The purpose of this report is to provide the City Council with updated information concerning the subject property selected for the planned development of the Silicon Valley Animal Control Authority (SVACA or "the Authority") animal shelter, including formal notification of encumbrance challenges with the property, which will result in a "much more creative design challenge" (Attachment A). An update is also provided regarding comparative information for the current shelter services operating expenses. In addition, new information has been received regarding the alternative shelter opportunity initially presented to the Council at its September 24^th meeting. The City has received a letter of intent to enter into formal negotiations to provide an alternative animal shelter operation from the City of Palo Alto (Attachment B). The combined effect of these items is that all parties involved in this effort need more time to conclude their work.

On July 20, 2000, the City of Sunnyvale entered into a Joint Powers Authority agreement with six other cities to form the Silicon Valley Animal Control Authority with the specific goal of providing animal field and shelter and related services to seven partnering cities. Unlike the other city partners, who receive field services from the Authority, Sunnyvale elected to retain its existing animal control field services administered by the Department of Public Safety. Prior to the Authority being formed certain assumptions were made and information was gathered by Sunnyvale concerning alternatives to building a new facility. Among the various alternatives were contracting for services with the City of Palo Alto or the Humane Society of Santa Clara Valley. At that time both of these entities were pursued, but neither of these alternatives were viable. As a result, the partner cities decided to "start up" a new operation, as this was the only remaining alternative meeting the long-term animal shelter goals of the partnering cities.

Currently, the Authority’s field service is operational and it is providing animal control to six of the seven participating cities. SVACA has secured an animal shelter contract with the Humane Society for all seven partner cities (Sunnyvale included), which will provide continued shelter services until the proposed, new SVACA shelter is operational.

SVACA completed its first full year of field operations during FY 2001/2002. During its first year and up to the present, the Authority continued to expand its operation by hiring a General Manager, filling other key staff positions, acquiring vehicles, installing its support operations (payroll, computers, policies/procedures, budget, etc.) and performing all of the necessary tasks associated with the start-up of a new operation to provide field services to its constituents.

While things have progressed concerning the development of the day-to-day field operations, several challenges have emerged concerning the development of SVACA’s new animal shelter. First, the proposed shelter is larger than originally planned, requiring the partner cities to appropriate more capital funding, currently estimated at an additional $431,000 for the City of Sunnyvale. Second, challenges have emerged with the proposed shelter site related to an "existing hydrocarbon plume" and Bart Test Track/Bart Around the Bay "right of way take possibility." See Attachment A for the complete text of the letter from Ron Garratt, Assistant City Manger, City of Santa Clara to Deborah Biggs, General Manager, SVACA. The exhibit also includes an aerial photo of the site and a detailed plat map prepared by Steve Yoshino, City Engineer, City of Santa Clara.

Program Outcome Statement: Control animal disease and vicious animals, minimize animal nuisances, and promote the humane treatment of animals.

SDP 45301: Contribute to public health and safety as related to animal control issues concerning vicious, injured, and stray animals.

Since Report to Council No. 02-384 on this subject on September 24, 2002, many events have occurred and items received. They include:

• On 9/25/02 a letter was sent by the City Manager on behalf of the Mayor and City Council seeking an extension of time for Sunnyvale to further research its options and delay confirming appropriation of additional funds for the SVACA animal shelter.
• On 9/25/02 letters were sent by the City Manager on behalf of the Mayor and City Council to the Humane Society of Santa Clara Valley and the City of Palo Alto seeking formal proposals for animal shelter services. The proposal due date of 10/15/02 was specified.
• Due to the short time frame in which to respond, facsimile copies of the two items above were sent to the letter recipients above on 9/25/02.
• An additional letter was sent on 9/25/02 to the SVACA Board encouraging it to send a letter to the Humane Society of Santa Clara Valley encouraging the Humane Society to submit an animal sheltering proposal to SVACA for all SVACA member cities, including Sunnyvale.
• The SVACA Board at its 9/30/02 meeting granted the City of Sunnyvale until its 10/28/02 meeting to confirm appropriation of the additional construction funds.
• The SVACA Board at its 9/30/02 meeting did not act on the Sunnyvale request to seek a long term animal sheltering proposal from the Humane Society for shelter services for all SVACA member cities.
• It was decided at the meeting above that an ad hoc group would assemble to discuss SVACA cost information, comparison of costs to other similar municipal animal operations, and the fairness of the SVACA cost allocation model. Carol Atwood, Administrative Services Director, is leading this group for the City of Cupertino, Mary Bradley, Director of Finance for the City of Sunnyvale, along with Scott Maze of Maze and Associates. (This group has met several times, including a special update meeting with the SVACA General Manager. Its most recent meeting was 10/15/02 and results of their data collection and analysis are still in development.)
• It was also decided at the City Managers’ meeting that the results of the ad hoc group needed to be shared and discussed with them. The City Manager from the City of Los Gatos agreed to arrange the meeting. Since the ad hoc group’s work is not complete, this meeting has not been held.
• A City Managers’ update conference call is scheduled for 10/18/02 to provide them with information regarding progress of the ad hoc group, to discuss the property challenges at the Reed Street property, to share with them the l0/15/02 letter-of-intent from the City of Palo Alto and other items to be shared by the SVACA General Manager.
• The City of Los Gatos at the SVACA Board meeting made a motion to seek outside help in the form of a "peer review" to test the assumptions and help determine if the configuration, size, staffing and costs of the proposed SVACA animal shelter are prudent for the entire operation. This motion was approved.
• The City of Los Gatos took the lead in identifying a list of potential "peer review" candidates and presented the list to the SVACA Technical Advisory Committee at its 10/8/02 meeting. Two candidates were selected and reference checks were initiated. The results of their reviews are due to be reviewed by the TAC prior to the SVACA Board meeting scheduled for 10/28/02. (At this time the TAC review meeting has not been scheduled.)
• At the TAC meeting on 10/8/02 it was decided that the auditor for SVACA, Maze and Associates, should be engaged to develop comparative cost information for SVACA and to review the results of the ad hoc group. The audit group has been retained for this assignment, but they do not expect to have the work completed until the end of October at best.
• The City of Sunnyvale received a copy of a letter to the SVACA General Manager from the City of Santa Clara disclosing challenges at the 888 Reed Street property and the conclusion from these challenges that "siting the building on this property becomes much more of a creative challenge."
• On October 17^th the City received a letter from David A. Marion, Chairman of the Board of Directors of the Santa Clara Valley, declining to provide long-term animal shelter services. "They are willing, however, to submit a proposal…on a short term basis." (See Attachment C for the complete text of the letter.)

Unfortunately, the originally requested extension of time was not sufficient to allow for the completion of all of the events and items above. At the time of the original extension, it was not contemplated that the project scope would expand the way it has.

Further, given the challenges before us and the expanded scope of the program we think that it is appropriate to request the following:

• Receipt of a SVACA Board approved animal shelter plan that has been subjected to a "peer review," and any other value engineering exercise aimed at arriving at a final building size, configuration, and cost.
• Assurance by SVACA or the City of Santa Clara that the Reed Street property with its known "unbuildable" areas (toxic plume and BART right of way) can be mitigated and/or built around resulting in enough remaining land area to accommodate the final Board approved animal shelter.
• Receipt of a letter from the SVACA Board stating that its members unanimously accept the Reed Street property with its completed or contemplated mitigation plan and that they will execute a lease without reservation accepting the property’s limitations.

Listed below are the possible fiscal impacts, based upon information available at this time:

• Continuing with the current SVACA arrangement and the contemplated building plan, per the September 6^th letter from SVACA to the City Manager, requires a budget modification appropriating an additional $431,000 to the Animal Shelter capital project already budgeted at $2,201,319. Given the challenges at the Reed Street property, the pending "peer review," and other possible value engineering activities that may be initiated following the peer review, the $431,000 figure is very likely to change, up or down. The additional funds for this project will come from the General Fund Non-Recurring Events Reserve, reducing the balance from $1,358,892 to $927,892, as of September 30^th, assuming the current $431,000 additional cost estimate remains unchanged. Further, future operating costs are unknown at this time and will be driven by the size and configuration of the building. Sunnyvale will continue to pay 32.41% (or a modified pro rata share) of these operating costs.
• Granting additional time will allow City staff, in conjunction with the SVACA General Manager and member cities, to conclude the final size, configuration and cost of the proposed shelter and resolve the "unbuildable" issues with the Reed Street property, per Ron Garratt’s letter to the SVACA General Manager. In addition, we will be able to seek answers to a number of questions regarding capital, operational costs and methods of cost share allocations at SVACA, which are now being developed and are scheduled to be reviewed by Maze and Associates, auditor for SVACA.
• Allowing additional time for the City of Palo Alto to provide the information specified in its letter of intent, dated October 15, 2002, may result in capital cost savings of an estimated $2.1 million and a further estimated annual operating savings of $128,000. These estimates are based on its preliminary proposal for animal sheltering services prepared by the City of Palo Alto and presented to City staff on September 17, 2002.

Prepared by:
David R. Johnson
Senior Management Analyst, Provisional