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HomeMy WebLinkAbout2024-08-06 Finance Committee Summary MinutesFINANCE COMMITTEE SUMMARY MINUTES Page 1 of 9 Special Meeting August 6, 2024 The Finance Committee of the City of Palo Alto met on this date in virtual teleconference at 3:30 P.M. Present In-Person: Burt (Chair), Lauing, Veenker Present Virtually: Absent: Call to Order Chair Burt called the meeting to order. The clerk called roll and declared all were present. Public Comment There were no speakers. Agenda Items 1. Review and Discuss the Funding Level of the Human Services Resource Allocation Process and Other Grants in the General Fund and Potential Recommendation to City Council Assistant to the City Manager Lupita Alamos furnished slides and voiced that the presentation and discussion would focus on the human services funding level. This would focus on Council's referral from the FY2024 adopted budget to focus the evaluation of HSRAP funding as a percentage of the General Fund. She provided a recap of the March 19 Finance Committee discussion, and staff had been asked to return with a definition of human services, the HSRAP proposal evaluation criteria, information on the HSRAP process, and additional financial information for other human services and specifically those outlined and bulleted in the previous Staff Report, which had been captured in the current Staff Report. She supplied the definition of human services. She discussed the HSRAP evaluation criteria, which was linked in the report. The Staff Report also listed the 11 considerations that ranged from alignment with community services, organizational effectiveness, etc. The report had also been updated with the nonprofits that had been outlined in the previous Staff Report. She noted that total HSRAP SUMMARY MINUTES Page 2 of 9 Sp. Finance Committee Meeting Summary Minutes: 8/6/2024 grant allocation listed for FY2025 reflected $885,076, but the amount should have been listed as $919,644, and the change only minimally changed the total percent of the General Fund for HSRAP and total funding. The HSRAP listed on the table was 0.31% of the General Fund but it was actually 0.33%, and the total funding should be 2.83%, not 2.81%. The table included only human services and other nonprofit organizations as listed in the report. It was not a comprehensive list of all human service grants and agreements, and she outlined what was not included. The table from FY2015 to 2025 reflected that General Fund expenditures allocated averaged 1.3%. The projected numbers for FY2026 and 2027 showed human services funding would be approximately 1.3% of the General Fund Budget expenditures. In light of exceeding 1% of the General Fund, staff recommended focusing on providing Council with a Human Services Funding Report, including but not limited to HSRAP as part of the annual budget process, instead of making a policy change. Vice Mayor Lauing asked why Magical Bridge was not included on Slide 8. He thought it should be included. Assistant to the City Manager Alamos answered that the assignment did not include all human services, in part because what that meant had not been defined. As a start, it included those listed in the Staff Report, and even with just those listed, the 1% had been exceeded. If they were to do a comprehensive evaluation, it would by far exceed that. Chair Burt was surprised it was not included, which he stated could be discussed more. Public Comment There were no comments from the public. Council Member Veenker was glad this was being discussed. She stated that how Palo Alto treated the neediest in the community spoke of Palo Alto's values. She understood that there would be later discussions on nonprofits more generally, and she thought there was substantial overlap of both discussions. She asked what the source was for the human services definition on Slide 4. She referenced the funding table on Slide 5 and inquired what the number would be without the LifeMoves but with the other. Chair Burt noted, regarding LifeMoves, that the capital investment should be segregated from the operating investment. Human Services Manager Minka Van der Zwaag explained that the first human services definition on Slide 4 was what was included in the Budget Book and was a very general definition. Assistant to the City Manager Alamos replied that if excluding LifeMoves capital, the number reflected was correct, and the 1.41% reflected only the $1M moving forward from LifeMoves, so it did not include the initial investment of $4M. SUMMARY MINUTES Page 3 of 9 Sp. Finance Committee Meeting Summary Minutes: 8/6/2024 City Manager Ed Shikada stated that FY2025 for LifeMoves was $5M and FY2026 and beyond was $1M. Council Member Veenker did not think her question was being answered. She inquired if of the approximately $2M there was $1M for LifeMoves in the other General Fund Human Services funding for 2026 and 2027. City Manager Shikada remarked that it was all operating for LifeMoves. Council Member Veenker questioned what the percentage would be without the LifeMoves operating and if the operating expenses for LifeMoves was for the transitional housing or other operational expenses as well. City Manager Shikada answered that the operating expenses for LifeMoves was just operating expenses for Project Homekey. Chair Burt asked if FY2025 for LifeMoves included $4M capital and $1M operating. He assumed there would be operating dollars since there would be operations in FY2025. He wanted both numbers to be listed in the table. [Human Services Manager Minka Van der Zwaag 26:17] replied that it included $4,944,000. She asked staff if there were revised numbers. Office of Management and Budget Paul Harper specified that $4.9M had been programmed for the Capital Project in 2025, and there should be another $1M programmed in the budget on the operating side, but he needed to confirm that. Council Member Veenker added that it may not be the full $1M in FY2025 because it was not yet up and running. Vice Mayor Lauing was glad to see that one of the big components for HSRAP criteria was item number 5. He stated that Palo Alto should supplement service funding but not be a major provider, although with certain exceptions, such as Avenidas. He noted that the goal was to determine if 1% was the right guideline. He noted that in some years that had been almost tripled in terms of forecasts. He stated a decision needed to be made as to whether there should be a percentage that was a target and a guideline or if the new staff recommendation should be done. Regarding organization, he questioned how much interaction there should be with the HRC concerning HSRAP. Human Services Manager Van der Zwaag discussed Avenidas' budget. She explained that they wanted Avendias’ programs to have diversified funding sources. Chair Burt noted that the scope of what was included had been broadened from the traditional definition. He thought this exercise was an ongoing process. Concerning the supplemental list on Page 2, he queried which were included in the dollar amount. He explained that some SUMMARY MINUTES Page 4 of 9 Sp. Finance Committee Meeting Summary Minutes: 8/6/2024 categories were not clearly in one bucket or another. He thought there should be a grouping of entities that were in part social service, which may be majority of minority. Regarding Number 3, the HSRAP criteria and Palo Alto residents being the beneficiaries, he did not know if it should be narrowly defined and that maybe Palo Alto workers who were in need of services should be considered. He understood that Palo Altans being beneficiaries meant direct beneficiaries and then there were indirect beneficiaries through programs. He discussed Ada's Café being a social benefit to all, and thought such should be considered. Assistant to the City Manager Alamos clarified that all those listed on Page 2 were included in the dollar amount, including PATMA. Human Services Manager Van der Zwaag replied that she had been thinking about indirect benefits and would continue to do so. She had been looking into how such would be measured. She voiced that the criteria had to be an objective measurement that the organizations could respond to. She thought all the HSRAP grantees could be considered a social benefit. Chair Burt voiced that the decisions were a combination of objective and subjective criteria. He mentioned that quantitative criteria did not capture the whole picture. Human Services Manager Van der Zwaag was concerned that the greater knowledge of one organization would come into play, which could bring bias. Objective and subjective criteria intrigued her, and she would continue to think about that. Chair Burt expressed that the current criteria was influenced by HRC member's familiarity. He did not think it was realistic to remove familiarity from the picture. He explained why the criteria may need to be refined. Council Member Veenker thought it was hard to draw a clear line with respect to the rules but there needed to be a starting point, which could be adjusted. She had been asking about the dollar figure because she wanted the City to get credit, so to speak, for all the human services work being done. She understood there was $4.9M of capital in FY2025 and roughly $1M of operating expenses ongoing in 2026 and 2027. She inquired if pulling out the $1M each year would reflect the numbers being around 1%. She pointed out big projects should maybe sometimes not be included in the 1%. Chief Financial Officer Lauren Lai responded that excluding the $4.9M from FY2025, it would be at 1.06% for the year, and for the 10-year average from 2015 through 2025, it would be at 1.11%. Council Member Veenker thought that was an interesting benchmark to take note of and without the new big expenditure [inaudible]. Chair Burt added that 1% was based upon a certain definition of what would be included, and the definition had been broadened, and he did not think it was relevant to use 1% in the SUMMARY MINUTES Page 5 of 9 Sp. Finance Committee Meeting Summary Minutes: 8/6/2024 conversation. He voiced that the conversation should be about what was to be funded in different categories, what should be done, and what was afforded. Council Member Veenker discussed groups that helped with community building. She thought it would be valuable to have a discussion to set parameters and a description and to discuss what was desired. She stated that the definition in the slides was narrow. Human Services Manager Van der Zwaag specified that the definition was created without any of the other programs and services in mind. Chief Financial Officer Lai stated why the buckets being considered was important. She mentioned that Avenidas had been pulled out in 2016, which was $500M. Human Services Manager Van der Zwaag clarified that Avenidas and PACCC were pulled from HSRAP at their request, and now they were direct services contracts, which was more relevant to the services they were providing. The same thing happened with Project Sentinel in 2004. Chair Burt added that a special fund had been created for some of the community partners that did not fit well into HSRAP or otherwise. He thought it would be useful to go back and look systematically at what was being done and consider whether it was right, which he thought it was in general. He voiced that it was important to recognize that some of the most valuable nonprofits in the community were spinoffs. A category to consider may be City-funded, City- administered community partners in other cities. As a next step, in advance of the FY2026 budget, he wanted to add some things in and break down categories, and there may need to be a couple different spreadsheets depending on the amount of granularity, certainly one breaking down capital from operating, another breaking down major partners, one with partners not wholly or primarily human services but with a significant component to what human services did, and others that were community building and civic responsibility, which would help inform budgeting and priorities. He added that out of that, a gap could be done. Council Member Veenker inquire if entities for operating and capital could apply for HSRAP. She was curious where AbilityPath would fit in the groupings. Human Services Manager Van der Zwaag replied that only entities for operating applied for HSRAP. If it was capital for a project, she would usually refer them to CDBG. Chair Burt thought AbilityPath was human service but not something that could be funded through HSRAP. There had been a last-minute proposal and some additional information at the Budget hearing but it was too late, and it was said that a harder look would be taken. He did not know if a better explanation for the context, accountability, etc., had been received. He detailed a concern he had related to Mitchell Park Place. City Manager Shikada did not believe he was as up to date as others on AbilityPath, but he thought there was an evolution in staff's understanding related to it. It was not related to capital as originally believed but staffing a new program that raised questions on how it would SUMMARY MINUTES Page 6 of 9 Sp. Finance Committee Meeting Summary Minutes: 8/6/2024 dovetail with existing funding provided for existing programs. There was still a question on how to best to tackle it, and if it fit within the HSRAP program, as an example, what would be the timing opportunity for them to apply versus the cycle. It was services and may fit within HSRAP. There was a question as to the timing of their funding need and when it would open. Staff wanted to have some follow-up with them. Council Member Veenker asked if there was money given to them outside of the matching grant request. Human Services Manager Van der Zwaag answered that she knew of AbilityPath receiving only the HSRAP of about $80K and an Emerging Needs Grant of about $10K. Council Member Veenker expressed that AbilityPath knew that process and this was outside that process, so the question was whether to tell them the one-off independent ones would not be taken or that there was an alternative process or tell them to return for this one and it would be an additional request. Chair Burt inquired if they requested an ongoing or a one-time amount. City Manager Shikada responded that staff was seeking clarification as to it being an ongoing or a one-time amount. Chair Burt detailed why he did not feel it could be funded through HSRAP. Council Member Veenker asked if it being between X and Y dollars should be another criterion added to HSRAP. She noted that RFPs with grants would often specify an upper limit or they would give a range of typical grant amounts, just something to set an expectation. Human Services Manager Van der Zwaag responded that there was a lower end amount of $5K, and often new grantees were started at that range. There was no upper amount specified. They averaged from $30K to $50K. LifeMoves and AbilityPath were the largest grants now. She stated that specifying an upper limit or giving a range could easily be added to the RFP. There would be a premeeting ahead of any RFP time, which would be a great time to communicate this extra information. Vice Mayor Lauing spoke of the gaps and overlaps and thought this processes should identify those, which could address priorities. He felt that each year there should be a dollar cap or a percentage as a guideline. He voiced that in responsibility to the citizens, the 1% guideline should be adhered to. He discussed AbilityPath being one of the largest grants and being careful, particularly if they had already been contributed to. He added that no matter the classification, any nonprofit would find a way to fit into one of the classifications. Chair Burt thought there should be subcategories reflecting which of the seven categories would be served, so it could be determined how much was being spent on each of the different programs. He inquired if one of the biggest HSRAP recipients was the existing LifeMoves SUMMARY MINUTES Page 7 of 9 Sp. Finance Committee Meeting Summary Minutes: 8/6/2024 programs. He pointed out that there should be a distinction between the ongoing small share of the cost of the Opportunity Center versus what was being done at the transitional housing site. He queried what was in the Human Service Children and Youth programs versus all the other youth programs, such as the Children's Theatre. He stated that the human services definition was helpful, but the portion of children and youth programs within the human services scope versus all children and youth programs needed to be refined. Human Services Manager Van der Zwaag confirmed that one of the biggest HSRAP recipients was the existing LifeMoves programs at the Opportunity Center. Concerning what was in the Human Service Children and Youth programs versus all the other youth programs, she stated that was just HSRAP. City Manager Shikada remarked that Chair Burt had touched on the services provided by the City and that also fit the definition of human services, so it was a question of how to define the scope. As related to the portion of children and youth programs within the human services scope versus all children and youth programs, as a practical matter, it excluded what was provided by the City, so the definition was to provide a category of grant-making distinct from the services provided directly by the City. Chair Burt noted that grants were not given to soccer leagues, etc., so there were reasons, based on criteria, for looking at HSRAP grants for youth and children programs. City Manager Shikada stated he understood Chair Burt's point. Community Services Department Director Kristen O’Kane added that anything the City provided to the community was a direct service from the Community Services Department from the City's General Fund budget and through fees for service. Any grants coming through the application process were through HSRAP. Chair Burt thought this category was not anything that was not directly provided from the City because little league, etc., would not be eligible. It would be within meeting certain human services criteria that were youth and children related, which was not being explained in the definition. City Manager Shikada thought it would be worth explaining the distinction, which he tried to do in stating that in contrast to what was funded through HSRAP, little league or other athletic programs were financially self-sustaining as they were able to identify their own revenue sources to continue. In contrast, the programs funded through HSRAP targeted children and perhaps special needs and may have multiple community benefits and perhaps demonstrated not being financially self-sustaining and required... Chair Burt stated there was a certain aspect to self-sustaining. He spoke to why little league, etc., was self-sustaining and why they did not qualifying for HSRAP due to the criteria. He thought what was different was children and youth programs that had needs aligning with SUMMARY MINUTES Page 8 of 9 Sp. Finance Committee Meeting Summary Minutes: 8/6/2024 social service rather than community services, and thought needed to be given to how that would be described. Kristin O’Kane added that there were outliers. For example Project Safety was funded YCS and outside of the HSRAP process. Chair Burt voiced those were ones he wanted to continue supporting but again it was a question of where to categorize them. He discussed having a starting point and supporting valuable programs and meeting criteria, and maybe there needed to be reflection on how to get to that point and the reasons for needed programs. Human Services Manager Van der Zwaag thought the purpose of the meeting was to address HSRAP, which was well defined and... Chair Burt stated that was not the purpose of the meeting but a portion of the meeting. Assistant to the City Manager Alamos thought this was a valuable conversation and would lead well into the study session in trying to approach defining the establishment of relationships, criteria, and categories and layered over that was the audit review and recommendations of how to get the nonprofits and the appropriate level of reporting, etc. There was a referral from Council concerning whether to tie a percentage of the General Fund. She thought maybe the best solution would be to focus on the next steps, instead of a percentage of the General Fund, and conclude the referral. Chair Burt questioned at what point in time a recommendation should be returned to Council. Vice Mayor Lauing voiced that the place to start was to figure out the buckets within human services, even if not within HSRAP, and what would not be counted, so the total could be seen. Chair Burt added that it should also be ones not wholly within human services. Council Member Veenker was having trouble extracting the relationship with the nonprofit community more broadly and human services. There were public interest nonprofits aligning with the City's missions, which would fit in a bunch of buckets, and one was Safety Net Human Services and others could be community building and belonging, civics, arts, and health. Some could have a human services aspect. How this would be extracted and accounted for dollarwise may depend on the particular program or nonprofit. She asked what today's mission was. Chair Burt stated the Committee also needed to reflect on how much the discussion broadens. He thought that in going forward boundaries should be drawn and the buckets should have a significant component in human services, but there would be the broader set that Council Member Veenker was discussing, which was a worthwhile discussion but outside the human services discussion. This referral was about human services, but it had been discovered that there were gray boundaries, but he did not think there was Council direction to take on too SUMMARY MINUTES Page 9 of 9 Sp. Finance Committee Meeting Summary Minutes: 8/6/2024 much in this discussion, which could cause loss of focus. The Committee could return to Council and suggest there be a follow-on discussion about the other categories. Council Member Veenker hoped that could be the study session on nonprofits. She stated that she was describing the categories as different categories in parallel, not as concentric circles. City Manager Shikada thought the Committee was moving toward getting a little more clarity in terms of what would be in the buckets and perhaps staff should come back with a revised listing that may expand capital versus operating and include Magical Bridge. He was not sure if other revisions were identified. Chair Burt responded that one was categories of nonprofits with a significant human services component, whether majority or a sizeable minority, but did not fit as principally human services funding, such as PATMA and Downtown Streets Team. Chief Financial Officer Lai addressed the timing of staff coming back for the reporting and the Committee supporting staff as this evolved. She understood that the potential categorization should include capital versus operating, major partners, partners that were not wholly or partially human services, and partners in the other category that added value to the community. Staff would seek to have a better understanding of that and then look through the financial contributions. She voiced that a lot of custom and new reports were put together and then it would be determined how informative they might be – how data received might inform the policy and funding decisions. The 1% referral would be closed out and it appeared, based on the summarization, there would be at least 1% funding when broadly defining human services. Chair Burt replied that the original question was will funding be done at 1% in the way it was previously defined, so he did not think the 1% was relevant with a change in scope. He voiced that he was okay with not fixating on that. Chief Financial Officer Lai agreed. Chair Burt thought a lot of this was putting things in categories that were not distinct in how they may lay, so there was a lot of judgment, which was fine. NO ACTION TAKEN Adjournment: The meeting was adjourned at 4:42 P.M.