Santa Clara County Grand Jury

2021-2022

12 reports

From the annual report
The consolidated year-end volume. The individual investigations it contains are listed separately below.
📑 Year-End Report
View the full annual report (PDF)
The full consolidated volume; individual reports are listed below.
Individual reports (12)
Findings & Recommendations 10 findings
F1: "The District did not fulfill its responsibility to provide technical support to the Oversight Committee relating to conflict of interest requirements. Although the bylaws reference the Oversight Committee's ethical responsibilities, the requirements are written in legal terminology. The District did not adopt a Conflict of Interest Policy for the Oversight Committee as suggested by referencing Attachment A in the adopted bylaws." Response to Finding 1: The District disagrees with Finding 1. The District provided an in-person training session to all of the current members of the Oversight Committee which included a discussion of the members' ethical responsibilities. Section 5.3 of the Oversight Committee Bylaws, and the laws incorporated thereby; include all of the content which might be found in a Conflict of Interest Policy.
Related Recommendations (2)
R1a: "The District should create a plan to provide a conflict of interest policy to Oversight Committee members and incorporate the subject matter into the Oversight Committee's training and orientation. This recommendation should be implemented no later than April 30, 2022." WILL BE IMPLEMENTED IN PART. The District agrees that as membership changes on the Oversight Committee periodic training sessions summarizing the roles and responsibilities of Oversight Committee members should be conducted. The District disagrees that there is a need for a conflict of interest policy, inasmuch as the Bylaws adequately describe the rules governing conflicts, and inasmuch as past and future training sessions have and will continue to provide guidance on conflicts of interest.
R1b: "The District should create a process for Oversight Committee members to evaluate and disclose conflicts of interests and incompatible activities. This recommendation should be implemented no later than April 30, 2022." WILL NOT BE IMPLEMENTED. The District already has a process by which it screens applicants who desire to serve on the Oversight Committee which reveals whether the applicant is a District employee or has financial interests associated with the expenditure of bond funds.
F2: "Current Oversight Committee membership falls below the minimum required by law. Failing to maintain members in the required affiliation category can create crucial vacancies where vital constituencies' voices may not be heard or adequately represented." Response to Finding 2: The District disagrees with Finding 2. The Oversight Committee membership meets the legal requirements established by the Education Code. From time to time vacancies occur and the Bylaws direct that such vacancies seek to be filled within 90 days. Inasmuch as the Oversight Committee meets quarterly, the District does not believe that designated groups' voices are not heard or are inadequately represented.
Related Recommendations (1)
R2: "The Board of Trustees should appoint sufficient Oversight Committee members to meet or exceed the minimum number required by law. This recommendation should be implemented no later than April 30, 2022." WILL NOT BE IMPLEMENTED. Membership on the Oversight Committee currently satisfies the legal requirements set forth in the Education Code.
F3: "The District-approved Oversight Committee bylaws contain inconsistent and incomplete term limit provisions as specified in the Education Code. The District included a bylaw authorizing members to serve beyond the expiration of their third term while waiting for a replacement to be appointed. The District did not comply with the additional term limit provisions associated with the member serving in the student affiliation category. The student member may only serve six months after graduation with the specific approval of the Board of Trustees." Response to Finding 3: The District disagrees with Finding 3. The current Bylaws comply with the requirements of the Education Code in all respects. Temporary service beyond a member's third term does not constitute an inappropriate fourth term, but rather, serves the public purpose temporarily assuring that while a vacancy is being filled, there is a person present and participating in the deliberations of the Oversight Committee. Student members are appointed to a term, which they may or may not complete depending on their enrollment status. The most recent student member of the Oversight Committee had not served past her term limit or past her status as a student at Gavilan College. "The District should develop a plan to update the Oversight
Related Recommendations (2)
R3a: Committee bylaws to rescope the term limit bylaw addressing replacement holdovers as well as incorporate the additional student term limit provisions outlined in the Education Code. This recommendation should be implemented by April 30, 2022." WILL BE IMPLEMENTED IN PART. Membership on the Oversight Committee is governed by the Education Code and the Bylaws implement the Education Code. The Bylaws currently satisfy all legal requirements. However, for clarification of the limits of service of a student member on the Oversight Committee, the District agrees that the application form for membership on the Committee can be amended to include a specific reference to Section 15282(a)(4) of the Education Code.
R3b: "The District should develop a plan to ensure that it abides by the term limit provisions required by law for its student affiliation category. The plan should also address the student's term limit provision on the Committee Member Term Chart provided by the District. This recommendation should be implemented by April 30, 2022." WILL BE IMPLEMENTED IN PART. The Bylaws properly describe the legal term limits on Oversight Committee membership, and the District has been in full compliance with those requirements. The District does not need to develop a plan to assure continued compliance. The District agrees to update the Committee Membership Term Chart to clarify that once a student member of the Committee has no longer been a student at Gavilan College for six months, that the student will resign, and the remaining period of the student's term will be filled by such member's successor.
F4: "There are areas in which the Oversight Committee might be perceived as having its independence questioned or compromised in relation to the administrative and technical support it receives through the District's contractor." Response to Finding 4: The District disagrees with Finding 4. Since the Oversight Committee is a statutory committee (created by action of the State of California Legislature) "independent" means (i) members not having a conflict caused by being a District employee or vendor to the District and (ii) members being free to exercise members' responsibilities without interference by the elected Board which appointed them to the Oversight Committee. The independence of the Oversight Committee cannot be compromised by the form of administrative or technical support it receives from the District.
Related Recommendations (1)
R4: "The District should identify and communicate to both the Oversight Committee and the public, the relationship the District's contractor has to the Oversight Committee regarding the Measure X program. The District should clarify the level of authority and independence the Oversight Committee has to request services from its contractor, AKG. This recommendation should be implemented by April 30, 2022." WILL NOT BE IMPLEMENTED. The Oversight Committee has no authority to request services from a District contractor. Such requests can only be made to the District who has the responsibility to determine if such services are required to assist the Oversight Committee perform its statutory functions. As appropriate, the District may choose to provide such additional services through a particular contractor, or provide them by some other means.
F5: "The "Measure X Bond Newsletter" has been dormant despite the District inviting members of the public to sign up for program updates. The newsletter service is identified in a contract agreement but has not been posted since the September 2019 issue as reflected on the Measure X website." Response to Finding 5: The District disagrees with Finding 5. The "Measure X Bond Newsletter" has not been dormant since September 2019, and in fact five additional newsletters have been issued between September 2019 and August 2020. The Newsletter Archive webpage had not been kept up- to-date to reflect the more recent issues. The Newsletter Archive webpage has been updated to include copies of all the Measure X Bond Newsletters.
Related Recommendations (1)
R5: "The District should develop a plan to provide the necessary resources to revive the "Measure X Bond Newsletter". This recommendation should be implemented no later than April 30, 2022." . . WILL NOT BE IMPLEMENTED. The District presently commits the necessary resources to prepare and distribute the Measure X Bond Newsletter. The Newsletter will continue to be published as new developments regarding Measure X are approved by the Board of Trustees. The District will, however, implement a plan to better maintain the record of Newsletter distributions on the Newsletter Archive webpage.
F6: "The District does not provide Oversight Committee members with a clear, direct, or transparent way of receiving electronic communications from the public. There is a standing agenda item for this type of direct communication, but an effective accompanying tool does not exist for Oversight Committee members to receive and respond to this type of communication." Response to Finding 6: The District disagrees with Finding 6. The Oversight Committee is subject to the public meeting requirements of the Brown Act. Communications from the public to the Oversight Committee and from the Oversight Committee to the public should occur at a properly noticed public meeting. Nonetheless, members of the public can communicate to the Oversight Committee by using the existing "Contact" link of the Measure X website. The "Contact" link is a clear and direct way for the Oversight Committee to receive electronic communications from the public. Notices of meetings of the Oversight Committee are provided in accordance with the requirements of the Brown Act. Violations of the Brown Act might likely occur in the event members the Oversight Committee had the ability to electronically respond to members of the public outside of the context of a properly noticed public meeting of the Oversight Committee.
Related Recommendations (1)
R6: "The District should develop a plan to institute an electronic communication tool to contact the Oversight Committee directly. The District needs to provide an appropriate communication tool to foster public engagement, correspondence, and feedback. This recommendation should be implemented no later than April 30, 2022." WILL NOT BE IMPLEMENTED. The District currently has a tool by which the Oversight Committee can be contacted by members of the public, described above. To avoid a violation of the Brown Act all communications and public engagement should occur at a properly noticed public meeting.
F7: "The District did not follow established norms and protocols for posting meeting notifications and announcements specifically associated with cancelled meetings. Additionally, the District has inhibited the public's ability to access agendas and meeting materials because the link to the agenda is not clear and the multiple steps required to navigate to the meeting materials is unduly complicated." Response to Finding 7: The District disagrees with Finding 7. Notices of all meetings of the Oversight Committee are provided in accordance with the requirements of the Brown Act. 4
Related Recommendations (2)
R7a: "The District should create a plan to update meeting announcements published on the Measure X homepage to prominently identify the webpage links to access the meeting agenda. This recommendation should be implemented no later than April 30, 2022." WILL BE IMPLEMENTED. The District agrees to post a link to the agenda on the Measure X homepage for additional ease of access.
R7b: "The District should review the structure and navigation to meeting agendas and create a plan that addresses the public's need for efficient access to agendas and meeting materials. This recommendation should be implemented no later than April 30, 2022." WILL NOT BE IMPLEMENTED. The District already utilizes BoardDocs, a standard agenda and meeting management tool, commonly used by K-14 educational institutions, that provides efficient access to agendas and meeting materials.
F8: "The orientation the District provides to the Oversight Committee does not adequately prepare members to effectively carry out their roles and responsibilities. The District provides a general overview using reference materials. More in-depth and specialized training is needed to ensure committee members are equipped to fulfill their oversight responsibilities." Response to Finding 8: The District disagrees with Finding 8. The District has provided in- depth and specialized training regarding their role and responsibilities to all current members of the Oversight Committee, including a one-on-one training session for the member of the Oversight Committee who missed the orientation meeting when such group training was conducted. Training has been conducted by a knowledgeable attorney, expert in the field.
Related Recommendations (1)
R8: "The District should provide detailed and targeted training to members of the Oversight Committee. A training plan should be developed with input from the Oversight Committee. This recommendation should be implemented no later than June 30, 2022." WILL NOT BE IMPLEMENTED. The District current provides detailed and targeted training to members of the Oversight Committee. The District agrees that as new members join the Oversight Committee it will arrange for a knowledgeable attorney to provide follow-up trainings as to the roles and responsibilities of the Oversight Committee. Input from the Oversight Committee regarding topics for discussion during training sessions has been and will continue to be welcome.
F9: "The District did not provide the Oversight Committee with any information about initiatives to maximize bond revenues through the use of cost-saving measures such as joint-use facilities. As a result, the Oversight Committee was not able to communicate those initiatives to the public, which led to the mistaken impression that none were considered." . . ... Response to Finding 9: Education Code Section 15278(b)(5) outlines examples of cost saving measures that the Oversight Committee might address. During the training session members of the Oversight Committee were informed of their duty to ask questions designed to inform them of such cost-saving measures. Because the State Constitution restricts the use of bond proceeds exclusively for "school facilities," joint use facilities are very difficult arrangements. The District will, however, be more cognizant of informing the Oversight Committee of project delivery mechanisms which are designed to reduce construction costs.
Related Recommendations (1)
R9: "The District should develop a plan to communicate the ways in which the District has identified or enacted cost-saving measures to the Oversight Committee. This recommendation should be implemented no later than April 30, 2022." WILL NOT BE IMPLEMENTED. An independent plan is not required in order for the Oversight Committee to request relevant information regard cost-savings measures, if any, which have been implemented with respect to a particular bond funded project. The District, nonetheless, can identify such measures, if any, and bring them to the attention of the Oversight Committee.
F10: "The District did not provide the Oversight Committee with timely, certified final financial and performance audits to review. The District's 10-month drawn-out process put the Oversight Committee in the position of issuing an annual report with a constitutionally mandated compliance statement using draft audits. Those draft audit reports remain on the Measure X website. The draft audits lack a date and auditor's signature and therefore are not certified, despite final versions being provided to the Board of Trustees Budget and Audit Planning Committee." Response to Finding 10: Due to the pandemic and other internal accounting concerns, the District's comprehensive financial audit, as well as subsidiary financial and performance audits for 2020 were delayed. There is no constitutional imperative for the Oversight Committee to have received the bond financial and performance audits prior to the submission of their Annual Report. The District agrees that when the audits have been completed they should be signed, dated and posted on the Measure X website. The District further agrees that the bond audits should be provided to the Oversight Committee concurrently with being provided to the Board of Trustees,
Related Recommendations (2)
R10a: "The District should provide the dated and certified 2020 Financial and Performance Audits to the Oversight Committee. The audits should also be posted to the Measure X website for public disclosure. This recommendation should be implemented no later than April 30, 2022." WILL BE IMPLEMENTED.
R10b: "The District should create a plan with appropriate milestones to ensure the timely completion of annual, independent financial and performance audits. Milestones should include when audits are expected to be available for the Oversight Committee to receive and review, the District's responses to the audits for Oversight Committee review, and when the final signed and dated audits are to be posted to the . . . . . . . . . . . . . . . . . . . . Measure X website. This recommendation should be implemented no later than April 30, 2022.” WILL BE IMPLEMENTED. . .
Findings & Recommendations 14 findings
F1: The Civil Grand Jury commends the City of Mountain View for prioritizing and exhibiting strong, visible support for affordable housing and progress towards Regional Housing Needs Allocation targets. No recommendation.
F2: The Civil Grand Jury commends the City of Mountain View for creating a multi-tiered communication plan that both communicates the value of affordable housing to all stakeholders and addresses their issues. This has engendered strong community support for affordable housing leading to many successful projects. No recommendation.
F3: The Palo Alto City Council has not taken a leadership role in developing community support for affordable housing planning and projects.
Related Recommendations (1)
R3: The City of Palo Alto should research how other cities foster support for affordable housing and develop a communication plan focused on increasing community support for affordable housing. The plan should be developed and made available to the public by June 30, 2022.
F4: Palo Alto City councilmembers do not play a strong enough leadership role in personally engaging in community education and discussion to aid in resident acceptance of affordable housing.
Related Recommendations (1)
R4: The City of Palo Alto should conduct a “lessons learned” analysis from the 4-year unsuccessful North Ventura Coordinated Area Plan planning process. The City of Palo Alto should create an improved process to bring residents to a shared understanding of the needs and complexities of affordable housing development. This process should include direct involvement of Palo Alto City elected leaders in community outreach. These recommendations should be completed by June 30, 2022.
F5: The Housing Element Plan and land-use changes are foundational to supporting affordable housing, but they are not enough. Affordable housing also needs cities to create area-specific land- use and zoning plans like the City of Mountain View’s Precise Plans. Mountain View has also prioritized affordable housing development by using its planning processes to specifically identify a set of projects and actions within a concrete time frame. The City of Mountain View is to be commended for both its use of Precise Plans and its short-term City Strategic Planning process. No recommendation.
F6: The City of Palo Alto’s multiplicity of planning policies and documents creates lengthy processes and can lead to frustration for all parties, including neighborhoods as well as developers. The City of Palo Alto does not have a comprehensive set of plans organized by area or neighborhood that include all zoning elements and regulations that could support AH. Current plans do not clearly and concisely identify where affordable housing could be built with design and density acceptable to the City of Palo Alto and the community.
Related Recommendations (2)
R6a: The City of Palo Alto should identify, by March 31, 2022, three or four areas where significant affordable housing can be built.
R6b: The City of Palo Alto should agree, by June 30, 2022, to task its planners to create realistic plans for each identified area in consultation with residents and developers.
F7: Mountain View Planning Division’s summary memo to the Mountain View City Council provides a clear, concise update on progress toward Housing Element goals. The City of Mountain View is commended for the clarity and conciseness of its Annual Housing Element Progress Update to the Mountain View City Council. However, the Annual Housing Element Progress Updates with cover memos to the Mountain View City Council cannot be found easily by the public on the city’s website.
Related Recommendations (1)
R7: The City of Mountain View should publish its Annual Housing Element Updates and the summaries (in an appropriate form) on the city’s website by June 30, 2022.
F8: Combining the City of Palo Alto’s Housing Element Annual Update and the Comprehensive Plan Update with one cover memo does not communicate city progress in either area clearly.
Related Recommendations (1)
R8: The City of Palo Alto should publish the latest two years of its Housing Element Annual Updates and cover memos summarizing annual progress to the city’s website by June 30, 2022. To better communicate to the public, the Housing Element Annual Updates and the Comprehensive Plan Updates should be separated.
F9: The length of time it takes developers to get their plans approved is significantly higher in the City of Palo Alto compared to the City of Mountain View. This discourages developers from proposing residential development in Palo Alto.
Related Recommendations (2)
R9a: Once the guidelines for developments are clearly defined in area plans, the Palo Alto City Council preliminary review could be eliminated. The City of Palo Alto should establish a schedule by June 30, 2022, for defining and accepting the area plans identified in Recommendation 6a.
R9b: The City of Palo Alto should explore combining the Planning and Transportation Commission and Architectural Review Board reviews into a single review, as is done in Mountain View. Palo Alto City staff should also consult with Mountain View planners to investigate ways to further streamline the approval process. Recommendations for changes to the planning review process should be proposed by June 30, 2022.
F10: Developers (both for-profit and non-profit) find it very useful to work with a designated individual who is responsible for the affordable housing target and coordinates all activities across developers, funding sources, city council, planning departments, and other stakeholders to enable progress on projects.
Related Recommendations (2)
R10a: The City of Palo Alto should identify an Affordable Housing Manager who can be responsible for the affordable housing target and ensure coordination among stakeholders by June 30, 2022. This role should be the primary focus of this individual and should have the support of Palo Alto’s City Council.
R10b: The City of Mountain View should identify an Affordable Housing Manager who can be responsible for the affordable housing target and ensure coordination among stakeholders by June 30, 2022. This role should be the primary focus of this individual and should have the support of Mountain View’s City Council.
F11: In the past decade, the City of Mountain View has created substantial affordable housing funding derived both from City revenues (fees, charges to developers, etc.) and from external funding. However, the City of Mountain View’s fund is diminishing and needs to be built up.
Related Recommendations (1)
R11: The City of Mountain View should develop a specific affordable housing funding plan to cover its needs for the next five years by July 30, 2022.
F12: The City of Palo Alto does not have a multi-faceted affordable housing funding strategy (including creating a fund for affordable housing as well as proactively leveraging all potential external funding sources) that would encourage it to build more below market housing.
Related Recommendations (2)
R12a: The City of Palo Alto should create a plan with specific goals and timelines by July 30, 2022, to build up the affordable housing fund considering tools such as business tax, document tax, bond measure, and property tax.
R12b: The City of Palo Alto should create a Memorandum of Understanding with Santa Clara County by July 30, 2022, to establish goals and actions to leverage Measure A bond funding and advance identified affordable housing projects.
F13: One hundred percent affordable housing projects are more reliant on scarce city funds and other resources compared to mixed-use projects that combine housing with commercial space. Having a city-wide portfolio of both 100% affordable housing projects and mixed-use projects will yield the greatest number of units and best utilize available funds.
Related Recommendations (1)
R13: The City of Palo Alto should include both mixed-use and 100% affordable funding opportunities in its affordable housing plan referred to in Recommendation 12a by July 30, 2022.
F14: 45 REQUIRED RESPONSES ......................................................................................................... REFERENCES ............................................................................................................................ GLOSSARY AND ABBREVIATIONS ABAG Association of Bay Area Governments: a regional planning agency AH Affordable Housing AMI Area Median Income: The median family income in a metropolitan or nonmetropolitan area ELI Extremely Low-Income: Households with income at or below the Poverty Guideline or 30% of AMI, whichever is higher FAR Floor Area Ratio: the measurement of a building’s floor area in relation to the size of the lot/parcel that the building is located on. GDP Gross Domestic Product: the total value of goods produced, and services provided in a country for one year HCD The California Department of Housing and Community Development: the state agency which produces the RHNA allocations HE Housing Element: a report created by each city in response to the city’s share of RHNA housing goals LI Low-Income: households with incomes between 50% and 80% of AMI MI Moderate-Income: households with income between 80% and 120% of AMI NOFA Notice of Funding Availability: a public notice issued by a governmental entity which announces the availability of funding for a specific purpose and can be requested through an application process. It is typically awarded competitively for proposals that achieve an outcome desired by that organization NVCAP North Ventura Coordinated Area Plan: an area in Palo Alto, located near the old Fry’s store, where multiple proposals from City staff, residents, and property owners have been developed Permitted An official approval that has been issued by a local government agency that allows a builder to proceed with a project. Prop 13 Proposition 13: a June 1978 amendment to the California Constitution that established the concepts of a base year value for property tax assessments, and limitations on the tax rate and assessment increase for real property. This reduced property tax revenue for California municipalities. RHNA Regional Housing Needs Allocation: On an eight-year cycle, the state’s Department of Housing and Community Development gives each regional planning agency a housing planning target for the number of units needed and affordable at various income levels. The regional planning agencies then sub-allocate target numbers to local jurisdictions. VLI Very Low-Income: households with income below 50% of the AMI. This also includes the extremely low-income category. SUMMARY While Charles Dickens’ novel, A Tale of Two Cities, was written over 160 years ago, we can extrapolate some important ideas that continue to be relevant today.1 At its core, the Dickens novel is about the continuing possibility of resurrection and transformation as well as the capacity of humans to change. He believes that discarding the old way of thinking prepares the pathway for transformation. The 2021 Civil Grand Jury of Santa Clara County (Civil Grand Jury) will try to illuminate one city’s new way of thinking about Affordable Housing (AH), while contrasting it with a city still thinking in the old way. The Civil Grand Jury examined the efforts of the City of Palo Alto and the City of Mountain View to implement an AH strategy. While all jurisdictions in Santa Clara County (the County) struggled to meet AH mandates, Mountain View was on a path of meeting its targets (56% of AH goals as of 2019) while Palo Alto was consistently falling short (just over 10% of AH goals as of 2019).2 Why are these northern neighbors performing so differently? What practices have caused one to be more effective than the other in handling this difficult challenge? To answer the question about practices, the Civil Grand Jury identified four broad areas which significantly impact AH success. They are: (i) Political and Community Support, (ii) Proactive Planning and Effective Reporting, (iii) Supportive Practices, and (iv) Affordable Housing Financing. Each area will be discussed in more detail later in the report. The Civil Grand Jury identified important differences between the two cities in these four areas. Mountain View has built up strong community support for AH and has fostered and maintained the political will over several years to advance on its goals and meet its mandates. Palo Alto lacks a cohesive and effective way to communicate with its citizens and as a result, has continually struggled to garner community support for the value of and need for AH. Mountain View has systematically planned to achieve AH targets through well-coordinated regional housing plans and straightforward near-term planning. Once the plans were in place, they were continually monitored and effectively communicated to the citizens. Due to the lack of alignment on AH goals and on the zoning changes AH requires, Palo Alto has a variety of separate plans and policies but few outcomes. Mountain View’s coordinated plans enabled much shorter approval cycles compared to Palo Alto. Given the cost and complexity of AH financing, Mountain View has taken a very targeted approach to building an AH fund and leveraging all available State and County resources. Palo Alto has 1 Charles Dickens, A Tale of Two Cities, (New York: Penguin Books, 2000). City of Mountain View, 2020 Housing Element Progress Report (2015-2023 Housing Element), March 3, 2021, p. 3. struggled to build an AH fund because, in comparison to Mountain View, there has been less commercial or mixed-use development due to its lack of political and community support and slow approval process. Both cities would also benefit from having a dedicated and empowered affordable housing manager to champion this important cause. The Civil Grand Jury believes there are lessons to be learned from this tale of two cities. Other jurisdictions might look to these best practices to improve their own policies and strategies. Due to increasing AH needs and challenging new state mandates exerting greater state control over AH developments, there is more urgency for cities to successfully meet AH targets. The Civil Grand Jury hopes the findings and suggestions in this report will lead to renewed efforts by the cities to successfully meet their AH targets and mandates. While the Civil Grand Jury cannot say this is the best of times yet for AH in these cities, it is through greater commitment and renewed efforts that additional housing opportunities for the residents of Santa Clara County will be created. BACKGROUND The Problem California and the Bay Area are failing to solve one of the most important economic, environmental, and social issues facing the state—affordable housing. California’s housing/job imbalance has been growing. A McKinsey report discovered that since the 1970s, “the state [has] added only 325 homes for every 1,000 additional people.”3 Given the importance of this crisis, it is not surprising that prior civil grand juries (two in Southern California and one in Santa Clara County) have investigated this issue.4 In June 2018, the 2017- 2018 Santa Clara County Civil Grand Jury concluded “The critical need for affordable housing is the issue of the day in Santa Clara County … and our cities are failing.”5 However, the problem persists. The pandemic and the economic slowdown of the past two years have worsened the housing situation in the Bay Area for low-income wage earners and their families. This year in Santa Clara County, there are just 29 homes available for every 100 extremely low-income (ELI) renter households. Homelessness increased 31% between 2017 and 2019.6 The County has the fourth highest rate of homelessness of any community in the country.7 3 Jonathan Woetzel, et al., A Tool Kit to Close California’s Housing Gap, October 2016, p. 2, accessed November 26, 2021, https://www.mckinsey.com/~/media/mckinsey/industries/public%20and%20social%20sector/our%20insights/closin g%20californias%20housing%20gap/closing-californias-housing-gap-full-report.pdf. 4 2016-2017 Civil Grand Jury of Los Angeles County, “Affordable Housing,” Final Report, pp. 1-18, accessed November 12, 2021, http://grandjury.co.la.ca.us/pdf/LOSANGELESCOUNTY2016- 2017CIVILGRANDJURYFINALREPORT.pdf; 2019-2020 Civil Grand Jury of Santa Barbara County, “Homelessness in Santa Barbara County: Our Everyday Epidemic,” accessed November 12, 2021, http://www.sbcgj.org/2020/homeless.pdf, and “Affordable Housing in Santa Barbara: An Oxymoron?” accessed November 12, 2021, http://www.sbcgj.org/2020/AffordableHousing.pdf. 5 2017-2018 Civil Grand Jury of Santa Clara County, “Affordable Housing Crisis: Density is our Destiny,” p. 2, June 21, 2018, https://www.scscourt.org/court_divisions/civil/cgj/2018/BMRH%20Rpt%202018-06- 19%20REVISED%20FINAL.pdf. 6Andrew Aurand, et al., The GAP: A Shortage of Affordable Homes: Appendix B: Metropolitan Comparisons, March 2021, p. 25, accessed November 13, 2021, https://reports.nlihc.org/sites/default/files/gap/Gap- Report_2021.pdf. Destination Home, Understanding Homelessness in Santa Clara County, accessed September 28, 2021, https://destinationhomesv.org/understanding-homelessness/numbers/. If “adequate housing is universally viewed as one of the most basic human needs,” then Santa Clara County is not meeting a basic need of almost 50% of its residents.8 Affordable Housing Defined The term AH denotes either rental or owned housing which costs less than a region’s average housing cost. AH is generally divided into three categories: Extremely Low-Income (ELI), Very Low-Income (VLI), or Low-Income (LI).9 These low-income levels vary by region because they are determined by an area’s Average Median Income (AMI). Table 1 shows these categories for Santa Clara County. Income Household Household Household Household Household Level 1* 2 3 4 5 Low Income: <80% of $82,450 $94,200 $106,000 $117,750 $127,200 AMI Very Low Income: $58,000 $66,300 $74,600 $82,850 $89,500 <50% of AMI Extremely Low Income: $34,800 $39,800 $44,750 $49,700 $53,700 <30% of AMI *Number of individuals in the Household Table 1. Santa Clara County 2021 Area Median Income (AMI) Chart10 8 Joint Venture Silicon Valley, Institute for Regional Studies, 2021 Index Highlights, 2021, p. 41, https://jointventure.org/publications/silicon-valley-index 9 Many cities are also very concerned about housing affordability for “moderate-income” earners. See The Committee to House the Bay Area, CASA Compact, January 2019, p. 15, https://mtc.ca.gov/sites/default/files/CASA_Compact.pdf. County of Santa Clara, accessed May 1, 2021, https://covid19.sccgov.org/sites/g/files/exjcpb766/files/Documents/santa-clara-county-2021-area-median-income- ami-chart.pdf. The Affordable Housing Gap Thirty-two percent of Silicon Valley households earn $200,000 or more annually.11 This is a larger share of high-income households than the City and County of San Francisco (31%), California (14%), or the United States (9%).12 Income inequality in Silicon Valley is more than double that of the U.S. overall and has increased by 81% since 1990.13 The extreme income disparity between the highest- and lowest-wage earners drives up housing costs because increased demand by high- income households creates competition which drives home prices higher.14 Currently, California’s real estate prices are rising “three times faster than household incomes, [and] more than 50% of the state’s households cannot afford the cost of housing.”15 Nearly half of Bay Area renters are rent-burdened—they spend more than 30% of their household income on rent.16 In 2021, Santa Clara County renters need to earn 2.8 times the minimum wage, or $46.21 per hour, to afford the County’s average rent.17 11 Joint Venture Silicon Valley, 2021 Silicon Valley Index, p. 41, https://jointventure.org/publications/silicon-valley-index. Ibid, p. 41. Ibid, p. 40. 14 “The less equal the distribution, the higher income inequality is.” from Carol M. Kopp, “Income Inequality,” Investopedia November 2, 2021, https://www.investopedia.com/terms/i/income-inequality.asp; Thomas Goda, et al., Absolute Income Inequality and Rising House Prices, December 1, 2016, https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2886481; Andrew Aurand, Dan Emmanuel, Daniel Threet, Ikra Rafi, and Diane Yentel, The GAP: A Shortage of Affordable Homes: Appendix B: Metropolitan, March 2021, p. 5; https://reports.nlihc.org/sites/default/files/gap/Gap-Report_2021.pdf; Joint Venture Silicon Valley, p. 40. Woetzel, et al., A Tool Kit, p. vi. Wikipedia, “San Francisco Bay Area,” “is defined by the Association of Bay Area Governments to include the nine counties … Alameda, Contra Costa, Marin, Napa, San Mateo, Santa Clara, Solano, Sonoma, and San Francisco,” https://en.wikipedia.org/wiki/San_Francisco_Bay_Area; Bay Area Equity Atlas, “Housing Burden: Nine-County Bay Area vs. California,” accessed November 27, 2021, https://bayareaequityatlas.org/indicators/housing-burden#/; Joint Venture Silicon Valley, p. 102. California Housing Partnership, Santa Clara County 2021 Affordable Housing Needs Report, p.1, accessed November 13, 2021, https://1p08d91kd0c03rlxhmhtydpr-wpengine.netdna-ssl.com/wp- content/uploads/2021/05/Santa-Clara_Housing_Report.pdf. % of Monthly Income Mean Needed to Afford Occupation Annual Average Market Rent Wage for a 2-Bedroom Unit Dishwashers $30,160 127% Hairdressers $33,384 115% Receptionists and $39,239 98% Information Clerks Retail Salespersons $39,987 96% Security Guards $41,512 93% Preschool Teachers $41,563 92% Medical Assistants $47,846 80% Daycare & Preschool Administrators $55,020 70% Police Officers $130,911 29% Table 2. Santa Clara County Wage/Housing Gap18 Since the 1970s, jobs in the region have increased faster than available housing units.19 A study by the Bay Area Council Economic Institute shows that one high-tech sector job is associated with the creation of 4.3 additional jobs in the local goods and services economy.20 The number of AH units needed has severely lagged job creation for the past five decades. Consequences of the Affordable Housing Crisis According to the McKinsey Global Institute study, nearly 100% of California’s ELI, VLI, and LI households cannot afford the cost of local housing. This disparity negatively affects every aspect of a community’s well-being, forcing lower-income workers to commute long distances, increasing their stress, reducing family time, and impacting the environment. Lack of decent affordable housing increases crowded, multi-family households, housing instability, and 18 City of Gilroy, What is Affordable Housing in Santa Clara County? p. 2, accessed November 13, 2021, https://www.cityofgilroy.org/DocumentCenter/View/11636/Affordable-Housing-101-and-FAQs. City of Gilroy, What is Affordable Housing in Santa Clara County? p. 2. Bay Area Council Economic Institute, Technology Works: High-Tech Employment and Wages in the United States, December 2012, p. 5, accessed November 13, 2021, http://www.bayareaeconomy.org/files/pdf/TechReport.pdf. homelessness.21 Diversity is diminished because “Black people, Native Americans and Latinos are more likely to experience homelessness and overcrowded housing than white people.”22 The McKinsey Global Institute calculates that “in dollar terms, California loses $140 billion per year in output or 6 percent of state Gross Domestic Product due to the housing shortage.”23 They divide these annual losses into approximately $90 billion in missed construction investment and more than a $50 billion loss in consumer spending on food, health, and education.24 The AH crisis also impacts the social fabric of the community. Homelessness was increasing in the County before the pandemic and the current economic uncertainty has made it worse.25 Many low-income wage earners are one paycheck away from eviction. Although moving to lower-cost housing areas avoids the threat of homelessness, it creates other negative consequences. About 120,000 Silicon Valley workers live long distances from their jobs.26 Silicon Valley “super commuters” drive 3 hours one way to work, resulting in traffic gridlock, air pollution, and degraded health and quality of life.27 Other negative consequences are more subtle. Low-income workers and families with long commutes are disproportionately from non-White, non-Asian backgrounds.28 The communities they work in—but cannot live in—suffer a loss of diversity. Because of this loss of workers, the civic, political, cultural, and human engagement of the region narrows. In addition, the region loses 21 Andrew Aurand, “The GAP,” p.1. Ibid. Woetzel, et al., A Tool Kit: In Brief, p. vi. Ibid. Marisa Kendall, “How Can We Solve the Bay Area Housing Crisis? Build 160,000 Affordable Homes,” Mercury News, March 18, 2021, https://www.mercurynews.com/2021/03/18/how-can-we-solve-the-bay-area- housing-crisis-build-160000-affordable-homes/. Sophia Harrison, Ethics Study: Silicon Valley Housing Crisis, March 19, 2021, https://sevenpillarsinstitute.org/ethics-study-silicon-valley-housing-crisis/. Annette Schaefer, “Commuting Takes Its Toll,” Scientific American Mind, v. 16 no. 3, pp. 14-15, October 1, 2005, accessed December 2, 2021, https://www.scientificamerican.com/article/commuting-takes-its-toll/; Deanna Pai, “5 Ways Your Commute Affects Your Health,” Keck Medicine of USC, accessed June 7, 2021, https://www.keckmedicine.org/commuting-and-your-health/. Sophia Harrison, Ethics Study. Bay Area Equity Atlas, “Extreme Community: Drivers of Inequity,” accessed November 27, 2021, https://bayareaequityatlas.org/indicators/extreme- commuting#/?geo=05000000000000017. needed workers. In 2019-2020, more people left the state than moved here, resulting in a net migration loss of 135,600.29 State-Driven Planning Solutions The California Department of Housing and Community Development (HCD) drives statewide housing planning efforts through the Regional Housing Needs Allocation (RHNA). Every eight years, the HCD works with regional councils of government to estimate the number and type of jobs that are expected. With this job estimate, RHNA then projects the number of housing units needed at a variety of affordability levels. HCD allocates the appropriate number of new housing units to each region. The County is part of the Association of Bay Area Governments (ABAG) region which is responsible for allocating the housing need among the cities and counties in the Bay Area.30 Once ABAG has sub-allocated housing quotas, each city must produce a planning document, titled the Housing Element Report.31 This plan identifies potential sites where housing may be built over the next eight years and the policies and strategies that are needed to help cities meet the housing goals. The sites identified typically include property the city does not own or control. Although most cities in the County are meeting their ABAG quotas for higher-income level housing, few are meeting their AH allocations (see Table 3). In response to the AH crisis, the California Governor signed on September 16, 2021, three bills that address the state’s housing crisis. Senate Bill 8 accelerates housing project approval processes and limits fee increases and a city’s ability to downzone (i.e., reduce the density of housing development in an area). Senate Bill 9 requires cities and counties to approve development proposals that meet specified size and design standards. It also allows property owners to split a single-family lot into two lots and place up to two units on each newly created lot. Assembly Bill 1174 amends an existing measure that streamlines approval processes for housing in cities and 29 Eric Escalante, “California’s Growth Rate at Record Low as More People Leave,” ABC10 News, December 16, 2020, https://www.abc10.com/article/news/local/california/californias-growth-rate-at-record-low-as- more-people-leave/103-3f814e19-ffe1-44af-90c0-a49168be4a60. California Department of Housing and Community Development, Regional Housing Needs Allocation: 5th Cycle, accessed July 17, 2021, https://www.hcd.ca.gov/community-development/rhna/index.shtml. California Department of Housing and Community Development, Housing Elements, accessed November 7, 2021, https://www.hcd.ca.gov/community-development/housing-element/index.shtml. counties that have not yet made sufficient progress in meeting their RHNA goals.32 The impact of these statewide reforms is yet to be felt.33 Permits Jurisdiction Affordability Level RHNA % Progress approved as of Goals 2019 Palo Alto Very Low Income (VLI) 1123 80 7% & Low Income (LI) Moderate Income (MI) 865 426 49% and Above Moderate Income (AMI) Mountain LI & VLI 1306 326 25% View MI & AMI 1620 2557 158% San José LI & VLI 14661 854 6% MI & AMI 20419 11748 58% City of Santa LI & VLI 1745 145 8% Clara MI & AMI 2348 3980 170% 34 Table 3. Percent Achievement Compared to RHNA Goals Cities in the Middle Creating affordable housing is a complex local interaction among a variety of players – city officials and staff, non-profit and for-profit developers, landowners, residents, banks, and a variety of advocacy organizations. Cities by themselves rarely have the full resources needed to build AH. Whitney Hodges and Talya Gulezyan, ”California Enacts New Legislation to Combat Growing Housing Crisis, But Not Without Controversy,” National Law Review, September 20, 2021, https://www.natlawreview.com/article/california-enacts-new-legislation-to-combat-growing-housing-crisis-not- without. George Skelton, “Don’t Be Fooled, California’s New Housing Laws Are Game-Changers,” Mercury News, September 24, 2021, https://www.mercurynews.com/2021/09/24/skelton-dont-be-fooled-californias-new- housing-laws-are-significant/?utm_source=ourcommunitynow&utm_medium=web. Association of Bay Area Governments, “2015-2019 Bay Area Building Permit Activity Report,” February 2021, https://abag.ca.gov/sites/default/files/documents/2021-02/2015-2019_Permit_Activity_Report.pdf. They often lack sufficient financial resources to completely fund an AH project. They also may not have appropriate public land on which to build their RHNA quota of AH units. Despite many challenges, some cities in the County have come closer to meeting their affordable housing RHNA quotas than other cities. The Civil Grand Jury investigated this discrepancy by examining the efforts of two cities in the County that share a border, Mountain View and Palo Alto, which have very different achievement levels, as shown in Table 4. Income % of Palo Permits % of RHNA Mountain Permits % of RHNA Group County Alto approved Accomplished View approved Accomplished AMI RHNA Palo Alto RHNA Mountain View Very Low 0-50% 691 101 15% 814 218 27% Low 51-81% 432 65 15% 492 212 43% Moderate 81- 278 26 9% 527 18 3% 120% Above 120%+ 587 540 92% 1093 3771 345%35 Moderate Total 1988 732 37% 2926 4219 52% ---- Table 4. Regional Housing Needs Allocation (RHNA) 2015-2023: Palo Alto & Mountain View Progress36 The table above shows the current achievement of each city. The future outlook for these two cities is also very different. By 2023, Mountain View (MV) Planning Division anticipates reaching 45.6% of its RHNA goal for VLI housing and 75.6% of its RHNA goal for LI housing.37 In contrast, the Palo Alto (PA) Planning Department warned the City Council in January 2021 that progress building AH continues to be slow and that “near-term housing production is not anticipated to reach” the 2023 RHNA goals.38 35 In Mountain View, the number of permitted units exceeding the RHNA Above Moderate category allocation (an “excess” of 2,678) are not counted in the calculation of the total percentage accomplished. Data drawn from Mountain View and Palo Alto 2021 Housing Element reports covering progress through 2020. City of Mountain View, Community Development, 2020 Housing Element Annual Progress Report, March 23, 2021; City of Palo Alto, City Council Staff Report ID#11838, 2020 Comprehensive Plan and Housing Element Annual Progress Reports, March 15, 2021, https://www.cityofpaloalto.org/files/assets/public/agendas- minutes-reports/reports/city-manager-reports-cmrs/2021/id-11838.pdf. City of Mountain View, 2020 Housing Element Annual Progress Report, March 23, 2021, p.4. City of Palo Alto, City Council Staff Report ID#10950, Housing Work Plan Update, January 21, 2020, pp. 2, 17, https://www.cityofpaloalto.org/files/assets/public/agendas-minutes-reports/reports/city-manager-reports- cmrs/year-archive/2020/id-10950.pdf. METHODOLOGY The Civil Grand Jury’s interest in this issue started with a review of the 2017-18 Civil Grand Jury of Santa Clara County’s report, Affordable Housing Crisis: Density is our Destiny.39 The Civil Grand Jury also reviewed other county civil grand jury reports: the 2016-2017 Civil Grand Jury of Los Angeles County’s report on affordable housing needs and progress, as well as the two Civil Grand Jury of Santa Barbara County reports, one on county homelessness and one on the City of Santa Barbara’s lack of affordable housing.40 The Civil Grand Jury interviewed twenty people for this report, some of them more than once. Interviewees also answered follow-up emails, suggested additional individuals to interview, and supplied the Civil Grand Jury with documents and data. People interviewed represented a broad spectrum of interests and organizations involved in AH: city and county elected and appointed officials, city and county staff, leaders of regional and local non-profit organizations, non-profit and for-profit developers, and representatives of residential/neighborhood advocacy organizations. The Civil Grand Jury read the Regional Housing Needs Assessment (RHNA) for Mountain View and Palo Alto for the current RHNA cycle, 2015-2023 as well as the two Cities’ corresponding Housing Element planning documents and annual Housing Element updates to their respective city councils. The Civil Grand Jury also researched over a hundred city-produced staff reports, land- use documents, plans and proposals, consultants’ findings, city council agendas, minutes, and memoranda. Local and regional news outlets were particularly helpful in identifying key city council actions and studies. To better understand the actions and outcomes of these two Cities’ affordable housing efforts, the Civil Grand Jury also examined online resources and housing studies identifying best practices in AH development. A bibliography of key best practices appears in a separate section of this report’s References. 39 2017-2018 Civil Grand Jury of Santa Clara County, “Affordable Housing Crisis,” https://www.scscourt.org/court_divisions/civil/cgj/2018/BMRH%20Rpt%202018-06- 19%20REVISED%20FINAL.pdf. 40 2016-2017 Civil Grand Jury of Los Angeles County, “Affordable Housing,” Final Report, pp. 1-18, http://grandjury.co.la.ca.us/pdf/LOSANGELESCOUNTY2016-2017CIVILGRANDJURYFINALREPORT.pdf; 2019-2020 Civil Grand Jury of Santa Barbara County, “Homelessness in Santa Barbara County: Our Everyday Epidemic,” accessed November 12, 2021, http://www.sbcgj.org/2020/homeless.pdf, and “Affordable Housing in Santa Barbara: An Oxymoron?” accessed November 12, 2021, http://www.sbcgj.org/2020/AffordableHousing.pdf. DISCUSSION Santa Clara County cities struggle to create AH. Yet Mountain View and Palo Alto have made radically different progress in building LI and VLI units during the first six years of the current RHNA cycle as shown in Table 4 above. There is no easy solution that will solve the AH crisis. However, advocacy groups, researchers, and innovative municipalities have identified a set of best practices. These best practices fall into four areas: • Political Commitment and Community Support • Proactive Planning and Effective Reporting • Supportive Practices • Affordable Housing Financing In each area, there are tools and strategies that can be used to assist cities in building affordable housing. The Civil Grand Jury investigated how Mountain View and Palo Alto use these tools. Political Commitment and Community Support The housing crisis can only be solved at the local level.41 The solution requires city leadership, residents, property owners, and developers collaborating to achieve AH goals. In their study of housing affordability best practices, James Wood and colleagues acknowledge that: as city councils and planners respond to their constituents, zoning ordinances come to embody, in part, resident concerns, interests, and preferences. And a facet of land use regulation familiar to every developer is the opportunity for neighbors to express their views, in front of the city council and planning commission, on proposed new residential and commercial developments.42 How do city leaders create the conditions that support AH? How do they align all stakeholders behind a local strategy and then successfully execute that strategy? AH success requires long-term 41 Woetzel, et al., A Tool Kit: In Brief, p. vi. James Wood, Dejan Esikic, D.J. Benway, and Kathryn Macdonald-Poelman, Housing Affordability: What Are Best Practices and Why Are They Important? (University of Utah: Kem C. Gardner Policy Institute, November 2020), p. 1, https://gardner.utah.edu/wp-content/uploads/Best-Practices-Dec2020.pdf. commitment of city leaders and city residents. Commitment requires leadership, education, and persistence. Mountain View: political commitment Cities develop each Housing Element eight-year plan through a formal process that includes substantial community input. Both the MV City government and the residents of MV support the goal of socioeconomic and cultural diversity and support building AH as a way to reach that goal. The Mountain View 2015 - 2023 Housing Element’s two top goals are: • Support the production of new housing units serving a broad range of household types and incomes • Provide assistance to households at different income levels to address their housing needs43 These goals build on several of the City’s core values, including: • Promote a community for all with a focus on strategies to protect vulnerable populations • Improve the quantity, diversity and affordability of housing • Preserve Mountain View’s socioeconomic and cultural diversity44 The MV City Council uses these values to drive the City’s priorities. Every two-to-five years the City Council develops a Strategic Action Plan. These plans establish an achievable set of priorities, direct funding, and identify project completion dates. They remain relatively stable across City Council election turnover and reflect MV’s stated values. In the past five years, the Strategic Action Plan goals have prioritized affordable housing.45 The Civil Grand Jury learned that MV city leaders take pride in MV’s positive and stable support of AH. This support, reflected in their strategic plans, is a key component of Mountain View’s AH successes. For example, in the City’s 43 City of Mountain View, 2015-2023 Housing Element, October 14, 2014, pp. 18, 26, https://www.mountainview.gov/civicax/filebank/blobdload.aspx?BlobID=15284. City of Mountain View, City Council Major Goals for Fiscal Years 2019-20 and 2020-2021, accessed August 23, 2021, https://www.mountainview.gov/council/goals.asp; City of Mountain View, Strategic Roadmap Action Plan for Fiscal Years 2021-22 and 2022-23, April 23, 2021, https://www.mountainview.gov/council/strategic_planning_and_visioning.asp. City of Mountain View, Previous City Council Major Goals Fiscal Years 2017-19 and 2018-19, accessed November 12, 2021, https://www.mountainview.gov/council/goals.asp#previousgoals; City of Mountain View, FY 2019-20 through FY 2020-21 City Council Major Goals Work Plan, April 25, 2019, https://www.mountainview.gov/civicax/filebank/blobdload.aspx?BlobID=29232. 2021-2022 and 2022-2023 action plans, two of the seven strategic priorities are “Community for All” and “Intentional Development & Housing Options.”46 (Finding 1) Mountain View: community support The Mountain View City government could not champion AH without the support of its residents. Many MV residents are renters, who have been politically active, and have aligned in the past with AH advocates.47 For example, in 2016 MV voters passed the Community Stabilization and Fair Rent Act (CSFRA) which tied annual rent increases to the Bay Area Consumer Price Index.48 This charter amendment was in direct response to AH scarcity and large multi-year rent increases.49 However, an active population of renters is not sufficient to explain MV’s sustained AH achievements. As in other cities, AH does not have total community support. To overcome resistance and ensure community concerns are heard and resolved, the MV City Council and staff have built a strong communication process that systematically reaches MV residents in every neighborhood. The goal of this ongoing dialog is to educate residents about the need for AH, the costs and trade-offs required, and the areas that are zoned for AH development. With this proactive communication, specific projects may be modified by resident input but are rarely derailed. The MV City government organizes this communication around twenty-five published Precise Plans—defined city areas where development and zoning options are identified in detail. Some of these Precise Plans include affordable housing zoning. The City uses these as both planning and communication tools “for coordinating future public and private improvements on specific properties where special conditions of size, shape, land ownership, or existing or desired development require particular attention.”50 Each plan is reviewed every three years on a rotating schedule. As part of each plan’s review, a team comprised of a City councilmember, staff, developers, and public safety representatives meet with neighborhood residents to talk about the 46 City of Mountain View, Strategic Priorities, https://www.mountainview.gov/council/strategic_planning_and_visioning.asp. 47 58% of Mountain View residents are renters. See: TownCharts.com, Figure 32: Number of Owners vs. Renters in Mountain View, CA and Area, accessed August 16, 2021, https://www.towncharts.com/California/Housing/Mountain-View-city-CA-Housing-data.html. Ballotpedia, “Mountain View, California, Rent Control City Charter Amendment, Measure V November 2016,” accessed November 7, 2021, https://ballotpedia.org/Mountain_View,_California,_Rent_Control_City_Charter_Amendment,_Measure_V_(Nove mber_2016). Tenants Together, July 2019, https://www.tenantstogether.org/resources/mountain-view-tenants- coalition-mvtc. City of Mountain View, Precise Plans, accessed August 18, 2021, https://www.mountainview.gov/depts/comdev/planning/regulations/precise.asp. plan, allay fears, and understand and mitigate concerns. One of the communication goals is to make sure no one is surprised when AH is built. The Civil Grand Jury found it compelling to hear that when visitors toured a Mountain View AH project, they could not differentiate it from a middle-income project. City staff and councilmembers take pride and satisfaction in creating attractive housing for all. (Finding 2) Palo Alto: political commitment In PA, the City Council, staff, and the residents have also expressed support for Affordable Housing. AH is a top priority in many of the PA City Council policy and planning documents. For example, the second and third goals in the PA 2015-2023 Housing Element address and establish policies to support AH: • H2 GOAL: Support the Construction of Housing Near Schools, Transit, Parks, Shopping, Employment, and Cultural institutions ▪ H2.1 POLICY: Identify and implement strategies to increase housing density and diversity…. Emphasize and encourage the development of affordable and mixed-income housing to support the City’s fair share of regional housing needs and to ensure that the City’s population remains economically diverse. • H3 GOAL: Meet Underserved Housing Needs and Provide Community Resources to Support Our Neighborhoods ▪ H3.1 POLICY: Encourage, foster, and preserve diverse housing opportunities for very low-, low-, and moderate-income households.51 This emphasis on policies that support AH is reflected in other City documents and City Council actions. The Palo Alto Comprehensive Plan includes Policy L-1.4 which commits the City to: creating an inventory of below market rate housing for purchase and rental. Work with neighbors, neighborhood associations, property owners and developers to identify barriers to infill development of below market rate and more affordable market rate housing and to remove these barriers, as appropriate. Work with these same stakeholders to identify sites and facilitate opportunities for below market rate housing and housing that is affordable.52 51 City of Palo Alto, 2015-2023 Housing Element City of Palo Alto, 2014, pp. 131, 136, accessed November 7, 2021, https://www.cityofpaloalto.org/files/assets/public/planning-amp-development-services/housing- element/housingelement_2015_2023/complete-public-hearing-draft-09-17-14.pdf. City of Palo Alto, City of Palo Alto Comprehensive Plan, November 13, 2017, p. 36, https://www.cityofpaloalto.org/Departments/Planning-Development-Services/Long-Range-Planning/2030- Comprehensive-Plan. Through Council Colleagues’ Memos and a variety of other actions, PA City councilmembers continue to acknowledge and support the need to create more AH.53 Despite this public support, the actions have not matched policies. The City has permitted far fewer AH units in this RHNA cycle, and in the previous one, than it achieved two RHNA cycles ago:54 • 166 AH units or 15% of RHNA by 2020 • 165 AH units or 13% of RHNA by 2014 • 344 AH units or 90% of RHNA by 2006 Palo Alto has a strong tradition of community consultation. A potentially contentious issue such as where to build AH can be resolved if consultation and conversation is productive. The PA City Council has charged the Planning and Development Services Department with the responsibility to “maintain an ongoing conversation with the community regarding the need for affordable housing, the financial realities of acquiring land and building affordable housing, and the reasons that affordable housing projects need higher densities to be feasible.”55 However, the PA City Council should not expect staff to manage such a contentious issue. Councilmembers should be taking a leadership role in these conversations. Several of the current City leaders ran on platforms that included support for AH. Campaign websites state this commitment: 53 City of Palo Alto, Ordinance No. 5460: Housing Crisis Zoning Changes, accessed September 1, 2021, https://www.cityofpaloalto.org/files/assets/public/city-clerk/ordinances/ordinances-1909-to-present/ordinances-by- number/ord-5460.pdf?t=67468.69; City of Palo Alto, Colleagues’ Memo, No. 63027, November 6, 2019, https://www.cityofpaloalto.org/files/assets/public/agendas-minutes-reports/reports/city-manager-reports-cmrs/year- archive/2017/id-8630-colleagues-memo.pdf; City of Palo Alto, Colleagues’ Memo, No. 73361, September 23, 2019, https://www.cityofpaloalto.org/files/assets/public/agendas-minutes-reports/reports/city-manager-reports-cmrs/year- archive/2019/id-10548-colleagues-memo.pdf. Association of Bay Area Governments, San Francisco Bay Area Progress in Meeting 2007-2014 Regional Housing Need Allocation (RHNA), p. 6, accessed June 15, 2021, https://abag.ca.gov/sites/default/files/rhnaprogress2007_2014_082815.pdf; City of Palo Alto, City Council Staff Report ID#11838, 2020 Comprehensive Plan and Housing Element Annual Progress Reports, March 15, 2021, https://www.cityofpaloalto.org/files/assets/public/agendas-minutes-reports/reports/city-manager-reports- cmrs/2021/id-11838.pdf; City of Palo Alto, 2015-2023 Housing Element City of Palo Alto, p. 127; City of Palo Alto, Housing Work Plan, February 2018 Draft, p. 10, accessed November 12, 2021, https://www.cityofpaloalto.org/files/assets/public/planning-amp-development- services/2018_01_26_housing_work_plan_final.pdf. City of Palo Alto, City Council Staff Report ID#10950, Housing Work Plan 2018-2019: Summary Status Update, January 21, 2020, pp. 5. 7, https://www.cityofpaloalto.org/files/assets/public/agendas-minutes- reports/reports/city-manager-reports-cmrs/year-archive/2020/id-10950.pdf. • funding for moderate and low-income housing56 • Prioritize housing by focusing on leveraging government programs, developer fees, and implementing our Comprehensive Plan to increase our affordable (below market rate) housing57 • a vision for Palo Alto that is inclusive and diverse … provides new affordable housing opportunities58 Rather than relying on staff to educate PA residents about the complexities involved in building AH and hear resident concerns, PA councilmembers should be the point-persons in working with and listening to residents. (Finding 3) Palo Alto: community support Palo Alto conducts an annual community survey that is reported to the City Council and helps shape their annual plan. Over the past four years, resident concern about the lack of affordable housing has become more prominent.59 In the 2021 Community Survey, nine in ten PA residents rated the quality of their city and neighborhoods as excellent or good. The unique qualities of PA’s 35 neighborhoods are highly valued, and residents wish to preserve their tree-lined streets, many parks, and historic homes and neighborhoods. A desire to maintain these qualities motivates some residents to resist the changes AH might bring. In that same survey, the responses to the question “What should the city change?” give a flavor of the tensions surrounding the AH issue for Palo Altans: • Build more housing! Affordable housing will give us a more diverse and vibrant city. The idea that it will ruin what we have is just silly. • Limit developers from adding more residences because it makes traffic a nightmare. • More affordable housing for all – teachers, firemen, police, secretaries, etc. Patrick Burt, “My Top 3 Priorities,” Voters’ Edge California, November 3, 2020, https://votersedge.org/ca/en/election/2020-11-03/santa-clara-county/city-council-city-of-palo-alto/patrick-burt. Tom DuBois, “Re-Elect Tom DuBois for Palo Alto City Council,” accessed September 21, 2021, https://www.votedubois.com. Greer Stone, “Greer Stone Palo Alto City Council,” accessed September 21, 2021, http://www.greerstone.com/GStone2020/home.asp. City of Palo Alto, City Council Staff Report ID#12270, Presentation of the Annual Community Survey Results, May 17, 2021, p. 14, https://www.cityofpaloalto.org/files/assets/public/agendas-minutes- reports/reports/city-manager-reports-cmrs/2021/id-12270.pdf. • Stop increasing population density of the city by allowing more housing that is not single family. I bought into Palo Alto because it is primarily single-family zoning.60 Unfortunately, several promising AH projects have been derailed in this RHNA cycle and the last cycle because of negative input from residents.61 Resident objections to AH proposals stem from a variety of reasons, including lack of agreement on goals, failure to feel consulted, and worry that AH will compromise the beauty and safety of a neighborhood. One example of a lack of agreement on goals is the controversial North Ventura Coordinated Area Plan (NVCAP) project near the former Fry’s location. A fourteen-person panel worked with staff from the PA Planning Department, developers, and consultants to create alternative plans for the NVCAP area. After four years, the panel has not reached a consensus on goals, let alone ways to reach those goals. The City of Palo Alto and pro-AH groups see the North Ventura area as an opportunity to build needed AH. Many residents support AH but do not want their neighborhood to become the vanguard for tall, dense buildings and parking scarcity. Some residents also do not accept the City’s model of mixed-use development as a trade-off for AH units. The Civil Grand Jury learned that some members of the working group and residents felt the project’s goals were changed by staff and the consultants during the planning process. Residents felt the changes no longer aligned with what the neighborhood wanted. The PA Planning Department based its work in part on financial data from a study done in 2020 that identified what percentage of AH units were financially feasible for a for-profit developer to include in the project.62 The staff and consultants also “engaged in a tremendous amount of 60 City of Palo Alto, City Council Staff Report ID#12270, pp. 65-68, https://www.cityofpaloalto.org/files/assets/public/agendas-minutes-reports/reports/city-manager-reports- cmrs/2021/id-12270.pdf. Louis Hansen, “Fierce, 7-Year NIMBY Battle in Palo Alto Reaches a Conclusion: Big $5 Million Homes Rise on Site Once Eyed for Affordable Senior Units,” Mercury News, June 23, 2020, https://www.mercurynews.com/2020/06/23/fierce-7-year-nimby-battle-in-palo-alto-reaches-a-luxury-conclusion/; Gennady Sheyner, “Facing Concerns from College Terrace, City Looks to Reassert Commitment to Single-Family Housing Zones,” Palo Alto Weekly, April 7, 2021, https://www.paloaltoonline.com/news/2021/04/07/facing- concerns-from-college-terrace-city-looks-to-reassert-commitment-to-single-family-housing-zones; Gennady Sheyner, “With No Consensus in Sight, Palo Alto’s Vision for Ventura Gets Murky,” Palo Alto Weekly, June 10, 2021, https://www.paloaltoonline.com/news/2021/06/10/with-no-consensus-in-sight-palo-altos-vision-for-ventura- gets-murky. community outreach, providing numerous opportunities for public engagement and meaningful input.”63 Few people were satisfied by the three alternatives presented to the PA City Council. They were “deemed unfeasible by the city’s consultants and unappealing by the property owners and residents.”64 North Ventura residents felt that the City’s staff and consultants controlled the process and did not listen to community concerns.65 The outcome of this four-year planning process has been characterized as “a terrible, disappointing, and unfortunate failure.”66 An example of another failed project occurred in 2012. The non-profit Palo Alto Housing Corporation purchased a 2.5-acre site on Arastradero Road with plans to build 60 units of AH for seniors and 15 single-family homes. In September 2012, the non-profit held a poorly attended community meeting to introduce nearby residents to the project.67 Another community meeting was held in January 2013. With few residents in attendance, the PA Planning and Transportation Commission approved a plan to change the zoning, and the PA City Council approved loaning funds to the non-profit in March of that year. A final neighborhood meeting was held in April to discuss the project’s modified plans and its impact on traffic. In contrast to the poorly attended neighborhood and City meetings, a large group of residents attended the May 2013 PA City Council meeting to protest the development. They expressed the feeling that their issues had not been adequately listened to by PA City Council and the non-profit developer.68 After signatures were gathered, a measure was placed on the November 2013 ballot to halt the development. Once the measure passed, Palo Alto Housing Corporation was unable to build the project. City of Palo Alto, City Council Staff Report ID#11472, “Inclusionary Below Market Rate Feasibility Study,” September 21, 2020, https://www.cityofpaloalto.org/files/assets/public/agendas-minutes-reports/reports/city- manager-reports-cmrs/year-archive/2020-2/id-11472.pdf. City of Palo Alto, City Council Staff Report ID#11930, “NVCAP – Review Plan Alternatives,”, June 14, 2021, https://www.cityofpaloalto.org/files/assets/public/agendas-minutes-reports/reports/city-manager-reports- cmrs/2021/id-11930.pdf. Sheyner, “With No Consensus.” 65 Rebecca Sanders, “PAN’s Outreach to the Community Regarding the NVCAP2 Survey,” April 16, 2020, https://www.cityofpaloalto.org/files/assets/public/planning-amp-development-services/north-ventura-cap/survey- emails-only.pdf?t=42004.46. Sheyner, “With No Consensus.” 67 Gennady Sheyner, “What’s Measure D Really About?” Palo Alto Online, October 11, 2013, https://www.paloaltoonline.com/news/2013/10/11/whats-measure-d-really-about. Joseph Hirsch, “Guest Opinion: A Neighborhood Perspective of Maybell Avenue Development,” Palo Alto Weekly, July 16, 2016, https://www.paloaltoonline.com/news/2016/07/16/guest-opinion-a-neighborhood- perspective-of-maybell-avenue-development. Resident commenting on a variety of AH proposed projects indicate that they want to be engaged in PA’s AH planning and are willing to negotiate and compromise: • Residents need to be actively and genuinely consulted with regard to significant developments proposed to take place in their immediate neighborhood69 • The Working Group met for two years, and they [City staff] didn’t respect their time, commitment, and dedication to even take their ideas under consideration”70 • Despite initial misgivings…residents of the Ventura neighborhood on Monday rallied behind the project. Many credited the development team for listening and constructively responding to their concerns.71 Building AH is neither simple nor inexpensive. Palo Altans need to understand the possible locations, design requirements, and financing required for AH. Responding to residential apprehensiveness that an AH project will lead to crime and increased traffic, the City can lead discussions that explain to residents how an AH project will allow teachers, city workers, and service employees to live in the city where they work. City leaders can also lead discussions to combat the idea that AH developers are motivated by profit when, in fact, they are often non-profit organizations. The City can also explain the perspective of for-profit developers who expect a fair rate of return on the time and money they must invest, and the risk they take when developing a mixed-use project that combines AH with commercial space or market-rate housing. An urban economics consulting firm analyzed the feasibility of including below-market rate housing in different types of developments.72 Their analysis assumed that if a rental project provided a return of 5% or more, the project was “highly likely” to be built; if the return was less than 4.75 %, the project was unlikely to be built. Many residents believe that developers make excessive profits and are unaware that many AH projects struggle to reach viability. Residents are less likely to make financially 69 Hirsch, “Guest Opinion.” 70 Suzanne Keehn, Letter to City Council, “Fw: NVCAP,” June 14, 2021, https://www.cityofpaloalto.org/files/assets/public/planning-amp-development-services/north-ventura-cap/all-public- comments_1.pdf. Gennady Sheyner, “First Affordable-Housing Project in Seven Years Wins Approval: City Council Supports 59-Unit Development on El Camino Real,” Palo Alto Weekly, January 14, 2019, https://www.paloaltoonline.com/news/2019/01/14/affordable-housing-project-wins-approval-in-palo-alto. City of Palo Alto, Inclusionary Below Market Rate Feasibility Study, p. 5. untenable proposals or objections to a project if they understand the issues and tradeoffs and feel their concerns have been respected.73 According to many researchers, building resident and stakeholder support for AH is an effective best practice.74 City staff do not have the same stature as elected leaders. Therefore, PA City councilmembers cannot expect staff alone to lead community conversations that enable PA residents to understand AH needs and cost requirements and to build community support. City councilmembers--PA's community leaders--can play a critical role in publicly supporting and discussing AH. Since many current PA City councilmembers ran on platforms that included AH, they are well-positioned to take a leadership role in discussing this issue with residents. To be more successful in building AH, the PA City Council should continue its tradition of strong resident input but engage with residents to create a series of defined area plans with clear zoning rules, including for AH zoning. One example of the City’s success in doing this is the South of Forest Area Coordinated Area Plan (SOFACAP).75 Palo Alto should employ the process used for SOFACAP to work with residents in other areas where AH is appropriate to build. Direct, transparent, and committed dialog, particularly when crafting plans and projects, can be effective. Palo Alto City councilmembers should develop a communication plan that they can use to engage residents and stakeholders in proactive, detailed, and fact-based conversation to allay resident concerns, focus on the benefits of AH, and build resident support.76 (Finding 4) Proactive Planning and Effective Reporting The RHNA-mandated Housing Element reports written by cities are planning documents as opposed to approved projects. The Housing Element lists potential sites where AH might be built as well as policies and actions cities might undertake to help build AH. To be effective, these 73 Allison Levitsky, “Palo Alto Council Unanimously Approves Affordable Housing Project,” Daily Post, January 15, 2019, https://padailypost.com/2019/01/15/palo-alto-council-unanimously-approves-affordable-housing- project/. Woetzel, et al., Toolkit, p. iv; James Wood, et al., Housing Affordability, 75 City of Palo Alto, South of Forest Area Coordinated Plan, December 2003, accessed November 13, 2021, https://www.cityofpaloalto.org/files/assets/public/planning-amp-development-services/file-migration/current- planning/forms-and-guidelines/south-of-forest-coordinated-area-plan-phase-2.pdf. See “Mountain View: Political Commitment” section above; Hee-Jung Jun, “The Link Between Local Comprehensive Plans and Housing Affordability,” Journal of the American Planning Association v. 83, no. 3 (Summer 2017), pp. 249-261, https://www.tandfonline.com/doi/full/10.1080/01944363.2017.1321496; City of Morgan Hill, 2021 Housing Conversation, accessed July 8, 2021, https://www.morgan-hill.ca.gov/2162/2021- Housing-Conversation. general plans must be turned into action-oriented outcomes supported by local leadership, developers, and residents.77 To develop resident support, cities must not only create specific plans with resident input but also communicate those plans effectively to the community. Creating community engagement by including community members in the advance planning processes and communicating the value of AH are best practices.78 Successful AH projects require “that local governments should restore direct reliance on adopted plans and create transparency, predictability, reliability and timeliness to the housing approvals process.”79 So how effective are MV and PA in creating proactive plans that are realistic for all stakeholders (residents, developers) and result in real housing being built? Are these plans well-tailored to each area or a mix of options that require time-consuming negotiations or approvals? Who leads the planning effort and engages stakeholders? Finally, how well are the two Cities making progress on these plans and their AH goals? Mountain View: proactive planning Mountain View has 25 Precise Plans covering 24 neighborhoods. The City uses these plans as “a tool for coordinating future public and private improvements on specific properties where special conditions of size, shape, land ownership, or existing or desired development require particular attention.”80 The visions, principles, and goals in these plans are coordinated with MV’s General Plan and Housing Element Plan. But the Precise Plans live up to their titles—they are concrete, spelling out where and how AH will be included.81 Not only does MV leadership take a proactive role in creating precise plans, but when property owners struggle to resolve development conflicts, MV has actively stepped in to offer a 77 Hee-Jung Jun, “The Link Between Local Comprehensive Plans and Housing Affordability,” p. 258,, https://www.tandfonline.com/doi/full/10.1080/01944363.2017.1321496; Charles Hoch, “How Plan Mandates Work: Affordable Housing in Illinois,” Journal of the American Planning Association v. 73, no. 1 (Winter 2007), pp. 87, 94-95, https://www.tandfonline.com/doi/abs/10.1080/01944360708976138. Wood, et al., Housing Affordability, p. 5. Committee to House the Bay Area, CASA Compact, p. 12. City of Mountain View, Precise Plans. See for example: City of Mountain View, El Camino Real Precise Plan, p. 3, accessed August 21, 2021, https://www.mountainview.gov/civicax/filebank/blobdload.aspx?BlobID=29701; North Bayshore Precise Plan: North Bayshore Affordable Housing Administrative Guidelines, accessed August 21, 2021, https://www.mountainview.gov/civicax/filebank/blobdload.aspx?BlobID=22584; East Whisman Precise Plan: Guiding Principles, p. 17, accessed August 17, 2021, https://www.mountainview.gov/civicax/filebank/blobdload.aspx?BlobID=32005. resolution.82 Within MV’s North Bayshore Precise Plan area, two property owners with adjacent land (Google and SyWest) could not agree on a coordinated approach to developing the sites. In response, the MV City Council created a new set of development standards for a 30-acre section. This proposed Gateway Master Plan “will help implement the goals and objectives of the [broader] Precise Plan.”83 Google likes the proposed plan, but SyWest says it doesn’t work financially for them. City officials are working proactively with the developers to resolve their concerns over this proposed solution.84 In addition to the Precise Plans, the MV City Council uses its planning process to focus City work on AH outcomes. The Council periodically adopts and updates a 2-to–5-year Strategic Roadmap Action Plan in which AH is prioritized. The current plan lists specific affordable housing actions to be completed in the next two years of the five-year plan.85 (Finding 5) Palo Alto: multiple plans, few outcomes Unlike MV, PA does not have a comprehensive, well-organized set of planning documents that clearly identify regions where the City is planning AH development that the Civil Grand Jury could find. Instead, AH is addressed in a confusing combination of general and specific approaches. The Comprehensive Plan defines allowable land uses for residential, mixed-use, and commercial areas within PA. Some areas include options for affordable housing.86 The Comprehensive Plan was used extensively in creating PA’s 2015-2023 Housing Element. Palo Alto strengthened its current Housing Element with specific AH-enabling zoning changes in 2019 when the PA City Council passed the Housing Work Plan Implementation Ordinance. Martin Alkire, North Bayshore Gateway Master Plan: Public Draft – August 2021, accessed November 13, 2021, https://www.mv-voice.com/news/reports/1629396384.pdf. City of Mountain View, Gateway Master Plan, accessed August 21, 2021, https://www.mountainview.gov/depts/comdev/planning/activeprojects/gateway_master_plan.asp. Wesley Severson, “Mountain View Pushes Ambitious Development Plans, Developer Calls them Unrealistic,” Hoodline, August 25, 2021, https://hoodline.com/2021/08/mountain-view-pushes-ambitious- development-plans-developer-calls-them-unrealistic/. City of Mountain View, Strategic Roadmap Action Plan. City of Palo Alto, 2030 Comprehensive Plan, Land Use and Community Design Element, pp. 31-33, accessed August 21, 2021, https://www.cityofpaloalto.org/files/assets/public/planning-amp-development- services/3.-comprehensive-plan/comprehensive-plan/2030-comp-plan-2-land-use-june-21.pdf. Prompted by a 2018 Council Colleagues’ Memo calling for more AH, this ordinance amended the Municipal Code to “remove barriers and disincentives to housing development at higher densities where appropriate near transit, jobs and services, and that is affordable for a range of income levels [sic].”87 By approving these zoning changes, PA acknowledged that the housing shortage, particularly for AH, “threatens the city’s prosperity, diversity, stability, environment, quality of life, and community character.”88 The PA City Council has created many documents that address affordable housing, including the Comprehensive Plan, the Housing Element, Title 18 of the Municipal Code, and numerous ordinances, zoning maps, reports, studies, and design and development guidelines: • Housing Work Plan • Coordinated Area Plans (CAP) • Planned Home Zones (PHZ) • Priority Development Areas (PDA) • Affordable Housing Overlays • Workforce Housing Overlays • Housing Incentive Programs There has been some AH success in the current RHNA cycle. For example, a 2019 Palo Alto Weekly article announced, “First Affordable-Housing Project in Seven Years Wins Approval.”89 Yet, as the headline demonstrates, PA is not making rapid progress in meeting the community’s AH needs. In January 2020, the PA Planning and Development Services Department updated City Council on housing progress. Staff was not optimistic about the City’s ability to meet its RHNA goals. The update warned that “many of the conditions that precipitated the [2018 Council] Colleagues’ Memo … continue” and that “the lack of affordable housing at all income levels contributes to” many other problems PA is experiencing, such as “traffic congestion, increased motorist travel time, … greater greenhouse gas emissions,” and the difficulty hiring and retaining low-wage workers.90 87 City of Palo Alto, Municipal Code Ordinance No. 5460, April 1, 2019, p. 2, https://www.cityofpaloalto.org/civicax/filebank/documents/71494. Ibid. Gennady Sheyner, “First Affordable-Housing Project in Seven Years Wins Approval: City Council Supports 59-Unit Development on El Camino Real,” Palo Alto Weekly, January 14, 2019, https://www.paloaltoonline.com/news/2019/01/14/affordable-housing-project-wins-approval-in-palo-alto. These planning documents offer different levers to help AH projects, but there have been few results. To match AH outcomes with their policy goals and campaign platforms, PA leaders need to employ best planning practices such as creating specific planned areas with identified densities, setbacks, height limits, etc., that support AH development. The PA City Council should identify specific regions where zoning will allow AH to be feasible and clarify and simplify zoning requirements. This should be done with wide community input and education. Compact, comprehensive, and clear plans coupled with 1-to-2-year strategic plans with specific outcomes would give the PA City Council a powerful tool to help make AH development viable. (Finding 6) Mountain View: effective reporting Mountain View reports on its plans in a variety of ways. As discussed above in the Community Support section, MV City councilmembers conduct annual conversations with residents. The MV Planning Division’s website has the precise plans, often with supporting documentation and details.91 In addition, the MV Planning Division annually presents a Housing Element Annual Progress Report to the City Council (and RHNA). This report is accompanied by a cover memo that summarizes the specific actions and achievements made during the year, which makes the City’s accomplishments easy to identify and quantify.92 The MV 2015-2023 Housing Element text is available on the City’s website.93 However, a search of the City’s website does not easily reveal any 2015-2023 annual updates. The most prominent search result is a link to the 2023-2031 Housing Element Update on the Community Development website.94 A version of the 2020 Housing Element Annual Update is provided as an attachment to the March 3, 2021 agenda of the MV Environmental Planning Commission as a staff report.95 90 City of Palo Alto, City Council Staff Report ID#10950, Housing Work Plan Update, January 21, 2020, https://www.cityofpaloalto.org/files/assets/public/agendas-minutes-reports/reports/city-manager-reports-cmrs/year- archive/2020/id-10950.pdf. City of Mountain View, Precise Plans. City of Mountain View, 2020 Housing Element Annual Progress Report, March 23, 2021. City of Mountain View, 2015-2023 Housing Element, October 14, 2014, https://www.mountainview.gov/civicax/filebank/blobdload.aspx?BlobID=15284. City of Mountain View, General Plan and Housing Element, accessed August 24, 2021, https://www.mountainview.gov/depts/comdev/planning/regulations/general.asp. Mountain View should update its website to include all the annual Housing Element Progress Reports. (Finding 7) Palo Alto: reporting confusion The Civil Grand Jury found that there are so many plans—with documents, specific rules, and details—that it is difficult for PA residents to understand where AH is planned, what specific design elements zoning would permit (density, height, setbacks, etc.), and what public benefits might accompany each project. Since there is often no linked text, the myriad of plans, overlays, and other documents are also difficult to find when mentioned on a website.96 Annual reports are an excellent way to communicate AH progress. This past year, PA’s Planning Department submitted a memo with its 2020 Comprehensive Plan and Housing Element Annual Progress Report to the City Council.97 The Comprehensive Plan’s progress and the Housing Element’s Update are discussed together. The annual Housing Element Update tables identifying progress are difficult to understand and are buried as an accompanying attachment. Palo Alto should more clearly communicate its annual AH progress. The City’s website can be a powerful tool to aid in communicating AH plans and achievements to the community. Palo Alto is to be commended on the fact that the full text of its 2015-2023 Housing Element is linked from the Planning & Development website and that it has Annual Housing Element Progress Reports from 2015 through 2018.98 It should update this annual list with the missing most recent years. (Finding 8) 95 City of Mountain View, Environmental Planning Commission, “Staff Report, 2020 Housing Element Progress Report,” March 3, 2021, https://mountainview.legistar.com/LegislationDetail.aspx?ID=4811887&GUID=31D36D2F-EA70-4326-BE48- 2026143531E0&Options=&Search=. See City of Palo Alto, Area Plans and Studies: Ongoing Area Plans and Studies, “Priority Development Areas (PDAs) and Priority Conservation Areas (PCAs),” December 12, 2019. This website has two paragraphs announcing the adoption of a PDA for University Avenue/Downtown but there are no linked documents, https://www.cityofpaloalto.org/News-articles/Planning-and-Development-Services/Priority-Development-Areas- PDAs-and-Priority-Conservation-Areas-PCAs. City of Palo Alto, City Council Staff Report ID#11838, 2020 Comprehensive Plan and Housing Element Annual Progress Reports, March 15, 2021, https://www.cityofpaloalto.org/files/assets/public/agendas-minutes- reports/reports/city-manager-reports-cmrs/2021/id-11838.pdf. City of Palo Alto, Housing Element (2015-2023), accessed August 24, 2021, https://www.cityofpaloalto.org/Departments/Planning-and-Development-Services/Long-Range-Planning/Housing- Policies-and-Programs/Housing-Element-2015-2023. Supportive Practices Defining and communicating neighborhood plans is an essential best practice in the creation of AH. But, after plans are adopted, cities must create an environment that supports developers as they consider the construction of housing. One supportive practice is “streamlining and standardizing the uncertain and time-consuming approval process.”99 The Civil Grand Jury learned that a second supportive practice is to identify a member of the city planning staff who takes the lead on AH development, and who can guide developers through the approval process. Efficient city review and approval In Mountain View, the City review and approval process, beginning with the submission of an initial proposal and ending with formal approval by the City Council, averages less than twelve months. Two Mountain View projects with AH units reflect this efficient process: • 535-555 Walker Dr., with 58 townhouse units, took eleven months. This involved two meetings with the Development Review Committee followed by the MV City Council approval.100 • 394 Ortega Ave., a 144-unit project (including five AH units), took ten months. This involved two meetings with the Development Review Committee, a meeting with the Environmental Planning Commission, and the MV City Council approval.101 The length of time it takes developers in PA to move from proposal to entitlement is significantly longer. Two projects with sizes comparable to MV’s examples are: • 2755 El Camino Ave., a 57-unit project, took two years and one month from the preliminary screening before the PA City Council to the final City 99 Wood, et al., Housing Affordability, p. 5. City of Mountain View, “Council Report,” June 12, 2018, https://mountainview.legistar.com/LegislationDetail.aspx?ID=3523778&GUID=57E1911A-07B7-4D74-87F5- 0185E491F20A. City of Mountain View, “Council Report,” September 20, 2016, https://mountainview.legistar.com/LegislationDetail.aspx?ID=2838231&GUID=74838AC8-BB92-49DC-8CC1- 2F0D4B52B705&Options=&Search=. Council approval. The approval process involved a preliminary review by the PA City Council, reviews by the Planning Commission and the Architectural Review Board, and a final City Council hearing. This project was complicated by a requirement to amend the zoning code and because architectural plans had to be resubmitted six times.102 • 788-796 San Antonio Rd., ground-level retail with 102 units (including 16 below market rate units), took one year and eleven months. The approval process included rezoning, an architectural review, an Environmental Impact Report, and the PA City Council approval.103 The Civil Grand Jury found that PA’s lengthy approval process discourages developers from working with the City. If the PA wants to encourage the development of AH, it needs to find ways to streamline the approval process. (Finding 9) Palo Alto uses Planned Home Zoning to offer developers greater density, higher building height, and less required parking—provided the project includes Below Market Rate (BMR) housing. This type of development requires a preliminary review by the PA City Council, which adds about four months to the time it takes to obtain final approval. This is an additional risk for developers, who not only must extend the project schedule by four months, but after investing in the project, may subsequently discover that the City Council dislikes the proposed development. Palo Alto should take the time to define specific area development plans with the attendant neighborhood involvement, similar to the Precise Plan process in Mountain View.104 If Palo Alto develops area plans that clearly specify the designs that would be acceptable to the City and the community, not only could preliminary reviews be eliminated, but the developer could invest in the project with more confidence that final approval would be obtained. Another possibility is to combine public meetings. Currently, after the preliminary review by the PA City Council, the project is reviewed in a public meeting with the PA Planning and 102 City of Palo Alto, “2755 El Camino, Attachments,” accessed December 3, 2021, https://aca- prod.accela.com/paloalto/Cap/CapDetail.aspx?Module=Planning&TabName=Planning&capID1=16PLN&capID2= 00000&capID3=00234&agencyCode=PALOALTO&IsToShowInspection=no; https://aca- prod.accela.com/paloalto/Cap/CapDetail.aspx?Module=Planning&TabName=Planning&capID1=16PLN&capID2= 00000&capID3=00464&agencyCode=PALOALTO&IsToShowInspection=no. City of Palo Alto, “788-796 San Antonio Road, Attachments,” accessed December 3, 2021, https://aca- prod.accela.com/paloalto/Cap/CapDetail.aspx?Module=Planning&TabName=Planning&capID1=19PLN&capID2= 00000&capID3=00084&agencyCode=PALOALTO&IsToShowInspection=no. The City of Palo Alto uses the phrase “Precise Plans” in the Palo Alto Municipal Code: Title 20 Precise Plans to “provide for the systematic execution of the circulation element of the general plan … by [among other regulations] designating the precise location of planned rights-of-way” and prevent encroachments. Accessed December 10, 2010, https://codelibrary.amlegal.com/codes/paloalto/latest/paloalto_ca/0-0-0-82433. Transportation Commission, and in a separate public meeting with the Architectural Review Board. In contrast, MV combines the two meetings with its Design Review Committee, which is chaired by a planning administrator and two consulting architects. Combining the public review meetings would reduce the time it takes for a project to obtain final approval. This would take away an opportunity for public comment, but this drawback could be effectively neutralized by encouraging public feedback when specific area development plans are defined. Palo Alto planners should explore whether a combined process would speed up its approval timeline. There may be other ways to reduce the time it takes for developers to get their plans approved by the City. Palo Alto planning staff should consult with Mountain View staff to explore additional ways to streamline their approval process. Single role to manage and advocate for affordable housing A classic organizational best practice involves “assigning responsibility for outcomes along with the authority to do what is needed to produce the desired results.”105 A dedicated AH manager would be responsible for outcomes and drive progress toward the city’s AH target. Cities such as Morgan Hill have created a similar affordable housing position leading to strong results. The Civil Grand Jury learned that the Morgan Hill Housing Manager is responsible for achieving the City of Morgan Hill’s AH numbers and coordinates projects, funding sources, and organizations to achieve AH outcomes. Top city leader support is critical to the success of position. With that support, a knowledgeable and dedicated AH manager can be responsible for the AH targets, solve problems, and provide stakeholders with expert advice. The Civil Grand Jury learned that both non-profit and for-profit developers prefer to work with a city expert, a single point-of-contact, particularly when negotiating about residential and affordable units. According to the Newport Beach Community Development Director, “establishing a dialogue with developers on the front end of projects is important.”106 By consulting with developers, a city’s AH manager can understand what they need to make a project feasible. This manager can eliminate lengthy negotiations and prevent avoidable delays. With a clear understanding of both sides’ priorities, the AH manager is in a strong negotiation position when working with for-profit developers. (Finding 10) 105 Sam Lloyd, “Managers Must Delegate Effectively to Develop Employees: Planning Can Minimize Poor Performance,” accessed August 15, 2021, https://www.shrm.org/resourcesandtools/hr-topics/organizational-and- employee-development/pages/delegateeffectively.aspx; Alexandra Kalev, Frank Dobbin, and Erin Kelly, “Best Practices or Best Guesses? Assessing the Efficacy of Corporate Affirmative Action and Diversity Practices,” American Sociological Review v. 71, no. 4 (2006), pp. 589-617. Nikie Johnson, and Jeff Collins, “Report Card: California Cities, Counties Failing Again on Affordable Housing Goals,” Orange County Register, January 31, 2021, https://www.ocregister.com/2021/01/31/report-card- california-cities-counties-failing-again-on-affordable-housing-goals/. AH Financing: City Funding and Financial Participation Affordable housing is expensive In June of this year, MV announced its Montecito Proposal for 84 affordable units and 147 bedrooms.107 The planned project development cost totals $88,702,160, or $1,055,978 per unit and $591,348 per bedroom. In December 2020, MV announced its similarly scaled La Avenida project.108 The total development cost was listed as $78,573,646 for 100 units ($785,736 per unit) and 119 bedrooms ($603,416 per bedroom). In Santa Clara County, 29 projects - totaling 2,969 units and 3,989 bedrooms - have received Measure A funding approval over a three-year span. The average cost per unit of AH for those projects is $678,365. The average cost per bedroom for these same projects is $504,905. Affordable housing financing is complex One public official close to this issue noted that the projects require anywhere from 8-15 sources of financing. As an example of this complexity, the funding plan for the Montecito project is shown in Table 5 below. In addition to the Measure A and MV funds, the project required seven additional sources: Permanent Sources Dollar Amounts Tax Credit Equity $31,085,934 City of Mountain View 18,000,000 County of Santa Clara Measure A 16,000,000 Federal Home Loan Bank-Affordable Housing Program 820,000 Conventional Loan 9,507,000 Contributed Developer Fee 5,478,000 Deferred Developer Fee 877,655 Fee Waivers 5,473,911 Deferred Interest from City and County 1,459,660 TOTAL $88,702,160 Table 5. Charities Housing Funding Proposal – 1265 Montecito Avenue 107 Kevin Forestieri, “Mountain View City Council Earmarks $16M for Costly New 84-Unit Affordable Housing Project,” Mountain View Voice, June 28, 2021, https://www.mv-voice.com/news/2021/06/28/mountain- view-city-council-earmarks-16m-for-costly-new-84-unit-affordable-housing-project. Kevin Forestieri, “Mountain View Pours $15M into North Bayshore’s First Affordable Housing Project, Mountain View Voice, December 14, 2020, https://dmv-voice.com/news/2020/12/14/mountain-view-pours-15m- into-north-bayshores-first-affordable-housing-project. The largest source, the Tax Credit Equity, is from a Low-Income Housing Tax Credit Program.109 When the Charities Housing Funding Proposal to build AH at 1265 Montecito Avenue in MV was later announced, the funding mix changed. Santa Clara County took the lead on the project, committing $18M, and MV committed $16M. Multi-faceted funding strategies build more affordable housing Despite the scale of resources required and the complexity of project financing, AH does get built. However, it is difficult to fully understand the financing and what deals are made because real estate negotiations are done behind closed doors. Real estate negotiations, like those that involve personnel decisions, are not subject to the Ralph M. Brown Act’s public meeting requirements.110 In addition, residential and commercial development projects add costs to local infrastructure and services. When offices and housing are built, more people will live in the community. More classrooms and teachers will be needed. Parks need to be built. Demands for police, fire and utilities providers will increase. The need for other service workers in restaurants and delivery services will increase and those individuals will need places to live. In a post-Prop 13 world, cities must find ways to fund these services. Often that means charging fees on commercial development projects. Multiple public funding sources are available to achieve AH goals. Federal and state programs play a central role. A prime example is the federal tax credit program in the Montecito project. Both the federal government and the State are committing funding through Homekey (as described below). The federal government is the primary funding source for AH, supplying all the Low- Income Housing Tax Credit money and most of the funding for Homekey. Unfortunately, the State of California is not providing a substantial amount of funding to help cities with this difficult problem. The Low-Income Housing Tax Credit is a federal resource, administered by the states, available to support affordable housing. Developers receiving an award use the tax credits to raise equity capital from investors. The tax credit gives investors a dollar-for-dollar reduction in their federal tax liability in exchange for equity. The tax credits are claimed over a ten-year period. California Government Code § 54956.8, accessed November 7, 2021, https://leginfo.legislature.ca.gov/faces/codes_displayText.xhtml?lawCode=GOV&division=2.&title=5.&part=1.&ch apter=9.&article=. Santa Clara County plays an important fiscal role as well. Measure A, a bond approved by voters in 2016, provides $950M to build AH.111 Santa Clara County is commended for its support of the County’s AH needs. Private organizations such as the Housing Trust Silicon Valley also play a role. Their Tech Fund enables private individuals and Bay Area employers to invest in AH projects.112 City Affordable Housing funding challenges and opportunities The task at the city level is twofold. First, it must leverage all possible external funding from federal, state, and county sources. The Montecito and La Avenida projects are good examples of leveraging from city and county funds, including funds from Measure A. Second, cities must contribute directly. An excellent recent example of this occurred when MV contributed $15M to the La Avenida Project and $16M to the Montecito Project. It is critical for cities to contribute funding since city funds are often the first—and most necessary—step to acquiring other external funding sources. Cities can contribute directly by: 1. Developing local pools of funding. For example, until recently, MV had a fund of $69M to finance AH and support the cost of new infrastructure. (Finding 11) Mountain View built its AH fund through linkage or impact fees (fees imposed on property developers by municipalities for the new infrastructure required to accommodate new development). These fees are paid by office space developers. Palo Alto, with its annual cap on office space development, has severely restricted this source of funding.113 2. Waiving or deferring fees where AH is provided. The Montecito project is an example. 3. Negotiating other benefits to have developers include AH units. For example, allowing additional height, less required parking, or increased Floor Area Ratio (FAR), which is the size of a building’s floor area in relation to the parcel size on which the building is located. For example, a market rate housing project can be transformed by trading increased density 111 Santa Clara County, “Complete Text of Measure A,” accessed August 1, 2021, https://www.sccgov.org/sites/scc/Documents/Complete-Text-of-Measure-A-20.pdf. Donna Kimura, “Silicon Valley Firms Invest in Affordable Housing,” Affordable Housing Finance, February 13, 2019, https://www.housingfinance.com/finance/silicon-valley-firms-invest-in-affordable-housing_o. Gennady Sheyner, “Palo Alto Approves Permanent Office Cap,” Palo Alto Online, May 1, 2018, https://www.paloaltoonline.com/news/2018/05/01/palo-alto-approves-permanent-office-cap. for more affordable units, or by obligating the developer to build or buy AH elsewhere. Both MV and PA have used these methods to incentivize housing development. Mountain View has had a greater degree of success, in part because it has been much more aggressive with office development. 4. Contributing city-owned land. The inventory of available city land can have a significant impact on the cost and risk of building AH. 5. Using tax increment financing. As property taxes rise above a base year, the added amount, or the “increment,” could be used to finance AH and/or needed infrastructure. To do this, some of the increase in property tax revenue that has traditionally supported operations like the police and fire departments would be redirected to AH. No new taxes would be required because this is a diversion of property taxes from other services. This approach has long been in use in the United States and elsewhere but has many legal complications that would need to be addressed. 6. Establishing new ongoing sources of revenue by relying on a broader base of payors rather than an individual project developer. Revenue could include new business taxes, fees on real estate activity such as transfer taxes and recording fees, or parcel taxes. Both PA and MV are exploring these opportunities. Mountain View changed its business licensing tax in 2018 and currently raises about $6M per year. At this time, MV intends to spend these funds on capital projects related to commuting activity instead of AH. The increased AH housing targets in the next RHNA cycle may cause MV and PA to consider asking voters to consider increasing local property taxes as part of their funding solution.114 (Finding 12) Mountain View’s success in developing a local housing fund enabled the City to issue several Notices of Funding Availability (NOFAs).115 These substantial NOFAs, 2014 ($12.5M), 2016 ($36M), and 2018 ($22M), encouraged developers to come forward with AH proposals.116 Mountain View’s commitment to AH funding set the stage for leveraging other sources of financing to build affordable housing projects. Kevin Forestieri, “Facing a Requirement to Allow 11K New Homes, Mountain View Looks to Update its Housing Plans,” Mountain View Voice, August 16, 2021, https://mv-voice.com/news/2021/08/16/mountain-view- seeks-to-update-housing-plans-following-new-requirement-to-allow-11k-new-homes; Gennady Sheyner, “New Numbers, Same Concerns as Palo Alto Challenges Housing Mandate,” Palo Alto Weekly, January 13, 2021, https://www.paloaltoonline.com/news/2021/01/13/new-numbers-same-concerns-as-palo-alto-challenges-housing- mandate. Notice of Funding Availability is a public notice issued by a governmental entity which announces the availability of funding for a specific purpose and can be requested through an application process. It is typically awarded competitively for proposals that achieve an outcome desired by that organization. Mark Noack, “Affordable Housing Project Carries Steep Price,” Mountain View Voice, April 20, 2018, https://mv-voice.com/news/2018/04/20/affordable-housing-project-carries-steep-price. 100% affordable housing projects vs. mixed-use projects There are two main types of AH projects. The first is the 100% AH type in which only housing is built, often by a non-profit organization. The second type is a mixed-use project. In mixed-use projects, the developer delivers a combination of occupant units, including some or all of office space, retail space and housing. Mountain View and Palo Alto have differing views on the relative use of these two project types. The Montecito and La Avenida projects are examples of strong public funding for 100% AH projects. Both projects make use of significant County Measure A funds and MV pooled funds. That said, building 184 units and 264 bedrooms required committing $34M, almost 50% of the MV Development Fund. One hundred percent AH projects may be too costly for cities to afford, particularly if cities cap commercial development and the fees or inclusionary units that such development generates.117 An alternative to 100% city-financed AH is the Gateway Master Plan (“Plan”) announced by MV.118 This large mixed-use project located at the Shoreline Boulevard entrance to MV’s North Bayshore neighborhood is a 29-acre project spanning land owned by Google, SyWest and MV. The Plan provides for 500,000 square feet of office space, 300,000 square feet of entertainment/restaurants and retail, and a 200-room hotel. After earlier attempts by Google and SyWest to agree on a plan failed, MV took the initiative and proposed this project. The Gateway Plan provides up to 2,800 residential units. Twenty percent of those units (560) are affordable units. While the publicly accessible plan does not include financing data, the heavy office space and retail space components create a mixed-use blend that likely makes the project profitable for the two property owners. Mountain View contributed land to the deal and offered zoning that increased the FAR as an incentive. At the time of this report, Google likes the Plan, while SyWest has said it doesn’t meet its profitability requirements.119 Mixed-use projects typically involve substantial negotiations between a developer and a city. Developers need zoning concessions (height, parking, density) or other concessions such as reduced city fees. Cities need AH units or other public benefits in return for those concessions. Inclusionary units are affordable housing units that a developer includes in a project—typically at a city- mandated percentage (e.g., 15 or 20%) of the total project units approved. Martin Alkire, North Bayshore Gateway Master Plan. 119Wesley Severson, “Mountain View Pushes Ambitious Development Plans, Developer Calls Them Unrealistic,” Hoodline, August 25, 2021, https://hoodline.com/2021/08/mountain-view-pushes-ambitious- development-plans-developer-calls-them-unrealistic/. Although each project is unique, including profitable office space in the project underpins the developers’ ability to provide AH and other community benefits. Achieving AH goals require that a balance be found between the community’s needs and the developer’s profitability requirements. (Finding 13) Unintended consequences of a commercial project focused funding approach In addition to the benefits of mixed-use projects, the Gateway Project poses an important question: When a city permits more office space to be built, are enough units of AH created to support the service workers needed because of the increased office space? Gateway will generate at least three types of service worker demands: • The new office buildings will require maintenance, landscaping, food service, and security workers. • The project’s restaurants, retail, and hotel operations will require service workers. • There will also be impacts throughout the city - police, fire, teachers, grocery clerks, and others. A very large percentage of the workers in the list above will be low-income employees and will require AH. At the high end of the Gateway Plan, the project will provide 560 affordable units potentially housing approximately 1,100 service workers.120 Is that enough? (Finding 14) Homekey The State of California has created significant housing funding through Homekey, which combines both state and federal funds.121 Cities and the County can use these funds to create affordable housing for the homeless and other vulnerable populations. In one such affordable housing implementation, MV has partnered with the State, the County, and a private builder (LifeMoves) 120 Bay Area Council Economic Institute, Technology Works, p. 24-25; Non Profit Housing Association of Northern California, “Jobs/Housing Fit and the Effects on Bay Area Health, Equity and Environment,” accessed December 10, 2021, https://nonprofithousing.org/wp-content/uploads/2020/02/JH-Fit-Fact-Sheet-FINAL-9.15.pdf. California Department of Housing and Community Development, Homekey: Bringing California Home, accessed September 23, 2021, https://homekey.hcd.ca.gov; H. Blair Kincer, “Homekey Program Provides Additional Subsidy for Affordable Housing Development Across California,” Novogradac, November 19, 2020, https://www.novoco.com/notes-from-novogradac/homekey-program-provides-additional-subsidy-affordable- housing-development-across-california; Wesley Severson, “Mountain View Pushes Ambitious Development Plans.,” Hoodline. to construct 100 units and 124 beds of Homekey housing.122 The Homekey funding for this project is $14.4M. Occupancy began in the spring of 2021. Palo Alto is also considering a similar Homekey project. The Homekey/LifeMoves target population in MV is homeless families, seniors, and disabled individuals. This program is intended to house people for 4-6 months, and they will subsequently need to find permanent AH. City of Mountain View, LifeMoves Mountain View Now Providing a Path to Stability for Individuals and Families Experiencing Homelessness, May 6, 2021, https://www.mountainview.gov/civicax/filebank/blobdload.aspx?BlobID=35478. FINDINGS AND RECOMMENDATIONS
Related Recommendations (1)
R14: By July 30, 2022, both the City of Palo Alto and the City of Mountain View should require a Housing Impact Study in the approval process for new commercial development, that informs decision-makers about how the proposed project affects the job-to-housing ratio.
Findings & Recommendations 10 findings
F1: The District did not fulfill its responsibility to provide technical support to the Oversight Committee relating to conflict of interest requirements. Although the bylaws reference the Oversight Committee’s ethical responsibilities, the requirements are written in legal terminology. The District did not adopt a Conflict of Interest Policy for the Oversight Committee as suggested by referencing Attachment A in the adopted bylaws.
Related Recommendations (3)
R1: In tough economic times, community colleges, including Gavilan College, are critically important to re-train people who want to expand their job skills;
R1a: The District should create a plan to provide a conflict of interest policy to Oversight Committee members and incorporate the subject matter into the Oversight Committee’s training and orientation. This recommendation should be implemented no later than April 30, 2022.
R1b: The District should create a process for Oversight Committee members to evaluate and disclose conflicts of interests and incompatible activities. This recommendation should be implemented no later than April 30, 2022.
F2: Current Oversight Committee membership falls below the minimum required by law. Failing to maintain members in the required affiliation category can create crucial vacancies where vital constituencies’ voices may not be heard or adequately represented.
Related Recommendations (1)
R2: The Board of Trustees should appoint sufficient Oversight Committee members to meet or exceed the minimum number required by law. This recommendation should be implemented no later than April 30, 2022.
F3: The District-approved Oversight Committee bylaws contain inconsistent and incomplete term limit provisions as specified in the Education Code. The District included a bylaw authorizing members to serve beyond the expiration of their third term while waiting for a replacement to be appointed. The District did not comply with the additional term limit provisions associated with the member serving in the student affiliation category. The student member may only serve six months after graduation with the specific approval of the Board of Trustees.
Related Recommendations (3)
R3: Because University of California and California State University systems are becoming more expensive, more people rely on community colleges, therefore Gavilan College must be upgraded so it can provide local students with a high-quality education they might not otherwise receive. The Facilities Master Plan is on file at the District’s Office of the Superintendent/President, and includes the following projects: 90 League of Women Voters of California Education Fund, “Measure E Gavilan College Job Training, Overcrowding, Repair/Safety Measure Gavilan Joint Community College District,” accessed November 3, 2021, http://www.smartvoter.org/2004/03/02/ca/scl/meas/E/. GAVILAN COLLEGE - GILROY CAMPUS • Repair, Upgrade, and/or Replace Aging Obsolete Classrooms, Science Labs, Instructional Facilities, Sites and Utilities: Repair, renovate and/or replace deteriorating roofs, corroding pipes and power lines, plumbing, sewer, drainage, electrical systems, wiring, unsanitary and run down bathrooms, antiquated boiler systems, telecommunications, foundations, classrooms, fields and grounds, science laboratories, pools, lecture halls, performing arts, and other instructional facilities, wire classrooms for computers and technology, increase campus security, installation and repair of fire safety equipment, including alarms, smoke detectors, sprinklers, emergency lighting, fire safety doors, increase energy efficiency, reduce operating costs and improve job training and academic instruction, and meet legal requirements for disabled access. • Safety Improvements: Upgrade existing fire alarms, sprinklers, smoke detectors, intercoms and fire doors; install security systems, exterior lighting, emergency lighting, door locks and fences. • Expand Job Training and Academic Classroom, Library and Facility Capacity: Increase classroom capacity for academic and job training classes, including math, business, english, science labs, library complex, physical and health education facilities; upgrade, repair, equip, and expand student services buildings to include academic and job training and counseling centers, study areas, lecture/meeting/seminar rooms, computer hook-up and other student support, as well as fine and performing arts, labs; expand maintenance building to support facilities, high technology learning resource center, and classrooms for partnering with a 4-year university to allow residents to obtain a bachelor’s degree without commuting. • Energy Efficiency Improvements; Repair, Replace and Upgrade Electrical, Mechanical, Old Boiler and Energy Systems To Reduce Energy Consumption: Replace old boiler and energy systems, heating, ventilation and air conditioning system and related utility systems; energy efficiency projects designed to increase efficiency. • Information Technology Wiring and Equipment: Upgrade electrical systems and wiring for computer technology and Internet access; upgrade and replace outdated technology including computers, laboratory equipment and classroom furnishings. • Refinance Existing Lease Obligations To Lower Interest Rates and Increase Funds Available For Instruction and Ongoing Maintenance of Classrooms and Buildings. • Safety and Security; Sites; Site Accessibility; Improve Emergency Access: Improve pedestrian access routes across campus for safety; improve campus safety and security by adding exterior lighting; implement safety upgrades to relieve gridlock, traffic flow and parking congestion; redesign campus walkways to eliminate unsafe conditions; repair or replace outdated natural gas, water, sewer, storm drain systems; acquire property to expand student capacity, alleviate traffic congestion in neighborhoods adjacent to campus, increase access for emergency vehicles; add parking to accommodate increasing student population. GAVILAN COLLEGE - SAN BENITO CAMPUS • Establish Gavilan College Education Center in San Benito County to Accommodate Growth and Increasing Student Enrollment: Provide permanent classrooms, labs, library, job training and college transfer counseling and partner with a 4-year university to allow residents to obtain a bachelor’s degree without commuting. Improvements in the San Benito County campus will be made with a combination of bond monies and State matching funds. GAVILAN COLLEGE - GREATER MORGAN HILL AREA CAMPUS • Establish Gavilan College Education Center to Accommodate Growth and Increasing Student Enrollment: To provide permanent classrooms, labs, job training and college transfer counseling buildings facilities in the Greater Morgan Hill area, including the acquisition of a site(s) to allow local students greater access to an affordable education. Improvements in the Greater Morgan Hill area campus will be made with a combination of bond monies and State matching funds. Listed repairs, rehabilitation projects and upgrades will be completed as needed. Each project is assumed to include its share of equipment, architectural, engineering, and similar planning costs, construction management, and a customary contingency for unforeseen design and construction costs. The allocation of bond proceeds will be affected by the District’s receipt of State matching funds and the final costs of each project. The budget for each project is an estimate and may be
R3a: The District should develop a plan to update the Oversight Committee bylaws to rescope the term limit bylaw addressing replacement holdovers as well as incorporate the additional student term limit provisions outlined in the Education Code. This recommendation should be implemented by April 30, 2022.
R3b: The District should develop a plan to ensure that it abides by the term limit provisions required by law for its student affiliation category. The plan should also address the student’s term limit provision on the Committee Member Term Chart provided by the District. This recommendation should be implemented by April 30, 2022.
F4: There are areas in which the Oversight Committee might be perceived as having its independence questioned or compromised in relation to the administrative and technical support it receives through the District’s contractor.
Related Recommendations (1)
R4: The District should identify and communicate to both the Oversight Committee and the public, the relationship the District’s contractor has to the Oversight Committee regarding the Measure X program. The District should clarify the level of authority and independence the Oversight Committee has to request services from its contractor, AKG. This recommendation should be implemented by April 30, 2022
F5: The “Measure X Bond Newsletter” has been dormant despite the District inviting members of the public to sign up for program updates. The newsletter service is identified in a contract agreement but has not been posted since the September 2019 issue as reflected on the Measure X website.
Related Recommendations (1)
R5: The District should develop a plan to provide the necessary resources to revive the “Measure X Bond Newsletter”. This recommendation should be implemented no later than April 30, 2022.
F6: The District does not provide Oversight Committee members with a clear, direct, or transparent way of receiving electronic communications from the public. There is a standing agenda item for this type of direct communication, but an effective accompanying tool does not exist for Oversight Committee members to receive and respond to this type of communication.
Related Recommendations (1)
R6: The District should develop a plan to institute an electronic communication tool to contact the Oversight Committee directly. The District needs to provide an appropriate communication tool to foster public engagement, correspondence, and feedback. This recommendation should be implemented no later than April 30, 2022.
F7: The District did not follow established norms and protocols for posting meeting notifications and announcements specifically associated with cancelled meetings. Additionally, the District has inhibited the public’s ability to access agendas and meeting materials because the link to the agenda is not clear and the multiple steps required to navigate to the meeting materials is unduly complicated.
Related Recommendations (2)
R7a: The District should create a plan to update meeting announcements published on the Measure X homepage to prominently identify the webpage links to access the meeting agenda. This recommendation should be implemented no later than April 30, 2022.
R7b: The District should review the structure and navigation to meeting agendas and create a plan that addresses the public’s need for efficient access to agendas and meeting materials. This recommendation should be implemented no later than April 30, 2022.
F8: The orientation the District provides to the Oversight Committee does not adequately prepare members to effectively carry out their roles and responsibilities. The District provides a general overview using reference materials. More in-depth and specialized training is needed to ensure committee members are equipped to fulfill their oversight responsibilities.
Related Recommendations (1)
R8: The District should provide detailed and targeted training to members of the Oversight Committee. A training plan should be developed with input from the Oversight Committee. This recommendation should be implemented no later than June 30, 2022.
F9: The District did not provide the Oversight Committee with any information about initiatives to maximize bond revenues through the use of cost-saving measures such as joint-use facilities. As a result, the Oversight Committee was not able to communicate those initiatives to the public, which led to the mistaken impression that none were considered.
Related Recommendations (1)
R9: The District should develop a plan to communicate the ways in which the District has identified or enacted cost-saving measures to the Oversight Committee. This recommendation should be implemented no later than April 30, 2022.
F10: 47 REQUIRED RESPONSES ........................................................................................................... APPENDIX 1 – Measure E........................................................................................................... APPENDIX 2 – Ethics Policy Statement...................................................................................... APPENDIX 3 – The Brown Act ................................................................................................... APPENDIX 4 – Measure X Oversight Committee Bylaws.......................................................... APPENDIX 5 – Financial and Performance Audits ..................................................................... APPENDIX 6 – Navigating to Meeting Agendas......................................................................... APPENDIX 7 – Area Community College Audit Reports ........................................................... GLOSSARY AND ABBREVIATIONS § A symbol used to abbreviate the term section (§) or sections (§§) in legal documents. The symbol is commonly used to specify the applicable section number within legal documents. AKG A Kennedy Group is a consulting firm providing program management, compliance and accountability, tracking and reporting, and communication and documentation services to educational institutions and public agencies. BoardDocs® A commercially available integrated agenda management platform used by community college districts to manage a committee structure. It serves as a source for the public to obtain agendas, supporting attachments, and meeting minutes. Board of Trustees Elected officials who serve the public interest, establish a climate of learning, and monitor the effectiveness of the institution through the policies they create and approve. Board Resolution A formal, legal document that solidifies in writing important decisions made by a Board of Trustees. Bond List Revision A formal process for managing and tracking changes made throughout a bond construction program. Changes include individual project names, scopes, and budgets, and they must be approved by a governing body. Bond Measure An initiative placed on the ballot to be approved or defeated by the voting public, which permits the use of bonds to borrow money and the levy of taxes to pay the debt service. The bonds can be used by community college districts to finance construction or other capital projects. Brown Act The Ralph M. Brown Act is a California state law ensuring the public’s right to attend, participate, and discuss in meetings of local legislative bodies (including city council, county government, and community college districts). The sections pertaining to the Brown Act are California Government Code §§ 54950 – 54963. See Appendix 3 for a summary of the Brown Act. Bylaws Rules and regulations enacted by a body to provide a framework for its operations and management. CABOC California Association of Bond Oversight Committees is an independent, non-profit organization which supports the State’s Citizens’ Bond Oversight Committees with training materials, classes, conferences, and workshops. CBOC Formed when a bond is passed, the Citizens’ Bond Oversight Committee is an independent body of citizens representing affiliation categories such as a senior citizen group, business community, and taxpayer association. Members have legal authority to examine bond measure expenditures and to oversee the progress of projects tied to the bond. They are mandated to report to and keep the public informed. Education Code A collection of California laws related to public schools, which are created or changed by the Governor and Legislature. Local education boards and county offices of education are responsible for complying with applicable code provisions. The sections pertaining to school bonds include §§ 15100 – 17204 of the California Education Code. Gavilan Joint Community Gavilan Joint Community College District encompasses the College District southern part of Santa Clara County and the northern part of San Benito County. The District is comprised of Gavilan College and the associated learning facilities that are within the district. Measure E A bond measure passed by Gavilan Joint Community College District voters in 2004. Measure E was a facilities improvement bond used to upgrade utilities, renovate classrooms and libraries, provide access for disabled students, improve campus safety, and plan for the future by expanding satellite sites. See Appendix 1 for a summary of the ballot measure. Measure X A bond measure that was passed in 2018 and used to fund improvements and capital projects for the Gavilan Joint Community College District. Proposition 39 A constitutional amendment approved in 2000 to make passing school district bond measures easier. It reduced the threshold required to pass local California school district bond issues from two-thirds to 55%. INTRODUCTION The 2021 Civil Grand Jury of Santa Clara County (Civil Grand Jury) studied the creation, management, and execution of voter approved educational construction bond measures. The Civil Grand Jury focused its initial analysis and research on community college districts located within the County of Santa Clara. However, it became evident that the history of the Measure E bond from 2004 (summary attached as Appendix 1) influenced voter sentiment when Measure X was proposed in 2018 by the Gavilan Joint Community College District (District).1 A lingering mistrust felt by some District residents was revealed in response to a 2017 survey commissioned by the District. Responses to the survey questions included 61.5% who agreed “[The] District can't be trusted, they managed [the] last bond and [they] didn’t build what they promised.”2 Nearly 60% of respondents agreed that there would be, “No guarantee that money will be distributed fairly, some areas will get more than their fair share than others.”3 This mistrust carried over to the November 6, 2018 election. The subject was front and center in a November 14, 2018 news article in the Gilroy Dispatch, “[Santa Clara County] SCC Voters Help Pass Gavilan’s $248M Bond: New trustees look to build trust between college and [San Benito County] SBC residents.”4 A newly elected Trustee was quoted: “That low approval rating (of Measure X) in San Benito County, given the fact that a major focus of the bond is to provide a satellite campus there, that creates a reason for concern,” said Diaz, who has [previously] provided oversight for over $500 million in school bond projects. “Throughout my campaign, I’ve been hearing about some of the discontent with how the last bond was allocated. …Even though (Measure X) passed, for me, we have work to do as a board to reach out to San Benito residents and engage them in a way that improves their level of support for Gavilan.”5 1 Eric He, “Gavilan College President Announces Retirement,” Patch Media, October 11, 2021, https://patch.com/california/gilroy/gavilan-college-president-announces-retirement. True North Research, Bond Measure Feasibility Survey: Summary Report, September 22, 2017, p. 28, https://www.gavilan.edu/administration/board/documents/GavilanCollege_BondFeasibilitySurveyReport.pdf. Ibid. Scott Forstner, “SCC voters help pass Gavilan’s $248M bond,” Gilroy Dispatch, November 14, 2018, https://gilroydispatch.com/scc-voters-help-pass-gavilans-248m-bond/. Ibid. Another recently elected trustee highlighted the challenges from the last bond measure, saying: “With the passage of Measure E and the promises that were broken, it’s going to be a long process in order to get trust back up from our community,” Gonzalez said. “I don’t believe anything was done intentionally. It’s just a lack of trust that we have to build again. …We do have to fulfill promises that were made.”6 With this report, the Civil Grand Jury aims to educate the public about educational bonds, inform residents about the Measure X bond program, and suggest ways to improve bond oversight. The report exposes support and resourcing gaps that should be rectified to ensure that the Gavilan Joint Community College District’s Board of Trustees support the District’s Independent Citizens’ Bond Oversight Committee in effectively carrying out its work. This report includes 14
Related Recommendations (2)
R10a: The District should provide the dated and certified 2020 Financial and Performance Audits to the Oversight Committee. The audits should also be posted to the Measure X website for public disclosure. This recommendation should be implemented no later than April 30, 2022.
R10b: The District should create a plan with appropriate milestones to ensure the timely completion of annual, independent financial and performance audits. Milestones should include when audits are expected to be available for the Oversight Committee to receive and review, the District’s responses to the audits for Oversight Committee review, and when the final signed and dated audits are to be posted to the Measure X website. This recommendation should be implemented no later than April 30, 2022.
Findings & Recommendations 5 findings
F1: The Office of Supportive Housing is managing the funding commitments in a manner consistent with Measure A language. The Program Goals and projects are targeted at the vulnerable populations specified in Measure A. No recommendation.
F2: Measure A funding of Affordable Housing projects is at pace with the eleven-year cycle specified in the Program Guidelines No recommendation.
F3: The needs of the Rapid Re-Housing target population may not be met because unit completion is lagging in that Category.
Related Recommendations (2)
R3a: To address this Rapid Re-Housing lag, the County should aggressively pursue Homekey funding where consistent with Measure A Goals and Guidelines. The County should develop a plan to address this recommendation by June 30, 2022.
R3b: If Rapid Re-Housing development continues to lag, the County should consider redistributing unit goals in a way which still supports the core homeless and disabled vulnerable populations. The County should develop a plan to address this recommendation by June 30, 2022.
F4: The Civil Grand Jury commends the Board of Supervisors and the members of the Measure A Independent Citizens’ Oversight Committee for providing strong and transparent oversight to Measure A implementation. No recommendation.
F5: 21 REQUIRED RESPONSES ......................................................................................................... APPENDIX .................................................................................................................................. GLOSSARY AND ABBREVIATIONS AH Affordable Housing AMI Area Median Income B Billion BMR Below Market Rate: a BMR unit is priced to be affordable to households that are moderate income or below CTCAC California Tax Credit Allocation Committee ELI Extremely Low-Income: households with income at or below the Poverty Guideline or 30% of Area Median Income (AMI), whichever is higher Homekey A program providing grants to local public entities to provide housing for the chronically homeless. HUD Housing and Urban Development Leveraging Ratio The amount of funding from Measure A proceeds compared to the amount of non-bond funding sources required by a project LI Low Income: households with incomes between 50% and 80% of the Area Median Income LIHTC Low-Income Housing Tax Credit M Million MGO Macias, Gini & O’Connell: a certified public accounting firm MOU Memorandum of Understanding: a binding document between two organizations that outlines roles, responsibilities, and deliverables OSH County of Santa Clara Office of Supportive Housing Oversight Committee Measure A (2016 Housing Bond) Independent Citizens’ Oversight Committee Pipeline The length of time from building project inception to units being ready-to-lease. Program Goals Measure A Program Goals specify the amount and type of housing that will be funded. Program Guidelines The rules governing the use of Measure A Program funds PSH Permanent Supportive Housing: a Measure A housing category providing housing units and long-term rental assistance, case management, and supportive services for homeless persons with disabling conditions, including the chronically homeless RRH Rapid Re-Housing: these units house clients who have become homeless through a recent adverse life event. RRH provides time- limited rental subsidy, case management, and supportive services. In RRH programs, individuals and families eventually take over the full rent of their leased housing units. VLI Very Low-Income: households with income below 50% of the Area Median Income. This also includes the extremely low- income category. INTRODUCTION In 2016, voters of Santa Clara County (County) passed Measure A, which allows the County to borrow up to $950M (million) by issuing general obligation bonds. Bond proceeds can only be used to acquire or improve real property for the purposes of providing Affordable Housing (AH) and related support and services for vulnerable populations: including veterans, seniors, the disabled, low- and moderate-income individuals or families, foster youth, victims of abuse, the homeless and individuals suffering from mental health or substance abuse illnesses, which housing may include supportive mental health and substance abuse services.1 After Measure A passed, the County Board of Supervisors (Board) took two actions. They first set Measure A Program Goals, which included building, by developing or financing, at least 4,800 housing units for residents within the Measure’s designated categories.2 Second, the Board established the Measure A Independent Citizens’ Bond Oversight Committee (Oversight Committee).3 The nature and complexity of Measure A warrants a strong oversight group tasked with reviewing the expenditures of bond proceeds. Further, as required, an independent, external auditor reviews the County's spending of bond proceeds to ensure accountability. Less than five years into the Measure’s 11-year cycle, 289 units have been built. Recently, several news outlets have noted that the number of Measure A authorized AH units built is low.4 Additionally, the 2021 Civil Grand Jury of Santa Clara County (Civil Grand Jury) received a complaint asking about the slow pace of Measure A construction. The purpose of this investigation 1 County of Santa Clara, “List of Local Measures Presidential General Election November 8, 2016,” accessed October 28, 2021, https://sccvote.sccgov.org/sites/g/files/exjcpb1106/files/E110%20List%20of%20local%20measures.pdf. County of Santa Clara, Office of Supportive Housing, “2016 Measure A Housing Bond Progress,” accessed November 1, 2021, https://osh.sccgov.org/housing-community-development/2016-measure-affordable- housing-bond/2016-measure-housing-bond. County of Santa Clara Code of Ordinances, “Measure A (2016 Housing Bond) Independent Citizens’ Oversight Committee,” October 25, 2021, https://library.municode.com/ca/santa_clara_county/codes/code_of_ordinances?nodeId=TITAGEAD_DIVA6BOCO _CHXXIME2016HOBOINCIOVCO. Barry Holtzclaw and Dan Pulcrano, “Billion-Dollar Boondoggle: Four Years After Measure A, Santa Clara Co. Has Little to Show for It,” sanjoseinside, June 25, 2020, https://www.sanjoseinside.com/news/billion- dollar-boondoggle-four-years-after-measure-a-santa-clara-co-has-little-to-show-for-it/; Madelyn Reese, “Measure A Housing Not Moving Fast Enough, Oversight Committee Says,” San Jose Spotlight, September 21, 2020, https://sanjosespotlight.com/measure-a-housing-not-moving-fast-enough-oversight-committee-says/. is to understand the County’s performance on Measure A, including why the number of units completed to date is so low. BACKGROUND It is important to note that Measure A (See Appendix) accountability safeguards state that “the specific purposes of the bond are to fund [emphasis added] the acquisition or improvement of real property in order to provide affordable housing” for the vulnerable populations defined above.5 The County utilizes the bond proceeds to partner with cities and the affordable and supportive housing community to address the AH needs of the target population. The County’s Office of Supportive Housing (OSH) is largely responsible for administering the funding available from the bond proceeds for these AH projects. But OSH is only one player. When it comes to building AH, other factors and organizations have significant control over the development process. AH Development Is a Lengthy Process Developing AH is a complex and lengthy process from project inception to the construction of units ready to be leased by qualified occupants. That process includes land acquisition, project design, zoning and permit approval, financing, and, finally, construction and leasing. Multiple entities are involved, and all project stages take time. The length of the development pipeline, which is the time from project inception to units being ready-to-lease, is 4-5 years. The process steps noted below are simplified. For example, project financing work begins quite early and often changes as the entitlement steps are finalized and the overall scope and design of the plan is completed. Figure 1: 15 Step Affordable Housing Development Process6 5 County of Santa Clara, “List of Local Measures,” https://sccvote.sccgov.org/sites/g/files/exjcpb1106/files/E110%20List%20of%20local%20measures.pdf. Yun Soo Kim and Lintong Li, Housing on Merit: Stakeholder Mapping of Affordable Housing Development in Los Angeles County, February 2020, p. 5, https://housingonmerit.org/wp- content/uploads/2020/04/HOM-Final-Report-lm-edits-to-HOM-April-2020.pdf. Development Takes Many Players AH development involves a complex mix of organizations which are outside the County’s direct control. Cities, both the city governments and their residents, play an independent role in this process. Cities control entitlement processes, which include land use approvals, the density of housing projects, and design-related issues. Developers negotiate with city councils to obtain AH project approvals. Also, developers and city councils must engage directly with those most impacted by a project, particularly those living near it. These approvals alone can take one to two years. Cities vary widely in their willingness to approve AH projects and in the amount of time it may take to obtain that approval. Similarly, the funding process for an AH project is complex and involves many sources. A general example of the funding complexity and funding sources in California are illustrated in the chart below: Figure 2: Financing Multi-Family Affordable Housing7 How is the County performing? Is OSH going to achieve the voter approved goals specified in Measure A? What is the prognosis for the successful attainment of Measure A goals, both in terms of funding and building 4,800 affordable units for those vulnerable populations? 7 City of Golden, “How Does Affordable Housing Happen?” December 7, 2017, https://www.guidinggolden.com/affordable-housing/news_feed/how-does-affordable-housing-happen. METHODOLOGY During the course of this investigation, the Civil Grand Jury conducted interviews, read reports, and followed public discussion about Measure A. The Civil Grand Jury interviewed County officials charged with implementing Measure A and individuals involved in the oversight effort. The Civil Grand Jury also interviewed public officials involved in AH, who provided information about Measure A progress and effectiveness. Civil Grand Jury members attended the most recent quarterly meeting (September 2021) of the Oversight Committee, and also reviewed earlier Oversight Committee meeting information.8 The Civil Grand Jury reviewed reports from the independent external auditor of bond expenditures, the OSH’s Annual Report, and local media articles. County of Santa Clara Board of Supervisors & Boards and Commissions, “Meeting Calendar,” accessed November 1, 2021, http://sccgov.iqm2.com/Citizens/calendar.aspx. DISCUSSION Measure A Program and Progress Guidelines and goals In 2017, the Board approved Measure A Program Guidelines, which detailed how the Program would be managed and the amount of Measure A funds committed to projects. The Board also established Program Goals, which identified how many units would be assigned to each category of housing. (Finding 1) This was intended to meet the varying needs of the targeted populations. Housing categories, target populations, and the number of units assigned to each are: • Permanent Supportive Housing (PSH) Goal: 1,800 units This housing category provides units with long-term rental assistance, case o management, and supportive services for homeless persons with disabling conditions, including the chronically homeless. • Rapid Re-Housing (RRH) Goal: 1,600 units RRH units house clients who have become homeless through a recent adverse life o event. RRH provides time-limited rental subsidy, case management, and supportive services. In RRH programs, individuals and families eventually take over the full rent of their leased housing units. • Extremely Low-Income (ELI) Goal: 800 ELI units are rented at Below Market Rate (BMR) to households making less than o 30% of a region’s Area Median Income (AMI). • Very Low-Income (VLI) Goals: 600 units VLI units are rented at BMR to households making between 31% and 50% of a o region’s AMI.9 The 2017 Program Guidelines also established a target Leveraging Ratio.10 The County set that target requirement at 3:1, which means that, on average, there needs to be $3 of non-County money for every $1 of Measure A money invested. Success in attracting adequate funding from non- County sources is critical to the success of Measure A Goals. County of Santa Clara, Office of Supportive Housing, “Measure A Affordable Housing Bond Implementation Report #3,” p. 4, August 15, 2017, https://osh.sccgov.org/sites/g/files/exjcpb671/files/Housing%20Bond%20Report_03%208.15.17.pdf. Through the fourth quarter of FY 2020-2021, total project approval costs were $2.3B. Funds from Measure A totaled $511M, leaving $1.8B in funding from non-County sources. The leveraging ratio equals 3.46:1. Measure A funding progress Macias, Gini, and O’Connell (MGO), the independent auditors of Measure A, reported that by the close of the fourth quarter of the 2021 fiscal year (ending 6/30/2021), project funding commitments and expenditures totaled $683.6M, or 72.0% of the $950M allowable bond proceeds. At that time, Measure A was just over 4 years into its 11-year Program cycle. By that same date, OSH had committed $510.9M for 34 development and renovation projects to fund 57.6% of the Measure A Program housing unit goals. An additional $110.0M has been committed to purchasing 16 properties. These acquisitions include County properties and privately owned properties. All these purchases will be converted to or redeveloped as AH. Development plans are not yet in place for these properties, so AH unit numbers are not yet associated with these commitments. The balance of Measure A commitments total $72M and are detailed in the footnote below.11 The expenditures and activity to-date suggest that Measure A’s stated responsibility, to fund development of multi-family rental housing for the community’s most vulnerable populations, is on target. (Finding 2) However, performance by housing category has varied. Housing unit achievement is very strong in three of the four Program Guideline categories. The RRH Category is well behind schedule. This RRH lag will be addressed later in this report. (Finding 3) 11 Program commitments-to-date include a $25.0M bridge loan to developers that will be returned. In addition, the County has committed $25.0M to a first-time homebuyer assistance program and $11.9M to a supportive housing fund. While not building activity per se, both are commitments made consistent with the Measure A Program Guidelines and are targeted to assist the vulnerable populations specified in Measure A. Program Category Goal Units Units Funded % of Goal (as of 6/30/21) Achieved Permanent Supportive Housing 1,800 1,494 83.0% Rapid Re-Housing 1,600 315 19.7% Extremely Low- Income 800 417 52.1% Very Low-Income 600 539 89.8% Total 4,800 2,765 56.7% Table 1: Measure A Housing Unit Funding Commitments by Category12 On August 31, 2021, OSH reported back to the Board of Supervisors on the implementation of Measure A.13 In the OSH’s unaudited report, the housing funding commitments, including building new units, were up another 291 units, raising the housing Program Goal total performance to 64%. The switch from fund to build Measure A’s funding pace appears reasonable, and the money is being committed in a manner that is aligned with the language of Measure A. But construction has been slow. As noted earlier, the pipeline for complete, ready-to-lease units is long. As of June 2021, 289 AH units have been built. In addition, 1,008 units, or 21.0% of the Program Goals, are in construction. Another 1,468 units, 30.6% of the Program Goals, are in pre-construction. Pre-construction includes projects that are still working on one or more of the project elements listed in the first two phases of Table 1, such as design, entitlements, non-County financing, and construction preparation. As noted earlier, these are very challenging and time-consuming processes, which are in the hands of numerous non-County parties. MGO, “County of Santa Clara, Citizens’ Oversight Committee’s Measure A 2016 Affordable Housing Bond Program Independent Advisor’s Annual Report and Fourth Quarter Report for Fiscal Year 2020-21,” September 16, 2021, Agenda Item 4.a, p. 51, http://sccgov.iqm2.com/Citizens/FileOpen.aspx?Type=1&ID=12256&Inline=True. County of Santa Clara, Office of Supportive Housing, “Supportive Housing Development Program Update,” August 31, 2021, Agenda Item 59, p. 735, http://sccgov.iqm2.com/Citizens/FileOpen.aspx?Type=1&ID=12217&Inline=True. The construction of units is not explicitly in Measure A’s charter. However, the building lag is a topic of discussion for both OSH and the Oversight Committee. Both parties understand that the County can control the funding commitments it makes, and that funding is only part of Measure A’s goals. AH needs to be built, and OSH and the Oversight Committee are discussing how to influence that outcome too. Building Challenges As noted above, the County has provided on average about 20% of the required financing for an AH project. The balance of the funds comes from multiple sources, each with their own requirements. Financing 100% Affordable Housing Mixed use development projects contain enough high margin office space to finance the inclusion of affordable units. However, developments that are comprised solely of 100% AH units require very large amounts of public money and/or subsidies. Not only is a significant amount of money required, but also many funding sources. One example of this complexity is the La Avenida project, which is a 100-unit, 119-bedroom AH development in Mountain View. $30,000,000 $25,000,000 $20,000,000 $15,000,000 $10,000,000 $5,000,000 $- Figure 3: La Avenida Funding Plan Totaling $74.2M14 14 City of Mountain View, “1100 La Avenida-Affordable Housing Development Appropriation of Funding,” October 12, 2021, Agenda Item 4.3, p. 4, https://mountainview.legistar.com/Calendar.aspx; The California Housing Consortium, “Resources :: Affordable Housing 101 :: How Is It Built?” accessed November 22, 2021, https://calhsng.org/resources/affordable-housing-101/how-is-it-built/; Local Housing Solutions, “How Is Affordable Housing Funded?” accessed November 22, 2021, https://localhousingsolutions.org/housing-101-the- basics/how-is-affordable-housing-funded/. The project’s funding profile illustrates many of the challenges that a 100% AH project faces for both County and City staff implementing Measure A as well as for the developers. The County has committed $19M in Measure A funds, or 25.6% of the total. Mountain View has committed $15M, a large share of its AH development fund. As Figure 3 shows, the Tax Credit and General Partner Equity funding comprise the largest sources ($25M) of AH funding in this and many other AH projects. The challenges of these two funding sources are described below. Leveraging tax credits and general partner equity contributions In the La Avenida project, the Tax Credit funds and the General Partner Equity funds (the developer’s investment) are combined as the first column in Figure 3 above. Together, they are the single largest line item of the project’s financing, totaling $25.4M. The Low-Income Housing Tax Credit (LIHTC) is a primary source of funding for building 100% AH. LIHTC funds come from a program administered by the United States Department of Housing and Urban Development (HUD).15 In California, this HUD program is administered by the California Tax Credit Allocation Committee (CTCAC).16 La Avenida’s success relies heavily on obtaining LIHTC funds. The amounts committed by the County and City of Mountain View are predicated on the project receiving these tax credit funds. However, the State awards these funds on a competitive scoring basis, with preference going to projects in areas of the state where development costs are relatively low. Because the Bay Area has very high land and building costs, the County is at a clear disadvantage under the State’s current scoring criteria. The County’s lack of competitiveness for this critical funding has been an ongoing topic of discussion between the Oversight Committee and OSH. The Oversight Committee recommended that the County lobby the State to change its scoring system. The County has written CTCAC requesting a scoring change. While out of the County’s control, this tax credit money is a critical financing element for many Measure A projects and merits the attention and effort being made. Leveraging ratio As noted above, in the Measure A Program Guidelines, the County set the target leveraging ratio requirement at 3:1. For all 34 projects funded through June 30, 2021, the average amount of non- County funding sources to Measure A money results in a ratio of 3.5:1, exceeding the Guideline. U.S. Housing and Urban Development, “Low-Income Housing Tax Credit (LIHTC),” accessed November 1, 2021, https://www.huduser.gov/portal/datasets/lihtc.html. California Office of the State Treasurer, “Low-Income Housing Tax Credit Programs,” accessed November 1, 2021, https://www.treasurer.ca.gov/ctcac/tax.asp. The fact that Measure A supported AH projects have been able to attract increasing shares of non- County funding bodes well for the coming years of the Measure’s term. Land use and entitlements challenges The public record is replete with examples of local contention about the location, design, and developer concessions involved in building AH. Many issues emerge from these discussions, including density and design concerns, neighborhood preservation, and local control. Community acceptance of and desire to build AH varies significantly. To date, 38 of the 54 committed Measure A development and renovation projects and property acquisitions are in San José. To broaden the geographic distribution of projects, OSH has supplemented its funding commitments with additional outreach and support to other cities. OSH is negotiating loan terms with cities through Memorandums of Understanding (MOUs) and developing grant programs to encourage the cities in the County to commit to AH projects. One example of a creative approach to working through city entitlement issues is the County’s proposal for the La Avenida site. The La Avenida project was first brought to the Mountain View City Council in December of 2020. The County will own the La Avenida property, because they have contributed more funds than the City. Measure A’s financing terms include a 55-year term and affordability covenant.17 Upon expiration of the 55-year term, the County could then repurpose the site for another use and might not be subject to the City’s building code and land use authority.18 The County and Mountain View are currently drafting an MOU that addresses funding commitments to the project and this land use issue. Housing the Homeless Rapid Re-Housing challenges In the case of OSH-managed RRH programs, the unhoused client is a recently homeless individual or family who became homeless due to an event that has upended their life. This event may have been a loss of employment, the loss of a partner or family member, or a serious health problem. In the RRH program, these clients are moved into housing with rent subsidies, case management, and other support services to help them re-stabilize their lives. The expectation is that the rent subsidies will decline over 24 months or less. Then, the clients can transition in place in their AH units. This transition is usually accompanied by a phase out of program service support. To ensure that those 17 City of Mountain View, Agenda Item 4.3, p. 6, https://mountainview.legistar.com/Calendar.aspx. This project is designed so that its purpose and use must remain AH for 55 years. In year 56, that AH restriction lapses. individuals and families can transition in place, units that are set aside for RRH programs will have their rent restricted to a level affordable to households earning nor more than 30% of AMI. All four of the housing categories in the Program Goals (see Table 1) require significant rent subsidies, and both RRH and PSH clients receive supportive services. Rent subsidies and supportive services are an integral part of meeting Measure A’s overall success. While scarce, both the U.S. Department of Housing and Urban Development (HUD) and County funding are currently available to support these subsidies and services. But as more units are built, the subsidies and services required will grow, and the County may have to look to other funding sources to achieve Measure A Program Goals. RRH is an important Program Goal. As noted earlier, OSH has had significant success in funding AH projects in the PSH, ELI, and VLI goal categories. This has not yet been the case in the RRH goal. The Civil Grand Jury learned that OSH and the Oversight Committee are discussing this lag in the RRH progress.19 Chronically homeless challenges The chronically homeless, as defined by HUD, are either: • an unaccompanied homeless individual with a disabling condition who has been continuously homeless for a year or more, or • an unaccompanied individual with a disabling condition who has had at least four episodes of homelessness in the past three years.20 In addition to PSH programs, the chronically homeless are also candidates for transitional housing. The need for transitional housing is caused by the lack of PSH in the County and across the U.S. While they are the most visible homeless population, this group has traditionally been either unserved or underserved, and moved in and out of homeless shelters. Recently, a funding program called Homekey has made significant grant money available to local public entities to specifically target this homeless population. Homekey is funded through a mix of federal funds originating in the CARES Act (83%) and State general fund sources (17%).21 19 “The [Oversight] Committee recognizes that County staff are aware of the Committee’s concerns and are taking steps to address them.” from Attachment “SSC Measure A – BOS transmittal letter annual Q4 FY20-Final,” p. 1, October 20, 2020, http://sccgov.iqm2.com/Citizens/Detail_LegiFile.aspx?Frame=&MeetingID=12219&MediaPosition=&ID=103181 &CssClass=. HUD, “Defining Chronic Homelessness,” September 2007, accessed December 1, 2021, https://files.hudexchange.info/resources/documents/DefiningChronicHomeless.pdf. Several Homekey funded approaches to housing this target population have been developed, from lightly engineered units in Mountain View to motel and hotel rooms and other relatively inexpensive property acquisitions throughout the County. The clients in this program benefit from a secure, dry place to live with some level of case management. Homekey projects cost less per bedroom and require less time to complete than traditional AH development. OSH is evaluating this program as an additional and significant non-Measure A funding source. OSH has used Homekey funding in Measure A PSH unit projects and is evaluating its applicability as a RRH solution. While the Homekey program has had some success getting people off the street, its value as part of the solution to chronic homelessness is yet to be determined. When Homekey funded projects are used as transitional housing, and a client’s stay is long enough to enable them to move into PSH, it can be a meaningful housing solution. However, there are different implementations of Homekey. Some organizations running a Homekey project provide sufficient length of stay. There are also cases, such as the Homekey development in Mountain View, where the expected stay is 90-120 days and then the client is back on the streets. When the client has nowhere affordable to go, the program fails. Higher Costs in the Future? OSH and the Oversight Committee have noted concerns about inflation.22 The County’s average contribution per unit has remained relatively stable over the 4.5 years of Measure A. The stability of the County’s contribution does not reflect cost pressures that may develop in the future. More relevant to the concern about inflation is the estimated total cost per unit or bedroom. The challenge in using this metric is the relatively small sample size of 34 development projects over four years, although that sample includes more than 4,000 bedrooms. Additionally, a project’s location complicates the inflation issue because land and other costs are higher in some cities than others. However, if one examines only the San José projects, which are over 80% of the bedrooms built, it is not clear that inflation has yet affected the unit costs. Coronavirus Aid, Relief, and Economic Security Act (CARES Act), H.Res. 748, 116th Cong., 2nd sess., (January 3, 2020), https://www.congress.gov/116/bills/hr748/BILLS-116hr748enr.pdf. MGO, “Independent Advisor’s Annual Report and Fourth Quarter Report for Fiscal Year 2020-21,” September 16, 2021, Agenda Item 4.a, p. 23, http://sccgov.iqm2.com/Citizens/FileOpen.aspx?Type=1&ID=12256&Inline=True. Overall, Bay Area construction trade groups indicate that building/unit inflation has not yet risen significantly.23 The pandemic reduced construction activity in the County, which would not surprise people who walked by halted construction sites in their communities in 2020. This general slowdown idled many contractors and suppliers. As activity resumes, those contractors and suppliers have been eager to re-build their volume of work and have competitively vied for business. In the 2021 calendar year, the industry expected construction pricing increases in the range of 1-5%.24 While currently uncertain, there is a possibility that inflation in the coming years may become significant. Recognizing those risks, the County has committed $108M of program funds to the acquisition of 16 properties suitable for development of AH. A primary motivation for these acquisitions was to hedge against likely increases in land costs. The Oversight Challenge Measure A’s full text required an Oversight Committee.25 In June of 2017, the Board established the Oversight Committee structure, purpose, and responsibilities.26 (Finding 4) The Committee’s mandatory activities were detailed in a memorandum from the Santa Clara County Office of the County Counsel.27 Those responsibilities include: • To send advisory reports at least quarterly to the Board and each of the cities in the County • To receive reports on bond implementation provided by OSH and other County departments – including a monthly dashboard of metrics with project level detail • To receive an annual financial audit and quarterly report from an independent financial auditor 23 ONESF, “2021 Annual Infrastructure Construction Cost Inflation Estimate,” October 26, 2020, https://www.onesanfrancisco.org/sites/default/files/2020- 10/Agenda%20Item%204_2021%20Proposed%20AICCIE.pdf. Ibid. County of Santa Clara, “Santa Clara County Affordable Housing Bond – Measure A 2016,” accessed November 1, 2021, https://www.sccgov.org/sites/scc/Documents/Complete-Text-of-Measure-A-20.pdf. County of Santa Clara Municipal Code, “Measure A (2016 Housing Bond) Independent Oversight Committee,” accessed November 1, 2021, https://library.municode.com/ca/santa_clara_county/codes/code_of_ordinances?nodeId=TITAGEAD_DIVA6BOCO _CHXXIME2016HOBOINCIOVCO. James R. Williams and Steve Mitra, “Overview of the Measure A (2016 Housing Bond) Independent Citizens’ Oversight Committee,” June 13, 2017, Agenda Item 5a, pp. 6-8, http://sccgov.iqm2.com/Citizens/FileOpen.aspx?Type=1&ID=8402&Inline=True. • To receive other financial reports as provided • To provide an annual report with public and wide distribution In this same memorandum, the Office of the County Counsel specified the Committee’s role with respect to the independent auditor: The Board has provided an independent, external auditor who will report directly to the Committee to the extent permitted by law. While the auditor is to be selected by the Board after a competitive selection process, the Committee, or representatives of the Committee, are required to participate in the selection process. Such participation would most logically occur through a subset of the members of the Committee sitting on an evaluation panel, assessing the strengths and weaknesses of the firms or persons bidding to fill the role of the auditor. The Committee is also able to make a recommendation to the Board regarding the selection of the auditor. Once the auditor is selected, the Committee will have direct access to the firm or person selected. The Committee may request "spot check" audits by the auditor in addition to the annual financial audit.28 The memorandum established the Oversight Committee’s roles and independence. In addition, the Board selected a number of knowledgeable members to serve on the Oversight Committee. While it is common to have both geographical and interest group representation on oversight boards, it is far less common to select members with capabilities related to the subject matter of the bond.29 Members of the Oversight Committee have housing policy experience, accounting expertise, and senior level organizational and political leadership experience. (Finding 5). The Oversight Committee has been diligent and has worked effectively to exercise its oversight responsibilities. In addition, the Oversight Committee has worked with OSH and the independent auditors, MGO, to promote transparency and to communicate Measure A’s performance. An example of this is the Measure A activity dashboard.30 This set of metrics and reports supplies information on projects and performance at both a detailed project level and in the aggregate. The dashboard was a collaborative and cooperative effort on the part of a sub-committee of the Oversight Committee, OSH, and the independent auditors, MGO. The Oversight Committee makes recommendations on a quarterly basis. The Civil Grand Jury learned that inquiries, challenges, and concerns are openly shared between the OSH and the 28 Ibid., p. 8. Williams and Mitra, “Overview of Measure A,” p. 14. County of Santa Clara, Office of Supportive Housing, “2016 Measure A Housing Bond Progress,” accessed November 22, 2021, https://osh.sccgov.org/housing-community-development/2016-measure-affordable- housing-bond/2016-measure-housing-bond. Oversight Committee in a manner that is transparent and promotes the public’s understanding of Measure A progress. CONCLUSION The direct response to the question that prompted this investigation is that the funding purpose specified in Measure A is being addressed – the County is funding the right categories of AH in a timely manner. This could change over time, but for now it looks to be on track. Reframing the question to ask, “Are we building at an appropriate pace?” leads to a more subtle answer. It is important to recognize that there are many factors in the AH development process that are beyond the control of OSH and the County. A very capable and assertive Oversight Committee has independently come to the same conclusion. Despite the narrow charter found in Measure A’s language, both OSH and the Oversight Committee have moved the discussion beyond County funding. They are now examining how to ensure the goal of 4,800 units are constructed. The Civil Grand Jury sees value in shining a light on the current state of building progress and the challenges posed in reaching the Measure A Program Goals. While the recommendations to achieve Measure A Program Goals mirror those of the Oversight Committee, the Civil Grand Jury hopes Santa Clara County residents will benefit from this examination of the largest bond measure in County history. The related Findings 4 and 5 point to the effectiveness and value of the oversight function. The Civil Grand Jury has reviewed other bond oversight committees and attended the California Association of Bond Oversight Committees statewide conference.31 All oversight committees have rules for committee representation, most often expressed as geographical or interest group (e.g., seniors, students, taxpayer advocacy groups). None of the reviewed bond oversight committees specify skills or experience relevant to the bond program, such as financial, analytical, political, or legal expertise. In contrast, members of the Oversight Committee bring housing policy and high-level accountancy expertise, as well as senior political and organizational leadership experience. In the Civil Grand Jury’s judgement, this has strongly contributed to the Oversight Committee’s effectiveness and benefited County residents. The Board of Supervisors is to be commended for their selection of this Oversight Committee’s membership. California Association of Bond Oversight Committees, “First Annual Virtual CABOC Statewide Conference 2021,” accessed November 24, 2021, https://www.bondoversight.org/caboc-conference/. FINDINGS AND RECOMMENDATIONS
Related Recommendations (1)
R5: The Civil Grand Jury recommends that the County evaluate whether this selection model can be extended to other advisory boards and commissions. This evaluation should be completed June 30, 2022.
Findings & Recommendations 5 findings
F1: TSS failed to recognize significant warning signs from staff and CalEQRO reports in its effort to link two systems from separate vendors. As a result, the system was not able to process Medi-Cal claims. Furthermore, the system did not satisfy federal privacy and state reporting requirements. This led to delays in billing, unanticipated additional work for County staff, and finally, a redesign of the system.
Related Recommendations (1)
R1: When undertaking a new project, the County should add a requirement for a high-level feasibility analysis during the initial planning phase. In most cases, the analysis should include a survey of how other counties and organizations, with an emphasis on counties and organizations of a similar size, solved the problem. If no organization has used the approach being considered, explicit risk mitigation steps should be added to the project plan, and schedules and budgets should be adjusted accordingly. Resources such as CalEQRO and other state or independent auditors should be fully utilized to assess these risks. The County should develop a plan to establish these practices by June 30, 2022.
F2: TSS did not follow project management best practices. There was no requirement that the project managers need project management experience. TSS used multiple project managers, none of whom had responsibility for the overall project. This complicated coordination and decision making.
Related Recommendations (4)
R2a: The County should develop a plan to require anyone serving in a project management role to have sufficient project management experience and/or certification for the nature of the project. The County should develop this plan by June 30, 2022.
R2b: The County should develop a plan to require that each project have a single overall project manager who has relevant project management experience or certification. The plan should be established by June 30, 2022.
R2c: If a project requires additional project managers, then the County should require a clear organizational structure that facilitates coordination and decision-making. The County should develop a plan to establish these requirements by June 30, 2022.
R2d: The County should verify that project managers follow the best practices defined by the County’s own Project Management Center of Excellence. The County should monitor all projects and verify that all required items listed in the Governance Gates Checklist are completed by the project manager and approved by the executive responsible for the project. The County should verify the completion of required items for existing projects and should develop a plan to monitor compliance with the County’s own Project Management Center for Excellence criteria for current and future projects by June 30, 2022.
F3: TSS did not have a process in place to prove that the new EHR system would work prior to deployment. TSS did not adequately test the integration of the HealthLink and Netsmart system before releasing it to Behavioral Health clinics. Management placed primary emphasis on meeting the project schedule rather than supporting a gradual system rollout. This led to halting the submission of Medi-Cal claims, which threatened the loss of tens of millions of dollars.
Related Recommendations (2)
R3a: The County should develop a plan to require documenting user acceptance testing criteria at the start of a project. The testing should involve applicable clerical staff, with testing done in their work environment when possible. The schedule for this testing should account for staff availability. The County should develop this plan by June 30, 2022.
R3b: The County should develop a plan for situations where the user acceptance testing cannot be done in the users’ work environment. This can, for example, call for releasing the system to a subset of a department’s staff before releasing it to an entire department. The County should develop this plan by June 30, 2022.
F4: TSS and Behavioral Health were not sufficiently engaged in the contract negotiations with Netsmart for the May 2019 agreement. Lacking detailed input from project management on resources and scheduling for the analysis and training work, Procurement eliminated these tasks from the agreement. This elimination contributed to delays and required the subsequent negotiation of three additional agreements to address these shortcomings.
Related Recommendations (3)
R4a: To ensure that Procurement is prepared to negotiate with vendors, the County should develop a plan that requires an analysis of technical staff needed to complete and deploy the project. This plan should include escalation procedures to be followed when Procurement is not provided the information it needs. The County should develop this plan by June 30, 2022.
R4b: When the County intends to have County staff train their colleagues on how to use a new system, the County should first determine if staff is available to do the training. If staffing is not available, either additional consultant support must be included in the agreement negotiated with the vendor or the project schedule should be revised. The County should develop a plan for this scenario by June 30, 2022.
R4c: The County should investigate the feasibility of negotiating vendor contracts that include a bonus for on-time and successful completion of all parts of an IT project, even if the vendor is not responsible for them. This would incentivize outside vendors to provide TSS project management with complete information about what is needed from all parties to bring projects to successful conclusions. The County should report on its investigation of this approach by June 30, 2022.
F5: 29 REQUIRED RESPONSES ......................................................................................................... APPENDIX: Project Manager Responsibilities ....................................................................... GLOSSARY AND ABBREVIATIONS 42 CFR Part 2 A section of the Code of Federal Regulations that requires substance use disorder treatment providers to observe privacy and confidentiality restrictions with respect to patient records. Behavioral Health Behavioral Health Services, often referred to as Behavioral Health, is the department within the County of Santa Clara Health System that works with clients experiencing mental health and behavioral issues. CalEQRO California External Quality Review Organization performs an annual evaluation of every county’s behavioral health services department. Contract Provider An organization that contracts with the County to provide behavioral health services CSI Client and Service Information is a system that generates reports required by the State of California for measuring timeliness of mental health care. EHR Electronic Health Record is a digital version of a patient’s paper medical record. Governance Gates Checklist A Technology Services and Solutions project management form that divides a project into distinct stages Health System The County of Santa Clara Health System includes the Behavioral Health Services Department, Public Health Department, Santa Clara Valley Medical Center hospital and clinics, O'Connor Hospital, St. Louise Regional Hospital, Emergency Medical Services Agency, Custody Health Services Department, and Valley Health Plan. HealthLink An electronic health record system, developed by Epic Systems Corporation and used by the County of Santa Clara Health System HL7 A network protocol used to electronically transmit medical information Hospital Finance A department within the Health System that manages patient billing and other financial responsibilities HSR A Health Service Representative is a clerical staff member who registers clients and schedules appointments. Medi-Cal Medi-Cal is California’s Medicaid program, which pays for a variety of medical services for children and adults with limited income and resources. MHSA The Mental Health Services Act was passed by California voters in 2004 to expand services to county mental health systems. Netsmart Netsmart Technologies, Inc. develops electronic health record systems for behavioral health organizations. Procurement The County department responsible for purchasing goods and related services Project Management Center of Excellence A Technology Services and Solutions office that administers the Governance Gates Checklist ProviderConnect A Netsmart module that allows contract providers to securely transmit medical data to the County through a web interface ProviderConnect Enterprise A Netsmart module that allows contract providers to securely transmit medical records to the County through a programmatic interface RFP A Request for Proposals is a document that solicits bids from vendors for County services. Short-Doyle Act The Short-Doyle Act established a county- based, rather than state-based, behavioral health system. It includes requirements that must be followed when submitting claims to Medi-Cal. SUTS Substance Use Treatment Services is the division of the Behavioral Health Services Department that provides alcohol and drug treatment services. TSS Technology Services and Solutions is the County of Santa Clara information technology (IT) department. Uni/Care The software system used by Behavioral Health Services prior to 2018 INTRODUCTION Complex software projects are notorious for encountering delays and cost overruns. However, sophisticated development teams can overcome these challenges by using software engineering best practices, following established project management frameworks, and continually learning lessons from past projects. The 2021 Civil Grand Jury of Santa Clara County (Civil Grand Jury) investigated one troubled project to understand what went wrong. This report looks at one particular example as a case study. In 2018, the County launched a customized electronic health record (EHR) system for clinics in the Behavioral Health Services Department (Behavioral Health). Development of this system was overseen by Technology Services and Solutions (TSS), the County's information technology department, which is responsible for managing the County’s computer hardware, software, and network infrastructure. The EHR system was intended to modernize clinical record-keeping, patient billing, and reporting for State and County oversight. The County Health System operates the County-owned hospitals and clinics. In 2013, most of the Health System departments started using an EHR system named HealthLink (made by Epic Systems Corporation) to keep track of patient healthcare records. However, HealthLink did not fully meet the needs of one Health System department, Behavioral Health. Behavioral Health is the department that works with clients experiencing mental health or substance use issues. Clients experiencing mild or moderate symptoms can receive support from the County’s primary care clinics, but clients with severe issues are seen at clinics that specialize in behavioral health. The 14 Behavioral Health specialty clinics operated by the County serve less than 20% of the demand for services. Consequently, the County contracts with non-profit providers for additional clinics to provide more than 80% of behavioral health services.1 Most behavioral health services are covered by Medi-Cal, which is California’s public health insurance program that provides health care coverage to low-income individuals and families. Medi-Cal contributes $100 million to $120 million in annual revenue to Behavioral Health and has specific claims requirements for behavioral health services. Because these claims requirements were not supported by HealthLink, TSS selected Netsmart, a vendor specializing in behavioral 1 Behavioral Health Concepts (CalEQRO), “FY2020-21 Medi-Cal Specialty Mental Health External Quality Review: Santa Clara MHP Final Report,” p. 46, January 14, 2021, https://www.caleqro.com/data/MH/Reports%20and%20Summaries/Prior%20Years%20Reports%20and%20Summa ries/Fiscal%20Year%202020- 2021%20Reports/MHP%20Reports/Santa%20Clara%20MHP%20EQRO%20Final%20FY20-21%2003.24.21.pdf. health services, to provide the billing software. As discussed later in this report, linking HealthLink with Netsmart complicated the project. After almost two years of planning and development, the new EHR system was launched in February 2018. However, once the system became operational, the County detected numerous errors in the pending behavioral health Medi-Cal claims. The County halted the billing component of the new system and faced the crisis of potentially losing millions in reimbursements. Medi-Cal requires claims to be submitted within one year from the date of service, and it was unclear how long it would take to fix the billing problems. Management formed a billing remediation team to correct the problems and managed to resolve most of the billing issues before the Medi-Cal deadlines expired. Nevertheless, such an intensive effort on individual claims was unsustainable, and by late 2018 the County decided to redesign the EHR system. There are a number of important lessons to be learned from this project. After a more detailed discussion of the history of this multiyear project, several areas are identified as the root causes of the troubles encountered. These include insufficient attention to the initial analysis and feasibility of the project, a failure to follow industry best practices for project management, and the lack of testing necessary to ensure a successful deployment. In addition, miscommunication among County departments led to problems while negotiating amendments to the original Netsmart agreement. Finally, there are concerns that the current phase of the project lacks sufficient planning and project management controls. In this report, the Civil Grand Jury provides 12
Related Recommendations (2)
R5a: The County should conduct a risk assessment to identify threats to the objectives of the ongoing project. Potential responses to those risks should be captured in a risk management plan for this project. The County should develop a plan that evaluates the future risks of this project by June 30, 2022.
R5b: The County should develop a plan to ensure that contract providers are informed as decisions are made about what work needs to be done by the contract providers, what work will be done by the County, who will pay for the work, and when the work will be scheduled. The County should develop the plan by June 30, 2022.

Findings and recommendations not yet extracted.

Findings and recommendations not yet extracted.

Findings and recommendations not yet extracted.

Findings and recommendations not yet extracted.

Findings & Recommendations 2 findings
F4: The Annual Property Tax Bill and the Supplemental Property Tax Bill do not explain that cents are truncated and do not explain the rounding adjustment. Although these practices are consistent with legal requirements imposed by the Revenue and Taxation Code, the current information provided to taxpayers lacks transparency for how tax dollars are being calculated.
Page 17
F5: DTAC collects customer feedback via an online survey available only in English that addresses website interaction but gives little opportunity for customer input regarding other concerns. There is limited effort to gather input from the public about how best to improve the overall taxpayer experience using alternative methods.
Page 17
Additional Recommendations 2

Not linked to specific findings.

R4: DTAC should provide the taxpayer with an explanation for the truncation and rounding adjustment. This should be implemented in the next annual property tax bill.
Page 17
R5: The County should create a way to capture concerns from taxpayers in multiple languages, independent of an online communication channel, such as surveys included with the paper property tax bill, focus groups, and advisory boards. This should be implemented by June 30, 2022. PROPERTY TAX BILLS: MORE THAN MEETS THE EYE PROPERTY TAX BILLS: MORE THAN MEETS THE EYE
Page 17

Findings and recommendations not yet extracted.

Findings and recommendations not yet extracted.

* This report's PDF did not contain easily extractable text and required Optical Character Recognition (OCR) for analysis. There may be minor errors in the extracted findings and recommendations due to OCR limitations with scanned documents.