(3) Travel related costs should be reimbursed in accordance with Caltrans’ Travel and Expense Claims Guidelines for Consultants.
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EXHIBIT D
INSURANCE REQUIREMENTS
CONSULTANTS TO THE CITY OF PALO ALTO (CITY), AT THEIR SOLE EXPENSE, SHALL FOR THE TERM OF THE
CONTRACT OBTAIN AND MAINTAIN INSURANCE IN THE AMOUNTS FOR THE COVERAGE SPECIFIED BELOW, AFFORDED BY COMPANIES WITH AM BEST’S KEY RATING OF A-:VII, OR HIGHER, LICENSED OR AUTHORIZED TO TRANSACT INSURANCE BUSINESS IN THE STATE OF CALIFORNIA.
AWARD IS CONTINGENT ON COMPLIANCE WITH CITY’S INSURANCE REQUIREMENTS AS SPECIFIED HEREIN.
REQUIRED TYPE OF COVERAGE REQUIREMENT
MINIMUM LIMITS
EACH
OCCURRENCE AGGREGATE
YES
YES
WORKER’S COMPENSATION
EMPLOYER’S LIABILITY
STATUTORY
STATUTORY STATUTORY STATUTORY
YES
GENERAL LIABILITY, INCLUDING
PERSONAL INJURY, BROAD FORM
PROPERTY DAMAGE BLANKET
CONTRACTUAL, AND FIRE LEGAL
LIABILITY
BODILY INJURY
PROPERTY DAMAGE
BODILY INJURY & PROPERTY
DAMAGE COMBINED.
$1,000,000
$1,000,000
$1,000,000
$1,000,000
$1,000,000
$1,000,000
YES
AUTOMOBILE LIABILITY,
INCLUDING ALL OWNED, HIRED,
NON-OWNED
BODILY INJURY
- EACH PERSON
- EACH OCCURRENCE
PROPERTY DAMAGE
BODILY INJURY AND PROPERTY
DAMAGE, COMBINED
$1,000,000
$1,000,000
$1,000,000
$1,000,000
$1,000,000
$1,000,000
$1,000,000
$1,000,000
$1,000,000
$1,000,000
YES
PROFESSIONAL LIABILITY,
INCLUDING, ERRORS AND
OMISSIONS, MALPRACTICE (WHEN
APPLICABLE), AND NEGLIGENT
PERFORMANCE
ALL DAMAGES $1,000,000
YES
THE CITY OF PALO ALTO IS TO BE NAMED AS AN ADDITIONAL INSURED: CONSULTANT, AT ITS SOLE COST
AND EXPENSE, SHALL OBTAIN AND MAINTAIN, IN FULL FORCE AND EFFECT THROUGHOUT THE ENTIRE TERM
OF ANY RESULTANT AGREEMENT, THE INSURANCE COVERAGE HEREIN DESCRIBED, INSURING NOT ONLY CONSULTANT AND ITS SUBCONSULTANTS, IF ANY, BUT ALSO, WITH THE EXCEPTION OF WORKERS’ COMPENSATION, EMPLOYER’S LIABILITY AND PROFESSIONAL INSURANCE, NAMING AS ADDITIONAL INSUREDS CITY, ITS COUNCIL MEMBERS, OFFICERS, AGENTS, AND EMPLOYEES.
I. INSURANCE COVERAGE MUST INCLUDE:
A. A CONTRACTUAL LIABILITY ENDORSEMENT PROVIDING INSURANCE COVERAGE FOR CONSULTANT’S AGREEMENT TO INDEMNIFY CITY.
II. THE CONSULTANT MUST SUBMIT CERTIFICATES(S) OF INSURANCE EVIDENCING REQUIRED COVERAGE AT THE FOLLOWING EMAIL: [email protected]
III. ENDORSEMENT PROVISIONS WITH RESPECT TO THE INSURANCE AFFORDED TO ADDITIONAL INSUREDS:
A. PRIMARY COVERAGE
WITH RESPECT TO CLAIMS ARISING OUT OF THE OPERATIONS OF THE NAMED INSURED,
INSURANCE AS AFFORDED BY THIS POLICY IS PRIMARY AND IS NOT ADDITIONAL TO OR
CONTRIBUTING WITH ANY OTHER INSURANCE CARRIED BY OR FOR THE BENEFIT OF THE ADDITIONAL INSUREDS.
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B. CROSS LIABILITY
THE NAMING OF MORE THAN ONE PERSON, FIRM, OR CORPORATION AS INSUREDS UNDER
THE POLICY SHALL NOT, FOR THAT REASON ALONE, EXTINGUISH ANY RIGHTS OF THE
INSURED AGAINST ANOTHER, BUT THIS ENDORSEMENT, AND THE NAMING OF MULTIPLE
INSUREDS, SHALL NOT INCREASE THE TOTAL LIABILITY OF THE COMPANY UNDER THIS POLICY.
C. NOTICE OF CANCELLATION
1. IF THE POLICY IS CANCELED BEFORE ITS EXPIRATION DATE FOR ANY REASON
OTHER THAN THE NON-PAYMENT OF PREMIUM, THE CONSULTANT SHALL PROVIDE CITY AT LEAST A THIRTY (30) DAY WRITTEN NOTICE BEFORE THE EFFECTIVE DATE OF CANCELLATION.
2. IF THE POLICY IS CANCELED BEFORE ITS EXPIRATION DATE FOR THE NON-PAYMENT OF PREMIUM, THE CONSULTANT SHALL PROVIDE CITY AT LEAST A TEN (10) DAY WRITTEN NOTICE BEFORE THE EFFECTIVE DATE OF CANCELLATION.
EVIDENCE OF INSURANCE AND OTHER RELATED NOTICES ARE REQUIRED TO BE FILED WITH THE CITY OF PALO ALTO SENT TO THE FOLLOWING EMAIL:
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EXHIBIT E
DIR REGISTRATION FOR PUBLIC WORKS CONTRACTS
This Exhibit shall apply only to a contract for public works construction, alteration, demolition, repair or maintenance work, CITY will not accept a bid proposal from or enter into this Agreement with CONSULTANT without proof that CONSULTANT and its listed subcontrac tors are registered with the California Department of Industrial Relations (“DIR”) to perform public work, subject to limited exceptions. City requires CONSULTANT and its listed subcontractors, if any, to comply with all applicable requirements of the California Labor Code including but not limited to Labor Code Sections 1720 through 1861, and all applicable related regulations , including but not limited to Subchapter 3, Title 8 of the California Code of Regulations Section 16000 et seq., as amended from time to time. This Exhibit E applies in addition to the provisions of Section 26 (Prevailing Wages and DIR Registration for Public Works Contracts) of the Agreement.
CITY provides notice to CONSULTANT of the requirements of California Labor Code S ection 1771.1(a), which reads:
“A contractor or subcontractor shall not be qualified to bid on, be listed in a bid proposal, subject to the requirements of Section 4104 of the Public Contract Code, or engage in the performance of any contract for public work, as defined in this chapter, unless currently registered and qualified to perform public work pursuant to Section 1725.5. It is not a violation of this section for an unregistered contractor to submit a bid that is authorized by Section 7029.1 of the Business and Professions Code or Section 10164 or 20103.5 of the Public Contract Code, provided the contractor is registered to perform public work pursuant to Section 1725.5 at the time the contract is awarded.”
This Project is subject to compliance monitoring and enforcement by DIR. All contractors must be registered with DIR per Labor Code Section 1725.5 in order to submit a bid. All subcontractors must also be registered with DIR. No contractor or subcontractor may be awarded a contract for public work on a public works project unless registered with DIR . Additional information regarding public works and prevailing wage requirements is available on the DIR w eb site (see e.g. http://www.dir.ca.gov) as amended from time to time.
CITY gives notice to CONSULTANT and its listed subcontractors that CONSULTANT is required to post all job site notices prescribed by law or regulation.
CONSULTANT shall furnish certified payroll records directly to the Labor Commissioner (DIR) in accordance with Subchapter 3, Title 8 of the California Code of Regulations Section 16461 (8 CCR Section 16461).
CITY requires CONSULTANT and its listed subcontractors to comply with the requirements of Labor Code Section 1776, including but not limited to:
Keep accurate payroll records, showing the name, address, social security number, work classification, straight time and overtime hours worked each day and week, and the actual per diem wages paid to each journeyman, apprentice, worker, or other employee employed by, respectively, CONSULTANT and its listed subcontractors, in connection with the Project.
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The payroll records shall be verified as true and correct and shall be certified and made available for inspection at all reasonable hours at the principal office of CONSULTANT and its listed subcontractors, respectively.
At the request of CITY, acting by its P roject Manager, CONSULTANT and its listed subcontractors shall make the certified payroll records available for inspection or furnished upon request to the CITY Project Manager within ten (10) days of receipt of CITY’s request.
CITY requests CONSULTANT and its listed subcontractors to submit the certified payroll records to CITY’s Project Manager at the end of each week during the Project.
If the certified payroll records are not provided as required within the 10 -day period, then CONSULTANT and its listed subcontractors shall be subject to a penalty of one hundred dollars ($100.00) per calendar day, or portion thereof, for each worker, and CITY shall withhold the sum total of penalties from the progress payment(s) then due and payable to CONSULTANT.
Inform CITY’s Project Manager of the location of CONSULTANT’s and its listed subcontractors’ payroll records (street address, city and county) at the commencement of the Project, and also provide notice to CITY’s Project Manager within five (5) business days of any change of location of those payroll records.
Eight (8) hours labor constitutes a legal day’s work. CONSULTANT shall forfeit as a penalty to CITY, $25.00 for each worker employed in the execution of the Agreement by CONSULTANT or any subcontractor for each calendar day during which such worker is required or permitted to work more than eight (8) hours in any one calendar day or forty (40) hours in any one calendar week in violation of the provisions of the Labor Code, and in particular, Sections 1810 through 1815 thereof, except that work performed by employees of CONSULTANT or any subcontractor in excess of eight (8) hours per day, or forty (40) hours during any one week, shall be permitted upon compensation for all hours worked in excess of eight (8) hours per day, or forty (40) hours per week, at no t less than one and one -half (1&1/2) times the basic rate of pay, as provided in Section 1815.
CONSULTANT shall secure the payment of workers’ compensation to its employees as provided in Labor Code Sections 1860 and 3700 (Labor Code 1861). CONSULTANT shall sign and file with the CITY a statutorily prescribed statement acknowledging its obligation to secure the payment of workers’ compensation to its employees before beginning work (Labor Code 1861).
CONSULTANT shall post job site notices per regulation (Labor Code 1771.4(a)(2)).
CONSULTANT shall comply with the statutory requirements regarding employment of apprentices including without limitation Labor Code Section 1777.5. The statutory provisions will be enforced for penalties for failure to pay prevailing wages and for failure to comply with wage and hour laws.
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City Council
Staff Report
From: City Manager
Report Type: ACTION ITEMS
Lead Department: City Clerk
Meeting Date: October 5, 2026
Report #:2607-6592
TITLE
Approval of FY 2027 Architectural Review Board, Historic Resources Board, Planning and Transportation Commission, and Utilities Advisory Commission Work Plans; CEQA Status – Not a Project
RECOMMENDATION
The Architectural Review Board, Historic Resources Board, Planning and Transportation Commission, and Utilities Advisory Commission recommend approval of their respective Fiscal Year 2027 Work Plans.
BACKGROUND
On November 30, 2020, the City Council adopted the Boards, Commissions and Committees (BCC) Handbook,1 which implemented annual review and approval of BCC work plans. Each BCC is required to prepare an annual work plan for Council’s review and approval. The annual report should include the results of the prior year’s work plan and should consist of up to three priorities. When applicable, the City Council would like to see metrics of community involvement and participation in meetings and activities included in the work plan. Work plans should include if there is an intent to use Ad Hoc committees to assist in the BCC’s work for the year ahead.
Council may refer additional items to the BCC in response to new developments. If the BCC would like to add an issue for review after an annual work plan has been approved, a prompt request by the BCC Chair to the City Council is required and the item will then be addressed by the City Council as a whole.
1 Boards, Commissions, Committees Handbook: https://www.paloalto.gov/files/assets/public/v/5/city-clerk/bcc- handbook.pdf
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At its December 2, 2024 meeting,3 the City Council approved dividing BCC recruitments and work plan approvals into fall and spring cycles. Per the adopted schedule, work plans for the Architectural Review Board, Historic Resources Board, Planning and Transportation Commission, and Utilities Advisory Commission are before the City Council for consideration.
City Council will consider work plans for the remaining BCCs (Human Relations Commission, Public Art Commission, Parks and Recreation Commission, and Storm Water Management Oversight Committee) in the spring.
Representatives from each Board/Commission will be available to discuss these workplans with the City Council in addition to the representative staff liaisons to each of these bodies.
FISCAL/RESOURCE IMPACT
Projects included in commission work plans ultimately require staff time and other City resources to complete. When possible, staff provide input to the commissions during work plan development to ensure the impact on staff time and resources is reasonable given staff workload and other competing priorities.
STAKEHOLDER ENGAGEMENT
Commission work plans are discussed publicly either at regular BCC meetings or retreats.
ENVIRONMENTAL REVIEW
Council action on this item is not a project as defined by CEQA because this is a continuing administrative activity that will not result in direct or indirect physical changes in the environment. CEQA Guidelines section 15378(b)(5).
ATTACHMENTS
Attachment A: 2026-2027 Architectural Review Board Work Plan Attachment B: 2026-2027 Historic Resources Board Work Plan Attachment C: 2026-2027 Planning and Transportation Commission Work Plan Attachment D: 2026-2027 Utilities Advisory Commission Work Plan APPROVED BY:
Mahealani Ah Yun, City Clerk
3 City Council, December 2, 2024; Agenda Item #14; SR # 2409-3480 https://recordsportal.paloalto.gov/WebLink/DocView.aspx?id=83110&dbid=0&repo=PaloAlto&searchid=247938e 8-43ef-425b-b6cc-432d7cc553e0
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Prior Year
Accomplishments See attached summary for more information.
Architectural Review Board
Staff Liaison: Steven Switzer, Senior Planner
Lead Department: Current Planning, Planning and Development Services Division About the Board The Architectural Review Board is composed of five members, at least three of whom are architects, landscape architects, buildi ng designers or other design professionals.
Terms are for three years. See Palo Alto Municipal Code (PAMC) Chapter 2.21. Residency is not required. For the ARB webpage go to bit.ly/paloaltoARB. 2026-2027 Workplan
Mission Statement The Palo Alto Architectural Review Board aims to maintain and enhance the aesthetic of planned, built, and landscaped environme nt of Palo Alto.
Current Commissioners Mousam Adcock (Chair), Yingxi Chen, David Hirsch, Kendra Rosenberg (Vice Chair), Marton Jojarth Item 10
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TIMELINE RESOURCES NEEDED MEASURE OF SUCCESS STATE MANDATED / LOCAL
LAW / COUNCIL-APPROVED
On-Going
Planning staff prepare staff reports,
packets and presentations. They ensure
paper plan sets and material boards are
ready for ARB review. Other departments,
such as, City Attorney, Urban Forestry,
Transportation, etc., may be required from
time to time. Consultants, including CEQA
consultants, may also be required.
Issuance of recommendations on
projects and high-quality architecture
throughout the City.
Yes
COUNCIL-DIRECTED
POLICY UPDATE
N/A
2026-2027 Workplan
This is the Board's main mission and serves to ensure
the City develops high quality projects. This includes
preliminary review early in the planning process.
LOWER PRIORITY
Architectural Review Board
PROJECT/GOAL 1:
BENEFICIAL IMPACTS
Review Planning applications for conformance with ARB Findings and Objective Standards Staff Liaison: Steven Switzer, Senior Planner
Lead Department: Current Planning, Planning and Development Services DivisionPURPOSE STATEMENT:
The Architectural Review Board reviews and makes recommendations to the Planning Director on the building design, site planning, landscape planning, massing and facades, material selection, lighting, signage and other related issues for most major new construction including additions and renovations that alter the exterior building face. The type of buildings reviewed include commercial, industrial, and multiple-family residential. In addition, the ARB is a resource as knowledgeable observers of many varied urban environments, to assist Palo Alto as it develops area plans to accommodate additional housing.
The ARB Scope of Review is fully noted in Title 18 of the Municipal Code, Chapter 18.76 under Section 18.76.020, Chapter 18.77 under Section 18.77.073, and Chapter 18.38.
HIGH PRIORITY
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TIMELINE RESOURCES NEEDED MEASURE OF SUCCESS STATE MANDATED / LOCAL
LAW / COUNCIL-APPROVED
On-Going Staff time. Council Approval Yes
COUNCIL-DIRECTED
POLICY UPDATE
Yes
TIMELINE RESOURCES NEEDED MEASURE OF SUCCESS STATE MANDATED / LOCAL
LAW / COUNCIL-APPROVED
FY 2026-27 with major code and policy milestones
anticipated in calendar year 2026 and 2027
Additional staff at Planning so that the
quality and completeness of the work is
maintained.
Council Approval No COUNCIL-DIRECTED
POLICY UPDATE
Yes
PROJECT/GOAL 3: Assist the City as it considers modifications to Objective Standards; Provide feedback based on research from projects as the y go through the objective standards ministerial processes. Suggest ways to better address different housing typology.
HIGH PRIORITY LOWER PRIORITY
•Design guidance for major growth areas
BENEFICIAL IMPACTS
The ARB has unique feedback to provide as a
stakeholder as they have interest in approving the
aesthetic environment of the City while also
understanding constraints that architects/developers
may come across when implementing standards being
considered
•Housing generation, feasibility and design quality.
•Downtown Housing Plan and SB 79 implementation
•Review and recommend aesthetic standards for Wireless Communication Facilities (WCFs) as part of an ongoing WCF Ordinance update.
PROJECT/GOAL 2:
BENEFICIAL IMPACTS
Provide feedback to staff and Council on the creation of new guidelines, ordinances, and/or streetscapes, as directed by Council Streamline the objective standard review process and
ensure that projects using the streamlined review
process/objective standards conform to the City’s
Comprehensive Plan, Goals and Policies, including its
high-quality design standards
HIGH PRIORITY LOWER PRIORITY
•Modifications to South of Forest Area Coordinated Area Plan (SOFA) subjective development standards with objective standards consistent with Housing Element Program 3.7. •Objective standards for diverse housing types
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TIMELINE RESOURCES NEEDED MEASURE OF SUCCESS STATE MANDATED / LOCAL
LAW / COUNCIL-APPROVED
On-going
Planning staff to help research policies and
programs; coordination with long range
planning section staff.
Increased adherence to Comprehensive
Plan policies YesCOUNCIL-DIRECTED
POLICY UPDATE
Yes
TIMELINE RESOURCES NEEDED MEASURE OF SUCCESS STATE MANDATED / LOCAL
LAW / COUNCIL-APPROVED
On-going Staff time
•Have staff continue to provide updates
in the pending projects attachment on
development proposals.
•The ARB can appoint a representative
to attend Council and PTC and to
provide feedback on reviewed projects.
No
COUNCIL-DIRECTED
POLICY UPDATE
No
Improve Coordination between the Architectural Review Board and other boards, commissions, and Council.PROJECT/GOAL 5:
PROJECT/GOAL 4:
HIGH PRIORITY LOWER PRIORITY
This project would enhance implementation of the City's Comprehensive Plan.
BENEFICIAL IMPACTS
•San Antonio Road Area Plan
•Downtown Housing Plan
•South of Forest Area (SOFA)
•California Avenue
•University Avenue streetscape improvements
Discuss specific Coordinated Area Plans/ streetscape improvements and provide comments that the ARB would recommend exploring/implementing.
BENEFICIAL IMPACTS
Improved coordination between boards/commissions and
council to get feedback from colleagues on other boards.
Provide more coordinated feedback from the City for
developers.
HIGH PRIORITY LOWER PRIORITY
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ARCHITECTURAL REVIEW BOARD ANNUAL REPORT
PRIOR YEAR ACCOMPLISHMENTS FISCAL YEAR 2026
ITEMS OF NOTE
• The ARB provided valuable feedback to assist Council with respect to the San Antionio Road Area Plan, Cubberley Master Plan, and California Avenue Pre-Approved Parklet designs. This work was consistent with Goal 2 and 4 of the 25/26 Work Plan. • The ARB designated board members as representatives to attend Council and Planning and Transportation Commission meeting to provide feedback on reviewed projects. In addition, the ARB selected board members to represent the board with the Urban Land Institute Initiative with Palo Alto, Valley Transportation Authority (VTA), and Stanford related to the Palo Alto Transit Center. This work is consistent with Goal 5 of the 25/26 Work Plan.
• The ARB reviewed around 17 projects, including multi-family housing with below-market units, mixed-use developments, master sign programs, and retail modifications at Stanford Shopping Center aligning with Goal 1 of the 24/25 Work Plan.
APPLICATION REVIEW
The ARB prides itself on its collaborative review process, where board member’s diverse perspectives enhance proposed projects and improve Palo Alto's built environment. Our oversight has made a significant impact, as shown in the renderings section of this report, comparing initial proposals to final designs.
ADDRESS/PROJECT DESCRIPTION
975 Page Mill Road Commercial Office Renovation, Façade modification 180 El Camino Real Tenant improvement (Cedar and Sage Restaurant) 762 San Antonio Road Multifamily residential development 660 University Avenue/511 Byron Street Mixed Use and Housing 2280 El Camino Real Façade
180 El Camino Real Tenant improvement (Ralph Lauren)
250 Hamilton Avenue/1661 Page Mill Road Tier 2 Wireless Modification in Right-of-way 340 Portoga Avenue Signage
2100-2400 Geng Road Builder’s Remedy (145 For Sale Townhomes) 375 Hamilton Avenue Public Parking Garage
3606 El Camino Real Builder’s Remedy (321 Rental units) 3781 El Camino Real Builder’s Remedy (177 Rental units) 4103 Old Trace Road Streamlined Housing Development (Single-Family Residences with ADUs/JADUs; total 16 units)
450 Lytton Avenue (Lot T) Streamlined Housing Development (72 Rental units) 800-808/814 San Antonio Road Planned Home Zoning (174 Rental units) 788 San Antonio Road Planned Home Zoning (167 Rental units) Item 10
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ADDRESS/PROJECT DESCRIPTION
4000 Middlefield Road (Cubberley Community Center) Cubberley Master Plan San Antiono Road Area Plan San Antiono Road Area Plan
Cal Avenue Pre-Approved Parklets Pre-approved parklets for car-free streets
RENDERINGS
Below are renderings of approved projects, showcasing the evolution from their initial proposal to designs with the incorporated ARB feedback. A summary of key design modifications made based on ARB feedback is also provided.
2100-2400 Geng Road
Initial Proposal: Final Design:
Incorporated Feedback:
• Incorporated a third duplex building typology to the project. • Softened contrast of colors for a more muted color palette to align with the Baylands Master Plan.
• Tiered retaining walls and landscaping on Geng Road and entry drive to allow for a more gradual transition to the raised grade of the site.
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3606 El Camino Real
Initial Proposal: Final Design:
Incorporated Feedback:
• Continued the fin design motif to both building corners • Included an accentuated massing break along El Camino Real and more inset balconies. • Enhanced landscaping on the south side to transition the building into the lower density development of the Barron Park neighborhood. • Revised podium level courtyards with improved access and circulation.
3781 El Camino Real
Initial Proposal: Final Design:
Incorporated Feedback:
• Expanded the podium level patios to maximize usable outdoor space and strengthened the connection between the building and the street. • Improved bike circulation with direct connections to the parking garage and relocated trash staging to avoid right-of-way conflicts. • Redesigned garage entry to better screen the two levels of parking from Curtner Avenue.
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Prior Year
Accomplishments
• Reviewed nine (9) applications including historic category upgrades, rehabilitation projects, accessibility upgrades, adaptive reuse, and transfer of development right projects.
• Created the City’s first Historic Preservation Awards program that will occur every 5 years. The HRB reviewed over 100 projects in the past 10 years and selected 10 award winners aligning with FY 25/26 work plan goal #5. This initiative aligns with Comprehensive Plan Program L 7.6, which promotes awards programs and other forms of public recognition for exemplary Historic Preservation projects. • Reviewed the Certified Local Government annual report and continued implementation of the City’s historic preservation program. •An Ad Hoc Committee prepared a list of additional preservation incentives for Council consideration, including establishing a Mills Act Pilot Program, digital preservation through photography and 3D scanning, and the relocation of structures.
Historic Resources Board
Staff Liaison: Steven Switzer, Senior Planner
Lead Department: Planning and Development Services
About the Commission
The City is a Certified Local Government (CLG) responsible for historic preservation - to identify, evaluate, register, and preserve historic properties within its jurisdictions and promote the integration of local preservation interests and concerns into local planning and decision-making processes. Staff prepares an annual report of the activities of the Certified Local Government each spring for the prior year and submits these to the State Office of Historic Preservation. This HRB Work Plan covers July 2026 - July 2027. The HRB consists of five members with terms for 3 years and are staggered per PAMC Section 2.27.020. For the HRB Webpage: https://www.cityofpaloalto.org/City- Hall/Boards-Commissions/Historic-Resources-Board.
2026-2027 Workplan
Mission Statement
Per Palo Alto Municipal Code Chapter 2.27 Historic Resources Board, Section 2.27.040 Duties, HRB purview is:
(a) Render advice and guidance to a property owner upon the owner's application for alteration of any historic single-family or duplex building in the downtown area and any such building designated as significant elsewhere in the city (b) Inform the ARB of the historical and/or architectural significance of historic commercial and multiple-family structures in the downtown area and any such buildings designated as significant elsewhere in the City that are under review by the ARB. Submit recommendations to the ARB regarding proposed exterior alterations of such historic structures
(c) Recommend to the Council the designation of additional buildings and districts as historic. Research available information and add historical information to the inventory sheets of historic structures/sites. This inventory is maintained in the department of planning and development services. (d) Perform such other functions as may be delegated from time to time to the HRB by the City Council.
Current Commissioners Alisa Eagleston-Cieslewicz, Geddes Ulinskas, Caroline Willis (Vice Chair), Samantha Rohman(Chair), Item 10
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TIMELINE RESOURCES NEEDED MEASURE OF SUCCESS STATE MANDATED / LOCAL
LAW / COUNCIL-APPROVED
Ongoing
Planning staff prepare staff reports,
packets and presentations. Other
departments, such as the City Attorney,
Urban Forestry, etc., may be required from
time to time. Consultants, including CEQA
consultants, may also be required.
Issuance of recommendations on
projects and protection of historic
resoruces throughout the City.
Yes
COUNCIL-DIRECTED
POLICY UPDATE
Yes
Historic Resources Board
Staff Liaison: Steven Switzer, Senior Planner
Lead Department: Planning and Development Services
PURPOSE STATEMENT:
The Board Commission's goals and purposes (purview) are set in Palo Alto Municipal Code Chapter 2.27 Historic Resources Board, Section 2.27.040 Duties. These duties include reviewing alterations to historic resources and providing recommendations on nominations to the l ocal historic resources inventory. The City's historic program includes the implementation of Comprehensive Plan policies on an ongoing basis including Policy L7.2 (preparation of historic evaluations to determine eligibility for the California Register of Historical Resources and associated tracking), Policy L7.1.1 (recommend eligible resources to the local inventory), and Policy L7.1.2: Reassess Historic Preservation Ordinance. 2026-2027 Workplan
Review Planning applications for conformance with Secretary of the Interior Standards for the Treatment of Historic Structures.
Protects and preserves the City’s historic
and architectural resources, strengthening
community identity, character, and cultural
and aesthetic value for current and future
generations.
HIGH PRIORITY LOWER PRIORITY
BENEFICIAL IMPACTS
PROJECT/GOAL 1:
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TIMELINE RESOURCES NEEDED MEASURE OF SUCCESS STATE MANDATED / LOCAL
LAW / COUNCIL-APPROVED
Subject to Council direction.
City Council direction and accommodation
in the PDS department workplan would be
needed. HRB subcommittee and staff of
planning and city attorney departments to
prepare draft amendments for Council
review and adoption
Well-written ordinance language that
assists the public's understanding and
calms the fears of property owners
about governmental overreach
Council may provide
direction to modify
PAMC 16.49; CLG
cities maintain historic
preservation
ordinances.
COUNCIL-DIRECTED
POLICY UPDATE
Council may provide
direction to modify
PAMC 16.49; CLG
cities maintain historic
preservation
ordinances
TIMELINE RESOURCES NEEDED MEASURE OF SUCCESS
STATE MANDATED / LOCAL
LAW / COUNCIL-APPROVED
To begin in the first quarter and continue
throughout the duration of the 26/27 work
plan cycle
Staff of PDS would be tasked as well as an
HRB ad hoc committee to make progress.
Website contains links to information
resources and videos, to assist property
owners, staff, and others.
N/A
COUNCIL-DIRECTED
POLICY UPDATE
N/A
PROJECT/GOAL 2:
BENEFICIAL IMPACTS
PROJECT/GOAL 3:
BENEFICIAL IMPACTS
Limited modification to PAMC 16.49, historic preservation, providing clarifications regarding the HRB’s role. The HRB could discuss language providing clarifications of its role with respect to three potential topics: (a) the nomination process, (b) the effect of HRB recommendations regarding exterior modifications to residential historic resources, and (c) category changes (upgrades, downgrades, removals) Education and Creating New User-Friendly Resources/Communication Regarding Historic Preservation. (a) find new ways to promote preservation, including use of the existing zoning code incentives and State historic building code (b) improve upon communicat ion types to provide the community accessible information, including the use of videos (linked to the City’s and State’s webpages) to help property owners understand the local and State preservation incentives and codes, (c) continue to provide updates to the historic review process bulletin as needed to communicate CEQA requirements related to PAMC 16.49 and listed historic resources, and (d) enable the HRB staff liaison(s), the City’s historic preservation consultant, and Chief Building Official to implement training providing an ongoing opportunity for HRB members, staff, and the community to gain working knowledge as to the use of the State’s historic building code
LOWER PRIORITY
Lower priority: Goal item (c) - listed historic resources placed on the City's inventory in the late 1970s and 1980s have not been reviewed to determine whether any modifications reduce critical aspects of integrity and drop or lower the properties' local historic resource category.
The benefits are providing clarification of the
HRB's role for the public
The benefits would be to improve
preservation in Palo Alto and clarity for
owners of historic properties.
Item (a) a table of existing zoning code incentives and another table of historic building code provisions and Item (b) improvements to types of communications used to promote historic preservation.
HIGH PRIORITY
HIGH PRIORITY
Priority is high to enable greater understanding of the HRB's role and address property owners' concerns with respect to Goal items (a) and (b)
LOWER PRIORITY
Items (c) and (d)
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TIMELINE RESOURCES NEEDED MEASURE OF SUCCESS STATE MANDATED / LOCAL
LAW / COUNCIL-APPROVED
Continuing efforts from last 25/26 FY
workplan targetting completion in the
second quarter
Staff of PDS would be tasked as well as an
HRB ad hoc committee to make progress.
Website contains links to updated
Inventory List, to assist property owners,
staff, and others.
No
COUNCIL-DIRECTED
POLICY UPDATE
No
TIMELINE RESOURCES NEEDED MEASURE OF SUCCESS STATE MANDATED / LOCAL
LAW / COUNCIL-APPROVED
On-going throughout FY 26/27
PDS staff and CAO staff. City Council
direction and accommodation in the PDS
department workplan would be needed.
More historic properties are preserved
for future enjoyment of the owners and
community, due to the additional
incentives.
Yes
COUNCIL-DIRECTED
POLICY UPDATE
N/A
Properties that have been demolished remove from local inventory Providing the public with updated
information
HIGH PRIORITY LOWER PRIORITY
PROJECT/GOAL 4:
Properties that have lost integrity over time that may need a category change Prepare an updated Local Inventory Resource list that incorporates the recently designated properties from the 2023 Historic Reconnaissance Survey efforts, Category Upgrades, and removal of properties that have been demolished.
BENEFICIAL IMPACTS
PROJECT/GOAL 5:
Additional preservation incentives (a) discuss and recommend additional zoning code incentives to continue the community engagement process that began with the 2023 reconnaissance survey inventory update; (b) represent the HRB’s interests during public hearings, or participate in joint meetings with the Planning and Transportation Commission and City Council, to review any proposed zoning code modifications incentivizing historic preservation incentives; (c) outreach to the community after adoption of any adopted new incentives.
Benefit will be for all property owners who do
not currently see any benefit to listing their
property on the City's historic inventory
HIGH PRIORITY LOWER PRIORITY
• Review the Floor Area Bonus and Transfer of Development Rights (TDRs) incentives for historic resources.
• Expand incentives to other Category 1 and 2 historic resources such as the text amendment for TDRs at 51 Encina Avenue.
• Identify code barriers to rehabilitation, seismic upgrades, accessibility, and adaptive reuse.
• Develop guidance tools for property owners and applicants. • Evaluate additional financial incentives, including potential Mills Act or similar tools. • Conduct outreach on preservation incentives and adaptive-reuse opportunities.
BENEFICIAL IMPACTS
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Historic Resources Board
Work Plan
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2026 HISTORIC RESOURCES BOARD AWARDS
For the inaugural Historic Resources Board (HRB) Awards Program, the HRB reviewed 159 preservaƟon projects completed over the past 10 years and selected nine award recipients, including a Board's Choice Award recognizing a block in Professorville for its collecƟve preservaƟon efforts and a special award honoring all residenƟal properƟes that voluntarily completed seismic retrofits during the past decade. CreaƟon of this award program implements Comprehensive Plan Program L7.6, which encourages awards programs and other forms of public recogniƟon for exemplary historic preservaƟon projects. 215 Fulton Avenue| ResidenƟal PreservaƟon 501 Kingsley Avenue | Residen Ɵal RehabilitaƟon Listed Category 3 Resource. Work idenƟfied
from a 2016 permit including porch repair,
reroof, and window replacement. This is one
of three remaining Mission Revival Houses
built in the city from 1908-1909.
Listed Category 2 Resource built in 1897.
Work idenƟfied from a 2022 permit including
the removal of non historic addiƟons from
the 1970s (Solarium) and restoraƟon of the
Colonial Revival residence.
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2026 HISTORIC RESOURCES BOARD AWARDS
1100 Block of Ramona Street Professorville Historic District | Board Choice Award As one of Palo Alto's oldest residenƟal neighborhoods, the Professorville Historic District reflects the unique background of the city’s origins and its early Ɵes to the founding of Stanford. CollecƟvely the homes on the 1100 Block of Ramona Street retain a high degree of historic integrity and conƟnue to exemplify the cohesive character and architectural significance of the Professorville historic district.
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2026 HISTORIC RESOURCES BOARD AWARDS
2510 Waverley Street | ResidenƟal RehabilitaƟon 1143 Bryant Street | ResidenƟal RestoraƟon Listed Category 2 Resource built in 1937. Early
California style adobe style. Work idenƟfied from a
2022 permit including window and door
replacements and parƟal reroof with interior
modificaƟons.
Located in the Professorville Historic District.
Work idenƟfied from a 2016 permit following
a fire that destroyed the residence’s interior.
Work included restoraƟon of the basement,
first, and second floors.
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2026 HISTORIC RESOURCES BOARD AWARDS
900 High Street (Peninsula Creamery) |
Commercial PreservaƟon
165 Channing Avenue (Watercourse Way) |
Commercial RehabilitaƟon
Listed Category 2 resource and a family-owned
business over 100 years old. Founded in 1923. Work
idenƟfied from a 2021 permit for voluntary
accessibility upgrades.
Listed Category 4 resource built in 1931. Work
idenƟfied from a 2019 permit for voluntary
accessibility upgrades
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2026 HISTORIC RESOURCES BOARD AWARDS
450 Bryant Street (Avenidas) | Commercial AdapƟve
Re-Use
Voluntary Seismic Retrofits | ResidenƟal
RehabilitaƟon
Over the past 10 years, 14 residenƟal properƟes have
voluntarily completed seismic retrofits.
Listed Category 2 resource built in 1927. Originally
designed by Birge Clark as the Palo Alto Fire and
Polica StaƟon. The work idenƟfied here is from a
2016 permit for modificaƟons to accommodate the
proposed Senior CiƟzen Center use.
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Planning and Transportation Commission (PTC)
2026-27 Work Plan Date Re commended by PTC August 12 , 202 6 Staff Liaison: Jennifer Armer, Assistant Director, Planning and Development Services (PDS) Lead Department: Planning and Development Services (PDS); Office of Transportation (OOT)
About the Commission The seven-member Planning & Transportation Commission adopted its 2025-26 work plan on July 8, 2026. The members and chairs are listed below. Members serve 4-year terms. See Planning & Transportation Commission (PTC) webpage link: http://www.paloalto.gov/gov/boards/ptc/default.asp Current Commissioners • Allen Akin
• Bryna Chang (Chair)
• Bart Hechtman
• Todd James
• Kevin Ji (Vice Chair)
• Cari Templeton
Mission Statement The Planning & Transportation Commission advises the City Council, Planning Director, and Chief Transportation Official on land use and transportation matters, including the Comprehensive Plan, zoning, transportation programs, and related matters. The Commission's primary responsibilities include:
• Preparing and making recommendations to the City Council on the City's Comprehensive Plan and applying the Comprehensive Plan to proposed development, public facilities, and transportation in Palo Alto; • Considering and making recommendations to the City Council on zoning map and zoning ordinance changes; any changes to Title 18 of the Palo Alto Municipal Code must be reviewed by the PTC and the City Council; • Reviewing and making recommendations to the City Council on subdivisions and Site and Design Reviews, on appeals on variances and use permits;
• Considering other policies and programs affecting development and land use in Palo Alto for final City Council action;
• Reviewing and making recommendations on individual projects as described in the Municipal Code, and Open Space development;
• Reviewing and making recommendations to the City Council on transportation, parking, and other related mobility issues; and
• Ensuring robust community engagement and dialogue regarding planning, land use, and transportation; and providing recommendations to the City Council regarding these matters and incorporating the public discussion. The PTC hearings provide a forum for public comment and public interaction.
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Prior Year Work Plan On February 2, 2026, the City Council accepted the July 9, 2025, PTC recommended 2025-26 Work Plan:
https://www.paloalto.gov/files/assets/public/v/1/planning-amp-development-services/ptc/council-approved-ptc- 2025-26-work-plan.pdf
Prior Year
Accomplishments
During the period of the PTC 2025-26 Work Plan:
• The PTC's transportation efforts included study sessions and/or recommendations on: Bicycle and Pedestrian Transportation Plan Update; Crescent Park Traffic Calming; South Palo Alto Bike/Ped Connectivity; SamTrans Grand Boulevard Initiative; and Palo Alto Link.
• The PTC's work on implementing the Comprehensive Plan, Housing Element, and Council Priorities included study sessions and/or recommendations on: Cubberley Conceptual Master Plan; Retail Code Amendments; Stream Corridor Protections; Bird Friendly Design Ordinance; Annual Review of Comprehensive Plan and Housing Element progress report; Housing Element Implementation including Program 6.5; Prohousing Designation application review; San Antonio Road Area Plan; Code Amendments for Special Setback, De Minimis Exceptions, and the “Shrink Wrap Rule”; and ADU regulations. • The PTC's work on development projects included review and recommendations on four Tentative Maps; two Conditional Use Permits; two Site and Design applications; a Planned Community (PC) amendment; and three Planned Home Zone (PHZ) applications.
PROJECT/GOAL 1: Area Planning: This goal carries forward the prior year goal for neighborhood planning approaches and overall effectiveness of various approaches to neighborhood planning including both land use and mobility. The staff and PTC will consider new neighborhoods that result from the 6th cycle Housing Element sites and demand for public facilities/services. This goal includes continued work on both the Downtown Housing Plan and the San Antonio Road Area Plan.
Beneficial Impacts Timeline Resources Needed Measure Of Success State Mandated/ Local Law/ Council
Approved
Development policy
recommendations and
preferred alternatives for the
new area plans enable City
Council to provide direction to
guide the City's future
development.
By June 2027 Staff time to research and
prepare staff reports and
conduct project coordination.
Consultant budgets have
already been allocated.
Successful conversation and
recommendations of policies
and preferred alternatives to
City Council, and initiation of
environmental review.
Yes – Council
assigned.
High Priority Lower Priority Council-Directed
Policy Update
Council directed work toward future area plans. N/A Yes
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PROJECT/GOAL 2: Housing Program Implementation: The Housing Element was adopted by City Council on April 15, 2024, and certified by California Department of Housing and Community Development (HCD) on August 20, 2024. PTC will continue work on Housing Element implementation programs as scheduled within the Housing Element.
Beneficial Impacts Timeline Resources Needed Measure Of Success State Mandated/ Local Law/ Council
Approved
Complying with the
requirements of the adopted
Housing Element to encourage
housing development and
comply with State Law.
PTC and Council review of
a number of programs will
proceed over the work
plan year, as required by
the Housing Element.
Staff and consultant
resources employed.
Implementation of programs
by target dates.
Yes - State Mandated
High Priority Lower Priority Council-Directed
Policy Update
Program 3.9 (incentivizing multi-family as an alternative to commercial development); Program 4.2 (short term rentals); Program 6.3 (SB 9 unit standards); and Program 6.5
(supporting innovative housing types).
SOFA objective standards Yes
PROJECT/GOAL 3: State Law Implementation – Laws with Prior Effective Dates and any new 2026 Laws to Become Effective in 2027: The State adopts new laws every year, some like Senate Bill (SB) 79, required quick action through an interim ordinance during the last fiscal year, that will then require consideration and recommendation from PTC of a permanent ordinance, others will require modifications to maintain consistency with State law and Housing Element goals.
Beneficial Impacts Timeline Resources Needed Measure Of Success State Mandated/ Local Law/ Council
Approved
Provide clarity to property
owners and potential
developers.
Ordinance
Recommendation during
2026-27 work plan term.
Staff and consultant
assistance.
Adoption of ordinance
amendments.
Yes - State
High Priority Lower Priority Council-Directed
Policy Update
Implementing State laws and discuss policy considerations. N/A Possibly
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PROJECT/GOAL 4: Parking Programs: The PTC will receive periodic updates regarding options for improving the City’s parking programs. Updates may include parking program activities, recent parking data, and upcoming parking policy efforts and program changes.
Beneficial Impacts Timeline Resources Needed Measure Of Success State Mandated/ Local Law/ Council
Approved
Improved parking operations. Ongoing. Staff resources. Feedback from PTC and continued engagement from
the public.
Yes
High Priority Lower Priority Council-Directed
Policy Update
The staff work behind the project continues; proposed
updates help advance the work. Additionally, the PTC
welcomes opportunities to engage w/the public on this
topic.
This project represents a large body of ongoing work to manage parking supply and parking policy.
Yes
PROJECT/GOAL 5: Comprehensive Plan Policy Implementation: This includes changes in Title 18 and other Comp Plan policies that lead to Title 18 revisions.
Beneficial Impacts Timeline Resources Needed Measure Of Success State Mandated/ Local Law/ Council
Approved
Comprehensive Plan policies
and programs to completion.
As directed by Council. Staff and consultant
assistance – particularly
when staff resources will be
focused on implementation of
the Housing Element.
Adopted ordinances to amend
Title 18.
No
High Priority Lower Priority Council-Directed
Policy Update
N/A N/A Yes – Comprehensive
Plan
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PROJECT/GOAL 6: Title 18 Updates: Considering and making recommendations to the City Council on any changes to Title 18 of the Palo Alto Municipal Code as directed by City Council, for example updates to the City’s Wireless Communications Facilities Ordinance.
Beneficial Impacts Timeline Resources Needed Measure Of Success State Mandated/ Local Law/ Council
Approved
Development of code
recommendations to support
City Council updates.
As directed by Council. Staff and consultant
resources would be identified
based on specific projects.
Wireless Ordinance update is
currently unresourced.
Adopted ordinances to amend
Title 18.
No
High Priority Lower Priority Council-Directed
Policy Update
N/A N/A Yes
PROJECT/GOAL 7: Project Review: The PTC will provide review as part of their regular ongoing responsibility for recommendations to City Council and staff on quasi-judicial development projects and transportation projects.
Beneficial Impacts Timeline Resources Needed Measure Of Success State Mandated/ Local Law/ Council
Approved
Public review of planning and
transportation projects.
Ongoing. Staff resources. Feedback from PTC and
continued engagement from
the public.
Yes
High Priority Lower Priority Council-Directed
Policy Update
N/A N/A Yes
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PROJECT/GOAL 8: Comprehensive Plan Updates: The PTC will advise on updates of the Comprehensive Plan. This may include updates to individual Elements as required by State law and/or small updates that have been surfaced by the PTC.
Beneficial Impacts Timeline Resources Needed Measure Of Success State Mandated/ Local Law/ Council
Approved
Improved consistency between
the Comprehensive Plan and
current City priorities, like
reducing fire risk in the urban
wildland interface.
As directed by Council. Staff and consultant
resources would be identified
based on specific updates.
These are currently
unresourced.
Determine extent to which
plan needs to be updated,
timeline, and activities for
completion.
Yes
High Priority Lower Priority Council-Directed
Policy Update
Safety Element Natural Environment Element, Initiate Comprehensive Plan Update
Yes
PROJECT/GOAL 9: Improve PTC Processes and Scope: Investigate and implement improvements in PTC processes, including but not limited to technology use and communication with Council, other boards, staff, and the public.
Beneficial Impacts Timeline Resources Needed Measure Of Success State Mandated/ Local Law/ Council
Approved
Faster applicant progress
through PTC reviews, reduced
load on Council and staff.
As directed by Council. Staff resources and budget
would be identified based on
specific efforts. These are
currently unresourced.
Reduction in average amount
of time per project review or
agenda item, in total over PTC
and Council (for items
involving PTC).
No
High Priority Lower Priority Council-Directed
Policy Update
N/A N/A No
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Utility Advisory Commission Annual Workplan - FY 2027
City Council Priorities 2026:
UAC Purpose & Duties:
The purpose of the utilities advisory commission shall be to advise the city council on present and prospective
long-range planning and policy and major program and
project matters relating to the electric utility, gas utility, water utility, wastewater collection utility, fiber optics utility and recycled water matters, excluding daily
operations.
See PAMC UAC Purpose & Duties 2.23.050
Item # UAC Workplan FY 2027 Objectives – By Category
Referred by City Council
4 Review and advise on reserve policies changes informed by the Baker Tilly Utility Reserve Assessment that balance the need to be attractive to private markets and rates that are affordable to residents and competitive to businesses, for inclusion in the FY 2028 rate setting. (PAMC 2.23.050.(b).(4)) 13 Review materials that inform upcoming action items on the BAWSCA agenda regarding SFPUC water policies and provide advice to Council on a policy stance toward BAWSCA and SFPUC. (PAMC 2.23.050.(b).(1).(B)) Affecting Multiple Utilities
2 Review and recommend reliability, resiliency, emergency response, and preparedness metrics and goals related to the local supplies and distribution of water and power. (PAMC 2.23.050.(b).(2)) 5 Recommend FY 2028 and five-year capital improvement program, timing of the projects, pace of infrastructure replacements, and use of financing mechanisms vs pay-go to ensure affordability across the five-year rate projections and financial plans with a special focus on the electric and wastewater utilities. (PAMC
2.23.050.(b).(4))
3 Review and recommend to City Council FY 2028 rate changes to Water (including advise on a new Cost of Service Study), Gas, Electric, Wastewater Collection, Recycled Water, and Fiber Optic Services with priority on affordability. (PAMC 2.23.050.(b).(4))
Electric Utility
15 Electric Utility Business Strategy: Develop a flexible scenario-based business strategy that incorporates impacts on CPAU of increased and highly uncertain demand from data centers and other loads, both within CPAU territory and throughout CAISO.
7 Develop policies and fee and rate structures specifically for large electric load growth including but not limited to a financial charge for the reservation of electric system capacity, expansion of the large non-residential electric rate (E-7) or new rate structure for large commercial loads within Palo Alto. (PAMC 2.23.050.(b).(1) and
2.23.050.(b).(4))
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8 Review and evaluate preliminary results of the E-1 T Electric Utility time-of-use rate pilot, changes in energy usage patterns and financial impacts to customers and utility to inform further implementation to the full Palo Alto community. (PAMC 2.23.050.(b).(2) and 2.23.050.(b).(4)) 9 Review and recommend approval of new Power Purchase Agreements or other supplies to ensure electric supply contracts are cost-effective and aligned with the City's long-term electric portfolio strategy and the integrated resources plan. (PAMC 2.23.050.(b).(2))
14 Electric Grid Modernization: Review load projections and strategy for City-wide grid upgrades, design standards and technologies, timing of investment and work, and customer impacts.
Fiber Utility
6 Review Fiber to the Premises (FTTP) pilot results including use of key performance indicators (KPI) and recommend next steps. (Examples of KPIs include: take rate, customer satisfaction, cost per passing, revised long-term financial model, and capital expenditure estimates) (PAMC 2.23.050.(b).(5)) Gas Utility
1 The UAC will review progress towards a gas transition study that addresses the political, economic, legal, environmental, regulatory, and operational elements of a potential gas decommissioning. (PAMC
2.23.050.(b).(1).(A) & 2.23.050.(b).(4))
Key Priorities or Ongoing
10 Advise on funding and financing strategies for S/CAP for City Council consideration (see S/CAP 2026-2027 Work Plan Item CA13) and advise on revision to current Carbon Neutral and Cap and Invest (C&I) funding City Council spending resolutions to clarify uses balancing S/CAP strategies, long-term affordability, and decarbonization incentives. (PAMC 2.23.050.(b).(5)
11 Review and recommend advisory positions on legislative proposals at the local, state, and federal level impacting any of the five utilities through new laws, regulations, or ordinances. (PAMC 2.23.050.(b).(3)) 12 Review customer survey results, communication methods, and new initiatives for the year (e.g., implementation of leak notifications), including review of effectiveness of engagements to inform continued iterative changes. (PAMC 2.23.050.(b).(5).(c))
The Utilities Advisory Commission reviewed the Commission accomplishments and draft workplan at its June 3, 2026 meeting Agenda item #3. FY 2026 UAC accomplishments can be found in the staff report. The agenda packet for Item 3 can be found here beginning on page 11: https://recordsportal.paloalto.gov/WebLink/DocView.aspx?id=896997&dbid=0&repo=PaloAlto.
Item 10
Attachment D - 2026-2027
Utilities Advisory
Commission Work Plan
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City Council
Staff Report
From: City Manager
Report Type: ACTION ITEMS
Lead Department: City Clerk
Meeting Date: October 5, 2026
Report #:2606-6510
TITLE
Consideration of City Council Positions on State and Local Measures Presented to Palo Alto Voters on the November 3, 2026 Ballot; CEQA status – not a project
RECOMMENDATION
Staff recommends the City Council review and discuss the November 3, 2026 state and local ballot measures and consider adoption of positions as relevant to the City of Palo Alto or desired by the City Council. Staff recommends that City Council consider taking the following suggested positions based on the Legislative Guidelines and previous City Council action:
Proposition 1 – Support
Proposition 37 – Support
Proposition 43 – Oppose
Public Transit Revenue Measure District (Measure RTM) – City Council already supported City of Palo Alto Measure J – Support
BACKGROUND
The City Council regularly considers taking positions in an election year on ballot measures presented to Palo Alto voters. This item is intended to inform Palo Alto voters about the upcoming election and provides the City Council the opportunity to hear from residents, discuss, and take positions on measures if desired.
The Secretary of State has qualified 14 statewide measures for the November 3, 2026 election.
Townsend Public Affairs, the City’s legislative consultant, has summarized the statewide measures in Attachment A. Additional information, including impartial analyses and arguments, may be found in the Secretary of State’s Official Voter Information Guide.1 Additionally, there are two (2) local measures that will be on Palo Alto voters’ ballots. Additional information, including 1 California General Election November 3, 2026 Official Voter Information Guide:
https://voterguide.sos.ca.gov/propositions/
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impartial analyses and arguments, may be found at the Santa Clara County Registrar of Voters 3 and City4 webpages.
ANALYSIS
The below section summarizes the ballot measures, relevant legislative guideline (if available), and suggested positions. For statewide measures, the official title and summary as prepared by the Attorney General are listed; for local measures, the ballot question as received by the Registrar of Voters is listed. The suggested positions are based on the City Council-approved Legislative Guidelines5 and previous City Council action. Staff only suggested positions where the Legislative Guidelines clearly apply.
Statewide
Title Summary
Suggestion and
Relevant
Guideline
Proposition 1:
Authorizes Bonds
for Housing
Affordability
Programs.
Legislative Statue
Authorizes $11.25 billion in state general obligation bonds for housing affordability programs, including for California veterans, and to finance housing development projects seeking federal tax credits.
Allocates funds:
o$5.1 billion to build and rehabilitate multifamily rental housing;
o$2.1 billion to acquire, rehabilitate, or preserve affordable housing units, and provide supportive housing for those experiencing homelessness;
o$1.25 billion for state-funded mortgages for California veterans;
o$1.1 billion for homeownership and downpayment
assistance;
o$1 billion for farmworker, tribal, and student housing; o$500 million for housing infrastructure; and
o$200 million to support local housing programs.
Support.
Guideline:
“Supports
additional state
and federal
funding in support
of affordable
housing”
3 Santa Clara County Registrar of Voters List of Local Measures: https://vote.santaclaracounty.gov/list-local- measures-4
4 City of Palo Alto Municipal Elections: https://www.paloalto.gov/Departments/City-Clerk/Municipal-Elections 5 City of Palo Alto’s 2026 Federal and State Legislative Guidelines:
https://www.paloalto.gov/files/assets/public/v/2/city-manager/legislation/2026-legislative-guidelines.pdf Item 11
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Title Summary
Suggestion and
Relevant
Guideline
Proposition 2:
Increases the
State’s Rainy Day
Fund.
Legislative
Constitutional
Amendment
Increases California’s Rainy Day Fund, approved by voters in 2014, to provide funding for education, health care, public safety, and other essential services during economic downturns. Doubles the budget reserve cap from 10% to 20% of General Fund revenues, requiring savings until Fund’s balance equals 20% of General Fund.
Requires additional savings in years when tax revenues are high. Increases budget reserves available for education, state debts, and pension obligations.
None.
Proposition 3:
Provides
Permanent
Funding for
Schools and
Health Care by
Extending Existing
Tax on High
Incomes.
Initiative
Constitutional
Amendment
Makes permanent the existing 2012 voter-approved tax rates for high-income Californians, currently set to expire in 2031. Rates apply to income over about $371,000 for single filers, $742,000 for joint filers, and $505,000 for heads of household (2025 levels; adjusted annually for inflation).
Allocates tax revenues 89% to K–12 schools, 11% to community colleges.
Allows local school boards to decide how revenues are spent; bars use for administrative costs.
Increases General Fund revenues available for health care, budget reserves, and other programs.
None.
Proposition 4:
Repeals
Prohibition
Against Public
Funding of
Election
Campaigns.
Legislative Statute
Current law prohibits state and local governments from using public funds for election campaigns except in charter cities and counties.
This measure repeals that prohibition and allows state and local governments to establish public campaign financing programs for candidates who agree to specified spending limits and meet eligibility criteria.
Prohibits public funding programs from using funds earmarked for education, transportation, or public safety.
Prohibits candidates from using public funds for legal defense costs, fines, or repayment of personal loans to campaigns. Triples maximum fine for campaign contributions by foreign entities.
None.
Item 11
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Title Summary
Suggestion and
Relevant
Guideline
Proposition 5:
Changes Recall
Election Process
For Statewide
Officers.
Legislative
Constitutional
Amendment
Under current law, voters decide at the same election whether (1) to recall a state officer, and (2) who will replace that officer if recalled.
Under this measure:
oif the Governor is recalled, the Lieutenant Governor
becomes Governor for the remainder of the term or until a successor is elected;
ofor all other recalled officers, the office will remain vacant until filled by a subsequent special election or appointment as specified in existing law; and
oa recalled officer may be a candidate in a special election to fill the office.
None.
Proposition 37:
Creates Loan
Program For
Middle-Income
Buyers of
Qualified New
Homes.
Initiative Statute
Authorizes up to $25 billion in bonds to offer eligible buyers fixed-rate mortgages for up to 17% of the purchase price of a “qualified new home” (new construction or first sale of converted nonresidential property, priced below about $1 million–$1.5 million, depending on county, adjusted annually). Borrowers must be California residents for one year, occupy the home, earn less than twice the area’s median income, and pay at least 3% down.
Requires that bonds be repaid by homeowners’ mortgage
payments, not the State.
Support.
Guideline:
“Promotes the
development and
enhancement of
safe and
affordable housing
and accessible
housing within the
City for all
economic
segments of the
population”
Proposition 38:
Authorizes Bonds
For Immunology
Medical Research.
Initiative Statute.
Authorizes $8.4 billion in state general obligation bonds for immunology and immunotherapy research (technologies that use body’s immune system to treat disease), with half dedicated to cancer, heart disease, and Alzheimer’s disease.
Allocates funds equally between (1) a single University of California-affiliated nonprofit medical research institute, and (2) research grants for public or nonprofit universities and institutions.
Requires funding recipients to sell technology and drugs derived from research in California for 20% below national average price.
Appropriates money from General Fund to repay bonds;
General Fund receives 10% of licensing royalties until bonds are repaid.
None.
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Title Summary
Suggestion and
Relevant
Guideline
Proposition 39:
Prohibits Citizens
From Voting
Unless They
Present
Government-
Issued
Identification.
Initiative
Constitutional
Amendment
Prohibits voting by mail unless voter designates a government- issued identification number for their voter registration. Invalidates mail ballots if envelope does not include last four digits of a government-issued identification number matching the number designated in the voter’s registration (e.g., if voter designates Social Security number for registration, but provides driver’s license number on envelope, their ballot would not count).
Prohibits voting in person without presenting government- issued identification.
Requires elections officials to annually report percentage of each county’s voters whose citizenship status they have verified.
None.
Proposition 40:
Imposes One-Time
Tax on Certain
Taxpayers.
Initiative
Constitutional
Amendment and
Statute
Imposes one-time tax of up to 5% on certain taxpayers with covered assets valued over $1 billion; covered assets include businesses, securities, art, collectibles, and intellectual property, but exclude real property and some pensions and retirement accounts.
Allocates 90% of these tax revenues for health care, 10% for food assistance or education-related programs; prohibits using revenues to replace existing funding for these purposes. Exempts such tax revenues from constitutional requirements for school funding, budget reserves, and state spending limit.
None.
Proposition 41:
Prohibits New
State Taxes That
Exclude Revenues
From State
Spending Limit.
Requires Audits
For New State
Special Taxes.
Initiative
Constitutional
Amendment
Prohibits any new state taxes that exclude their revenues from the state spending limit approved by voters in 1979.
For statewide special taxes, requires (1) a pre-election audit of programs that would receive funding from a voter-proposed special tax, and (2) recurring audits of programs funded by special taxes enacted after January 1, 2026.
It states that other voter-approved measures appearing on the same ballot are void if they conflict with this measure and this measure receives more affirmative votes.
None.
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Title Summary
Suggestion and
Relevant
Guideline
Proposition 42:
Prohibits New
State Personal
Property Taxes
and Certain
Retroactive State
Taxes.
Initiative
Constitutional
Amendment
Prohibits new state taxes on personal property, including business interests, intellectual property, and financial assets (including assets in retirement and investment accounts). Prohibits new state taxes that apply retroactively based on the taxpayer’s conduct, activities, or a status that occurred before the new tax’s effective date.
Applies to new taxes that are enacted or take effect on or after January 1, 2026.
States that other voter-approved measures appearing on the same ballot are void if they conflict with this measure and this measure receives more affirmative votes.
None.
Proposition 43:
Limits Voters’
Ability To Raise
Revenues For
Local Government
Services.
Legislative
Constitutional
Amendment
Currently, local governments must obtain two-thirds voter approval to impose, extend, or increase special taxes (taxes dedicated to a specific purpose) that they place on the ballot.
However, this two-thirds vote requirement does not currently apply to special taxes put on ballot by voter signature gathering. This measure would limit voters’ ability to pass voter-proposed local special taxes by raising the percentage of votes needed to approve such ballot measures from a simple majority (over 50%) to a new two-thirds threshold.
Applies to voter-proposed ballot measures approved after January 1, 2027.
Oppose.
Guideline:
“Supports the
lowering or
maintaining of
voter thresholds
for local revenue
measures”
Proposition 44:
Requires
Community
Health Clinics
Spend 90% Of
Revenue On
Program Services.
Initiative Statute
Imposes penalties on nonprofit Federally Qualified Health Centers (community clinics providing primary care to medically underserved areas and populations) that spend less than 90% of revenue on “program services” advancing their charitable purpose, including but not limited to patient services.
Department of Public Health may waive spending requirements in exceptional circumstances.
Authorizes Attorney General to publish guidance defining qualifying expenditures.
Monetary penalties may be refunded if centers become
compliant within five years.
Authorizes criminal charges for false reports or artificially increasing spending ratio.
None.
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Title Summary
Suggestion and
Relevant
Guideline
Proposition 45:
Modifies
Environmental
Review for Certain
Projects.
Initiative Statute
Amends California Environmental Quality Act (CEQA) to
expedite environmental review for specified project categories (including most housing, transportation, water, health, wildfire mitigation, educational facility, internet access, and clean energy projects). For these types of projects, this measure:
oSets deadlines for public agencies to complete
environmental review and take required actions.
oAllows expedited review of environmental impacts,
limiting public agencies’ current obligation to consider a range of feasible project alternatives to reduce
environmental impacts.
oEstablishes deadlines for filing and resolving lawsuits challenging project approvals; limits evidence courts may consider and relief courts can order.
None.
Local Measures
Title Summary Suggested Position
Public Transit
Revenue Measure
District (Measure
RTM) – Connect
Bay Area Transit
Initiative
To prevent major service cuts to BART and other transit, avoid increased traffic, and reduce pollution by: Preserving BART, Caltrain, VTA, SamTrans, AC Transit, Muni, other transit for everyone, including workers, students, seniors, persons with disabilities; Supporting transit safety, cleanliness,
affordability, reliability; Repairing targeted roads/potholes; Requiring financial transparency, oversight, accountability; shall the measure enacting a 0.5% (Alameda, Contra Costa, San Mateo, Santa Clara counties) and 1% (San Francisco) sales tax for 14 years generating approximately $980,000,000
annually, be adopted?
Support
Prior City Council
Action:
The City Council
endorsed this measure
on March 2, 20269.
9 City Council, March 2, 2026; Agenda Item #4; SR# 2601-5865 https://recordsportal.paloalto.gov/WebLink/DocView.aspx?id=86659&dbid=0&repo=PaloAlto&searchid=4ac36678 -93df-47e6-8ba6-05de931a117d
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Title Summary Suggested Position
City of Palo Alto –
Measure J –
Transactions and
Use Tax
City of Palo Alto Community Safety/Services Measure. To provide general city services including repairing Cubberley Community Center for current safety, earthquake,
accessibility standards; upgrading deteriorating electrical systems, wiring, plumbing; acquiring outdoor space/sites; maintaining streets, safe, clean downtown/commercial cores; preparing for natural disasters; repairing deteriorating community spaces, libraries, shall City of Palo Alto’s measure enacting a 0.5% (1/2¢) sales tax, providing approximately $15,600,000 annually until ended by voters, with published financial audits, all funds used locally, be adopted?
Support.
Prior City Council
Action:
Cubberley acquisition
and renovation funding
is a 2026 City Council
Priority11 and City
Council voted to place
the measure on the
ballot.12
FISCAL/RESOURCE IMPACT
There is no financial impact associated with adopting support or oppose positions on ballot measures. The City Council annually budgets for legislative advocacy services, and these efforts are led by staff in the City Manager and City Clerk’s Office with stakeholder support across departments.
STAKEHOLDER ENGAGEMENT
Staff from multiple departments are involved in the City’s legislative advocacy process. Staff meet regularly with the City’s legislative consultants to review pending state activity, including legislation, grant opportunities, and ballot measures with potential impacts to the City.
Departments reviewed this list of ballot measures and propositions.
ENVIRONMENTAL REVIEW
The City’s legislative advocacy activities are not a project under section 15378(b)(5) of the California Environmental Quality Act Guidelines (administrative activities that will not result in direct or indirect physical change in the environment).
ATTACHMENTS
Attachment A: TPA Ballot Initiatives Memo
APPROVED BY:
Mahealani Ah Yun, City Clerk
Ed Shikada, City Manager
11 City Council January 24, 2026 Action Minutes:
https://recordsportal.paloalto.gov/WebLink/DocView.aspx?id=85782&dbid=0&repo=PaloAlto 12 City Council. June 8, 2026; Agenda Item #14; SR# 2603-6081 https://recordsportal.paloalto.gov/WebLink/DocView.aspx?id=887096&dbid=0&repo=PaloAlto Item 11
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CALIFORNIA ADVOCACY • FEDERAL ADVOCACY • GRANT WRITING
Sacramento • Washington, D.C.
Northern California• Central California• Southern California
MEMORANDUM
From Townsend Public Affairs
Date: July 17, 2026
Subject: November Ballot Update: Statewide Initiatives
EXECUTIVE SUMMARY
California's November 3, 2026 statewide ballot was finalized on June 25, 2026, marking the constitutional deadline for citizen initiatives to qualify for the November election and the final opportunity for proponents to withdraw qualified measures through negotiated agreements. The weeks leading up to the deadline were defined by extensive negotiations among the Governor's Office, Legislative Leadership, initiative proponents, business organizations, labor groups, taxpayer advocates, and local government stakeholders, resulting in significant changes to the measures voters will consider this November.
For local agencies, the most consequential outcome was the negotiated withdrawal of the proposed Taxpayer Protection Act (Initiative 1983). In its place, the Legislature approved ACA 22, which appears on the November ballot as Proposition 43. If approved by voters, the measu re would amend the California Constitution to require all local special taxes, including those proposed through the citizen initiative process, to receive two-thirds voter approval. As part of the same agreement, the Legislature approved ACA 21, removing ACA 13 from the ballot. While the agreement eliminated provisions affecting charter city real estate transfer taxes and the retroactive invalidation of certain existing local taxes, Proposition 43 preserves one of the initiative's central policy objectives and could significantly affect future local and regional revenue measures.
Additional negotiations also reshaped the ballot. Competing healthcare initiatives were withdrawn pursuant to an agreement between healthcare stakeholders and the California Labor Federation, while competing rideshare liability initiatives were removed following a settlement between Uber and the Consumer Attorneys of California. Meanwhile, a broader debate over statewide taxation remains on the ballot through competing measures addressing a one- time tax on ultra-high-net- worth individuals, restrictions on future wealth taxes, and new accountability requirements for statewide special taxes.
As a result of these negotiations, California voters will consider 14 statewide measures in November, consisting of five legislative measures and nine citizen initiatives. The ballot includes measures affecting affordable housing, state finances, local taxation, election administration, campaign finance, environmental review, healthcare, and constitutional governance.
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This memorandum provides an overview of the final statewide ballot, summarizes the negotiations that shaped its composition, and highlights the measures with the greatest potential implications for California local governments.
QUALIFIED STATEWIDE BALLOT MEASURES
PROPOSITION 1: Veterans and Affordable Housing Bond Act of 2026
Proposition 1 was placed on the ballot by the Legislature through SB 417 and would authorize the State to issue $11.25 billion in general obligation bonds for affordable housing and veterans’ housing programs.
Of the total bond authorization, $10 billion would support affordable housing programs, while $1.25 billion would support the CalVet Home Loan Program. The affordable housing funding would be administered through existing and expanded state housing programs and would support activities such as the development, rehabilitation, preservation, and acquisition of affordable rental and ownership housing.
The measure is intended to provide a substantial new infusion of state housing resources at a time when many existing housing programs are oversubscribed or nearing exhaustion. Funding could support housing for lower -income households, people experiencing homelessness, farmworkers, veterans, and other populations facing barriers to obtaining stable housing.
The specific timing and allocation of bond funding would depend on subsequent state budget appropriations, program guidelines, and implementation decisions by state housing agencies.
Even if the measure is approved, the entire $11.25 billion would not be available immediately.
Bond funding would likely be appropriated over several fiscal years. Because the bonds would be repaid from the State General Fund, the measure would also create long-term state debt-service obligations.
PROPOSITION 2: Save for California’s Future Act
Proposition 2 was placed on the ballot by the Legislature through ACA 20 and would amend the California Constitution to modify the State’s budget reserve requirements.
The measure would increase the constitutional limit on the State’s Budget Stabilization Account, commonly referred to as the Rainy -Day Fund, from 10 percent to 20 percent of annual General Fund revenues. The objective is to allow the State to retain a larger reserve during periods of revenue growth so that additional resources are available during recessions, revenue downturns, emergencies, or future budget deficits.
California’s revenue structure is particularly sensitive to changes in personal income, capital gains, and the financial markets. As a result, state revenues can increase rapidly during strong economic periods and decline substantially during downturns. Increasing the reserve limit is intended to reduce the need for abrupt program reductions, borrowing, payment deferrals, or other budget-balancing actions when revenues fall.
The measure would not raise taxes or immediately require the State to deposit the full amount permitted under the higher reserve limit. Rather, it would increase the amount the State is constitutionally permitted to retain and would operate within the State’s broader reserve and budget framework.
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PROPOSITION 3: Permanent Funding for Schools and Health Care Through the Existing Tax on High Incomes
Proposition 3 is an initiative constitutional amendment that would make permanent the higher personal income tax rates originally approved by voters in 2012.
The existing tax applies to higher-income taxpayers and is currently scheduled to expire in 2031.
The income thresholds are adjusted annually for inflation. Based on the thresholds included in the official ballot summary, the rates apply to taxable income above approximately $360,000 for single filers, $490,000 for heads of household, and $721,000 for joint filers, using 2024 income levels.
Proposition 3 would remove the 2031 expiration date and continue the tax rates indefinitely.
Revenue attributable to the measure would be allocated 89 percent to kindergarten through grade 12 schools and 11 percent to community colleges. Local school boards would retain authority to determine how their allocated funding is spent, and the measure would prohibit the funds from being used for administrative costs.
The Legislative Analyst and Director of Finance estimate that the measure would maintain between $5 billion and $15 billion annually in state revenue, measured in today’s dollars, that would otherwise end after 2031. The amount collected in any year would fluctuate significantly because high-income tax collections are affected by wages, business income, capital gains, and financial market conditions.
Although the measure is presented primarily as an education funding proposal, continuing the tax could also affect the broader State General Fund. Maintaining these revenues could reduce pressure on other state- funded programs, including health care, housi ng, homelessness, transportation, and local assistance. Conversely, opponents may argue that permanently extending the tax could affect taxpayer behavior, business decisions, or the State’s dependence on volatile high-income tax revenue.
PROPOSITION 4: California Fair Elections Act of 2026
Proposition 4 was placed on the ballot through SB 42 and would amend the Political Reform Act to permit state and local governments to establish public campaign financing programs.
Existing provisions of the Political Reform Act generally prohibit public officers from spending public funds, and candidates from accepting public funds, for the purpose of seeking elective office. Proposition 4 would remove that statewide prohibition and allow the State and local jurisdictions to establish public financing systems if they choose to do so.
The measure would not automatically create a statewide public financing program, provide funding for candidates, or require a city or county to establish such a program. Instead, it would give state and local governments the legal authority to develop programs through which qualifying candidates could receive public campaign funds, subject to locally or legislatively established eligibility requirements, contribution limits, expenditure rules, disclosure requirements, and enforcement provisions.
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Potential public financing models could include matching small -dollar contributions, providing campaign grants, or issuing democracy vouchers or similar forms of public support. The precise structure would be determined separately by each participating jurisdiction.
For cities and counties, the principal effect would be the restoration of local discretion. A jurisdiction interested in public campaign financing would still need to adopt a program, identify a lawful funding source, establish administrative and enforceme nt procedures, and comply with applicable election laws.
Supporters contend that public financing can reduce candidates’ reliance on large donors and encourage a broader range of individuals to seek office. Opponents may question whether public funds should be used for political campaigns or whether such program s provide sufficient public benefit. SB 42 was enacted subject to voter approval because it amends provisions of the voter- approved Political Reform Act.
PROPOSITION 5: Recall of State Officers
Proposition 5 was placed on the ballot by the Legislature through SCA 1 and would change the process used to replace a statewide elected officer who is removed through a recall election.
Under California’s current recall system, voters are generally asked two questions on the same ballot. The first asks whether the officer should be recalled. The second asks which replacement candidate should serve if the recall is successful. A replacement candidate can win with a plurality of votes, even if that candidate receives fewer votes than the number of voters who opposed recalling the incumbent.
Proposition 5 would eliminate the replacement -candidate portion of a recall election for state officers. If voters approve a recall, the office would become vacant and would be filled under the succession or vacancy procedures that otherwise apply to that office. For example, if a Governor were recalled, the Lieutenant Governor would succeed to the office. Vacancies in other statewide or legislative offices would be filled in accordance with the applicable constitutional or statutory process.
The measure is intended to simplify recall elections and address concerns that an official who was elected by a statewide majority could be replaced by a candidate receiving only a relatively small plurality. It would not eliminate the public’s power to recall state officers, alter the signature requirements for qualifying a recall, or apply to recalls of local officials unless otherwise provided by law.
PROPOSITION 37: Middle-Income Homebuyer Loan Program
Proposition 37 is an initiative statute that would authorize up to $25 billion in bonds to establish a home loan program for qualifying middle-income buyers purchasing newly constructed homes or certain converted properties.
The program would provide eligible buyers with a fixed-rate mortgage covering up to 17 percent of the purchase price of a qualified home. The assistance would be available for newly constructed homes or the first sale of qualifying properties converted from non-residential use.
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To qualify, an applicant would generally have to be a California resident for at least one year, intend to occupy the property as a primary residence, have household income below 200 percent of area median income, and provide a down payment of at least 3 percent.
Eligible home prices would be capped at approximately $1 million to $1.5 million, depending on the county, with the limits adjusted annually. Because housing costs vary considerably across California, the applicable maximum would be determined geographically.
The measure states that the bonds would be repaid through mortgage payments made by participating homeowners rather than through the State General Fund. Accordingly, the official fiscal estimate identifies no direct state or local government costs. However, the ultimate financial performance of the program would depend on loan repayments, interest rates, defaults, administrative costs, and housing market conditions.
The measure would not directly require cities to approve new housing developments or change local land-use standards. Its primary effect would be to expand financing assistance for eligible buyers and potentially stimulate the production and purchase of qualifying homes.
PROPOSITION 38: Bonds for Immunology and Immunotherapy Research
Proposition 38 is an initiative statute that would authorize $8.4 billion in state general obligation bonds for immunology and immunotherapy research.
The bond proceeds would be divided equally between two purposes. Half would be allocated to a University of California-affiliated nonprofit medical research institute selected by the California Department of Public Health. The other half would support a competitive grant program for public or nonprofit universities and research institutions.
The measure would require that at least half of the research funding be directed toward cancer, heart disease, and Alzheimer’s disease. It would also impose conditions related to the pricing and availability of technologies and drugs developed using bond proceeds. Research recipients would be required to make resulting technologies and drugs available in California at prices at least 20 percent below the national average price.
Unlike Proposition 37, these bonds would be repaid from the State General Fund. The Legislative Analyst and Director of Finance estimate that repayment would cost approximately $500 million annually for 25 years. The State could potentially recover some costs if funded research produces commercially successful discoveries, but such revenues are uncertain.
The principal policy consideration is whether the State should incur long-term general obligation debt to finance medical research, particularly where the benefits and potential commercial returns cannot be predicted in advance.
PROPOSITION 39: Voter Identification and Citizenship Verification Requirements
Proposition 39 is an initiative constitutional amendment that would establish additional identification and citizenship verification requirements for California voters.
Under current law, an individual registering to vote must declare under penalty of perjury that the individual is a United States citizen and provide identifying information such as a birthdate, driver’s license number, state identification number, or partial Social Security number.
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Proposition 39 would additionally require voters appearing at a polling place to present government-issued identification. A person voting by mail would be required to provide the last four digits of a government-issued identification number.
The State would be required to provide voter identification cards to eligible voters upon request.
Elections officials would also be required to issue annual reports identifying the percentage of registered voters in each county whose citizenship has been verified.
The measure would significantly affect county elections officials, who administer elections on behalf of the State. Counties would need to modify voting systems, ballot materials, voter education programs, poll-worker training, vote-by-mail procedures, provisional ballot processes, and citizenship verification systems.
The Legislative Analyst and Director of Finance estimate one -time state and local costs in the tens of millions of dollars to prepare for implementation. Ongoing costs could range from tens of millions to the low hundreds of millions of dollars annually, depending on how the identification, reporting, outreach, and verification requirements are implemented.
The measure could also result in litigation concerning voter access, implementation standards, acceptable forms of identification, provisional voting, and the State’s responsibility to provide identification at no cost.
PROPOSITION 40: One-Time Tax on Certain Individuals and Trusts
Proposition 40 is an initiative constitutional amendment and statute that would impose a one-time tax of up to 5 percent on individuals and trusts with covered assets exceeding $1 billion.
Covered assets would include businesses, securities, investment holdings, artwork, collectibles, and intellectual property. Real property and certain pension and retirement accounts would be excluded.
The measure would allocate 90 percent of the revenue to health care programs and 10 percent to food assistance or education-related programs. It would prohibit the State from using the new revenue to replace existing funding for those purposes, meaning the money would generally be required to supplement rather than supplant current appropriations.
The measure would also exempt the new revenue from certain constitutional requirements, including the Proposition 98 school -funding guarantee, state budget reserve requirements, and the State Appropriations Limit.
The Legislative Analyst and Department of Finance estimate that the tax could generate tens of billions of dollars over several years. However, they also estimate that the measure would likely result in an ongoing reduction in state personal income tax revenue of hundreds of millions of dollars or more annually. This could occur if affected taxpayers move, restructure assets, change residency, or otherwise reduce future taxable income in California.
The measure does not impose a local tax or provide unrestricted revenue directly to local governments. Nevertheless, funding for health care, food assistance, and education could flow through county-administered or locally delivered programs.
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The measure could also have broader state budget implications. If the tax produces substantial short-term revenue but reduces ongoing income tax collections, the State could experience both an immediate funding increase and longer-term revenue losses.
Proposition 40 remained on the ballot despite efforts by state leaders and other organizations to negotiate its withdrawal before the June 25 deadline.
PROPOSITION 41: Audits of Programs Funded by State Special Taxes and State Spending- Limit Requirements
Proposition 41 is an initiative constitutional amendment concerning statewide special taxes, program audits, and the State Appropriations Limit.
For a special tax proposed through the statewide initiative process, the measure would require an audit of the programs proposed to receive the tax revenue before the election. The audit would provide voters with information regarding the performance, admi nistration, or financial condition of those programs before they decide whether to approve the tax.
The measure would also require recurring audits of programs funded by state special taxes enacted after January 1, 2026. The audit findings would likely be included in or referenced through future voter information materials and public reports.
In addition, Proposition 41 would prohibit the enactment of new state taxes that exclude their revenue from the existing voter-approved State Appropriations Limit. The restriction would apply to taxes enacted after January 1, 2026, including taxes appearing on the November 2026 ballot.
This provision could directly interact with Proposition 40 because the billionaire wealth tax proposes to exempt its revenue from the State Appropriations Limit. The outcome and legal interaction of the two measures could depend on which receives more affi rmative votes if both are approved and their provisions are determined to conflict.
The official fiscal impact is unknown. Costs or savings would depend on the number of future special tax initiatives, the programs subject to audit, the extent of audit recommendations, and whether those recommendations produce operational savings.
PROPOSITION 42 : Prohibition on New State Personal Property Taxes and Certain Retroactive Taxes
Proposition 42 is an initiative constitutional amendment that would restrict the State’s authority to impose certain future taxes.
The measure would prohibit new state taxes on the ownership or control of personal property.
The definition would encompass financial assets, investment accounts, retirement accounts, business interests, intellectual property, and other forms of personal property.
The measure would also prohibit certain retroactive state taxes. A tax generally could not be applied to conduct, activities, ownership, transactions, or taxpayer status that occurred before the tax’s effective date, subject to limited exceptions.
The restrictions would apply to taxes enacted or taking effect on or after January 1, 2026, including taxes appearing on the November 2026 ballot.
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The measure appears designed in part to prevent the State from adopting wealth taxes or asset- based taxes similar to Proposition 40. If both Propositions 40 and 42 are approved, the measures could conflict because Proposition 40 would impose a tax based on covered assets, while Proposition 42 would prohibit new state taxes on the ownership or control of personal property.
The legal effect could depend on constitutional rules governing conflicting ballot measures, including which measure receives more affirmative votes.
The Legislative Analyst and Department of Finance identify the fiscal effect as the possibility that state tax revenues would be lower in the future. The measure would not necessarily reduce revenue collected under current taxes, but it would limit the Legislature’s and voters’ options for establishing certain new taxes later.
The measure applies to state taxation and would not directly prohibit local property, sales, parcel, utility, or other local taxes. Its indirect significance for local agencies would arise if future state revenue limitations reduce the resources available for state-local programs or increase pressure on existing revenue sources.
PROPOSITION 43: Local Taxes and the Two-Thirds Vote Requirement
Proposition 43 was placed on the ballot through ACA 22 and would amend the California Constitution to require approval by two- thirds of voters for local special taxes, including special taxes proposed through the local initiative process.
A special tax is a tax whose proceeds are dedicated to one or more specified purposes. Examples may include taxes dedicated to transportation, public safety, libraries, parks, housing, homelessness programs, emergency response, or other identified services.
Local government-sponsored special taxes are already generally subject to a two- thirds voter- approval requirement. However, following the California Supreme Court’s decision in California Cannabis Coalition v. City of Upland, appellate decisions concluded that certain constitutional procedural restrictions applying to local government -sponsored measures did not necessarily apply in the same manner to measures placed on the ballot through the citizens’ initiative power.
That created a pathway under which some voter-sponsored special taxes could be approved by a simple majority.
Proposition 43 would close that distinction by expressly applying the two-thirds vote requirement to special taxes proposed by the electorate through the initiative process. As a result, a citizen - sponsored special tax would be subject to the same voter -approval threshold as a special tax placed on the ballot by a city council, county board of supervisors, or other local governing body.
Proposition 43 emerged from negotiations concerning the Howard Jarvis Taxpayers Association’s broader Taxpayer Protection Act. The original initiative would have imposed additional restrictions, including limitations involving real estate transfer taxes an d retroactive invalidation of certain previously approved taxes. Under the negotiated agreement, HJTA withdrew that initiative after the Legislature placed ACA 22 on the ballot and removed ACA 13.
For local governments, Proposition 43 is among the most significant measures on the 2026 ballot.
Requiring two-thirds approval for all local special taxes would make voter -sponsored dedicated revenue measures more difficult to approve. The effect could be particularly significant for regional Item 11
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measures, where reaching two -thirds approval across a large and politically diverse geography can be challenging.
The measure would not raise taxes or invalidate all existing special taxes. Rather, it would establish the approval threshold that future local special tax measures must meet. Local agencies contemplating future revenue measures should evaluate how Proposition 43 could affect measure structure, timing, polling, coalition development, and whether revenue is proposed as a general or special tax.
PROPOSITION 44: Community Health Clinic Spending Requirements
Proposition 44 is an initiative statute that would require nonprofit Federally Qualified Health Centers to spend at least 90 percent of their revenue on program services advancing their charitable purposes.
Federally Qualified Health Centers provide primary and preventive care in medically underserved communities and frequently serve patients who are uninsured, enrolled in Medi-Cal, or otherwise face difficulty accessing health care.
Under Proposition 44, qualifying program expenditures could include patient care and other services that directly advance a clinic’s charitable mission. No more than 10 percent of revenue could generally be used for management, administration, overhead, and other non -program expenses.
The California Department of Public Health would be authorized to waive the requirement in exceptional circumstances. The Attorney General could issue guidance defining which expenses qualify as program services and which are considered management or overhead.
Clinics that fail to comply could face monetary penalties. Those penalties could be refunded if the clinic comes into compliance within five years. The measure would also authorize criminal penalties for false reporting or schemes intended to artificially inflate a clinic’s reported program- spending ratio.
The Legislative Analyst and Department of Finance estimate that state enforcement costs could reach the low tens of millions of dollars annually. Much of that cost could be offset by fees and penalties imposed on affected entities.
If clinics reduce administrative expenses to satisfy the 90 percent standard, the measure could direct more resources toward patient care. At the same time, clinics may argue that the limitation could constrain legitimate expenditures for compliance, technology, workforce administration, facilities, billing, quality assurance, and other functions necessary to operate health care organizations.
PROPOSITION 45: Environmental Review for Certain Projects
Proposition 45 is an initiative statute that would amend the California Environmental Quality Act to expedite environmental review and litigation for specified categories of projects.
The measure would apply to many housing, transportation, water, health care, and clean-energy projects. For covered projects, it would establish deadlines for public agencies to complete environmental review and take required actions.
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The measure would also limit the extent to which an agency must evaluate a range of feasible project alternatives. Under existing CEQA procedures, an environmental impact report generally evaluates alternatives that could avoid or substantially reduce a project’s significant environmental effects. Proposition 45 would narrow that obligation for covered projects in an effort to reduce the time and cost associated with environmental documentation.
In addition, the measure would change judicial review of covered project approvals. It would establish deadlines for filing and resolving CEQA lawsuits and limit the evidence courts may consider and the remedies courts may order.
For cities, counties, transit agencies, water districts, joint powers authorities, and other lead or responsible agencies, Proposition 45 could substantially alter environmental review procedures.
Agencies would need to revise internal practices, consultant contracts, hearing schedules, document preparation timelines, and litigation strategies.
The measure could accelerate the approval and construction of housing, transit, water infrastructure, renewable energy, and health care projects. It could also reduce administrative and legal costs over the long term by limiting the scope and duration of environmental review and litigation.
However, the deadlines could create near-term staffing and implementation challenges. Agencies may need to complete complex reviews more quickly, coordinate with applicants and other responsible agencies under shorter timeframes, and ensure that abbreviated processes remain legally defensible.
The Legislative Analyst and Department of Finance estimate state and local implementation costs in the tens of millions of dollars annually during the first several years. Over time, state and local governments would likely experience net savings from reduced administrative and legal workload, although the precise fiscal effects are uncertain. The effect on state courts could range from savings in the tens of millions of dollars to costs in the low tens of millions annually.
Proposition 45 is likely to be particularly significant for local agencies with substantial housing, infrastructure, transportation, water, or clean -energy project portfolios. It could create faster project-delivery tools, but agencies would need detailed implementation guidance to understand which projects qualify and how the new review and litigation requirements interact with other environmental, land-use, coastal, endangered species, and permitting laws.
NEGOTIATIONS AND WITHDRAWALS OF MEASURES
California's November 3, 2026 statewide ballot was finalized on June 25, the constitutional deadline for citizen initiatives to qualify for the November election and the final day proponents could voluntarily withdraw qualified measures. In the days leading up to the deadline, negotiations among the Governor's Office, Legislative Leadership, initiative proponents, taxpayer advocates, labor organizations, business groups, healthcare interests, and local government stakeholders significantly reshaped the ballot.
Ultimately, six qualified initiatives were withdrawn through negotiated agreements, while one additional initiative failed to qualify because county signature verification extended beyond the constitutional deadline. These negotiations reduced the number of statewide measures before Item 11
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voters and, in several cases, replaced broad initiative proposals with narrower legislative compromises.
Taxpayer Protection Act Agreement
The most consequential agreement involved Initiative 1983, the Taxpayer Protection Act, sponsored by the Howard Jarvis Taxpayers Association. The initiative proposed sweeping changes to local taxation authority, including requiring a two-thirds vote for all local special taxes, restricting charter city real estate transfer taxes, and potentially invalidating certain existing voter- approved taxes through retroactive provisions.
Following months of negotiations, Initiative 1983 was withdrawn after the Legislature approved ACA 22 (Proposition 43) and simultaneously removed ACA 13 from the ballot through ACA 21.
Unlike the original initiative, Proposition 43 is limited to requiring a two-thirds vote for all local special taxes, including citizen- sponsored initiatives, and does not include the proposed restrictions on charter city transfer taxes or retroactive provisions affecting existing local taxes.
For local governments, the agreement significantly reduced the immediate fiscal risk posed by the original initiative while preserving one of its central policy objectives. If approved, Proposition 43 would make future local and regional special tax measures more difficult to pass by requiring two-thirds voter approval regardless of how they qualify for the ballot.
Healthcare and Rideshare Settlements
Two additional negotiated settlements removed four qualified initiatives from the ballot.
Healthcare stakeholders and the California Labor Federation agreed to withdraw competing initiatives involving healthcare executive compensation and healthcare union political spending.
Similarly, Uber and the Consumer Attorneys of California reached a settlement that resulted in the withdrawal of competing initiatives concerning automobile liability, attorney fees, and rideshare passenger safety.
While these measures had limited direct implications for local agencies, their withdrawal eliminated several costly statewide campaigns and narrowed the policy issues voters will consider in November.
LOOKING AHEAD
Although the statewide ballot is now finalized, implementation questions remain for many of the measures should they be approved by voters.
Several propositions would require additional legislation, administrative rulemaking, or regulatory guidance before they could be fully implemented. Others, particularly those involving constitutional changes, taxation, and election administration, could generate litigation addressing statutory interpretation and implementation.
Between now and the November election, campaign spending, endorsements, and public polling will continue to shape the political environment surrounding these measures. Proposition 43 is expected to generate substantial interest from local governments, taxpayer organizations, labor groups, business organizations, and regional coalitions because of its implications for future local Item 11
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revenue measures. Likewise, housing, CEQA reform, voter identification requirements, and statewide taxation are expected to remain prominent topics throughout the campaign.
Townsend Public Affairs will continue monitoring campaign developments, legislative implementation discussions, fiscal analyses, and administrative guidance as the election approaches. We will provide clients with updates regarding significant campaign dev elopments, implementation considerations, and the practical implications of each measure.
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City Council
Staff Report
From: City Manager
Report Type: INFORMATION REPORTS
Lead Department: Utilities
Meeting Date: October 5, 2026
Report #:2608-6709
TITLE
Informational Report: Utilities Quarterly Report for FY2026-Q3 (January 2026 – March 2026)
RECOMMENDATION
This is an informational report, and no action is requested.
EXECUTIVE SUMMARY
This report has been prepared to keep the Council apprised of the major issues that are facing the water, gas, electric, wastewater collection and fiber utilities including legislative/regulatory issues, utility-related capital improvement programs, operations, reliability impact measures and a utility financial summary.
This item was transmitted to the Utility Advisory Commission (UAC) on August 5, 2026; however, upon further review, certain components of this report are required to be transmitted to the City Council per the Energy Risk Management Guidelines. Information required includes:
- Net supply cost versus budget for the reporting fiscal year (Figure 2) - Electric market exposure that includes a 36 month load resource balance by month (section 8.4) - Hydro Generation providing a 36 month review of hydro and renewables uncertainty in the electric utility (Figure 3)
- Financial forecasted position reflecting the estimated and/or approved ending balance of the electric utility reserves and net revenue projections and uncertainty for the electric utility - Annually the transmission of the cap and invest allowance revenues and expenditures per City Council approved resolutions 9487 and 10077 for the electric and gas utilities.
Key information is summarized below:
Vacancies and Staffing – Appendix B
The Utilities Department has 37 vacant positions out of 269 authorized positions or a 14% vacancy rate at the end of March 2026, compared to 46 vacancies or 17% in December 2025. Electric Operations continues to have the highest number of vacancies at 16 full-time employees (FTEs) or a 20% vacancy rate, however, there are 3 new hires since the previous quarter. CPAU is in the process of hiring and developing in-house crews to reduce reliance on third party contractors to reduce construction cost, improve work quality, and build in-house expertise.
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Electric Utility:
Electric net supply cost for FY 2026 is currently projected to be $83.8M, which represents an
8.34% decrease from the adopted budget level of $91.7M. During FY 2026 through Q3, congestion and loss costs were down $6.2 million and transmission costs were down $1.8 million. (Section
1.1.1)
Utilities staff is working with the Northern California Power Agency (NCPA) to identify new renewable energy and storage projects. (Section 1.1.3)
An update regarding the electric grid modernization work is provided. With the completion of the pilot project in April 2025, 908 homes in the Pilot area are ready for electrification and overhead design and material procurement is in progress for the remainder of Phase 1, which will include an additional ~3,500 homes (Section 1.2). An update on electric power outages and reliability is provided (Section 1.3)
Electric sales volumes in FY 2026 through Q3 were 6.1% higher than forecasted. (Section 1.4.1) Gas Utility:
Gas prices have been relatively low and stable. (Section 2.1) One gas main replacement project is in progress, and one is in the design stage; repairs at Arastradero Creek from the winter of 2023 storms are anticipated to begin mid-2027. (Section 2.2) An update on gas service interruptions and work to proactively meet new compliance goals before they go into effect is provided (Section 2.3)
Gas sales are highly weather-dependent and were down 8.8% below forecast through Q3 of FY 2026 resulting from mild winter conditions. (Section 2.4.1) Water Utility:
As of April 1, precipitation at the Hetch Hetchy weather station was about 93% of median for Water Year 2026. (Section 3.1)
Two water main replacement projects are in the design stage; design work to relocate a water pumping line at Arastradero Creek is underway and the relocation work is anticipated to begin July 2028. (Section 3.2)
Water sales through Q3 of FY 2026 were about 3.6% lower than forecasted; this number increased relative to Q2 when water sales were 6.1% below forecast driven by the water March weather in 2026. (Section 3.4.1)
Wastewater Utility:
Actual wastewater sales revenues through Q3 are tracking 3.8% above the budget. (Section 4.3.1) Fiber Utility:
Dark fiber sales decreased by $0.3 million compared to the same period in the prior fiscal year.
This decline in operating revenues is mainly from lower customer sales associated with customer disconnections due to move-outs and business closures.
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Utilities Quarterly Report
FY 2026-Q3
Fiscal Year 2023
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1 ELECTRIC UTILITY..........................................................................................................................................7
1.1 ELECTRICITY SUPPLY AND TRANSMISSION...............................................................................................................7
1.1.1 Forecasted Supply Costs ......................................................................................................................7
1.1.2 Hydroelectric Conditions .....................................................................................................................8
1.1.3 Renewable Energy Procurement .........................................................................................................9
1.2 CAPITAL IMPROVEMENT PLAN STATUS..................................................................................................................9
1.3 RELIABILITY....................................................................................................................................................11
1.4 FINANCIAL HEALTH..........................................................................................................................................11
1.4.1 Sales Forecasts vs. Actuals ................................................................................................................11
1.4.2 Financial Position ..............................................................................................................................12 2 GAS UTILITY................................................................................................................................................14
2.1 GAS SUPPLY AND TRANSMISSION.......................................................................................................................14
2.1.1 Actual and Forecasted Supply Costs ..................................................................................................15
2.2 CAPITAL IMPROVEMENT PLAN STATUS................................................................................................................15
2.3 RELIABILITY....................................................................................................................................................16
2.4 FINANCIAL HEALTH..........................................................................................................................................17
2.4.1 Sales Forecasts vs. Actuals ................................................................................................................17
2.4.2 Financial Position ..............................................................................................................................18 3 WATER UTILITY...........................................................................................................................................20
3.1 WATER SUPPLY AND TRANSMISSION...................................................................................................................20
3.2 CAPITAL IMPROVEMENT PLAN STATUS................................................................................................................22
3.3 RELIABILITY....................................................................................................................................................25
3.4 FINANCIAL HEALTH..........................................................................................................................................26
3.4.1 Sales Forecasts vs. Actuals ................................................................................................................26
3.4.2 Financial Position ..............................................................................................................................27 4 WASTEWATER UTILITY ...............................................................................................................................28
4.1 WASTEWATER TREATMENT UPDATES AND CAPITAL PLANNING STATUS.....................................................................28
4.1.1 Treatment Cost Trends ......................................................................................................................28
4.1.2 Regional Water Quality Control Plant Capital Planning Status .........................................................30
4.2 COLLECTION SYSTEM CAPITAL IMPROVEMENT PLAN STATUS....................................................................................30
4.3 FINANCIAL HEALTH..........................................................................................................................................32
4.3.1 Sales Forecasts vs. Actuals ................................................................................................................32
4.3.2 Financial Position ..............................................................................................................................32 5 FIBER UTILITY .............................................................................................................................................33
5.1 FIBER UTILITY STRATEGIC PLANNING...................................................................................................................33
5.2 CAPITAL IMPROVEMENT PLAN STATUS................................................................................................................33
5.3 RELIABILITY....................................................................................................................................................34
5.4 FINANCIAL HEALTH..........................................................................................................................................34
5.4.1 Fiber Sales .........................................................................................................................................34
5.4.2 Financial Position ..............................................................................................................................34 6 COMMUNICATIONS....................................................................................................................................35 Item A
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7 LEGISLATIVE, REGULATORY AND INDUSTRY ACTIVITY.................................................................................37
7.1 STATE LEGISLATIVE ACTIVITY.............................................................................................................................37
7.2 STATE REGULATORY ACTIVITY............................................................................................................................37
7.3 FEDERAL ACTIVITY...........................................................................................................................................38 8 APPENDIX A: ENERGY RISK MANAGEMENT PROGRAM ...............................................................................40
8.1 OVERVIEW OF HEDGING PROGRAMS...................................................................................................................40
8.2 OVERVIEW OF ENERGY RISK MANAGEMENT PROGRAM..........................................................................................40
8.3 FORWARD DEALS............................................................................................................................................41
8.4 ELECTRIC MARKET EXPOSURE............................................................................................................................41 9 APPENDIX B: STAFFING AND VACANCIES ....................................................................................................43 10 APPENDIX C: ELECTRIC UTILITY ANNUAL INFRASTRUCTURE MAINTENANCE AND REPLACEMENT REPORT ..44 11 APPENDIX D: PALOALTOGREEN GAS PROGRAM .........................................................................................48 Figures
FIGURE 1: FY 2026 Q3 NET SUPPLY COST FORECAST VS. ACTUALS.............................................................................................8 FIGURE 2: FY 2026 Q1 – Q3 ADOPTED BUDGET VS ACTUAL NET SUPPLY COST ($K) .....................................................................8 FIGURE 3: HYDRO GENERATION: FY 2026-2028 ACTUALS & PROJECTIONS (GWH) ......................................................................9 FIGURE 4: HYDRO GENERATION: FY 2027-2029 UNCERTAINTY (GWH)......................................................................................9 FIGURE 5: ELECTRIC SALES VOLUME (KWH), FY 2026-Q3 ......................................................................................................12 FIGURE 6: ELECTRIC SALES REVENUE ($), FY 2026-Q3...........................................................................................................12 FIGURE 7: BUDGET VS CURRENT ESTIMATE ($1,000S), FY 2026..............................................................................................13 FIGURE 8: PALO ALTO GAS COMMODITY RATES.....................................................................................................................14 FIGURE 9: GAS SUPPLY COSTS ($), ACTUAL VS BUDGET, FY2026-Q3........................................................................................15 FIGURE 10: SEWER LATERAL INSPECTION..............................................................................................................................16 FIGURE 11: GAS SERVICE INTERRUPTIONS, FY 2025 TO FY 2026 .............................................................................................17 FIGURE 12: GAS SALES VOLUME (THERMS), FY 2026 Q3 .......................................................................................................17 FIGURE 13: GAS SALES REVENUE ($), FY 2026 Q3................................................................................................................18 FIGURE 14: CURRENT WATER YEAR 10-STATION SNOW PILLOWS INDEX....................................................................................21 FIGURE 15: SFPUC WATER DELIVERIES...............................................................................................................................21 FIGURE 16: WATER SERVICE INTERRUPTIONS, FY 2025 TO FY 2026.........................................................................................25 FIGURE 17: WATER SALES VOLUME (CCF), FY 2026 Q3 ........................................................................................................26 FIGURE 18: WATER SALES REVENUE ($), FY 2026 Q3 ...........................................................................................................27 FIGURE 19: PALO ALTO’S SHARE OF WASTEWATER TREATMENT EXPENSES.................................................................................29 FIGURE 20: CURRENT RWQCP CAPITAL WORK IN-PROGRESS (AS OF MARCH 31, 2026) .............................................................30 FIGURE 21: WASTEWATER SALES REVENUE ($), FY 2026 Q3 ..................................................................................................32 FIGURE 22: ELECTRIC RESOURCE ADEQUACY DEALS................................................................................................................41 FIGURE 23: ELECTRIC LOAD RESOURCE BALANCE, FY 2026 – 2029 ..........................................................................................42 FIGURE 24: UTILITIES VACANCIES AND RECRUITMENTS BY DIVISION...........................................................................................43 FIGURE 25: ELECTRIFICATION PERMITS BY CATEGORY..............................................................................................................45 FIGURE 26: ELECTRIC OUTAGE RELIABILITY, CY 2019 THROUGH 2025 ......................................................................................45 Item A
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FIGURE 27 : CALENDAR YEAR 2025 SUSTAINED OUTAGES BY CAUSE.........................................................................................46 FIGURE 28: OFFSET PORTFOLIO COMPOSITION......................................................................................................................48 FIGURE 29: OFFSET PROJECT DESCRIPTIONS..........................................................................................................................48 FIGURE 29: OFFSET PROJECT DESCRIPTIONS (CONT’D.) ...........................................................................................................49 Item A
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1 Electric Utility
The City’s electric utility serves all residential and non-residential electric demands in Palo Alto at a lower cost than PG&E in surrounding communities. Its electric supply portfolio is 100% carbon neutral. The City maintains and operates an electric distribution system but does not operate any transmission lines or any generating capacity on its own. Instead, the City belongs to Northern California Power Agency (NCPA) which operates its Calaveras hydroelectric generating plant and provides power scheduling services for its other generating resources. This carbon free power is supplied through power purchase agreements with various generation operators.
1.1 Electricity Supply and Transmission
Below is an update on electricity supply and transmission services.
1.1.1 Forecasted Supply Costs
The electric net supply cost for FY 2026 is currently projected to be $83.8 M, which represents an 8.34% decrease from the Adopted Budget level of $91.7 M. For FY 2027, electric net supply cost is projected to be $95.78 M. During Q3 of FY 2026, net supply cost was about ~$4.0M lower than the adopted budget.
The largest changes relative to the previous quarter’s actual cost were the lower congestion and loss costs (down $3.5 M) and the lower transmission costs (down $1.1M). Overall, actual supply costs for FY 2026 through the end of Q3 are currently 8.71% below the budgeted level. Similar to Q3’s performance, actual congestion and loss costs were below budget by $6.2 million, and transmission costs were lower than budget by $1.8 million year to date. FY 2026 has seen higher-than-expected load demand, which reduced surplus energy sales (down $3.5M). Revenue from RA sales as well was also higher than expected (up $2.2 M). Based on these actuals and the forecasted supply costs for the remainder of the year, which differ from the estimated April and May costs shown in the figure below, FY 2026 net supply cost is projected to end the fiscal year $7.65 M below the adopted budget.
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Figure 1: FY 2026 Q3 Net Supply Cost Forecast vs. Actuals Figure 2: FY 2026 Q1 – Q3 Adopted Budget vs Actual Net Supply Cost ($K)
1.1.2 Hydroelectric Conditions
The City receives power from two hydroelectric projects, the Calaveras project and the Western Base Resource contract for federal hydropower from the Central Valley Project.1 The watershed for Western 1 The Calaveras project is a hydropower project located in Calaveras County that is maintained and operated by the Northern California Power Agency on behalf of the City and other project participants. The City is also one of several public entities with contracts with the Western Area Power Administration for “Base Resource” electricity, which is the hydroelectric power available from the federal government’s Central Valley Project (operated by the Bureau of Reclamation) after accounting for power used for Central Valley Project operations and power delivered to certain “preference” customers.
Adopted
Budget
Back
Office
Actual
Variance Variance %
Jul-25 4,553 4,184(368) -8.1%
Aug-25 6,431 6,651220 3.4%
Sep-25 6,714 5,590(1,124) -16.7%
Oct-25 8,346 6,978(1,368) -16.4%
Nov-25 8,709 9,8361,127 12.9%
Dec-25 8,786 8,222(563) -6.4%
Jan-26 9,490 6,342(3,149) -33.2%
Feb-26 8,193 7,299(894) -10.9%
Mar-26 8,446 8,49953 0.6%
Total 69,667 63,601 (6,066) -8.7%
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hydropower is primarily in the northern end of California, while the watershed for the Calaveras project is in the Central Sierras.
Following the average water year of 2024-2025, reservoir levels across the state have maintained slightly above average levels. As of April 21 st, precipitation in northern California is about 1% above average for this time of year, while central California is 11% below average. Hydro generation levels are currently projected to be roughly average for FY 2026 and FY 2027, with total output of about 96% of the long-term average level for FY 2026 through FY 2028. As shown in Figure 3, hydropower generation has high uncertainty beyond roughly six months from the forecast date.
Figure 3: Hydro Generation: FY 2026-2028 Actuals & Projections (GWh) Figure 4: Hydro Generation: FY 2027-2029 Uncertainty (GWh)
1.1.3 Renewable Energy Procurement
Utilities staff is currently working with NCPA to negotiate a new power purchase agreement (PPA) for a co-located solar and storage project. This effort is the result of a request for proposals (RFP) that NCPA issued late last year. Staff will update the UAC in the coming months as this effort proceeds.
1.2 Capital Improvement Plan Status
The following capital projects are currently in progress or have been recently completed:
FY 2026 FY 2027 FY 2028
Calaveras Generation (GWh) 106 113 97
Western Generation (GWh) 244 259 259
Total Hydro Generation (GWh) 350 372 356
% of Long-term Average Total 93% 99% 95%
Long-term Average Total Hydro (GWh) 376 376 376
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EL-17001 (East Meadow Circles 4/12kV Conversion)
This project is scheduled to be completed in several phases. Phase 1 is completed. Phase 2 engineering design is completed. Phase 2 construction is expected to be completed December 2026.
EL-10006 (Rebuild Underground 24)
This project is in the design phase, which is scheduled to be completed in December 2026.
Construction will be completed by December 2027.
EL-16000 (Rebuild Underground 26)
The engineering design for this project is currently in progress. The project will be completed in multiple phases and will take additional years to complete. All engineering design phases are expected to be completed by December 2026. Construction is expected to be completed by December 2028.
EL-19004 (Wood Pole Replacement)
CPAU staff and contract consultants are continuously working on pole replacement designs for construction. 44 poles were replaced to date in FY 2026. The replacement of poles will continue to be prioritized in the Grid Modernization areas.
EL-16003 (Substation Physical Security)
This project is scheduled to be completed in two phases. Substation Security lighting and camera contract was awarded in June 2022. The installation for the first phase was completed for 7 of the 9 substations in December 2024. The next phase of the Substation Physical Security Project is pending the Colorado Master Plan. The Colorado Master Plan incorporates and coordinates all planned construction work at Colorado Substation, and the Physical Security work is expected to start in FY27.
EL-17002 (Substation 60kV Breaker Replacement)
This project funds the purchase and replacement of both 60kV and 12kV substation circuit breakers that are reaching the end of their useful life expectancy. Council approved the purchase request for the sixteen 12kV circuit breakers and eight 60kV breakers. The installation of the 12kV breakers is complete. The project to purchase the eight 60KV breakers was approved by City Council on May 20, 2024. The engineering design and installation of the 60kV breakers has been postponed pending the results and recommendations of a Master Plan for Colorado Substation, a Plan that coordinates all planned work in the Substation and is expected to result in a re-design of the 60KV Buss to either a Breaker-and-a-Half or Ring Buss scheme. The final Master Plan from the City's consultant Ampirical is expected to be delivered by the end of FY26, and the tentative schedule for the Colorado Substation re-design is expected to commence in FY27.
EL-21001 (Foothills Rebuild)
This project will rebuild approximately 9 miles of overhead line in Foothills Park, as necessary to lower the risk of wildfires due to overhead electric lines. Staff has completed 39,200 feet of substructure work and de-energized an equivalent amount of overhead electric lines.
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installed and energized. Phase 4 construction has completed 20,700 feet of the planned 22,000 feet. Phase 4 undergrounding and has slowed due to winter weather. Phase 5 substructure installation along Arastradero road is 100% completed with all substructure and cable installed and energized. Phase 4 undergrounding is planned for completion this summer and overhead lines (currently de-energized) will be removed on all phases as weather permits. All work is expected to be complete before the end of fiscal year 2026.
EL-02011 (Electric Utility Geographic Information System (GIS)) The project scope includes on-going maintenance/technical support of the existing GIS system and implementation of the new GIS platform, ESRI. IT is developing a new ESRI based, asset management system Electric Engineering and Operations that will be completed by July 2026.
EL-24000 (Grid Modernization)
The Pilot project was completed April 2025. Sixty-six poles have been replaced in the Grid Modernization Pilot area. Additionally, 908 homes in the Pilot area are ready for electrification.
The overhead design and material procurement is in progress for the remainder of Phase 1. This includes an additional ~3,500 homes within boundaries of Embarcadero Road, West Bayshore Road, Loma Verde Ave, Middlefield Road, Oregon Expressway, and El Camino Real. The scope remains the same as the Pilot area, which is to upgrade and install new transformers, overhead wires, poles and attachment equipment. The target date for Engineering design is December 2026 and construction to follow (12-18 months). Additionally, as Engineering staff review customer service upgrade requests and maintenance projects throughout the City, opportunities for infrastructure upgrades are being designed and constructed. An additional 24 transformers have been designed for upgrade or new install, which makes 150+ homes ready for electrification outside of the Phase 1 area. East Meadow Circles is also currently in construction which will convert the line voltage to 12kV and electrify 289 homes by July 2026.
1.3 Reliability
CPAU tracks electric power outages through industry recognized indices; System Average Interruption Duration Index (SAIDI), System Average Interruption Frequency Index (SAIFI), and Customer Average Interruption Duration Index (CAIDI). The chart below summarizes outage indices for Palo Alto. With this quarterly update, staff is presenting outage indices and discussion in Appendix C.
1.4 Financial Health
Below is a summary of the financial position for the electric utility.
1.4.1 Sales Forecasts vs. Actuals
Actual electric sales volumes through FY 2026-Q3 were 6.1% higher than forecast (653.9 GWh), driven by continued consumption from the top ten commercial customers, largely reflecting increased data center demand. Overall, actual sales revenues through FY 2026-Q3 exceeded the Financial Plan by 1.5%.
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Figure 5: Electric Sales Volume (kWh), FY 2026-Q3
Figure 6: Electric Sales Revenue ($), FY 2026-Q3
1.4.2 Financial Position
In FY 2026, total revenues are expected to be about $16.6 million, or 7% higher than budgeted, due to load growth and higher-than-expected wholesale revenues. Total expenses are expected to be about $27.5 million, or 12% higher than budgeted, due to higher supply purchases and increased capital investment funding, including grid modernization, partially offset by lower operations costs. Staff will update the estimated numbers with actual figures in the Q4 report.
6.1%
1.5%
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Figure 7: Budget vs Current Estimate ($1,000s), FY 2026 Budget Estimated Var. Var. %
Sales Revenue 190,025 199,175 9,151 5%
Other Revenue 49,870 57,326 7,456 15%
Revenue 239,895 256,501 16,607 7%
Supply Purchases 127,961 134,879 6,919 5%
Operations (w/o CIP) 91,434 81,766 (9,668) -11%
CIP 5,332 35,591 30,259 567%
Expense 224,727 252,236 27,509 12%
Net (Cost)/Benefit 15,168 4,265 (10,902) -72%
Staff proposed a 6% rate increase in FY 2027 in the March 31 UAC meeting3, which is the same as projected in the FY 2026 Financial Forecast4 presented to Council on June 16, 2025. Staff projects the Electric Utility’s Operations Reserve will total $41.6 million at end of FY 2026, which is below the target level of $49.3 million. Staff expects that debt will be issued in FY 2027 to offset a portion of the grid modernization costs already spent and planned in FY 2026 – FY 2029. At the Finance Committee meeting on April 21, 2026 5, the Finance Committee approved staff’s proposal, with a modification to increase the $6 million to the hydro stabilization reserve over a two-year period with a corresponding reduction in the rate increase from 6% to 4.5% in FY 2027. This revised proposal was approved unanimously. The City Council approved the revised Electric rate proposal in June 2026.
3 Staff Report 2512-5641: https://recordsportal.paloalto.gov/WebLink/DocView.aspx?id=87018&dbid=0&repo=PaloAlto 4 Attachment D, Exhibit 1 to Staff Report 2411-3776, June 16, 2025:
https://www.paloalto.gov/files/assets/public/v/2/agendas-minutes-reports/agendas-minutes/city-council-agendas- minutes/2025/june-16/rates-attachments/finalized-attachment-d-exhibit-1-fy26-electric-utility-financial-forecast-and-cip- detail.pdf
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2 Gas Utility
The City’s gas utility serves all residential and non-residential gas demand in Palo Alto. The City maintains and operates a system of medium-pressure gas lines for delivering gas but does not operate any transmission lines. Costs for the gas utility are split approximately two thirds for the operation, maintenance, and capital improvement and one third for the cost of the gas commodity, PG&E gas transmission, compliance with the State’s Cap and Trade Program and the City’s Carbon Neutral Gas Program.
2.1 Gas Supply and Transmission
After experiencing a notable price spike during winter 2022-2023, natural gas prices in California have seen a significant decline, returning to more typical ranges. This shift can be attributed to several factors, including milder temperatures and above average gas storage levels in the West. The combination of these factors has kept natural gas prices low, and we do not expect a significant price spike to occur in the near future. The chart below shows Palo Alto’s gas commodity rates from September 2021 through March 2026.
Figure 8: Palo Alto Gas Commodity Rates
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2.1.1 Actual and Forecasted Supply Costs
Actual supply costs ($11.42 million) through FY 2026-Q3 were approximately 32% lower than budgeted ($16.88 million) in the FY 2026 Financial Forecast. This variance was primarily driven by historically low natural gas prices, which remained well below initial forecasts. PG&E benchmark prices at Citygate and Malin were projected at $4.74 and $4.14 per MMBtu through the third quarter of 2026, while actual average costs have been substantially lower at $3.28 per MMBtu.
Figure 9: Gas Supply Costs ($), Actual vs Budget, FY2026-Q3
2.2 Capital Improvement Plan Status
The following capital projects are currently in progress:
GS-15000 – GMR 25 (Gas Main Replacement 25)
The GMR 25 project will replace approximately 26,000 linear feet of gas mains on Ross Road from Colorado Avenue to East Meadow Drive and surrounding streets, as well as North and Southampton Drive and surrounding streets, and Walter Hays Drive and surrounding streets.
Construction on the project began in March 2026 and is anticipated to finish in mid-2027. Currently the contractor is installing pipelines in the North and Southampton Drive and surrounding streets area. A $16.5 million reimbursable grant from the Pipeline and Hazardous Material Safety Administration was awarded for this project.
GS-25001 – Gas Line Repair at Arastradero Creek
During the 2023 winter storms, portions of Arastradero Creek eroded away and exposed a gas pipeline crossing Arastradero Creek. This project completed the data gathering phase and will begin the design and permitting phase of the work. A permanent solution was presented to the permitting agencies (Water Board, CDFW, USACE) in August 2025 for input. Construction on this project is anticipated in mid-2027 through mid-2028. All work will take place in the Pearson Arastradero Preserve.
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GS-16000 – GMR 26 (Gas Main Replacement 26)
The GMR 26 project will replace approximately 26,000 linear feet of gas mains in the Midtown, Palo Verde, Fairmeadow, and Evergreen Park neighborhoods. The project is currently in design with construction anticipated in mid-2027.
Operational Fund – Historic Crossbore Inspection Project The Cross Bore Phase IV Project includes a total of 963 sewer laterals located throughout the City.
The project inspections are on-going and are being performed by the City’s Operational crew. The laterals that cannot be completed by city crews, will be inspected by a contractor at a later date. A total of 271 laterals have been inspected by city crews, with 153 confirmed to be free of cross bores, and 118 more presenting more complex situations requiring reinspection with specialty equipment, which may be completed by a contractor or staff with additional training. A lateral launch camera may be required for the reinspection, which Operations staff recently acquired.
Training was completed in December 2025. 692 sewer laterals remain to be inspected by city crews and will continue in 2026 when new hourly employees are anticipated to be hired.
Figure 10: Sewer Lateral Inspection
2.3 Reliability
The City of Palo Alto tracks all gas service interruptions. A summary chart of these interruptions can be found below. Gas service interruptions are usually due to repairs of broken or damaged gas services and mains. This kind of damage is often caused by excavation by outside parties digging in the City. In Q1 FY25, staff recorded higher numbers in gas service interruption tracking due to the division allocating more resources to resolve existing gas leaks. These leaks are small and are monitored; however, expected changes in gas legislation will require them to be resolved more quickly. The gas division has been proactively working to meet upcoming compliance goals before the new rules go into effect. In Q2 FY 2026 there was an increased number of gas dig-ins by outside contractors. These were responsible for 7 of the 11 outages and 189 of the customers affected. In Q3 FY 2026 the total minutes increased from Q2 due to unplanned gas leaks and repairs needed to resolve these leaks. 153
118
692
Total Sewer Laterals Completed
Total Sewer Laterals Incomplete
Total Addresses remaining to be
Inspected
963 sewer laterals for Inspection
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Figure 11: Gas Service Interruptions, FY 2025 to FY 2026 FY 2025 FY 2026
Gas Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Number of Breaks 13 7 6 6 4 11 9
Total Minutes 1860 1205 1050 930 300 1063 1770
Customers
Affected 135 48 23 40 17 200 202
2.4 Financial Health
Below is a summary of the financial position for the gas utility.
2.4.1 Sales Forecasts vs. Actuals
Actual gas sales volumes through Q3 2026 were approximately 8.8% below forecast, resulting in revenues
20.6% below budget, as gas market prices remained lower than anticipated. In addition, milder-than- normal winter conditions in the Palo Alto area contributed to reduced heating demand, with approximately 57% of days in Q3 2026 above historical temperature norms and no corresponding increase in extreme cold days.
Figure 12: Gas Sales Volume (Therms), FY 2026 Q3
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Figure 13: Gas Sales Revenue ($), FY 2026 Q3
2.4.2 Financial Position
At the end of FY 2025, the Gas Utility’s Operations Reserve was $9.7 million, slightly above the minimum guideline level of $8.6 million (this balance includes $8.57 million held in the CIP Reappropriations Reserve to be reimbursed through a grant, and $5.4 million temporarily recorded in the Operations Commitments Reserve due to an administrative oversight, which should have been placed in Operations Reserve).
Gas sales revenue in FY 2025 was about $4.7 million below forecast due to lower usage. Although supply purchases were $3.2 million below forecast and distribution expenses were $0.6 million lower, these savings did not fully offset the revenue shortfall. CIP expenses exceeded projections by $6.8 million, funded largely through the CIP Reappropriation and Commitments Reserve for Gas Main Replacement Project 24. In FY 2026 and FY 2027, staff projects the Operations Reserve will be impacted by lower sales revenues from lower consumption and higher CIP expenses. Staff projects the Gas Utility’s Operations Reserve will total $12.1 million at end of FY 2026.
As a result, staff proposed a 9% overall increase for FY 2027 in the March 31 UAC meeting 9, assuming supply charges remain unchanged, which is higher than the 6% overall increase projected in the FY 2026 Financial Forecast10 presented to Council on June 16, 2025. Commissioners voted 4-3 to recommend an overall rate increase of 7% for FY 2027, instead of the staff proposed overall rate increase of 9%, and identify potential options to address the resulting gap, including reducing the General Fund Transfer and tapping reserves. At the April 21 Finance Committee meeting 11, staff proposed a 9% overall increase for FY
9 Staff Report 2512-5641: https://recordsportal.paloalto.gov/WebLink/DocView.aspx?id=87018&dbid=0&repo=PaloAlto 10 Attachment D, Exhibit 1 to Staff Report 2411-3776, June 16, 2025:
https://www.paloalto.gov/files/assets/public/v/2/agendas-minutes-reports/agendas-minutes/city-council-agendas- minutes/2025/june-16/rates-attachments/finalized-attachment-d-exhibit-1-fy26-electric-utility-financial-forecast-and-cip- detail.pdf
11 Staff Report 2512-5607: https://recordsportal.paloalto.gov/WebLink/DocView.aspx?id=87765&dbid=0&repo=PaloAlto -20.6%
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2027 and outlined alternative options for lowering the rate increases. A Committee member proposed deferring the staff’s rate reduction options, particularly reducing and extending the gas spike mitigation collection, for consideration by the full City Council. However, another Committee member expressed concern about the risk of future gas commodity spikes and preferred to maintain the current pace of rate increases as proposed by staff. The Finance Committee approved staff’s proposal, which passed on a 2-1 vote. The City Council approved the 9% overall gas rate increase in June 2026.
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3 Water Utility
The Water Utility serves water to virtually all Palo Alto residential and non-residential customers. All potable water in the City is from the San Francisco Public Utilities Commission (SFPUC) Hetch Hetchy Water System. This system delivers high quality water from the Sierra Nevada and uses no pumping to deliver water to the City. Palo Alto uses a small amount of recycled water for irrigation of the Municipal Golf Course and a few other sites near the Regional Water Quality Control Plant. The City also maintains a system of reservoirs, wells, and emergency interties that enable Palo Alto to serve water during an interruption of the Hetch Hetchy system. Costs for the Water Utility are split approximately half for the operation, maintenance and periodic replacement of Palo Alto’s water system and half for the costs of the water purchased.
3.1 Water Supply and Transmission
As of April 1, 2026, cumulative Hetch Hetchy Weather Station precipitation for Water Year (WY) 2026 was 93% of median, and the Regional Water System total storage operated by the San Francisco Public Utilities Commission (SFPUC) was at 93% of maximum storage and the Water Bank was full. Regional Water System Storage is 1,387 Thousand Acre Feet (TAF) as of April 1, 2026.
March 2026 brought unusually hot and dry conditions in the Tuolumne River Basin, accelerating snowmelt and producing earlier-than-normal runoff and elevated river flows. Even so, reservoir operations are being actively managed to maintain seasonal targets, and all upcountry reservoirs are projected to reach maximum storage by the end of runoff, with the Water Bank expected to remain full. Overall, current storage conditions remain strong, supporting a reliable water supply outlook for the year. The figure below shows current water year 10-Station Snow Pillows Index as of April 1 (red line), based on real-time snow water equivalent measurements in the Tuolumne Basin. Historic median, wet and dry years, and previous water year are included for comparison purposes.
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Figure 14: Current Water Year 10-Station Snow Pillows Index The figure below shows water usage for the South Bay/East Bay (including Palo Alto) compared to several benchmarks, including 2015, 2025 and a five-year average. For the South Bay/East Bay region as well as systemwide, demand for 2026 has been higher than the average of the last five years, reflecting the unusually hot and dry conditions in March.
Figure 15: SFPUC Water Deliveries
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California Senate Bill 555, adopted in 2015, requires all California water suppliers to submit annual validated water loss audits to the Department of Water Resources. These audits are prepared and validated in accordance with the American Water Works Association M36 Manual for Water Audits and Loss Control Programs. The audits help identify the scale and sources of water loss and guide operational and capital investments that improve the efficiency of water production and delivery.
Each year the City tests its water supply meters and more than one hundred customer meters for accuracy. Meters with low or no flow are identified and replaced to maintain accurate accounting and billing. Staff issued a notice of award to ME Simpson to conduct an acoustical leak detection survey of the water distribution system, with field work expected to begin in Spring 2026.
Water loss audits are prepared on a calendar year basis. The audit for calendar year 2024 was submitted to the Department of Water Resources before the January 1, 2026, deadline. Water loss results of previous audits are listed below. Water losses are calculated as the difference between water supplied and consumed. Apparent losses include all types of inaccuracies associated with customer metering and may include water theft and data handling errors, and real losses include all pipe leaks from the public distribution mains, service lines, and tank storage.
CY2022
oApparent Losses: 16.1 gal/connection/day
oReal Losses: 6.7 gal/connection/day
CY2023
oApparent Losses: 16.7 gal/connection/day
oReal Losses: 4.0 gal/connection/day
CY2024
oApparent Losses: 11.6 gal/connection/day
oReal Losses: 6.8 gal/connection/day
3.2 Capital Improvement Plan Status
The following capital projects are currently in progress:
WS-09000 – Water Tank Seismic Upgrade and Rehabilitation The seismic water system improvement project will be completing an engineering assessment and seismic analysis of two 60-year-old, one-million-gallon, welded steel tanks located near the San Andreas Fault. These are the last two water storage tanks in the distribution network yet to be seismically retrofitted. The tanks also require rehabilitation and new coatings. The engineering assessment will be completed by Fall of 2026. Staff will solicit services for engineering design, and the anticipated project construction start date for rehabilitation is January 2030.
WS-16001 – WMR 30 (Water Main Replacement 30)
The WMR 30 project is currently in the design phase and will replace approximately 2,700 linear feet of water main on Stanford Avenue and Channing Avenue. The anticipated project construction start date is in Spring of 2027.
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WS-19001 – WMR 31 (Water Main Replacement 31)
The WMR 31 project is currently in a preliminary scoping phase. The project will replace approximately 4,000 linear feet of water main. This pipe replacement project is being coordinated with the Gas Replacement Program. A combined water and gas replacement project is anticipated to start in Summer of 2028.
WS-11003 – Water Distribution System Improvements
Arastradero Creek Relocation: During the 2023 winter storms, a section of Arastradero Creek eroded away and exposed a gas pipeline crossing. The gas line is in close proximity to a large diameter water pumping line. This project will relocate the water pumping line to a location out of the creek bed and eliminate the undermined creek crossing. The project is currently in design and permitting phase of the work. A preliminary design for the relocated water line has been completed. Work to relocate the pipeline is anticipated for July 2028. Water System Leak Detection: Leaks are repaired when they reach the surface, but small leaks can remain hidden. This project will use acoustical leak detection to identify and map small, unreported leaks in the distribution system. The data will guide future repairs and pipe replacement priorities. Leak detection began in April of 2026 and will finish by Summer of 2026, with additional leak detection repeated in 2027 and 2028 under a 3-year contract, as needed. This approach follows state guidance.
Water HDPE and Water Standard Updates: The Plastic Pipe Institute released a new technical paper for engineering and design of in-line anchor blocks for new HDPE pipe. This project will prepare new engineering calculations and standard details. HDPE is the primary pipe material for all new water pipes in Palo Alto. These engineered details will be used in all water main replacement projects within the City. Calculation and new details are expected to be completed by Summer of 2026.
WS-11004 – Water System Supply Improvements
Risk and Resilience Assessment & Emergency Response Plan: In compliance with the Safe Drinking Water Act Section 1433 and the America’s Water Infrastructure Act Section 2013 an update to the Risk and Resilience Assessment was completed in December of 2025 and certified with the U.S. EPA before the deadline. An update to the Emergency Response Plan (“ERP”) for the water utility began in January of 2026. The first draft of the ERP was completed in April of 2026 and the final plan will be completed and certified by June of 2026. Water System Master Plan: The previous full system water system master plan was completed in 1999, and a Master Plan of the water distribution piping network was completed in 2015. A new Water System Master Plan will evaluate the City’s existing water distribution system, demands, and maintenance needs. The plan will develop a recommended and prioritized list of capital improvement projects. Professional engineering services to prepare the plan will be solicited by Spring of 2026.
Well Improvements: Palo Alto owns eight wells. The pump at the El Camino Park Well failed and was removed, rebuilt, and returned to service. About one hundred eighty feet of column pipe was replaced with new 10-inch steel pipe, and the pump received a new power cable, new coatings, and a new intake strainer. The well casing was inspected and cleaned before reinstallation.
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backup power needs, with an informal review completed in Winter 2025 to identify generator locations, new power cables, and other well site improvements. Generator sizing calculations and a strategic plan to provide back-up power generation to each well site will be completed in Summer of 2026.
Wildfire Hardening Improvements: Wildfires can contaminate potable water and damage water system infrastructure. The Office of Emergency Services, with input from water engineering staff, updated vegetation removal plans and wildfire hardening buffers around water facilities in Fire Hazard Severity Zones. Professional services will be solicited in 2026 to evaluate vulnerable facilities in these zones and recommend improvements.
Appurtenances and Large Meter Replacements: Small water meters are routinely replaced and monitored for low and no flow errors. Meters three inches and larger serve critical customers and require more complex testing and replacement. Several large meters have been identified for replacement through the AMI program, which will improve accuracy and data quality for annual water audits and loss reduction efforts. A solicitation for construction services is planned for Spring 2026 and will include on call work to replace aging sampling stations and air release valves. Water Storage Improvements: The City of Palo Alto owns and maintains seven water storage reservoirs, two of which need improvement or replacement. A new PAX water tank mixer has been purchased to replace the mixer for the Montebello Tank site after the water tank mixer failed. The Boronda Tank roof has multiple indentations where water collects and ponds on the roof. Construction services will be solicited in 2026 to mitigate the roof ponding in accordance with State Water Resources Control Board requirements.
Water Supply Connections: Palo Alto receives water through five connections to the San Francisco Public Utility Commission Regional Water System. Three of the connections tie into the 36-inch Palo Alto Pipeline along El Camino Real. The supply connection at California Avenue and El Camino Real was reconstructed in 2024, providing improved control of water supply pressure.
Engineering and operations plan to adjust valving from the new station to serve a second pressure zone and strengthen system resiliency. This project will also add communication and control devices and pipe supports. Operations have improved water quality monitoring with new on demand chlorine analyzers installed at the supply connections. Automatic Flushing Systems: Most storage in the distribution network is reserved for emergency supply. About six and a half million gallons are stored west of El Camino Real in tanks built in the 1950s and 1960s, including a series of five tanks and pump stations from Arastradero Road to Montebello Road. Water in these tanks and in the main City reservoirs is routinely cycled into the system to maintain freshness, and staff flush low-demand areas to manage water age. Operations and engineering have identified potential sites for automatic flushing systems that can be coordinated with tank down flush cycles and seasonal water quality needs. A pilot is planned for 2026.
WS-13002 – Water General Equipment/Tools
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oNew clamp-on flow monitoring device
oNew line stopping equipment and replacement components WS-80013 – Water System Customer Connections
This project is a permanent, ongoing project. The project includes improvements required to provide service to new customers and customers requesting expanded service. Work includes new main extensions, valves, domestic services, meters on upgraded services, backflow devices, fire services, and fire hydrants.
WS-80014 – Water Service and Hydrant Replacement
This project is a permanent, ongoing project. The project replaces system control valves, deteriorated services, and replacing fire hydrants.
WS-80015 – Water Meters
New meters have been purchased for the AMI program, which is currently 90% complete. In 2026, staff will purchase all of the new large meters of 3” and larger, for the Appurtenance and Large Meter Replacement project work described above in the WS-11004 section.
3.3 Reliability
The City of Palo Alto tracks all water service interruptions. A summary chart of these interruptions can be found below. Water service interruptions are usually due to repairs of broken or damaged water services and mains. The number of water service interruptions increased in Q3, although there is no systemic cause. Five incidents in Q3 affected more customers than usual and a few were longer shutdowns than usual. For example, one break affected 25 people with an outage of 600 minutes.
Figure 16: Water Service Interruptions, FY 2025 to FY 2026 FY 2025 FY 2026Water
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Number of Breaks 8 7 7 8 6 7 12
Combined Minutes 510 1250 795 960 1200 1295 2308
Customers Affected 127 99 61 146 95 114 162
Water distribution network hydraulic capacity design includes sizing pipelines, pump stations, pressure- regulating valves, tanks and reservoirs to meet water demand and system flow needs. Fire-flow demand plus maximum day demand is an important limiting demand condition for pipe sizing and system operation. In 2025, the Fire Department and Water Transmission Operational team completed multiple large, multi-hydrant fire flow tests throughout the two largest pressure zones. The results indicated stronger than expected water system performance, and it improved coordination between the Fire Department and Water utility.
The City of Palo Alto’s water system has seven emergency interties with neighboring water agencies.
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with the City of Mountain View, and two interties with Purissima Hills Water District. The City of Palo Alto and the City of East Palo Alto maintain an emergency intertie on the University Avenue bridge over the San Francisquito Creek. The City of East Palo Alto completed the first phase of the reconstruction of the emergency intertie. The project improved reliability and flows of the emergency intertie. The General Manager of Purissima Hills Water District requested an additional emergency intertie located near the intersection of Page Mill and Old Page Mill Road. City of Palo Alto and Purissima Hills Water District engineering teams are analyzing benefits.
3.4 Financial Health
Below is a summary of the financial position for the water utility.
3.4.1 Sales Forecasts vs. Actuals
Actual water sales volumes through FY 2026 Q3 were 3.6% lower than forecasted, and actual water sales revenues were about 3.9% lower than budgeted. However, warmer-than-expected weather in March drove usage above budget.
Figure 17: Water Sales Volume (CCF), FY 2026 Q3
-3.6%
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Figure 18: Water Sales Revenue ($), FY 2026 Q3
3.4.2 Financial Position
At FY 2025 year-end, the Water Operations Reserve balance was $16.35 million, which is within the guideline range. Additionally, the Rate Stabilization Reserve had $4 million remaining at the end of FY 2025. In March 2026, staff presented to the Utilities Advisory Commission (UAC) 15 and the Finance Committee16 a 12% distribution rate increase and an 8% commodity rate increase, which is equivalent to a 10% overall system average increase. The UAC recommended (vote: 5-2) an overall 8% rate increase for FY 2027 and reducing the amount going to the operation reserves by $1.2 million from the proposed amount. The Finance Committee (vote: 3-0) agreed with that recommendation. On April 28, 2026, the San Francisco Public Utilities Commission adopted a wholesale rate (commodity rate) increase of 7.4% for FY 2027. The City Council approved the overall 8% rate increase in June 2026, which reflects an 8.3% distribution rate increase and a pass-through 7.4% commodity rate increase. 15 Staff Report 2512-5639: https://recordsportal.paloalto.gov/WebLink/DocView.aspx?id=86697&dbid=0&repo=PaloAlto 16 Staff Report 2512-5604: https://recordsportal.paloalto.gov/WebLink/DocView.aspx?id=86855&dbid=0&repo=PaloAlto -3.9%
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4 Wastewater Utility
The Wastewater Utility includes the system of sewer pipes that collect and transport wastewater to the Regional Water Quality Control Plant (RWQCP) operated by the City of Palo Alto under a partnership agreement with several surrounding communities, as well as Palo Alto’s share of the cost of operating the RWQCP. The RWQCP provides treatment and disposal of wastewater for Palo Alto. Costs for the Wastewater Utility are split approximately half for the operation, maintenance and periodic replacement of Palo Alto’s sewer collection system and half for the costs of wastewater treatment at the RWQCP.
4.1 Wastewater Treatment Updates and Capital Planning Status The RWQCP, operated by Palo Alto's Public Works Department, provides wastewater treatment to Palo Alto, Mountain View, Stanford, Los Altos, East Palo Alto, and Los Altos Hills. The Palo Alto Wastewater Collection Utility contributes approximately 36% of the costs in FY 2025. Capital costs, driven by necessary upgrades to aging equipment and changing environmental regulations, are a major factor in cost increases. With plant equipment over 50 years old, significant rehabilitation and replacement are required to maintain safe, compliant wastewater treatment operations.
4.1.1 Treatment Cost Trends
RWQCP staff project a 10% average annual increase in net treatment costs paid by Palo Alto’s Wastewater Utility from FY 2027 to FY 2031. The main drivers are capital projects, materials, and debt service (including loan repayments). Treatment capital expenses, including debt service, are expected to rise by about 29% per year on average to fund equipment replacement and major upgrades. The figure below outlines Palo Alto’s share of estimated net treatment costs, including treatment operations costs, pay-as- you-go CIP expenses, existing debt service, and planned debt service payments shown in the "Planned Debt Service" bar.
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Figure 19: Palo Alto’s Share of Wastewater Treatment Expenses Note: Total wastewater treatment expenses (green line) shown above are presented net of projected Valley Water grant funding While operations costs make up the bulk of treatment expenses, they are growing slower than planned debt service. The largest increase in planned debt service in FY 2030 is primarily due to the debt service repayments beginning on the Secondary Treatment Upgrades, which is an estimated $193 million capital project to remove nutrients from the wastewater (denitrification) in order to meet upcoming regulatory requirements. Nutrient removal is important to reduce algae blooms that kill fish and other aquatic life.
The Secondary Treatment Upgrades project will also replace critical, aging mechanical and electrical equipment.
In June 2024, the Council approved a Cost-Sharing Agreement with the Santa Clara Valley Water District for the Guiding Principle 5 grant program, which funds future RWQCP19 projects. The program supports communities like Palo Alto, where taxpayers pay State Water Project property taxes but rely on non-Valley Water supplies for most of their water. Staff estimates a total of $11.2 million in grant funding for Palo Alto’s share of approved RWQCP projects, directly benefiting local customers. Four upcoming projects are eligible for this funding:
Outfall Line Construction
Headworks Facility Replacement
12kV Electrical Power Distribution Loop Improvements
Joint Intercepting Sewer Rehabilitation
In FY 2025, approximately $2.8 million in CIP expenses were reimbursed through this funding, and about $3.9 million in reimbursements are anticipated in FY 2026. 19 Staff Report 2404-2877, June 3, 2024 https://portal.laserfiche.com/Portal/DocView.aspx?id=72164&repo=r-704298fc
12,734
5%
13,387
24%
16,625
7%
17,833
2%
18,200
32%
24,101
3%
24,861
-
5,000
10,000
15,000
20,000
25,000
30,000
2025 2026 2027 2028 2029 2030 2031
Actuals Projected
Net Expenses ($000)
Fiscal Year
Treatment O&M Pay-as-you-go CIP ExpensesExisting Debt Services Planned Debt Services Total and YOY%
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4.1.2 Regional Water Quality Control Plant Capital Planning Status The RWQCP continues to undergo significant capital improvements to address aging infrastructure, respond to evolving regulations, and meet future capacity needs. These efforts are guided by the Long- Range Facilities Plan (LRFP), which was originally adopted in 2012 and is now undergoing a comprehensive update, anticipated for completion in 2027. The following table summarizes these ongoing projects and provides their status and costs. Palo Alto’s share of these costs is captured in Figure 17 in the “Planned Debt Service” category.
Figure 20: Current RWQCP Capital Work In-Progress (as of March 31, 2026) The RWQCP plans to fund these capital projects through a combination of mechanisms including pay-as- you-go, State Revolving Fund loans, and revenue bonds. One of the largest projects is the Headworks Facility Replacement, which will upgrade the raw sewage pumping systems along with bar screens and grit removal equipment to improve reliability and protect downstream processes. As part of a broader campus-wide approach to meet future space needs, the RWQCP is evaluating the purchase of neighboring properties and, following Council approval of a 20-year lease agreement in May 2025, has initiated design and construction of tenant improvements at a leased facility located at 2470 Embarcadero Way to provide necessary laboratory and office space.
4.2 Collection System Capital Improvement Plan Status
The following capital projects are currently in progress:
WC-15002 – Wastewater System Improvements - Sewer Master Plan Study The Master Plan Study evaluated the City’s existing wastewater collection system, flows, and flow patterns to determine the adequacy of the system’s hydraulic capacity to meet current and anticipated future wastewater flow demands and develop a recommended prioritized Sewer Main rehabilitation plan. The project kicked off in December 2023. The project was completed in December 2025.
WC-15002– Wastewater System Improvements and WC-13002 – Lodge/Foothills Lift Station Emergency Back-up Generator Purchase
The Lodge/Foothills Lift Station (LFHLS) experienced pump failure of Pump #1 and partial failure of Pump #2. Pump #1 was removed, repaired, and reinstalled. Pump #2 was removed and transported to vendor to repair. Pump #2 was repaired and installed in December 2025.
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lift station pumps. An undersized generator at a lift station causes severe damage to the pumps by failing to provide enough starting wattage, leading to low voltage (brownout conditions). This causes excessive heat, overloaded motors, premature mechanical seal failure, and burnout. The generator was delivered to the City on December 24, 2025. The City has finalized the DMV Special Equipment registration of this generator in February 2026. The City is now in the process of obtaining a PERP permit (Portable Equipment Registration Program) and schedule a training session for our City staff to safely operate this new generator in April 2026. Shortly after the City will begin mobilization to the Lodge/Foothills Lift Station location.
WC-15002– Wastewater System Improvements – Arastradero Creek Wastewater Relocation During the 2023 winter storms, a section of Arastradero Creek eroded away and exposed a gas pipeline crossing. The gas line is in close proximity to a sanitary sewer main. This project will relocate the sanitary sewer main to a location out of the creek bed and eliminate the undermined creek crossing. The project is currently in design and permitting phase of the work. A preliminary design for the relocated sanitary sewer main has been completed. Work to relocate the pipeline is anticipated for July 2028.
WC-20000 - SSR 32 (Sanitary Sewer Replacement 32)
The SSR 32 project is currently in the planning phase and will replace approximately 26,000 lineal feet of sewer mains, laterals, and manholes. Currently, the project is in the process of being rescoped based on the recently received Sewer Master Plan which identifies prioritized improvements based on rehabilitation and capacity issues. Design will restart in FY27 for construction in FY28.
WC-26001 – 3-Year CCTV Sanitary Sewer Main Inspection
The City has created a Request for Proposal (RFP) for a three-year program to Closed Circuit Television (CCTV) Sanitary Sewer Mains. The project will incorporate CCTV pipeline inspections to approximately 225,000 linear feet of Sanitary Sewer Main over a three-year duration at an annual rate of approximately 75,000 linear feet per year. Results of the project will be used to identify defective Sanitary Sewer Mains which will be incorporated into future SSRs to rehabilitate and replace Sanitary Sewer Mains. The project has an anticipated start date in October 2026.
WC-99013 – Sanitary Sewer Lateral Rehabilitation and Replacement The City is in the process of developing an IFB for a three-year program to rehabilitate or replace Sanitary Sewer Lower Laterals (Lower Laterals). City staff has identified approximately 210 Lower Laterals that will be rehabilitated or replaced over a three-year period at an annual rate of approximately 70 per year. In addition to addressing defective Lower Laterals, the project will reduce inflow and infiltration into the sanitary sewer system. The target date for Solicitation process will be in April 2026. The project will go to council in August 2026, with an anticipated project commencement date in September 2026.
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4.3 Financial Health
Below is a summary of the financial position for the wastewater utility.
4.3.1 Sales Forecasts vs. Actuals
Wastewater sales revenues through Q3 FY 2026 were 3.8% above budget.
Figure 21: Wastewater Sales Revenue ($), FY 2026 Q3
4.3.2 Financial Position
At the end of FY 2025, the Wastewater Collection Utility’s Operations Reserve was $1.7 million, which is below the risk assessment level of $2.8 million.
In FY 2025, the Utility received $2.7 million in Valley Water grant revenue to offset Wastewater Treatment costs, directly benefiting Palo Alto customers. The cash balance at the end of FY 2025 was approximately $0.9 million, which is lower than Staff’s projections. The Utility plans to fully repay the Fiber Utility loan21 due in FY 2026.
Staff proposed a 16% rate increase in FY 2027 at the March 4 UAC meeting 22 and March 17 Finance Committee meeting 23. The UAC voted 6-1 and the Finance Committee voted unanimously to move forward with the proposal. The City Council approved the Wastewater Collection 16% rate increase in June 2026.
21 Resolution 10173: https://portal.laserfiche.com/Portal/DocView.aspx?id=83857&repo=r-704298fc 22 Staff Report 2503-4364: https://cityofpaloalto.primegov.com/viewer/preview?id=0&type=8&uid=18457643-b8bd-4c15-b8db- 822059719251
23 Staff Report 2512-5608: https://recordsportal.paloalto.gov/WebLink/DocView.aspx?id=86858&dbid=0&repo=PaloAlto
3.8%
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5 Fiber Utility
The City offers a "dark" fiber service, providing a fiber connection from Palo Alto businesses to the downtown Internet Exchange. At the exchange, businesses select an internet service provider (ISP) for bandwidth and connection speed. The City is piloting Palo Alto Fiber ISP service under the fiber-to-the- premises project (FTTP) to provide residents with a fast, reliable, affordable, and local internet service.
5.1 Fiber Utility Strategic Planning
Below are highlights and status updates of the Fiber-to-the-Premises (FTTP) Project:
The fiber hut at the Colorado Substation is fully operational, supporting the Phase 1 pilot area for residential fiber internet services and providing the infrastructure needed to support future system growth.
Staff connected the first early adopter customer to Palo Alto Fiber internet and received positive feedback.
Activation of 20 or more early adopters in the pilot area is targeted by the end of July. These early adopters will help staff validate contractor installation processes, service activation, customer service workflows, and network support.
5.2 Capital Improvement Plan Status
The following capital projects are currently in progress:
FO-16000 – Fiber Optic System Rebuild
oThe new fiber backbone will be built in segments based on City and dark fiber business needs and in consideration of any strategic FTTP opportunities. CPAU is installing new aerial ducts or substructure (conduit and boxes) and fiber backbone cables to increase capacity from 144 to 432 fiber strands in areas that are at or near capacity to meet new customer dark fiber connection requests. The initial areas of rebuild are in Stanford Research Park for capacity and along Colorado Ave to provide resiliency and redundancy for electric and fiber.
FO-24000 – Fiber-to-the-Premises
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anticipate launch of service in March of 2026. As of May, the fiber hut at the Colorado Substation is fully operational, supporting the Phase 1 pilot area for residential fiber internet services and providing the infrastructure needed to support future system growth. Staff also completed installation for two early adopter customers, and working through initial performance challenges, received positive feedback from the residents on staff’s support and responsiveness. Activation of 20 or more early adopters in the pilot area is targeted by the end of June.
5.3 Reliability
There were no unplanned fiber outages or events to report in Q3 of FY 2026.
5.4 Financial Health
Below is a summary of the financial position for the fiber utility.
5.4.1 Fiber Sales
Through FY 2026 Q3, dark fiber licensing sales were $2.4M and ($0.2M) or (8%) below the revenue forecast of $2.6M. Fiber expenses were $4.0M and $0.4M or 11% above forecast of $2.6M due to construction costs and network equipment for FTTP. Three of the four positions added in FY 2024 to support FTTP are on hold, pending results of the FTTP Palo Alto Fiber pilot. Existing staff and contractors are collectively performing the work that staff in those roles would perform at this time.
5.4.2 Financial Position
At the end of FY 2025, the Fiber Fund had a total reserve of $34 million which consists of $17.4 million of rate stabilization, $13.1 million of commitments and reappropriations, and $3 million loan to Wastewater Collection utility. As of Q3 FY 2026, the Fiber Fund has a total reserve of $32 million including the $3 million loan to Wastewater Collection utility. The $3 million loan is anticipated to be repaid as part of the year-end close out activities for FY 2026.
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6 Communications
This section summarizes communication highlights from the City of Palo Alto Utilities (CPAU), updates on major campaigns and noteworthy events. Copies of ads, bill inserts, and brochures are available online at www.paloalto.gov/UTLbillinsert
Gas COSA Update: The Gas Cost of Service Analysis (COSA) update was approved by Council in December for an effective date of February 1, 2026. Staff are communicating with customers about this and other proposed utility rate changes for fiscal year 2027.
Time-of-Use (TOU) Rates Implementation Update: CPAU began a phased rollout of the TOU rate to customers in March 2026. Several customers expressed interest in switching to the TOU rate and requested an assessment of whether the TOU rate would be financially beneficial based on household energy consumption. The TOU rate may be favorable for customers who have high energy consumption and/or may drive an EV and charge at home. For customers with lower energy consumption and/or the inability to shift energy usage, switching to the TOU may not be beneficial due to limited savings or a potential increase in monthly billing costs. Broader marketing of this new rate schedule is planned for early summer following testing in the first and second quarters of 2026.
Utility Billing Print Vendor Change: CPAU is working with a new vendor to print utility bills, which provides the city with multiple benefits. The new vendor, InfoSend, provides continuity of operations for utility billing with redundant facilities in multiple states. The city will be saving approximately $150,000 annually, or 25% from the previous contract, for printing and mailing. E-bill customers will now be able to see utility bill inserts with their bills rather than having to click through our website. Key information on the bill remains the same, and there is no change to billing processes, schedules, or payment options.
Gas Main Replacement Project 25 (GMR 25): GMR 25 will replace roughly five miles of gas mains and services that are near their operational life expectancy in the Duveneck/St. Francis, Leland Manor, and Midtown and Palo Verde neighborhoods. This is a critical infrastructure initiative to enhance safety and reliability of gas distribution infrastructure. CPAU is using funding for this project from the $16.5 million- dollar federal grant awarded by the Pipeline and Hazardous Material Safety Administration (PHMSA). GMR 25 began in early 2026 and is scheduled for completion in summer 2027.
Wildfire Mitigation: The California Wildfire Safety Advisory Board (WSAB) completed its review of utilities wildfire mitigation plans and applauded Palo Alto in its public report for substantially reducing wildfire risk by undergrounding overhead utility lines in the high fire threat district, the Foothills. The WSAB also commended the city for its contributions to an innovative gas monitoring network for early detection of wildfire. The WSAB members and staff acknowledged that this technology is not widely used by publicly owned utilities or investor-owned utilities. It was recommended that CPAU report on the status of its undergrounding project (scheduled for completion in 2026) in the next wildfire mitigation plan, and its efforts to reduce risk from remaining infrastructure. WSAB also advised that the city report the results, benefits, and challenges of deploying gas monitoring technology to inform broader adoption decisions in the utility community.
Electric Integrated Resource Plan: Every five years, CPAU submits an Electric Integrated Resource Plan (IRP) to the California Energy Commission (CEC) to demonstrate that the city is on track to meet the state’s requirements for long-term energy policy goals, greenhouse gas emissions reduction targets, and renewables portfolio standard. The CEC recently sent CPAU a detailed report and letter from the Executive Director to verify that the 2023 IRP, which staff provided in April 2024, satisfies all requirements, including meeting the state’s mandated 60% by 2030 renewables standard.
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Charging Smart Gold Designation: The city received Gold level designation from Charging Smart, a program funded by the US Department of Energy and implemented by the International Renewable Energy Council, for its leadership in advancing efficient EV charging. After reviewing the city’s efforts, the program awarded Palo Alto its highest-level award for robust planning, streamlined permitting, community programs, and fleet and infrastructure investments. This recognition showcases our progress and helps us exchange best practices with other communities advancing clean mobility.
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7 Legislative, Regulatory and Industry Activity
7.1 State Legislative Activity
The 2026 California legislative session continues last year’s focus on utilities affordability, wildfire mitigation, and permitting streamlining with data center costs and rates seeing increased attention.
Hundreds of utilities-related bills have been introduced, though many only impact investor-owned utilities (IOUs), and CPAU staff are actively tracking about 130 bills with help from trade associations NCPA and CMUA. Some bills of particular interest to CPAU are listed below:
AB 34 (Patterson) | California Renewables Portfolio Standard Program: local publicly owned electric utilities: large hydroelectric generation. This bill is a reintroduction of last year’s AB 1273 with the language relating to CPUC oversight (the reason for the Governor’s veto in 2025) removed to focus AB 34 solely on large hydropower generation, specifically, it would allow local publicly owned electric utilities to count large hydroelectric generation toward their renewable procurement goals. Sponsored by NCPA at the behest of CPAU, AB 34 is estimated to save CPAU roughly $1 million per year starting in 2030. AB 34 was signed into law by Governor Newsom on July 13, 2026.
SB 222 (Wiener) | Residential heat pump systems: water heaters and HVAC: installations. This bill is a reintroduction of last year’s SB 282 and aims to streamline permitting and installation of heat pump water heater and HVAC systems. Some of the bill’s goals include automated permitting for simple installations, easier inspection requirements, and caps on permit fees. SB 868 (Wiener) | Electricity: portable solar generation devices. This bill is part of a nationwide trend to allow small, safety-certified solar generation systems up to 1,200 watts to plug directly into standard electrical outlets to offset electricity usage. SB 868 forbids utilities from requiring interconnection agreements or approval or imposition of fees for the installation of plug-in solar generation systems.
SB 875 (Wiener) | Public utilities: eminent domain. This bill seeks to reduce the barriers local public entities face when trying to break away from PG&E and form their own publicly owned utility (POU). The driving force behind this bill is a desire to address legal delays faced by San Francisco as they attempt to leave PG&E and form their own POU. SB 875 failed passage out of the Senate Energy, Utilities, and Communications Committee and will not advance. SB 943 (Becker) | Public utilities: electricity: transmission charge: industrial transition usage. This bill, among other things, directs the CPUC to request the California Independent System Operator (CAISO) reconsider the structure of the transmission access charge (TAC) to better reflect cost causation principles. CPAU supports TAC reforms that move away from charging based solely on the volume of electricity and towards a hybrid structure that incorporates both volume and demand for electricity, because CPAU would see lower TAC costs.
7.2 State Regulatory Activity
Long-awaited draft amendments to the Cap and Invest regulation were released by the California Air Resources Board (CARB) in January and April 2026, consuming most of the regulatory focus for CPAU staff.
The first round of Cap and Invest amendments focused on accelerating emission reductions to meet state goals in 2030 and 2045, primarily by reducing electric and gas utility free allowance allocations. An allowance is equivalent to one ton of CO2 and they are bought and sold in CARB’s quarterly auctions. CARB elected not to change the allowance allocation methodology and simply updated the data for electric load Item A
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forecasts, electric resource mixes, and Renewable Portfolio Standard (RPS) requirements for each utility.
As a result, most electric utilities would have seen a significant decrease in their free allowance allocations from 2027 – 2030. To protect ratepayer affordability, utilities and their associations, including NCPA and CMUA, pushed back strongly on this proposal by advocating for methodological changes that properly account for the RPS program or prevent allowance allocation reductions entirely. The second round of amendments incorporated some of the recommended changes, thereby reducing the severity of the allowance reductions for most utilities. Some utilities, including CPAU, see an increase in allowance allocation for a variety of reasons including increasing load or changing electric portfolios. On the gas utility side, AB 1207 required CARB to transition free allowances away from natural gas corporations and to electric utilities. CPAU occupies a unique niche in the proposed amendments because as a gas POU, CPAU will not lose any allowances allocated to its natural gas utility but also will not receive any of the additional allowances that are transitioned away from natural gas corporations. The other proposed change is restricting allowable uses of new natural gas allowance value to fuel switching and electrification, eliminating the existing usage of allowance value for more efficient natural gas appliances, though allowance value acquired before September 1, 2026 may still be used for natural gas efficiency projects. To have an effective date of 2027, CARB has a self-imposed deadline of May 28 th for Board adoption of the amended regulation, so another round of proposed amendments is unlikely at this time.
7.3 Federal Activity
CPAU continues its work with NCPA to support federal workers and investments related to the Central Valley Project (CVP). Seeking to downsize the federal workforce, the federal administration eliminated critical employees at the Bureau of Reclamation (BOR) and the Western Area Power Administration (WAPA). Especially concerning are significant reductions in dam and powerplant mechanics and other technologists instrumental for the safe and effective operations of the dams and powerplants. Through NCPA, CPAU staff and elected officials have been able to secure protections for the remaining BOR and WAPA employees and start hiring for open WAPA positions. However, the BOR has not received permission to resume hiring, leaving critical operational positions unfilled. NCPA and other utilities are exploring stop-gap measures for providing mutual aid to federal facilities, as conditions permit, to complete important projects safely and efficiently while also advocating to fill vacant BOR positions.
Lastly, CPAU and NCPA continue collaborating with WAPA and academic institutions to improve hydropower generation forecasting, which would help CPAU with electric resource planning.
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Appendices
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8 Appendix A: Energy Risk Management Program
This appendix provides a quarterly update on the City’s Energy Risk Management Program.
8.1 Overview of Hedging Programs
The City’s Utilities Department maintains a hedging program for its Electric and Gas Utilities. In the Gas Utility, the program protects against short-term (intra-month) price spikes caused by weather or major incidents on the Western gas system. However, the City does not hedge its gas supply more than one month in advance, choosing instead to protect the Gas Utility’s financial position by passing gas supply costs through to customers via a charge that varies monthly based on gas market prices. As a result, the Gas Utility’s only market exposure is the amount by which gas demand deviates from forecasts within the month. This exposure is relatively small and can be managed using Gas Utility Operating Reserves.
Additionally, the City Council approved a $0.055 charge per therm for mitigating the impact of short-term natural gas price spikes. 27 A risk assessment is performed each year as part of the Gas Utility financial planning process to ensure adequate reserves to cover all risks. The most recent Gas Utility Financial Forecast was adopted June 16, 2026 (Staff Report #2602-589428).
The City has entered into long-term contracts for its Electric Utility to ensure that the City has carbon free electricity supplies equal to 100% of Palo Alto’s annual electric demand. However, the output from these generating sources does not match Palo Alto’s electric load on an hourly basis. In the summer, the City has a surplus of carbon free energy and it has a deficit in the winter. This exposes the City to market price risk, and staff maintains a hedging program (executing short-term market purchases and sales to balance the City’s load and supplies) to protect against this risk. In addition, hydroelectric generation makes up approximately half the City’s energy supply. During dry years, these resources do not generate as much energy, creating an additional market exposure that must be hedged.
8.2 Overview of Energy Risk Management Program
The hedging programs described above are conducted in accordance with the City’s Energy Risk Management Program, which includes a set of Policies adopted by the City Council ( Resolution 1016629), Guidelines adopted by the City’s Utilities Risk Oversight Coordinating Committee (UROCC), and Procedures approved by the Utilities Director. In addition, NCPA maintains its own Risk Management Program that applies to intra-month transactions it makes on behalf of the City (and other NCPA members) to balance the City's hourly load and supplies. The City is able to provide policy level oversight 27 Resolution 10187, adopted August 19, 2024:
https://recordsportal.paloalto.gov/WebLink/DocView.aspx?id=62063&dbid=0&repo=PaloAlto 28 Staff Report #2411-3776
https://cityofpaloalto.primegov.com/api/compilemeetingattachmenthistory/historyattachment/?historyId=35104f06-6925- 4fe3-89c7-b0e53e6eec42
29 Resolution 10166, adopted June 10, 2024:
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of this program through its seat on the NCPA Risk Oversight Committee, which is held by the City’s Risk Manager.
Per the Energy Risk Management Policies, the City Council must receive semi-annual reports on the City’s forward contract purchases, market exposure, credit exposure, counterparty credit ratings, transaction compliance, and other relevant data.
8.3 Forward Deals
Palo Alto executed the following Electric and Gas transaction in Q3 of FY 2026.
Figure 22: Electric Resource Adequacy Deals
Delivery Month Deal Type Avg RA
(MW-mo)
Price ($/kW-mo)
Apr’26 Purchase 26.00 $1.60
8.4 Electric Market Exposure
The chart below shows the City’s electric supply market exposure and committed purchases and sales to cover timeframes where load is expected to exceed supply. The load resource balance (LRB) for the prompt 12-month period is 103%. The LRB percentage represents the percentage of resources available to cover the City’s load (i.e. the resources available for the prompt 12 months are 3% greater than the City’s load). The City’s expected load for the prompt 36-month period is shown by the black line in the chart below. The red dashed line below represents the City’s net resource position, including completed energy transactions. Additional purchases will be executed for FY 2027 and FY 2028 in the coming months.
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Figure 23: Electric Load Resource Balance, FY 2026 – 2029 Item A
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9 Appendix B: Staffing and Vacancies
The Utilities Department has 37 vacant positions out of 269 authorized positions, or a 14% vacancy rate.
The City developed a Recruitment Strategic Plan33 to reduce the citywide vacancy rate. Some of the many initiatives and accomplishments completed to improve the city’s recruitment and retention include:
Through analysis of workflow and process efficiency opportunities, the City successfully reduced the onboarding timeline from 60+ days to an average of 23 days from time an offer is accepted to the new employee’s first days.
Relaunched the Citywide Internship program and continues to expand participation to grow and invest in building a strong future talent pipeline.
Enhanced the City’s training courses for hiring managers to provide opportunities to learn about recruitment trends and improving the employee experience. Reengaged active participation in career fairs at community colleges, universities and local community events.
Enhanced collaboration with the City Communications team to create active social media recruitment campaigns for hard-to-fill positions.
Strengthened citywide training programs to strengthen the knowledge, skills, and abilities of all employees, empowering them to grow at their own pace as leaders, whether as supervisors and managers or as individual contributors.
Figure 24: Utilities Vacancies and Recruitments by Division
33 May 6, 2024 City Council Meeting, Staff Report 2404-2890:
https://recordsportal.paloalto.gov/WebLink/DocView.aspx?id=82820&dbid=0&repo=PaloAlto&searchid=d230fd3b-dd24-4eb1- b495-84560e808bc3
As of March 31, 2026
Division
Authorized
FT E s
Vacant
FT E s
Active
R ecruitments Vacancy %
Administration 15 2 0 13%
Customer S ervice 24 0 0 0%
FT T P & S /CAP 6 3 0 50%
R esource Management 26 4 3 15%
E lectric E ngineering 25 2 2 8%
E lectric Operations 81 16 14 20%
W G W E ngineering 23 4 4 17%
W G W Operations 69 6 6 9%
T otal 269 37 2914%
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10 Appendix C: Electric Utility Annual Infrastructure Maintenance and Replacement Report
Executive Summary
Calendar year 2024 safety metrics include zero OSHA recordable injuries and no lost workdays but did include three minor, non-recordable accidents. To maintain employee competency with safe working practices, the City provides ten department-wide safety meetings, numerous online training courses and field assessments. During CY2024 employees collectively completed over 1,388 training courses.
The City of Palo Alto continues to provide safe and reliable electric service at the lowest reasonable cost. System reliability numbers have improved primarily due to milder winter weather but also due to improvements in restoration processes following an outage. While slowed by the loss of key staff within the metering division, progress continues to complete the AMI project. Currently staff are coordinating across departments to add a new AMI base station atop City Hall providing connectivity and transmission for the downtown district, Stanford campus, and Oak Creek apartments. The base station will allow approximately 3,000 electric meters to be modernized.
The Grid Modernization Pilot for the distribution system is completed. The electric infrastructure suppling roughly 908 homes has been upgraded including the replacement of 70 wood utility poles, 106 new transformers, and 22,650 feet of new low-voltage wire. The cost to complete the pilot area reached just over $10 million with contracted labor being the largest cost. Design work continues on necessary upgrades to the Colorado Substation. Recently the City Council approved of a professional services agreement with Burns & McDonnell to support the City in the redesign and replacement of aging infrastructure within the Colorado substation. Staff have begun scoping the work with Burns & McDonnell and expect to have a final high-level assessment of the substation by December of 2025.
CY2025 (to-date) Electrification Permit Applications
To manage increased load, CPA’s Electric Engineering is responsible for evaluating all electrification- related applications. Figure 1 provides a summary of activity levels across the five main categories. As shown, electrification and the adoption of electric appliances is increasing year over year.
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Figure 25: Electrification Permits by Category
Between 2021 and 2025, electrification experienced Compound Annual Growth Rates (CAGR) ranging from 13% for ESS up to 74% for hot water heat pumps. This upward trajectory is anticipated to persist through 2026, as suggested by mid-year performance data.
Electrification is placing pressure on local permitting organizations, including the City of Palo Alto (CPA).
CPA is grappling with a flood of permit applications, often with longer review times and at times inadequate staffing to perform the necessary permit reviews. Although CPA Electric Engineering staff are relatively new, they have undergone training to competently conduct the required reviews.
System Reliability Indices
The reliability indices presented below, in general, represent the duration and frequency of unplanned outages to the average Palo Alto electric customer. By including and excluding Major Event Days (MED), staff can review both the impact of major events (impacting more than 10% of Palo Alto’s electric customers) versus more typical day-to-day operations. Reliability indices for CY2025 show improvement over CY2023 and CY 2024. The improved system reliability is attributed to milder winter weather and improvements in outage restoration procedures.
Figure 26: Electric Outage Reliability, CY 2019 through 2025 Major Event Days Included Major Event Days Excluded
CY SAIDI SAIFI CAIDI SAIDI SAIFI CAIDI
2019 132.8 1.065 124.7 25.3 0.225 112.0
2020 46.2 0.830 55.7 20.9 0.165 126.7
2021 39.7 0.277 143.1 9.4 0.029 329.3
2022 71.7 0.622 115.3 13.4 0.070 190.5
0 50
100
150
200
250
300
350
400
2021 2022 2023 2024 2025
PV ESS EVCS HEAT PUMPS W_HEATPUMP
Electrification Trends City of Palo Alto
2021 - 2025
Number of Units
Year
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Major Event Days Included Major Event Days Excluded
CY SAIDI SAIFI CAIDI SAIDI SAIFI CAIDI
2023 154.1 1.182 130.4 43.5 0.176 247.0
2024 134.7 0.844 159.7 67.4 0.474 142.1
2025 68.1 0.617 110.4 27.2 0.111 245.2
CPAU Reliability indices compared to PG&E’s performance locally show Palo Alto’s electric system roughly five times more reliable than PG&E’s. When compared nationally, Palo Alto’s reliability numbers for FY2025 fall within the nation’s top quartile for best performing systems. Continued investment in preventative maintenance and asset replacement will help to maintain and improve overall system reliability.
Separating unplanned power outages
by their primary cause helps focus
where reliability work is needed. For
CPAU most unplanned outages are due
to equipment-related failures (failure,
damage or worn out). The next two
largest causes of power outages are
trees outages and outages where the
cause could not be determined
(unknown). Equipment failures
continue to be the leading cause of
outages indicating a need for ongoing
planned replacement through the
City’s Capital Improvement Program.
Figure 27 : Calendar Year 2025 Sustained Outages by Cause CY2025 Facility Inspections
General Order 165 (overhead and underground) and 174 (substations) cover facility inspections. Some inspections are monthly, some annual, and others are between 3 to 10-year cycles. Completion of these inspections helps to identify issues that can be resolved prior a power outage, or that otherwise could impact customer service.
Type of Inspection (inspection unit) Units Due in CY 2025 Still Outstanding % Complete Annual Visual Patrols (equipment) 6,816 0 100.0%
Overhead Detailed (poles & all related
equip.) 1,215 451* 62.88%
Underground Detailed (subsurface
equipment, boxes, & vaults) 1,258 0 100
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Type of Inspection (inspection unit) Units Due in CY 2025 Still Outstanding % Complete Wood Pole Intrusive (poles tested) 22 222** 0
Substation (inspections) 132 132 100.0%
* Grid Mod Construction in zone of inspection. These inspections will be completed in the current year. **Previous contract ended in 2025, new contract awarded in 2026. These intrusive inspections will be completed in the current calendar year.
Preventative Maintenance Tags
GO 165 inspections generate maintenance tags to correct either construction infractions or maintenance issues. Tags are graded based upon their severity and risk to the public or potential to cause a power outage. Three rankings are possible: Priority-1, complete immediately or within 30-days, Priority-2, complete within 24 months, and Priority-3, complete within 60-months. Maintenance tags can range from minor work of clearing vegetation around poles or pad-mounted equipment to identifying portions of the system that need to be fully reconstructed. Lack of maintaining an adequate number of qualified staff impacts the City’s ability to complete preventative maintenance tags.
CY2025 Overhead Maintenance Tags
Grade Total Due in CY2025 Completed Pending
Priority-1 14 14 0
Priority-2 26 108 26
Priority-3 335 250 321
Total 375 372 347
Overhead maintenance tags typically include the replacement of reflective strips at the base of utility poles, high-voltage warning signs, replacement of down guy visibility markers, and others. Most work helps maintain the City’s compliance with industry construction standards and prevents future power outages.
CY2025 Underground Maintenance Tags
Grade Total Due in CY2025 Completed Pending
Priority-1 2 2 0
Priority-2 158 0 158
Priority-3 133 0 133
Total 293 2 293
Underground maintenance tags typically include the replacement of signage on vaults and pad-mounted equipment, replacement of cracked or broken vault lids, removal of vegetation, replacement of worn or deteriorated underground equipment, and others. This work also maintains the City’s compliance with industry construction standards and prevents future power outages.
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11 Appendix D: PaloAltoGreen Gas Program
In December 2020, Council adopted Resolution #993035 maintaining the Carbon Neutral Natural Gas Plan to achieve carbon neutrality for the gas supply portfolio using high-quality carbon offsets with a cost cap of $19 per ton CO2e.
Offsets are purchased to neutralize
emissions equal to those caused by natural
gas usage in Palo Alto. Staff procured
115,000 tons of offsets from U.S. Forest and
Livestock projects during Spring 2025 to
cover FY25 usage. The figure below shows
the composition of all offset purchases for
the Carbon Neutral Gas Plan through Q3
2026.
Figure 28: Offset Portfolio Composition
The following table provides a description of the projects.
Figure 29: Offset Project Descriptions
35 Resolution #9930 https://www.cityofpaloalto.org/files/assets/public/v/1/city-clerk/resolutions/resolutions-1909-to- present/2020/reso-9930.pdf
Project Name Project Type Description
Grotegut Dairy Livestock Grotegut Dairy is a 3,900 milk-cow operation in Newton, Wisconsin with a methane capture system.
Green Trees U.S. Forest
GreenTrees Advanced Carbon Restored Ecosystem is reforestation of agricultural lands into native hardwood forest in Mississippi, Louisiana, Arkansas, and Illinois San Juan Lachao Mexico Forest
Protection of forests located in High Biological Value Zones which contain flora and fauna listed in the Mexican Endangered Species List and the International Union for Conservation of Nature’s Red List of Threatened Species. Project in San juan Lachao near Palo Alto's Sister City of Oaxaca.
Blandin Forest U.S. Forest Blandin Native American Hardwoods Conservation and Carbon Sequestration project in Minnesota.
Pocosin+ U.S. Forest
These projects are all forested land that will not be disturbed by human development. Without this protection, the forests would be converted to grow wheat or corn. Forest conservation plays a vital role in protecting freshwater systems like lakes. The forests around the lakes act as natural water filters and purify the water for all who use it. The projects also support healthy populations of red wolf, bald eagle, black bear, and various bird species.
Refex ODS Ozone Depleting Substance
The RemTec facility in Bowling Green, Ohio uses an argon arc plasma destruction device to achieve 99.99 percent removal. The majority of refrigerants originated in California, and all were sourced within the United States.
The RemTec facility uses an argon arc plasma destruction device to achieve the required destruction and removal efficiency of 99.99 percent. The majority of ODS refrigerants originated in California, and all were sourced within the United States.
Methane Capture Mine Methane Capture
This project is the first of its kind. Peabody Natural Gas, LLC removed methane from the North Antelope Rochelle Coal Mine before mining. The methane was compressed and transported to a natural gas pipeline and distributed to a national gas grid for use as fuel. Before implementation of the project, all the methane was vented to the atmosphere.
Virginia
Conservation
Forestry Program U.S. Forest
The Virginia Conservation Forestry Program - Clifton Farm and Rich Mountain is a 9000+ acre improved forest management project in which the timber and carbon ownership and management rights have been transferred to The Nature Conservancy's Conservation Forestry Program. The program manages for multiple goals to include: Water quality protection, habitat diversity, high value forest products, and carbon sequestration.
Co-benefits: Biodiversity, Watershed Protection, Climate Resilience, and Connectivity Riverview Farm
Anaerobic Digester Livestock
Riverview is a carbon offset project generating emission reductions thought the capture and destruction of methane at a dairy farm in Minnesota. Under the baseline, manure managed in open lagoons led to the fugitive emission of methane to the atmosphere. In the project scenario, this methane is captured by an anaerobic digester and destroyed on site in the production of electricity. Co-benefits include job creation and the improvement of local air and water quality.
Big River / Salmon
Creek Forests IFM U.S. Forest
The Big River and Salmon Creek Forests are located in Mendocino County, CA and cover 16,000 acres of redwood and Douglas-fir forest. This project is a conservation-based forest management project.
Co-benefits include the creation of 140 jobs, protection of 37 miles of streams, and improved water quality for local fish and bird species.
Hiawatha
Sportsmans Club U.S. Forest
Located in Michigan’s Upper Peninsula, Hiawatha Sportsmans Club (HSC) is a member-owned 35,000-acre forest and Michigan’s oldest certified Tree Farm. The property contains a variety of habitats: Lake Michigan shoreline, inland lakes, spring-fed rivers, marsh, mature conifer and hardwood forest and open fields.
Supported by HSC’s sustainable forest management, these diverse habitats attract and sustain a wide variety of birds, mammals and other wildlife.
Appalachian
Mountain Club
Maine Woods
Initiative U.S. Forest
Founded in 1876, the Appalachian Mountain Club (AMC) is the oldest outdoor conservation and recreation organization in the U.S. By implementing sustainable management practices like deferred harvesting, extended rotations, and the retention of standing dead wood, AMC enhances forest carbon stocks and promotes long-term ecological health. The project sequesters carbon effectively while supporting diverse wildlife habitats and protecting soil and water quality, all in alignment with Maine's best management practices. Through the Maine Woods Initiative, AMC demonstrates that conservation and economic opportunity can coexist, integrating sustainable forestry with outdoor recreation to create lasting, positive impacts for Maine's forests and communities.
Alliance Dairy Livestock
Founded in 1876, the Appalachian Mountain Club (AMC) is the oldest outdoor conservation and recreation organization in the U.S. By implementing sustainable management practices like deferred harvesting, extended rotations, and the retention of standing dead wood, AMC enhances forest carbon stocks and promotes long-term ecological health. The project sequesters carbon effectively while supporting diverse wildlife habitats and protecting soil and water quality, all in alignment with Maine's best management practices. Through the Maine Woods Initiative, AMC demonstrates that conservation and economic opportunity can coexist, integrating sustainable forestry with outdoor recreation to create lasting, positive impacts for Maine's forests and communities.
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Figure 29: Offset Project Descriptions (Cont’d.)
Approved By:
Alan Kurotori, Director of Utilities
Staff: Tim Denterlein, Resource Planner
Project Name Project Type Description
Grotegut Dairy Livestock Grotegut Dairy is a 3,900 milk-cow operation in Newton, Wisconsin with a methane capture system.
Green Trees U.S. Forest
GreenTrees Advanced Carbon Restored Ecosystem is reforestation of agricultural lands into native hardwood forest in Mississippi, Louisiana, Arkansas, and Illinois San Juan Lachao Mexico Forest
Protection of forests located in High Biological Value Zones which contain flora and fauna listed in the Mexican Endangered Species List and the International Union for Conservation of Nature’s Red List of Threatened Species. Project in San juan Lachao near Palo Alto's Sister City of Oaxaca.
Blandin Forest U.S. Forest Blandin Native American Hardwoods Conservation and Carbon Sequestration project in Minnesota.
Pocosin+ U.S. Forest
These projects are all forested land that will not be disturbed by human development. Without this protection, the forests would be converted to grow wheat or corn. Forest conservation plays a vital role in protecting freshwater systems like lakes. The forests around the lakes act as natural water filters and purify the water for all who use it. The projects also support healthy populations of red wolf, bald eagle, black bear, and various bird species.
Refex ODS Ozone Depleting Substance
The RemTec facility in Bowling Green, Ohio uses an argon arc plasma destruction device to achieve 99.99 percent removal. The majority of refrigerants originated in California, and all were sourced within the United States.
The RemTec facility uses an argon arc plasma destruction device to achieve the required destruction and removal efficiency of 99.99 percent. The majority of ODS refrigerants originated in California, and all were sourced within the United States.
Methane Capture Mine Methane Capture
This project is the first of its kind. Peabody Natural Gas, LLC removed methane from the North Antelope Rochelle Coal Mine before mining. The methane was compressed and transported to a natural gas pipeline and distributed to a national gas grid for use as fuel. Before implementation of the project, all the methane was vented to the atmosphere.
Virginia
Conservation
Forestry Program U.S. Forest
The Virginia Conservation Forestry Program - Clifton Farm and Rich Mountain is a 9000+ acre improved forest management project in which the timber and carbon ownership and management rights have been transferred to The Nature Conservancy's Conservation Forestry Program. The program manages for multiple goals to include: Water quality protection, habitat diversity, high value forest products, and carbon sequestration.
Co-benefits: Biodiversity, Watershed Protection, Climate Resilience, and Connectivity Riverview Farm
Anaerobic Digester Livestock
Riverview is a carbon offset project generating emission reductions thought the capture and destruction of methane at a dairy farm in Minnesota. Under the baseline, manure managed in open lagoons led to the fugitive emission of methane to the atmosphere. In the project scenario, this methane is captured by an anaerobic digester and destroyed on site in the production of electricity. Co-benefits include job creation and the improvement of local air and water quality.
Big River / Salmon
Creek Forests IFM U.S. Forest
The Big River and Salmon Creek Forests are located in Mendocino County, CA and cover 16,000 acres of redwood and Douglas-fir forest. This project is a conservation-based forest management project.
Co-benefits include the creation of 140 jobs, protection of 37 miles of streams, and improved water quality for local fish and bird species.
Hiawatha
Sportsmans Club U.S. Forest
Located in Michigan’s Upper Peninsula, Hiawatha Sportsmans Club (HSC) is a member-owned 35,000-acre forest and Michigan’s oldest certified Tree Farm. The property contains a variety of habitats: Lake Michigan shoreline, inland lakes, spring-fed rivers, marsh, mature conifer and hardwood forest and open fields.
Supported by HSC’s sustainable forest management, these diverse habitats attract and sustain a wide variety of birds, mammals and other wildlife.
Appalachian
Mountain Club
Maine Woods
Initiative U.S. Forest
Founded in 1876, the Appalachian Mountain Club (AMC) is the oldest outdoor conservation and recreation organization in the U.S. By implementing sustainable management practices like deferred harvesting, extended rotations, and the retention of standing dead wood, AMC enhances forest carbon stocks and promotes long-term ecological health. The project sequesters carbon effectively while supporting diverse wildlife habitats and protecting soil and water quality, all in alignment with Maine's best management practices. Through the Maine Woods Initiative, AMC demonstrates that conservation and economic opportunity can coexist, integrating sustainable forestry with outdoor recreation to create lasting, positive impacts for Maine's forests and communities.
Alliance Dairy Livestock
Founded in 1876, the Appalachian Mountain Club (AMC) is the oldest outdoor conservation and recreation organization in the U.S. By implementing sustainable management practices like deferred harvesting, extended rotations, and the retention of standing dead wood, AMC enhances forest carbon stocks and promotes long-term ecological health. The project sequesters carbon effectively while supporting diverse wildlife habitats and protecting soil and water quality, all in alignment with Maine's best management practices. Through the Maine Woods Initiative, AMC demonstrates that conservation and economic opportunity can coexist, integrating sustainable forestry with outdoor recreation to create lasting, positive impacts for Maine's forests and communities.
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