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CC 09-02-97 CC-951 MINUTES Cupertino City Council Adjourned Regular Meeting Tuesday, September 2, 1997 PLEDGE OF ALLEGIANCE At 6:45 p.m. Mayor Baufista called the meeting to order in the Council Chambers, 10300 Torte Avenue, Cupertino, California, and led the Pledge of Allegiance. ROLL CALL City Council members present: Mayor John Bautista, Vice-Mayor Michael Chang, Councilmembers Don Burnett, Wally Dean, and Lauralee Sorensen. Council members absent: None. Staff present: City Manager Don Brown; City Clerk YAmberly Smith; City Attorney Charles YAlian; Administrative Services Director Carol Atwood; Community Development Director Bob Cowan; Parkz and Recreation Director Steve Dowling; Public Information Officer Donna Krey; and Public Works Director Bert Viskovich. CEREMONIAL MATTERS - PRESENTATIONS None. POSTPONEMENTS None. WRITTEN COMMUNICATIONS None. ORAL COMMUNICATIONS None. CONSENT CALENDAR Dean moved to approve the item on the consent calendar, as presented, with the exception of Item No. 9 which was withdrawn, and Item No. 10 which was removed for discussion. Sorensen seconded and the motion carried $-0. 1. Resolution No. 9937: Accounts Payable, August 22,1997. 2. Resolution No. 9938: Accounts Payable, August 29, 1997. September 2, ! 997 Cupertino City Council Page 2 3. Resolution No. 9939: Payroll, August 22, 1997. 4. Resolution No. 9940: Approving agreement and street impwvement plang for 10700 South De Anza Boulevard, Yuko Iwamoto and Masako Iwamoto. 5. Resolution No. 9941: Accepting grant of easement for public utilities, Ytrico Iwamoto and Masako Iwamoto, 10700 South De ~,nTa Boulevard. 6. Resolution No. 9942: Accepting grant of easement for roadway purposes, Yuko Iwamoto and Masako Iwamoto, 10700 South De Anza Boulevard. 7. Resolution No. 9943: Approving agreement, final map, and improvement plans of Tract No. 8960, 22110 McClellan Road, Brian Kelly, Sr. 8. Resolution No. 9944: Accepting quitclaim deed and authorization for underground water fights, Kelly Gordon Development Corporation, APN 356-07-060 and 061, 22110 McClellan Road. 9. Resolution No. 9945: Approving agreement and map of Tract No. 8980, west side of Wolfe Road at Pmnefidge Avenue, Tandem Computers, Inc. 11. Acceptance of municipal improvements: 10496 Byme Avenue, Dan Askari. 12. Minutes of the regular meeting of August 18, 1997. 13. Resolution No. 9947: Declaring intent to conduct a public hearing concerning a nuisance on parcel 326-24-013, 10118 Santa Clara Avenue, storage of trash and debris in side yard. 14. Request from Cupertino Community Services for waiver of use fees for a fund raiser to be held at Blackberry Farm. 15. Resolution No. 9948: Authorizing City Manager to execute agreement wSth County of Santa Clara for Community Development Block Grant funding for FY 1997=98. 16. Resolution No. 9949: Setting date for consideration of annexing, "Byrne Avenue 97-06", west side of Byrne Avenue between Almaden Avenue and Lomita Avenue, APN 357=11= 016, Vote Councilmembers Ayes: Bautista, BurneR, Chang, Dean, and Sorensen Noes: None. ._. Absent: None. Abstain: None. geptem~er 2, 10~}? (~uperflno City Council Page 3 -- ITEMS REMOVED FROM T~4~. CONSENT CALENDAR 10. Resolution No. 9946: Approving change order No. 4 for Creekside Park, Project 96-9208. Public Works Director Bert Viskovich gave an update on the change order and said that they were mostly minor field changes. The project was on schedule and would be done by December. Seeding would take place in one month. Staff has been working to address the concems of residents along the pathway, and there may need to be an additional appropriation for a sound wall and lighting. Sorensen moved to adopt Resolution No. 9946. Chang seconded and the motion carried 5-0. PUBLIC HEARINGS 17. Public hearing to evaluate proposal for lease of water utility. (a) Resolution No. 9950: Authorizing the Mayor to execute lease. Public Works Director Bert Viskovich reviewed the staff report and said staff's recommendation was to award the lease to California Water Service Company. The recommendation was based upon (1) The return on investment; (2) The highest level of service that could be pwvided to existing customers; and (3) The impact of the rate increase. He reviewed a chart in the packet which compared existing water bills for Cupertino Municipal water with those of California Water Service and San Jose Water. He said that rates were expected to fluctuate and this chart compared the fees as they are to date, The change will be effective on October 1, with the first rate increase in January of 1998 and all rate increases phased in over three years. It appears, based on rate histories received from the PUC that the rates for both companies have remained very close, although in some years California water service rates may have been less. Viskovich said that California Water has 400,000 meters and 18,000 are in Santa Clara County. San Jose Water has 210,000 meters, and Cupertino Water h~q 4,200. Viskovich said that the city will be ready to implement another capital improvement program in the future, which would also trigger a rate increase for Cupertino water customers. Mr. Jim Good, representing California Water Service Company, urged council to vote in favor of the staff recommendation for a 25-year lease. He said they are the largest investor-owned company and they take pride in the people they hire and their participation in the community. He introduced a number of managers and employees of California water service who are also residents of the local community. Mr. Good said that in three years the rates for this community will be the lowest in the Bay area. They have programmed in $5 million for capital improvement projects over 25 years and repairs will be done as needed to operate the system at the highest level. One immediate benefit of going' with California water will be the emergency inter-ties. They have a local ~eptember 2, 1997 Cupertino City Council Page 4 office in Los Altos and would establish local pay stations in Cupertino. Mr. Good said their rates are currently higher than San Jose Water's, but that has not always been the case. Their rates are higher because of their regular maintenance schedule, such as main replacement which is done annually. They also have an aggressive earthquake retrofit program. The only other increases that might occur would be from increased costs from the Santa Clara water district, or as a result of inflation. Richard Balocco, representing San Jose Water Company, commended staff on the very professional process. He gave a brief history of his company and said their bid, which is very competitive, remains on the table. Their plans regarding main replacement and earthq-ake preparedness would be similar to the service that California water plans to provide. In addition to correspondence which had already been printed in the packet, the following documents were distributed to Council at the meeting: (1) Letters opposing the lease of the utility from James and Jamie Chang; Eugene Michaels; Jan Stoeckenius; and John Poff, representing the Rancho Deep Cliff Homeowners Association; (2) A letter asking for additional information from Laura Stevens Mercher; (3) A letter supporting the lease to California Water Service from Carol McDowell; (4) A cost/benefit summary and conclusion that the lease should be made to San Jose Water, from Mci Amato. The following individuals spoke in opposition to the lease of the Cupertino Municipal - Water utility: Allen Holzman, representing Cupertino Stonebridge HOA, 23000 Stonebridge John Eilts, 10470 Stokes Avenue; Robert Levy, 10802 Wilkinson Avenue Eugene. C. Michaels, 21338 Meteor Drive Robert B. Sunmer, 10314 Mira Vista Road Bill Staiger, 10317 Vista Knoll Boulevard Roy Schenerlein, 22145 Orchard Court Allen Snyder, 10534 Meteor Place; Bruce G. Wenniger Ken Brown, representing Foothill Comers HOA, 22475 McClellan Road; Mark Fanto~.i, 10915 Linch Vista Dr. John Ennals, 10481 Florence Dr. Dean Sayre, 10805 S. Stevens Canyon Road Julia Tien, 22386 Cupertino Road Lyn Faust, 11033 Canyon Vista Dr. Mike Jerbic, 20575 Merriman Road Their comments included the following: (1) The proposed change is not in the best interests of the 4,200 existing customers of Cupertino Municipal Water and there is nothing wrong with the existing water system; (2) The literature provided to the customers did not provide sufficient information to make an informed decision, and did not thoroughly explain why the change was needed; (3) This proposal is a disguised tax and was not approved by the voters; (4) The utility belongs to the people who paid for it via hookup fees and ongoing maintenance; (5) The funds will go to the City of Cupertino ~]ep/ember 2, l {)07 Cupertino Council Page General Fund and California Water stockholders, but it will not benefit the citizens; (8) -- There is inadequate information about where the money will be spent; (9) Cash was thc primary justification for making the choice; and (1) One-third of the City's customers should not subsidize the increase to the General Fund. Mci Amato, 21639 Edward Way, reviewed his cost/benefit analysis and said that if Council chose to lease the water utility, the best choice was San Jose Water. Jan Stoeckenius, 22386 Cupertino Road, suggested one alternative would be to the lease the utility and return the additional costs to the customers in cash. The City Attorney noted that in January of 1997 the legislature passed SB 2111, which provided that a municipality may lease a water utility independent of other laws, with or without benefit of a vote of the people. He said that all three options before the City Council were legal. Viskovich responded to a number of questions from Council members. He said there is not currently a problem with the water system, and the main reason for considering the lease is that the utility company, as an enterprise fund, is not generating the revenue that it should compared to an open-market enterprise. Therefore there is the possibility that the entire community might benefit from a small portion of the community that is now paying a below-market rote. Another reason is that there are future water quality requirements to be met. They will be imposed on larger companies first, so the community will be able to enjoy the benefit of these improvements early on, before a smaller utility would have to implement them. Staff feels that the future water quality requirements, such as pipe evaluations, chemical evaluations, etc., will be more onerous on a small company and it will be necessary to contract out much of the work. The City is not really in the business of supplying water, that is better trusted with a larger company that does it full time. Viskovich noted that the water rates were established to create a reserve for capital improvements and they were ready to embark on building some additional pumping facilities and additional storage. As an individual company, Cupertino Water cannot do well without the help of surrounding utility companies if there are problems, and must develop its own contingency plan. This step would not be needed if the utility is leased because the larger companies have more resources. Viskovich noted that the City received a lot of benefit over the years from federal grants, and even used grants to replace all the water lines in Monta Vista. Developers also put in many new lines. The City was fortunate to receive those grants at the time but they cannot be relied upon for the future. Viskovich discussed the control mechanisms that would be in the leasing agreement. He noted that because this is a lease it is not under the PUC's review, so the City Council will have the ultimate say in rote establishment, although the lease does give expectations to the water companies that they will be able to conduct business using the cost of doing _ business rates. It is expected that in most cases the Council will honor those unless there are some extenuating circumstances. For example, if there is a catastrophe in Cupertino that is above and beyond what the lease agreement called out as routine maintenance, the company could request a surcharge until the problem was addressed. ~eptem~r ~-, 10{)7 Cupertino City Council Page 6 Viskovich said that the funds from the lease payment plus reserves that would be freed could be used for a number of the capital improvement program items which have been included in the 5-year CIP but which are long-range or unprogrammed because funding was not available. Some of these include the library expansion, which could range from $4 million to $12 million; Senior Center expansion; open space acquisition as shown in the General Plan, including 5 or 6 acres next to Blackberry Farm, some potential areas in the foothills, and some trails and road improvements that have been deferred along McClellan Road. The total cost could range fxom $8 million to $16 million or more. Discussion followed regarding potential rate increases and how those would be reviewed by the City Council. City Manager Don Brown said it is natural to discuss the proposal in terms of one part of the community versus another part because it affects a distinct geographical area. However, the Council has historically based their decisions upon what is good for the whole community. Sometimes that means that private companies provide the services, as was done with garbage company service and street sweeping. The City has done things which involve other agencies of government such as the sheriff's service and the $oint Powers Agreement with the library authority. The City has also taken things out of private hands to protect those resources for the citizens, such as Blackbeny Farm and the Sports Center. It is really the entire community that should be considered and there would be some significant benefits that could accrue to this part of the community in the long Dean said that Council is trying to find a way to utilize an asset and yet cover the responsibility to the citizens. This lease can generate up to $1 million in revenue just in interest. The impact on the one-third of the population served by the utility would be $155,000. He asked statT if they could grandfather in the rate for current customers. The needs that have been envisioned are also important for the community and staff is trying to come up with new ways to meet them. The grandfathered rates would be a compromise with no impact to the users. Sorensen said she will be off council in November and will not be participating as to how the money will be spent. If the lease is agreed upon, she asked that staff verify the original agreement would not create any restrictions. She felt that Dean's suggestion was excellent and should be considered, since Council is constantly looking for ways to generate revenue for entire city. Bumett said that Dean's suggestion comprises a completely new agreement starting fxom ground zero and it's not clear that the water companies would be interested in doing that. Chang said that staff's recommendation that Council look at the viability of continuing small water works in the changing environment was one of the driving forces for _ considering this proposal, and he had not changed his mind about that. In terms of rates, Council should do it in the way that has the least impact on the residents, so he was in favor of San Jose Water. He would also be in favor of the grandfathered rates if that proved to be viable. geptember 9_, 1997 Cupertino City Council Page 7 Baufista said that Cupertino Water is faced with increasing burdens such as nnlmown and -- known capital improvements and requirements that are likely to be beyond the 2.5 million in reserves. He said he would hate to be in a situation in which, through murine maintenance or catastrophe, the city were required to bail out the water company or the water users were required to pay for capital improvements in the system. This system is aging and Council is looking for way to pass that risk and liability to larger system that can spread it among greater number of users. He felt there was some argument that the since San Jose Water starts out at a lower rate it gives Council some ability to maintain that low rate. That needs to be weighed against the benefit of an extra $1.1 million to the city. He would vote in favor of California Water since the rote is not gamranteed, but would not object to going with San Jose Water iftbe majority of Council were in favor of that. From threshold point view he was in favor of leasing the water system to insure that the city does not carry the risk associated with this kind of system and infrastructure over the long term. Burnett said that the uses of money have been couched in terms of capital improvements and that is not the whole story. When he joined the council the Fourth of July had been canceled, library hours cut back, and the City was not maintaining facilities at an adequate level. Things are more prosperous now, but there will be another down mm, and he wanted to have enough in the General Fund at that time to be able to fide it out and continue to provide the services everyone expects in the community. He said it the spirit of the community to share in the common good and this City has done it time and time · - again. To lease a water company is something that is going to hurt those who have to pay increased rates and he would not do that unless there was a solid need for the money. He felt Mr. Amato's analysis was excellent and Bumctt felt the best deal was with San Jose Water. He was not sure if Dean's suggested new approach was viable. If there is anything that could be done in that area he would support it but since it's a new concept Council can't make a decision to do that tonight. They have choice of selecting one of three options or continuing this and directing staff to look into another arrangement as proposed by Dean. Discussion followed regarding Dean's proposal to grandfather rates, how those rates might be calculated, and what the city's final income would be. Bautista said the result of Dean's proposal would mean that, besides an expanded library, senior center and open space purchases, one of the uses would be to refund money to the Cupertino water users over the period of 25 years. He did not support that because it is not a use that benefits the entire community, which was the original purpose for considering the water utility lease. Dean said only the residential rates would be grandfathered, so it will filter itself so the gross raw numbers would not be that bad. It would create an accounting problem for the City, but the users who created the water district and supported it for 38 years would get a return on their equity. ._ Kilian said one question that comes to mind is whether it would create a discriminatory situation because one household would have grandfatbered rates and someone next door would pay much more. The purpose of water rates is to spread the cost for providing the services in a fair and equitable manner based upon use. He also questioned whether it was pcimitted to discriminate between commercial and residential water use rates. geptember 2, 1997 Cupertino City Council Page 8 Bautista said that there are two ways to approach thc decision. One is to decide tonight whether the lease should be granted to California Water or San Jose .Water, then decide later whether there is some portion of that revenue stream that get rebated to the residents. Another way is to go back to the bidders and ask how their proposals would change in terms of the range between $6 million and $7.95 million if there is a rote scheme that always involved lower rates for the Cupertino residents. He asked is there consensus on any of the alternatives. Kilian noted that the bids will expire after a certain period of time and Council should be careful not to continue their action until a time in which the bidders would be able to withdraw their bids. Bumett and Chang said that they favored the lease with San Jose Water. Sorensen said she would vote no because she wanted to address the rebate question first. Dean also voted no. Bautista said he was willing to vote for a lease with San Jose Water. He felt that tonight's analysis gave an understanding of what the value of the extra $1.1 million dollars would mean to the city. In connection with the rebate program it is not really that valuable, based on return of investment of 5.5%. Burner moved to award the lease to San Jose Water Company at the San Jose Water rates for the amount of $6.8 million, and to adopt Resolution No. 9950. Chang seconded and the motion carried 3-2, with Dean and Sorensen voting no. RECESS The meeting was recessed from 9:50 p.m. to 10:00 p.m. 18. Application Nos. 15-U-96 (Modified), $-TM-96 (Modified), and 6-Z-96 (Modified), Sand Hill Properties (Tandem) - Public hearing to consider modifications to a use permit related to site design and development phasing, and to a tentative map and zoning related to development phasing. Environmental detem~inafion: Categorically exempt. Recommended for approval. (a) Ordinance No. 1764: "An Ordinance of the City Council of the City of Cupertino Amending Ordinance No. 1750 Regarding a Condition of Approval for Application No. 6-Z-96, a Parcel Located at 10?41 North Wolfe Road and 19590 Pruneridge Avenue (Application No. 6-Z-96(Modified)." (b) Resolution No. 9935: Approving Application No. 8-TM-96(Modified). (c) Resolution No. 9936: Approving Application No. 15-U-96(Modified). Commnnity Development Director Bob Cowan reviewed the staff report which shows correspondence from the applicant and a re-drafted condition. The only issue that remains is the question of timing between when apartments can get started and the hotel must be built. The shorter the time period, the more assurance the hotel will be built. ~ep/eml~er 2, ! {)07 Cupertino City Council Page The applicant is asking for a longer time period to give them flexibility in case there are · '- any.problcms. There were also some discussions about another option of keeping the 120 days but changing the trigger date so that the podium first and then start the 120 days when the permits are issued for the framc part of the buildings. Mr. Mike Anderson, representing Sand Hill Properties (Tandem), said the issue for them is that they will lose the $1 million security if the foundation is not done by a certain date. Sand Hill would prefer a year, but the absolute minimum they can support is 240 days f~om the date of building permit for the hotel. Staff did not approve of that suggestion, which triggered the third alternative. He would not have a problem setting an outside date, such as 10 months of getting the building permit. Anderson said that the plans are being checked for the apathrtents fight now. Cowan said that the hotel is undergoing its second plan check, and that plan check fees have been paid for both the hotel and the apathixents. Building pe~aa,it fees get paid when the pe~i;~its are acB~ally issued, which will depend on how many changes are needed on the plans. It could be as soon as 3 or 4 weeks. City Attorney Charles Kilian said suggested that if Council is inclined to make a change, the 240-day request is simpler to administer rather than having two touch points associated with building permits. Anderson said that once the building pe,~-,~its have been issued, they will proceed as soon as they can, because they will have invested millions in the land. They will have also put · -- over a million dollars' worth of bonds regarding roads, sewer lines, water lines, etc. Bautista said there is a substantial penalty of $1 million if the dcadiine is not met. Because of the amount that is risk, he felt it was fair to increase the time to 240 days. Bumett and Chang agreed. Sorensen and Dcan said they preferred the staff recommendation of 120 days. Burner moved to approve the modified condition wording as shown on Exhibit A of the September 2 staff report, changing "120" days to "240" days as thc period of timc in which the hotel construction must commence. Chang seconded and the motion carried 3- 2 with Dean and Sorensen voting no. Kilian clarified that these changcs will apply to Condition 4 of 6-Z-96, Condition 17 of 15-U-96, and Condition 6 of $-TM-96. Cowan clarified that the trigger is the iss~auce of building permits for the apartments, which is distinct from grading. The City Clerk read the title of Ordipance No. 1764. Buruett moved and Chang seconded to read the ordinance by title only, and that the City Clerk's reading would constitute the first reading thereof. Motion carried 3-2 with Dean and Sorensen voting no. Burnett moved to Adopt Resolution No. 9936 with the samc modified condition. Chang seconded. Motion carried 3-2 with Dcan and Sorenscn voting no. Chang moved to adopt Resolution No. 9935 with the same modified condition. Chang seconded. Motion carried 3-2 with Dean and Sorensen voting no. gepfember 3, 1007 Cuper~o City Council Page 10 PLANNING APPLICATIONS None. UNFINISNP~B BUSINESS None. NEW BUSINESS None. ORDINANCES 19. Second reading and enactment of Ordinance No. 1765: "An Ordinance of the City Council of the City Of Cupertino Amending Section 11.20.020 of the Cupertino Municipal Code Relating to Establishment of Vehicular Stop and Section 11.20.030 All Directional Vehicular Stop Required at Certain Intersections to Include Prospect Road at the Intersection of Seven Springs Parkway." The City Clerk read the title of the ordinance. Chang moved and Burner seconded to read - the ordinance by title only, and that the City Clerk's reading would constitute the second reading thereof. Motion carried 5-0. Chang moved and Burnett seconded to enact Ordinance No. 1765. Motion carried 5-0. 20. Second reading and enactment of Ordinance No. 1766: "An Ordinance of the City Council of the City Of Cupertino Amending Section 11.08.250 of the Cupertino Municipal Code Relating to the Designation of Bicycle Lanes." The City Clerk read the title of the ordinance. Chang moved and Burner seconded to read the ordinance by rifle only, and that the City Clerk's reading would constitute the second reading thereof. Motion carried 5-0. Chang moved and Burnett seconded to enact Ordinance No. 1766. Motion carried 5-0. 21. Ordinance No. 1767: "An Ordinance of the City Council of the City Of Cupertino Amending Chapter 11.08 of the Cupertino Municipal Code To Add References to Roller Skates and Skateboards." The City Clerk read the title of the ordinance. Chan~ moved and Burnett seconded to read the ordinance by title only, and that the City Clerk's reading would constitute the second ._. reading thereof. Motion carried 5-0. Chang moved and Burner seconded to enact Ordinance No. 1767. Motion carried 5-0. - ' ~ep/em~r 9~, 1007 Cupertino Ci~y Council Page 11 STAFF REPORTS Public Works Director Bert Viskovich reported that Mr. Dean Sayre had said at the last meeting that his garbage can had been damaged by the garbage company. Los Altos Garbage offered to buy him a new can and he refused because the can was old and he didn't feel fight about having them buy a new one. Also, Mr. McCarthy liad difficulties of disposing of a water softener with Los Altos Garbage because it was on their list of hazardous items. The City has challenged that and it has been removed from the list. Los Altos Garbage also contacted Mr. McCarthy to make amends and he refused any assistance since it had already been disposed of. Viskovich reported that the conflict between street sweeping and garbage collection had been eliminated by modifying the street sweeping schedule beginning late October. Sorensen said she had noticed that even the plastic garbage cans in her neighborhood are dumped on the side, so the company needs a reminder to be more careful in her neighborhood. COUNCIL REPORTS Sorensen commended Diane Snow on the success of the volunteer luncheon, which she accomplished during unexpected sprinkles and a broken water main. Chang commended staff on their excellent work regarding the water utility lease. All Council members agreed. City Manager Don Brown reviewed the recommendations of the Legislative Review Committee, as follows: Oppose School Fees and Local Control Support AB 1362 (Maz?oni), Local Taxation, Court Case Implementation Oppose AB 62 0VIcClintock), Local Government Detachments Oppose SB 137 (Maddy), AB 297 (Vincent), Smoking and Tobacco Control, Bar and Bar Areas Support SB 500(Polanco), Fire~iiis, Local Regulations Support SB 1066 (Sher), Solid Waste, AB 939 Indemnification Burner moved and Chang seconded to adopt the recommendation of the committee. The motion carried 5-0. Brown said that the Sister City delegation from Toyokawa will arrive on September 24, where there will be a reception. A barbecue in tbeir honor will be held at the Senior Center on September 26. ADJOURNMENT .,_ At 10:35 p.m. the meeting was adjourned. , City Clerk~''