Pets in Need, the city of Palo Alto's animal services contractor, announced in a fiery letter on Monday that it is ending its contract with the city of Palo Alto, alleging the city has breached its agreement with the nonprofit.

The 55-year-old nonprofit organization itself has come under harsh criticism since police announced the citations of three employees in the deaths of seven puppies. Twenty other dogs in the same van became overheated during transport from the Central Valley to Palo Alto on Aug. 2. The three employees were charged with failure to give proper care and attention to an animal and inhumane transportation of an animal by the Santa Clara County District Attorney's Office on Oct. 26.

A police investigative report found that 27 dogs transported from other shelters in the Central Valley for housing and potential adoption were packed into a poorly ventilated and improperly cooled van. The animals were not given water. Many of the dogs were panting and in distress by the time they arrived at the Palo Alto shelter, according to the police report. They had traveled in 90-plus degree heat for at least four hours.

Multiple board-certified veterinary anatomic pathologists could not conclusively determine the specific cause of death because of moderate decomposition of the puppies' tissues, but heat stroke and/or traumatic asphyxiation were top considerations for the causes of death, according to conclusions from three autopsy reports noted in the police investigation, which a police investigator noted she received on Sept.14.

Pets in Need Executive Director Al Mollica notified City Manager Ed Shikada on Nov. 15 that the organization will end its services in Palo Alto in one year. The organization claims that the city failed in its contractual agreement, which hampered the operations of Pets in Need (PIN).

"As PIN has continuously advised you and your team, our operations in Palo Alto have been significantly hampered by the egregious failure of the city to meet the timelines for the construction and renovation projects specified in the agreement. Failure in particular to meet the expected completion date of March 15, 2019 for renovation of the existing kennels has caused injury to both dogs and staff. This is a clear breach of the city's duty," Executive Director Al Mollica wrote.

He noted that Cheryl Nolan, the organization's attorney, sent a letter to the city on May 11, 2021 stating that "PIN urgently requires repairs and renovations to its existing dog kennels to keep staff and the dogs residing there from continuing to be injured … The existing kennels and kennel house are neither adequate nor safe."

Nolan's letter included a draft amendment to the agreement with new deadlines for the upgrade projects and penalties for late performance. If an amendment wasn't signed within 28 days, Pets in Need would consider all available remedies including filing a lawsuit, the May letter said.

Mollica said that city leaders assured Pets in Need that the renovations and construction of the new kennels would be given top priority.

"In reliance on your assurances, PIN elected not to pursue the amendment or file a formal notice of breach of contract but to continue working with the city to expedite these vitally important projects," Mollica wrote. "In point of fact, in spite of those assurances and the continuing entreaties of PIN staff, the city has not even begun the actual renovations. In addition, your officials have informed us that there are no longer adequate funds to construct a new kennel house, which was clearly understood to be the centerpiece capital improvement project when we negotiated the contract with the city."

The condition of the kennels has meant they weren't safe for dogs and remained empty, Pets in Need said in a separate statement posted on the organization's website. It said it didn't make the decision lightly, but "made it out of deep consideration of our ability to effectively carry out our mission and serve the animals and communities in our care. Unfortunately, our relationship the past three years has been marked by the city's inability to fulfill agreements that have materially affected the manner in which Pets In Need could care for our animals at the Palo Alto shelter," the statement said.

"Pets In Need has worked tirelessly to fulfill our responsibilities under the contract during the past three years, and we have repeatedly notified the city of its deficiencies with respect to this contract," the statement said.

Pets In Need also operates its flagship shelter in Redwood City in addition to Palo Alto's. It listed some of its accomplishments despite the facility deficiencies it has experienced, it said.

The organization launched an emergency assistance program for animals and people impacted financially by the COVID-19 pandemic, distributing more than $750,000 in aid for the care of nearly 750 pets and their guardians; placed 1,040 animals in foster homes during the pandemic; increased adoptions and expanded services to pets and their guardians throughout the region. It saved the lives of almost 600 large-breed dogs that were at risk of being euthanized and conducted free and low-cost vaccine clinics in East Palo Alto and at the Palo Alto shelter, it said.

The organization said it would continue to serve Palo Alto, Los Altos and Los Altos Hills residents until the contract expired. The Redwood City facility and services would remain unchanged.

On Tuesday, the city responded to Mollica's allegations with an email statement.

"It's unfortunate that PIN found it necessary to blame the city for things not working out as hoped for all parties. Several capital improvements to the Palo Alto Animal Shelter have been made in coordination with Pets In Need. To date, the City of Palo Alto has invested $1.5 million, completing office and classroom building and medical suite renovation projects at the Palo Alto animal shelter, as well as minor improvements and repairs to the existing kennel building that were completed early in the contract term.

"The city completed the design of a new kennel building, but the construction cost estimate was greater than the remaining available budget. Due to the approximately $500,000 funding gap and delayed schedule in the construction of the new kennel building, Pets In Need (PIN) requested that the city prioritize using available funding to provide upgrades to the existing kennel building that improve the day-to-day conditions for the animals. These upgrades include acoustics, lighting and mechanical system, drainage upgrades, epoxy floor and paint and replacing the existing kennel caging system," the city said.

City staff last updated the council in June, when the council approved a contract amendment for additional design work for the existing kennel building. Staff, in coordination with the consultant and Pets in Need, have completed the design work and are in the process of purchasing new kennels. The improvements to the existing kennel building are anticipated to cost $400,000, the city said.

The decision by Pets In Need to initiate its divorce from Palo Alto leaves the city with the same dilemma it was facing in 2017, when the council began its quest to outsource animal services — a function that has historically been performed by city employees. The operation fell into limbo in 2012, when Mountain View opted to pull out of its partnership in the shelter, taking away its $400,000 in annual contributions to the operation. A subsequent attempt by then-City Manager James Keene to shut down the shelter fizzled in the face of intense community opposition, prompting the city to issue a request for proposals and to ultimately negotiate an agreement with Pets In Need.

The new development also deals a massive setback to the city's plan to ultimately replace its shelter at 3281 E. Bayshore Road, an undersized facility that a 2015 audit described as "outdated" and as a one that "does not meet modern standards for animal care." While the city has made some upgrades to the shelter since then, the five-year partnership with Pets In Need envisioned a multiyear fundraising campaign by the nonprofit to support construction of the new facility.

The planned departure of Pets In Need effectively halts the city's plans to replace the shelter while leaving it with the same question that the council wrestled with since 2012: How to maintain a popular municipal service at a time of flagging revenues and budget cuts? With Pets In Need set to depart, the council will be tasked with reconciling in the coming months the desires of local animal lovers with competing demands to restore funding for community services and public safety.

Shikada expressed disappointment about the nonprofit's termination letter on Monday.

"Our partnership with Pets In Need has been an important one, providing sheltering services for our community and the cities of Los Altos and Los Altos Hills. Given our three-year partnership, the city is disappointed to receive today's announcement by Pets In Need of their intent to terminate our agreement in the next 12 months, particularly under current circumstances.

"The city will evaluate option and determine next steps in order to provide a smooth transition," he said.

Read Pets in Need's letter to the city of Palo Alto terminating its contract.