Reports from the City Auditor's Office rarely get Palo Alto residents riled up, but this one had a black dog and a white cat on the cover, so all bets were off.
More importantly, the April 2015 audit carried potentially grave implications for one of the city's most beloved and beleaguered facilities: the animal shelter at 3281 E. Bayshore Road. While the city now boasts state-of-the-art libraries, a new arts center and a refurbished City Hall lobby, the shelter has been — and remains — a scrappy underdog: a place of chain-link fences, cramped kennels and an uncertain future.
The auditor's main conclusion — that the city needs to find a new way to provide animal services — wasn't exactly shocking. Three years before the audit came out, City Manager James Keene briefly flirted with the idea of closing the facility and outsourcing its services — a proposal that ultimately fizzled in the face of widespread public opposition. But as the auditor made clear, the problems that plagued the shelter in 2012 did not go away. The facility is "outdated and does not meet modern standards for animal care," the audit found. It has kennels with "sharp edges that are unsafe for animals"; "porous flooring" that cannot be cleaned to recognized standards; and insufficient space, which may explain why some small animals — including hamsters, rabbits, birds and even snakes — were housed in the staff lunch room.
The shelter's financial condition was hardly better. The 2012 withdrawal of Mountain View from its partnership in the facility decreased annual revenues by more than $400,000 and despite efforts to cut costs and raise fees, the facility still fell far short of being self-sustaining. Residents may clamor for a local facility, but the city auditor concluded that Palo Alto Animal Services "faces challenges that are unlikely to be resolved if it continues to be operated as a city-managed function without a significant increase in General Fund subsidy, donations and/or revenue-generating contracts."
Two years later, the shelter still operates at a loss. Last month, Deputy City Manager Rob de Geus told the City Council that — above and beyond the revenue from service fees and partner cities (Los Altos and Los Altos Hills) — the facility requires an annual General Fund subsidy in the range of $700,000 to $800,000.
Spurred by the audit, the city is now preparing for the biggest shift in its animal services operation since 1972, when the shelter was built on a 1.58-acre parcel just east of U.S. Highway 101. If things go as planned, Pets In Need, a nonprofit that runs a "no-kill" shelter in Redwood City, will take over management of the city's animal services early next year. The city will start a series of renovations of the cramped East Bayshore Road building, followed by construction of a new state-of-the-art animal facility, either on the same East Bayshore parcel or on a larger city-owned site on San Antonio Road. The new shelter will likely cost more than $10 million.
For Palo Alto officials, the partnership with Pets In Need represents the best hope for solving the shelter's heretofore intractable problems. After many months of negotiations that left just about every party and stakeholder exasperated, a giddy City Council approved on Aug. 21 a letter of intent with Pets In Need that lays out the goals and parameters of the new deal and the timeframe for the transition.
Councilman Eric Filseth, who had recently toured the Pets in Need facility, praised the nonprofit as a "knowledgeable," "high-energy" and well-organized group and reaffirmed that now prevalent view that Palo Alto should continue to have an animal shelter. A healthy city, he said, takes care of its animals.
"We have the opportunity to increase services to the community without increasing costs, and potentially decreasing them somewhat," Filseth said. "We don't get a lot of opportunities like that."
The letter of intent lays out a roadmap and a timeline for Pets In Need's ultimate takeover of the shelter, which is currently scheduled for between next March and July. It commits the city to paying for a fundraising feasibility study and to "interim improvements" to the existing shelter. It also paves the way for the two parties to sign a comprehensive "service and management agreement" early next year and to move ahead with a financing plan for a new, modern shelter.
The council's hopes and dreams are reflected in the correspondence that the city and Pets In Need have exchanged since 2015, when the nonprofit first came on the scene. The emails, reports and draft agreements, which the Weekly obtained through a Public Records Act request, paint a picture of two parties slowly moving toward a compromise to achieve disparate but related goals: an improved animal operations for Palo Alto and the expansion of the "no-kill" movement for Pets in Need.
But for all the excitement, the documents also indicate that the agreement is far from a done deal: No contract between the city and nonprofit has been signed.
According to the documents, getting to "yes" is predicated on Pets In Need working — at least temporarily — in a shelter that its leaders view as completely unacceptable. It entails difficult labor negotiations and the elimination of more than four union positions — a sensitive topic for City Hall and a painful one for the Service Employees International Union. Most crucially, it depends on Palo Alto residents putting their money where their mouths were in 2012 and raising millions of dollars for a brand new shelter: an idea that has not generated much excitement in the past.
The exchanges also indicate that cost savings are no longer the priority that they once were. When the shelter's future first became murky five years ago, the goal was to make animal services financially sustainable — even if it meant closing the shelter altogether. Since then, the conversation has gradually shifted to giving Palo Alto a cutting-edge animal-services operation. In a recent interview, de Geus said reducing costs is "not the primary objective" of the city's transition to Pets In Need.
"Providing high quality animal services for the residents of Palo Alto is the primary interest," said de Geus, who is leading the city's negotiations with Pets In Need, "and doing that in a cost-effective and efficient way that stabilizes the General Fund subsidy for the programs."
The new partner
It's easy to see why Filseth and others who have visited the Pets In Need shelter in Redwood City are excited about the transition. The blue two-story building boasts a spacious lobby, a spotless veterinary clinic and cat rooms that would delight many a toddler. One such room has pink walls, a glass door and furnishings that include an armchair, a crib-like enclosure and a set of connected cubes that look like they can either house a toy collection or a half dozen cats (the tray of litter at the side of the room suggests that it's made for the latter).
"We wanted to have an environment that's of course nice for cats — they have a lot of places for them to climb or hide — but we also wanted to make it a nice place where people can see a cat in a natural home environment," said Alexandra Baggs, the nonprofit's development and marketing manager. "This is sort of like a living room."
Across from the cat suites, 10 cubes are arranged in two rows of five, each housing a kitten awaiting adoption. Those with health problems or that have yet to get their medical clearance are hanging out upstairs near the veterinary clinic. The youngest kittens must be spayed or neutered, microchipped and vaccinated. A new arrival has to wait at least eight weeks before moving on to a foster home.
These cats never encounter dogs, who have their own dedicated sections of the building. A few dogs woofed and wagged recently when they watched a stranger approach through the glass panels fronting their private enclosures. In the shelter's courtyard, a group of three mid-sized yappers ran giddy laps.
The Pets In Need shelter takes in about 800 animals annually (Baggs said it's well on pace to meet its 2017 goal of taking in and adopting out 840). Because this is a no-kill shelter — it does not euthanize animals unless they present a danger or are in extreme pain — some dogs are long-term guests.
"A couple that have stuck around have behavior issues, so we hired a canine trainer to work with them," Baggs said. "We're trying to get them to foster (care) to take care of these issues."
Pets in Need focuses on those animals that are most in danger of euthanasia, Baggs said. The nonprofit has established relationships with several shelters in the area and, most recently, in the Central Valley. The shelters give the nonprofit a list of animals that may need to be euthanized and Pets In Need tries to take in as many of those as it can.
"There's a lot of stuff that animals get euthanized for that are not as big of a deal," Baggs said. "Little kittens get colds and end up getting euthanized because it's too hard (for other shelters) to go through that stuff. We like to be that backup option. It's not too hard to get rid of a kitty cold if you give them time and medicine and things like that."
Like many a venerable Silicon Valley institution, Pets In Need started out in a garage, Baggs said. Redwood City resident Jean Mahoney and her friend, Alice Hodges, launched a "lost animal registry" in 1965 to help find homes for animals at area shelters. The small group became a nonprofit two years later and, in the ensuing decades, expanded its services to include adoptions, financial assistance and emergency veterinary care.
Pets In Need opened its first adoption center in 1986 on Whipple Avenue. Seven years later, it purchased a plumbing-supply warehouse on Fifth Avenue and retrofitted it to support an adoption operation. In 2007, the organization launched a $6 million campaign to replace the warehouse with a new state-of-the-art animal shelter — a project that was completed in 2010, when the big blue building opened for business.
Then, in fall 2015, Palo Alto came calling with a request for proposals for animal services. Pets In Need was the only respondent.
Hoping to get more offers, Palo Alto issued another request for proposals in spring 2016 — this time giving more flexibility to potential responders. The result was the same.
Al Mollica, executive director of Pets In Need, said the organization decided to engage in talks with Palo Alto because of its desire to advance the "no kill" movement — as well as expand the organization's profile.
But the talks, which are now entering their third year, are clearly taking their toll.
"Palo Alto moves at a slow pace," Mollica said, when asked about the status of the negotiations. "If you take that out of the mix, I think it's been wonderful."
When Pets In Need first decided to move forward with the partnership, there was 100 percent support on the board of directors and "everyone was tremendously excited." Now, with negotiations dragging on, some board members are starting to get frustrated — even though their support for moving ahead hadn't wavered, Mollica said.
"Because it's dragged on for so long, some board members are saying, 'Is this really how we want to operate? Is this what our life will be like for the next five years?'"
Among the biggest sticking points separating the city and the nonprofit is the rundown 45-year-old facility, which everyone agrees has seen better days. For Pets In Need, the condition of the current shelter is unacceptable.
Earlier this year, at the nonprofit's request, the city commissioned a $50,000 needs-assessment study that confirmed the many inadequacies of the existing shelter — its inefficient layout (too many kennels in a room; too many dogs facing each other, contrary to best practices, etc.); its antiquated drainage system (which requires those interacting with animals to do so over a trench filled with urine); and a heating system that mystified the consulting firm, George Miers ("We have never seen a system quite like this and question how efficient this can be," the report states).
The dog-holding ward and its kennels are "so old and antiquated that reuse/renovation of this room is neither recommended nor ... economical," the report states.
In late June, the nonprofit floated the idea of renting another facility to serve as Palo Alto's shelter until the new one is built. Days after Assistant City Manager Ed Shikada and Khashayar Alee, a senior manager in the City Manager's Office, attended a Pets In Need board meeting to discuss the process, they received an email from Mollica lamenting that the two sides weren't able to make progress on the two "most crucial elements": — speeding up the process for constructing a new shelter and making operating in the existing shelter "more palatable."
"With all due respect, no one has any confidence that the city will be able or willing to address the existing shelter's shortcomings any time soon, so an alternative plan was floated that involves purchasing/leasing a building and using part of that facility to provide animal care service to Palo Alto," Mollica wrote. "That's obviously a significantly more costly alternative, but it's something we're considering because of our aversion to operating out of the existing shelter."
The question of interim improvements remains unanswered. The August "letter of intent" states that the "parties intend to ensure that the existing facility meets PIN's requirements." But it's not yet clear what these requirements are, and Palo Alto officials aren't too keen on investing in an obsolete facility. De Geus said the city is currently waiting for Pets In Need to submit a list of improvements it requires at the current shelter.
"They know that, from the city's perspective, we are not interested in spending a lot of money on interim improvements when our goal is to build a new shelter in partnership with Pets In Need," de Geus said. "That being said, the shelter is run down, and to the extent we can make some modifications and improvements, we'll do our best to try to accommodate them."
Mollica said his group and the city are now looking for a "happy medium" — a modest investment that would make the shelter palatable without depleting the resources that would be better spent on the future facility. One idea that the two sides are coalescing around is installing modular units next to the shelter, providing extra space.
De Geus also said the city has identified some fixes that could be made in short order: new doors for the dog kennels, replaced flooring for the cat rooms, upgraded air conditioning and the resurfacing of the parking lot and driveway. But if Pets In Need requires most substantive changes — like moving walls — that will be challenging for the city to do, de Geus said.
"A lot of these improvements we can do in-house and repair," de Geus said.
Mollica said Pets In Need is now working with an architect to come up with a few different options for temporary improvements — with expected costs in the range of $500,000 to $1 million, he said. De Geus said he expects the cost of the interim fixes to be nowhere near $1 million.
"Less than $500,000 is where I'm hoping we end up," de Geus said.
The two sides do have a common interest: getting to a decision without further delay.
"What we're interested in is moving more quickly with Pets In Need to start a capital campaign and build a new shelter," de Geus said.
Mollica was more blunt: "Enough with the hand-wringing, enough with the RFPs. Let's get together and decide how we an make this existing facility more habitable and more suitable for what we're trying to do."
Beyond the disagreement over what to do about the present shelter, an even bigger question looms over the city and nonprofit's partnership: how the shelter of the future would be funded. The end-goal for both Palo Alto and Pets In Need is a modern animal shelter that would serve as a welcoming community center, run a robust volunteer program and offer education about animal well-being.
That, however, depends on the city coming up with roughly $10 million — whether through General Fund contributions, private donations or, in the most likely scenario, some combination of both. Last month, the City Council approved a $60,000 feasibility study to gauge the community's appetite for fundraising for a new shelter. While the results won't be released until December or January, both sides are somewhat optimistic. Palo Alto, is after all, both a wealthy community and one deeply concerned about its animals — as the 2012 outcry over the shelter's potential closure demonstrated.
Yet the question of the funding mechanism remains a vexing one. While the council enthusiastically supported the idea of a new shelter, Councilmen Tom DuBois and Cory Wolbach both said they do not support funding the project through a ballot measure — a means that the city employed in 2008, when residents passed a $76 million bond to reconstruct city libraries; and in 2014, when voters raised the hotel-tax rate to pay for a list of infrastructure priorities that included a new police headquarters, two rebuilt fire stations and parking garages in downtown and near California Avenue.
The animal shelter was not on Palo Alto's 2014 list of infrastructure priorities for good reason. In early 2013, the council had commissioned a survey to gauge public interest in funding a new $7 million Animal Services Center and only 47 percent said they would support such a project (with 15 percent marking "strongly support" and 32 percent choosing "somewhat support") — well short of the two-thirds majority that a bond would require. Road repairs, park improvements and a new bike bridge over U.S. Highway 101 scored far better.
Another survey, conducted by City Auditor Harriet Richardson in 2015, found that Palo Alto residents value animal services but aren't particularly passionate about having a brand new shelter. Eighty percent said they would support refurbishing the existing animal shelter — an option that both 2015 audit and the George Miers study had discounted as infeasible — but just 55 percent said they would support building a shelter.
Given that questionable support, during the August discussion of the Pets In Need agreement, Wolbach said, "As much as I think the fundraising is important — and I'm curious to see what Pets In Need and Friends can do to improve the facility — I'm very skeptical that this is something we should be sending to the ballot."
There are, however, some positive signs of support. About 90 percent of the respondents to the 2015 survey said they would support a public-private partnership to improve the shelter; similarly, 90 percent favored fundraising events. And more than 70 percent said they wouldn't mind a supporting the animal shelter through General Fund subsidy, as part of the city's regular budgeting process.
To date, the city hasn't explicitly committed any funds toward the new shelter — a source of some frustration for Pets In Need. In June, Mollica wrote in an email to de Geus that the city should be taking the lead on raising money for a new shelter, not playing a "waiting game."
"To hear in year three of our discussions that the decision about that commitment is still months away is deflating," wrote Mollica, who said that the biggest factor in determining whether Pets In Need will move ahead with the partnership is the community's desire to fund a new shelter.
In an interview, Mollica indicated that it's possible for Palo Alto to get a new shelter without a major infusion of cash from the city (the Redwood City facility, for example, was financed entirely by private fundraising). But a contribution authorized by the council would go a long way both because it would reduce the amount that needs to be raised from private sources and demonstrate to the community that the city has "skin in the game."
"From our end, even if the city gave $5 or $6 million, if you're trying to raise $15 million and the appetite is not there from the community, that would be a nightmare," Mollica said. "I'm not getting the organization involved in this so that we can do an interminable fundraising effort."
That, he said, is what makes the funding feasibility study that the council approved last month so critical.
"It will really make or break what our next steps are," Mollica said.
Even as the city and Pets In Need have been negotiating the partnership, some residents and council members have raised questions about whether the city's path forward will lead to a reduction in services — concerns that prompted Wolbach to cast the sole dissenting vote during the council's approval of the "letter of intent" with Pets In Need.
At the August meeting, council members wondered whether the Pets In Need will provide spay-and-neuter services for free (or for a very low rate); whether the nonprofit will reduce the shelter's intake rate; and whether the new shelter will be open on the weekends. (While the answers to all three questions are presumably "yes," the details won't be hashed out until the city and Pets In Need sign an Operation and Management Services Agreement.)
There is also a general recognition that for Pets In Need, the city's operation presents challenges that it hadn't had to grapple with in the past. Among other things, the nonprofit will be dealing with wildlife — a new venture for a nonprofit that up until now has been exclusively focused on dogs and cats. Mollica, who headed the Delaware SPCA before he joined Pets In Need in 2014, is confident that the nonprofit can absorb these functions. During the recent tour of the Pets In Need facility, Baggs insisted the nonprofit would continue the current service levels in Palo Alto.
"We've had questions including: Are we going to keep allowing people to surrender pets? Are we going to take in animal-control-officers' animals? Are we going to take in a bunch of different animals? The answer is yes to all of that," Baggs said. "We're not anticipating a drop in services. It will be an increase."
There's also the question of ongoing operating costs. The city has agreed to pay Pets In Need a management fee of $650,000 for the first year of the contract — a sum that will allow the city to achieve modest near-term savings. But future contracts will depend on animal-intake numbers, Mollica said. If the shelter ends up taking in many more animals, this would likely require a higher fee (conversely, if the intake falls below the current level of roughly 550 animals per year, the sum would go down).
In negotiating with the city, Mollica said he's been asking officials not to "fixate so much on cost savings right now." In July, as he reviewed the city's draft "letter of interest" with Pets In Need, he suggested deleting a reference to "reducing costs" as one of the objectives of the new shelter.
Mollica noted in a comment on the draft letter that even if the exact same number of animals is processed through the shelter every year, "You have to accept the fact that your cost will increase to some degree year after year" (the city took his suggestion and deleted the reference to cost savings).
The focus, Mollica said, should be less on the costs and more on the benefits of the new shelter.
"Think about it this way," Mollica said. "If you end up having the shelter as a community resource, if you're able to identify the shelter as one of the assets for the community, if people are excited about coming to the shelter and you have vibrant education programs — all things that we have here in Redwood City — you're providing a better service to the community.