Councilwoman LaDoris Cordell voted no, citing the high degree of financial risk, the importance of the city's other priorities and a racial discrimination lawsuit against 180 Connect that was not disclosed during the bidding process. Council members Judy Kleinberg, Dena Mossar and Jack Morton didn't vote due to conflicts of interest.
The project is expected to cost about $41 million.
When the city officially announced its intention to develop a broadband network last year (after discussing the matter for nearly a decade), only two companies came forward with formal proposals.
DynamicCity, a Utah company, offered to act as a consultant so long as the city bore all the financial risk, a bid that was "not responsive" to the city's request, Director of Administrative Services Carl Yeats said Monday.
180 Connect's proposal adheres to the city's requirements, Yeats said, but the company it has a poor financial record and is facing two lawsuits.
In addition, its estimation of public interest in subscribing to the service may be unrealistically high, Yeats said.
Yeats told the council he does not know of any city in California that is successfully operating its own high-speed fiber network.
Several members of the public addressed the council, volunteering their time to help improve the city's project.
Vice Mayor Larry Klein agreed a committee could be formed, but then rescinded his offer when he learned it would be subject to the state's open meeting law. Instead, Mayor Yoriko Kishimoto indicated she may put together a less formal mayor's committee of lay experts from the community to advise the council during negotiations.
The council action will require city staff to postpone or eliminate other projects, City Manager Frank Benest said. He said he will prepare a report to inform the council how its decision will affect other city work.
Meanwhile, the council approved a $22 million emergency water supply plan Monday night with an eye towards creating a 2.5-million gallon underground reservoir -- essentially a giant tank -- in El Camino Park. The park would still be usable for recreation after construction is complete, city staff members said.
Wells are also proposed for Eleanor Pardee Park and the Main Library/Community Gardens area. No garden plots would be affected.
The existing Hale well in the Timothy Hopkins Creekside Park and wells in Rinconada Park and Peers Park would also be improved.
The project stems from a study that found the city could not cope with the loss of its Hetch Hetchy water supply in an emergency. The reservoir would hold 2.5-million gallons, which when supplemented by the wells could supply the city for 30 days, if outdoor water use is restricted, according to Roger Cwiak, engineering manager for the Water, Gas and Wastewater section of the Utilities Department.
The city will attempt to secure an easement on the El Camino Park reservoir site, which is owned by Stanford University but leased by Palo Alto.
The wells issue will also be placed on the ballot because it affects parkland. If the public votes it down, the city would need to find alternative emergency water supplies.
The project could be completed by 2012 and would cost about $22 million. The utility's water customers would pay for it as part of their water bills.
In other business:
* Following its request for additional candidates for the Parks and Recreation Commission, particularly those with open space expertise, the city received seven new applicants, in addition to the five existing candidates. Two previous candidates withdrew their bids for the four open seats. The city also received four applications for two terms to the Human Relations Commission. The council voted to interview all candidates for the commissions.
* The council approved a contract with the International Association of Fire Fighters Local 1319 covering July 2006 through June 2010. The firefighters will receive a 13 percent salary boost over the length of the contract, part of which will be directed into their retirement accounts. The city also eliminated the top medical plan for the IAFF, as it did with its largest union, the Service Employees' International Union, in a contract signed in fall 2006. Mossar and Kishimoto voted against the agreement.