REPORT TO COUNCIL
SUBJECT
Title
Action to Authorize the City Manager to Execute an Agreement with the City of San José Regarding Fiber Optic Cable and Conduit Where the City of San José Will Provide Construction Services Not-to-Exceed $379,000 and Authorization to Enter Into a Dark Fiber Lease Agreement With the Santa Clara Unified School District
Report
BACKGROUND
In 2000, the City of Santa Clara’s Electric Department, Silicon Valley Power (SVP), upgraded its communication system from an older copper-based network to a modern fiber-optic network. The upgraded system was intentionally designed with excess capacity to ensure long-term reliability for internal City operations and to allow for future commercial leasing.
Today, the SVP fiber-optic network (“SVP Fiber Program”) spans approximately 100 route-miles, with about 70% installed underground and 30% installed aerially. This network supports critical SVP operations, City communication networks, local schools, and connectivity for 33 data centers.
Through its SVP Fiber Program, SVP also makes limited use of the excess capacity by leasing dark fiber to third parties. Dark fiber consists of City-owned, unlit fiber-optic networks that customers use for their own communication needs. SVP Fiber currently provides services to 17 commercial customers and generates approximately $2.1 million in annual revenue.
SVP also provides fiber optic service to the Santa Clara Unified School District (SCUSD). The City and the SCUSD entered a dark fiber lease agreement on May 19, 2009, allowing SVP Fiber to provide dark fiber services to 29 sites. Since 2019, the SCUSD has been asking SVP Fiber for a dark fiber solution to their planned schools in San José near the City of Santa Clara boundary, but at the time the only known solution would cost millions of dollars in construction. On December 18, 2023, SVP received another dark fiber request from the SCUSD for additional dark fiber leasing for three additional new SCUSD schools within the City of San José: (1) Kathleen MacDonald High School, located at 3588 Zanker Road, San José, CA 95134, (2) Dolores Huerta Middle School, located at 3556 Zanker Road, San José, CA 95134, and (3) Abram Agnew Elementary School, located at 3534 Zanker Road, San José, CA 95134.
Due to the location of the three schools, extensive new construction and right-of-way acquisition along major roadways in the City of San José would normally be required to extend SVP's dark fiber optic network to the requested the SCUSD locations. As mentioned earlier, this would be quite expensive; fortunately, SVP Fiber staff and San José staff developed a mutually beneficial solution whereby the City of San José would provide SVP conduit and construct additional facilities to accommodate SVP’s fiber.
Because the three schools are beyond the City’s boundaries, the City and the SCUSD are in process of negotiating a new dark fiber lease agreement specific to these three schools based on the current dark fiber lease agreement template. The separate dark fiber lease agreement is contingent on the execution of this agreement between the City and the City of San José, which will facilitate the provision of leased fiber to the three schools.
DISCUSSION
SVP embarked on its collaboration with the City of San José based on the SCUSD’s request for SVP Fiber Service to its three San José campuses. SVP staff coordinated with San José and concluded that a collaborative approach was mutually beneficial. In this proposed agreement, San José will allow Santa Clara to install, own, and use fiber optic cable in San José’s existing telecommunications conduit(s). This will enable SVP to provide a dark fiber path from the SCUSD’s district office at 1889 Lawrence Road, Santa Clara, CA 95051, to the three campuses listed above. The agreement will also allow SVP to service additional commercial customers who are in the vicinity of the new SVP fiber alignment.
The agreement will require SVP to pay project costs equal to $379,000. These costs will cover upgrades to San José’s existing telecommunications lines from copper communication cable to fiber optic cable specifically within designated shared conduit(s).
The City of San José and their contractor will manage and complete all construction work required within San José, including along Tasman Drive and Zanker Road, and furnish all materials needed. San José will install new 3-cell innerduct into the designated conduit(s) and will install two separate fiber optic cables, one 288-strand fiber optic cable and one 72-strand fiber optic cable, in two separate cells within the conduit’s 3-cell innerduct. San José will also be responsible for, but not limited to, installing short spans of new conduit and new or upgraded pull boxes, and removing and disposing of the old copper cable. The City of San José will also perform all supporting activities, including preliminary conduit investigation, obtaining permits, coordinating traffic control, testing, and documentation.
SVP will have ownership, maintenance, and use of the 3-cell innerduct, the 288-strand fiber optic cable, and all associated fiber optic splice enclosures or panels. This means SVP will not need to pass-through third-party fees from San José to the SCUSD and SVP will remain the SCUSD’s point of contact for any outages.
Separately, SVP Fiber staff and the SCUSD are negotiating a Dark Fiber Lease Agreement which will be based on SVP’s current template with non-substantive edits.
ENVIRONMENTAL REVIEW
Staff recommends that the City Council determine that the actions being considered are exempt from the California Environmental Quality Act (“CEQA”) pursuant to section 15303 (Class 3 - New Construction) of Title 14 of the California Code of Regulations as the proposed agreement involves the extension of existing dark fiber facilities.
FISCAL IMPACT
The proposed project costs by the City of San José are estimated to be $379,000, which consists of the estimated construction cost and a 15% contingency. Sufficient funding is included in the FY 2025/26 Electric Utility Capital Fund Fiber Development, Design, and Expansion project. SVP will fund the full cost up front in FY 2025/26 and the SCUSD will provide its 50% cost share for construction in FY 2026/27. The overall impact to SVP is $189,500 for construction. Since this agreement enables additional fiber leasing to the SCUSD, SVP’s anticipated additional annual lease revenue from the SCUSD would be $78,223, which is subject to an annual 3% or consumer price index (CPI) increase, whichever is greater, as described in the SCUSD’s fiber lease agreement. SVP expects to recover the cost of this investment through lease revenues in approximately 3 years.
COORDINATION
This report has been coordinated with the City Attorney’s Office. Additionally, staff received information from the City of San José for the preparation of this report.
PUBLIC CONTACT
Public contact was made by posting the Council agenda on the City’s official-notice bulletin board outside City Hall Council Chambers. A complete agenda packet is available on the City’s website and in the City Clerk’s Office at least 72 hours prior to a Regular Meeting and 24 hours prior to a Special Meeting. A hard copy of any agenda report may be requested by contacting the City Clerk’s Office at (408) 615-2220, or by email to: clerk@santaclaraca.gov.
RECOMMENDATION
Recommendation
1. Determine that the proposed actions are exempt from CEQA pursuant to section 15302 section 15303 (Class 3 - New Construction) of Title 14 of the California Code of Regulations;
2. Authorize the City Manager or designee to execute the Agreement between the City of Santa Clara and the City of San José Regarding Fiber Optic Cable and Conduit to allow the City of Santa Clara to install and use fiber optic cables in the City of San José’s existing conduits, for a not-to-exceed amount of $379,000, subject to the review and approval as to form by the City Attorney;
3. Authorize the City Manager or designee to negotiate and execute a Dark Fiber Lease Agreement between the City of Santa Clara and the Santa Clara Unified School District (SCUSD) to lease dark fiber in the boundaries of the City of San José in substantially the form attached to this Report to Council, subject to the review and approval as to form by the City Attorney; and
4. Authorize the City Manager or designee to (1) take any action as necessary to implement and administer the above agreements, (2) amend the Dark Fiber Lease Agreement to include additional SCUSD schools, and (3) amend both agreements to make non-substantive modifications, subject to the review and approval as to form by the City Attorney.
Staff
Reviewed by: Nico Procos, Director of Silicon Valley Power
Approved by: Jovan D. Grogan, City Manager
ATTACHMENTS
1. Proposed Agreement with the City of San José
2. Current Dark Fiber Lease Agreement Template