The URL can be used to link to this page

Home My WebLink AboutStaff Report 2505-4628CITY OF PALO ALTO Finance Committee Regular Meeting Tuesday, May 06, 2025 Agenda Item 1.Fiscal Year 2026 Budget Process Overview (9:00 AM – 10:30 AM) Supplemental Memo, Staff Presentation Item No. 1 Page 1 of 1 Finance Committee Supplemental Report From: Lauren Lai, Administrative Services Director Meeting Date: May 6, 2025 Item Number: 1 Report #:2505-4628 TITLE Supplemental Memo - Fiscal Year 2026 Budget Process Overview RECOMMENDATION Attached is Memorandum Agenda Item #1: Additional Information signed by Lauren Lai, Director of Administrative Services and Ed Shikada, City Manager. ATTACHMENTS Attachment A: Memorandum Agenda Item #1: Additional Information APPROVED BY: Lauren Lai, Administrative Services Director FINANCE COMMITTEE MEETING _______ [X] Placed Before Meeting [ ] Received at Meeting #1 City of Palo Alto MEMORANDUM To: Finance Committee Date: May 5, 2025 SUBJECT: Agenda Item #1: Additional Information Staff would like to provide the Finance Committee with additional information for the May 6 and May 7 FY 2026 Budget Hearing meetings. This material is supplemental in nature and does not reflect any recommended changes, it is for information and reference only. Information to Assist the Finance Committee During the Budget Review Process In previous years, the City Council has made a variety of requests to provide context and/or additional data points of reference to aid in budget deliberations. Staff has compiled these items to assist the Finance Committee’s review of the FY 2026 Proposed Budget documents. Capital Fund Reappropriation List City Council authorization is required for Capital funds to be carried forward from one fiscal year to the next (Palo Alto Municipal Code 2.28.090, amended September 2014). There are several opportunities for departments to request funds to be carried over from one fiscal year to the next. First, is the proposed budget process that the Finance Committee is reviewing. Departments may request funds to be carried over from one year to the next through the budget process. By estimating lower than budgeted expenditures in the current year (FY 2025), funds not anticipated to be spent in the current year but still required for the completion of the project are reflected in the first year (FY 2025) of the five-year CIP. The Fund Narrative for each fund indicates the total amount of reappropriations included in this budget. Second, is the Budget Wrap-up with the Finance Committee (scheduled May 20, 2025) where staff typically bring a list of final amendments to the proposed budget that include refinements to reappropriation assumptions. Due to the timing of information needed for the reappropriation refinements, this information may be brought forward as part of the budget adoption by the City Council (scheduled June 16, 2025). Lastly, as part of the year-end closing actions anticipated to be brought forward for City Council approval in the Fall, all projects will be reviewed to determine if additional adjustments to reappropriations are required. Attachment A shows the reappropriated amounts by fund and by capital project estimated not to be spent in FY 2025 that are included in the proposed budget, the first opportunity listed above. These amounts are recommended to be reappropriated to FY 2026 to continue work on the projects and keep Docusign Envelope ID: F49C4F78-751F-4748-A105-2AB0666B993B 2 the total project budgets intact over the five-year CIP and are reflected in the FY 2026 Proposed Capital Budget. Additional Staffing Information – Vacancies, Recruitment, & Retention: Vacancy rates have decreased significantly, from a high of 17% in FY 2020, the peak of the global pandemic, to a current (April 2025) low of 10.12%, as adjusted by final stage recruitment full-time- equivalents (“FTE”). This decrease in vacancy rate can be attributed to several factors including the City’s focus on recruitment and being an employer of choice – ensuring a positive work environment as well as resetting target salaries and benefits for flexibility – that has positively impacted employee retention. Other meaningful factors include an improved methodology to adjust for positions in the final stages of recruitment, such as those with offers of employment accepted, which are now more accurately reported as filled. While these numbers are promising, the pipeline remains highly competitive within the markets and industries in which the City competes for staff with the abilities to meet Palo Alto’s high expectations. Vacancy Report: A list of full-time (benefitted) positions that are vacant throughout the City is detailed in Attachment B. This attachment includes the position title, hiring status, and the distribution of the position allocation by fund. Summary Comparison of Vacancies Citywide April 2023 - April 2025 April 2023 Vacancies FY 2023 Adjusted Budget April 2024 Vacancies FY 2024 Adjusted Budget April 2025 Vacancies FY 2025 Adjusted Budget General Fund 64.68 557.56 77.14 587.06 56 602,57 Enterprise Funds 66.45 371.58 52.10 380.58 53 391,43 Other Funds 12.12 94.46 8.76 96.46 14 98.10 Total 143.25 1,023.60 138.00 1,064.10 121.5 1,092.10 Citywide Vacancy Rate 14.0% 13.0% 11.13% Recruitment Final Stage* (14.00) (26.50) (11) Net Vacancy w/ recruitment 129.25 12.6% 111.50 10.5% 110.5 10.12% * As indicated in Attachment B “status”, 11 FTE current vacancies are in the final stages of recruitment and can be considered filled. Assuming these positions are filled as anticipated, the citywide vacancy rate would be 10.12%. Factors Impacting Vacancy Rate (Turnover, New Positions, Promotions): The citywide vacancy rate is impacted by three key components (1) total number of positions, (2) total number of separations, including promotions, (3) total number of new hires. Each of these dynamic factors impact the vacancy rate. The City continued to reinvest in services in FY25, which necessitated the addition of new positions. New positions increased the total headcount and added to the overall vacancy rate until positions can be recruited and filled. The vacancy rate has decreased by increasing the number of department HR Liaisons (HRLs) to assist with recruiting, streamlining the pre-onboarding process, and hiring a Recruitment Manager to improve oversight and responsiveness for hiring decisions. Docusign Envelope ID: F49C4F78-751F-4748-A105-2AB0666B993B 3 Recruitment & Retention Activities Underway: In FY 2026 the City will continue to invest in advancing organizational resilience by continuing to implement a multiyear workforce recruitment strategic plan which includes continuing HRL and staff training, and further system integrations between the City’s applicant tracking system, onboarding system, and Enterprise Resource Planning system. This complements the City's positive work environment initiatives in the areas of professional development, career advancement/continuity planning, wellness and belonging. These initiatives build upon the success in improving employee retention, resulting in the reduction of year over year turnover rates, which aids in lowering the vacancy rate. The table below reflects the decrease in turnover during the past five years. General Fund Vacancy Rates and Savings: The vacancy rate for the General Fund as of April 2025 is 9.29% (56 vacancies to 602.57 FTE) or 8.63% when adjusted for final stage recruitments. Vacancy savings from Public Safety positions are typically exhausted by uses such as backfill, hire ahead programs, and overtime. Adjusting for Public Safety and final stage recruitments, the General Fund has a vacancy rate of 7% and budgeted vacancy savings of approximately 5%. Throughout the year vacancy savings are utilized by operating departments to deliver services and/or complete projects. Some illustrative examples of vacancy savings use include filling staffing gaps by contracting for professional services, hiring ahead for technical positions to allow overlap and smooth transitions, and supporting a summer internship program. It is important to consider that even if positions are vacant, there are still associated costs. For example, the City contributes to proactive retirement funding and is responsible for the Unfunded Accrued Liability (UAL) allocated to that position regardless of whether the position is filled. At the direction of the Council these costs are administratively allocated by position, which means that even if the position is vacant, the full budgeted cost will not result in savings to the City. Service Provider Spend Report for FY 2022, FY 2023, FY 2024 and Year-to-Date FY 2025 Attachment C is a list of service providers where the City spent more than $1 million between FY 2022 through FY 2025 (year-to-date). _______________________ _______________________ Lauren Lai Ed Shikada Director of Administrative Services City Manager Docusign Envelope ID: F49C4F78-751F-4748-A105-2AB0666B993B Attachment A: Capital Improvement Plan FY 2025 Reappropriations to FY 2026 Fund Project Title Proj. No. Expense Reappropriation Adjustment Revenue Reappropriation Adjustment 471 ‐ Capital Improvement Fund Americans With Disabilities Act Compliance PF‐93009 200,000 Animal Shelter Renovation PE‐19002 2,420,239 Art In Public Spaces AC‐86017 1,657,951 Athletic Courts Resurfacing PG‐06001 139,290 Baylands Boardwalk Piling Repair PE‐24000 33,787 Baylands Comprehensive Conservation Plan PG‐17000 43,100 Baylands Nature Preserve Entrance Gate OS‐24000 1,374 Benches, Signage, Walkways, Perimeter Landscaping, and Site Amenities PG‐06003 78,298 Bicycle and Pedestrian Transportation Plan Implementation PL‐04010 1,937,186 Boulware Park Improvements PE‐17005 143,174 Building Systems Improvements PF‐01003 65,000 Byxbee Park Completion PE‐18006 450,000 California Avenue District Gateway Signs PE‐17004 123,382 Churchill Avenue Enhanced Bikeway PL‐14000 200,000 City Bridge Improvements PE‐20001 1,508,071 City Hall Space Planning PE‐19000 486,400 Civic Center Electrical Upgrade & EV Charger Installation PE‐17010 1,265,872 Civic Center Fire Life Safety Upgrades PE‐18016 131,741 Civic Center Waterproofing Study and Repairs PE‐15020 427,537 El Camino Park Turf Replacement PG‐24000 639,550 Facility Interior Finishes Replacement PF‐02022 457,517 Fire Training Facility Replacement FD‐24000 49,988 Foothills Nature Preserve Boronda Lake Dock Replacement OS‐18000 102,000 Foothills Nature Preserve Dam Seepage Investigation and Repairs PE‐20000 18,463 Foothills Nature Preserve Improvements PE‐21000 692,744 Golf Course Net and Artificial Turf Replacement PG‐18000 770,000 Golf Reconfiguration & Baylands Athletic Center Improvements PG‐13003 97,906 Heritage Park Site Amenities Replacement PG‐21000 40,000 JMZ Renovation AC‐18001 398,024 Library Automated Material Handling LB‐21000 324,586 Lucie Stern Community Theater Mechanical Equipment Replacement PE‐24002 2,199,713 Lucie Stern Community Theatre Fire Curtain AC‐24001 200,000 Municipal Service Center Lighting, Mechanical, and Electrical Improvements PF‐16006 6,365,504 New California Avenue Area Parking Garage PE‐18000 743,876 New Downtown Parking Garage PE‐15007 13,106,958 Open Space Lakes And Pond Maintenance OS‐00002 74,430 Open Space Trails and Amenities OS‐00001 91,773 Park and Open Space Emergency Repairs PG‐09002 95,161 Park Restroom Installation PG‐19000 173,898 Parking District Implementation PL‐15003 163,900 Performing Arts Venues Seat Replacement AC‐18000 53,289 Ramos Park Improvements PG‐14000 1,010 Rinconada Pool Family Changing Room PE‐24004 1,181,202 Robles Park Improvements PE‐18015 641,308 Safe Routes To School PL‐00026 888,000 388,000 San Francisquito Creek Joint Powers Authority Ongoing Creek Projects PE‐22000 150,652 Sidewalk Repairs PO‐89003 100,000 Stanford Palo Alto Community Playing Fields Turf Replacement PG‐26000 2,424,114 Street Lights Condition Assessment PE‐13014 220,000 Street Lights Improvements PO‐05054 108,422 Street Maintenance PE‐86070 218,549 Thermoplastic Lane Marking and Striping PO‐11001 125,000 Transportation and Parking Improvements PL‐12000 250,000 250,000 University Avenue Streetscape Update PE‐21004 151,443 Mitchell Park Library Repair PE‐24006 151,192 Baylands Interpretive Signage Program OS‐24001 47,343 47,343 Traffic Intersection Accessibility Improvement Project PL‐25001 250,000 250,000 Children's Theatre Facility Upgrade/Repair AC‐28002 125,000 471 ‐ Capital Improvement Fund Total 45,204,917 935,343 472 ‐ Cubberley Property Infrastructure Fund Cubberley Field Restroom CB‐17002 27,697 Cubberley Roof Replacements CB‐16002 100,000 472 ‐ Cubberley Property Infrastructure Fund Total 127,697 530 ‐ Airport Enterprise Fund Airport Parking Lot Electric Vehicle Charger Installation AP‐24001 25,000 22,500 Automated Weather Observation System (AWOS)AP‐19000 1,340,237 1,291,050 530 ‐ Airport Enterprise Fund Total 1,365,237 1,313,550 523 ‐ Electric Fund Colorado Power Station Equipment Upgrades EL‐19001 2,725,339 Colorado Substation Site Improvements EL‐19002 1,041,142 Foothills Rebuild (Fire Mitigation)EL‐21001 1,599,239 Inter‐substation Line Protection Relay EL‐17005 437,505 Smart Grid Technology Installation EL‐11014 876,335 Substation Breaker Replacement EL‐17002 2,748,481 Substation Physical Security EL‐16003 2,476,728 Wood Pole Replacement EL‐19004 328,950 Hanover Substation Upgrade Project EL‐24001 14,779,014 523 ‐ Electric Fund Total 27,012,733 533 ‐ Fiber Optics Fund Fiber Optics Customer Connections FO‐10000 153,100 Fiber Optics Network ‐ System Improvements FO‐10001 540,325 Fiber‐to‐the‐Premises (FTTP)FO‐24000 10,946,450 533 ‐ Fiber Optics Fund Total 11,639,875 524 ‐ Gas Fund Gas Main Replacement ‐ Project 25 GS‐15000 8,728,324 Gas Meters and Regulators GS‐80019 516,000 524 ‐ Gas Fund Total 9,244,324 528 ‐ Stormwater Management Fund Green Stormwater Infrastructure SD‐22001 1,239,330 Storm Drainage System Replacement And Rehabilitation SD‐06101 1,183,015 528 ‐ Stormwater Management Fund Total 2,422,345 527 ‐ Wastewater Collection Fund Wastewater Collection System Rehabilitation/Augmentation Project 32 WC‐20000 1,000,000 527 ‐ Wastewater Collection Fund Total 1,000,000 526 ‐ Wastewater Treatment Fund Headworks Facility Replacement WQ‐16002 1,638,974 New Laboratory And Environmental Services Building WQ‐14002 16,472,600 Attachment A Page 1 of 2 Docusign Envelope ID: F49C4F78-751F-4748-A105-2AB0666B993B Attachment A: Capital Improvement Plan FY 2025 Reappropriations to FY 2026 Fund Project Title Proj. No. Expense Reappropriation Adjustment Revenue Reappropriation Adjustment 526 ‐ Wastewater Treatment Fund Outfall Line Construction WQ‐19000 10,605,800 Secondary Treatment Upgrades WQ‐19001 811,320 526 ‐ Wastewater Treatment Fund Total 29,528,694 522 ‐ Water Fund Water System Supply Improvements WS‐11004 2,307,792 522 ‐ Water Fund Total 2,307,792 682 ‐ Technology Fund City Council Chambers Upgrade TE‐19001 1,483,737 Computer Aided Dispatch (CAD) Upgrade TE‐23000 320,000 Enterprise Resource Planning Upgrade TE‐19000 230,000 Infrastructure Management System TE‐13004 285,906 IT Data Center Upgrade TE‐25000 850,000 682 ‐ Technology Fund Total 3,169,643 681 ‐ Vehicle Replacement & Maintenance Fund Emergency Repair and Replacement VR‐15001 158,194 Scheduled Vehicle and Equipment Replacement ‐ Fiscal Year 2020 VR‐20000 30,000 Scheduled Vehicle and Equipment Replacement ‐ Fiscal Year 2021 VR‐21000 16,981 Scheduled Vehicle and Equipment Replacement ‐ Fiscal Year 2023 VR‐23000 712,277 Scheduled Vehicle and Equipment Replacement ‐ Fiscal Year 2024 VR‐24000 3,296,275 Scheduled Vehicle and Equipment Replacement ‐ Fiscal Year 2025 VR‐25000 3,398,584 681 ‐ Vehicle Replacement & Maintenance Fund Total 7,612,311 Grand Total 140,635,568 2,248,893 Attachment A Page 2 of 2 Docusign Envelope ID: F49C4F78-751F-4748-A105-2AB0666B993B Department Name Position Name Enterprise Funds General Fund Other Funds Total Recruitment Status Administrative Services Department Accounting Specialist 0.5 0.5 - Administrative Services Department Management Analyst 1 1 - Administrative Services Department Manager Budget 1 1 - Administrative Services Department Offset Equipment Operator 1 1 - Administrative Services Department Senior Accountant 1 1 Interviews in Progress Administrative Services Department Senior Buyer 1 1 Offer in Progress Administrative Services Department Senior Management Analyst 1 1 Filled Administrative Services Department Sr Management Analyst 1 1 Offer in Progress Administrative Services Department Warehouse Supervisor 1 1 Filled Community Services Department Coord Rec Prog 1 1 Filled Community Services Department Park Maint Person 1 1 Filled Community Services Department Park Ranger 1 1 - Community Services Department Program Assistant I 1 1 Hiring Review in Progress Community Services Department Program Assistant I 1 1 Interviews in Progress Fire Department Assistant Fire Marshal 1 1 - Fire Department Fire Apparatus Operator EMT HAZMT PARA 1 1 Interviews in Progress Fire Department Fire Appratus Op Emt 1 1 Interviews in Progress Fire Department Fire Cap Haz Mat EMT 1 1 Interviews in Progress Fire Department Fire Fighter EMT 1 1 Interviews in Progress Fire Department Fire Fighter EMT Haz Mat Paramedic 1 1 Interviews in Progress Fire Department Fire Fighter Prmdc-12.5 Emt 1 1 Interviews in Progress Fire Department Fire Fighter Prmdc-12.5 Emt 1 1 Interviews in Progress Fire Department Fire Fighter Trainee 1 1 Interviews in Progress Fire Department Fire Fighter Trainee 1 1 Interviews in Progress Human Resources Department Sr. HR Administrator 1 1 Interviews in Progress Information Technology Department Asst Director Information Technology/CTO 1 1 Offer in Progress Information Technology Department Manager of Information Technol 1 1 - Information Technology Department Sr Technologist 1 1 Filled Information Technology Department Sr. Business Analyst 1 1 - Library Services Department Senior Business Analyst - M 1 1 - Library Services Department Coordinator Library Program 1 1 Hiring Review in Progress Library Services Department Library Associate 1 1 - Library Services Department Sr Librarian 1 1 Interviews in Progress Library Services Department Sr Librarian 1 1 Interviews in Progress Library Services Department Sr Librarian 1 1 - Office of Transportation Chief Transportation Official 1 1 Filled Office of Transportation Planner 1 1 - Planning & Development Services Department Building/Planning Technician 1 1 - Planning & Development Services Department Planner 1 1 - Planning & Development Services Department Principal Planner 1 1 - Planning & Development Services Department Principal Planner 1 1 Hiring Review in Progress Planning & Development Services Department Senior Building Inspector 1 1 Hiring Review in Progress Planning & Development Services Department Senior Building Inspector 1 1 Hiring Review in Progress Planning & Development Services Department Senior Building Inspector 1 1 Hiring Review in Progress Planning & Development Services Department Senior Planner 1 1 - Planning & Development Services Department Senior Planner 1 1 - Planning & Development Services Department Sr Plan Check Engineer 1 1 Filled Planning & Development Services Department Technologist 1 1 - Police Department Police Agent/Advance 1 1 Offer in Progress Police Department Police Officer-Adv Bilingual 1 1 Posted Police Department Police Officer-Adv-Bilingual 1 1 Posted Police Department Police Officer-Bilingual 1 1 Posted Police Department Police Officer-Inter 1 1 Posted Police Department Police Officer-Inter 1 1 Posted Police Department Police Officer-Inter 1 1 Posted Police Department Public Safety Dispatcher - II 1 1 Posted Police Department Public Safety Dispatcher - II 1 1 Posted Public Works Department Coord Pub Wks Proj 1 1 - Office of Transportation Planning & Development Services Department Police Department Utilities Department Library Services Department Administrative Services Department Community Services Department Fire Department Human Resources Department Information Technology Department Attachment B Page 1 of 2 Docusign Envelope ID: F49C4F78-751F-4748-A105-2AB0666B993B Department Name Position Name Enterprise Funds General Fund Other Funds Total Recruitment Status Public Works Department Administrative Associate III 1 1 - Public Works Department Architect/Pk Planner 1 1 - Public Works Department Assitant Fleet Manager 1 1 - Public Works Department Cement Finisher 1 1 Interviews in Progress Public Works Department Coord Pub Wks Proj 1 1 - Public Works Department Equipment Maintenance Svcs Per 1 1 - Public Works Department Fleet Services Coordinator 1 1 - Public Works Department Industrial Waste Inspector 1 1 Interviews in Progress Public Works Department Inspector, Field Svc 1 1 - Public Works Department Landfill Technician 1 1 Filled Public Works Department Management Assistant 1 1 - Public Works Department Mgr Maint Ops 1 1 Posted Public Works Department Motor Equip Mech - II 1 1 - Public Works Department Sr Chemist 1 1 Interviews in Progress Public Works Department Sr Operator WQC 1 1 - Public Works Department Supv WQC Oper 1 1 - Public Works Department Traf Cont Maint I 1 1 - Public Works Department Tree Trim/Ln Clr 1 1 Interviews in Progress Public Works Department Tree Trim/Ln Clr 1 1 Interviews in Progress Public Works Department WQC Plant Operator II 1 1 Filled Public Works Department WQC Plt Oper II 1 1 Filled Public Works Department WQC Plt Oper II 1 1 Filled Utilities Department Administrative Associate II 1 1 - Utilities Department Asst Dir Util Customer Support Svcs 1 1 - Utilities Department Cement Finisher 1 1 - Utilities Department Cust Svc Represent 1 1 Interviews in Progress Utilities Department Director Utilities 1 1 Filled Utilities Department Electric Heavy Equip Oper 1 1 - Utilities Department Electric Project Engineer 1 1 - Utilities Department Electrical Equipment Tech 1 1 - Utilities Department Electrician - Lead 1 1 Hiring Review in Progress Utilities Department Engineering Technician III 1 1 Filled Utilities Department Engr Mgr-WGW 1 1 Posted Utilities Department Engr Tech III 1 1 Offer in Progress Utilities Department Gas and Water Meas and Control Tech 1 1 Posting in Progress Utilities Department HEO/Installer Repairer 1 1 - Utilities Department Lineper/Cable Spl 1 1 Filled Utilities Department Lineper/Cable Spl-L 1 1 - Utilities Department Meter Reader 1 1 - Utilities Department Meter Reader 1 1 - Utilities Department Meter Reader-Lead 1 1 - Utilities Department Metering Technician 1 1 Hiring Review in Progress Utilities Department Mgmt Analyst - U 1 1 - Utilities Department Mgr Util Telecommunications 1 1 - Utilities Department OH UG Troubleman 1 1 Hiring Review in Progress Utilities Department OH UG Troubleman 1 1 Hiring Review in Progress Utilities Department Operations Supervisor 1 1 - Utilities Department Project Engineer 1 1 Interviews in Progress Utilities Department Senior Electrical Engineer 1 1 Posted Utilities Department Senior Engineer - U 1 1 - Utilities Department Sr Mkt Analyst 1 1 - Utilities Department Sr Resource Planner 1 1 Interviews in Progress Utilities Department Sr Resource Planner 1 1 - Utilities Department Sr. Electrical Engineer 1 1 Posted Utilities Department Substation Electrician 1 1 - Utilities Department Util Comp Tech 1 1 Hiring Review in Progress Utilities Department Util Engr Estimator 1 1 Filled Utilities Department Util Install/Rep 1 1 - Utilities Department Util Install/Rep 1 1 - Utilities Department Utilities Supervisor 1 1 Hiring Review in Progress Utilities Department Utilities System Analyst 1 1 Posting in Progress Utilities Department Utility Field Services Representative 1 1 Posting in Progress Utilities Department Utility Marketing Program Administrator 1 1 - Utilities Department WGW Utilities Field Inspector 1 1 Hiring Review in Progress Grand Total 52.5 56 13 121.5 Public Works Department Attachment B Page 2 of 2 Docusign Envelope ID: F49C4F78-751F-4748-A105-2AB0666B993B VENDOR NAME FY 2022 FY 2023 FY 2024 FY 2025 TOTAL ANDERSON PACIFIC ENGINEERING 4,807,211$ 12,482,352$ 63,681,977$ 35,976,082$ 116,947,622$ SWINERTON BUILDERS 38,280,086 34,858,530 14,807,454 3,229,723 91,175,792 CRATUS INC 1,176,003 3,281,899 10,672,679 3,840,800 18,971,382 AUTHORITY FOR CA CITIES EXCESS LIAB 3,310,860 3,731,516 4,505,690 5,002,011 16,550,077 O'GRADY PAVING INC 2,360,486 4,653,097 3,840,945 4,724,323 15,578,851 C OVERAA & CO 2,203,374 6,090,607 3,921,656 2,019,673 14,235,311 THE DAVEY TREE SURGERY COMPANY 2,090,821 3,573,774 3,492,802 4,486,411 13,643,808 MP NEXLEVEL OF CALIFORNIA INC 2,855,718 2,612,140 3,825,663 4,138,041 13,431,562 PALO ALTO UNIFIED SCHOOL DISTRICT 3,629,898 3,062,529 3,623,060 2,836,483 13,151,970 DALEO INC 4,305,444 2,443,532 2,083,985 4,173,208 13,006,170 SENSUS USA INC 215,613 2,400,610 5,826,794 4,354,809 12,797,827 TEICHERT CONSTRUCTION 7,638,364 3,666,969 894,133 - 12,199,465 THOMAS J BRANDI - - - 12,000,000 12,000,000 OB SPORTS GOLF MANAGEMENT 3,122,574 3,184,540 3,068,513 1,618,863 10,994,490 SWA SERVICES GROUP INC 2,249,828 2,365,966 2,851,251 2,639,077 10,106,123 PALO ALTO HISTORY MUSEUM - - 4,777,772 3,920,991 8,698,763 STATE WATER RESOURCES CONTROL BOARD 2,488,129 2,486,524 2,512,076 977,432 8,464,161 RANGER PIPELINES INC - 7,306,584 123,778 - 7,430,363 HOT LINE CONSTRUCTION INC 2,641,827 3,008,291 1,665,130 - 7,315,248 CAROLLO ENGINEERS INC - 699,653 2,282,348 3,670,165 6,652,166 VIP POWERLINE CORP - - 1,756,961 4,453,040 6,210,001 BRIGHTVIEW LANDSCAPE SERVICES INC 890,764 1,320,835 1,963,288 1,568,856 5,743,744 COUNTY OF SANTA CLARA, VARIOUS DEPTS 2,948,403 857,686 842,347 911,023 5,559,458 GRANITE CONSTRUCTION CO INC 4,630,572 - - - 4,630,572 AZUL WORKS INC 4,163,911 448,603 - - 4,612,514 OBS ENGINEERING INC - - 1,755,208 2,516,626 4,271,834 PETS IN NEED 710,768 636,902 1,428,633 1,027,500 3,803,803 MAGELLAN ADVISORS LLC 1,174,320 833,866 1,226,712 519,863 3,754,761 NOVA PARTNERS INC 1,276,927 1,101,704 969,876 387,164 3,735,671 WEST COAST ARBORISTS, INC 196,313 1,206,142 1,347,977 923,431 3,673,862 ALLIANT INSURANCE SERVICES INC 691,067 724,583 1,103,113 1,131,133 3,649,897 EMANUEL LAW GROUP, A PROFESSIONAL CORPORATION - - - 3,600,000 3,600,000 SCA OF CA LLC - 1,043,522 1,308,114 1,168,404 3,520,041 NOMAD TRANSIT LLC - 310,133 1,826,266 1,128,195 3,264,594 LYSTEK INTERNATIONAL LIMITED 585,167 877,906 712,595 1,065,341 3,241,009 MCCANDLESS LIMITED LLC 822,708 820,353 833,131 724,838 3,201,031 BADGER METER 169,544 224,190 2,654,901 135,140 3,183,775 4LEAF INC 701,162 981,891 856,908 630,486 3,170,446 ONESOURCE SUPPLY SOLUTIONS LLC / ONESOURCE DISTRIBUTORS LLC 418,142 894,025 902,398 898,108 3,112,673 LIFEMOVES 233,688 123,820 2,237,009 360,612 2,955,129 BENINK & SLAVENS LLC - - - 2,889,519 2,889,519 INSIGHT PUBLIC SECTOR INC 513,856 750,418 784,542 833,460 2,882,276 VALLEY OIL COMPANY 702,958 802,220 791,304 558,999 2,855,480 STATE OF CALIFORNIA, VARIOUS DEPTS 674,340 814,232 900,881 464,268 2,853,721 EAGLE SYSTEMS INTERNATIONAL Inc 7,540 95,008 1,284,238 1,410,836 2,797,622 GOLDEN BAY CONSTRUCTION INC 884,067 486,345 921,060 469,287 2,760,760 TECHLINK SYSTEMS INC 133,350 693,112 1,003,054 912,281 2,741,797 PARKING GUIDANCE SYSTEMS LLC - - 954,388 1,678,710 2,633,097 285 HAMILTON LLC 695,149 622,786 686,536 624,572 2,629,043 LIFE INSURANCE OF NORTH AMERICA 623,142 693,420 775,164 527,713 2,619,439 SYNAGRO WWT INC 381,819 460,000 520,592 1,163,220 2,525,630 PRISM 522,540 544,155 663,436 786,563 2,516,694 ROSSDRULISCUSENBERY ARCHITECTURE INC 1,465,978 394,255 501,213 139,611 2,501,057 WOODARD & CURRAN 474,600 618,898 814,162 582,677 2,490,337 SAFEBUILT LLC 536,707 740,421 760,983 439,849 2,477,959 ALL CITY MANAGEMENT SERVICES INC 520,123 593,133 684,804 631,728 2,429,788 BLACK & VEATCH CORPORATION 1,237,333 526,685 222,907 439,643 2,426,568 BROWN AND CALDWELL 967,165 594,542 518,444 331,676 2,411,827 C&S ENGINEERS INC 872,545 695,848 695,677 135,729 2,399,799 GRAHAM CONTRACTORS INC 932,583 - - 1,365,067 2,297,649 ANIXTER INC 540,951 557,446 490,864 686,483 2,275,744 TMT ENTERPRISES INC 522,317 566,151 555,993 614,361 2,258,821 Largest Vendor Payments by Fiscal Year (All Funds) * Data as of April 24, 2025 Includes Check, ACH, and most related wire payments (excludes top dollar for commodity purchases and City of Sunnyvale). Does not include P-Card payments. Attachment C Page 1 of 2 Docusign Envelope ID: F49C4F78-751F-4748-A105-2AB0666B993B VENDOR NAME FY 2022 FY 2023 FY 2024 FY 2025 TOTAL Largest Vendor Payments by Fiscal Year (All Funds) * Data as of April 24, 2025 Includes Check, ACH, and most related wire payments (excludes top dollar for commodity purchases and City of Sunnyvale). Does not include P-Card payments. PALO ALTO COMMUNITY CHILD CARE 399,916 546,472 707,392 594,353 2,248,133 DENALI WATER SOLUTIONS LLC 527,653 733,229 703,754 150,781 2,115,417 AVENIDAS 552,089 443,144 632,462 458,913 2,086,609 BAKER TILLY US LLP / BAKER TILLY ADVISORY GROUP LP 297,181 658,178 292,080 784,771 2,032,211 NAPA AUTO PARTS 437,559 625,466 776,427 175,413 2,014,865 CLEARESULT CONSULTING INC 266,520 299,771 688,660 696,039 1,950,990 RINCON CONSULTANTS INC 463,603 600,694 527,820 337,656 1,929,773 CASEY CONSTRUCTION INC - 660,216 1,039,111 189,624 1,888,951 EPI-USE LABS LLC - 746,834 621,237 507,390 1,875,462 DASHER TECHNOLOGIES INC 198,783 603,681 365,240 594,346 1,762,050 NATIONAL AUTO FLEET GROUP 532,060 486,355 646,720 59,308 1,724,442 BEST CONTRACTING SERVICES INC 1,543,896 174,184 - - 1,718,080 ACCURATE STRUCTURAL INC - 511,879 961,206 208,379 1,681,464 THE PELOTON ALLIANCE 341,484 391,532 539,744 403,472 1,676,232 MOMENTUM FOR HEALTH - - 620,033 1,050,511 1,670,544 BKF ENGINEERS 469,381 210,280 340,872 611,410 1,631,942 LAZ KARP ASSOCIATES LLC 327,866 298,093 462,270 518,538 1,606,767 JJR CONSTRUCTION INC - - - 1,595,400 1,595,400 CITY OF MENLO PARK 416,542 540,673 373,665 254,776 1,585,655 PIVOT INTERIORS INC 517,329 235,137 570,092 260,048 1,582,605 SAN FRANCISQUITO CREEK JOINT POWERS 337,240 395,926 472,763 350,935 1,556,864 HARRIS COMPUTER SYSTEMS 380,990 368,009 405,408 321,928 1,476,334 1900 EMBARCADERO PROPERTY OWNER LP 359,386 342,920 366,322 353,336 1,421,965 SAK CONSTRUCTION LLC - - - 1,412,579 1,412,579 HITACHI ENERGY USA INC 45,636 - 298,130 1,050,755 1,394,520 CONTRACT SWEEPING SERVICES 825,976 279,449 190,426 95,213 1,391,064 STANFORD UNIVERSITY 332,084 148,959 616,882 284,370 1,382,295 E SOURCE COMPANIES LLC 364,872 493,699 410,664 84,720 1,353,955 CLEAN HARBORS ENVIRONMENTAL SERVICE 379,885 254,717 228,614 446,640 1,309,856 CITY OF MOUNTAIN VIEW 603,515 178,116 239,924 286,055 1,307,609 RON PARIS CONSTRUCTION CO INC - 1,173,324 116,472 - 1,289,796 SAP PUBLIC SERVICES INC 297,634 307,554 316,360 325,697 1,247,246 THE OKONITE COMPANY - 113,926 521,418 584,568 1,219,911 GRANITE ROCK COMPANY 147,146 181,061 422,382 466,043 1,216,632 ISPATIAL TECHNO SOLUTIONS INC 410,740 443,760 213,160 136,060 1,203,720 AT&T 303,440 313,117 301,458 262,676 1,180,690 MNS ENGINEERS INC 598,307 444,684 131,491 - 1,174,482 ACCELA INC 213,021 206,379 362,739 380,876 1,163,015 EMERALD TRANSFORMER 6,935 2,725 7,332 1,137,931 1,154,923 TRB AND ASSOCIATES, INC 50,831 241,028 409,185 446,939 1,147,982 GOLDEN STATE FIRE APPARATUS INC - 1,135,943 - - 1,135,943 NV5 INC 332,031 389,643 244,787 164,251 1,130,713 DG WEST 2021 LLC 147,485 341,795 346,890 253,787 1,089,957 M-GROUP (METROPOLITAN PLANNING GROUP)216,800 364,893 337,960 157,030 1,076,682 HAMILTON AND HIGH LLC - - 1,075,000 - 1,075,000 ARC DOCUMENT SOLUTIONS LLC 225,965 265,187 303,984 266,900 1,062,037 AECOM TECHNICAL SERVICES INC 218,841 139,619 640,803 57,496 1,056,759 JOHNSON CONTROLS FIRE PROTECTION LP 159,068 271,119 446,790 174,831 1,051,809 GOLDEN GATE SYSTEMS LLC 134,396 110,798 357,061 436,196 1,038,451 CANOPY 114,403 397,410 229,750 280,825 1,022,388 BAKER & TAYLOR / BAKER TILLY ADVISORY GROUP LP 221,298 232,140 282,464 280,369 1,016,272 GSW CONSTRUCTION INC - - 859,556 142,607 1,002,163 GRAND TOTAL 130,918,542$ 143,868,067$ 198,738,341$ 160,536,844$ 634,061,794$ Attachment C Page 2 of 2 Docusign Envelope ID: F49C4F78-751F-4748-A105-2AB0666B993B May 6, 2025 www.paloalto.gov/budget FY 2026 PROPOSED OPERATING AND CAPITAL BUDGETS 1 BUDGET CONVERSATIONS & CALENDAR 2 MAY 5 MAY 6 & 7 MAY 12 MAY 20 JUNE 10 JUNE 16 Finance Committee Budget Workshops: Review the proposed budgets and recommend amendment(s) Study Session City Council: Finance Committee check-in with the City Council Non-Profit Partnerships Workplan: May 9 – Proposal deadline June 10 - P&S review & recommend awards June 16 - Council budget adoption includes funding appropriation and grantees City Council: FY 2026 Proposed Budget Overview:Discuss guidance for Finance Committee colleagues City Council Budget Adoption: Adopt Operating & Capital budgets (as amended by the Finance Committee) Finance Committee Budget Wrap-up:Based on the input from the May budget meetings, recommend final adjustment(s) to proposed budgets for Council adoption 3 NEW INFORMATION (AS OF MAY 6th 9AM) OV E R V I E W •Open Budget Web App updated to include FY 2026 Proposed Budget •At-Places Memorandum o Issued May 6th to provide general information (i.e. vacancies, capital project reappropriations, and contract expenses) •Staff Presentations o Today (May 6th) linked to agendas (www.paloalto.gov/budget) and o May 7th presentations will be posted prior to 9AM Tuesday 4 BUDGET HEARING GUIDELINES •Meeting proceedings organized by agenda item: o Combined presentation from departments by City service area (CSA) o Highlight budgetary information and areas of focus o Finance Committee discussion with a 5-minute timer for Councilmember comments and questions •Recommended Motions: o “Tentative Approval of [insert item]”: majority vote o Recommend to be placed in the “parking lot”: majority vote o Request additional information/staff follow up: majority vote Budget Hearings Council Update Budget Wrap Council Adoption OV E R V I E W 5 “PARKING LOT” OV E R V I E W •Used as a running list of items Committee approves adjusting, items for further discussion (parking lot), and recommended use of funds available. •Status reviewed at the end of each day •Will inform the basis of the discussions with Finance Committee at budget wrap The community is encouraged to join the budget conversations: •Finance Committee Budget Hearings: May 6 at 9:00 A.M. May 7 at 9:00 A.M. May 20 at 1:00 P.M. – Wrap-up •City Council Budget Discussion: May 12 at 5:30 P.M. •City Council Budget Adoption: June 16 at 5:30 P.M. All meeting details listed at https://www.paloalto.gov/budget JOIN THE BUDGET CONVERSATION 6 OVERVIEW May 6, 2025 www.paloalto.gov/budget www.paloalto.gov/councilpriorities 8 Vision The government of the City of Palo Alto exists to promote and sustain a superior quality of life in Palo Alto. In partnership with our community, our goal is to deliver cost-effective services in a personal, responsive and innovative manner. CITY VISION AND COUNCIL PRIORITIES www.paloalto.gov/budget ECONOMIC OUTLOOK •Economic uncertainty, stagnation •Tariff, inflation, supply chain disruptions •Federal administration FY 2026 BUDGET •Conservative approach •Balanced budget •Strong fiscal management to preserve valued & innovative services •Raise revenues through updated rates and fees •Strategic preparation for range of economic conditions. 9 www.paloalto.gov/budget •Operating budget totals $1.0 billion ($312.5 million in General Fund) •Capital budget totals $316.2 million in FY 2026 and $1.18 billion over the five-year Capital Improvement Program (CIP) •Second year of two-year strategy using one-time funds to balance FY 2026 shortfall with Uncertainty Reserve. •Limited service investments and Council Priorities continue valued and innovative services, especially support public safety and utilities. PROPOSED BUDGET OVERVIEW 10 Use of one-time funding •$12.0M Uncertainty Reserve recommended to: •Offset FY 2026 deficit and fully appropriates the balance. •Maintain Budget Stabilization Reserve (BSR) at $54.0M or 17.3%, within 15% to 20% range, and below 18.5% target by $3.8M. Labor Agreements: The SEIU new contract is effective March 2025 to December 2027. All other labor agreements expire in June 2025, and negotiations are underway. Capital Investments: Base transfer to Capital Improvement Fund ($18.3M in FY26)(Total $32.6M: Base $17.2M, Interest $1.1M, TOT $14.3M) resume pre-pandemic levels as planned starting with the 2023-27 CIP City's Pension & Other Post-Employment Benefits (OPEB): Proactive funding of long- term liabilities (pension and retiree medical) to accelerate funding target, reduce cost and liability, and enhance fiscal stability. CITYWIDE BUDGET STRATEGIES 11 CAUTIOUS ASSUMPTIONS 12 REVENUES •Cautious assumptions •Property Tax •Sales Tax •TOT •UUT •Charges for Service (updated) EXPENDITURES •Maintain vacancy assumption at 5% •Limited investments in services & Council priorities RISK MITIGATION •Budget Stabilization Reserve •Prefund Liabilities •Infrastructure Investments ALL FUNDS SOURCES & EXPENSES 13 FY 2026 Sources $1.0 Billion FY 2026 Expenses $1.0 Billion HISTORICAL FULL-TIME STAFFING COMPARISON 1,104 FTE Citywide 608 FTE GF +12 FTE all funds Great Recession 14Pandemic 10.1% adjusted vacancy rate all funds, 9.3% in the General Fund (including Public Safety) FULL-TIME STAFFING AND VACANCIES 15 Full-Time Position Changes General Fund Enterprise Funds Other Funds Total FY 2025 Adopted Budget 602.57 391.43 98.10 1,092.1 FY 2025 Approved Adjustments -1.00 -1.00 FY 2025 Modified Budget 602.57 392.43 98.10 1,093.10 FY 2026 Increase 6.60 4.55 2.10 13.25 FY 2026 Decrease -(0.50)(0.50)(1.00) FY 2026 Reallocation (1.20)0.40 (0.20) (1.00) FY 2026 Proposed Budget 607.97 396.88 99.50 1,104.35 Net Difference: FY 25 Adopted to FY 26 Proposed 5.40 5.45 1.40 12.25 RETIREE BENEFIT FUNDING POLICY 16 Supplemental Contributions to Section 115 Trust Funds Pension Trust •FY 2026: $14.2 million ($9.0 million General Fund) •Through FY 2025 $87.5 million contributed •July 2023 funded status: 64% Other Post-Employment Benefit (OPEB) Trust •FY 2026: $6.1 million ($3.8 million General Fund) •Through FY 2025 $17.4 million contributed •July 2023 funded status: 56% GENERAL FUND SOURCES & EXPENSESE 17 FY 2026 GF Revenues $312.5 Million FY 2026 GF Expenditures $312.5M FY 2026 GENERAL FUND BALANCING 18 ($ in millions)FY 2024 FY 2025 FY 2026 FY 2027 Forecasted (Deficit)/Surplus ($9.8)($6.8)($12.0)($9.6) Use of Reserves Use of Uncertainty Reserve $4.4 $3.5 $12.0 - Use of Budget Stabilization Reserve $4.4 $2.6 -- Use of DSD Reserve $1.0 $0.7 -- Proposed (Deficit)/Surplus $0 $0 $0 ($9.6) Ending Reserve Balances Uncertainty Reserve $9.6 $12.0 -- DSD Reserve $2.8 $3.1 $3.1 $3.1 BUDGET STABILIZATION RESERVE $57.0 $54.0 $54.0 $54.0 •General Fund Taxes comprise $175.6M or 56.2% of total General Fund revenues •Positive assumption of overall 4.8% increase in this source category •Estimated increases: Property Tax +7.8%, Business Tax +24%, Sales Tax +2.2%, TOT +2.8% MAJOR TAX REVENUE 19 2022 Actuals 2023 Actuals 2024 Actuals FY 2025 Adopted 2025 Midyear 2026 Proposed $ Chg $ Chg Sales Tax 32,705 36,926 37,482 39,577 35,588 36,377 789 2.2% Property Tax 59,353 63,129 66,344 68,623 68,319 73,627 5,308 7.8% Transient Occupancy Tax 16,946 25,485 27,781 27,857 28,344 29,139 795 2.8% General Purpose 8,828 13,471 14,115 14,188 14,467 14,874 407 2.8% Infrastructure 8,118 12,014 13,667 13,669 13,877 14,265 388 2.8% Documentary Transfer Tax 11,990 5,751 7,016 7,260 8,550 8,542 (8)-0.1% Utility Users Tax 15,599 18,763 19,013 19,943 21,489 21,437 (52)-0.2% Business Tax 0 0 5,286 4,763 5,250 6,488 1,238 23.6% Total Taxes 136,593 150,054 162,922 168,023 167,540 175,610 8,070 4.8% 20 GENERAL FUND REVENUES – MAJOR TAXES $51 $57 $59 $63 $66 $68 $74 $31 $29 $33 $37 $37 $36 $36 $19 $5 $17 $25 $28 $28 $29 $16 $15 $16 $19 $19 $21 $21 $7 $11 $12 $6 $7 $9 $9 $5 $5 $6 $0 $10 $20 $30 $40 $50 $60 $70 $80 20 2 0 Ac t u a l 20 2 1 Ac t u a l 20 2 2 Ac t u a l 20 2 3 Ac t u a l 20 2 4 Ac t u a l 20 2 5 Ad j u s t 20 2 6 Bu d g e t M I L L I O N S Property Tax Sales Tax TOT UUT DDT Business Tax 46% -Builds on investments from FY 2024 & FY 2025 in alignment with Measure K Priority Spending -Grade sep. & safety improvements, bike & ped transportation plan -Project Homekey, San Antonio Coordinated Area Plan, Geng Road Safe Parking. -Public Safety services appropriated in adopted budget, additional staffing for dispatch, traffic team, fire engine at FS2, and recruitment & retention through competitive labor agreements. -Annual administration including outreach, renewals, compliance review and collections. Investments Funded by Business Tax – Measure K 21 Gas Equity Transfer Funding (Measure L) 22 FY 2026 PROPOSED BUDGET •Measure L (Nov. 2022) affirms transfer to the General Fund of up to 18% of annual gross gas retail revenue based on actuals from 2 years prior (FY26 Budget based on FY24 Actuals) •FY 2026 proposed transfer at full 18% rate or $9.7M, decrease of $1.2M or 11.0% from FY 2025 •FY 2025 transfer approved at 14.5% or $10.9M, based on FY23 gross gas retail revenue that had a spike compared to other years •Funding may be used to support general city services such as roads; parks; libraries; climate change reduction; police, fire, emergency medical, and 9-1-1 response. FY 2026 PROPOSED BUDGET INVESTMENTS 23 Public Safety CSA •Upstaffing Fire Engine 64 at Fire Station #4 with cross- staffing, brings firefighting capacity from 5 to 6 stations. •Enhancing organizational resilience – add Police recruit hire ahead, uses SUMC funding for Psychiatric Emergency Response Team (PERT). •Funding police and fire equipment and vehicles. Community & Library Services CSA •Continued extended hours & days for library branches and programming •Resources for Art Center rentals, Public Art Program, children & teen programs, therapeutic recreation resources and summer camps. FY 2026 PROPOSED BUDGET INVESTMENTS 24 Planning, Transportation & Infrastructure CSA •Enhance University Ave & California Ave pressure washing and cleaning services. Limited funding to continue PA Link. •Investments in development center staffing to support economic recovery efforts, housing for social and economic balance, and support Council priorities. •Resources for traffic control, RWQCP System operations and maintenance , gas and water infrastructure maintenance, watershed protection and crossbore program phase 4. FY 2025 PROPOSED BUDGET INVESTMENTS 25 Internal Support & Administration CSA •Proactive funding of long-term liabilities. •Funding the adopted labor agreements and support negotiations underway. •Reserving funds for real property investments. •Supporting organizational resilience with talent recruitment, employee childcare pilot program (carryforward), BayPass Commuter Program for employee benefit and transportation, and resources to support information technology, enterprise services and financing. •Leadership and support from the City Manager’s Office for implementation of Council Priority projects CAPITAL IMPROVEMENT PROGRAM (CIP) – OVERVIEW 5-YR PLAN 26 GENERAL FUND INVESTMENT IN CAPITAL IMPROVEMENT FUND 27 28%15 12 5 3 9 11 14 17 2 4 4 2 3 9 7 2 8 10 14 14 14 1 1 1 1 1 2 1 1 4 3 3 0 5 10 15 20 25 30 35 40 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025 Estimated FY 2026 Proposed Mi l l i o n s Project-Specific (including Measure K) Interest TOT Excess BSR Base* *Prior to FY 2024, $1 M of Utility Users Tax (UUT) benefitting streets and sidewalks capital projects were part of the Base transfer. Since FY 2024, that funding has been transferred directly to the streets and sidewalks projects and is part of the Project-Specific category of transfers rather than the Base category. 2026 CAPITAL IMPRVT FUND REVENUES BY SOURCE: $117.5 MILLION 28 Fund Balance/ Reserve $45.1M Transfer from Parking Funds $0.1M Revenue from Other Agencies $8.0M Impact Fees/ In- Lieu Fees $1.1M Gas Tax Funds $3.4M Federal and State Grants $4.7M Transfer from General Fund $35.5M Transfer from Other Funds $0.1M 2026 CAPITAL IMPROVEMENT FUND REVENUES BY SOURCE $98.1 MILLION Conclude May 6, 2025 www.paloalto.gov/budget