City Council Regular Meeting

Summary

The City Council is considering revisions to its Investment Policy, an annual review process. These updates follow the transition of the City's investment management to Chandler Asset Management in late 2025. The revised policy aims to enhance investment flexibility and potential returns while maintaining asset safety and compliance with California Government Code.

Key Revisions Include:

• Investment Strategy: A shift from a strict "buy and hold" philosophy to allow for tactical sales before maturity, aiming to optimize returns.
• Diversification & Limits: Introduction of new permitted investment types, such as Asset-Backed and Mortgage-Backed Securities (up to 20% of the portfolio), and adjustments to concentration limits for various instruments. For example, Medium-Term Corporate Notes can now comprise up to 30% (previously 10%) and Banker's Acceptance Notes up to 40% (previously 30%) of the portfolio's market value.
• Reporting & Oversight: Clarified definition of "liquid investments" and updated requirements for quarterly reporting to the City Council if the portfolio's market value falls below 95% of its book value.

Fiscal Impact: These changes are projected to increase citywide investment returns to approximately $18.7 million in FY 2027, representing an 18.4% increase ($2.9 million) over FY 2026 adopted budget levels. The General Fund is expected to receive about 20% of these additional receipts.

Citizen Impact

These policy revisions are expected to increase the City's investment earnings by $2.9 million annually, providing additional revenue that can support city services and projects without increasing taxes. The changes also ensure continued safety and liquidity of public funds.

Confidence

high

Summary

The City Council is considering authorizing the City Manager to procure essential fleet vehicles and equipment, totaling up to $1,430,000. This includes:

• One Cable Handling Trailer (not-to-exceed $300,000)
• One Caterpillar Wheel Loader (not-to-exceed $430,000)
• Seven Police Patrol Vehicles (not-to-exceed $700,000), including two Rivian R1S electric vehicles and five hybrid models.

Additionally, the Council will approve an amendment to a purchase order with Altec Industries, Inc., increasing it by $94,911 to a new total of $1,167,986 for two hydraulic digger derricks. This increase is to correct a sales tax omission from a previous approval. The FY 2026 budget will be amended to reflect these changes, moving funds between the Vehicle Replacement and Maintenance Fund and the Electric Fund. These procurements are necessary due to supply chain challenges and to maintain operational reliability and adhere to the fleet replacement policy, while also supporting the City's fleet electrification goals.

Citizen Impact

This action ensures the continued operation of critical City services by replacing aging vehicles and equipment. Residents will benefit from reliable public safety (police vehicles) and utility services (trailer and wheel loader), with a portion of the new police vehicles being electric, supporting sustainability goals.

Confidence

high

Summary

This item seeks approval to increase the construction contingency for Contract No. C24189237 with SAK Construction, LLC by $800,000, bringing the total contingency to $4,334,770 and the total potential contract amount to $11,682,470. This increase is necessary due to unforeseen site conditions, design clarifications, contractor sequencing challenges, and extended rental costs for a temporary bypass system used during the Joint Intercepting Sewer Rehabilitation (Phase 1) Project (WQ-24000). The project addresses critical structural deterioration in a 72-inch trunk sewer serving multiple cities. The additional funds will also cover remaining restoration work in Byxbee Park. The FY 2026 budget in the Wastewater Treatment Fund will be amended to reflect this increase. The project is exempt from CEQA review as it involves repairs to existing facilities.

Citizen Impact

Residents may see increased costs reflected in future wastewater rates as Palo Alto's share of this $800,000 increase is approximately $288,000. The project aims to prevent critical sewer failures, ensuring continued wastewater treatment services for the region.

Confidence

high

Summary

This item approves Amendment No. 1 to extend the Facility Use Agreement between the City of Palo Alto and First Tee – Silicon Valley (FTSV) for the use of the Youth Practice Area at Baylands Golf Links. The amendment extends the term for three years, from February 2026 to February 2029, with an option for an additional two-year renewal. This extension provides program continuity for FTSV, a nonprofit youth development organization, and supports their efforts to fund capital improvements to the practice area. The City is concurrently conducting a feasibility study for a potential double-deck driving range, which will inform future planning. The agreement generates annual revenue for the City and involves no additional appropriations.

Citizen Impact

This agreement ensures the continuation of youth development programs offered by First Tee – Silicon Valley at Baylands Golf Links, providing ongoing access to golf and life skills training for local children and teens.

Confidence

high

Summary

This item approves Amendment No. 3 to Contract No. S23187281 with Urban Planning Partners, Inc. The amendment increases the contract's not-to-exceed amount by $52,409, bringing the total to $137,409. It also extends the contract term through December 31, 2027. The purpose of this amendment is to expand the scope of services to create standalone, pre-approved parklet plans specifically for the California Avenue Streetscape Update (PL-23000). These plans will be adapted for the unique car-free and all-weather dining environment of California Avenue, building upon the existing Ongoing Parklet Program designs. The project is categorically exempt under CEQA.

Citizen Impact

This amendment will facilitate the creation of specialized parklet designs for California Avenue, supporting year-round outdoor dining in a car-free environment. Residents can expect to see these new designs implemented, potentially enhancing the streetscape and dining experience.

Confidence

high

Summary

The City Council approved four professional services contracts totaling an aggregate $1,438,800 for on-call fire code, hazardous material, inspection, plan review, and environmental consultation services. These contracts, with Interwest Consulting Group, Inc., TRB and Associates, Inc., Atlas Environmental, and West Coast Code Consultants, Inc., will run for a three-year term from January 2026 through December 2028. This initiative ensures the Fire Prevention Bureau has access to specialized expertise and surge capacity to efficiently process development applications, maintaining compliance with fire, building, and hazardous materials codes. The individual contract amounts are: Atlas Environmental ($748,800), TRB and Associates, Inc. ($365,000), West Coast Code Consultants, Inc. ($250,000), and Interwest Consulting Group, Inc. ($75,000). The budget for these services is included in the Fire Department's adopted budget, with $487,000 allocated for Fiscal Year 2026.

Citizen Impact

These contracts help ensure that development projects in the city comply with critical fire safety, hazardous materials, and environmental regulations, protecting residents and the environment. By providing on-call expertise, the city can process permits more efficiently, which can lead to more predictable development timelines.

Confidence

high

Summary

The City Council is asked to approve a resolution granting an exception to the standard 180-day waiting period required by CalPERS before a retiree can be rehired as a retired annuitant. This exception is for Aaron Miller, the former Assistant Plant Manager, who retired on December 31, 2025. Mr. Miller possesses critical, long-term knowledge of the Regional Water Quality Control Plant's (RWQCP) infrastructure, which is essential during the plant's ongoing modernization and rebuild. He will be appointed to a temporary, part-time assignment to assist with special project work, focusing on integrating new systems with legacy infrastructure, ensuring regulatory compliance, and facilitating knowledge transfer. His employment will be limited to 960 hours per year and is anticipated to not exceed two years, funded by vacancy savings within the Wastewater Treatment Fund. The hourly rate for Mr. Miller will be $106.91.

Citizen Impact

This action allows the city to retain critical expertise for the Regional Water Quality Control Plant modernization, ensuring continued service reliability and regulatory compliance without impacting partner agencies or requiring new funding. Residents benefit from the ongoing operational integrity of essential utility infrastructure.

Confidence

high

Summary

The City of Palo Alto is advancing plans to redevelop a 15-acre portion of the Cubberley campus at 4000 Middlefield Road, including the potential purchase of 7 acres from the Palo Alto Unified School District (PAUSD) for $65.5 million. This redevelopment aims to create a reimagined community center, with a master concept plan expected for City Council adoption and California Environmental Quality Act (CEQA) clearance in April 2026. The project's full cost is estimated to exceed $300 million, with funding dependent on a potential November 2026 ballot measure (parcel or sales tax), development impact fees, and public-private partnerships.

Third Round Polling Results (January 2026): A poll of 416 likely voters revealed insufficient support for proposed funding mechanisms:

• A parcel tax (11¢/sq ft, ~$7.3M annually) received 48% support, falling short of the two-thirds majority required.
• A 0.5% sales tax (~$15.6M annually) also received 48% support, below the 50% + 1 simple majority needed.
• The perceived need for additional funds for updated recreation facilities dropped from 55-58% to 36%. Voters prioritized basic city services like storm drains (71%), potholes (64%), and street maintenance (61%) for a general-purpose tax. For Cubberley-specific funding, top priorities were preserving trees/outdoor space (65%) and upgrading electrical/plumbing (65%).

Partnerships:

• TheatreWorks Silicon Valley: Staff recommends approving a Letter of Intent (LOI) to formalize a public-private partnership. This aims to create a two-theater complex by renovating the existing Community Theatre and Pavilion and adding new construction for a 500-seat theater. TheatreWorks would manage the complex, using the new theater while the existing Community Theatre remains available for local groups. TheatreWorks will lead a substantial fundraising effort.
• Friends of the Recreation and Wellness Center: An LOI was approved in December 2024 to develop a multi-use gymnasium, with the Friends committed to raising donor funds for construction.

Financials & Next Steps: The City has allocated $1.7 million from the Real Property Reserve for project resources in FY25/26, including $697k for master planning (Concordia), $202k for CEQA (Rincon), and $153k for polling (FM3). Staff will conduct a fourth poll in Spring 2026 to assess voter support with partner contributions and revised ballot measure language. The City Council is asked to approve the LOI with TheatreWorks and provide direction on next steps, acknowledging that a longer timeline (e.g., a 2028 ballot measure) may be necessary.

Citizen Impact

Residents will see the Cubberley campus redeveloped into a modern community center with new cultural and recreational facilities, including a two-theater complex through a partnership with TheatreWorks Silicon Valley. However, funding for the full project, including the $65.5 million land purchase, faces challenges as recent polls show insufficient voter support for new parcel or sales taxes, potentially delaying improvements or requiring alternative funding strategies.

Confidence

high

Summary

This item approves several updates to the City Council Procedures and Protocols Handbook, as recommended by the Policy and Services Committee, with an effective date of February 9, 2026.

Key Revisions Include:

• Brown Act Amendments (Section 2.3): Incorporates changes from SB 707, extending alternative teleconferencing provisions for Councilmembers to 2030. It removes procedural differences between "just cause" and "emergency circumstances" for remote participation, expands "just cause" to include military service obligations, and requires meeting minutes to identify the specific provision relied upon for remote attendance. Limits on remote appearances are 5 meetings per year for the full Council and Finance Committee, and 2 per year for other committees.
• Proclamations (Section 3.2): Updates guidelines, clarifying that proclamations are issued at the Mayor's discretion and can be presented at a meeting or issued without. Potentially controversial proclamations will be brought to the full Council for a vote. The Council will also refrain from taking positions on foreign governments or U.S. foreign policy, or issues outside local governance, except for Sister Cities.
• Consent Calendar Process (Section 3.8): If an item is pulled from the Consent Calendar, it will be heard as the first action item for a brief 10-minute discussion at the same meeting if feasible; otherwise, it will be continued to a future meeting.
• Mayor and Vice Mayor Compensation (Protocols Section 4.1): This section, which previously outlined additional compensation for the Mayor ($150 monthly) and Vice Mayor ($100 monthly), will be removed from the Handbook as Councilmember compensation is already at the highest authorized level by State law.
• Councilmember Expense Reimbursement (Protocols Section 5.1): Language adopted on December 16, 2024, is incorporated, detailing reimbursement for technology purchases (up to $2,000 annually, 100% for exclusive use, 25% for mixed use, with device return if fully reimbursed) and cellular phone usage (25% of monthly cost, up to $2,000 annually).
• Boards and Commissions (BCCs) Engagement: BCC Chairs/Vice Chairs can coordinate with the Mayor and City Manager for an annual meeting opportunity with the Council or Council Committees, with flexible timing. The Youth Council will meet with the Policy & Services Committee in the fall and report to the full Council in the spring, and the Youth Climate Action Board (YCAB) will meet with the Climate Action and Sustainability Committee in the fall and/or spring. Staff will also align language on the role of City Council liaisons in both the City Council and BCC Handbooks.

Citizen Impact

These updates will streamline City Council meeting procedures, potentially leading to more efficient decision-making, especially for routine items. Residents will see clearer guidelines for remote Councilmember participation in meetings and how proclamations are issued. The changes also clarify Councilmember expense reimbursements, ensuring transparency in the use of public funds, and enhance engagement with community advisory bodies.

Confidence

high

Summary

This is an informational report detailing the rental residential vacancy rate for properties with three or more dwelling units in Palo Alto for the second half of 2025. The vacancy rate was determined to be 1.01% for the second half of 2025, and 0.85% for the first half of 2025. According to Palo Alto Municipal Code (PAMC) Section 21.40.050, applications to convert residential rental units to ownership units via a subdivision process are only eligible for consideration if there is a vacancy surplus of 3% or more. Since the determined vacancy rate is below this threshold, such conversion applications are not eligible at this time. The report notes that the vacancy rate has been the lowest in the past decade, with an average of 0.93% for 2025, down from 1.22% in 2024. The purpose of these regulations is to maintain a balance of rental and ownership housing and protect the multi-family rental housing stock.

Citizen Impact

The low vacancy rate of 1.01% means that property owners cannot currently apply to convert multi-family rental units into ownership units. This aims to preserve the existing rental housing stock and protect tenants from displacement.

Confidence

high

Summary

The City Council will receive an update on the third round of community polling results for the Cubberley Project. The polls indicate that support for a parcel tax or sales tax measure to fund the project is at 48%, which is short of the required thresholds (two-thirds for parcel tax, simple majority for sales tax). The Council will also consider approving a Letter of Intent (LOI) with TheatreWorks Silicon Valley to formalize a public-private partnership for a two-theater complex at the Cubberley site. This partnership would involve renovating the existing Community Theatre and Pavilion, and adding new construction. The City is also continuing discussions with the Friends of the Recreation and Wellness Center for a gymnasium.

The overall project involves redeveloping 15 acres of the Cubberley campus, including the potential purchase of 7 acres from PAUSD for $65.5 million. The master concept plan is slated for adoption in April 2026, with a potential ballot measure for funding in November 2026. The LOI with TheatreWorks aims to establish a framework for future agreements, including cost sharing, fundraising goals, and management structures, with a target negotiation period of six months.

Citizen Impact

Residents will have the opportunity to provide input on the future of the Cubberley campus and potential funding measures. The approval of the Letter of Intent with TheatreWorks signals a step towards developing a new cultural and recreational hub, but the project's full realization depends on voter approval of future funding measures.

Confidence

high

Summary

This item concerns proposed updates to the City Council Procedures and Protocols Handbook, incorporating recommendations from the Policy and Services Committee. The key changes focus on enhancing the interaction between City Council and various Boards and Commissions (BCCs), the Youth Council, and the Youth Climate Action Board (YCAB).

Key Recommendations:

• Annual BCC Meetings: The Chair/Vice Chair of each BCC can coordinate with the Mayor and City Manager for an annual meeting opportunity with the City Council or its committees. This allows for flexibility in timing.
• Youth Council Engagement: The Youth Council will meet with the Policy & Services Committee in the fall and report to the full Council in the spring.
• YCAB Engagement: The Youth Climate Action Board (YCAB) will meet with the Climate Action and Sustainability Committee in the fall and/or spring.

The updates aim to balance the need for BCCs to discuss their work with the City Council's workload. Additionally, the language regarding the role of Council liaisons in both the City Council Procedures and Protocols Handbook and the BCC Handbook will be reviewed for alignment.

Citizen Impact

These changes aim to improve communication and collaboration between city advisory bodies and the City Council, potentially leading to more informed policy decisions that affect residents. Residents may see more structured input from youth and other commissions on city matters.

Confidence

high