SEP 1 8 2014 Honorable Brian C. Walsh David H. Yamasaki Presiding Judge Santa Clara County Superior Court*

From 1996 to 2005, the City of Palo Alto leased the Lee Gift Deed Property to an adjacent landowner for construction staging even though the property was required to be used for conservation, including parks and recreation. RESPONSE to Finding 1: The City agrees with the finding. The City should not have leased the parcel except for "conservation purposes, including parks and recreation." The lease agreements were executed and administered under two prior administrations. The officials and employees who took these actions have long since left the City's service.

The City of Palo Alto leased the Lee Gift Deed Property without following its P&P 1-11/ASD regarding the Procedure for Leasing of City-Owned Real Property. RESPONSE to Finding 2: The City agrees in part with the finding. This pertains to decisions made many years ago. Local law allows the City Manager to enter into leases up to three years. (Palo Alto Municipal Code Section 2.30.210(h).) Consistent with the Municipal Code, Policy & Procedure 1-11/ASD states that it does not apply to short term leases. The initial lease of the Lee Gift Deed Property – which was signed by a prior city manager nearly 15 years ago – was a short-term lease that was not required to comply with P&P 1-11/ASD. A prior administration allowed the lease to hold over beyond the authority granted to the city manager in the Municipal Code. At that point, both the Municipal Code and P&P 1-11/ASD required additional process, which did not occur.

On September 18, 2012, the City of Palo Alto held a closed session meeting, under the real- estate negotiation exception to the Brown Act, to discuss price and terms of the sale of the Lee Gift Deed Property. Prior to the meeting, the public was not aware that the City was considering the sale of the Lee Gift Deed Property and had no opportunity for public debate on the future use or sale of the property. <b>RESPONSE to Finding 3:</b> The City agrees in part with the finding. Real property in Palo Alto is a valuable asset. It is not often that the City sells or even seriously contemplates selling any of its real property assets. On the occasions when it does so, property may be designated for sale after a survey that identifies the property as appropriate for sale through the process described in P&P 1-48. In addition, from time to time, a third party (which may be a private individual, company, non-profit, educational institution or other governmental entity) may approach the City to initiate discussions about a real property transaction. City staff initiated the closed session on September 18, 2012, to inform and receive direction from the Council regarding an unsolicited proposal by Mr. Arrillaga to purchase the Lee Gift Deed Property for a specific price, For the closed session on September 18, 2012, (and one on June 4, 2012), staff listed the property by the assessor's parcel number, because the property does not have a street address. After the September 18th agenda was published but before the meeting occurred, the staff realized that more information would be helpful. On September 18th, before the closed session, the Mayor orally listed properties adjacent to the Lee Gift Deed Property. When Mr. Arrillaga approached the staff in late 2011 about acquiring the Lee Gift Deed Property, staff research revealed that this was not the first time that Mr. Arrillaga had proposed to acquire the land. Although the parcel is in a remote location and prior to late 2011 was not familiar to current City staff or Council Members, Mr. Arrillaga in fact had a long history of attempting to acquire the parcel. He was the neighboring landowner, and between 1983 and 1996 had control of the property because the Lees had sold him the estate that they had reserved on the parcel, including the exclusive right of access and use. After 1996, as noted above, Mr. Arrillaga continued to lease the property for almost 9 years from the City. Throughout the years, the City of Palo Alto had responded to Mr. Arrillaga's periodic questions about the process for acquiring the parcel. Beginning in late 2011, Mr. Arrillaga again began asking City staff about acquiring long-term access to the parcel, either through a long-term lease or purchase. Staff intermittently answered his questions about the procedures that would be required for long-term lease or purchase, including Council action, an open public process, surplus property designation, significant consideration and the ongoing need to comply with the deed restriction, Anticipating the need to provide information to the Council, staff ordered an appraisal of the property, which was completed in May 2012 and came in at $175,000. The City conducted an initial closed session on June 4, 2012. The staff informed Mr. Arrillaga that it was not conceivable that the Council would consider selling the parcel at that price, and that additional/offsetting parkland may need to be a factor to even be considered and that possibility uncertain. The City later received a general proposal for funding and construction of playing fields at the Baylands. The City also received a proposal to purchase the Lee Gift Deed Property for $175,000. City staff had a responsibility to bring the purchase offer to the Council for preliminary direction and did so on September 18, 2012. (As described below, the Council has referred to its Policy & Services Committee a review of Policy & Procedure 1-48, which may include guidance regarding whether future such meetings should occur in open or closed session.) Following the Closed Session and Council tours of the property, neither City staff nor the Council elected to move forward to consider the sale of the property by placing an Item on the Council's open session agenda. On August 18, 2014, the City Council approved an ordinance dedicating the Lee Gift Deed Property as parkland, and declaring it a part of Foothills Park. The Parks and Recreation Commission is considering best uses for the property, consistent with its status as parkland and the deed restriction.

The City of Palo Alto does not consistently respond to requests for public records in a timely manner. RESPONSE to Finding 6: The City agrees that it has not satisfied every public record request in the optimal timeframe, though its practices are within reasonable and customary standards for similar cities in the region. The City receives many requests for routine information every single day and does a good job of responding promptly to the public. Formal requests under the Public Records Act come into the City from many different points across the City organization. For formal Public Records Requests, we recently have added an FAQ and a request form to the Public Records Request webpage that can be submitted online to better track requests. The City also receives Public Records Requests via email, traditional mail and orally, which often need to be coordinated internally to ensure appropriate departments are responding. The City strives to provide an initial response to Public Records Requests within ten days and generally meets this standard. 4

The City of Palo Alto's current system for tracking and documenting non-routine PRR and the City's response to the request fails to capture all requests or responses. RESPONSE to Finding 7: The City agrees with this finding. While the City's system does a reasonably good job of capturing most requests and responses, the City agrees that its current system does not capture all requests and responses, and that the system could be improved. The City will provide software solutions in this area and increase staff training.