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New City Budget Focuses on Community Recovery & Community Services

Learn more about the City’s budget which began on July 1, 2021

The City of Palo Alto City Council concluded an eight-week budget process, with significant community engagement, by adopting a revised Fiscal Year 2021–22 budget on June 21, 2021, paving the way for the announced phased expansion of City hours and services, restoration of services in the coming year, and more. With the first quarter of the fiscal year now closing, this blog provides the community with an overview of the budgetary plan being implemented, details on community services maintained and library hours restored, plus ways for the community to stay connected on the budget. The City Council is tentatively scheduled to receive an update on actual revenues and expenditures, as well as possible budget adjustments, on October 25. Please feel free to participate in this discussion by sending an email to citymgr@cityofpaloalto.org or city.council@cityofpaloalto.org.

Focus on Community Recovery & Reconnecting as a Community

As with many other organizations, the past year hit the City hard due to the pandemic. As the community continues to recover from the unprecedented circumstances of this public health emergency, the adopted budget prioritizes essential services and, while the significant reductions taken in FY 2021 will persist this year, the adopted budget maintains critical services and community services due to one-time American Rescue Plan Act (ARPA) funding. In addition, after California fully reopened on June 15, 2021, the City has worked to resume many of the community facing services offered in-person, with modifications, to keep in mind the health and safety of all.

With community recovery and reconnecting as a community in mind, examples of program and service funding included in this year’s budget are:

  • Public reopening of public facilities with modified hours or by appointment
  • Community events and activities, Children’s Theatre productions, Summer Hotdog Series, Twilight Concerts and the new Movies in the Park.
  • Art Center exhibits and programming
  • Crossing guard services for approximately 30 crossings
  • Police patrol, fire and emergency response staffing maintained at current levels
  • ArtLift Microgrants continue to fund uplifting temporary art projects and experiences in Palo Alto’s commercial areas and neighborhoods.
  • Phased reopening of the libraries and library services (with three library branches previously slated for closure staying open).
  • The City continues assisting City utility customers for residents and businesses. Building on last year’s moratorium and establishment of 36-month payment plans for those residents and businesses suffering pandemic-related shortfalls, the City has committed this year to minimal to no rate increases in various utility enterprise fees.
  • The City continues to explore new ways to support its Race and Equity Framework adopted one year ago, including fostering programs that engage the community and foster inclusion and equity. Recent and upcoming activities that have taken place this fiscal year can be found here.

In addition to funding for services, funding for capital investments across the City includes: Infrastructure Plan projects like the Charleston/Arastradero Corridor and the Public Safety Building; an approved funding plan for renovation of the Roth Building; and renovation and rehabilitation of the Regional Water Quality Control Plant.

For the City’s adopted capital budget, go here.

FY 2022 Adopted Budget Financial Summary

Thank you to all the community members who provided input and participated in the City’s budget process. Collaboration and significant work by all parties, including the City Council, the community, labor groups, and staff, was vital to this budget process. Public comment was received as part of the Budget Town Hall and Budget Hearings, via email to the City Council, and as a result of an online survey informing this nearly two-month long process to assist in guiding the City Council’s decisions on the adopted budget.

Overall, the City Council adopted a balanced budget of $703.5 million across all funds. In the General Fund, the Adopted budget of $209.2 million reflects a 6.2 percent increase compared to the FY 2021 Adopted Operating Budget. The City’s Capital Improvement Plan (CIP) reflects $174.3 million, and a $747.2 million plan over the five-year CIP (FY 2022–26). Of this, the General Capital Fund FY 2022 budget reflects expected expenses of $64.0 million and $189.5 million over the five-year CIP.

This includes a reduction of 86 full-time staff positions (78.85 Full-Time Equivalents) and 102 part-time staff positions (24.73 FTE) resulting in a workforce of 956 full-time staff positions and 245 part-time staff positions (81.59 FTE). The majority of these reductions reflect the City Council’s direction to eliminate positions that were defunded and frozen in FY 2021 (CMR 11872). The General Fund is funded for staffing of 506.80 full-time positions (a reduction of 67.63 FTE) and 56.58 part-time positions (a reduction of 24.73 FTE). Separations of staffing are expected as a result of these changes impacting all departments.

The budget adoption followed a series of budget conversations that began on May 4, 2021 when the City Council provided direction to staff to assume a moderate economic recovery that spans three to five years. In addition to these assumptions, the budget also includes impacts of the City’s utility transfer litigation, totaling $8.4 million in FY 2022. The budget balancing strategy adopted by the City Council included use of federal American Rescue Plan Act (ARPA) funds, use of the General Fund budget stabilization reserve (BSR) and program specific revenues, reductions in service and infrastructure investments, and a zero percent wage increase for employee groups not currently under contractual agreement during the 2023 fiscal year at the time of adoption.

For the City’s adopted operating budget, go here.

Strong Fiscal Management & Continued Focus on Recovery

The FY 2022 Operating Budget adjusts for both the current impacts of pending litigation related to the City’s utility transfer, as well as the recovery period due to the pandemic, and relies significantly on one-time federal funding to bridge uncertainties and delay further service reductions. The budget ensures that the City continues to proactively fund long term liabilities and continues capital investments in our most critical infrastructure. The City continues to pay for both the current pension and Other Post-Employment Benefits (OPEB) liabilities (assuming lower discount rates of 6.2 percent for funding levels). In addition, resources are provided to successfully adapt to public life following the reopening from pandemic restrictions and establish funding to ensure service delivery modifications, if needed.

The significant service reductions taken in the FY 2021 budget will continue unless ongoing revenue resources can be brought into alignment with the cost to provide services. Work has already begun in pursuit of revenue generating local ballot measures, tentatively planned for the November 2022 general election, and is the first step in resuming prior discussions to address structural financial needs. For more on this effort, go here.

For more on the City’s recovery efforts, go here for a recent status update.

Maintaining City Services & Low to No Increases in Utility Rates

The City began reopening its facilities with limited in-person hours and activities on July 12. Sworn police officers have been focusing on patrol and other collateral duties, while administrative procedures are completed through more cost effective civilian staffing. All five libraries have remained open on reduced schedules. Three of the five libraries operate as “neighborhood” libraries, with two of the three opening two days a week while one three days a week. Two libraries will operate as “full-service” libraries, with one opening five days a week and one four days a week.

For more about new library hours as of the end of September, go here.

To address the need for flexibility during this recovery phase of the pandemic, the adopted budget includes the City Council establishing a $0.5 million Uncertainty Reserve and sets aside $0.75 million for strategic investments, including economic and fiscal recovery work.

The City continues to support residents and the business community through minimal to no rate increases in various utility enterprise fees. Utility rate adjustments will be adopted in August and include zero percent increases for water, electric, and refuse, a 3% increase in gas and wastewater, and a 2% increase for stormwater and fiber inline with the consumer price index (aka CPI).

Join the Budget Conversation: October 25, 2021

As noted, the City Council is tentatively scheduled to receive an update on actual revenues and expenditures, as well as possible budget adjustments, on October 25. Share your feedback and participate in this discussion by sending an email to citymgr@cityofpaloalto.org or city.council@cityofpaloalto.org.

Find the October 25 Council meeting details when they are posted in mid-October at www.cityofpaloalto.org/councilagendas.

More Online Resources

For budget related materials, go here.

For the City’s adopted budget, go here.

For more about the City’s adopted capital budget, go here.

For more about the library’s reopening plans, go here.

For more about the City’s library programs, go here.

For more about the City’s community services department and programs, go here.

For more about the City’s Utilities, go here.

For more about the City’s capital projects, go here.

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