Palo Alto will move ahead with a business plan for high-speed Internet access with 180 Connect.
The council approved the plan despite City Auditor Sharon Erickson's finding that the city's potential high-speed broadband partner, 180 Connect, has a "history of operating losses, is in a tenuous cash flow position and is at a higher risk and potential for default than may be desirable from the city's perspective."
The council voted 5-1 to move forward with the next step in a multi-year effort to get faster online access citywide.
Only Councilwoman LaDoris Cordell opposed the proposal, which will cost the city $65,000 for consulting services. Council members Judy Kleinberg, Dena Mossar and Jack Morton did not vote due to conflicts of interest.
Councilman John Barton was absent June 18, leaving the council without the necessary five votes to advance the project.
180 Connect, in a consortium with other businesses including NorthStar Capital Partners and PacketFront, responded to the council's 2006 request for a company to develop and operate a network that would provide high-speed two-way cable service to most Palo Alto businesses and residences -- without requiring the city to pay much, if anything.
In response to Erickson's findings, 180 Connect's chief financial officer Steven Westberg said the company is working to strengthen its financial position and was willing to provide a bond to reassure the city.
Since the June 18 meeting, 180 Connect agreed to drop its request for $30,000 to conduct the business plan and clarified that it does not expect cash from the city.
The business plan and associated studies are expected to take about six months, according to Joe Saccio, deputy director of administrative services.
In other business:
o Despite vehement opposition from the city's hotel operators, the council unanimously voted to place a 2 percent increase of the transient occupancy tax (TOT) on the Nov. 2007. To pass, the measure would require a simple majority. The tax, which has not been increased since 1983, is currently 10 percent of the room rate.
The increase is expected to generate between $624,000 and $1.2 million annually, according to city staff. That money would be used for general city expenses.
Hotel managers and owners said city leaders had not done adequate research or outreach on the issue.
"It has been abundantly clear that no substantive evidence (shows) the net effect of the increase will be to raise revenue for the city," said Lee Wieder, the vice chair for the Chamber of Commerce's Government Action Committee.
The higher tax could encourage travelers to stay in nearby cities where the tax is lower, the hoteliers said. East Palo Alto is the only neighboring city with a 12 percent hotel tax.
The increase will be particularly problematic for the city's small hotels, several hotel managers said.
Past data has shown that travelers will continue to stay in Palo Alto even if rates increase, Administrative Services Director Carl Yeats said.
City Manager Frank Benest and Councilman Bern Councilman Bern Beecham said they spoke with several hoteliers and the business community about the proposal.
The business opposition is "as predictable as the sun coming up in the morning," Vice Mayor Larry Klein said, adding his father was a hotel operator.
The increase is necessary because the city cannot continue to meet its needs by making cuts, Councilman John Barton said, noting the budget has shrunk by $20 million in the past five years.
o The council unanimously approved a preliminary agreement with the non-profit Environmental Volunteers to restore the Sea Scout building in the Bay lands.
The group, which provides environmental education to youth, has already raised $1.9 million to restore the 66-year-old ship-shaped structure, according to Executive Director Allan Berkowitz.
Construction could begin this fall and finish within a year, Berkowitz said. Although the city once planned to demolish the building, it was declared historic in 2002. Negotiations with the Environmental Volunteers began in 2004.
o On an 8-1 vote, with Barton opposed, the council agreed to pay up to $12,000 for public safety and public works services associated with closing portions of University Avenue downtown for a film and music festival July 20. The free event, sponsored by the Palo Alto Downtown Association will include three stages, food and other activities. Barton said he opposed the expenditure for several reasons, including its limited sponsorship.
o The council unanimously voted to postpone discussion of the recently released audit of the Palo Alto library system until September, when all staff members and the council will have returned from vacation.
The audit called for changes in the libraries, which were inferior to those of surrounding communities, Auditor Sharon Erickson concluded.
o Voters in November can also weigh in on an advisory measure on a project to install a water reservoir for emergencies under El Camino Park.
The park would be restored following construction. The measure would guide but not limit the city's decision makers, city staff have said.
The council approved placing the measure on the ballot with a 5-0 vote, with Kleinberg, Cordell, Mossar and Klein not participating due to conflicts due to links to Stanford University, which owns the land under El Camino Park.