by certified or registered mail, postage prepaid, or by private messenger or courier services and addressed as follows:
If to COUNTY: If to CITY:
County of Santa Clara Public Health
Department
Sara H. Cody, MD Health Officer and Public
Health Director
976 Lenzen Avenue150 W. Tasman Drive
San Jose, CA 9512695134
City of Palo Alto
Brad EgglestonMike Sartor, Director
of Public Works
250 Hamilton Ave., 6th Fl.
Palo Alto, CA 94301
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With a copy to:
County of Santa Clara Public Health Department
Contracts and Compliance Unit
976 Lenzen Avenue. Second Floor150 W. Tasman Drive
San Jose, CA 9512634
[email protected]
Notice shall be deemed effective on the date personally delivered or, if mailed, three (3) days after deposit in the mail. Either Party may designate a different person and/or address for the receipt of notices by sending written notice to the other Party.
16. Third Party Beneficiaries
This Agreement does not and is not intended to confer any rights or remedies upon any person or entity other than the Parties.
17. Entire Agreement
This document represents the entire Agreement between the Parties with respect to the subject matter hereof. All prior negotiations and written and/or oral Agreements between the Parties with respect to the subject matter of this Agreement are merged into this Agreement.
18. Amendments
This Agreement may only be amended by a written instrument signed by the Parties.
19. Survival
The rights and duties under the following provisions shall survive the termination or expiration of this Agreement: Section 6 8 – Indemnification and Insurance; Section 108 – Monitoring/ Records; Section 119 – Conflicts of InterestRepresentation and Warranties; and Section 1317 – Governing Law, Jurisdiction, and Venue/Venue, and in any instrument, certificate, exhibit, or other writing attached hereto and incorporated herein.
20. Severability
If any term, covenant, condition or provision of this Agreement, or the application thereof to any person or circumstance, shall to any extent be held by a court of competent jurisdiction to be invalid, void or unenforceable, the remainder of the terms, covenants, conditions and provisions of this Agreement, or the application thereof to any person or circumstance, shall remain in full force and effect and shall in no way be affected, impaired or invalidated thereby.
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21. Contract Execution
Unless otherwise prohibited by law or City or County policy, the Parties agree that an electronic copy of a signed contract, or an electronically signed contract, has the same force and legal effect as a contract executed with an original ink signature. The term “electronic copy of a signed contract” refers to a transmission by facsimile, electronic mail, or other electronic means of a copy of an original signed contract in a portable document format. The term “electronically signed contract” means a contract that is executed by applying an electronic signature using technology approved by the CountyParties. This agreement
22. Counterparts
This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the dates written below.
Signed:
County of Santa Clara:
City of Palo Alto
Gene ClarkMatthew Hada
Chief Procurement OfficerDirector
of Procurement
Date Brad EgglestonEd Shikada
Director of Public WorksCity
Manager
Date
Approved as to Form and Legality:
Approved as to Form:Attest:
Jenny LamJessica Mar
Deputy County Counsel
Date Tim Shimizu
Assistant City AttorneyLesley
Milton
Palo Alto City Clerk
DateD
ate
Approved:
Approved as to Form:
Sara H. Cody, MD
Health Officer and Public Health
Date Molly Stump
Palo Alto City Attorney
Date
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Director
Approved:
Tina Cordero
CSCHS Chief Fiscal Officer
Date
County of Santa Clara: City of Palo Alto
Dave Cortese, President
Date Date
Board of Supervisors
Approved as to Form and Le
gality:
Jenn
y S. Lam Date
Deputy County Counsel
Approved:
John Cookinham
Date
SCVHHS Chief Financial Officer
Exhibits to this Agreement:
Exhibit A: Description of Roles by Agency
Attest:
Megan Doyle Date
Clerk of the Board of Supervisors
Approved:
Sara H. Cod
y, MD Date
Health Officer and Public Health
Director
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EXHIBIT A
DESCRIPTION OF ROLES BY AGENCY
County of Santa Clara
Department of Environmental Health
1. Provide permit applications to all new retailers selling tobacc o products in the City of Palo Alto and issue permits to eligible applicants.
2. Ensure all existing tobacco retail permits that meet and maintain eligibility requirements are renewed on an annual basis.
3. Maintain database tracking system for all permitted tobacco retailers.
4. Provide list of permitted tobacco retailers to Public Health Department and City of Palo Alto on an annual basis or more frequently as requested.
5. Collect required permit fees.
6. Meet with all related personnel to: (1) coordinate enforcement strategy; and (2) develop/maintain policy and procedure for enforcement.
7. Conduct at least one annual inspection of tobacco retailers to ensure compliance with local, state, and federal laws (except sales to underage individuals).
8. Meet with all related personnel as necessary to: (1) coordinate post compliance check strategy; and (2) next steps for violations.
9. Conduct follow up inspections, including for complaints receive d by the public, if necessary, for ensuring compliance with the tobacco retail permit ordinance. Provide and promote a clear process for the public to file and track complaints for potential violations of the tobacco retail permit ordinance.
10. Respond to requests for information from Palo Alto tobacco retailers and the public regarding requirements under the tobacco retail permit ordinance.
11. Keep records of inspection outcomes for each tobacco retailer a nd provide annual inspection report summaries to a single point of contact at the P u b l i c H e a l t h Department.
12. Take appropriate enforcement action, as appropriate, to address violations.
13. Notify the City of Palo Alto when Notice of Violations (NOVs) are issued as a result of violations of the ordinance.
14. Issue NOVs per Ordinance and ensure the tobacco retailer corrects violations and executes all required corrections identified in the NOV.
15. Coordinate with the Office of County Hearing Officer as appropriate on hearings, including to supply information on violations where an appeal is requested.
Public Health Department
1. Provide initial list of tobacco retailers to Department of Environmental Health to send out permit applications.
2. Obtain lists from California Department of Tax and Fee Administration and monitor Item 8
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for any new retailers.
3. Provide on-going technical assistance to Department of Environmental Health on ordinance requirements. This may include trainings for inspectors, research on flavored and emerging products, and development of educational materials for tobacco retailers.
4. Map any new retailers to ensure they meet eligibility requirements related to distance from schools, distance from existing tobacco retailers, and that under the ordinance the retailer meets all other eligibility requirements.
5. If a business seeking a tobacco retail permit is deemed ineligible by the County due to ordinance requirements, including attaching any relevant documentation supporting the basis for business ineligibility (e.g. maps of business location; documentation of pharmacy license status; copies of 3 or more NOVs issued in a 60-month period.
6. Proactively engage the business community so that they are aware of the TRL ordinance (e.g., effective date, requirements, fines/penalties) as appropriate.
7. Coordinate with the Office of County Hearing Officer and County Counsel as appropriate on appeals hearings.
8. Provide an annual update to appropriate Palo Alto staff on enforcement and compliance activities and outcomes for the program.
City of Palo Alto
Police Department
1. Funding and staffing permitting, cConduct undercover decoy operations at tobacco retailers to ensure compliance with laws regarding sales of tobacco products to underage individuals laws. Prior to performing operations, notify Department of Environmental Health of planned operation dates.
2. Issue citations for any violations of laws regarding sales of tobacco sales products to underage individuals laws (e.g. PC § 308(a), Palo Alto Municipal Code Chapter 4.64, CA Business and Professions Code § 22958).
3. Immediately notify the Department of Environmental Health on outcomes of enforcement operations within 3-5 days of the performed operation. Provide copies of all documentation associated with the violation: a copy of the citation, written reports/records, or any additional evidence of violation (e.g. receipts, photo copies of the tobacco product sold to the underage individual) to the Department of Environmental Health.
4. Coordinate with the Office of County Hearing Officer and County Counsel as appropriate on appeals hearings.
Public Works Department
1. Publish information on the City of Palo Alto’s website on the TRP tobacco retail permit ordinance, for example: where tobacco retailers can get more information on the Item 8
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requirements for selling tobacco in Palo Alto, and how the public can file a complaint or request more information about the TRP tobacco retail permit ordinance.
2. Act as a resource to other cities that may be interested in a similar partnership with the County.
3. Update ordinance as needed in collaboration with City Attorney and the County Departments.
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City Council
Staff Report
From: City Manager
Report Type: CONSENT CALENDAR
Lead Department: Planning and Development Services
Meeting Date: September 23, 2024
Report #:2408-3400
TITLE
REINTRODUCED FIRST READING: Adopt an Ordinance Adding Chapter 18.29 and Amending Chapters 18.14, 18.24, 18.70, and 16.65 in the Palo Alto Municipal Code as well as Amendments to the Zoning District Map, and Rezoning of Parcels Within the NVCAP area (PREVIOUSLY INTRODUCED: August 5, 2024 PASSED 6-1, Kou no)
RECOMMENDATION
Adopt an Ordinance Adding Chapter 18.29 and Amending Chapters 18.14, 18.24, 18.70, and
16.65 in the Palo Alto Municipal Code as well as Amendments to the Zoning District Map, and Rezoning of Parcels Within the NVCAP area.
BACKGROUND
The City Council approved a resolution adopting the North Ventura Coordinated Area Plan and certifying associated environmental documents on August 5, 2024. In conjunction with the resolution, the City Council introduced an ordinance (6-1) that adds Chapter 18.29 and amends Chapters 18.14, 18.24, and 16.65 in the Palo Alto Municipal Code. Council directed the following modifications to the ordinance:
1. Amend the ordinance and NVCAP to require parking in compliance with PAMC 18.52 and 18.54 for areas beyond the boundary of AB 2097.
2. Amend the proposed ordinance section 18.29.100 to allow a nonconforming use to be discontinued for up to two years instead of one year as set forth in PAMC 18.70.
3. To the extent allowed by State Law require EV and ADA parking spaces within the NVCAP boundaries.
4. Apply a 15-foot setback from Park Boulevard on either side of the street.
Attachment A provides a draft ordinance incorporating this Council direction as well as one additional amendment proposed by staff.
ANALYSIS
Following the City Council’s review on August 5, 2024, two changes are proposed to the subject ordinance that staff believes consistent with prior Council direction. These changes arguably Item 9
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introduce new or refined policy direction and therefore staff is re-introducing the ordinance as first reading; a second reading will follow about two weeks later if approved on consent. Three councilmembers may pull the ordinance off consent if there are questions or concerns with the changes.
Council Motion to Extend Nonconforming Use Timeline
In the course of preparing the Council-directed amendments, staff encountered a policy question regarding a situation where an existing empty building or tenant space that was previously occupied by a conforming land use loses its ability to re-establish that prior use under the new NVCAP regulations. For instance, if a building was previously occupied by a permitted auto repair use but is vacant or has been vacant for some time upon ordinance adoption – that use could be precluded from being re-established immediately upon the effective date of the rezoning ordinance. This approach does not afford property owners in that or a similar situation sufficient time (from ordinance adoption) to find a replacement tenant should there be interest in extending the newly nonconforming use. It may also be inconsistent with the direction Council provided to extend the period of discontinuance for other existing, but soon to be non-conforming land uses, from one to two years. Accordingly, staff has modified the ordinance to reflect a two-year discontinuance period for existing land uses that become nonconforming after ordinance implementation and for buildings or tenant spaces that are vacant at time of ordinance adoption and were previously occupied by a formerly conforming land use. These amendments were added into PAMC Chapter 18.70 (Nonconforming Uses and Noncomplying Facilities) rather than Chapter 18.29 (North Ventura (NV) District Regulations) for administrative convenience and because similar questions may arise outside of the NVCAP.
Transition of Office Uses in the NVCAP
The ordinance presented to the Council in August did not accurately reflect prior Council guidance on treatment of existing office buildings within the project boundary after ordinance implementation. Staff reported and the ordinance reflected a policy that would have office uses terminate based on a schedule set forth in the zoning code, typically ten years for older buildings and up to 35 years for recent construction (PAMC 18.70.070). This policy is inconsistent with prior Council direction from January 10, 2022, where staff was directed to allow office uses to naturally transition into conforming uses over time and not deliberately amortize these land uses.
To align the NVCAP with the City Council’s prior direction, staff modified the language under the NVCAP ordinance Section 18.29.100 to permit existing office use and facilities to remain, but recognizing that they are still nonconforming use in the NVCAP area. The language is based on the nonconforming use provisions from the Downtown Commercial (CD) zoning district chapter. recognizing that they are still nonconforming use in the NVCAP area. The language is based on the nonconforming use and noncomplying facilities provisions from the Downtown Commercial (CD) zoning district chapter.
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Property owners with office holdings in the project boundary who have been following the NVCAP process alerted staff of this discrepancy and would have likely objected at the hearing if they had fully appreciated the implications of the draft ordinance. Note, this modification is not applicable to the development agreement between the City and the Sobrato Organization approved in 2023.
Either policy direction is available to the Council to implement but staff has modified the ordinance to reflect the prior guidance allowing for a natural transition as opposed to forced amortization.
As noted previously, because these issues were not raised when the Council previously discussed the item, this ordinance is being re-presented as a new first reading. Should the Council wish to discuss the issue or provide alternative direction to staff, this it may pull the item from the consent calendar and scheduled for another hearing and direction provided to staff. The ordinance otherwise reflects what was previously reviewed or directed by Council.
FISCAL/RESOURCE IMPACT
The implementation of the proposed ordinances is not anticipated to have any direct fiscal impacts on the City budget.
ENVIRONMENTAL REVIEW
On August 5, 2024, the City Council adopted the NVCAP and certified the Supplemental Environmental Impact Report (SEIR) and other associated environmental documents. Because the ordinance is implementing the adopted NVCAP, no additional environmental analysis is needed pursuant to California Public Resources Code Section 21080.5.
ATTACHMENTS
Attachment A: Ordinance adding Chapter 18.29 and amending Chapters 18.14, 18.24, 18.70, and 16.65
APPROVED BY:
Jonathan Lait, Planning and Development Services Director Item 9
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Ordinance No. _____
Ordinance of the Council of the City of Palo Alto Adding Chapter 18.29 (North Ventura (NV) District Regulations) and Amending Chapters 18.14 (Housing Incentives), 18.24 (Contextual Design Criteria and Objective Design Standards), 16.65 (Citywide Affordable Housing Requirements) to Implement the North Ventura Coordinated Area Plan (NVCAP) and 18.70.040 (Nonconforming use – Discontinuance)
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. On November 13, 2017, the City Council for the City of Palo Alto (City) certified a Final Environmental Impact Report (EIR) for the City of Palo Alto 2030 Comprehensive Plan through Resolution No. 9720, made findings in relation to the Final EIR, adopted a mitigation monitoring and report plan (MMRP), and adopted a statement of overriding considerations through Resolution No. 9721 and adopted the City of Palo Alto 2030 Comprehensive Plan through Resolution No. 9722.
B. The City of Palo Alto 2030 Comprehensive Plan Policy L-1.7 and Program L-4.10 calls for the preparation of a plan for the North Ventura and surrounding California Avenue area in order to establish the future of the North Ventura area as a walkable neighborhood with multi-family housing, ground-floor retail, a public park, creek improvements, and an interconnected street grid.
C. On November 6, 2017, the City Council adopted a Resolution No. 9717 to initiate the local planning process for a North Ventura Coordinated Area Plan in accordance with Palo Alto Municipal Code Section 19.10.020.
D. On April 30, 2018, the City Council appointed a total of 14 members of the working group to advise the staff, boards/commissions, and the Council during the preparation of the plan.
E. The City conducted extensive community outreach in multiple languages since the NVCAP process has initiated in November 2017 including 17 meetings of the NVCAP Working Group; several community pop-up events; numerous meeting with stakeholders including school district, commercial property owners and tenants, interest groups in housing and transportation; two community workshops; one meeting of the Architectural Review Board (ARB); two meetings of the Historic Resources Board (HRB); six meetings of the Planning and Transportation Commission (PTC); and seven meetings of the City Council.
F. Pursuant to the provisions and requirements of CEQA and CEQA Guidelines Section 15163, the City as lead agency, prepared a Supplemental Environmental Impact Report to the 2017 Comprehensive Plan Final EIR (SEIR) to analyze the potential environmental impacts resulting from adopting the NVCAP.
G. On May 8, 2024, the PTC held a duly and properly noticed public hearing to consider a draft of the SEIR and the NVCAP, and recommended that the City Council adopt the draft NVCAP.
H. On August 5, 2024, the City Council conducted a duly and properly noticed public hearing to take public testimony, consider the SEIR, reviewed the NVCAP and all pertinent maps, documents and exhibits, including the staff report, and all attachments, and oral and written public comments.
I. On August 5, 2025, the City Council adopted the NVCAP and certified SEIR and other environmental documents associated with the NVCAP.
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18.14, 18.24, 18.70, and
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J. The City Council now desires to adopt modifications to the Palo Alto Municipal Code to implement the NVCAP.
SECTION 2. Chapter 18.29 (North Ventura (NV) District Regulations) of Title 18 (Zoning) of the Palo Alto Municipal Code is added to read as follows:
CHAPTER 18.29
NORTH VENTURA (NV) DISTRICT REGULATIONS
18.29.010 Purpose
18.29.020 Applicability of Regulations
18.29.030 Zoning Districts
18.29.040 Definitions
18.29.050 Permitted Uses
18.29.060 Development Standards
18.29.070 Parking and Loading
18.29.080 Context-Based Design Criteria and Objective Design Standards
18.29.090 Housing Incentive Programs for NV District
18.29.010 Purpose
The purpose of the North Ventura district is to implement the vision and framework of the North Ventura Coordinated Area Plan (NVCAP) through use regulations and development standards.
18.29.020 Applicability of Regulations
(a) The North Ventura districts shall apply to properties within the NVCAP and designated as North Ventura Coordinated Area Plan within the Palo Alto Comprehensive Plan. Where designated, the regulations set forth in this chapter shall apply in lieu of the comparable provisions established by the underlying zoning district regulations.
(b) Refer to the NVCAP for design guidelines related to streets and buildings in conjunction with the regulations contained within this chapter.
18.29.030 Zoning Districts
The North Ventura districts shall apply to properties designated on the zoning map by the symbol “NV” in front of the zoning district designation.
The following zoning districts are intended to create and maintain sites for residential, commercial and mixed-use sites:
(a) Single Family Residential District (NV-R1)
The NV-R1 single family residential district is intended to create, preserve, and enhance areas suitable for detached dwellings with a strong presence of nature and with open area affording maximum privacy and opportunities for outdoor living and children’s play. Minimum site area requirements are established to create and preserve variety among neighborhoods, to provide adequate open area, and to encourage quality design. Accessory dwelling units, junior accessory dwelling units and accessory structures or Item 9
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buildings are appropriate. Community uses and facilities are allowed to the extent no net loss of housing would result.
(b) Two Family Residential District (NV-R2)
The NV-R2 two-family residential district is intended to allow a second dwelling unit, under the same ownership as the initial dwelling unit, in areas designated for single-family use or NVCAP by the Palo Alto Comprehensive Plan, under regulations that preserve the essential character of single-family use.
Community uses and facilities are allowed to the extent no net loss of housing would result. (c) Medium Density Multiple-Family Residential District (NV-R3) The NV-R3 medium density multiple-family residential district is intended to create, preserve and enhance neighborhoods for multiple-family housing with better transition to lower density residential districts.
Projects at this density are intended for larger parcels that will enable developments to provide their own parking spaces and to meet their open space needs in the form of garden apartments or cluster developments. While there is no maximum density in the NV-R3 residential district, the NVCAP anticipates realistic development yields ranging from 16 to 30 dwelling units per acre based on the applicable development standards.
(d) High Density Multiple-Family Residential District (NV-R4) The NV-R4 high density multiple-family residential district is intended to create, preserve and enhance locations for apartment living at the greater density deemed appropriate for NVCAP. The most suitable locations for this district are along major transportation corridors which are close to mass transportation facilities and major employment and service centers. While there is no maximum density in the NV-R4 residential district, the NVCAP anticipates realistic development yields ranging from 61 to 100 dwelling units per acre based on the applicable development standards. (e) Low Density Mixed-Use District (NV-MXL)
The purpose of the NV-MXL district is to allow for small-scale commercial and services with limited amount of residential that is compatible with the surrounding development. While there is no maximum density in the NV-MXL district, the NVCAP anticipates realistic development yields ranging from three to 17 dwelling units per acre.
(f) Medium Density Mixed-Use District (NV-MXM)
The purpose of the NV-MXM district is to allow for a compatible mix of residential and limited commercial.
While there is no maximum density in the NV-MXM district, the NVCAP anticipates realistic development yields ranging from 31 to 70 dwelling units per acre.
(g) High Density Mixed-Use District (NV-MXH)
The purpose of the NV-MXH district is to allow for a mix of retail, restaurant, entertainment and commercial uses on the ground floor with residential on the upper floors, while maintaining a pedestrian- oriented streetscape. It is intended that the active ground floor retail space required will ensure neighborhood-oriented retail and services are provided within walking distance of high density residential. Ground floor active uses are required along El Camino Real. While no maximum density in the Item 9
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NV-MXH district, the NVCAP anticipates realistic development yields ranging from 61 to 100 dwelling units per acre.
(h) Public Facilities District (NV-PF)
The NV-PF public facilities district is designed to accommodate governmental, public utility, educational, and community service or recreational facilities. Within the North Ventura area, an approximate one-acre portion of the NV-PF district may permit a 100% affordable housing project.
18.29.040 Definitions
For the purposes of this chapter, the following definitions shall apply:
(a) “Street yard” means a yard adjoining a street lot line and may also be a front lot line.
18.29.050 Permitted Uses
(a) The uses of land allowed by this chapter in each zoning district are identified in the following tables.
Land uses that are not listed in the tables are not allowed, except where otherwise noted. Where the last column on the following tables ("Subject to Regulations in") includes a section number, specific regulations in the referenced section also apply to the use; however, provisions in other sections not specifically referenced may apply as well.
TABLE 1: PERMITTED AND CONDITIONALLY PERMITTED USES
P = Permitted Use
CUP = Conditional Use Permit Required
TUP = Temporary Use Permit Required
— = Not Permitted
LAND USE NV-
R1
NV-
R2
NV-
R3
NV-
R4
NV-
MXL
(1)(5)
NV-
MXM
(5)
NV-
MXH
NV-
PF
Subject to
Regulations
In:
ACCESSORY AND SUPPORT USES
Accessory facilities
and activities
customarily
incidental to the
permitted use
P P P P P P P — 18.40
18.10.080
18.12.080
Accessory Dwelling
Unit & Junior
Accessory Dwelling
Unit when
accessory to
primary and
permitted
residential use
P P P P P P P — 18.09
Home Occupations,
when accessory to
P P P P P P P P 18.42
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LAND USE NV-
R1
NV-
R2
NV-
R3
NV-
R4
NV-
MXL
(1)(5)
NV-
MXM
(5)
NV-
MXH
NV-
PF
Subject to
Regulations
In:
permitted
residential use
Horticulture,
Gardening, and
Growing of food
products for
consumption by
occupants of a site
P P P P P P P —
EDUCATIONAL, RELIGIOUS, AND ASSEMBLY USES
Private Clubs,
Lodges, or Fraternal
Organizations,
excluding any such
facility operated as
a business for profit
— — — CUP CUP — — —
Private Educational
Facilities
CUP CUP CUP CUP CUP P P —
Religious
Institutions
CUP CUP CUP CUP P P P —
OFFICE USES(2)
Administrative
Office Services
— — — — P P P — 18.29.050(a)
Medical Offices — — — — P P P — 18.29.050(a)
Professional and
General Business
Offices
— — — — P P P — 18.29.050(a)
PUBLIC/QUASI-PUBLIC USES
Community Centers CUP CUP CUP CUP — — — CUP
(3)
Utility Facilities
essential to
provision of utility
services but
excluding
construction or
storage yards,
maintenance
facilities, or
corporation yards.
CUP CUP CUP CUP CUP CUP CUP —
RECREATION USES
Neighborhood
Recreational
Centers
— — CUP CUP — — — CUP
(3)
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LAND USE NV-
R1
NV-
R2
NV-
R3
NV-
R4
NV-
MXL
(1)(5)
NV-
MXM
(5)
NV-
MXH
NV-
PF
Subject to
Regulations
In:
Commercial
Recreation
— — — — CUP CUP CUP CUP
(3)
Outdoor Recreation
Services
CUP CUP CUP CUP — CUP CUP CUP
(3)
Youth Clubs — — — — — — — CUP
(3)
RESIDENTIAL USES
Single-Family P P — — — — — —
Two-Family P P — — — — — — 18.42.180
Multiple-Family — — P P P P P P(4)
Residential Care
Homes
P P P P P P P —
RETAIL USES
Eating and Drinking
Services, except
drive-in and take-
out services
— — P P P P P CUP
(3)
18.40.160,
18.29.050(c)
Personal Services
and Retail Services
of a neighborhood-
serving nature
— — P P P P P CUP
(3)
18.40.160,
18.29. 050(c)
Liquor stores — — — — — P P — 18.40.160,
18.29. 050(c)
SERVICE USES
Animal Care,
excluding boarding
and kennels
— — — — P P P — 18.29. 050(c)
Convalescent
Facilities
— — — CUP P P P —
Day Care Centers CUP CUP CUP P P P P — 18.40.160
Large Family Day
Care Homes
P P P P P P P P(3)
Small Family Day
Care Homes
P P P P P P P P(3)
Large Adult Day
Care Homes
CUP CUP P P P P P P(3)
Small Adult Day
Care Homes
P P P P P P P P(3)
Financial Services — — — — P P P — 18.29.050(a)
18.29.060(b)
General Business
Services
— — — — P P P — 18.29. 050(a)
18.29.060(b)
Hotels — — — — — P P — 18.40.160,
18.16.060(d)
Item 9
Attachment A - Ordinance
adding Chapter 18.29 and
amending Chapters
18.14, 18.24, 18.70, and
16.65 Item 9: Staff Report
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LAND USE NV-
R1
NV-
R2
NV-
R3
NV-
R4
NV-
MXL
(1)(5)
NV-
MXM
(5)
NV-
MXH
NV-
PF
Subject to
Regulations
In:
Personal Services — — — — P P P — 18.40.160,
18.29. 050(c)
18.29.060(b)
AGRICULTURAL AND OPEN SPACE USES
Park uses and uses
incidental to park
operation
— — — — — — — P
All facilities owned
or leased, and
operated or used,
by the City of Palo
Alto, the County of
Santa Clara, the
State of California,
the government of
the United States,
the Palo Alto
Unified School
District, or any
other
governmental
agency, or leased
by any such agency
to another party
— — — — — — — P
Utility Facilities — — — — — — — CUP
TEMPORARY USES
Temporary Uses — — TUP TUP — — — — 18.42.050
Farmer’s Markets — — — — — CUP CUP —
Temporary Parking
Facilities, provided
that such facilities
shall remain no
more than five
years
— — — — — CUP CUP CUP
(3)
Notes:
(1) For NV-MXL zoning district, the total floor area of non-residential uses permitted and conditionally permitted on a lot shall not exceed 5,000 square feet.
(2) For office uses, total floor area of permitted office uses on a lot shall not exceed 5,000 square feet. (3) Provided such use is conducted on property owned by the City of Palo Alto, the County of Santa Clara, the State of California, the government of the United States, the Palo Alto Unified School District, or any other governmental agency, and leased for said uses. (4) Only a 100% Affordable Housing Project is permitted. Development shall follow NV-R4 standards. (5) Ground floor uses shall comply with the ground floor edge framework set forth in NVCAP section
2.3. Item 9
Attachment A - Ordinance
adding Chapter 18.29 and
amending Chapters
18.14, 18.24, 18.70, and
16.65 Item 9: Staff Report
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(a) Office Use Restrictions
(1) Conversion of Ground Floor Housing and Non-Office Commercial to Office Medical, Professional, and Business offices shall not be located on the ground floor, unless any of the following apply to such offices:
(A) Have been continuously in existence in that space since the effective date of this ordinance and as of such date, were neither non-conforming nor in the process of being amortized pursuant to Chapter
18.30(I);
(B) Occupy a space that was not occupied by housing, neighborhood business service, retail services, personal services, eating and drinking services, or automotive service on the effective date of this ordinance or thereafter;
(C) Occupy a space that was vacant on the effective date of this ordinance; or (D) Are located in new or remodeled ground floor area built on or after the effective date of this ordinance if the ground floor area devoted to housing, retail services, eating and drinking services, and personal services does not decrease.
(E) Along El Camino Real, the office use has a consistent flow of in-person customers visiting the business, such as a dentist or medical office.
(2) Size Restrictions on Office Uses in the NV District (A) Total floor area of permitted office uses on a lot shall not exceed 5,000 square feet. (b) Late Night Use and Activities
Late Night Use and Activities requirements established in Section 18.42.040 shall apply to NV zoning districts.
(c) Active Ground Floor Commercial Uses
The NVCAP requires active ground floor uses along the El Camino Real corridor and encourages active ground floor uses on other designated streets. Active uses are activities and functions that promote social engagement, vitality, and interaction within a community. Refer to NVCAP, Section 2.3 for detailed requirements.
(1) Active ground floor commercial uses generally include retail, personal services, neighborhood business service, and eating and drinking establishments. These may also include other active uses such as daycare, building lobbies, spaces accessory to residential uses such as fitness rooms, workspaces, leasing offices, bicycle facilities (Class I) with direct access to the sidewalk. Office uses may be included only to the extent they are permitted in ground floor regulations, are consistent with 18.29.080(a) and have a regular flow of in-person customers.
(2) Ground floor commercial uses are required for properties with frontage along El Camino Real, as shown in the NVCAP Section 2.3 (Ground Floor Edges)
Item 9
Attachment A - Ordinance
adding Chapter 18.29 and
amending Chapters
18.14, 18.24, 18.70, and
16.65 Item 9: Staff Report
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(3) Ground floor commercial uses shall have a minimum floor to ceiling height of 14 feet. (4) Retail or retail-like at the ground floor is required at the intersections of El Camino Real and Olive Avenue, and El Camino Real and Portage Avenue.
(5) 100% affordable housing projects are exempt from providing ground floor commercial uses.
18.29.060 Development Standards
(a) The following tables specify the development standards that shall apply to NV district properties.
Where the last column on the following tables ("Subject to Regulations in") includes a section number, specific regulations in the referenced section also apply to the development standard; however, provisions in other sections may apply as well.
TABLE 1: LOW DENSITY RESIDENTIAL DEVELOPMENT STANDARDS
DEVELOPMENT STANDARD NV-R1 NV-R2 Subject to
Regulations In:
Minimum Setbacks Setback lines imposed by a special
setback map pursuant to Chapter
20.08 of this code may also apply
18.10.050
Street yard (ft) Pepper Ave:
10’ to create a
12’ effective
sidewalk width
(1)
Olive Ave:
10’
Olive Ave:
10’
18.29.020(b)
Height (ft) 35’ 35’
Parking Refer to 18.29.070
Other development standards See regulations
in Chapter 18.12
See regulations
in Chapter 18.10
Notes:
(1) The effective sidewalk width includes the pedestrian clear zone and landscape/furniture zone as described in PAMC 18.24.020.
TABLE 2: MULTI-FAMILY RESIDENTIAL & MUTLI-FAMILY RESIDENTIAL MIXED-USE DEVELOPMENT
STANDARDS
DEVELOPMENT STANDARD NV-R3
NV-R4
Subject to
Regulations
In:
Minimum Site Specifications
Site Area (ft2)
Site Width (ft)
Site Depth (ft)
8,500
70 100
Minimum Setbacks
Street Yard (ft) Park Blvd.: 15’
Ash St: 5’
Park Blvd.: 15’
Olive Ave.: 20’
18.29.020(b)
Item 9
Attachment A - Ordinance
adding Chapter 18.29 and
amending Chapters
18.14, 18.24, 18.70, and
16.65 Item 9: Staff Report
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DEVELOPMENT STANDARD NV-R3
NV-R4
Subject to
Regulations
In:
Acacia Ave: 5’
Portage Ave: 5’
Ash St.: 5’
Page Mill Rd:
sufficient to create a
12’ effective
sidewalk width(2)(3)
Interior Side Yards (ft) 5’ 5’
Interior Rear Yards (ft) 10’ 10’
Build-to-Lines 50% of frontage built to setback(1)
33% of side street built to setback(1)
Maximum Height (ft)
Standard 45’ 65’ 18.29.100
Daylight Plane, for side and rear lot
lines for sites abutting any NV-R1 or
NV-R2 district or abutting a site
containing a single-family or two-
family residential use in a mixed-use
district
10’ initial height
45-degree daylight plane angle
Daylight Plane, for side and rear lot
lines for sites abutting any NV-R3,
NV-R4, Planned Community, or
mixed-use district that does not
contain a single-family or two-family
residential use
Refer to 18.24.050(b)(1)(C)
Maximum Lot Coverage (%)
Base 60 80
Additional area permitted to be
covered by covered patios or
overhangs otherwise in
compliance with all applicable
laws
5 5
Floor Area Ratio (FAR)
Maximum Residential FAR 1.5:1 3.0:1
Maximum Non-residential FAR 0.15:1 0.15:1 18.29.050(c)
Total Mixed-Use FAR 1.5:1 3.0:1
Residential Density (net units per acre)
Maximum units per acre None None
Minimum units per acre 16 61
Minimum Landscape/Open Space
Coverage (%)(4)
30 10
Minimum Usable Open Space (ft2
per unit)
150 150
Minimum Common Open Space (ft2
per unit)
75 75
Item 9
Attachment A - Ordinance
adding Chapter 18.29 and
amending Chapters
18.14, 18.24, 18.70, and
16.65 Item 9: Staff Report
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DEVELOPMENT STANDARD NV-R3
NV-R4
Subject to
Regulations
In:
Minimum Private Open Space (ft2
per unit)
50 50
Landscape Requirements 18.40.130
Parking Refer to 18.29.070
Notes:
(1) 25-foot driveway access permitted regardless of frontage. (2) No parking or loading space, whether required or optional, shall be located in the first 10 feet adjoining the street property line of any required yard. (3) Any minimum front, street side, or interior yard shall be planted and maintained as a landscaped screen excluding areas required for access to the site. A solid wall or fence between 5 and 8 feet in height shall be constructed along any common interior lot line. (4) Landscape coverage may be provided above the ground-floor.
TABLE 3: MIXED-USE DEVELOPMENT STANDARDS
DEVELOPMENT
STANDARD
NV-MXL NV-MXM
NV-MXH
Subject to
Regulations
In:
Minimum Site
Specifications
Site Area (ft2)
Site Width (ft)
Site Depth (ft)
None Required
Minimum Setbacks
Street Yard (ft) Ash St.: 5’
Olive Ave.: 10’
Portage Ave: 0’
Pepper Ave: 10’
El Camino
Real: sufficient
to create a 12’
effective
sidewalk
width(1)(2)
El Camino
Real: sufficient
to create a 12’
effective
sidewalk
width(1)(2)
Pepper: 10’
Olive Ave 10’
Ash St: 5’
Park Blvd: 15’
Lambert Ave:
5’
Portage Ave:
5’
Park Blvd: 15’
El Camino Real:
sufficient to
create a 12’
effective
sidewalk
width(1)(2)
Oregon
Expy/Page Mill
Rd: sufficient to
create a 12’
effective
sidewalk(1)(2)
Lambert Ave: 5’
Acacia Ave: 5’
Portage Ave: 5’
18.29.020(b)
Item 9
Attachment A - Ordinance
adding Chapter 18.29 and
amending Chapters
18.14, 18.24, 18.70, and
16.65 Item 9: Staff Report
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DEVELOPMENT
STANDARD
NV-MXL NV-MXM
NV-MXH
Subject to
Regulations
In:
Acacia Ave: 5’
Build-to-Lines None For properties abutting El Camino
Real:
50% of frontage built to setback(1)
33% of side street built to
setback(1)
Rear Yard (ft) 10’ 10’ for
residential
portion/ none
for commercial
portion
10’ for
residential
portion/ none
for commercial
portion
Rear Yard abutting
residential zone district
(ft)
10’ 10’ 10’
Interior Side Yard (ft) 10’ 5’ 5’
Build-to-lines None Required
Permitted Setback
Encroachments
Refer to Section 18.40.070
Maximum Setback (ft) Not applicable El Camino
Real: 10’
El Camino Real:
10’
Maximum Lot Coverage
(%)
50 100 100
Minimum
Landscape/Open Space
Coverage (%)
20 10 10
Usable Open Space
(Private and/or
Common) (ft2)
150 per unit 18.16.090
Maximum Height (ft) 18.29.100
Standard 35’ 55’ 65’
Ground Floor Height Refer to Section 18.24.060(c)(5)(A) Daylight Plane for lot
lines abutting one or
more residential zoning
districts
Daylight plane height and slope shall be identical to
those of the most restrictive residential zoning district abutting the lot line
Residential Density (net units per acre)
Maximum units per
acre
None Required
Minimum units per
acre
3 31 61
Floor Area Ratio (FAR)
Maximum Residential
FAR
0.5:1 2.0:1 3.0:1
Item 9
Attachment A - Ordinance
adding Chapter 18.29 and
amending Chapters
18.14, 18.24, 18.70, and
16.65 Item 9: Staff Report
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DEVELOPMENT
STANDARD
NV-MXL NV-MXM
NV-MXH
Subject to
Regulations
In:
Maximum Non-
residential FAR(4)
0.25:1 0.25:1 0.25:1 18.29.050(c)
18.29.060(c)
Minimum Mixed-Use
Ground Floor
Commercial FAR
0.15:1 0.15:1 0.15:1 18.29.050(c)
Total Mixed-Use FAR 0.5:1(4) 2.0:1 3.0:1
Parking Refer to 18.29.070
Notes:
(1) No parking or loading space, whether required or optional, shall be located in the first 10 feet adjoining the street property line of any required yard. (2) Any minimum front, street side, or interior yard shall be planted and maintained as a landscaped screen excluding areas required for access to the site. A solid wall or fence between 5 and 8 feet in height shall be constructed along any common interior lot line. (3) The 150-foot measurement may be reduced to 50 feet at minimum, subject to approval by the Planning Director, upon recommendation by the Architectural Review Board pursuant to criteria set forth in Chapter 18.76.
(4) As provided in 18.29.060(c), maximum FAR for hotels shall be 2.0:1. Hotel projects in the NV-MXL zone may reach a Total Mixed-Use FAR of 2.0:1.
(b) Storefront Guidelines
Where active use and retail frontages are required or located within the NV district on the ground floor, the following design standards shall apply:
(1) Exterior windows on the ground floor shall use transparent glazing to the extent feasible. Low-e glass or minimal tinting to achieve sun control is permitted, so long as the glazing appears transparent when viewed from the ground level.
(2) Window coverings are not permitted on the ground floor during typical business hours. Where operations preclude transparency (e.g., theaters) or where privacy requires window coverings, sidewalk- facing frontage shall include items of visual interest including displays of merchandise or artwork; visual access shall be provided to a minimum depth of three (3) feet. (3) No more than 10% of the total street-facing building façade or a maximum of 25 feet in width, whichever is greater, shall be dedicated to mechanical equipment rooms, parking garage entrances, exit stairs, and other facilities necessary for building operation. (c) Hotel Regulations
(1) The purpose of these regulations is to allow floor area for development of hotels more than floor area limitations for other commercial uses, to provide a visitor-serving use that results in an enhanced business climate, increased transient occupancy tax and sales tax revenue, and other community and economic benefits to the city.
(2) Hotels, where they are a permitted use, may develop to a maximum FAR of 2.0:1, subject to the following limitations:
Item 9
Attachment A - Ordinance
adding Chapter 18.29 and
amending Chapters
18.14, 18.24, 18.70, and
16.65 Item 9: Staff Report
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(A) The hotel use must generate transient occupancy tax (TOT) as provided in Chapter 2.33 of the Palo Alto Municipal Code; and
(B) No room stays more than thirty days are permitted, except where the city council approves longer stays through an enforceable agreement with the applicant to provide for compensating revenues. (3) Hotels may include residential condominium use, subject to:
(A) No more than twenty-five percent (25%) of the floor area shall be devoted to condominium use; and
(B) No more than twenty-five percent (25%) of the total number of lodging units shall be devoted to condominium use; and
(C) A minimum FAR of 1.0 shall be provided for the hotel/condominium building(s); and (D) Where residential condominium use is proposed, room stays for other hotel rooms shall not exceed thirty (30) days.
(4) Violation of this chapter is subject to enforcement action for stays more than thirty days not permitted under the provisions of this chapter, in which case each day of room stay more than thirty days shall constitute a separate violation and administrative penalties shall be assessed pursuant to Chapters
1.12 and 1.16.
18.29.070 Parking and Loading
All projects shall comply with the parking and loading standards in PAMC Chapters 18.52 and 18.54, unless a parking reduction is permitted pursuant to state law. If a reduction in automobile parking is permitted under Government Code Section 65863.2, a project will be subject to the requirement to provide electric vehicle spaces and accessible parking spaces that would have otherwise applied to the development if Government Code Section 65863.2 did not apply.
18.29.080 Context-Based Design Criteria and Objective Design Standards In addition to the development standards prescribed in 18.29.050, all Housing Development Projects shall comply with the objective standards outlined in Chapter 18.24, as defined herein. All other developments, and Housing Development Projects that elect to deviate from one or more objective design standards in Chapter 18.24, shall meet the Context Based Design Criteria, as determined by the Director pursuant to the Architectural Review process. In the event of any conflict between the development standards established in this Chapter and those established in Chapter 18.24, the NVCAP standards shall prevail. (a) Multiple Family Context-Based Design Criteria
Refer to Section 18.13.060 for the Context Based Design Criteria. (b) Mixed-Use and Commercial Context-Based Design Criteria Refer to Section 18.16.090 for the Context Based Design Criteria.
18.29.090 Housing Incentive Programs for NV District
Item 9
Attachment A - Ordinance
adding Chapter 18.29 and
amending Chapters
18.14, 18.24, 18.70, and
16.65 Item 9: Staff Report
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(a) Housing development projects in the NV Districts may utilize any Housing Incentive Program or Affordable Housing Incentive Program set forth in Sections 18.14.030 and 18.14.040.
18.29.100 Non-conforming Uses and Non-Complying Facilities (a) Office Use.
(1) Any existing office use and facilities established prior to the effective date of this ordinance may remain as legal and non-conforming use and/or non-complying facility. (2) The legal and non-conforming office use shall be considered abandoned and may be replaced only by a non-conforming use if it ceases and thereafter remains discontinued for up to 24 consecutive months after the effective date of this ordinance. (3) A non-conforming office use which is changed to or replaced by a conforming use shall not be reestablished, and any portion of a site or any portion of a building, the use of which changes from a legal non-conforming use to a conforming use, shall not thereafter be used except to accommodate a conforming use.
(4) The legal and non-conforming office use and/or non-complying office facilities shall be permitted to remodel, improve, or replace site improvements on the same site, for continual use and occupancy by the same use, provided such remodeling, improvement, or replacement complies with all of the following:
(A) Shall not result in increased floor area.
(B) Shall not relocate below grade floor area to above grade portions of the building. (C) Shall not result in an increase of the height, length, building envelope, building footprint or any other increase in the size of the improvement. For purposes of this section, “building envelope” shall mean the three-dimensional shape and size occupied by an existing building. It is not the maximum, buildable potential of the site. (D) Shall not increase the degree of noncompliance.
(E) The Director may approve minor changes to the building’s footprint, height, length, and the building envelope through Architectural Review of minor aesthetic architectural improvements and to improve pedestrian-orientation provided there is no increase to the degree of any non-complying feature.
(b) Any other uses or facilities rendered non-conforming or non-complying by this Chapter shall be subject to Chapter 18.70, including the schedules for required termination of non-conforming uses under Section 18.70.070.
18.29.110 Transportation Demand Management Plan
A transportation demand management plan shall be required for all new development projects or any projects that meet the conditions listed in PAMC Section 18.52.030(i).
Item 9
Attachment A - Ordinance
adding Chapter 18.29 and
amending Chapters
18.14, 18.24, 18.70, and
16.65 Item 9: Staff Report
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SECTION 3. Table 1 of Section 18.14.020 (Housing Element Opportunity Sites) of Chapter
18.14 (Housing Incentives) of Title 18 (Zoning) of the Palo Alto Municipal Code is amended to read as follows (additions underlined):
Table 1
Housing Element Opportunity Site Development Standards
(Residential and Commercial Mixed Use Districts)
Base Zoning
District
Maximum Far(1) Minimum
Landscape
Coverage
Residential Density
(du/ac)(4)
Other
Development
Standards
Residential Total Minimum Maximum
CC(2) 1.5 2.0 (3) 20 See base
district
regulation
s: 18.16.0
60 See base district
regulations:
18.16.060 CC 1.25 1.25 (3) 20
CS (El Camino
Real)
1.25 1.25 (3) 20
CS (Other) 1.25 1.25 (3) 20 See HE
Appendix
D
CN (El Camino
Real)
1.25 1.25 30%(3) 20 See base
district
regulation
s: 18.16.0
60 CN (Other) 1.25 1.25 30%(3) 20 See HE
Appendix
D
CD-C 2.0 2.0 (2) (3) 20 See base
district
regulation
s: 18.18.0
60 See base district
regulations:
18.18.060
CD-N 1.5 1.5 (3) 20 See HE
Appendix
D
RP 1.25 1.25 (3) 25 None; 40
du/ac
anticipate
d
See base district
regulations:
18.20.040
RM-40 1.5 1.5 (3) 31 See base district
regulations: RM-30 1.25 1.25 (3) 20
Item 9
Attachment A - Ordinance
adding Chapter 18.29 and
amending Chapters
18.14, 18.24, 18.70, and
16.65 Item 9: Staff Report
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RM-20 1.25 1.25 See 18.13.0
40 20 See HE
Appendix
D
18.13.040
NV-R3 See base district regulations: 18.29.060, except that maximum height shall be 50’, maximum lot coverage shall be 70%, and minimum density shall be 25 du/ac.
Notes:
(1) Nothing in this table increases the non-residential floor area permitted in any district. (2) FAR may be increased with transfer of development rights; see Chapter 18.18 for details. (3) Landscape coverage may be provided above the ground-floor. If standard is not specified, refer to base district regulations.
(4) Where no maximum density is provided in terms of du/ac, maximum density shall be determined by estimating the realistic development capacity of the site based on the objective development standards applicable to the project. Where noted, refer to Housing Element Appendix D: Sites Inventory for specified densities.
SECTION 4. Section 18.24.010 (Purpose and Applicability) of Chapter 18.24 (Contextual Design Criteria and Objective Design Standards) of Title 18 (Zoning) of the Palo Alto Municipal Code is amended to read as follows (additions underlined, and unchanged text omitted by bracketed ellipses):
18.24.010 Purpose and Applicability
(a) Purpose
[. . .]
(b) Applicability of Regulations
These regulations apply to Housing Development Projects (as defined in Gov. Code 65589.5), both new construction and renovations, within the following zones and combining districts:
(1) Chapter 18.12: R-1, for multiple-family uses only (2) Chapter 18.13: RM-20, RM-30, RM-40
(23) Chapter 18.16: CN, CC, CC(2), CS
(34) Chapter 18.18: CD-C, CD-S, CD-N
(45) Chapter 18.20: MOR, ROLM, ROLM(E), RP, RP(5), GM (56) Chapter 18.28: PF
(7) Chapter 18.29: NV-N3, NV-R4, NV-MXM, NV-MXH
(68) Chapter 18.34: PTOD combining district
Housing Development Projects include m Multifamily housing with three or more units ("multiple-family use" as defined in Section 18.04.030), supportive and transitional housing, and residential mixed-use projects with at least two-thirds residential square footage shall meet the objective design standards. (c) Process and Alternative Compliance
Item 9
Attachment A - Ordinance
adding Chapter 18.29 and
amending Chapters
18.14, 18.24, 18.70, and
16.65 Item 9: Staff Report
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[. . .]
SECTION 5. Section 18.70.040 (Nonconforming use – Discontinuance) of Chapter 18.70 (Nonconforming Uses and Noncomplying Facilities) of Title 18 (Zoning) is amended to read as follows (additions underlined):
18.70.040 Nonconforming use - Discontinuance.
(a) On any site having facilities thereon valued at less than one thousand dollars, any nonconforming use, other than a residential use, which is discontinued or abandoned or otherwise ceases operation and use of the site for a period of six months or longer shall not be resumed, reestablished, or continued, and all subsequent use of such site and facilities thereon shall conform to this title.
(b) On any site not subject to subsection (a), a nonconforming use of facilities designed and constructed for nonresidential purposes which is discontinued or abandoned or otherwise ceases operation and use of the site for a period of one year or more shall not be resumed, and all subsequent use of such site and facilities thereon shall conform to this title. Notwithstanding the foregoing, a nonconforming use within the North Ventura Coordinated Area Plan boundaries may be reestablished unless the use is discontinued or abandoned or otherwise ceases operation and use of the site for a period of two years or more.
(c) Notwithstanding the provisions of Section 18.70.030, or the provisions of subsections (a) and (b) of this section, in any residential district, a nonresidential, nonconforming use occupying facilities originally designed and constructed for residential use which is discontinued or abandoned or otherwise ceases operation and use of the site for a period of ninety days or greater shall not be continued or recommenced, and any subsequent use of the site and facilities shall conform to this title. This provision shall not be construed to prevent a change of ownership or management of such nonconforming use; provided, that any cessation of operation of the use is solely in connection with the transfer of ownership or management to a specifically designated person or entity and is solely for the purpose of accomplishing any transfer of title, equipment, operational control, or similar purpose.
(d) The timeframes provided in this Section apply only when a use is both nonconforming and discontinued or abandoned or otherwise cease operation and use of the site.
SECTION 6. Section 16.65.030 (Basic affordable housing requirement - residential ownership projects) of Chapter 16.65 (Citywide Affordable Housing Requirements) of Title 16 (Building Regulations) is amended to read as follows (additions underlined, and unchanged text omitted by bracketed ellipses):
16.65.030 Basic affordable housing requirement - residential ownership projects.
The provisions of this section shall apply to all residential ownership projects, including the residential ownership portion of any mixed use project containing three or more units, except for any residential ownership project exempt under Section 16.65.025.
(a) Unless an alternative is approved as described in Section 16.65.080, residential ownership projects shall provide the following:
(1) For projects on sites of less than five acres, fifteen percent of the dwelling units in the project shall be made available at affordable sales price to very low, low, and moderate income households; Item 9
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(2) For projects on sites of five acres or more and all townhome projects in the NV districts, twenty percent of the dwelling units in the project shall be made available at affordable sales price to very low, low, and moderate income households; and
(3) For projects that convert existing rental housing to condominiums, other residential ownership or nonresidential space or that remove existing rental housing, twenty-five percent of the dwelling units in the project shall be made available at affordable sales price to very low, low, and moderate income households.
(4) Calculations of the number of affordable units required by this section shall be based on the number of dwelling units in the residential project, excluding any density bonus units. Projects shall not receive a credit for any existing dwelling units demolished as part of the project. (b) The affordable units shall be made available at the following affordable sales prices:
[. . .]
SECTION 7. Section 16.65.040 (Basic requirement - mixed use, nonresidential and residential rental projects) of Chapter 16.65 (Citywide Affordable Housing Requirements) of Title 16 (Building Regulations) is amended to read as follows (additions underlined; deletions struck-through):
16.65.040 Basic requirement - mixed use, nonresidential and residential rental projects. (a) Unless the mixed use, nonresidential or residential rental project is exempt under Section 16.65.025 or an alternative is approved as described in Section 16.65.080, all mixed use, nonresidential and residential rental projects shall pay housing impact fees as specified in Section 16.65.060 to mitigate the projects' impacts on the need for affordable housing; except:
(1) that theThe residential ownership portion of a mixed use project containing three or more units shall comply with Section 16.65.030.
(2) In the NV districts, residential rental projects, including mixed use projects containing residential rental units, shall provide fifteen percent of the dwelling units in the project at rates affordable to lower income households.
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SECTION 8. Pipeline Projects. This Ordinance and the NVCAP shall not apply to any project application deemed complete prior to the effective date of this Ordinance. Any project completed pursuant to such application shall be deemed a legal non-conforming structure and/or use, subject to the provisions of Palo Alto Municipal Code Chapter 18.70.
INTRODUCED:
PASSED:
AYES:
NOES:
ABSENT:
ABSTENTIONS:
ATTEST:
____________________________ ____________________________ City Clerk Mayor
APPROVED AS TO FORM: APPROVED AS TO CONTENT:
____________________________ ____________________________ Assistant City Attorney City Manager
____________________________
Director of Planning and
Development Services
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City Council
Staff Report
From: City Manager
Report Type: ACTION ITEMS
Lead Department: City Auditor
Meeting Date: September 23, 2024
Report #:2408-3409
TITLE
Review the Procurement Process Review Audit and Supplemental Information Regarding Competitive Solicitation Outcomes and Approve the Audit
RECOMMENDATION
The City Auditor’s Office recommends City Council approve the Procurement Process Review Audit
EXECUTIVE SUMMARY
The Procurement Process Review Audit was presented to the Policy & Services Committee on August 13, 2024. Committee members raised certain questions about the scope of the audit work performed. The Committee did not unanimously approve the audit necessitating presentation of the audit to the full City Council. Both the City Auditor’s Office and the Administrative Services Department reviewed prior analysis performed and data from the audit period to provide additional information for Council members to consider which is provided in the Background and Analysis sections of this staff report.
BACKGROUND
Work for the Procurement Process Review Audit was approved by City Council as part of the FY23 Annual Audit Plan. The audit was completed and a first draft sent to the department in December of 2023. Due to changes in the Administrative Services Department (ASD) and CIty Auditor’ Office Management at the beginning of 2024, the audit report and management response were not finalized and presented to the Policy & Services Committee until August 13, 2024. Policy and Services Committee members raised certain questions about the results of the audit and the scope of work that was completed. The City Auditor has followed up on the Committee’s request for additional information and provides answers to these questions in the Analysis section of this staff report for City Council consideration.
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Additionally, the City Auditor would like to note the general process for City Council to direct the Audit Office’s work each year. The Auditor suggests following this process if there is interest in requesting further work related to the procurement function. Each year, the Auditor’s Office conducts a risk assessment to identify topics and areas of concern for potential inclusion on the annual audit plan. The Auditor’s Office is currently conducting risk assessment interviews with Council Members and the Executive Leadership Team. The information gathered in these interviews will culminate in a draft FY25 Audit Plan. The FY25 Audit Plan will be presented to City Council in November 2024 for approval. The Auditor’s Office encourages participation in the risk assessment process as it provides a systematic and consistent approach to identifying risks and elevating those risks for City Council consideration in directing the Audit Office’s work for the following fiscal year.
ANALYSIS
The Procurement Process Review audit stated objectives were to:
1) Determine whether the needs assessment, budgeting, solicitation, and vendor selection processes are efficient, effective, and transparent to ensure value for money and fair competition.
2) Determine whether the procurement process is valid through proper approvals, adequate segregation of duties, and compliance with applicable laws, regulations, and the City's policies. 3) Determine whether technology is used appropriately and effectively to enhance integrity, efficiency, transparency of the procurement process and ensure consistency and validity of the relevant information and data.
4) Identify the opportunities to improve the efficiency and effectiveness in the procurement process.
The audit objectives, particularly 1 and 4, were stated in broad terms that could apply to many aspects of the procurement system. As a full review of the entire procurement system and its overall performance would far exceed the time and budget allotted for this audit engagement, the audit team scoped and focused their assessment on the City’s procurement process design of internal controls, including procurement policies, procedures and processes. These internal controls were assessed for their alignment with best practices associated with the efficient, effective, and transparent procurement of goods and services in order for the City to provide value for money and facilitate fair competition. While the audit did not assess the overall outcomes of the procurement process, it did test a sample of contracts for compliance with established City procurement practices.
A sample of fifty contracts from FY22 and FY23 were tested on the following criteria to determine if:
1. Contracts were appropriate, current, and accurately reflected terms and conditions and whether these conditions aligned with expectations identified within the corresponding Item 10
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chapter of the City’s Purchasing Manual for each type of solicitation and with the City’s Municipal Code.
2. Procurement documents including contracts, purchase orders, invoices and approval documents were properly maintained and accessible including the presence of internal documents, Appendix G and Appendix E, and if they were completed in accordance with the City’s Purchasing Manual and Municipal Code.
3. Initiation process for purchasing requests at the department level follow the City’s signature authority in accordance with the City’s Contract Solicitation and Award Limits Summary and approvals were obtained at the department level, purchasing department, and legal department as necessary.
4. Appropriate segregation of duties existed during the procurement process as the preparer, reviewer, and approvers were independent of each other and supporting evidence and documentation were present.
5. The competitive bidding process followed the City’s Municipal Code as required and the selection criteria was fair and transparent.
6. The vendor selection, evaluation and approval process were reasonable per review of supporting documentation.
The audit reported four findings based on testing the 50 contracts on the above criteria. A brief summary of these findings follows:
•Finding 1 noted that while most (44) of the contracts reviewed had the appropriate documentation supporting that policies and procedures were followed and internal controls operating as intended, a few contracts were missing key documentation:
o4 contracts did not include Appendix G, Solicitation Plan Checklist but should have included this documentation.
o2 contracts did not include Appendix E, Exemption from Competitive Solicitation but should have included this documentation.
•Finding 2 noted that the City’s purchasing manual required updates and was missing procedures to execute a “Design Build” contract. However, the City does have policies and procedures in place for different types of contracts and solicitations and the audit evaluated the efficiency, effectiveness, and transparency of the procurement process for these various types of contracts and did not note any additional areas for improvement.
•Finding 3 noted that needs assessments and market analyses are completed by individual departments and these processes are not formalized in the purchasing manual which may lead to inconsistent practices.
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•Finding 4 noted that the technological systems used to support the procurement process allow for the ability to create duplicate vendors in the system. While the City has controls related to who can create vendors in the system, there are several risks associated with this practice including the potential for making duplicate payments and generating fraudulent invoices. The audit did not complete any additional testing to determine if errors in billing had been made as a result of the duplicate vendors.
Policy & Services Committee Members specifically asked about testing related to competitive bidding procedures. The audit did evaluate documentation for each contract to confirm whether competitive bidding practices were followed (see Finding 1 and criteria number 5 above). In response to Committee Members questions, the City Auditor completed a second assessment of 11 of the 50 contracts sampled and noted the following characteristics:
•3 of the 11 contracts were exempted from the competitive bidding process as they were the sole vendor operating in that space in CA at the time of the solicitation •6 of the 11 contracts received multiple bids
o3 selected the lowest bidder
o3 selected the Best Value (2 of these 3 had external panelists serving on the bid review panel in addition to the Palo Alto employees)
•2 of the contracts failed testing due to not having the appropriate documentation to support the exemption (see Finding 1, above)
In response to questions asked at the August 13th Policy & Services Committee meeting, Administrative Services Department (ASD) staff provided the following summary of contract solicitations between July 2023 and July 2024. Please note this information has not been verified by the City Auditor but serves as part of the Management Response. •105 formal solicitations
•3 solicitations (3% of the total) received no bid
•27 solicitations (26% of the total) received only 1 bid ASD staff summarized vendor feedback on solicitations that received 1 or no bids. The primary themes of this feedback were:
•Vendors were not available to take on the City project (not enough bandwidth) •Vendors did not have the requested products and/or expertise Some vendors did not respond to the City’s request for feedback and a few cited forms and/or the e-procurement system as reason for not submitting a bid.
FISCAL/RESOURCE IMPACT
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Work conducted for this audit and in responding to subsequent requests for information is within the approved scope and compensation of the contract with Baker Tilly.
STAKEHOLDER ENGAGEMENT
The City Auditor’s Office met with relevant City leadership and staff and City to gather information and conduct work for this audit activity.
ENVIRONMENTAL REVIEW
Council action on this item is not a project as defined by CEQA because the audit activities do not involve any commitment to any specific project which may result in a potentially significant physical impact on the environment. CEQA Guidelines section 15378(b)(4).
ATTACHMENTS
Attachment A: Procurement Process Review Audit
APPROVED BY:
Kate Murdock, City Auditor
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City of Palo Alto
Office of City Auditor
Procurement Process 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 ...............................................................................................................5 DETAILED ANALYSIS .....................................................................................................8 AUDIT RESULTS............................................................................................................13 APPENDIX ......................................................................................................................22 Item 10
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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 a Procurement Process Audit based on the approved Task Order 4.20. The objectives of this audit were to:
1) Determine whether the needs assessment, budgeting, solicitation, and vendor selection processes are efficient, effective, and transparent to ensure value for money and fair competition. 2) Determine whether the procurement process is valid through proper approvals, adequate segregation of duties, and compliance with applicable laws, regulations, and the City's policies. 3) Determine whether technology is used appropriately and effectively to enhance integrity, efficiency, transparency of the procurement process and ensure consistency and validity of the relevant information and data.
4) Identify the opportunities to improve the efficiency and effectiveness in the procurement process.
Report Highlights
Finding 1: Supporting documentation for contract award
(Page 13) During the procurement process audit, the OCA requested a comprehensive list of contract awards spanning from fiscal year (FY) 2021 to FY2023, inclusive of solicitations. A sample of 50 contracts was selected for testing key controls, as identified during walkthroughs with the Purchasing Division.
Out of these 50 samples, 6 contracts exhibited exceptions. These exceptions were primarily due to the absence of supporting documentation, which resulted in compliance deficiencies, as mandated by the City’s Purchasing Manual and Chapter
2.30 of the Palo Alto Municipal Code.
•4 contracts did not include the Solicitation Plan Checklist or Appendix G •2 contracts did not include the Exemption From Competitive Solicitation Request Form or Appendix E
The expectation was that all the samples had the necessary supporting documents that were outlined in the City’s Purchasing Manual and/or the City of Palo Alto Municipal Code (Section 2.30 - Contracting and Purchasing Procedures). Risks associated with lack of support include failure to meet contract specifications, loss of data, fraudulent activity, and noncompliance with laws, regulations, and provisions.
Key Recommendations
It is recommended that the City establish and incorporate a formal checklist that includes all supporting evidence that is to be retained during the entire procurement phase. The checklist should include the various documents that are mandatory for each contract, as well as all internal documentation that is referenced in the purchasing manual and municipal code. This checklist is supplemental to the Solicitation Plan Checklist and Exemption From Competitive Solicitation Request Form. A checklist that identifies necessary documents for retention would help mitigate the risk of noncompliance.
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2 EXECUTIVE SUMMARY
Finding 2: Purchasing manual
(Page 15) The City of Palo Alto engages in various contracts for goods and services, with distinct procurement procedures for each type. The OCA conducted walkthroughs to evaluate the procurement process’s efficiency, effectiveness, and transparency. It was observed that the process for procuring a “Design Build” contract, although employed by the City, is not documented in the City’s Purchasing Manual. This highlights the need for comprehensive documentation to ensure transparency and adherence to established procedures in all aspects of the City’s procurement process.
Furthermore, it was determined when analyzing the City’s Purchasing Manual that inconsistencies exist. It was noted that there was no table of contents, multiple chapters were outdated, a chapter was inconsistently labeled, chapter revisions were completed with existing versions of the chapters representing several different years, and appendices were missing.
The Purchasing Division management has informed the OCA that the City is currently in the process of updating their Purchasing Manual with a finalized version expected to be completed in FY2024. The “Design Build” contract type is expected to have a designated chapter in the updated version as well.
Key Recommendations
The City should complete adding in the City’s Purchasing Manual a chapter that explains the necessary steps for processing a “Design Build” contract.
It is crucial that the City takes steps to document the process for procuring a “Design Build” contract. This could involve detailing each step of the process, from the initial solicitation to the final contract award. It would also be beneficial to include examples of best practices and potential pitfalls to avoid. By doing so, the City can ensure that its procurement process is robust, transparent, and in line with established procedures. This will ultimately contribute to more effective and efficient procurement operations within the City of Palo Alto.
It is also advisable that the City’s management regularly update the Purchasing Manual to ensure that the procurement process remains in alignment with the City’s evolving goals and needs. The Purchasing Manual should include a table of contents, frequently revised chapters, appropriate chapter titles, and all appendices. It is imperative that the City’s Purchasing manual is relative to the current operations that are being conducted at the City.
Finding 3: Needs assessment and market analysis
(Page 16) Based on the results of needs assessment and market analysis, an organization develops the specifications, requirements, a statement of work, and award criteria to properly describe the organization’s needs in the solicitation document and attract a sufficient number of qualified bidders
The OCA noted the following:
•The City currently lacks a formalized needs assessment process within its Purchasing Manual.
•The City departments perform their own needs assessments and market analyses before submitting budget requests.
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3 EXECUTIVE SUMMARY
•The Purchasing Division does not collect or review the needs assessments and market analyses conducted by the City departments.
As described in the Best Practices section of this report, it is important that an organization assesses needs and analyzes the market for thinking strategically and encouraging competition. Without them, the City may be exposed to some risks such as procurement of insufficient or inferior goods and services.
Key Recommendations
The City should incorporate a formal needs assessments and market analyses in the City’s Purchasing Manual to provide expectations and guidance to all departments to enable the procurement professionals to gather and analyze the information. The procedures performed should also include detailed review by the appropriate Purchasing Division personnel to ensure the results are utilized to encourage bid competition, meet strategic goals, comply with laws and regulations, and to leverage a buying power.
Finding 4: Vendor record creation
(Page 18) The OCA examined whether technology is used appropriately and effectively to enhance integrity, efficiency, transparency of the procurement process and ensure consistency and validity of the relevant information and data. It was observed during inquiry and assessment of vendor listings that duplicate vendors can be created in SAP. Being allowed to create vendors or duplicate vendors can lead to many risks.
Risks include making duplicate payments to the same vendor which may impact the City's financial position, fraudulent invoices can be paid to nonexistent vendors, noncompliance with laws, regulations and provisions, and data quality that is not accurate or complete.
The OCA noted that vendors are created by authorized personnel within the Accounting and Purchasing Divisions, the only Divisions that employ personnel that have the authority, have the ability to create a new vendor. Although duplicate vendors can be created without restrictions from the SAP system, mitigating controls exist to help decrease the likelihood of duplicating vendor submissions.
Key Recommendations
The City should implement application controls that help the City avoid creating duplicate vendor records unintentionally. Additionally, the City should implement a manual control where the creation and modification of new vendors are subject to appropriate independent reviews at the time of creation and modification to prevent duplicate or unauthorized entries and errors.
The City should also frequently validate and monitor vendor lists, and prioritize a structured approach to vendor management with regular reviews following City- developed procedures. This includes removing duplicate vendors that are in SAP currently, as well as old vendors that are no longer in-use.
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4 Introduction
1 Palo Alto Municipal Code Section 2.30.010 https://codelibrary.amlegal.com/codes/paloalto/latest/paloalto_ca/0-0-0-61798#JD_2.30.010 Objective The objectives of this audit were to:
1) Determine whether needs assessment, budgeting, solicitation, and vendor selection processes are efficient, effective, and transparent to ensure value for money and fair competition.
2) Determine whether the procurement process is valid through proper approvals, adequate segregation of duties, and compliance with applicable laws, regulations, and the City's policies.
3) Determine whether technology is used appropriately and effectively to enhance integrity, efficiency, transparency of the procurement process and ensure consistency and validity of the relevant information and data. 4) Identify the opportunities to improve the efficiency and effectiveness in the procurement process.
Background The Purchasing & Contract Administration (Purchasing) Division in the City of Palo Alto manages procurement processes and oversees contractual agreements. Its responsibilities include soliciting bids, purchasing goods and services, negotiating contracts, ensuring compliance with regulations, and managing vendor relationships. City departments play a primary role in contract administration once a contract is established, however, the Purchasing Division becomes involved if a contract needs to be modified. The division also provides support with other City departments to develop and execute contracts for these purchases. The department aims to acquire quality goods/services at competitive prices while maintaining transparency, efficiency, and adherence to City policies and procedures.
The Purchasing division operates in accordance with City of Palo Alto Municipal Code (Section 2.30 - Contracting and Purchasing Procedures) which establishes the contracting authority of the City Manager, the Chief Procurement Officer, designated employees, City Attorney, and City Council. The purpose of the Municipal Code for the Purchasing Division is “to foster and encourage the use of best management practices in contracting and purchasing; to ensure quality and efficiency in the procurement of goods, services, equipment, materials and supplies at the lowest cost commensurate with the quality needed; to provide for a fair and equitable procurement process utilizing standardized solicitation procedures; and to maintain honesty and integrity in the procurement process”1.
The Administrative Services Department goals and key performance measures in the FY2024 Adopted Operating Budget include the following purchasing- related goal and key performance measure:
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5 INTRODUCTION
The Purchasing division employees include a Chief Procurement Officer, 4 contract administrators, 2 senior buyers, and 2 buyers. All procurement activity is handled by 9 City employees plus staff in departments that initiate procurements and manage contracts. The list of contracts provided by Purchasing division shows that 2,201 contracts were active during the audit period, July 1, 2020, to June 30, 2023. The 2,201 contracts amounted to $399,412,385.95 in total contract value.
The current City’s Purchasing Manual is dated May 20, 2019, and consists of 22 chapters and Appendices A, B, G, and O. The City is currently in the process of updating their Purchasing Manual with a finalized version expected to be completed in FY2024.
Scope The OCA evaluated the controls surrounding the City’s procurement process and tested the selected controls by assessing a sample of contracts between July 1, 2020, to June 30, 2023 (audit period).
Methodology To achieve the audit objectives, the OCA performed the following procedures:
•Assessed the pertinent laws, policies, and guidelines related to Procurement including the City’s Purchasing Manual and City of Palo Alto Municipal Code (Section 2.30 - Contracting and Purchasing Procedures). •Interviewed the appropriate individuals to understand the roles and responsibilities, processes, and controls related to Procurement activities. •Selected a sample of contracts during the audit period, FY21 to FY23. The OCA stratified the population into smaller groupings by contract type (Appendix A). The percentages of counts for each contract type were multiplied by the sample size of 50 to select a representative number of contracts for each contract type for testing. The sample selected ultimately accounted for $244,409,100.22, or 61% of total contract value. •Assessed supporting documents for controls performed and approvals for the selected contracts and solicitations.
•Used State and Local Government Procurement” A Practical Guide by National Association of State Procurement Officials (NASPO), California Public Contract Code (PCC), and Auditing Procurement in the Public Sector by the Institute of Internal Auditors (IIA) as best practices.
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6 INTRODUCTION
2 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.
Compliance
Statement
This audit activity was conducted from August 2023 to December 2023 in accordance with generally accepted government auditing standards, except for the requirement of an external peer review2. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings, observations, and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings, observations, and conclusions based on our audit objectives.
Organizational
Strengths
During this audit activity, we noted the expertise and the responsiveness demonstrated by the Procurement team, notably the Chief Procurement Officer and Assistant Director. We also observed their willingness to provide and receive feedback regarding the procurement process flowcharts, which includes their receptiveness to process improvements.
The Office of the City Auditor greatly appreciates the support of the Purchasing & Contract Administrative Division of the Administrative Services Department in conducting this audit activity.
Thank you!
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7 Detailed Analysis
3 https://www.naspo.org/
4 https://county.milwaukee.gov/files/county/administrative-services/Procurement/PagesfromNASPOStateandLocalProcurementGuideCh1-
10.pdf
5 https://cdn.naspo.org/R&I%20Content%20Library/CriticalSucessAreas_KeyPerformances_2023.pdf Best Practices The National Association of State Procurement Officials (NASPO) offers guidance related to procurement in the public sector. The best practices highlighted by NASPO, within the publication of the State & Local Government Procurement: A Practical Guide, provides relative recommendations for the Purchasing Division and the overall procurement process. Additional key recommendations have been provided by the California Public Contract Code (PCC) and the Institute of Internal Auditors (IIA). The IIA offers audit guidance through its publication titled Auditing Procurement in the Public Sector, delineating a conceptual framework within the International Professional Practices Framework (IPPF) for procurement practices specific to the public sector.
National Association of State Procurement Officials (NASPO)3 The NASPO publication of the State & Local Government Procurement: A Practical Guide4 provides guidance for procurement in the public sector. This practical guide includes a comprehensive list of recommended best practices. Key recommendations that would positively impact the City, and are directly from the publication, are highlighted here:
•Governance
o“The central procurement office and the Chief Procurement Officer should establish measurements for assessing the performance of the procurement process, such as processing times, supplier performance data, and client survey responses.”
oThe Critical Success Area and Key Performance Indicators for State Central Procurement Offices5 by NASPO provides a list of indicators such as “Dollar value of the negotiated hard savings or cost avoidance realized due to the efforts of procurement staff” and “Average internal customer satisfaction score from monthly or annual customer satisfaction surveys.”
•Strategies and Planning
o“Public procurement officers must be encouraged to think strategically about each procurement and ensure that they have the right tools and data to make strategic decisions.”
•Competition
o“Public procurement officers must have at hand a wide range of source selection methods in order to be able to meet user agencies' and users' needs.”
o“Understand market conditions for every procurement.”
o“Performing market research to understand the scope of the marketplace.”
o“Estimating prices and costs based on thorough market price and cost research.”
o“If prequalification of suppliers is used, prequalifying as many suppliers as exist in the current market; and if there are too few suppliers, broadening the geographic area of qualification.” Item 10
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8 DETAILED ANALYSIS
6 https://leginfo.legislature.ca.gov/faces/codesTOCSelected.xhtml?tocCode=PCC&tocTitle=+Public+Contract+Co de+-+PCC
7 https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?lawCode=PCC§ionNum=10302. 8 https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?sectionNum=10303.&nodeTreePath=3.2.3.3&lawCode=PCC 9 https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?lawCode=PCC§ionNum=6106. o“The procurement office should budget for supporting staff access to current market information, such as subscriptions to online market research tools and attendance at trade shows.”
o“The objective of a sound specifications-drafting process is to find a balance between what the user believes that it needs and a fair expression of those needs that is not too restrictive for the marketplace.”
o“The standard for contract award under competitive sealed bidding should not merely be lowest price but also lowest cost to the state or local government.”
•Contractor Performance
o“Assess contract performance both during and at the end of the contract”
o“Policies should be in place up front to insulate performance evaluations and contract disagreements from undue political influence. The contract should clearly identify milestones, expectations for service levels, output measures, and standards.” oMonitoring performance is an iterative process. Periodic reviews for high-value procurements foster collaboration, addressing challenges and identifying cost-saving opportunities.
oOptimize with frequent technology-driven monitoring using diverse feedback sources, including contractors, citizens, consultants, and community groups.
oCollect meaningful performance data, share it with stakeholders, and leverage information technology for efficient data collection and evaluation.
oFinally, take advantage of less adversarial approaches to resolving disputes and handling performance issues, like mediation or arbitration.
California Public Contract Code (PCC)6
The PCC regulates the procurement process for public contracts in the state, setting forth guidelines, procedures, and requirements to govern the bidding, awarding, and execution of contracts for goods, services, and public works projects by state and local government entities. For consideration the California PCC includes the following elements:
•Every solicitation shall contain the statement “It is unlawful for any person engaged in business within this state to sell or use any article or product as a “loss leader.7””
•The department shall adopt, publish and apply uniform standards of rating bidders.8
•Any state agency or department, which is subject to this code, shall follow this section in negotiating fees and executing a contract for professional consulting services.9
•Payments upon contracts shall be made as the department prescribes upon estimates made and approved by the department, but progress Item 10
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10 https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?lawCode=PCC§ionNum=10261. 11 The Institute of the Internal Auditors, Auditing Procurement in the Public Sector, Practice Guide, (November 2021) payments shall not be made in excess of 100 percent of the percentage of actual work completed.10
Auditing Procurement in the Public Sector - Assess Needs and Analyze Market11
Assessing procurement typically begins by reviewing the organization's pre-tender planning policies and procedures. Effective risk mitigation in procurement hinges on well-designed strategies and proactive policies. Continuous monitoring and thorough follow-up assessments are essential to gauge the practical performance of these policies and procedures. Typically, this is performed by a procurement specialist who is separate from the manager who authorizes the procurement and performs the following:
•Assesses organizational need for goods or service.
•Assess the market for the requested good or service.
•Identify possible alternatives to external procurement. •Identify gaps that may be filled by external procurement. •Justify needs in terms of economy, effectiveness, and efficiency.
Auditing Procurement in the Public Sector - Plan and Budget⁹ During the pre-tendering phase, accurately estimating resources and devising a comprehensive budgeted plan is fundamental. Establishing precise selection criteria and budgeting guidelines is pivotal for successful procurement.
Procurement managers bear the responsibility of minimizing the risk associated with budget inaccuracies, particularly when dealing with new acquisitions or intricate projects where complexities may arise. To ensure proper planning and budget the following should be performed:
•Forecast cost in each phase of procurement.
•Prepare a project specific procurement plan (i.e. business case or feasibility study).
•Procurement plan approval through senior hierarchy.
•Separating budget estimation duties from authorizations and approvals and establishing peer reviews.
Auditing Procurement in the Public Sector - Post Award⁹ To maximize the effectiveness of post-award contract administration, it is pivotal to clearly define the roles and responsibilities of contract managers and administrators, detailing their involvement in performance oversight, change management, document upkeep, dispute resolution, and contract finalization.
Implementing robust monitoring systems with specific Key Performance Indicators (KPIs), fostering proactive adaptation to changes, maintaining centralized and accessible document repositories, establishing structured dispute resolution protocols, and outlining systematic contract closure processes are vital steps towards enhancing efficiency and ensuring compliance. Embracing these strategic measures will fortify the organization's ability to navigate post-award contract administration seamlessly. Implementation of the above and following can foster more favorable and successful contract outcomes:
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•Developing a contract administration plan containing operational details of the contract to monitor contract performance.
•Segregating duties of individuals who are responsible for receiving, paying or providing program expertise.
•Allocating funds upon contract award and ensuring payments are issued promptly.
Auditing Procurement in the Public Sector - The Organization for Economic Co-operation and Development (OECD) Issued Guidance⁹
The OECD serves as a forum for governments worldwide to collaborate on economic policies and address global challenges. The OECD aims to promote economic growth, prosperity, and sustainable development through research, policy analysis, and the exchange of best practices. The OECD contains the following recommendations:
•Developing performance measurement systems with KPIs focused on the outcomes of procurement processes.
•Using the performance data to inform strategic policy-making and to develop strategic plans that articulate expectations and responsibilities. •Ensuring the e-procurement system should is flexible, secure, and scalable, while the user interface should be simple yet effective. Strong access controls are crucial for data security and user privacy.
The following flowchart shows the abbreviated current processes and controls in place.
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11 Abbreviated Procurement Process
Department LevelPurchasing DivisionVendor
Create a purchase requisition (PR) in SAP
Add procurement documents to SharePoint
Review documents for completeness
Consult with department to align on solicitation timeline Create draft version of solicitation
Consult with project manager and CAO to finalize solicitation package Solicit and advertise request on opengov
Review bids/quotes Verify Licenses and other requirements Review and sign a contract
EndRouted for signaturesbased on the amount and length of contract Release documents to procurement
Provide recommended vendors to Project Manager (PM)
Issue intent to award. 5-day protest period begins. Issue Purchase Order (PO) to vendor Email PM to attach PO to staff report
• No requirement to provide supporting documents for needs assessment or market analyses • Required documents e.g., Appendix G & E, could be missing Risks of creating duplicate vendor records
• No formal process for vendor performance monitoring• No contract close out process Develop and maintain Purchasing Manual
PM selects vendor
• Missing sections • In the process of being updated
Perform the contract requirements
Monitor vendor performance
Create a new vendor record, if necessary
Council authorization required?
No
Yes
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Finding 1:
Supporting
documentation
for contract
award
During the audit of the procurement process, the OCA requested a comprehensive list of contract awards spanning from FY2021 to FY2023, inclusive of solicitations. A sample of 50 contracts was selected for testing key controls, as identified during walkthroughs with the Purchasing Division.
Out of these 50 samples, 6 contracts exhibited exceptions. These exceptions were primarily due to the absence of supporting documentation, which resulted in compliance deficiencies, as mandated by the City’s Purchasing Manual and Chapter 2.30 of the Palo Alto Municipal Code. •Four out of 50 contracts did not include the Solicitation Plan Checklist or Appendix G.
▪1 out of 4 contracts that did not include the corresponding Solicitation Plan Checklist were purchased goods. Chapter 6 (page 5), of the City’s Purchasing Manual - contracts for $10,001-$50,000 (Informal Solicitation) - states: “If desired, Purchasing can conduct the informal solicitation for the department. In these instances, departments must complete the “Solicitation Plan Checklist” of Appendix G, assemble a list of recommended sources with contact information, and provide a detailed specification, all saved to a designated location for Purchasing to process. This documentation must be referenced in the purchase requisition’s “Header Note” screen as “Supporting documentation completed in the [location].” Chapter 6 (page 6), of the City’s Purchasing Manual, for $50,001 and above (Formal Solicitation), states “When utilizing a formal bid process for purchases of goods above $50,000, City departments must create a fully funded purchase requisition (PR). Before releasing the PR for processing, a “bid ready” specification must be saved in MS Word format, along with a completed “Solicitation Plan Checklist” - Appendix G, to a designated location for Purchasing to process. This documentation must be referenced in the purchase requisition’s “Header Note” screen as “Supporting documentation completed in the [location].”
▪2 out of the 4 contracts that did not include the corresponding Solicitation Plan Checklist was a contract that was purchased professional services (informal proposal). Chapter 8 (page 5), of the City’s Purchasing Manual, contracts for $50,001-$85,000 (Informal Proposal), states “Departments (Project Managers) must complete a Solicitation Plan Checklist - Appendix G, saved to a designated location for the department, or Purchasing, to process the contract.
The checklist provides a road-map of direction for the requesting department and critical information needed by Purchasing & Contract Administration to process a procurement request. This
documentation must be referenced in the supporting PR ‘Header Item 10
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Note’ screen as “Supporting completed in the [LOCATION]” to advise Purchasing on where to obtain supporting electronic documentation.” ▪1 out of the 4 contracts did not include the corresponding Solicitation Plan Checklist was a contract that was purchased professional services (formal proposal). Chapter 8 (page 8), of the City’s Purchasing Manual, contracts for $85,001 and above (Formal Proposal), states “Departments (Project Managers) must complete a “Solicitation Plan Checklist” - Appendix G, saved to a designated location for the department, or Purchasing, to process the contract.
The checklist provides a road-map of direction for the requesting department and critical information needed by Purchasing & Contract Administration to process a procurement request. This
documentation must be referenced in the supporting PR ‘Header Note’ screen as “Supporting completed in the [LOCATION]” to advise Purchasing on where to obtain supporting electronic documentation.” •Two out of 50 contracts did not include the Exemption From Competitive Solicitation Request Form or Appendix E.
▪2 contracts tested, that were labeled as ‘exemptions’, did not include the Exemption From Competitive Solicitation Request Form or Appendix E. Per Chapter 4 (page 1), of the City’s Purchasing Manual, “When a City department requires a specific products or services over $10,000 that can only be furnished by a certain provider or that should be otherwise exempted from the competitive solicitation process (ref. PAMC 2.30.360), the requestor must complete an Exemption From Competitive Solicitation Request Form (Purchasing Manual Appendix E) via email. The exemption request requires a description of the unique need that necessitates an exemption from competitive solicitation, including actions taken to determine justification of why it may be impracticable, unavailing or impossible to solicit bids or proposals. For product standardization requests, the justification must demonstrate that standardization is necessary for the health, safety or welfare of the City or significant cost savings can be realized by standardizing on a single brand or trade name. These requests require Department Head, Purchasing Manager and City Manager approval. To be approved, the
justification request must demonstrate a need that can only be satisfied by the selected supplier.”
Risks associated with lack of support include failure to meet contract specifications, loss of data, fraudulent activity, and noncompliance with laws, regulations, and provisions.
Recommendation It is advisable for the City to establish and integrate a comprehensive checklist that encompasses all supporting evidence required to be retained throughout the entire procurement phase.
This checklist should include all mandatory documents for each contract, as well as all internal documentation referenced in the purchasing manual and municipal code. It should also provide space for commentary, enabling the Item 10
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purchasing manager to offer detailed explanations in cases where certain supporting evidence may not be applicable.
This proposed checklist would serve as a supplement to the existing Solicitation Plan Checklist and Exemption From Competitive Solicitation Request Form. Its implementation would enhance the transparency and efficiency of the procurement process, ensuring that all necessary documentation is consistently maintained and easily accessible. This, in turn, would contribute to the overall effectiveness of the City’s procurement operations. Lastly, a checklist that identifies necessary documents for retention would help mitigate the risk of noncompliance.
Management
Response
Responsible Department(s): Administrative Services Department Concurrence: Agree
Target Date: December 2024
Action Plan:
Staff agrees with the recommendation and to that end the Purchasing Division is currently implementing the intake process in the new procurement system provided by OpenGov. The OpenGov intake process will replace and automate Appendix G, the current checklist, and will be inclusive of all documents needed for the formal solicitation purposes. The new OpenGov intake process is designed to offer efficiencies through a streamlined interface and a single destination for communication replacing numerous emails and documents.
Staff is also finalizing new checklists that will cover the informal request for solicitations process as well for cooperative agreements. With the new OpenGov intake process and the new checklists, this will complete the checklist documentation needed to start any solicitation. Check lists already exist for professional service agreements, amendments to contracts, and general services agreements. With these tools, it will be clearly laid out what documents will be needed to complete a solicitation.
Summary:
Existing checklists: Appendix G (for most solicitations); professional services agreement; amendment to contract; general services.
New checklists to be changed/added: Appendix G to be integrated into OpenGov; new checklist for informal request for proposals.
Finding 2:
Purchasing
manual
The City of Palo Alto procures a variety of contracts for goods and services.
The procurement process employed by the City varies, with distinct procedures in place depending on the type of contract and solicitation.
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These types include the purchase of goods, general services, professional services, and public works contracts, among others. (Appendix A) The OCA undertook a series of walkthroughs to assess the efficiency, effectiveness, and transparency of the procurement process. These walkthroughs served to document the current state of the procurement process. The documented process was subsequently compared to the procedures outlined in the City’s Purchasing.
During the walkthroughs, it was observed that the City employs a specific process when procuring a “Design Build” contract. This process, however, is not documented within the City’s Purchasing Manual. As there was a Design Build contract with a contract value of $4.2 M in the list of contracts for the audit period, the OCA added this contract to our previously selected 50 contracts for testing.
It was noted that, at present, the procedure for processing a Design Build contract is executed through a blend of various solicitation processes, leading to possible inconsistencies. To address this, it is imperative to document this process and ensure its inclusion in the updated manual. This will foster consistency and efficiency in the City’s procurement operations as the procedures delineated in the purchasing manual will serve as a guide for City employees, enabling them to effectively evaluate and execute tasks when procuring a specific solicitation.
Furthermore, it was determined when assessing the City’s Purchasing Manual that inconsistencies exist. It was noted that there was no table of contents, multiple chapters were outdated, a chapter was inconsistently labeled, chapter revisions were completed with existing versions of the chapters representing several different years, and appendices were missing.
The Purchasing Division management has informed the OCA that the City is currently in the process of updating their Purchasing Manual with a finalized version expected to be completed in FY2025. The “Design Build” contract type is expected to have a designated chapter in the updated version as well. The absence of a well-documented purchasing manual can lead to inconsistencies and inefficiencies in the procurement process. A purchasing manual should provide clear guidelines for City employees to reduce ambiguity and ensure that all steps are followed correctly and consistently.
This would also enhance transparency, allowing for better oversight and accountability.
Regular updates to the Purchasing Manual will facilitate the timely identification and addressing of any gaps or inefficiencies, thereby enhancing the overall effectiveness of the City’s procurement strategy.
Recommendation The City should complete adding in the City’s Purchasing Manual a chapter that explains the necessary steps for processing a “Design Build” contract.
It is crucial that the City takes steps to document the process for procuring a “Design Build” contract. This could involve detailing each step of the process, from the initial solicitation to the final contract award. It would also be beneficial to include examples of best practices and potential pitfalls to avoid. By doing so, the City can ensure that its procurement process is Item 10
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robust, transparent, and in line with established procedures. This will ultimately contribute to more effective and efficient procurement operations within the City of Palo Alto. We recommend having a comprehensive and well-documented process for all types of solicitations within the City’s Purchasing Manual. It is our recommendation that the manual should encompass all types of solicitations. This will provide the City with a clear roadmap to ensure all types of solicitations and contracts are processed as expected by management and in compliance with applicable laws and regulations.
Furthermore, it is advisable that the City’s management regularly update the Purchasing Manual to ensure that the procurement process remains in alignment with the City’s evolving goals and needs. The Purchasing Manual should include a table of contents, frequently revised chapters, appropriate chapter titles, and all appendices. It is imperative that the City’s Purchasing manual matches the current operations that are being conducted at the City.
Management
Response
Responsible Department(s): Administrative Services Department Concurrence: Agree
Target Date: November 2024
Action Plan:
Staff agrees that updating the purchasing manual to include all solicitation processes is a good practice. This ensures that the manual is comprehensive and well documented of all processes and types of solicitations. This will provide the organization with a clear roadmap to ensure all types of solicitations and contracts are processed as expected and in compliance with the municipal code and applicable laws and regulations. Also, it is good practice to update the manual on a regular basis to ensure it has the most update to date information.
Staff will update the manual to include Design Build solicitations in a new chapter. It is relevant to note that design build solicitations occur roughly once per year. All other solicitation processes are captured in the current version of the manual.
The manual will be reviewed for necessary updates on a regular basis at least annually.
Finding 3: Needs
assessment and
market analysis
Before an organization invites providers of goods and services to bid on a contract, it is imperative for an organization to conduct a thorough needs assessment and market analysis to understand what is required to meet the organization’s needs and obtain necessary information for successful procurement. Based on the results of needs assessment and market analyses, an organization develops the specifications, requirements, a statement of work, and award criteria to properly Item 10
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describe the organization’s needs in the solicitation document and attract a sufficient number of qualified bidders.
The OCA noted the following:
•The City currently lacks a formalized needs assessment process within its Purchasing Manual.
•The City departments perform their own needs assessments and market analyses before submitting budget requests.
•The Purchasing Division does not collect or review the needs assessments and market analyses conducted by the City
departments.
As described in the Best Practices section of this report, the State and Local Government Procurement: A Practice Guide by NASPO, corroborates the importance of an organization assessing needs and analyzing the market for thinking strategically and encouraging competition. The Auditing Procurement in the Public Sector’s Practice Guide, published by the IIA notes that risks exist when needs assessments and market analyses are not performed. Without them, the City may:
•Over- or under-estimates needs.
•Inadequately or unrealistically define specifications. •Procure insufficient or inferior goods and services.
•Have insufficient capacity to assess needs and analyze market. •Fail to attract a sufficient number of qualified bidders/reduced competition.
Recommendation It is recommended that the City integrate standardized needs assessment and market analysis procedures that are applicable across all departments to enable the procurement professionals to gather and analyze the information. The expectations and guidance should be formally documented in the City’s Purchasing Manual.
The execution of these procedures should involve a comprehensive review by the appropriate Purchasing Division personnel, ensuring that and that the results are utilized to encourage bid competition, meet strategic goals, comply with laws and regulations, and to leverage a buying power.
Management
Response
Responsible Department(s): Administrative Services Department Concurrence: Partially Agree
Target Date: September 2024
Action Plan:
Currently, City departments handle needs assessments and market review with different degrees of formality where information gained from such reviews supports the solicitation process. On one end of the spectrum, a Item 10
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department may have detailed specifications and a thorough understanding of the marketplace of vendors because the market is well defined. On the other side, a scope of services might exist but a formal process of seeking qualifications from the market is performed in what is called a request for information or RFI process to gain more specific market awareness. These two ends of the spectrum and those in between are currently believed to be sufficient while not burdening the solicitation process with added time.
The Purchasing Division can ask departments for the needs assessment and market analysis where it exists and include that in the solicitation documentation file going forward. This approach to addressing the recommendation builds on what is currently done by departments. This approach seems like a reasonable step that won’t add significant time to the procurement process. However, creating a new City integrated standardized needs assessment and market analysis procedures across all departments would be more time consuming and costly for procurement transactions, likely exceeding the foreseeable potential benefits.
Finding 4:
Vendor record
creation
The OCA evaluated the use of technology in enhancing the integrity, efficiency, and transparency of the procurement process. This included ensuring the consistency and validity of all relevant information and data.
The OCA’s walkthrough interview regarding creation of vendor records within the Enterprise Resource Planning (ERP) system revealed that the City’s ERP system, SAP, permits the creation of duplicate vendors.
This was determined during inquiry with the Purchasing Division, and corroborated when viewing a requested SAP system generated approved vendor listing. Per our analysis of the vendor listing (report called “Vendor Export SAP 2023”), there were 28 instances where the same vendors were included, throughout the report, with different “Supplier” numbers, or different vendor numbers.
It appears that the City has a mitigating control in place, where all vendors that are created are reviewed by appropriate personnel prior to being posted to SAP. However, since manual reviews are not designed to identify duplicate vendors and payments, risks still exist due to the lack of adequate application controls to prevent the City from creating duplicate vendor records.
Risks include the potential for making duplicate payments to the same vendor or making erroneous payments, which could negatively impact the city’s financial standing. There is also a risk of fraud, where payments could be made against fraudulent invoices to internal and external fraudsters. Additionally, this could lead to noncompliance with laws, regulations, and provisions, and compromise the accuracy and completeness of data quality.
Recommendation The City should implement application controls that help the City avoid creating duplicate vendor records unintentionally. Additionally, the City should implement a manual control where the creation and modification of Item 10
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12 Auditing Procurement in the Public Sector, November 21, 2021, The Institute of Internal Auditors Auditing Procurement in the Public Sector (theiia.org)
new vendors are subject to appropriate independent reviews at the time of creation and modification to prevent duplicate or unauthorized entries and errors.
The City should implement procedures where vendor records in the ERP system are periodically validated and monitored. The City should remove any duplicate and invalid vendor records. The quality control process should be completed annually.
Management
Response
Responsible Department(s): Administrative Services Department Concurrence: Partially Agree
Target Date: August 2024
Action Plan:
Staff agrees to pursue with the SAP ERP team in the future the possibility of implementing application controls that would create a hard stop to creating a duplicate vendor or similar available options. As it currently stands SAP does not offer this capability now according to the ERP team. While it is useful to create duplicate vendor records, in instances of needing a second vendor address, for example, no other options exist other than to create duplicate vendors. The SAP ERP system does not allow for multiple address per vendor. Sometimes vendors have one corporate address, for instance, and a separate payment address. An application hard stop could further inhibit the creation of duplicate vendors beyond the current use cases. Staff currently operates under a procedure that requires staff to check for duplicate vendors before creating a new vendor. If a duplicate vendor is identified, it is eliminated from being usable unless it is needed as a second address.
Additional
Observation:
Vendor
performance and
contract close-
out process
In the current procurement process, a project manager, who is a department-level analyst, is assigned to each individual contract. The project manager’s responsibilities include managing vendor relations, overseeing activities and transactions, and monitoring and concluding the contract.
However, it was observed that there is no formalized procedure in place for the contract closeout process. The close-out process, which is initiated when a contract is finalized and completed, is typically handled at the department level by a department administrator or the project manager.
The Auditing Procurement in the Public Sector Practice Guide12 notes having a contract close-out process as a best practice, including reconciliation of planned against delivery budgets, evaluation of vendor performance, incorporation of public feedback and oversight by a central authority. The City might consider whether a more formal close-out process would be beneficial.
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process. However, monitoring vendor performance and determining where this function should reside is important for the City to consider when developing formal contract close-out procedures.
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21 Appendices
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22 Appendix A: City of Palo Alto Contract Types
The City of Palo Alto’s procures various contract and solicitation types. The City’s Purchasing Manual provides City departments with a practical step-by- step guide through the various stages of the purchasing process. The Purchasing Manual identifies the contract types and discusses each process separately in detail. Below is a chart of the contract types that are currently being procured by the City, as well as the solicitation types that can be utilized for each contract.
Solicitation Types:
¹ Request for Information (RFI) – document that is used to gather information about goods or services. Information is used to compare potential suppliers.
² Request for Proposal (RFP) – document that invites potential suppliers to submit bids for a project or service. ³ Request for Quotation (RFQ) – document that an organization sends to selected suppliers to get prices quotes for a project or service. ⁴ Invitation for Bid (IFB) – document that invites potential suppliers to submit bids for a project or service, based mainly on price. ⁵ Cooperative Purchasing (COOP) – buying goods or services together with buyers to get the lowest price and best terms. ⁶ Informal Bids – type of solicitation that includes bidding from suppliers for goods or services that are not subject to public notice.
Contract Type RFI¹ (Y/N) RFP²
(Y/N) RFQ³ (Y/N) IFB⁴ (Y/N) COOP⁵ and/or
Informal Bid⁶
Included in
Purchasing
Manual (Y/N)
Purchase of Goods N N Y N COOP /
Informal Bid Y
Purchase of General
Services N Y Y N COOP / N/A Y
Purchase of General
Services – IT only N Y Y N COOP /
Informal Bid Y
Professional Services Y Y N N COOP /
Informal Bid Y
Public Works N N N Y COOP /
Informal Bid Y
Design Builds N Y N N N/A / N/A N
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City Council
Staff Report
From: City Manager
Report Type: INFORMATION REPORTS
Lead Department: Planning and Development Services
Meeting Date: September 23, 2024
Report #:2408-3408
TITLE
Accessory Dwelling Unit (ADU) - 2024 Quarter 2 (April - June 2024) Report
RECOMMENDATION
This is an informational report, and no action is required.
ANALYSIS
This report transmits information related to application activity for accessory dwelling units (ADU), including junior accessory dwelling units (JADU) for the first half of calendar year 2024.
Since 2015, the City has received 736 ADU/JADU building permit applications and issued 557 building permits. In the first half of 2024, the City received 72 new applications, issued 57 ADU permits, and provided an approved Final Inspection on 46 ADU/JADU permits. As it relates to the Housing Element, the data continues to support the anticipated housing unit production expected from ADU/JADUs for the current housing element cycle, which is an average of 64 units per year over the 8-year planning period or a total of 512 units.
Of the applications submitted in the first half of 2024, the ADU sizes range from 165 to 1,000 square feet, with an average size of 517 square feet. Approximately 43% of applications are located north of Oregon Expressway, and 57% are located south of Oregon Expressway. Since 2017, the majority of ADU/JADU permits relative to the Oregon Expressway has shifted between north and south from year to year. Further details can be found in Table 1 of Attachment A.
ENVIRONMENTAL REVIEW
This informational report is not a project as defined by the California Environmental Quality Act Guidelines.
ATTACHMENTS
Attachment A: Q2 2024 ADU Data
APPROVED BY:
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Table 1: Summary of ADU Permits from 2015-2024 (Q1 – Q2) Category 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 (Q1-Q2)
New ADU Applications
Filed1 10 9 28 55 75 78 136 151 122 74
Permits: Ready to Issue
(City Approved)2 8 5 12 39 62 46 112 127 135 58
Permits: Issued (Permit
Obtained)3 8 5 12 36 62 43 89 120
125 57
Permits: Final Inspection
Approved4 3 4 9 12 33 46 37 62 101 46
Permits Expired 1 1 1 1
Detached ADUs
(Submitted)5 20 35 52 52 80 80 48 28
Detached ADUs (Issued)5 8 24 41 33 55 64 57 22
Attached ADUs
(Submitted)6 8 20 23 20 56 44 43 31
Attached ADUs (Issued)6 4 11 21 9 34 32 40 26
Junior ADUs (Submitted)7 1 1 1 25 27 31 15
Junior ADUs (Issued)7 1 1 1 9 24 28 9
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Category 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 (Q1-Q2)
Average Application
Processing Time (Days
Including Weekends)8
127 214 118 183 135 197 162 193 187 192
Average Construction
Time (Days Including
Weekends)9
578 751 330 287 173 262 455 431 496 489
City Impact Fees
Collected for New
ADUs10
$451,514 $402,012 $198,962 $44,057 $139,592 $540,453
$487,322 $274,782
ADU Size Smallest 150 SF 159 SF 220 SF 208 SF 178 SF 192 SF 227 SF 165 SF ADU Size Largest 900 SF 900 SF 1,031 SF 1,000 SF 1,218 SF 2,217 SF 1000 SF 1000 SF Average ADU Size 470 SF 469 SF 383 SF 518 SF 550 SF 589 SF 571 SF 517 SF
ADU Location
Relative to
Oregon
Expressway
North 46% 49% 52% 55% 49% 52% 41% 45%
South 54% 51% 48% 45% 51% 48% 59% 55%
Source: City of Palo Alto Accela Data January 2015 through June 2024
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Notes:
1. Any ADU/JADU Application SUBMITTED for the year
2. Any ADU/JADU application Permit 'READY TO Issue' for the year (regardless of when it was submitted)
3. Any ADU/JADU Permit ISSUED for the year (regardless of when it was submitted)
4. Any ADU/JADU Permit receiving a Final Inspection (Ready to Occupy) for the year, regardless of when the application wassubmitted. Years 2015-2017 data point not available.
5. Any Detached ADU Permit Application submitted for the year/Any Detached ADU Permit Issued for the year, regardless of when the application was submitted. Years 2015-2016 data point not available.
6. Any Attached ADU Permit Application submitted for the year/Any Attached ADU Permit Issued for the year, regardless of when the application was submitted. Years 2015-2016 data point not available.
7. Any JADU Permit Application submitted for the year/Any JADU Permit Issued for the year, regardless of when the application was submitted. Years 2015- 2016 data point not available.
8. Average number of days from permit application submittal to when permit is approved and ready to issue. This average includes weekends and days application is pending due to applicant preparation of resubmittal or additional information from applicant.
9. Average number of days from permit issued to final inspection completed. This average includes weekends and days staff is waiting for applicant to schedule the next required inspection; it also includes time related to the construction of a primary residence when the J/ADU is built at the same time.
10. Impact Fees collected for ADU’s permitted for the year. Years 2015-2016 data point not available.
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Attachment A - Q2 2024 ADU Data
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ADU Applications Submitted for CY 2024 (Q1) New Construction Conversion Type of Conversion
# of
apps
Dwelling
Type
Project
Location
Zoning
District
Date
Filed Application Status Attached Detached Attached Detached Garage Other Acc.
Structure/Space
# of
bdrms
ADU
Size
1 ADU North R-1 2/9/24 Incomplete x 1 324
2 ADU North R-1
(10000)
3/19/24 Pending Resubmittal x 2 868
3 JADU North R-1
3/26/24 Pending Resubmittal x x 1 196
4 ADU North R-1
2/20/24 Pending Resubmittal x 1 536
5 ADU North R-1
2/15/24 In Plan Check x x 2 720
6 ADU North R-1
3/13/24 Pending Resubmittal x 2 749
7 ADU North RM-15 1/8/24 Pending Resubmittal x 1 566 8 ADU North R-1 2/1/24 Pending Resubmittal x 1 514 9 ADU North R-1
3/13/24 Pending Resubmittal x x 0 392
10 ADU South R-1 2/7/24 In Plan Check x 2 749 11 ADU South R-1
2/29/24 In Plan Check x 1 750
12 ADU South R-1
3/28/24 Pending Resubmittal x 2 1,000
13 ADU South R-1
2/29/24 Pending Resubmittal x 2 749
14 ADU South R-1
1/12/24 Pending Resubmittal x 1 461
15 ADU South R-1
1/29/24 Permit Issued x 2 750
16 ADU South R-1 3/5/24 Pending Resubmittal x 2 805 17 ADU South R-1 (7000) 1/16/24 Pending Resubmittal x x 1 238 18 ADU South R-1 (8000) 3/20/24 Pending Resubmittal x 1 523 19 ADU South R-1 (8000) 1/2/24 Permit Issued x x 0 485 20 ADU South R-1 (8000) 3/12/24 Pending Resubmittal x 0 608 Item 11
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ADU Applications Submitted for CY 2024 (Q1) New Construction Conversion Type of Conversion
# of
apps
Dwelling
Type
Project
Location
Zoning
District
Date
Filed Application Status Attached Detached Attached Detached Garage Other Acc.
Structure/Space
# of
bdrms
ADU
Size
21 ADU South R-1
3/21/24 Pending Resubmittal x 2 750
22 ADU North RM-15 3/5/24 Submitted x x 0 645
23 ADU South R-1
2/29/24 Pending Resubmittal x x 1 402
24 ADU South R-1 (S)
2/14/24 Pending Resubmittal x x 1 519
25 ADU South R-1 (S) 3/6/24 Pending Resubmittal x 2 750 26 ADU South R-1 2/1/24 Pending Resubmittal x 1 600 27 ADU South RE
3/15/24 Incomplete x x 1 675
28 ADU North R-1
(10000) 3/6/24 Pending Resubmittal x x 1 524
29 ADU North R-1
1/30/24 Pending Resubmittal x x 1 456
30 JADU South R-1
1/11/24 Pending Resubmittal x x 1 478
31 ADU North R-1 2/2/24 Pending Resubmittal x 1 300 32 JADU South R-1
2/13/24 In Plan Check x x 1 357
33 ADU South R-1
2/27/24 In Plan Check x x 1 337
34 JADU South R-1 (8000)
3/27/24 Pending Resubmittal x x 0 280
35 ADU South R-1
3/19/24 Pending Resubmittal x 2 743
36 ADU North R-1
2/10/24 Pending Resubmittal x x 1 412
37 ADU North R-2
3/18/24 In Plan Check x x 1 360
38 JADU North R-1
2/12/24 In Plan Check x 1 493
39 ADU North R-1
3/15/24 Pending Resubmittal x 1 480
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ADU Applications Submitted for CY 2024 (Q2) New Construction Conversion Type of Conversion # of apps Dwelling
Type
Project
Location
Zoning
District Date Filed Application Status Attached Detached Attached Detached Garage Other Acc.
Structure or
Space
# of
bdrms
ADU
Size
40 JADU SOUTH R-1 4/4/24 Pending Resubmittal x x 1 500 41 JADU NORTH R-1 4/12/24 Resubmitted x 1 400 42 JADU NORTH R-1
(10000) 4/24/24 Pending Resubmittal x 1 165
43 JADU SOUTH R-1 5/3/24 Revisions Received x x 1 400 44 JADU SOUTH R-1 5/16/24 Pending Resubmittal x x 1 451 45 JADU SOUTH R-1 5/10/24 Incomplete x x 1 238 46 JADU SOUTH R-1 5/30/24 Pending Resubmittal x 1 476 47 JADU NORTH R-1 6/19/24 Submitted - PC Required x 1 478 48 JADU SOUTH R-1 6/4/24 Pending Resubmittal x 1 500 49 JADU SOUTH R-1 6/13/24 Pending Resubmittal x 1 466 50 ADU SOUTH R-1 6/17/24 Pending Resubmittal x 1 613 51 ADU NORTH R-1 6/4/24 Resubmitted x x 1 456
52 ADU NORTH R-1 6/5/24 Pending Resubmittal x 1 355 53 ADU SOUTH R-1 6/7/24 Pending Resubmittal x 2 749 54 ADU SOUTH R-1 (7000) 6/20/24 Submitted - PC Required x 1 735 55 ADU SOUTH R-1 6/24/24 Submitted - PC Required x 1 798 56 ADU NORTH R-1
(10000) 6/3/24 Pending Resubmittal x 2 800
57 ADU SOUTH R-1 (8000) 5/14/24 Resubmitted x 2 809 58 ADU NORTH R-1 5/23/24 Pending Resubmittal x x 1 553 59 ADU SOUTH R-1 (7000) 5/28/24 Resubmitted x 2 609 Item 11
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ADU Applications Submitted for CY 2024 (Q2) New Construction Conversion Type of Conversion # of apps Dwelling
Type
Project
Location
Zoning
District Date Filed Application Status Attached Detached Attached Detached Garage Other Acc.
Structure or
Space
# of
bdrms
ADU
Size
60 ADU SOUTH R-1 5/30/24 Pending Resubmittal x 2 800 61 ADU NORTH R-1 5/7/24 Pending Resubmittal x x 1 261 62 ADU NORTH R-1 5/9/24 Submitted - PC Required x x 0 340 63 ADU NORTH R-1 4/15/24 Pending Resubmittal x 0 567 64 ADU NORTH R-1 4/16/24 Pending Resubmittal x x 1 275 65 ADU NORTH R-1 4/19/24 Resubmitted x 1 534 66 ADU SOUTH RM-15 4/23/24 Resubmitted x 1 400 67 ADU NORTH R-1 4/5/24 Pending Resubmittal x 1 432 68 ADU NORTH R-1 4/9/24 Revisions Received x 1 534 69 ADU NORTH R-1 4/10/24 Resubmitted x x 2 750 70 ADU SOUTH R-1 4/12/24 Pending Resubmittal x 1 399 71 ADU SOUTH R-1 4/2/24 Resubmitted x 1 766
72 ADU SOUTH R-1 4/3/24 Pending Resubmittal x 1 750 73 ADU SOUTH RM-30 6/13/24 Submitted - PC Required x 1 565 74 ADU NORTH R-1 4/5/24 Pending Resubmittal x 1 432
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City Council
Staff Report
From: City Manager
Report Type: INFORMATION REPORTS
Lead Department: Administrative Services
Meeting Date: September 23, 2024
Report #:2311-2235
TITLE
City of Palo Alto's Energy Risk Management Report for the first half of Fiscal Year 2024 (July 1, 2023-December 31, 2023).
RECOMMENDATION
This is an informational report and no City Council action is required.
EXECUTIVE SUMMARY
Staff continues to purchase electricity and gas in compliance with the City’s Energy Risk Management Policies, Guidelines, and Procedures. This report is based on market prices and load and supply data as of December 31, 2023, the first half of Fiscal Year (FY) 2024.
The projected cost of the City’s fixed-price electricity purchases is $0.2 million lower than the market value of that electricity as of December 31, 2023 for the 12-month period beginning January 1, 2024. During the first half of FY 2024 (July 1, 2023 through December 31, 2023) the City’s credit exposure to fixed price contracts is minimal. The projected Electric Supply Operations Reserve is above the FY 2024 minimum guideline reserve level and the projected gas reserve is within the FY 2024 guideline reserve level range.
There were no exceptions to the Energy Risk Management Policies, Guidelines, or Procedures during this reporting period.
BACKGROUND
The purpose of this report is to inform the Council about the status of the City’s energy portfolio and transactions executed with energy suppliers for the first half of FY 2024. The City’s Energy Risk Management Policy requires that staff report on a semi-annual basis on: 1) the City’s energy portfolio; 2) the City’s credit and market risk profile; 3) portfolio performance; and 4) other key market and risk information. The City’s Energy Risk Management Policy describes the management organization, authority, and processes to monitor, measure, and control market risks. “Market risks” include price and counterparty credit risk. These are risks that the City is exposed to on a regular basis in procuring electric supplies, and to a lesser extent for gas supplies Item 12
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which are purchased at market rates via a monthly index price. The City’s Energy Risk Management function, whose role is to monitor and mitigate these energy market risks, is a part of the Treasury Division of the Administrative Services Department. This semi-annual of FY 2024 Energy Risk Management report contains information on the following:
•Electric Supplies
•Hydroelectricity
•Fixed-Price Forward Electricity Purchases
•Gas Supplies
•Credit Risk
•Electric Forward Mark-to-Market Values
•Electric and Gas Supply Operations Reserves Adequacy
•Exceptions to Energy Risk Management Policies, Guidelines, or Procedures
ANALYSIS
Electric Supplies
In order to serve the City’s electric supply demands, the City obtains electricity from hydroelectric resources (from Western and Calaveras Hydroelectric Projects); long-term renewable energy contracts (from landfill gas converted to electricity, wind, and solar projects); wholesale purchases which are carried out via fixed-priced forward market purchase contracts; and the electric spot market.
Figure 1 below illustrates the projected sources and expected purchases of electricity supplies by month for the 36 months from January 1, 2024 to December 31, 2026, in megawatt-hours (MWh). The negative bars represent sales of excess power on the wholesale market.
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Hydroelectricity
The cost of hydroelectricity received from Western over the 12-month period ending December 31, 2023 is lower than the market value of electricity by $5.7 million. Hydroelectric power from Calaveras was expected to cost $8.4 million (as of December 31, 2023) more than the market value of electricity. Note that Calaveras provides benefits not reflected in the mark- to-market (MTM, defined in the following section) calculation, including, for example, ancillary services (e.g., the ability to regulate energy output when the electric grid needs change), and that much of the above-market costs are related to debt service on the cost of constructing the dam.
This debt is due to be retired in 2032, and retirement will substantially improve the value of the project relative to the market price of electricity.
Fixed-Price Forward Electricity Purchases
The City, as of December 31, 2023, has purchased and sold fixed-priced supplies of electricity for the next 12 months totaling 41,790 MWh with an average price of $87.59 per MWh and totaling 69,280 with an average price of $47.08, respectively. The City contracted for these purchases with one of its approved counterparties: NextEra Energy Resources. The 12-month MTM value of the City’s forward transactions for wholesale power were $0.2 million for calendar year 2024; a positive MTM means that the sales price for these transactions was lower than the market value as of December 31, 2023. The City tracks the mark to market value of its forward contracts to measure the value that would be lost due to a counterparty failing to deliver on its contractual commitments, forcing the City to purchase replacement electricity in the market. The exposure listed above is well within risk management guidelines and presents little risk to the City’s financial outlook.
0 2 0 , 0 0 0
4 0 , 0 0 0
6 0 , 0 0 0
8 0 , 0 0 0
1 0 0 , 0 0 0
1 2 0 , 0 0 0
1 4 0 , 0 0 0
Jan-24
Mar-24
May-24
Jul-24
Sep-24
Nov-24
Jan-25
Mar-25
May-25
Jul-25
Sep-25
Nov-25
Jan-26
Mar-26
May-26
Jul-26
Sep-26
Nov-26
M e g a w a t t H o u r s
F i g u r e 1 - E l e c t r i c B a l a n c e G e o t h e r m a l & W h o l e s a l e
W i n d
W e s t e r n
S o l a r
L a n d f i l l
C a l a v e r a s
T o t a l L o a d
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The figures below represent the electric forward volumes (Figure 2) and MTM positions (Figure 3) for each electric supplier by month of delivery for all forward fixed-price electricity contracts over the 12-month period ending December 31, 2024.
Gas Supplies
In order to serve the City’s natural gas needs, the City purchases gas on the monthly and daily spot markets. The City purchases all of its forecasted gas needs for the month ahead at a price based on the published monthly spot market index price for that month. Within the month, the - 2 0 , 0 0 0
- 1 5 , 0 0 0
- 1 0 , 0 0 0
- 5 , 0 0 0
0 5 , 0 0 0
1 0 , 0 0 0
1 5 , 0 0 0
2 0 , 0 0 0
2 5 , 0 0 0
01/01/24
02/01/24
03/03/24
04/02/24
05/03/24
06/02/24
07/03/24
08/03/24
09/01/24
10/02/24
11/01/24
12/02/24
M e g a w a t t H o u r s
F i g u r e 2 - E l e c t r i c F o r w a r d V o l u m e s e n d i n g a s o f 1 2 / 3 1 / 2 4 N e x t E r a E n e r g y R e s o u r c e s
( 1 , 0 0 0 , 0 0 0 )
( 5 0 0 , 0 0 0 )
-
5 0 0 , 0 0 0
1 , 0 0 0 , 0 0 0
1 , 5 0 0 , 0 0 0
2 , 0 0 0 , 0 0 0
Jan-24
Feb-24
Mar-24
Apr-24
May-24
Jun-24
Jul-24
Aug-24
Sep-24
Oct-24
Nov-24
Dec-24
M T M D o l l a r A m o u n t
F i g u r e 3 - E l e c t r i c M a r k - t o - M a r k e t V a l u e s e n d i n g a s o f 1 2 / 3 1 / 2 4 N e x t E r a E n e r g y R e s o u r c e s
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City’s gas operator buys and sells gas to match the City’s daily needs if the actual daily usage is different from the forecasted daily usage. Those daily transactions are made at an average price based on the published daily spot market index. These costs are passed through directly to customers using a monthly rate adjustment mechanism, leaving the City with little or no price risk or counterparty risk exposure for the gas utility.
Credit Risk
Staff monitors and reports on counterparty credit risk based on the major credit rating agencies (S&P and Moody’s) scores, Ameresco has a 6.93 percent Expected Default Frequency (EDF) which is higher than the recommended EDF level of 0.08%. Staff is continuing to monitor Ameresco’s EDF and will continue to report to City Council in this semi-annual report. Table 1 below shows the EDF values for the City’s renewable energy counterparties. Table 2 below shows the EDF values and credit exposure for the City’s electric suppliers. There is virtually no credit exposure to the City’s gas suppliers since the supplies are purchased on a short-term basis.
Table 1 - Renewable Counterparties Credit Ratings and EDFs as of 12/31/23 Table 2 - Credit Exposure and Expected Default Frequency of Electric Suppliers as of 12/31/23 Electric Forward Mark-to-Market Values
It is important to note that, for contracts with renewable energy companies, Council waived the investment grade credit rating requirement of Section 2.30.340(d) of the Palo Alto Municipal Code, which applies to energy companies that do business with the City. In addition, the City does not pay for renewable energy until it is received, thereby reducing risk.
Current Expected Default Frequency
Moody's (EDF) Implied Rating
Ameresco 6.93% Ca
0.01% Baa3
Source: Moody's CreditEdge website
Avangrid (fomerly Iberdrola)
Renewable Counterparty
Electric Counterparty Costof Transaction Market Value of Transaction Current Expected Default Frequency
Moody's (EDF) Implied Rating
NextEra 2,439,365$ 2,237,891$ 0.042% A3
Totals 2,439,365$ 2,237,891$
(85)$ (201,474)$
(201,474)$ (85)$
Cost vs. Market (MTM) Value
S&P Cr
Expected Loss (MTM x Expected Default Frequency)
A-
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An EDF of 0.08% or below indicate supplier’s current expected default frequency falls within the investment grade range. An EDF above 0.08% indicates the supplier may have financial issues that require monitoring.
Electric and Gas Supply Operations Reserves Adequacy
As shown in Table 3 below, the Electric Supply Operations reserve’s unaudited balance as of December 30, 2023 is $60.6 million, which is $40.7 million above the minimum reserve guideline level. Contributing to this higher reserve are related to a favorable litigation settlement of the Central Valley Project Improvement Act (CVPIA) operated by the U.S. Bureau of Reclamation and an increase in wholesale revenues. The plan is to transfer the excess reserves to other reserves (e.g., Special Projects, CIP, etc.). The audited Gas Operations reserve balance is $9.8 million, which is at the minimum reserve guideline level.
Table 3 - Electric Supply Operations and Gas Operations Reserve Levels for FY 2024 Exceptions to Energy Risk Management Policies, Guidelines, or Procedures There were no exceptions to the Energy Risk Management Policies, Guidelines, or Procedures to report during the semi-annual of FY 2024.
FISCAL/RESOURCE IMPACT
This is an information report; no Council action required.
STAKEHOLDER ENGAGEMENT
ASD staff works internally with the Utilities Department to prepare this report.
ENVIRONMENTAL REVIEW
This Council informational report is not a project under California Environmental Quality Act (CEQA) as defined in CEQA Guidelines, section 15378, because it has no potential for resulting in either a direct or reasonably foreseeable indirect physical change in the environment.
APPROVED BY: Lauren Lai, Director of Administrative Services Fund
Audited Reserve for Operations Balance as of 06/30/2023 ($ Millions) Changes to the Reserves for Operations ($ Millions)
Unaudited Reserve for Operations Balance as of 12/31/23($ Millions) Minimum Guideline Reserve Level ($ Millions)
Maximum Guideline Reserve Level ($ Millions)
Electric $38.88 $21.72 $60.60 $19.90 $39.80
Gas $14.44 ($4.64) $9.80 $9.76 $19.52
FY 2024
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City Council
Supplemental Report
From: Jonathan Lait, Planning and Development Services Director Meeting Date: September 23, 2024
Item Number: 9
Report #:2409-3499
TITLE
REINTRODUCED FIRST READING: Adopt an Ordinance Adding Chapter 18.29 and Amending Chapters 18.14, 18.24, 18.70, and 16.65 in the Palo Alto Municipal Code as well as Amendments to the Zoning District Map, and Rezoning of Parcels Within the NVCAP area (PREVIOUSLY INTRODUCED: August 5, 2024 PASSED 6-1, Kou no)
RECOMMENDATION
Adopt an Ordinance Adding Chapter 18.29 and Amending Chapter 18.14, 18.24, 18.70, and
16.65 in the Palo Alto Municipal Code as well as Amendments to the Zoning District Map, and Rezoning of Parcels within the NVCAP area.
BACKGROUND
Following publication of the staff report for this item, staff identified a clerical error in the ordinance as well as an area of potential confusion. The attached ordinance has been updated to address both of these items.
The clerical error involved Section 5 of the ordinance, which amends Palo Alto Municipal Code (PAMC) Section 18.70.040. A new subsection (d) was added to PAMC 18.70.040, but was not underlined to show that it was a new addition.
The ordinance was also updated to further clarify the rules for nonconforming uses. In Section 2 of the Ordinance, the proposed language for PAMC 18.29.100 was modified to specify that the office uses are only permitted to remain under subsection (a) if they are the most recently established use on the site. For example, a building that had an office tenant in the past, but has since automotive use prior to the effective date of the ordinance would not be entitled to reestablish the office use under PAMC 18.29.100. A similar clarification was also added to PAMC 18.70.040, subsection (d).
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ATTACHMENTS
Attachment A: Ordinance Adding Chapter 18.29 and Amending Chapters 18.14, 18.24, 18.70, and 16.65
APPROVED BY:
Jonathan Lait, Planning and Development Services Director Item 9
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Ordinance No. _____
Ordinance of the Council of the City of Palo Alto Adding Chapter 18.29 (North Ventura (NV) District Regulations) and Amending Chapters 18.14 (Housing Incentives), 18.24 (Contextual Design Criteria and Objective Design Standards), 16.65 (Citywide Affordable Housing Requirements) to Implement the North Ventura Coordinated Area Plan (NVCAP) and 18.70.040 (Nonconforming use – Discontinuance)
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. On November 13, 2017, the City Council for the City of Palo Alto (City) certified a Final Environmental Impact Report (EIR) for the City of Palo Alto 2030 Comprehensive Plan through Resolution No. 9720, made findings in relation to the Final EIR, adopted a mitigation monitoring and report plan (MMRP), and adopted a statement of overriding considerations through Resolution No. 9721 and adopted the City of Palo Alto 2030 Comprehensive Plan through Resolution No. 9722.
B. The City of Palo Alto 2030 Comprehensive Plan Policy L-1.7 and Program L-4.10 calls for the preparation of a plan for the North Ventura and surrounding California Avenue area in order to establish the future of the North Ventura area as a walkable neighborhood with multi-family housing, ground-floor retail, a public park, creek improvements, and an interconnected street grid.
C. On November 6, 2017, the City Council adopted a Resolution No. 9717 to initiate the local planning process for a North Ventura Coordinated Area Plan in accordance with Palo Alto Municipal Code Section 19.10.020.
D. On April 30, 2018, the City Council appointed a total of 14 members of the working group to advise the staff, boards/commissions, and the Council during the preparation of the plan.
E. The City conducted extensive community outreach in multiple languages since the NVCAP process has initiated in November 2017 including 17 meetings of the NVCAP Working Group; several community pop-up events; numerous meeting with stakeholders including school district, commercial property owners and tenants, interest groups in housing and transportation; two community workshops; one meeting of the Architectural Review Board (ARB); two meetings of the Historic Resources Board (HRB); six meetings of the Planning and Transportation Commission (PTC); and seven meetings of the City Council.
F. Pursuant to the provisions and requirements of CEQA and CEQA Guidelines Section 15163, the City as lead agency, prepared a Supplemental Environmental Impact Report to the 2017 Comprehensive Plan Final EIR (SEIR) to analyze the potential environmental impacts resulting from adopting the NVCAP.
G. On May 8, 2024, the PTC held a duly and properly noticed public hearing to consider a draft of the SEIR and the NVCAP, and recommended that the City Council adopt the draft NVCAP.
H. On August 5, 2024, the City Council conducted a duly and properly noticed public hearing to take public testimony, consider the SEIR, reviewed the NVCAP and all pertinent maps, documents and exhibits, including the staff report, and all attachments, and oral and written public comments.
I. On August 5, 2025, the City Council adopted the NVCAP and certified SEIR and other environmental documents associated with the NVCAP.
Item 9
Item 9 Supplemental
Attachment A - Ordinance
Adding Chapter 18.29 and
Amending Chapters
18.14, 18.24, 18.70, and
16.65 Item 9: Staff Report
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J. The City Council now desires to adopt modifications to the Palo Alto Municipal Code to implement the NVCAP.
SECTION 2. Chapter 18.29 (North Ventura (NV) District Regulations) of Title 18 (Zoning) of the Palo Alto Municipal Code is added to read as follows:
CHAPTER 18.29
NORTH VENTURA (NV) DISTRICT REGULATIONS
18.29.010 Purpose
18.29.020 Applicability of Regulations
18.29.030 Zoning Districts
18.29.040 Definitions
18.29.050 Permitted Uses
18.29.060 Development Standards
18.29.070 Parking and Loading
18.29.080 Context-Based Design Criteria and Objective Design Standards
18.29.090 Housing Incentive Programs for NV District
18.29.010 Purpose
The purpose of the North Ventura district is to implement the vision and framework of the North Ventura Coordinated Area Plan (NVCAP) through use regulations and development standards.
18.29.020 Applicability of Regulations
(a) The North Ventura districts shall apply to properties within the NVCAP and designated as North Ventura Coordinated Area Plan within the Palo Alto Comprehensive Plan. Where designated, the regulations set forth in this chapter shall apply in lieu of the comparable provisions established by the underlying zoning district regulations.
(b) Refer to the NVCAP for design guidelines related to streets and buildings in conjunction with the regulations contained within this chapter.
18.29.030 Zoning Districts
The North Ventura districts shall apply to properties designated on the zoning map by the symbol “NV” in front of the zoning district designation.
The following zoning districts are intended to create and maintain sites for residential, commercial and mixed-use sites:
(a) Single Family Residential District (NV-R1)
The NV-R1 single family residential district is intended to create, preserve, and enhance areas suitable for detached dwellings with a strong presence of nature and with open area affording maximum privacy and opportunities for outdoor living and children’s play. Minimum site area requirements are established to create and preserve variety among neighborhoods, to provide adequate open area, and to encourage quality design. Accessory dwelling units, junior accessory dwelling units and accessory structures or Item 9
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Attachment A - Ordinance
Adding Chapter 18.29 and
Amending Chapters
18.14, 18.24, 18.70, and
16.65 Item 9: Staff Report
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buildings are appropriate. Community uses and facilities are allowed to the extent no net loss of housing would result.
(b) Two Family Residential District (NV-R2)
The NV-R2 two-family residential district is intended to allow a second dwelling unit, under the same ownership as the initial dwelling unit, in areas designated for single-family use or NVCAP by the Palo Alto Comprehensive Plan, under regulations that preserve the essential character of single-family use.
Community uses and facilities are allowed to the extent no net loss of housing would result. (c) Medium Density Multiple-Family Residential District (NV-R3) The NV-R3 medium density multiple-family residential district is intended to create, preserve and enhance neighborhoods for multiple-family housing with better transition to lower density residential districts.
Projects at this density are intended for larger parcels that will enable developments to provide their own parking spaces and to meet their open space needs in the form of garden apartments or cluster developments. While there is no maximum density in the NV-R3 residential district, the NVCAP anticipates realistic development yields ranging from 16 to 30 dwelling units per acre based on the applicable development standards.
(d) High Density Multiple-Family Residential District (NV-R4) The NV-R4 high density multiple-family residential district is intended to create, preserve and enhance locations for apartment living at the greater density deemed appropriate for NVCAP. The most suitable locations for this district are along major transportation corridors which are close to mass transportation facilities and major employment and service centers. While there is no maximum density in the NV-R4 residential district, the NVCAP anticipates realistic development yields ranging from 61 to 100 dwelling units per acre based on the applicable development standards. (e) Low Density Mixed-Use District (NV-MXL)
The purpose of the NV-MXL district is to allow for small-scale commercial and services with limited amount of residential that is compatible with the surrounding development. While there is no maximum density in the NV-MXL district, the NVCAP anticipates realistic development yields ranging from three to 17 dwelling units per acre.
(f) Medium Density Mixed-Use District (NV-MXM)
The purpose of the NV-MXM district is to allow for a compatible mix of residential and limited commercial.
While there is no maximum density in the NV-MXM district, the NVCAP anticipates realistic development yields ranging from 31 to 70 dwelling units per acre.
(g) High Density Mixed-Use District (NV-MXH)
The purpose of the NV-MXH district is to allow for a mix of retail, restaurant, entertainment and commercial uses on the ground floor with residential on the upper floors, while maintaining a pedestrian- oriented streetscape. It is intended that the active ground floor retail space required will ensure neighborhood-oriented retail and services are provided within walking distance of high density residential. Ground floor active uses are required along El Camino Real. While no maximum density in the Item 9
Item 9 Supplemental
Attachment A - Ordinance
Adding Chapter 18.29 and
Amending Chapters
18.14, 18.24, 18.70, and
16.65 Item 9: Staff Report
Pg.
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NV-MXH district, the NVCAP anticipates realistic development yields ranging from 61 to 100 dwelling units per acre.
(h) Public Facilities District (NV-PF)
The NV-PF public facilities district is designed to accommodate governmental, public utility, educational, and community service or recreational facilities. Within the North Ventura area, an approximate one-acre portion of the NV-PF district may permit a 100% affordable housing project.
18.29.040 Definitions
For the purposes of this chapter, the following definitions shall apply:
(a) “Street yard” means a yard adjoining a street lot line and may also be a front lot line.
18.29.050 Permitted Uses
(a) The uses of land allowed by this chapter in each zoning district are identified in the following tables.
Land uses that are not listed in the tables are not allowed, except where otherwise noted. Where the last column on the following tables ("Subject to Regulations in") includes a section number, specific regulations in the referenced section also apply to the use; however, provisions in other sections not specifically referenced may apply as well.
TABLE 1: PERMITTED AND CONDITIONALLY PERMITTED USES
P = Permitted Use
CUP = Conditional Use Permit Required
TUP = Temporary Use Permit Required
— = Not Permitted
LAND USE NV-
R1
NV-
R2
NV-
R3
NV-
R4
NV-
MXL
(1)(5)
NV-
MXM
(5)
NV-
MXH
NV-
PF
Subject to
Regulations
In:
ACCESSORY AND SUPPORT USES
Accessory facilities
and activities
customarily
incidental to the
permitted use
P P P P P P P — 18.40
18.10.080
18.12.080
Accessory Dwelling
Unit & Junior
Accessory Dwelling
Unit when
accessory to
primary and
permitted
residential use
P P P P P P P — 18.09
Home Occupations,
when accessory to
P P P P P P P P 18.42
Item 9
Item 9 Supplemental
Attachment A - Ordinance
Adding Chapter 18.29 and
Amending Chapters
18.14, 18.24, 18.70, and
16.65 Item 9: Staff Report
Pg.
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LAND USE NV-
R1
NV-
R2
NV-
R3
NV-
R4
NV-
MXL
(1)(5)
NV-
MXM
(5)
NV-
MXH
NV-
PF
Subject to
Regulations
In:
permitted
residential use
Horticulture,
Gardening, and
Growing of food
products for
consumption by
occupants of a site
P P P P P P P —
EDUCATIONAL, RELIGIOUS, AND ASSEMBLY USES
Private Clubs,
Lodges, or Fraternal
Organizations,
excluding any such
facility operated as
a business for profit
— — — CUP CUP — — —
Private Educational
Facilities
CUP CUP CUP CUP CUP P P —
Religious
Institutions
CUP CUP CUP CUP P P P —
OFFICE USES(2)
Administrative
Office Services
— — — — P P P — 18.29.050(a)
Medical Offices — — — — P P P — 18.29.050(a)
Professional and
General Business
Offices
— — — — P P P — 18.29.050(a)
PUBLIC/QUASI-PUBLIC USES
Community Centers CUP CUP CUP CUP — — — CUP
(3)
Utility Facilities
essential to
provision of utility
services but
excluding
construction or
storage yards,
maintenance
facilities, or
corporation yards.
CUP CUP CUP CUP CUP CUP CUP —
RECREATION USES
Neighborhood
Recreational
Centers
— — CUP CUP — — — CUP
(3)
Item 9
Item 9 Supplemental
Attachment A - Ordinance
Adding Chapter 18.29 and
Amending Chapters
18.14, 18.24, 18.70, and
16.65 Item 9: Staff Report
Pg.
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LAND USE NV-
R1
NV-
R2
NV-
R3
NV-
R4
NV-
MXL
(1)(5)
NV-
MXM
(5)
NV-
MXH
NV-
PF
Subject to
Regulations
In:
Commercial
Recreation
— — — — CUP CUP CUP CUP
(3)
Outdoor Recreation
Services
CUP CUP CUP CUP — CUP CUP CUP
(3)
Youth Clubs — — — — — — — CUP
(3)
RESIDENTIAL USES
Single-Family P P — — — — — —
Two-Family P P — — — — — — 18.42.180
Multiple-Family — — P P P P P P(4)
Residential Care
Homes
P P P P P P P —
RETAIL USES
Eating and Drinking
Services, except
drive-in and take-
out services
— — P P P P P CUP
(3)
18.40.160,
18.29.050(c)
Personal Services
and Retail Services
of a neighborhood-
serving nature
— — P P P P P CUP
(3)
18.40.160,
18.29. 050(c)
Liquor stores — — — — — P P — 18.40.160,
18.29. 050(c)
SERVICE USES
Animal Care,
excluding boarding
and kennels
— — — — P P P — 18.29. 050(c)
Convalescent
Facilities
— — — CUP P P P —
Day Care Centers CUP CUP CUP P P P P — 18.40.160
Large Family Day
Care Homes
P P P P P P P P(3)
Small Family Day
Care Homes
P P P P P P P P(3)
Large Adult Day
Care Homes
CUP CUP P P P P P P(3)
Small Adult Day
Care Homes
P P P P P P P P(3)
Financial Services — — — — P P P — 18.29.050(a)
18.29.060(b)
General Business
Services
— — — — P P P — 18.29. 050(a)
18.29.060(b)
Hotels — — — — — P P — 18.40.160,
18.16.060(d)
Item 9
Item 9 Supplemental
Attachment A - Ordinance
Adding Chapter 18.29 and
Amending Chapters
18.14, 18.24, 18.70, and
16.65 Item 9: Staff Report
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LAND USE NV-
R1
NV-
R2
NV-
R3
NV-
R4
NV-
MXL
(1)(5)
NV-
MXM
(5)
NV-
MXH
NV-
PF
Subject to
Regulations
In:
Personal Services — — — — P P P — 18.40.160,
18.29. 050(c)
18.29.060(b)
AGRICULTURAL AND OPEN SPACE USES
Park uses and uses
incidental to park
operation
— — — — — — — P
All facilities owned
or leased, and
operated or used,
by the City of Palo
Alto, the County of
Santa Clara, the
State of California,
the government of
the United States,
the Palo Alto
Unified School
District, or any
other
governmental
agency, or leased
by any such agency
to another party
— — — — — — — P
Utility Facilities — — — — — — — CUP
TEMPORARY USES
Temporary Uses — — TUP TUP — — — — 18.42.050
Farmer’s Markets — — — — — CUP CUP —
Temporary Parking
Facilities, provided
that such facilities
shall remain no
more than five
years
— — — — — CUP CUP CUP
(3)
Notes:
(1) For NV-MXL zoning district, the total floor area of non-residential uses permitted and conditionally permitted on a lot shall not exceed 5,000 square feet.
(2) For office uses, total floor area of permitted office uses on a lot shall not exceed 5,000 square feet. (3) Provided such use is conducted on property owned by the City of Palo Alto, the County of Santa Clara, the State of California, the government of the United States, the Palo Alto Unified School District, or any other governmental agency, and leased for said uses. (4) Only a 100% Affordable Housing Project is permitted. Development shall follow NV-R4 standards. (5) Ground floor uses shall comply with the ground floor edge framework set forth in NVCAP section
2.3. Item 9
Item 9 Supplemental
Attachment A - Ordinance
Adding Chapter 18.29 and
Amending Chapters
18.14, 18.24, 18.70, and
16.65 Item 9: Staff Report
Pg.
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(a) Office Use Restrictions
(1) Conversion of Ground Floor Housing and Non-Office Commercial to Office Medical, Professional, and Business offices shall not be located on the ground floor, unless any of the following apply to such offices:
(A) Have been continuously in existence in that space since the effective date of this ordinance and as of such date, were neither non-conforming nor in the process of being amortized pursuant to Chapter
18.30(I);
(B) Occupy a space that was not occupied by housing, neighborhood business service, retail services, personal services, eating and drinking services, or automotive service on the effective date of this ordinance or thereafter;
(C) Occupy a space that was vacant on the effective date of this ordinance; or (D) Are located in new or remodeled ground floor area built on or after the effective date of this ordinance if the ground floor area devoted to housing, retail services, eating and drinking services, and personal services does not decrease.
(E) Along El Camino Real, the office use has a consistent flow of in-person customers visiting the business, such as a dentist or medical office.
(2) Size Restrictions on Office Uses in the NV District (A) Total floor area of permitted office uses on a lot shall not exceed 5,000 square feet. (b) Late Night Use and Activities
Late Night Use and Activities requirements established in Section 18.42.040 shall apply to NV zoning districts.
(c) Active Ground Floor Commercial Uses
The NVCAP requires active ground floor uses along the El Camino Real corridor and encourages active ground floor uses on other designated streets. Active uses are activities and functions that promote social engagement, vitality, and interaction within a community. Refer to NVCAP, Section 2.3 for detailed requirements.
(1) Active ground floor commercial uses generally include retail, personal services, neighborhood business service, and eating and drinking establishments. These may also include other active uses such as daycare, building lobbies, spaces accessory to residential uses such as fitness rooms, workspaces, leasing offices, bicycle facilities (Class I) with direct access to the sidewalk. Office uses may be included only to the extent they are permitted in ground floor regulations, are consistent with 18.29.080(a) and have a regular flow of in-person customers.
(2) Ground floor commercial uses are required for properties with frontage along El Camino Real, as shown in the NVCAP Section 2.3 (Ground Floor Edges)
Item 9
Item 9 Supplemental
Attachment A - Ordinance
Adding Chapter 18.29 and
Amending Chapters
18.14, 18.24, 18.70, and
16.65 Item 9: Staff Report
Pg.
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(3) Ground floor commercial uses shall have a minimum floor to ceiling height of 14 feet. (4) Retail or retail-like at the ground floor is required at the intersections of El Camino Real and Olive Avenue, and El Camino Real and Portage Avenue.
(5) 100% affordable housing projects are exempt from providing ground floor commercial uses.
18.29.060 Development Standards
(a) The following tables specify the development standards that shall apply to NV district properties.
Where the last column on the following tables ("Subject to Regulations in") includes a section number, specific regulations in the referenced section also apply to the development standard; however, provisions in other sections may apply as well.
TABLE 1: LOW DENSITY RESIDENTIAL DEVELOPMENT STANDARDS
DEVELOPMENT STANDARD NV-R1 NV-R2 Subject to
Regulations In:
Minimum Setbacks Setback lines imposed by a special
setback map pursuant to Chapter
20.08 of this code may also apply
18.10.050
Street yard (ft) Pepper Ave:
10’ to create a
12’ effective
sidewalk width
(1)
Olive Ave:
10’
Olive Ave:
10’
18.29.020(b)
Height (ft) 35’ 35’
Parking Refer to 18.29.070
Other development standards See regulations
in Chapter 18.12
See regulations
in Chapter 18.10
Notes:
(1) The effective sidewalk width includes the pedestrian clear zone and landscape/furniture zone as described in PAMC 18.24.020.
TABLE 2: MULTI-FAMILY RESIDENTIAL & MUTLI-FAMILY RESIDENTIAL MIXED-USE DEVELOPMENT
STANDARDS
DEVELOPMENT STANDARD NV-R3
NV-R4
Subject to
Regulations
In:
Minimum Site Specifications
Site Area (ft2)
Site Width (ft)
Site Depth (ft)
8,500
70 100
Minimum Setbacks
Street Yard (ft) Park Blvd.: 15’
Ash St: 5’
Park Blvd.: 15’
Olive Ave.: 20’
18.29.020(b)
Item 9
Item 9 Supplemental
Attachment A - Ordinance
Adding Chapter 18.29 and
Amending Chapters
18.14, 18.24, 18.70, and
16.65 Item 9: Staff Report
Pg.
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DEVELOPMENT STANDARD NV-R3
NV-R4
Subject to
Regulations
In:
Acacia Ave: 5’
Portage Ave: 5’
Ash St.: 5’
Page Mill Rd:
sufficient to create a
12’ effective
sidewalk width(2)(3)
Interior Side Yards (ft) 5’ 5’
Interior Rear Yards (ft) 10’ 10’
Build-to-Lines 50% of frontage built to setback(1)
33% of side street built to setback(1)
Maximum Height (ft)
Standard 45’ 65’ 18.29.100
Daylight Plane, for side and rear lot
lines for sites abutting any NV-R1 or
NV-R2 district or abutting a site
containing a single-family or two-
family residential use in a mixed-use
district
10’ initial height
45-degree daylight plane angle
Daylight Plane, for side and rear lot
lines for sites abutting any NV-R3,
NV-R4, Planned Community, or
mixed-use district that does not
contain a single-family or two-family
residential use
Refer to 18.24.050(b)(1)(C)
Maximum Lot Coverage (%)
Base 60 80
Additional area permitted to be
covered by covered patios or
overhangs otherwise in
compliance with all applicable
laws
5 5
Floor Area Ratio (FAR)
Maximum Residential FAR 1.5:1 3.0:1
Maximum Non-residential FAR 0.15:1 0.15:1 18.29.050(c)
Total Mixed-Use FAR 1.5:1 3.0:1
Residential Density (net units per acre)
Maximum units per acre None None
Minimum units per acre 16 61
Minimum Landscape/Open Space
Coverage (%)(4)
30 10
Minimum Usable Open Space (ft2
per unit)
150 150
Minimum Common Open Space (ft2
per unit)
75 75
Item 9
Item 9 Supplemental
Attachment A - Ordinance
Adding Chapter 18.29 and
Amending Chapters
18.14, 18.24, 18.70, and
16.65 Item 9: Staff Report
Pg.
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DEVELOPMENT STANDARD NV-R3
NV-R4
Subject to
Regulations
In:
Minimum Private Open Space (ft2
per unit)
50 50
Landscape Requirements 18.40.130
Parking Refer to 18.29.070
Notes:
(1) 25-foot driveway access permitted regardless of frontage. (2) No parking or loading space, whether required or optional, shall be located in the first 10 feet adjoining the street property line of any required yard. (3) Any minimum front, street side, or interior yard shall be planted and maintained as a landscaped screen excluding areas required for access to the site. A solid wall or fence between 5 and 8 feet in height shall be constructed along any common interior lot line. (4) Landscape coverage may be provided above the ground-floor.
TABLE 3: MIXED-USE DEVELOPMENT STANDARDS
DEVELOPMENT
STANDARD
NV-MXL NV-MXM
NV-MXH
Subject to
Regulations
In:
Minimum Site
Specifications
Site Area (ft2)
Site Width (ft)
Site Depth (ft)
None Required
Minimum Setbacks
Street Yard (ft) Ash St.: 5’
Olive Ave.: 10’
Portage Ave: 0’
Pepper Ave: 10’
El Camino
Real: sufficient
to create a 12’
effective
sidewalk
width(1)(2)
El Camino
Real: sufficient
to create a 12’
effective
sidewalk
width(1)(2)
Pepper: 10’
Olive Ave 10’
Ash St: 5’
Park Blvd: 15’
Lambert Ave:
5’
Portage Ave:
5’
Park Blvd: 15’
El Camino Real:
sufficient to
create a 12’
effective
sidewalk
width(1)(2)
Oregon
Expy/Page Mill
Rd: sufficient to
create a 12’
effective
sidewalk(1)(2)
Lambert Ave: 5’
Acacia Ave: 5’
Portage Ave: 5’
18.29.020(b)
Item 9
Item 9 Supplemental
Attachment A - Ordinance
Adding Chapter 18.29 and
Amending Chapters
18.14, 18.24, 18.70, and
16.65 Item 9: Staff Report
Pg.
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DEVELOPMENT
STANDARD
NV-MXL NV-MXM
NV-MXH
Subject to
Regulations
In:
Acacia Ave: 5’
Build-to-Lines None For properties abutting El Camino
Real:
50% of frontage built to setback(1)
33% of side street built to
setback(1)
Rear Yard (ft) 10’ 10’ for
residential
portion/ none
for commercial
portion
10’ for
residential
portion/ none
for commercial
portion
Rear Yard abutting
residential zone district
(ft)
10’ 10’ 10’
Interior Side Yard (ft) 10’ 5’ 5’
Build-to-lines None Required
Permitted Setback
Encroachments
Refer to Section 18.40.070
Maximum Setback (ft) Not applicable El Camino
Real: 10’
El Camino Real:
10’
Maximum Lot Coverage
(%)
50 100 100
Minimum
Landscape/Open Space
Coverage (%)
20 10 10
Usable Open Space
(Private and/or
Common) (ft2)
150 per unit 18.16.090
Maximum Height (ft) 18.29.100
Standard 35’ 55’ 65’
Ground Floor Height Refer to Section 18.24.060(c)(5)(A) Daylight Plane for lot
lines abutting one or
more residential zoning
districts
Daylight plane height and slope shall be identical to
those of the most restrictive residential zoning district abutting the lot line
Residential Density (net units per acre)
Maximum units per
acre
None Required
Minimum units per
acre
3 31 61
Floor Area Ratio (FAR)
Maximum Residential
FAR
0.5:1 2.0:1 3.0:1
Item 9
Item 9 Supplemental
Attachment A - Ordinance
Adding Chapter 18.29 and
Amending Chapters
18.14, 18.24, 18.70, and
16.65 Item 9: Staff Report
Pg.
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DEVELOPMENT
STANDARD
NV-MXL NV-MXM
NV-MXH
Subject to
Regulations
In:
Maximum Non-
residential FAR(4)
0.25:1 0.25:1 0.25:1 18.29.050(c)
18.29.060(c)
Minimum Mixed-Use
Ground Floor
Commercial FAR
0.15:1 0.15:1 0.15:1 18.29.050(c)
Total Mixed-Use FAR 0.5:1(4) 2.0:1 3.0:1
Parking Refer to 18.29.070
Notes:
(1) No parking or loading space, whether required or optional, shall be located in the first 10 feet adjoining the street property line of any required yard. (2) Any minimum front, street side, or interior yard shall be planted and maintained as a landscaped screen excluding areas required for access to the site. A solid wall or fence between 5 and 8 feet in height shall be constructed along any common interior lot line. (3) The 150-foot measurement may be reduced to 50 feet at minimum, subject to approval by the Planning Director, upon recommendation by the Architectural Review Board pursuant to criteria set forth in Chapter 18.76.
(4) As provided in 18.29.060(c), maximum FAR for hotels shall be 2.0:1. Hotel projects in the NV-MXL zone may reach a Total Mixed-Use FAR of 2.0:1.
(b) Storefront Guidelines
Where active use and retail frontages are required or located within the NV district on the ground floor, the following design standards shall apply:
(1) Exterior windows on the ground floor shall use transparent glazing to the extent feasible. Low-e glass or minimal tinting to achieve sun control is permitted, so long as the glazing appears transparent when viewed from the ground level.
(2) Window coverings are not permitted on the ground floor during typical business hours. Where operations preclude transparency (e.g., theaters) or where privacy requires window coverings, sidewalk- facing frontage shall include items of visual interest including displays of merchandise or artwork; visual access shall be provided to a minimum depth of three (3) feet. (3) No more than 10% of the total street-facing building façade or a maximum of 25 feet in width, whichever is greater, shall be dedicated to mechanical equipment rooms, parking garage entrances, exit stairs, and other facilities necessary for building operation. (c) Hotel Regulations
(1) The purpose of these regulations is to allow floor area for development of hotels more than floor area limitations for other commercial uses, to provide a visitor-serving use that results in an enhanced business climate, increased transient occupancy tax and sales tax revenue, and other community and economic benefits to the city.
(2) Hotels, where they are a permitted use, may develop to a maximum FAR of 2.0:1, subject to the following limitations:
Item 9
Item 9 Supplemental
Attachment A - Ordinance
Adding Chapter 18.29 and
Amending Chapters
18.14, 18.24, 18.70, and
16.65 Item 9: Staff Report
Pg.
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(A) The hotel use must generate transient occupancy tax (TOT) as provided in Chapter 2.33 of the Palo Alto Municipal Code; and
(B) No room stays more than thirty days are permitted, except where the city council approves longer stays through an enforceable agreement with the applicant to provide for compensating revenues. (3) Hotels may include residential condominium use, subject to:
(A) No more than twenty-five percent (25%) of the floor area shall be devoted to condominium use; and
(B) No more than twenty-five percent (25%) of the total number of lodging units shall be devoted to condominium use; and
(C) A minimum FAR of 1.0 shall be provided for the hotel/condominium building(s); and (D) Where residential condominium use is proposed, room stays for other hotel rooms shall not exceed thirty (30) days.
(4) Violation of this chapter is subject to enforcement action for stays more than thirty days not permitted under the provisions of this chapter, in which case each day of room stay more than thirty days shall constitute a separate violation and administrative penalties shall be assessed pursuant to Chapters
1.12 and 1.16.
18.29.070 Parking and Loading
All projects shall comply with the parking and loading standards in PAMC Chapters 18.52 and 18.54, unless a parking reduction is permitted pursuant to state law. If a reduction in automobile parking is permitted under Government Code Section 65863.2, a project will be subject to the requirement to provide electric vehicle spaces and accessible parking spaces that would have otherwise applied to the development if Government Code Section 65863.2 did not apply.
18.29.080 Context-Based Design Criteria and Objective Design Standards In addition to the development standards prescribed in 18.29.050, all Housing Development Projects shall comply with the objective standards outlined in Chapter 18.24, as defined herein. All other developments, and Housing Development Projects that elect to deviate from one or more objective design standards in Chapter 18.24, shall meet the Context Based Design Criteria, as determined by the Director pursuant to the Architectural Review process. In the event of any conflict between the development standards established in this Chapter and those established in Chapter 18.24, the NVCAP standards shall prevail. (a) Multiple Family Context-Based Design Criteria
Refer to Section 18.13.060 for the Context Based Design Criteria. (b) Mixed-Use and Commercial Context-Based Design Criteria Refer to Section 18.16.090 for the Context Based Design Criteria.
18.29.090 Housing Incentive Programs for NV District
Item 9
Item 9 Supplemental
Attachment A - Ordinance
Adding Chapter 18.29 and
Amending Chapters
18.14, 18.24, 18.70, and
16.65 Item 9: Staff Report
Pg.
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(a) Housing development projects in the NV Districts may utilize any Housing Incentive Program or Affordable Housing Incentive Program set forth in Sections 18.14.030 and 18.14.040.
18.29.100 Non-conforming Uses and Non-Complying Facilities (a) Office Use.
(1) Any office use that is the most recently operating use and any office facility established prior to the effective date of this ordinance may remain as legal and non-conforming use and/or non-complying facility.
(2) The legal and non-conforming office use described in subdivision (a)(1) shall be considered abandoned and may be replaced only by a conforming use if it ceases and thereafter remains discontinued for up to 24 consecutive months after the effective date of this ordinance.
(3) A non-conforming office use which is changed to or replaced by a conforming use shall not be reestablished, and any portion of a site or any portion of a building, the use of which changes from a legal non-conforming use to a conforming use, shall not thereafter be used except to accommodate a conforming use.
(4) The legal and non-conforming office use and/or non-complying office facilities shall be permitted to remodel, improve, or replace site improvements on the same site, for continual use and occupancy by the same use, provided such remodeling, improvement, or replacement complies with all of the following:
(A) Shall not result in increased floor area.
(B) Shall not relocate below grade floor area to above grade portions of the building. (C) Shall not result in an increase of the height, length, building envelope, building footprint or any other increase in the size of the improvement. For purposes of this section, “building envelope” shall mean the three-dimensional shape and size occupied by an existing building. It is not the maximum, buildable potential of the site. (D) Shall not increase the degree of noncompliance.
(E) The Director may approve minor changes to the building’s footprint, height, length, and the building envelope through Architectural Review of minor aesthetic architectural improvements and to improve pedestrian-orientation provided there is no increase to the degree of any non-complying feature.
(b) Any other uses or facilities rendered non-conforming or non-complying by this Chapter shall be subject to Chapter 18.70, including the schedules for required termination of non-conforming uses under Section 18.70.070.
18.29.110 Transportation Demand Management Plan
A transportation demand management plan shall be required for all new development projects or any projects that meet the conditions listed in PAMC Section 18.52.030(i).
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Attachment A - Ordinance
Adding Chapter 18.29 and
Amending Chapters
18.14, 18.24, 18.70, and
16.65 Item 9: Staff Report
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SECTION 3. Table 1 of Section 18.14.020 (Housing Element Opportunity Sites) of Chapter
18.14 (Housing Incentives) of Title 18 (Zoning) of the Palo Alto Municipal Code is amended to read as follows (additions underlined):
Table 1
Housing Element Opportunity Site Development Standards
(Residential and Commercial Mixed Use Districts)
Base Zoning
District
Maximum Far(1) Minimum
Landscape
Coverage
Residential Density
(du/ac)(4)
Other
Development
Standards
Residential Total Minimum Maximum
CC(2) 1.5 2.0 (3) 20 See base
district
regulation
s: 18.16.0
60 See base district
regulations:
18.16.060 CC 1.25 1.25 (3) 20
CS (El Camino
Real)
1.25 1.25 (3) 20
CS (Other) 1.25 1.25 (3) 20 See HE
Appendix
D
CN (El Camino
Real)
1.25 1.25 30%(3) 20 See base
district
regulation
s: 18.16.0
60 CN (Other) 1.25 1.25 30%(3) 20 See HE
Appendix
D
CD-C 2.0 2.0 (2) (3) 20 See base
district
regulation
s: 18.18.0
60 See base district
regulations:
18.18.060
CD-N 1.5 1.5 (3) 20 See HE
Appendix
D
RP 1.25 1.25 (3) 25 None; 40
du/ac
anticipate
d
See base district
regulations:
18.20.040
RM-40 1.5 1.5 (3) 31 See base district
regulations: RM-30 1.25 1.25 (3) 20
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Item 9 Supplemental
Attachment A - Ordinance
Adding Chapter 18.29 and
Amending Chapters
18.14, 18.24, 18.70, and
16.65 Item 9: Staff Report
Pg.
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RM-20 1.25 1.25 See 18.13.0
40 20 See HE
Appendix
D
18.13.040
NV-R3 See base district regulations: 18.29.060, except that maximum height shall be 50’, maximum lot coverage shall be 70%, and minimum density shall be 25 du/ac.
Notes:
(1) Nothing in this table increases the non-residential floor area permitted in any district. (2) FAR may be increased with transfer of development rights; see Chapter 18.18 for details. (3) Landscape coverage may be provided above the ground-floor. If standard is not specified, refer to base district regulations.
(4) Where no maximum density is provided in terms of du/ac, maximum density shall be determined by estimating the realistic development capacity of the site based on the objective development standards applicable to the project. Where noted, refer to Housing Element Appendix D: Sites Inventory for specified densities.
SECTION 4. Section 18.24.010 (Purpose and Applicability) of Chapter 18.24 (Contextual Design Criteria and Objective Design Standards) of Title 18 (Zoning) of the Palo Alto Municipal Code is amended to read as follows (additions underlined, and unchanged text omitted by bracketed ellipses):
18.24.010 Purpose and Applicability
(a) Purpose
[. . .]
(b) Applicability of Regulations
These regulations apply to Housing Development Projects (as defined in Gov. Code 65589.5), both new construction and renovations, within the following zones and combining districts:
(1) Chapter 18.12: R-1, for multiple-family uses only (2) Chapter 18.13: RM-20, RM-30, RM-40
(23) Chapter 18.16: CN, CC, CC(2), CS
(34) Chapter 18.18: CD-C, CD-S, CD-N
(45) Chapter 18.20: MOR, ROLM, ROLM(E), RP, RP(5), GM (56) Chapter 18.28: PF
(7) Chapter 18.29: NV-N3, NV-R4, NV-MXM, NV-MXH
(68) Chapter 18.34: PTOD combining district
Housing Development Projects include m Multifamily housing with three or more units ("multiple-family use" as defined in Section 18.04.030), supportive and transitional housing, and residential mixed-use projects with at least two-thirds residential square footage shall meet the objective design standards. (c) Process and Alternative Compliance
Item 9
Item 9 Supplemental
Attachment A - Ordinance
Adding Chapter 18.29 and
Amending Chapters
18.14, 18.24, 18.70, and
16.65 Item 9: Staff Report
Pg.
19 Packet Pg. 321 of 324
*** NOT YET APPROVED ***
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[. . .]
SECTION 5. Section 18.70.040 (Nonconforming use – Discontinuance) of Chapter 18.70 (Nonconforming Uses and Noncomplying Facilities) of Title 18 (Zoning) is amended to read as follows (additions underlined):
18.70.040 Nonconforming use - Discontinuance.
(a) On any site having facilities thereon valued at less than one thousand dollars, any nonconforming use, other than a residential use, which is discontinued or abandoned or otherwise ceases operation and use of the site for a period of six months or longer shall not be resumed, reestablished, or continued, and all subsequent use of such site and facilities thereon shall conform to this title.
(b) On any site not subject to subsection (a), a nonconforming use of facilities designed and constructed for nonresidential purposes which is discontinued or abandoned or otherwise ceases operation and use of the site for a period of one year or more shall not be resumed, and all subsequent use of such site and facilities thereon shall conform to this title. Notwithstanding the foregoing, a nonconforming use within the North Ventura Coordinated Area Plan boundaries may be reestablished unless the use is discontinued or abandoned or otherwise ceases operation and use of the site for a period of two years or more.
(c) Notwithstanding the provisions of Section 18.70.030, or the provisions of subsections (a) and (b) of this section, in any residential district, a nonresidential, nonconforming use occupying facilities originally designed and constructed for residential use which is discontinued or abandoned or otherwise ceases operation and use of the site for a period of ninety days or greater shall not be continued or recommenced, and any subsequent use of the site and facilities shall conform to this title. This provision shall not be construed to prevent a change of ownership or management of such nonconforming use; provided, that any cessation of operation of the use is solely in connection with the transfer of ownership or management to a specifically designated person or entity and is solely for the purpose of accomplishing any transfer of title, equipment, operational control, or similar purpose.
(d) The timeframes provided in this Section apply only when a use is both nonconforming and discontinued or abandoned or otherwise cease operation and use of the site. Only the most recently operating nonconforming use may be reestablished within the timeframes provided in this Section.
SECTION 6. Section 16.65.030 (Basic affordable housing requirement - residential ownership projects) of Chapter 16.65 (Citywide Affordable Housing Requirements) of Title 16 (Building Regulations) is amended to read as follows (additions underlined, and unchanged text omitted by bracketed ellipses):
16.65.030 Basic affordable housing requirement - residential ownership projects.
The provisions of this section shall apply to all residential ownership projects, including the residential ownership portion of any mixed use project containing three or more units, except for any residential ownership project exempt under Section 16.65.025.
(a) Unless an alternative is approved as described in Section 16.65.080, residential ownership projects shall provide the following:
Item 9
Item 9 Supplemental
Attachment A - Ordinance
Adding Chapter 18.29 and
Amending Chapters
18.14, 18.24, 18.70, and
16.65 Item 9: Staff Report
Pg.
20 Packet Pg. 322 of 324
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(1) For projects on sites of less than five acres, fifteen percent of the dwelling units in the project shall be made available at affordable sales price to very low, low, and moderate income households; (2) For projects on sites of five acres or more and all townhome projects in the NV districts, twenty percent of the dwelling units in the project shall be made available at affordable sales price to very low, low, and moderate income households; and
(3) For projects that convert existing rental housing to condominiums, other residential ownership or nonresidential space or that remove existing rental housing, twenty-five percent of the dwelling units in the project shall be made available at affordable sales price to very low, low, and moderate income households.
(4) Calculations of the number of affordable units required by this section shall be based on the number of dwelling units in the residential project, excluding any density bonus units. Projects shall not receive a credit for any existing dwelling units demolished as part of the project. (b) The affordable units shall be made available at the following affordable sales prices:
[. . .]
SECTION 7. Section 16.65.040 (Basic requirement - mixed use, nonresidential and residential rental projects) of Chapter 16.65 (Citywide Affordable Housing Requirements) of Title 16 (Building Regulations) is amended to read as follows (additions underlined; deletions struck-through):
16.65.040 Basic requirement - mixed use, nonresidential and residential rental projects. (a) Unless the mixed use, nonresidential or residential rental project is exempt under Section 16.65.025 or an alternative is approved as described in Section 16.65.080, all mixed use, nonresidential and residential rental projects shall pay housing impact fees as specified in Section 16.65.060 to mitigate the projects' impacts on the need for affordable housing; except:
(1) that theThe residential ownership portion of a mixed use project containing three or more units shall comply with Section 16.65.030.
(2) In the NV districts, residential rental projects, including mixed use projects containing residential rental units, shall provide fifteen percent of the dwelling units in the project at rates affordable to lower income households.
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Item 9
Item 9 Supplemental
Attachment A - Ordinance
Adding Chapter 18.29 and
Amending Chapters
18.14, 18.24, 18.70, and
16.65 Item 9: Staff Report
Pg.
21 Packet Pg. 323 of 324
*** NOT YET APPROVED ***
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SECTION 8. Pipeline Projects. This Ordinance and the NVCAP shall not apply to any project application deemed complete prior to the effective date of this Ordinance. Any project completed pursuant to such application shall be deemed a legal non-conforming structure and/or use, subject to the provisions of Palo Alto Municipal Code Chapter 18.70.
INTRODUCED:
PASSED:
AYES:
NOES:
ABSENT:
ABSTENTIONS:
ATTEST:
____________________________ ____________________________ City Clerk Mayor
APPROVED AS TO FORM: APPROVED AS TO CONTENT:
____________________________ ____________________________ Assistant City Attorney City Manager
____________________________
Director of Planning and
Development Services
Item 9
Item 9 Supplemental
Attachment A - Ordinance
Adding Chapter 18.29 and
Amending Chapters
18.14, 18.24, 18.70, and
16.65 Item 9: Staff Report
Pg.
22 Packet Pg. 324 of 324