HomeMy WebLinkAboutStaff Report 2405-2969Supplemental Report Item No. 1. Page 1 of 10
Finance Committee
Supplemental Report
From: Lauren Lai, Administrative Services Director
Meeting Date: May 7, 2024
Item Number: 1
Report #:2405-2969
TITLE
Additional Funding Proposal Options for FY 2025 Budget Process Consideration
RECOMMENDATION
This is an informational report intended to assist the Finance Committee in its deliberations of
the FY 2025 Proposed Budget; no action is recommended.
BACKGROUND
In alignment with the City’s Charter, the City Manager prepares a proposed budget for Council
consideration no less than every two years for review and adoption. This budget provides
staff’s professional recommendations based on community feedback, council priorities,
operational needs, and regulatory requirements. In development of this annual financial plan,
staff evaluated requests submitted by departments, prior Council direction, audit
recommendations, community interests and Council priorities. Funding availability continues to
fall below both immediate requests as well as in the long term.
The budget development process highlights an inherent tension between desired areas to fund
and the resources available both in the immediate time period as well as positioning in
anticipation of future needs. The FY 2025 Proposed Budget assertively positions the City in
recognition of Council direction in recent years. Example of this include adjustments to the
assumed vacancy levels to fully align with historic savings, moving from a 3% to 5% assumed
level of vacancy, and more optimistic revenue estimates in alignment with or even beyond
consultant estimates for key taxes such as Sales Tax and Property Tax. The FY 2025 Proposed
Budget reflects Budget Stabilization Reserve (BSR) at 18.8%, down from 20%, with cautious
optimism as inflation and other economic, global and labor market factors impact both the
pace of revenue and expense growth.
The FY 2025 Proposed Budget continues the two-year budget balancing strategy from FY 2024
to use one-time surplus to bridge projected deficits. The FY 2025 budget relies on $6.9 million
from the Budget Uncertainty Reserve, leaving a balance of $4.7 million, including using $2.0
Supplemental Report Item No. 1. Page 2 of 10
million from the BSR to increase the Uncertainty Reserve to fund shortfalls expected in FY 2026
($9.7 million), for a net deficit of $5.0 million for FY 2026 budget planning. The Long-Range
Financial Forecast also projects continued deficits of $3.4 million in FY 2027 down to $0.5
million in FY 2029.
ANALYSIS:
•$ = up to $500,000
•$$ = up to $1 million
•$$$ = $1 million+
TABLE 1: Alternative Proposal Options for FY 2025 Investment
TABLE 1: Alternative Proposal Options for FY 2025 Investment
Potential Service/Capital Investment
Estimated
Funding
Need
Ongoing or
One-time
Funding
Junior Museum and Zoo (JMZ) Operations (CSD):
Add 6.0 FTE and delete 1.92 FTE, four part-time positions, partially offset by
additional revenue from increased programming and ticket pricing to $14 per
person. Additional staffing would support guest services and animal care. A
$500,000 Ongoing
Supplemental Report Item No. 1. Page 3 of 10
TABLE 1: Alternative Proposal Options for FY 2025 Investment
Potential Service/Capital Investment
Estimated
Funding
Need
Ongoing or
One-time
Funding
separate report can be found here for greater detail on this1, $500,000
ongoing net cost, pro-rated FY 2025 net expense of $175,000.
Cubberley Community Center Building Services Staffing (CSD):
Additional staffing of 1.0 Building Serviceperson at Cubberley Community
Center to address cleanliness challenges and support expended operations
seven days a week from 6am-11pm daily.
$105,000 Ongoing
Children’s Theater Production Staffing (CSD):
Additional staffing of 0.95 FTE, three part-time positions, overseeing
production tasks and overseeing carpenters, safety protocols, and provision
of set build technical drawings.
$85,000 Ongoing
Public Art Installation Crew Staffing (CSD):
Increase part-time staffing hours availability by the equivalent of 0.33 FTE,
three part-time positions, to support maintenance, handing of portable art
collection, and assisting in transporting and assembling large scale artworks in
the Public Art program.
$36,000 Ongoing
Family Events (CSD):
Additional funding to provide for a 6th summer concert series event and a
city-wide puzzle hunt annually; currently five (5) summer concerts are
recommended to be funded.
$35,000 Ongoing
Emergency Fire and Medical Service Expansion (FIR):
Adds 9.5 FTE in a multi-year plan to establish an emergency medical service
EMS) dedicated division resulting in addition of a 4th full time ambulance and
fire engine support in all fire stations. This costing models civilian staffing
ongoing costs in the third and final year of a phased implementation, with
first year costs estimated at $1.5 million. This would be subject to appropriate
conversations with labor organizations representing fire services. Station 2
and Station 4 to have engines stationed 24/7.
$4.0
million
Ongoing
Emergency Medical Service Expansion Contract (FIR):
Provides contractual services funding to increase survivability in medical
emergencies to explore additional ambulance coverage options to be able to
cover call volume and reduce response times for the current 90th percentile
response times at 9:41, above the goal of 8:00 minutes, however lower than
the current county medical response time of 27 minutes. Options include
contracting with a private ambulance company for peak coverage, adding an
hourly peak coverage ambulance with overtime, or establishing a civilian
$$ to $$$Ongoing
1 Finance Committee, May 7, 2024, Agenda Item #7:
https://recordsportal.paloalto.gov/Weblink/DocView.aspx?id=64511
Supplemental Report Item No. 1. Page 4 of 10
TABLE 1: Alternative Proposal Options for FY 2025 Investment
Potential Service/Capital Investment
Estimated
Funding
Need
Ongoing or
One-time
Funding
ambulance unit. Fiscal impact depends upon method and/or vendor
procurement.
Fire Services Strategic Plan Update (FIR):
Adds contract services funding for the completion of a strategic plan engaging
community stakeholders, the department, and internal resources to guide the
delivery of fire and medical response services last completed in FY 2019 and
sunsets in FY 2024. This cost reflects the partial offset of revenue from
Stanford for fire services.
$50,000 One-time
Fire Explorer Program (FIR):
Establish Fire/EMS Explorer Program through overtime and supply costs to
engage youth from 6th grade through age 20 in considering fire and
emergency medical services (EMS) as a career path. This cost reflects the
partial offset of revenue from Stanford for fire services.
$25,000 Ongoing
Active Recruitment Digital Marketing Services (HRD):
Add contract services funding for marketing and candidate sourcing expertise
for city-wide recruitment, bringing expertise on social media, marketing, and
digital advertising. A new position would be requested to maintain this
program ongoing. A separate report detailing a recent study and
recommendations for recruitment operations in the City can be found on the
May 6, 2024 Council agenda2.
$250,000 Ongoing
or
One-time
Employee Wellness and Benefits Administration (HRD):
Add 1.0 Human Resources Representative position to support wellness and
benefit programs ensuring adequate staff coverage and service levels creating
greater capacity for more experienced resources to focus on strategic benefit
programs. This would be funded in the General Benefit Fund, approximately
50% funded by the General Fund.
$155,000 Ongoing
Establish Organizational Development and Safety Division (HRD):
Adds 1.0 Human Resources Representative position to support citywide
career advancement, next generation preparation, organizational resilience
measures, and training needs of our highly specialized and high performing
organization, while also addressing crucial safety training requirements;
promote a culture of safety and continuous improvement across the city's
departments. This would be funded in the General Liability Fund,
approximately 50% funded by the General Fund.
$155,000 Ongoing
Expansion of Library Teen Services (LIB):
Adds 1.0 Librarian to develop and offer more programming and services to
$135,000 Ongoing
2 City Council, May 6, 2024, Agenda Item #16:
https://recordsportal.paloalto.gov/Weblink/DocView.aspx?id=82820
Supplemental Report Item No. 1. Page 5 of 10
TABLE 1: Alternative Proposal Options for FY 2025 Investment
Potential Service/Capital Investment
Estimated
Funding
Need
Ongoing or
One-time
Funding
the community, specifically teens, increasing dedicated resources for teen
programing in libraries to two positions. These positions support the Teen
Library Advisory Board (TLAB) in developing programs/events, mentoring,
collection development, materials selection and de-selection, technology
development.
Quarterly City-wide Newsletter (CMO):
Provides for the design, postage, and printing costs of four (4) city-wide
quarterly newsletter mailings with the preponderance of the costs reflecting
postage charges.
$100,000 Ongoing
Increase Code Enforcement Staffing (PDS):
Add 1.0 Code Enforcement Officer for a total of four (4) full-time code
enforcement positions to increase program as enforcement cases have
increased in recent years. Two of the three existing staffing were added
beginning in FY 2022 to support program expansion and enforcement efforts.
$155,000 Ongoing
Planning & Development Services Strategic Plan (PDS):
Adds contract services funding of $100,000, an estimated funding level
needed to support the development of a department-wide strategic plan as
recommended in the June 2022 audit report prepared by Baker Tilly in its
capacity as City Auditor.
$100,000 One-time
Construction and Demolition Permit (PDS):
Adds contract services funding of $100,000, an estimated funding level to
procure consultants to provide implementation, monitoring, enforcement,
and improvement of the City's Construction and Demolition (C&D) Debris
Diversion Program.
$100,000 Ongoing
Electric Vehicle Fleet Replacement (PWD):
Increases fleet replacement funding by $1.7 million in the General Fund, $2.2
million all funds to support replacement of all vehicles including heavy
equipment such as a fire engine, a dump truck, and an aerial tree truck with
electric vehicles. This differs from the FY 2025 Proposed Budget assumptions
which includes the replacement of 22 units, whereas this alternative proposal
option provides budget for the replacement of 34 units.
$2.2
million
Ongoing
OR
One-time
Storm Water Infrastructure Maintenance (PWD):
Adds contract services funding of $450,000 for Green Stormwater
Infrastructure maintenance ($250,000 ongoing) to support requirements of
the Municipal Regional Stormwater National Pollutant Discharge Elimination
System (NPDES) Permit in the San Francisco Bay Area (AKA Municipal
Regional Permit (MRP)) green stormwater infrastructure (GSI) for new and
redevelopment projects. Funding would be 68% General Fund and 32%
Stormwater Management Fund.
$250,000
to
$450,000
Ongoing
Supplemental Report Item No. 1. Page 6 of 10
TABLE 1: Alternative Proposal Options for FY 2025 Investment
Potential Service/Capital Investment
Estimated
Funding
Need
Ongoing or
One-time
Funding
Public Services Streets 311 Requests (PWD):
Add 0.96 FTE, two part-time General Laborer positions, to support work
orders generated from Palo Alto 311 street and sidewalk service requests and
address an existing backlog. Staff will provide support across teams,
encompassing sidewalks, streets, and storm drains; backlog of requests exist
in sidewalk replacement hot spots, and curb and gutter fixes.
$100,000 Ongoing
Sustainability Program Customer Service Support (UTL):
Adds 1.0 Associate Sustainability Program Administrator to support tracking
sales and marketing results, engage in direct customer calls related to both
sales and customer experience, and would assist with customer experience
improvement for various S/CAP programs. This would be funded in the
Electric Fund.
$150,000 Ongoing
TABLE 2: Council referrals through the City Council or Finance Committee, including Council
priority objectives, and community organization requests submitted to date
TABLE 2: Council Referrals & Community Requests
Potential Service/Capital Investment
Estimated
Funding
Need
Ongoing or
One-time
Funding
Ability Path Matching Gift:
On March 25, 2024, City Council approved consideration of $250,000 in
funding for Ability Path during the FY 2025 budget process. In partnership
with the Eden housing development of Mitchell Park Place, Ability Path will
provide program spaces on the first floor at this development and is seeking
this funding to encourage donors to support the work at Mitchell Park Place.
Additional information can be found in the March 4, 2024 presentation
received by the City Council (Attachment A, for ease of reference).
$250,000 One-time
Palo Alto Transportation Management Association (PATMA)
On April 23, 2024, the Finance Committee expressed a desire to consider
$200,000 in additional funding to the Palo Alto Transportation Management
Association (PATMA), increasing the funding allocation from $200,000 to
$400,000, to maintain current service levels. Previously PATMA has been
spending reserves to maintain service levels and have exhausted those funds.
Additional information can be found in the PATMA annual report and funding
request reviewed by the Committee3.
$200,000 Ongoing
3 Finance Committee, April 23, 2024, Agenda Item #6,
https://recordsportal.paloalto.gov/Weblink/DocView.aspx?id=64493
Supplemental Report Item No. 1. Page 7 of 10
TABLE 2: Council Referrals & Community Requests
Potential Service/Capital Investment
Estimated
Funding
Need
Ongoing or
One-time
Funding
Magical Series Programming & Events:
Magical Bridge Foundation requests additional annual funding of $150,000 to
develop and deliver adaptive and inclusive recreational programming and
events, collectively known as the "Magical Series." The intention is to provide
individuals of all ages and abilities with opportunities to partake in leisure and
community-building activities within a secure and supportive environment,
thereby fostering an enriching experience for all participants through a
Kindness Ambassador Program, a digital community hub, performances, and
classes. (Attachment B)
$150,000 Ongoing
United Nations Association Film Festival (UNAFF) & Annual Operations:
This action funds $45,000 in grant funding to the United Nations Association
Film Festival (UNAFF) October film festival ($25,000) and expended
programming throughout the year ($20,000). The FY 2024 Adopted Budget
provided a one-time allocation to support the festival held in Palo Alto to
ensure sufficient resources were available to provide a high-quality
experience for attendees; films presented cover topics such as environmental
sustainability and human rights, which align with many of the City’s future
goals and core ideals. UNAFF has requested an additional $20,000 to support
annual programming such as regular film screenings for the community
engagement. Attachment C reflects the funding request submitted by UNAFF.
Lastly, the City supports installation of banners at an annual cost of
approximately $10,000 for the festival.
$45,000 Ongoing
Environmental Volunteers Foothills Nature Preserve Program:
This action requests $11,000 for a Foothills Nature Preserve Program staffed
by the Environmental Volunteers including an information table on Saturdays
(five hours per week, for 50 weeks) and monthly nature walks. Funds would
support costs for program management, marketing and promotion, training,
and supplies and materials. Attachment D has a full breakdown of the costs
for this programming.
$11,000 Ongoing
Palo Alto History Museum Capital Contribution:
The Palo Alto Museum has requested a capital contribution of $1.0 million to
reflect a cost share of 50/50 between the City and Museum due to general
cost escalation. This would result in an amendment to the Tenant Work
Letter, that currently stipulate funding terms reflecting any cost escalation to
be covered by the HUD grant of $3 million. Attachment E reflects the letter
provided by the Museum requesting this financial support.
$1.0
Million
One-time
445 Bryant Community Facility:
Staff expects to continue discussion with the City Council in June 2024 on
proposals for use of the space. The FY 2025 makes minimal base line
assumptions for potential use of the space beginning in March 2025,
$Ongoing
OR
One-time
Supplemental Report Item No. 1. Page 8 of 10
TABLE 2: Council Referrals & Community Requests
Potential Service/Capital Investment
Estimated
Funding
Need
Ongoing or
One-time
Funding
however, costs both for capital investments and operations will be dependent
on Council discussion and direction.
Affordable Housing Development:
The City is planning significant investment in the building of affordable
housing in alignment with the City’s adopted Housing Element. Staff expect
that funding to support a share of the expected development will require
investment far beyond existing resources even if leveraged through the
issuance of debt.
$$$Ongoing
California Avenue Interim Improvements:
The Council adopted the 2024 priority outcome: Engage Cal Ave merchants
on high priority, rapid implementation projects. Staff estimates initial interim
improvements to cost $450,000 to support street paving adjustments,
signage, planters, and site furniture. Ongoing costs of maintaining these
improvements are unknown at this time.
$450,000 One-time
Human Services Resource Allocation Program (HSRAP) Funding Level:
Funding level for HSRAP or like programs remains an outstanding referral
under review by the Finance Committee. A follow-up of this is expected in the
third quarter of calendar year 2024 with the Finance Committee. As discussed
with the committee in March 2024, FY 2025 is the second year of a two-year
funding cycle and therefore aligning changes in funding levels for the cycle
beginning FY 2026 would be most efficient.
$$Ongoing
Car-free Streetscape Design for Ramona Street:
The Council adopted the 2024 priority outcome: Initiate preliminary analysis
and stakeholder engagement on a car-free streetscape design for Ramona
Street. Staff will begin this work within existing recommended resources,
however, anticipate that upon completion of scope and timeline, this effort
will require consultant resources for both design and feasibility analysis as
well as implementation costs. These are unknown at this time pending the
initiation of this priority.
$One-time
Supplemental Report Item No. 1. Page 9 of 10
TABLE 3: “Known Unknowns” – Known future investments, however, timing, scope of work
and/or funding needs are unknown
TABLE 3: “Known Unknowns”
Potential Service/Capital Investment
Estimated
Funding
Need
Ongoing or
One-time
Funding
Labor Cost Escalation:
The City’s General Fund is approximately 60% labor costs as a service driven
organization. Currently two significant efforts that may change these costs are
underway, 1) the City is beginning labor negotiations with all employee groups
with the sunset of current contracts by the close of FY 2025 and 2) the City is
undergoing its other post-employment benefits (OPEB) actuarial study
conducted every two years. Staff anticipate bringing the OPEB actuarial
studies which inform funding levels on May 21, 2024. Costs are expected to
increase as a result of the negative market performance in 2022.
+$1.5
million
Ongoing
Grade Separation/ Train Crossing:
Additional resources will need to be explored to plan and fund these grade
separations, including City staff pursuing additional funding through grant
opportunities as they become available and other financing mechanisms. Staff
has been successful in grant applications and received notifications of grant
awards for $6 million for Preliminary Engineering and Environmental work
from the Federal Rail Administration and $23.8 million for final design of
Churchill crossing.
$$$One-time
Capital Investments Citywide:
The Council and community have adopted various plans and identified areas of
future investment for capital improvements. These costs can range from as
little as $1 million to more than $20 million per project. None of these
projects are reflected in the FY 2025 Proposed Budget or the FY 2025-2029
Proposed Five Year Capital Improvement Plan. Examples of these include: full
implementation of the Council adopted Parks Master Plan, additional capital
or operating investments for partners of the City such as but not limited to the
Ventura Child Care Center, Palo Alto History museum (300 Homer Avenue
Roth facility), or Project Homekey; aging or noncompliant existing
infrastructure for ADA transition plan to full ADA compliance; new or future
infrastructure such as training facilities for Fire suppression training or City Hall
Forest Street side renovation after public safety moves out.
$$$One-time
Cubberley Community Center Redevelopment:
The City of Palo Alto and the Palo Alto Unified School District are actively
collaborating on a land transfer proposal that would enable the City to
permanently secure a portion of Cubberley for the development of a
community center. Both the cost of acquisition and the redevelopment of the
Cubberley site are expected to reach well over $300 million based on
conceptual designs developed through a community process completed in
2019. It is expected that a voter approved measure will be necessary to
support additional funding for this significant capital investment and
ultimately ongoing operational costs for the future facility.
$$$Ongoing
Supplemental Report Item No. 1. Page 10 of 10
TABLE 3: “Known Unknowns”
Potential Service/Capital Investment
Estimated
Funding
Need
Ongoing or
One-time
Funding
Significant Projects or Changing Operational Needs:
Updates to several significant programs, codes and ordinances are in process
or expected to be necessary in the near future. Examples of these include but
are not limited to a growing population with the development of additional
housing which will increase resources needed to maintain current service
levels, implementation of major plans such as the City’s housing element and
the capital and programs currently outlined in the eight-year plan, and the
internal services such as human resources, legal, finance, and technology to
support the growing services and organizational capacity.
$$$Ongoing
General Liability Umbrella Excess Premiums:
The City’s General Liability Program provides funding to cover various
insurance policies for City-owned facilities, equipment and machinery. The City
is self-insured for the first $1.0 million in losses per occurrence and
participates in a Joint Powers Authority for coverage up to $55 million per
occurrence. General Liability Umbrella Excess Premiums are anticipated to
increase in future years due to large settlements and judgements statewide as
well as significant national events and disasters.
$$Ongoing
ATTACHMENTS
Attachment A: Ability Path Matching Gift
Attachment B: Magical Series Programming & Events
Attachment C: United Nations Association Film Festival (UNAFF) & Annual Operations
Attachment D: Environmental Volunteers Foothills Nature Preserve Program
Attachment E: Palo Alto History Museum Capital Contribution
APPROVED BY:
Lauren Lai, Administrative Services Director