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Home My WebLink AboutStaff Report 2503-4243CITY OF PALO ALTO Finance Committee Regular Meeting Tuesday, May 20, 2025 Agenda Item 1.FY2026 Budget Wrap-up and recommended FY 2026 Budget including FY 2026 Municipal Fee Schedule Late Packet Report Added, Staff Presentation 6 6 5 8 Finance Committee Staff Report From: City Manager Report Type: ACTION ITEMS Lead Department: Administrative Services Meeting Date: May 20, 2025 Report #:2503-4243 TITLE Discussion on the Fiscal Year (FY) 2026 Budget Wrap-Up and Recommended FY 2026 Budget including the FY 2026 Municipal Fee Schedule for City Council Adoption; CEQA Status – Not a Project RECOMMENDATION This memorandum will be used to facilitate the discussion of the Finance Committee (“Committee”) budget wrap-up work for the FY 2026 Budget. 1) Staff recommends the Finance Committee: a. Review and discuss: i. Additional information provided as requested by the Committee or staff ii. Summary of current budget adjustments to the Fiscal Year 2026 Proposed Operating and Capital Budgets and Municipal Fee Schedule in alignment with the work completed by the Committee on April 29, May 6 and 7, 2025, and the full Council on May 12, 2025; and b. Recommend to the City Council: i. Adoption of the FY 2026 Proposed Operating and Capital Budgets and Municipal Fee Schedule (Staff Report 2504-45911), amended by the actions outlined in this report in ‘Table: Summary of Parking Lot Items for Potential Adjustments to the FY 2026 Proposed Budget,’ and as further amended in the wrap-up discussion; and ii. Approve the FY 2026-2030 Capital Improvement Plan, amended by the actions outlined in this report and as further amended in the wrap-up discussion. 1 Finance Committee, May 7, 2025; Agenda Item #4; Staff Report# 2504-4591, https://www.paloalto.gov/files/assets/public/v/1/administrative-services/city-budgets/fy- 2026-city-budget/proposed/may-7/finance-committee-5.25-supp-report-fy-2026-proposed- municipal-fee-schedule.pdf 6 6 5 8 EXECUTIVE SUMMARY This memorandum follows the Committee review of the FY 2026 Proposed Operating and Capital Budgets and Municipal Fee Schedule and includes additional information and recommended changes for further review in this Committee “wrap-up” session, to submit formal Committee adjustments to the City Council for their June 16 FY 2026 budget adoption. While the Committee Parking Lot items represent valued investments and great services, there are limited financial resources. Based upon Committee Parking Lot items and further financial and operational analysis, the revised Parking Lot listing is included in this memorandum. Taking all of this into consideration and based upon the revised Parking Lot items, which is focused upon preserving a minimum of $6.0 million of General Fund Uncertainty Reserve, the General Fund projected FY 2026 expenses decrease by $5.1 million to $307.4 million, and the use of reserves will decrease by $6.0 million in FY 2026. Also, Committee recommended reducing the projected FY 2027 net deficit after use of available Uncertainty Reserves and/or application of alternatives for savings. The revised FY 2027 projected net deficit decreased from $9.6 million to $4.0 million. The Budget Stabilization Reserve remains at $54.0 million while as a ratio of FY 2026 budget, it improved from 17.3% to 17.6%, within the policy target of 15% to 20%, but below 18.5% target level by $2.8 million. During this budget wrap-up session, the Committee is requested to provide budget recommendations to amend the FY 2026 budget. The Committee will direct items be moved from the “Parking Lot” list to the “Committee Budget Adjustments” list for the FY 2026 budget. Several items in the Parking Lot are categorized as placeholders in order to define the target totals needed to balance the budget, and also allow time to constructively develop more specific recommendations of one-time and ongoing savings. As of the publication of this memo, towards solving the $6.0 million, Staff identified revenues of $1.2 million, including re-allocation of $1.0 million Measure B and $0.2 million of charges, and recommends placeholders targets of $2.2 million of defer capital projects and $2.7 million of General Fund expense savings and/or FY 2025 ending fund balance carryover. Should Committee advance these recommendations, on June 16, Council will review and adopt the FY 2026 budgets with reductions inclusive of these placeholder amounts. Staff will return on August 19 with specific recommendations for Finance Committee consideration and recommendation to Council for approval. Balancing the budget should not be limited to consideration of only FY 2026 but broadly to the next several years, which is especially difficult with current economic uncertainties. Budget balancing strategies primarily focus upon fulfilling the City vision, Council priorities, City policies and core services, while non-core services and/or programs are appropriated if financial resources are available. This memo also includes the following attachments: Attachment A: Additional Staff Recommended Technical Adjustments Attachment B: Stormwater Management Oversight Committee Review of the FY 2026 Capital Budget 6 6 5 8 Attachment C: Reference: Finance Committee FY 2026 Proposed Budget Review (actions & references) Attachment D: Planning and Transportation Commission 2026-2030 Capital Improvement Plan Consistency Letter to the City’s Comprehensive Plan BACKGROUND The FY 2026 Proposed Budgets were transmitted to the City Council at the May 5, 2025 meeting. On May 6th and 7th, the Committee spent approximately 20 hours reviewing the budget materials and supplemental memorandums including the FY 2026 Proposed Operating Budget, Capital Budget, and Municipal Fee Schedule. After reviewing the $1.0 billion proposed budget, which includes the $312.5 million General Fund and $316.2 million capital budget, the Committee created a “Parking Lot” of items as potential adjustments to be refined by staff and discussed as part of this meeting for recommendation to the City Council for Adoption on June 17. Staff remains cautious of mixed economic indicators that suggest potential economic risk, and seeks to provide a budget that proposes a measured approach to using one-time surplus and limiting ongoing costs to mitigate the potential for exacerbating future deficits. During budget deliberations on May 6th and 7th, the Committee completed a detailed review of the FY 2026 Proposed Budget with public comment incorporated for each service area to provide opportunities for community input in the decision-making process. The Committee reviewed individual budget sections by Department for tentative approval of the budget, moved potential amendments to the Parking Lot, and requested additional information to aid in their review. A majority of the additional information was provided by staff during the hearings as part of the recap presentations to the committee. This report provides the status of the Committee’s review as well as feedback from a check-in with the full City Council on May 12, 2025 that focused on the Committee’s parking lot items. The Committee will finalize recommended amendments to the Proposed Operating and Capital Budgets and Municipal Fee Schedule to be included at the June 16th City Council meeting for budget adoption. This list includes seven expense proposals, totaling $5.1 million in savings ($0.6 million savings ongoing) in the General Fund. In addition to expense savings, the Committee also recommended utilizing additional funding sources in the General Fund. Staff has added two additional sources to the parking lot totaling $0.9 million in FY 2026 and ongoing. A couple expense items are placeholder target values that will be refined by staff and included as a discussion with the Committee on August 19 to define the specific savings. In order to allow Staff time to evaluate and determine an appropriate list of one-time and ongoing savings, it is recommended that the Committee forward the FY 2026 budget to the Council for adoption with these placeholder values ultimately reducing the General Fund FY 2026 budget and preserving $6 million of Uncertainty Reserve by the end of FY 2026. 6 6 5 8 ANALYSIS The Committee Parking Lot items represent Council and Committee’s budget meetings of May 5, 6, 7 and 12, with focus on fire and ambulance service enhancement, nonprofit funding and modifying General Fund budget and preserving at least $6 million of Uncertainty Reserve, with a balance of $4 million one-time and at least $2 million on-going savings. Further staff analysis will be required to fully develop the plan to modify the General Fund by $6 million so “placeholder” target figures are inserted for Committee to review and recommend to Council with the plan of adopting the budget on June 16th with the placeholders targets and returning with specific detail on August 19 to the Committee for review and recommendation to the City Council. To facilitate the Committee budget wrap up session, the Parking Lot items are organized in Table 1 Uses/Expense, and Table 2 Sources/Revenues into the following categories: -Policy/Priority/Vision – items that relate to City policy, Council Priorities and/or City Vision -Grants – items that relate to grants to other organizations -Placeholder – budget target values with detail to follow on August 19, 2025 -Information Requested by Finance Committee & Referrals – items requested by Finance Committee that were not addressed on May 6 or May 7 and Staff will work on during FY 2026, subject to Council approval Table 1: Summary of Revised Parking Lot Uses / Expenses Dept GENERAL FUND – Uses / Expenses Potential Adjustments to the FY 2026 Proposed Budget FY 2026 FY 2027 Category FIR Fire Single Role Ambulance Model (600,000)(1,200,000)Policy/Priority/Vision NON Non-Profit Workplan Phase I (From $235k to $346k) – with direct allocation to nonprofit as discussed later (111,000)(111,000)Grants CSD CSD Grants Community Events Program (50,000)(50,000)Grants CSD Youth Community Services – Youth Connectedness Initiative (50,000)(50,000)Grants CIP Measure B Funding Adjustment for Street Maintenance/ Reduce GF Transfer to Capital Fund 1,000,000 1,000,000 Policy/Priority/Vision CIP Defer Capital Projects in FY 2026/Reduce GF Transfer to Capital Fund 2,200,000 -Placeholder NON General Fund Expense Savings & FY 2025 Ending Fund Balance $2,711,000 $1,011,000 Placeholder Subtotal Uses (Expenses)$5,100,000 $600,000 Table 2: Summary of Revised Parking Lot Sources / Revenues Dept GENERAL FUND – Sources / Revenues Potential Adjustments to the FY 2026 Proposed Budget FY 2026 FY 2027 Category FIR Paramedic Transport Fee Revenue – updated fee 700,000 700,000 Policy/Priority/Vision FIR First Responder Fee Revenue – new fee 100,000 200,000 Policy/Priority/Vision CSD Rental and Reservation Fee Revenue 100,000 100,000 Policy/Priority/Vision 6 6 5 8 NON Use Uncertainty Reserve to partially balance FY 2027 -4,000,000 Policy/Priority/Vision Subtotal Sources (Revenue)$900,000 $5,000,000 Potential Fund Remaining Savings/(Cost)$6,000,000 $5,600,000 To illustrate the potential fiscal impact, Table 3 summarizes the General Fund projected FY 2026 and FY 2027 financial results, highlighting the reduced ongoing net costs in FY 2027 at this projected spending/investment level, retaining the uncertainty reserve level in FY 2026 and maintained budget stabilization reserve at $54.0 million. The General Fund projected FY 2026 expenses decrease by $5.1 million to $307.4 million, and the use of reserves will decrease by $6.0 million for $6.0 million total use of reserves in FY 2026. The General Fund projected FY 2027 expenses decrease by $0.6 million for a total of $318.6 million, and net deficit decreases by $5.6 million for a total net deficit of $4.0 million in FY 2027. Moreover, the budget stabilization reserve (BSR) is projected to continue at $54.0 million and be within the policy range of 15% to 20% however less than 18.5% target level by $2.8 million in FY 2026 and $4.9 million in FY 2027. In addition to maintaining the BSR at $54.0 million, this strategy also preserves $6.0 million in the Uncertainty Reserve which the Committee has directed to use $4.0 million in FY 2027 and retain $2.0 million for future budget planning. Table 3: Summary of General Fund FY 2026 – Proposed Budget vs. Parking Lot (Revised) ($ in millions) FY 2026 Proposed Budget FY 2026 Parking Lot (Revised) Increase / (Decrease) FY 2027 (Revised) Revenues Use of Reserves $300.5 12.0 $301.4 6.0 $0.9 (6.0) $310.4 4.0 Expenses 312.5 307.4 (5.1)318.4 Savings / (Cost)---(4.0) Status of General Fund Reserves Uncertainty Reserve at Year-End $0 $6.0 $6.0 $2.0 Budget Stabilization Reserve $54.0 54.0 54.0 54.0 Budget Stabilization Reserve %17.3%17.6%0.3%17.0% BSR at 18.5% policy target level requires $2.8M of additional funding in FY26 & $4.9M in FY27 During this budget wrap-up session, Committee is requested to provide budget recommendations to amend the FY 2026 budget. Committee will direct items be moved from the “Parking Lot” list to the “Committee Budget Adjustments” list for FY 2026 budget. Balancing 6 6 5 8 the budget should not be limited to consideration of only FY 2026 but broadly to the next several years and consider also the potential Council priorities that are currently unfunded. Budget balancing strategies primarily focus upon fulfilling the City vision, Council priorities, City policies and core services, while non-core services and/or programs are appropriated if financial resources are available. For context and deliberation, the following “Category Discussions” section discusses the Parking Lot items within each category for further Committee consideration and direction. Category: Policy/Priority/Vision The Policy/Priority/Vision category includes items that may relate to City policy, 2025 Council Priorities (and objectives) and/or City vision. -Fire Single Role (FY26: $600,000; Ongoing: $1,200,000) This action advances the goal of the City Council and Finance Committee to expand emergency medical services to meet service demands by appropriating $600,000 for the addition of 7.0 FTE positions to create the initial Single-Role Emergency Medical Services Division of the Fire Department. This action will enhance the current level of services by adding a 12-hour peak ambulance—operated as a single role apparatus—to the City’s fire and emergency medical services. Staff estimate 9 to 12 months for the implementation of a 12-hour single role ambulance with a target start date of April 2026. By expanding resources to support emergency medical services, this action will improve self-reliance of the ambulance system and improve Unit Hour Utilization (UHU). This action will not impact planned staffing at Fire Station 4 as the fire engine will continue to be cross staffed with an ambulance on a full-time basis. -Measure B Funding Adjustment for Street Maintenance/Reduce GF Transfer to Capital Fund (FY26: $1,000,000; Ongoing: $1,000,000) This action uses $1.0 million of Measure B Local Streets and Roads (LSR) revenue annually to fund the Street Maintenance (PE-86070) project in FY 2026 through FY 2028. LSR is administered by the Santa Clara Valley Transportation Authority (VTA) and may fund any phase and any aspect of multi-modal roadway infrastructure. By utilizing alternative funding, this action allows the Capital Fund to reduce reliance on the base transfer from the General Fund and is part of the strategy to align General Fund expenses with anticipated revenue over the next several years. Using Measure B LSR funds for streets maintains impacts the City’s funding for bike and pedestrian safety and action plan implementation. -Paramedic Transport Fee Revenue (FY26: $700,000; Ongoing: $700,000) This action appropriates $700,000 for the revenue generated from ambulance transport fee increases. On April 29, 2025, Matrix consulting firm presented a citywide municipal fee study to the Finance Committee and recommended increases to the base ambulance 6 6 5 8 transports fees. This additional revenue will be dependent on the type of insurance that patients carry. The analysis by Matrix was based on the City’s payer mix and it is estimated to generate $700,000 in additional revenue for a total revenue estimate of $5.3 million in paramedic transport fees. -First Responder Fee Revenue (FY26: $100,000; Ongoing: $200,000) On April 29, 2025, Matrix citywide municipal fee study presented to the Committee a new First Responder Fee for ground ambulance transport services and billable to commercially (privately) insured (i.e. Kaiser, BlueShield, etc.) transport patients. This fee was initially considered in Fiscal Year 2021 but was discontinued due to considerations for low-income patients and patients on Medicare and Medicaid programs that would have been forced to cover the cost out-of-pocket. With the recently enacted California Assembly Bill (AB) 716 disallowing balance billing, the City is now required to forgive the difference for uninsured or patients on Medicare and Medicaid and would not be allowed to collect on the remainder. Due to AB 716, Matrix recommended instituting this new fee as part of the citywide municipal fee study which Committee reviewed and approved on April 29, and given the new fee and implementation requirements, Staff recommends only estimating $100,000 revenue for FY2026 (year of implementation) even though the Matrix report estimates $400,00 ongoing new revenue. Staff recommends $200,000 for FY 2027 which is approximately 50% of the Matrix estimated revenues. -Community Services Rental and Reservation Fee Revenue (FY26: $100,000; Ongoing: $100,000) This action appropriates $100,000 for revenue generated from the increase of various fees in the Community Services Department, consistent with Committee recommendation of the fee updates on May 7. The FY 2026 Proposed Municipal Fee Schedule includes changes to fees that account for the General Rate Increase (GRI) of 6.8%, as well as other rates of change. Most rental and reservation-related fees are proposed to increase by 6.8% for residents and 10% for non-residents. This action recognizes additional revenue associated with these increases across various program areas. (Ongoing savings: $100,000) -Use Uncertainty Reserve to partially balance FY 2027 (FY26: $6,000,000; FY27: $4,000,000) As a result of the savings generated in the General Fund in FY 2026, the Uncertainty Reserve will have $6.0 million remaining for future year budget planning. Of this amount, $4.0 million is recommended to be used to reduce the estimated deficit in FY 2027 to $4.0 million. An additional $2.0 million will remain in the Uncertainty Reserve to be used to develop the budget strategy beyond FY 2027. Category: Grants The Grants category includes items that are potential City contributions to other organizations. 6 6 5 8 -Non-Profit Workplan (from $235,000 to $346,000) (FY26: $111,000; Ongoing: $111,000) The Finance Committee recommended adding an additional $111,000 to the Nonprofit Partnership Workplan Phase I process, bringing the total to $346,000. Of that amount, the Committee recommended directly allocating $150,000 to Magical Bridge, $40,000 to Third Thursday, $45,000 to the United Nations Association Film Festival, and $11,000 to Environmental Volunteers Foothills Nature Preserve as ongoing allocations. This action reflects the Council’s FY 2025 one-time funding commitments to these organizations. Following these allocations, $100,000 would remain available for Nonprofit Partnership Workplan Phase I applications. Additionally, the Finance Committee recommended adding $50,000 in ongoing funding for community event grants program to be managed by the Community Services Department. Also, $50,000 is recommended to supplement the funding from the County of Santa Clara for the Youth Connectedness Initiative (YCI), a program managed by the Youth Community Service (YCS) organization that uses service learning and social-emotional learning to improve youth connectedness. Below is a summary table of Committee nonprofit recommendations: Category: Placeholders This category includes budget target values with detail to be provided to Committee on August 19. They reflect the Committee’s direction to retain a minimum of $6.0 million Uncertainty Reserve (UR) in FY 2026 and the placeholders target values for budget adoption, with details to follow on August 19 and acknowledging actual amounts and allocation may differ from placeholder targets. -Defer Capital Projects in FY 2026/Reduce GF Transfer to Capital Fund (FY26: $2,200,000; One-Time) 6 6 5 8 Staff will evaluate capital projects to defer and deprioritize within the 5-year capital plan with the target of defunding $2.2 million of capital appropriation in FY 2026. Projects will be evaluated based upon a rubric that examines: 1) aesthetic as opposed to functional enhancements; 2) deferral that won’t cause deteriorating conditions; 3) need for significant rework or disruption to other dependent projects; and 4) minimal cost escalation. This will generate one-time savings in FY 2026, because the costs will be shifted to later years of the five-year Capital Improvement Plan. -General Fund Expense Savings and FY 2025 Ending Fund Balance (FY26: $2,711,000; Ongoing $1,011,000) Staff will evaluate FY 2026 budget expense to identify savings for FY 2026 and ongoing. These may include review of functions, contracts, general expenses and alternative service delivery models. Also, alternatives may also include any additional revenues/sources and FY 2025 ending fund balance that may offset FY 2026 expenses (i.e. unencumber balances in current contracts that could fund FY 2026). This will be a mix of one-time and on-going savings. Category: Information Requested by Finance Committee & Referrals This category includes items requested by Finance Committee that were not addressed on May 6 or May 7 and Staff will work on during FY 2026, subject to Committee recommendation and Council approval. -Debt Issuance and Cost Benefits Committee inquired about debt financing and refinancing to address projected cashflow and uncertainty. This summary focuses on cost of issuance, annual debt service, and refinancing. The cost of issuance is important to consider as there are fixed and variable costs. For a certificate of participation (COP) debt, the current fixed costs of issuance are approximately $0.3 million while variable costs are approximately $3 for every $1,000 borrowed. For example, a $15.0 million debt principal would cost approximately $0.5 million in issuance costs. The debt service, which is the annual principal and interest due, is approximately a 15/1 ratio. To illustrate, a $15.0 million principal borrowed would require an annual debt service payment of $1 million. Assuming a $15.0 million principal, 30-year term, and 5% interest, total debt service would be about $29.0 million of which $14.0 million is interest expense. Said differently, over 30-years, it would cost $14.0 million of interest to borrow $15.0 million of principal. As for refinancing current debt, savings can be garnered if current interest rates are lower than interest rates on outstanding debt, net of issuance costs. Staff and the City’s financial advisor, PFM, reviewed the City’s debt portfolio for possible refinancing opportunities. Based on the current bond market and interest rate environment, it was determined that the City’s current outstanding debt interest rates are favorable compared to today’s market 6 6 5 8 of approximately 5%. In addition, debt refunding parameters are included in the City’s Debt Policy2. Generally, the City will consider a refunding only when there is a net economic benefit. A net present value of at least 3% is the standard guideline for an initial refunding and 4% for an advance refunding. Based on an initial review, savings of only net present value of 2% would be realized, excluding issuance cost. Consequently, refinancing any outstanding debt is not advised at this time. -Historical Positions Filled and Vacant Staff was requested to provide a list of vacant positions from FY 2019 to present to determine if there are positions that consistently remained vacant since that time and should be eliminated from the City’s budget. Staff will evaluate staffing levels and historical position vacancies as part of the work to determine specific reductions for the ongoing general fund expense savings target and will return with this information in August. -Summary of Mental Health Investments/Appropriations As part of the budget meetings with the Council and the Finance Committee, it was noted that a comprehensive list of City investments in mental health programs was not displayed in the FY 2026 Proposed Budget document. Staff is compiling a list of mental health investments within programs, contracts and funding levels across departments and funds, and will return with this information in August. -Cost Recovery Policy Update Committee wishes to create a new 100% cost recovery category within the City’s Cost Recovery Policy. This will be added to Finance Committee as a referral to Council if approved, would be considered in the 2025 workplan. Other Funds Category: Policy/Priority/Vision On May 7, the Finance Committee continued its discussion regarding the Gas Utility rates as recommended by the Utilities Advisory Commission (UAC) and voted unanimously to continue the current rate structure, increased to meet the revenue requirement for FY 2026 in the Gas Utility. In addition, the Committee recommended a climate credit climate credit using Gas Cap and Trade and/or interest income to G-2 customers (small and medium meter capacities). Originally this figure was reported as $1.1 million, however, upon further review of calculations, this figure is mis-stated, and a $2.2 million credit is needed for the subset of G2 customers. The $1.1 million will be sufficient if review and adoption of alternative rates are completed by January 2026. Lastly, the Committee recommends that the Council refer staff to return to the 2 City Council, April 11, 2017; Staff Report# 7892, https://www.paloalto.gov/files/assets/public/v/1/agendas-minutes-reports/reports/city- manager-reports-cmrs/year-archive/2017/7892.pdf 6 6 5 8 Utilities Advisory Commission (UAC) to further review the FY 2025 Cost of Services Study (COSA) assumptions and principles. Also as noted on May 7 by Staff, there are few budgetary misstatements in the proposed FY 2026 budget that will be technically amended for the adopted FY 2026 five-year CIP. In addition, within wastewater rates, staff will bring forward a reallocation within expense categories to correct a misstatement of funding needed for the treatment reserve replenishment requirement (lower the assumptions) while reallocating those expenses to capital expense line items. This realignment does not change the FY 2026 recommended wastewater collection rates. These specific technical changes will be incorporated in the June 16th memo to Council for budget adoption. Additional Staff Recommended Adjustments (Attachment A) including Municipal Fee Updates In addition to the Parking Lot items outlined by the Finance Committee and included as placeholders, staff recommends adjustments for several items requiring technical corrections to align the budget with anticipated activity levels and changes that occurred following the release of the FY 2026 budget. These relate to capital projects, and municipal fees. On April 29, Committee approved the Citywide fee update per the Matrix study with direction for Staff follow-up. Municipal fee updates and clarifications are included, which tracks with the plans of sending the full municipal fees with Committee’s recommendation to the Council for formal approval on June 16th. Refer to Attachment A for further details. Stormwater Management Oversight Committee Review of the FY 2026 Stormwater Management Fund Budget (Attachment B) On April 22, 2025, the Stormwater Management Oversight Committee met to discuss the Fiscal Year 2026 proposed Stormwater Management Fund budget and compared it with the provisions of the Stormwater Management Fee approved by Palo Alto property owners in 2017. The Committee concurred that funding generated by the Storm Water Management Fee will be applied solely to fund the capital improvement projects, green stormwater infrastructure projects, innovative stormwater projects, enhanced maintenance of storm drain system, and stormwater quality protection programs specified for implementation in the ballot measure in Fiscal Year 2026. The Committee submitted a letter (Attachment B) for the Finance Committee and City Council’s review. Planning and Transportation Commission Review of the New Projects in the 2026-2030 Capital Improvement Plan (Attachment D) On May 14, 2025, the Planning and Transportation Commission (PTC) reviewed the new projects in the 2026-2030 Capital Improvement Plan for each of the project’s compliance with the City’s 2030 Comprehensive Plan. The Commission submitted a Letter of Conformance (Attachment D) for the Finance Committee and City Council’s review. 6 6 5 8 FISCAL/RESOURCE IMPACT Fiscal impact will depend upon Committee adjustments to the FY 2026 budget and subject to final Council adoption of the budget scheduled for June 16, 2025. Balanced budget strategies consider fulfilling the City vision, Council priorities, City policies, and City core services, balancing non-core services and programs within limited financial resources. STAKEHOLDER ENGAGEMENT Community members have been encouraged to participate in the FY 2026 budget process and provide input for the City Council to consider regarding priorities and service needs as part of the public budget meetings held in May. ENVIRONMENTAL REVIEW This activity is not a project under the California Environmental Quality Act (CEQA) as defined in CEQA Guidelines, section 15378, because discussion of the budget is a government funding mechanism or fiscal activity which does not involve any commitment to any specific project which may result in a potentially significant physical impact on the environment. CEQA Guidelines section 15378(b)(4). ATTACHMENTS Attachment A: Additional Staff Recommended Technical Adjustments Attachment B: Stormwater Management Oversight Review of the FY 2026 Capital Budget Attachment C: Reference: Finance Committee FY 2026 Proposed Budget Review (actions & references) Attachment D: Planning and Transportation Commission 2026-2030 Capital Improvement Plan Consistency Letter to the City’s Comprehensive Plan APPROVED BY: Lauren Lai, Administrative Services Director Attachment A Additional Staﬀ Recommended Technical Adjustments A-1 In addition to the tentative adjustments outlined by the Finance Committee, staﬀ recommends adjustments for several items requiring technical corrections to align the budget with anticipated activity levels and changes that occurred following the release of the FY 2026 proposed budget documents. Capital Projects - Reappropriations and Technical Adjustments to Capital Projects As an annual administrative budget process, Staﬀ is currently working on capital reappropriations to recommend shifting unspent funds in capital projects from FY 2025 to FY 2026 in order to advance the respective projects. These recommended reappropriations will be included as recommended adjustments to the FY 2026 Capital Budget as part of the Council Adoption staﬀ report on June 16. In addition to the reappropriations, several technical adjustments may be needed to some capital projects based on actions that happen at the end of FY 2025. These technical adjustments, if any, will also be included as recommended adjustments to the FY 2026 Capital Budget as part of the Council Adoption staﬀ report on June 16. Municipal Fee Adjustments - On April 29th Committee reviewed and approved municipal fee updates based upon the Matrix citywide cost of service study with direction for some Staﬀ clariﬁcations. These department fees included Fire, Public Works, Police, Animal Control, Public Works, City Clerk and Administrative Services Department. Based upon the Staﬀ updates below, Committee may continue it’s recommendation to the Council for approval of fee updates on June 16th. o Domestic partners registration – how does this align with the State registration and fees.  Staﬀ recommends continuing to oﬀer to this service at the City and aligning with the State’s fee of $33. While the State has two fees (i.e. $33 by mail and $15 in- person), Staﬀ recommends streamlining and having one fee of $33. o ASD Fees – several fee recommendations required update of cost recovery policy designation. Those will be updated in the City’s fee software accordingly, and listed below:  Mailing: Medium cost recovery  Duplicate Receipts: Medium cost recovery o Real Estate - Conveyance – Committee directed full cost recovery and the recommended fee is updated accordingly: Attachment A Additional Staﬀ Recommended Technical Adjustments A-2 o Remove two references to the City of Thousand Oaks from the Matrix report. This is done and the revised report is posted and also provided as a supplemental to Committee May 20th agenda. o Police Special Events Fees – update title to properly reﬂect applicants that are non-proﬁt and co-sponsorship. Fee titles are updates as follows:  Personnel Rates for Special Events  Personnel Rates for Special Events by Non-Proﬁt Organizations  Personnel Rates for Special Events Co-Sponsored by the City of Palo Alto o Animal control impoundment fees -- review especially for 5 or more incidents. Staﬀ recommends these fees to reﬂect rates higher than costs for 5 or more incidents: o Flood zone determination letters fees – review the cost. Staﬀ reviewed and conﬁrms the costs are supported by staﬀ time incurred for review and discussion with requestor of ﬂood zone determination letters which often entail questions, FEMA zone conﬁrmation and meetings with requestor. o Taxi fee - new license application – review the cost estimate. Staﬀ reviewed the estimated staﬀ time and determined that Staﬀ could complete a taxi permit new application within 20 hours instead of the prior 30 hour estimate, and recalculated the Attachment A Additional Staﬀ Recommended Technical Adjustments A-3 cost estimate to $4,849. Staﬀ recommends full cost recovery and setting the fee at $4,849. o Committee wishes to create a new 100% Category within the City’s Cost Recovery Policy. This will be added to Finance Committee as a referral to Council and may be considered in 2025workplan. Storm Water Management Oversight Committee MEMORANDUM Date: April 22, 2025 To: Honorable Finance Committee of the Palo Alto City Council From: Members of the Storm Water Management Oversight Committee Subject: Review of the Proposed Fiscal Year 2026 Stormwater Management Fund Budget As directed by the City Council, the Committee met to discuss the Fiscal Year 2026 proposed Stormwater Management Fund budget on Tuesday, April 22, 2025. Prior to the meeting, Public Works staff provided informational materials about the approved 2017 ballot measure and the proposed budget for the Committee’s review. During the meeting, staff presented information and answered questions from the Committee members. We have reviewed the proposed budget for Fiscal Year 2026 and compared it with the provisions of the Storm Water Management Fee approved by Palo Alto property owners in 2017. We find that the attached spreadsheet describing the proposed budget for Fiscal Year 2026 fairly describes the relationship between the budget and the ballot measure. Staff and the Committee concur that funding generated by the Storm Water Management Fee will be applied solely to fund the capital improvement projects, green stormwater infrastructure projects, innovative stormwater projects, enhanced maintenance of storm drain system, and storm water quality protection programs specified for implementation in the ballot measure in Fiscal Year 2026. Based on current staff analysis, there is no indication that present funding will be insufficient to complete the 13 Capital Improvement Projects. Because funds available for green stormwater infrastructure and innovative projects are not being utilized fully, the Committee supports efforts by staff to continue to identify and promote new projects that meet the goals associated with the ballot measure, such as the proposed Green Stormwater Infrastructure capital improvement project. Attachment: Fiscal Year 2026 Proposed Budget Attachment B B-1 STORMWATER MANAGEMENT PROGRAM Adopted Budget Adopted Budget Current Yr Projection*Proposed Budget** Fiscal Year 2025 Budget Year 7 Year 8 Year 8 Year 9 (Amounts in 1000s, as of April 2025)2024 2025 2025 2026 Revenue Collected Fee Revenue 8,167 8,791 8,917 9,002 Interest Earnings 110 28 474 301 Development Fees, Violation Fines, Other (Includes Grant Funding)**84 1,300 37 1,300 Total Revenue 8,361 10,319 9,427 10,603 Base Components 4,887 5,665 5,259 5,826 Base Program (Incl. Flood Control, Engineering and Administrative Support, Water Quality, Emergency Response)3,055 3,729 3,325 3,833 Storm Drainage Maintenance 1,832 1,939 1,934 1,933 Project & Infrastructure 6,840 5,227 2,793 8,416 Capital Improvements Program**4,433 2,714 1,229 7,115 Recurring System Repair (SD-06101)**953 1,814 1,123 600 Debt Service for Past Capital Projects 949 - 24 - Capital Program Engineering Support 155 194 190 196 Green Stormwater Infrastructure (GSI)380 380 28 380 GSI - CIP Design/Construction 150 150 - 150 GSI - Consulting Services 85 85 28 85 GSI - Other unassigned tasks 145 145 - 145 Innovative Project 125 125 1 125 Innovative Project - GSI Consulting Services & Outreach 100 100 - 100 Innovative Project - Rebates 125 25 1 25 Total Expenses 11,727 10,892 7,853 14,242 Net Impact (3,366)(573)1,574 3,639 *FY 2025 Projections and FY 2026 Proposed are subject to change as the current FY and budget development process is still in progress. **FY 2026 Proposed includes estimated remaining funding and grant revenue anticipated to be reappropriated from FY 2025. Attachment B B-2 Attachment C Summary of Finance Committee Review of FY 2026 Proposed Budget (Actions & References) Attachment C - 1 Action Minutes to the Finance Committee Hearings can be found on the City’s webpage here: https://www.paloalto.gov/Departments/City-Clerk/City-Council-Standing-Committees/Finance- Committee. In addition, throughout the Finance Committee Budget Hearings, various memoranda were distributed “At Places” in order to respond to inquiries made by the Committee or provide additional pertinent information at staff’s behest. In addition, summary presentations were given at each hearing providing high-level overviews of each item. Specific meetings and reference links to materials are outlined below. May 5, 2025 City Council Meeting Action Minutes: • https://cityofpaloalto.primegov.com/Public/CompiledDocument?meetingTemplateId=16066&c ompileOutputType=1 Presentations: • FY 2026 Proposed Budget Overview https://cityofpaloalto.primegov.com/api/compilemeetingattachmenthistory/historyattachment /?historyId=81f3f752-3e83-4329-b9e1-412dc2e12603 • Video: https://youtube.com/watch?v=4iup56e-7mw?feature=share May 6, 2025 Finance Committee Action Minutes: • https://cityofpaloalto.primegov.com/Public/CompiledDocument?meetingTemplateId=16072&c ompileOutputType=1 Presentations: • FY 2026 Proposed Operating and Capital Budgets: https://cityofpaloalto.primegov.com/Portal/Meeting?meetingTemplateId=16071 • Video: https://youtube.com/watch?v=Fk98-q_uHmM?feature=share May 7, 2025 Finance Committee Action Minutes: • https://cityofpaloalto.primegov.com/Public/CompiledDocument?meetingTemplateId=16086&c ompileOutputType=1 Presentations: • FY 2026 Proposed Operating and Capital Budgets Continuation: https://cityofpaloalto.primegov.com/Portal/Meeting?meetingTemplateId=16085 • Video: https://youtube.com/watch?v=kW97GWkgaY0?feature=share List of Supplemental Information provided during Budget Deliberations During the Finance Committee hearings and the City Council update, staff provided additional information to Committee members to assist in the review of the Fiscal Year 2026 Proposed Budget. Below is a list of links to those memoranda: • May 6: Supplemental Report: Evaluation of Fire and Ambulance Service Expansion Options Attachment C Summary of Finance Committee Review of FY 2026 Proposed Budget (Actions & References) Attachment C - 2 • May 6: Supplemental Memo: Capital Reappropriations, staffing & vacancies, and contract spend • May 7 Supplemental Report: FY 2026 Proposed Municipal Fee Schedule Additional Information Memo from May 6 (provided at staff’s behest) 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 compiled and transmitted the following items at the May 6, 2025 budget meeting: • Capital Fund reappropriations list • Vacancy report, as of April 2025 • Service Providers with Over $1M in Spending May 14, 2025 Honorable City Council C/O City of Palo Alto 250 Hamilton Avenue Palo Alto, CA 94301 RE: Review of 2026-2030 Capital Improvement Projects The Planning and Transportation Commission (PTC) reviewed the proposed 2026-2030 Capital Improvement Projects (CIPs) on Wednesday May 14, 2025. The PTC determined that the new projects included in the 2026-2030 Capital Budget are consistent with the Comprehensive Plan 2030 policies and programs. The PTC recommends forwarding this finding to the Finance Committee and City Council at this time. The motion was made by Vice Chair Chang and it was seconded by Commissioner Ji. The motion was approved by a vote of 7-0. Respectfully, Allen Akin, Chair Planning and Transportation Commission Docusign Envelope ID: F0F04FD5-A302-4ADE-9CA2-E3271F788E6B Certificate Of Completion Envelope Id: F0F04FD5-A302-4ADE-9CA2-E3271F788E6B Status: Completed Subject: Complete with Docusign: Attachment C 2025 CIP Comp Plan Consistency Letter.pdf Source Envelope: Document Pages: 1 Signatures: 1 Envelope Originator: Certificate Pages: 1 Initials: 0 Veronica Dao AutoNav: Enabled EnvelopeId Stamping: Enabled Time Zone: (UTC-08:00) Pacific Time (US & Canada) 250 Hamilton Ave Palo Alto , CA 94301 Veronica.Dao@PaloAlto.gov IP Address: 165.225.242.105 Record Tracking Status: Original 5/15/2025 9:54:40 AM Holder: Veronica Dao Veronica.Dao@PaloAlto.gov Location: DocuSign Security Appliance Status: Connected Pool: StateLocal Storage Appliance Status: Connected Pool: City of Palo Alto Location: Docusign Signer Events Signature Timestamp Allen Akin akin@arden.org Security Level: Email, Account Authentication (None) Signature Adoption: Pre-selected Style Using IP Address: 108.228.10.22 Sent: 5/15/2025 9:58:04 AM Viewed: 5/15/2025 1:11:19 PM Signed: 5/15/2025 1:11:57 PM Electronic Record and Signature Disclosure: Not Offered via Docusign In Person Signer Events Signature Timestamp Editor Delivery Events Status Timestamp Agent Delivery Events Status Timestamp Intermediary Delivery Events Status Timestamp Certified Delivery Events Status Timestamp Carbon Copy Events Status Timestamp Witness Events Signature Timestamp Notary Events Signature Timestamp Envelope Summary Events Status Timestamps Envelope Sent Hashed/Encrypted 5/15/2025 9:58:05 AM Certified Delivered Security Checked 5/15/2025 1:11:19 PM Signing Complete Security Checked 5/15/2025 1:11:57 PM Completed Security Checked 5/15/2025 1:11:57 PM Payment Events Status Timestamps May 20, 2025 www.paloalto.gov/budget FY 2026 PROPOSED OPERATING & CAPITAL BUDGETS & MUNICIPAL FEE SCHEDULE WRAP-UP Finance CommitteeItem #1 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 May 28 & 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 www.paloalto.gov/budget •Received Council feedback (May 12) and additional Staff analysis & information •Revised Parking Lot •Multi-Year Budget Balancing Strategies •Staff Recommended Technical Adjustments •Consideration for Referrals •Updates on Citywide Fees Cost of Service Study – from Committee April 29th meeting. UPDATES SINCE MAY 7 BUDGET HEARING 3 www.paloalto.gov/budget CATEGORIES 4 CATEGORIES DESCRIPTION Policy/Priority/Vision Items that relate to City Policy, Council Priorities and/or City Vision Grants Items that relate to grants to other organizations. Placeholder Items that are budget target values with detail to follow on Aug. 19 Info Requested & Referrals Items that relate to additional requested information or requests that may become referrals Items in the Parking Lot are organized into the following categories for further consideration: Dept Parking Lot Items FY2026 FY 2027 Category FIR Fire Single Role Ambulance Model (12-hour medic unit)(600,000)(1,200,000)Policy/Priority /Vision NON Non-Profit Workplan Phase I (From $235k to $346k) (111,000)(111,000)Grants CSD CSD Community Events Grant Program (50,000)(50,000)Grants CSD Youth Community Services – Youth Connectedness Initiative (50,000)(50,000)Grants CIP Funding Shift: Allocate Measure B (local streets and roads) funds for Annual Street Maintenance/Reduce GF Transfer CIP 1,000,000 *1,000,000**Policy/Priority /Vision CIP Defer Capital Projects in FY 2026/Reduce GF Transfer to CIP (projects to be determined) 2,200,000 *0 Placeholder NON General Fund Expense Savings & FY 2025 Ending Fund Balance (details to be determined) 2,711,000 *1,011,000 **Placeholder Subtotal General Fund Uses (Expenses) DECREASE $5,100,000 $600,000 REVISED PARKING LOT – EXPENSES (TABLE 1) 5 * Retain Uncertainty Reserve at a minimum $6M: $1.2M funding shift/revenues, $2.2M Defer CIP, $2.7M General Fund expense savings & FY2025 ending fund balance. Placeholder items reflect targets, details to be discussed in August. ** $2.2M ongoing includes: $1.2M new sources/revenues, $1M GF Expense savings REVISED PARKING LOT – REVENUE (TABLE 2) Dept Parking Lot Items FY 2026 FY 2027 Category FIR Paramedic Transport Fee Revenue – updated fee 700,000 700,000 Policy/Priority/ Vision FIR First Responder Fee Revenue – new fee 100,000 *200,000**Policy/Priority/ Vision CSD Rental and Reservation Fee Revenue 100,000 *100,000**Policy/Priority/ Vision NON Use Uncertainty Reserve to Partially Balance FY 2027 0 4,000,000 Policy/Priority/ Vision Subtotal General Fund Sources (Revenues) INCREASE $900,000 $5,000,000 POTENTIAL SAVINGS $6,000,000 $5,600,000 6 * Retain Uncertainty Reserve at a minimum $6M: $1.2M funding shift/revenues, $2.2M Defer CIP, $2.7M General Fund expense savings & FY2025 ending fund balance. Placeholder items reflect targets, details to be discussed in August. ** $2.2M ongoing includes: $1.2M new sources/revenues, $1M GF Expense savings 7 GENERAL FUND BUDGET BALANCING PROJECTED MULTI-YEAR FINANCIAL FORECAST (TABLE 3) ($ in millions) FY 2026 Proposed Budget FY 2026 Parking Lot (Revised) Increase/ Decrease FY 2027 (Revised) Revenues Use of Reserves $300.5 $12.0 $301.4 $6.0 $0.9 $(6.0) $310.4 $4.0 Expenses $312.5 $307.4 $(5.1)$318.4 Savings / (Cost)---$(4.0) General Fund Reserves Uncertainty Reserve at Year-End $0 $6.0 $6.0 $2.0 Budget Stabilization Reserve $$54.0 $54.0 $54.0 $54.0 Budget Stabilization Reserve %17.3%17.6%0.3%17.0% •BSR at 18.5% policy target level requires $2.8M of additional funding in FY26 & $4.9M in FY27 •Anticipated FY 2025 fund balance carryover is not represented above. Amount TBD Nonprofit Partnership Workplan Phase I: Received 20 applications totaling $797,000. (Excludes 2 applications totaling $23,000 received after deadline). If Direct Allocations are excluded, applications total $401,000. P&S Meeting on May 28th and June 8 Nonprofit Partnership Workplan Phase I Rec. Adjustments Category FY2026 Prop. Op. Budget FC Rec $ Changes FC Rec $ Allocations Total Funding Nonprofit Partnership Workplan Phase I (Application process currently underway) $235,000 $111,000 ($246,000)$100,000 Community Events – CSD Grants $0 $50,000 -$50,000 DIRECT ALLOCATIONS – Application consideration and review underway Project Safety Net $100,000 --$100,000 Youth Connectedness Initiative (YCI)$0 $50,000 -$50,000 Magical Bridge $0 -$150,000 $150,000 Third (3rd) Thursday $0 -$40,000 $40,000 United Nations Association Film Festival $0 -$45,000 $45,000 Envir. Volunteers Foothills Nature Preserve $0 -$11,000 $11,000 Total $335,000 $211,000 $0 $546,000City Council discussed having direct allocations also move through the application process underway with P&S www.paloalto.gov/budget •Information Requested & Proposed Referrals •Debt Issuance and Cost Benefits •Historical Positions Filled and Vacant (proposed referral) •Summary of Mental Health Investment / Appropriations •Cost Recovery Policy Update (100% Category) (proposed referral) •Other Funds •Gas Utility Rates and technical adjustments for various utility funds •Technical adjustments and municipal fee updates •Re-appropriations •Updates on Citywide Fees Cost of Service Study (from April 29) CATEGORIES – Not on Tables 1 & 2 9 Mental Health Direct Funding – Highlights 10 Organization FY 2025 Adopted FY 2026 Proposed Source Project Safety Net $100,000 $100,000 CSD Contract Palo Alto University $47,500 Note 1*CSD Contract Youth Community Services - Youth Connectedness Initiative (YCI) $50,000 Note 2**CSD Contract Psychiatric Emergency Response Team (PERT)$283,000 $283,000 Police & SUMC Momentum for Health $0 $0 Grant funded allcove (partnership with Palo Alto Library)$0 $0 No cost partnership Total without HSRAP Mental Health-Related Contracts $480,500 $383,000 Adolescent Counseling Services (Outlet Program)$51,318 $45,125 HSRAP Contract Counseling and Support Services (CASSY)$0 $23,764 HSRAP Contract KARA $28,738 $28,500 HSRAP Contract Children’s Health Council $7,955 $9,815 HSRAP Contract Peninsula Healthcare Connections $39,781 $77,781 HSRAP Contract Total with HSRAP Mental Health-Related Contracts $608,292 $567,985 Additional programming and special events in the Community Services and Library Departments also support community mental health. Other HSRAP grantees and City efforts provide indirect support for mental health. JED Foundation – amount TBD; funding via CSD operating budget and/or CMO contingency. Note 1*– Contract funded in FY25 and will extend into FY26. Staff will evaluate the contract along with other mental health initiatives to determine a path forward. Note 2**– Funding for YCS and other nonprofits will be discussed at the June Policy and Services Committee meeting. DEBT RATIO & FINANCING BEST PRACTICES 11 Budget/ Cash Flow Tax and Rate Payers Credit RatingRule of Thumb $15M issuance approximately $1M+ annual debt service (assuming an approx. 5% borrowing rate and includes ~$0.5M issuance cost) Moody’s affirmed City’s AAA rating in Dec 2024 S&P affirmed Utility AAA rating in April 2025 Refinancing Opportunities •Rates for City's current debt are favorable compared to today's market. •Debt Policy guideline: at least 3% NPV savings Category Metric General Gov’t Debt Modest Debt per capita: $5.05 % of Personal Income: 3.3% Enterprise Debt Meeting Requirement: 1.25 minimum Net Operating Income/ Debt Service Debt Service as % of Citywide Exp 2023 State Controller’s Report Palo Alto: 1.7% Cities in SCC: 1.9% All Cities in CA: 2.6% Important to manage these ratios OTHER FUNDS Median Residential Utility Bill FY 2025 Adopted FY 2026 Revised Proposed Electric 9.0%6% Gas 12.5%5% * Water 9.5%10% Wastewater 15.0%20% Refuse 0%0% Storm Drain 2.6%2.4% Monthly Bill Estimated Change 9% $34.50 8% $32.70 Additional actions included in the Proposed Budget address non- General Fund activities including but not limited to: •Parking Funds (General Fund support) •Enterprise Funds, rate changes to the right 12 * Assumes continued review of 2025 cost of service analysis, an approximately 9% rate increase for all customers with a one-time climate credit for G2 Small and Medium Customers of $2.2M from Cap & Trade Funds. The previously stated $1.1M is sufficient if review and adoption of alternative rates is completed by January 2026. www.paloalto.gov/budget •Finance Committee April 29 •Departments: Police, Fire, Public Works, CSD, ASD, City Clerk •Revised Report – agency name properly restated •Supplemental report and new report posted online •Requested Follow-up (Attachment A) •Police, Public Works, ASD, City Clerk fees •Clarification provided and new proposed fees, where appropriate. •Next Step •Annual process to include fee updates with Council budget adoption (June 10th) Updates on Citywide Fees Cost of Service Study 13 www.paloalto.gov/budget •Technical Adjustments•Various utility funds including 5-year CIP – as noted on May 7 •Annual Re-appropriations •Council June 16th will include all detail and incorporated into FY26 adopted budgets •Oversight Committee Reviews – 2026-2030 Capital Improvement Plan (CIP)•Stormwater Management Oversight Committee – Stormwater Capital Projects alignment to Stormwater Fee •Planning & Transportation Commission – CIP alignment with Comprehensive Plan •Proposed Referrals•Historical Positions Filled and Vacant •Summary of Mental Health Investment / Appropriations (if any) •Cost Recovery Policy Update (100% Category) Technical Adj & Oversight Committee Reviews 14 15 COMMITTEE RECOMMENDATIONS - MOVE ITEMS FROM “YELLOW” TO “GREEN” www.paloalto.gov/budget 15 Date Parking Lot Items FY 2026 GF (cost)/source Potential FY2027 GF (cost)/source Dept 7-May Restore Uncertainty Reserve minimum of $6M for FY27 ($4M) & FY28 (minimum of $2M) - 4,000,000 NON 7-May Paramedic Transport Fee Revenue - updated fee 700,000 700,000 FIR 20-May First Responder Fee Revenue - new fee 100,000 200,000 FIR 20-May Rental and Reservation Fee Revenue 100,000 100,000 CSD Subtotal Sources (Revenue)900,000$ 5,000,000$ 7-May Fire Single Role Model (600,000) (1,200,000) FIR 7-May Non-Profit Workplan Phase I (From $235k to $346k) - with direct funding to specified nonprofits (111,000) (111,000) NON 7-May CSD Grants Community Events Program (50,000) (50,000) CSD 7-May Youth Community Services - YCI Funding (50,000) (50,000) CSD 20-May Measure B Funding Adjustment for Street Maintenance/Reduce GF Transfer to Capital Fund 1,000,000 1,000,000 Capital 20-May Defer Capital Projects in FY 2026/Reduce GF Transfer to Capital Fund 2,200,000 - Capital 20-May General Fund Expense Savings & FY 2025 Ending Fund Balance 2,711,000 1,011,000 All GF Depts Subtotal Costs (Expense)5,100,000$ 600,000$ Potential Funds Remaining Net (cost) / source 6,000,000$ 5,600,000$ Date FY 2026 Council Contingency 6-May Beginning Balance 125,000$ Remaining:125,000$ Budget Stabilization Reserve FY 2026 estimate = $54.0M or 17.6%. Council range is 15% to 20% of expense budget, currently estimated at $307.4M. 16 RECOMMENDED ACTION DRAFT MOTION: Recommend to the City Council: 1.Adoption of the FY 2026 Operating and Capital Budgets and Municipal Fee Schedule, amended by: a.the Table of Finance Committee Adjustments to the Budget, including the Staff technical adjustments 2. Approve the FY 2026-2030 Capital Improvement Plan, amended by a.Changes approved in the wrap-up discussion Budget and meeting details listed at www.paloalto.gov/budget www.paloalto.gov/budget 16