HomeMy WebLinkAbout2020-12-15 Finance Committee Agenda PacketFinance Committee
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Tuesday, December 15, 2020
Special Meeting
6:00 PM
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Call to Order
Oral Communications
Members of the public may speak to any item NOT on the agenda.
Action Items
1.Review and Recommend to the City Council a Fire Department
Ambulance Subscription Program: 1) Adopt Ordinance to Establish
Program and Fees; and 2) Approval of a Budget Amendment in the
General Fund
2.Review the Draft Park, Community Center, and Library Development
Impact Fee Justification Study; and Recommend That the City Council
Consider Adoption of an Ordinance Based on Study Recommendations
to Update the City’s Park, Community Center, and Library Impact Fee
Program
3.Review and Recommend That the City Council Accept the Preliminary
General Fund Forecast for Fiscal Year (FY) 2022 and FY 2022 Budget
Development Guidelines
4.Fiscal Year 2021 Finance Committee Referrals Update and Potential
Recommendations to the City Council
5.First Quarter Fiscal Year 2021 Financial Report
Presentation
Presentation
Presentation
Presentation
Public
Comment
2 December 15, 2020
Future Meetings and Agendas
Adjournment
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3 December 15, 2020
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Meeting ID: 992-2730-7235 Phone No: 1 (669) 900-6833
City of Palo Alto (ID # 11710)
Finance Committee Staff Report
Report Type: Action Items Meeting Date: 12/15/2020
City of Palo Alto Page 1
Summary Title: Review a Fire Department Ambulance Subscription Fee
Program & Budget Amendment
Title: Review and Recommend to the City Council a Fire Department
Ambulance Subscription Program: 1) Adopt Ordinance to Establish Program
and Fees, and 2) Approval of a Budget Amendment in the General Fund
From: City Manager
Lead Department: Fire
Recommendation
To Establish a Fire Department Ambulance Subscription Program, Staff recommends that the
Finance Committee:
1. Review and provide direction on an annual Program fee amount from the proposed rate
ranges for Residential and Business Participants;
2. Recommend that City Council approve the Program and adopt the Finance Committee’s
recommended Program fee level(s);
3. Recommend that City Council adopt an Ordinance amending the Fiscal Year 2021
Municipal Fee Schedule (Attachment A); and,
4. Recommend that City Council make budget amendments as necessary to begin and
maintain this program.
Executive Summary
As part of the Fire Department budget for Fiscal Year 2021, both a new Ambulance Subscription
Program and First Responder Fee were proposed for residents and businesses. These programs
were programed to achieve $1.86 million in net revenues combined in the FY 2021 Adopted
Budget. This report specifically addresses establishing the new ambulance subscription
program. This program will be voluntary and proposes to waive the insurance co-pay
participants would otherwise be charged when transported to the hospital by ambulance. It is
recommended that the program be established with a flat annual participation fee that would
be administered by adding it to the household or business utility bill. Ultimately, staff is seeking
the Finance Committee’s review of the specific attributes of this program most notably a
discussion and recommendation on the proposed fee levels, for recommendation to the City
Council for formal adoption.
City of Palo Alto Page 2
Background
The Palo Alto Fire Department (PAFD) has been operating an ambulance service since 1974.
PAFD is the only fire agency in Santa Clara County that provides an ambulance service, which
responds to approximately 3,500 transports each year. Emergency medical calls for service
make up approximately two-thirds of all calls for service. For at least 5 consecutive years, PAFD
has exceeded the response standard for Emergency Medical Service (EMS) response for a unit
to arrive on-scene in 8 minutes or less 90% of the time, and a paramedic on-scene in 12
minutes or less 99% percent of the time. The ambulance transport service has been recognized
as one of the City’s highest-rated services. In recent operational model changes, the City now
cross staffs apparatus at the majority of stations; this means that crews either take an engine or
an ambulance depending on the call types and need.
On June 22, 2020, City Council adopted a budget that included an estimated $1.86 million in
revenue from creating a new Ambulance Subscription Program and First Responder Fee. The
First Responder Fee would be charged for all EMS calls regardless of transport and would cover
cost for initial response for first due engine. This fee would be assessed on insurance
companies. The Ambulance Subscription Program is an optional fee for residents and
businesses to secure co-pay free ambulance transport. This report focuses on the ambulance
subscription program (FY 2021 Adopted Budget estimate of $1.48 million), provides the
background, details and options for the program to be recommended for adoption by the
Finance Committee for City Council consideration. Staff expects to return separately for the
First Responder Fee.
Discussion
An Ambulance Subscription Program proposed by the Fire Department is modeled after similar
programs offered by other Fire Departments in Califonia that also provide an ambulance
transport service. The voluntary program covers the co-pay for ambulance transports to the
residents or employees of participants. The first known Ambulance Subscription Program was
established in 1985 in Anaheim, California, and has been very successful.
Subscription Program Landscape in California
The PAFD identified five other Fire Departments in California that offer an Ambulance
Subscription Program. All cities offer the program to residents and some offer it to businesses.
Each City has a flat annual fee for participation that was determined when the program started,
and they have not been adjusted since the programs started:
Table 1. California City Rate Comparison
City Year Implemented Residential Fee Business Fee
Anaheim 1985 $43 $43
Huntington Beach 1990 $60 Only residential
Newport Beach 1993 $60 $60
Orange 1995 $48 $48
Corona 2004 $60 $60 for every 5 employees
City of Palo Alto Page 3
The PAFD reached out to informationally interview all cities to discuss the performance and
details of their programs. The cities that adopted the program in the 1980s and 1990s have a
flat fee for both residential and businesses, and the one city, Corona, CA, which established its
program in 2004 has a structure for businesses based on employee headcount.
All cities reported participation rates of 25-30% of all residents and/or businesses in the initial
year of implementation and slowly declining participation rates over decades as residents and
businesses turn over. Some cities reported running marketing campaigns every 2-3 years to
boost enrollment or even adding an automatic voluntary payment on the utility bill once per
month to encourage enrollment.
Costs to Patients and Program Design
The PAFD has established ambulance transport fees, and contracts with a third-party vendor to
collect insurance fees. Often patients are responsible for a co-pay when transported to the
hospital, depending on their insurance coverage. In Fiscal Year 2019 the average deductible/co-
pay required for a single trip to the hospital for patients with commercial insurance was $650,
with most patients paying $385 out-of-pocket for a transport.
For residents or businesses that elect to enroll in the Ambulance Subscription Program, a flat
annual fee will be assessed, and eligible participants will have the co-pay amount waived when
transported by PAFD to the hospital. As this program does have the potential for the erosion of
current co-payments for transport services, staff will monitor the revenues estimates.
However, with the expected participation levels, staff estimates the impact to be no greater
than $15,000 to $25,000 of the approximately $3 million in transport fees collected annually.
During the implementation of this new subscriptions program, staff will track how many
waivers are granted to monitor the real impacts.
Participation in the program will be limited to residents and businesses within the City of Palo
Alto, and would apply only to EMS responses within the Palo Alto city limits.
- For residential participants, all household members who are permanent residents of the
subscribing household will be covered. The program will include umbrella coverage for
visitors who need emergency medical transport from a resident that is a program
participant.
- For business participants, the Program will cover all employees at the business address
or those elsewhere in the City of Palo Alto during the course of their duties. A business
subscription will not cover customers or other visitors to the premises of the business.
Program Administration and Fee Collection
Participants who elect to enroll in the Program will be able to do so through various methods
including online, email or phone. Current administrative staff within the PAFD will be assigned
to assist residents and businesses with enrolling and answering any questions they may have
about the program, and the Department will use current technology to create a database of
City of Palo Alto Page 4
participants. Fees will be collected in partnership with the Utilities Department, and Fire
Administrative staff will collaborate with Utilities Customer Support to coordinate enrollment
and billing.
From a customer perspective, the enrollment will be seamless after submitting their
information, and the pro-rated monthly charge will show up on their next utility bill.
Participants will be able to elect to unenroll at any time for any reason, and their subscription
benefits will be terminated upon request.
All cities interviewed reported the success of enrolling participants in the program resulted
from a strong marketing and outreach campaign over the course of the first year. The PAFD will
collaborate with the City Manager’s Office to launch a community education and outreach
campaign to inform the residents and businesses about the new program benefits, and provide
clear communication on the eligibility and enrollment.
Fee Setting and Revenue Estimates
The FY 2021 Adopted Budget estimated $1.48 million of net revenue generated from residential
and business participants. The Fire Department is seeking direction from the Finance
Committee on the amount to set as the annual Residential and Business Fees. The cities
identified with similar programs in California set fees upon the program’s onset and have not
increased them. With most of those fees set more than thirty years ago, the Fire Department is
proposing a higher rate than compared to other city programs based on the current cost of
services as well as the financial benefit of the program should the co-payment paid by the
participant be waived.
Residential Participants
With the average residence in Palo Alto having 3 people, the Department proposes modeling
other programs by offering the program with a flat annual fee for any and all permanent
residents living in a household located within the City of Palo Alto.
There are approximately 25,000 residential Utility customers in Palo Alto that could elect to
participate in the program. The Fire Department is proposing the following residential rate
options. Revenue estimates are calculated using an expected participation rate of 27.5%, this is
right in the middle of the 25-30% participation rates reported by the five cities interviewed.
Table 2. Residential Rate Options
Option A Option B Option C
Annual Fee $80 $100 $120
Utility Customers 25,000 25,000 25,000
Expected Participation Rate 27.5% 27.5% 27.5%
Estimated Annual Revenue $550,000 $687,500 $825,000
City of Palo Alto Page 5
Business Participants
In March of 2020 the City of Palo Alto considered a Local Tax Measure (Staff Report #11161)
which provided data on business population from the California EDD. That data showed an
estimated 3,141 businesses with employee counts ranging widely from under 10 to 1,000 or
more. It should be noted that these estimates and data reflect information prior to the current
shelter in place environment and the long-term impacts of business models as a result of the
current public health emergency.
A modified program approach similar to that of Corona, CA, that sets the Business rate based
on employee headcount is recommended. The Palo Alto Ambulance Subscription Program
would establish 5 tiers of rates for businesses based on employee headcount.
Table 3. Business Rate Options
Tier Employee
Headcount
Number of
Businesses
Option A Option B Option C
1 0-10 2,300 $200 $250 $300
2 11-50 621 $1,000 $1,250 $1,500
3 51-100 121 $2,000 $2,500 $3,000
4 101-250 62 $5,000 $6,250 $7,500
5 251-1000 37 $10,000 $12,500 $15,000
Expected Participation Rate 27.5% 27.5% 27.5%
Total Estimated Revenue $550,825 $688,531 $826,238
Resource Impact
The Department is requesting input and a recommendation from the Finance Committee on
which rate options to set as the proposed fees for the Ambulance Subscription Program for
Council consideration. The selection of which option may impact the Department’s ability to
meet the $1.48 Million annual revenue target for this program. Participation rate is still an
unknown factor in the generation of revenue from this Program. However, it is more likely that
the revenue target will be reached with Option B or C. Assuming an estimated participation rate
of 27.5%, the following rate options would generate the following revenue amounts annually:
Table 4. Annual Revenue Estimates
Residential Fees Business Fees Total Program
Revenues
Option A $550,000 $550,825 $1,100,825
Option B $687,500 $688,531 $1,376,031
Option C $825,000 $826,238 $1,651,238
There are costs to implement this program unanticipated at the time of budget development.
In collaboration with the Utilities Department, there will be staff resources required to support
the billing activities of the Program. Utilities estimates a total of 30 hours each month will be
City of Palo Alto Page 6
required for customer support, amounting to an annual charge of $60,000 to support customer
inquiries, payment posting, credit collection, and accounting. The fee for Utilities support will
be evaluated annually and charged in arrears based on the actual level of effort. The Fire
Department interdepartmental services budget will be increased by $60,000 annually to cover
the cost of supporting this program.
The Fire Department will work collaboratively to conduct a strong marketing and outreach
campaign throughout the first year. This will include no-cost efforts, such as press releases, and
for-cost efforts including print and digital marketing. Additional funding of $25,000 one-time
would be necessary to cover the campaign’s costs. Any budget amendments for either costs or
lower than expected revenues would require either use of the City Council COVID -19 reserve or
the Budget Stabilization Reserve (BSR).
Stakeholder Engagement
Residents and businesses have been engaged in the budget adoption process; however,
targeted outreach and information marketing are required to provide clear communication and
information to residents and businesses about the program benefits and enrollment. The
above-recommended approach includes a robust initial outreach campaign.
Environmental Review
The Finance Committee’s recommendation that Council adopt an Ambulance Subscription
Program is not a project requiring environmental review for the purpose of the California
Environmental Quality Act, because the Program will not result in a direct or reasonably
foreseeable indirect physical change in the environment (Pub. Res. Code sec. 21065).
The Finance Committee’s recommendation of an Ambulance Subscription Program fee rate and
the Committee’s recommendation to Council for approval of budget adjustments associated
with Program approval do not constitute a project requiring environmental review for the
purpose of the California Environmental Quality Act, as the creation of governing funding
mechanisms and fiscal activities that do not involve any commitment to any specific project
which may result in a potentially significant physical impact on the environment (14 Cal. Code
Regs. sec. 15478(b)(4)).
Attachments:
• Attachment A: Draft Ambulance Fee Ordinance
30431 AB 1
*Yet to be Passed*
Ordinance No. ___
Ordinance of the Council of the City of Palo Alto Amending the
Fiscal Year 2021 Municipal Fee Schedule to Add Fire Department
Ambulance Subscription Program Fees
The Council of the City of Palo Alto ORDAINS as follows:
SECTION 1. Findings and Declarations. The City Council finds and declares as follows:
A. The City of Palo Alto Fire Department has provided an ambulance transport service
since 1974.
B. The City plans to establish a new Ambulance Subscription Program (Program)
allowing eligible participants to pay an annual fee to have the insurance co-pay waived for
ambulance transports occurring within the City.
C. All residences and businesses within the City of Palo Alto are eligible for voluntary
participation in the program.
D. A Residential Program subscription will cover all permanent residents at the
subscribing household address.
E. A Business Program subscription will cover all employees at the subscribing
business address or those who are elsewhere in the City of Palo Alto during the course of their
duties. A business subscription will not cover customers or other visitors to the premises of the
business, or employees while outside the Palo Alto city limits.
The City will fund the Program through a flat annual fee for Residential and Business Program
participants.
SECTION 2. The Council of the City of Palo Alto approves and adopts new fees for an
Ambulance Subscription Program available to residential and business participants and adopts
the amendments to the Fiscal Year 2021 Municipal Fee Schedule as set forth in Exhibit “A” and
incorporated here by reference.
SECTION 3. The fees in this Ordinance are for voluntary enrollment in the Program.
Pursuant to Art. XIII C, Section 1(e) of the California Constitution, such fees are not a tax.
//
//
30431 AB 2
//
SECTION 4. The Council finds that this project is exempt from the provisions of the
California Environmental Quality Act (“CEQA”), pursuant to Section 20165 of the Public Resources
Code, because the Program will not result in a direct or reasonably foreseeable indirect physical
change in the environment.
SECTION 5. This ordinance shall be effective thirty-one days after the date of its adoption.
INTRODUCED:
PASSED:
AYES:
NOES:
ABSENT:
ABSTENTIONS:
ATTEST:
____________________________ ____________________________
City Clerk Mayor
APPROVED AS TO FORM: APPROVED:
____________________________ ____________________________
Deputy City Attorney City Manager
____________________________
Fire Chief
____________________________
Director of Administrative
Services
Exhibit A
30431 AB 3
Fiscal Year 2021 Municipal Fee Schedule
Chapter VIII - Fire Fees
New Fee: Ambulance Subscription Program
Residential Rate
Annual Fee per Household TBD
Business Rate
Rate Tier Employee Headcount Annual Fee
1 0-10 TBD
2 11-50 TBD
3 51-100 TBD
4 101-250 TBD
5 251-1000 TBD
City of Palo Alto (ID # 11794)
Finance Committee Staff Report
Report Type: Action Items Meeting Date: 12/15/2020
City of Palo Alto Page 1
Summary Title: Park, Community Center, and Library Development Impact
Fees
Title: Review the Draft Park, Community Center, and Library Development
Impact Fee Justification Study and Recommend that the City Council
Consider Adoption of an Ordinance Based on Study Recommendations to
Update the City’s Park, Community Center, and Library Impact Fee Program
From: City Manager
Lead Department: Community Services
Recommendation
Staff recommends that the Finance Committee review the Park, Community Center, and Library
Development Impact Fee Justification Study prepared by David Taussig & Associates (“DTA”)
(Attachment A), and recommend that the City Council approve any adjustments to fee levels
and direct staff to return with the necessary ordinance and fee schedule updates.
Executive Summary
Under California law (AB 1600), cities have the ability to charge new development for its
relative share of the cost to fund the acquisition of land and improvements to public
facilities and services. The Park, Community Center, and Library Development Impact Fee
Justification Study (the “Study”), found in Attachment A, provides a detailed legal
framework for the imposition of impact fees, defines the City facilities addressed in the
study, illustrates the calculation methodology used, and specifies the maximum fee levels
which the City could charge to new development.
On November 8, 2019, staff released the RFP for a Parks, Library, and Community Center
Development Impact Fee Nexus Study. The local firm of DTA was determined to be the most
qualified consultant and a Consultant Agreement in the amount of $60,000 was executed on
April 17, 2020. DTA has inventoried City data and conducted market research, and a check-in
with the Finance Committee and City Council to ensure current efforts are consistent with the
City Council’s direction is important before moving to the next phase of the process.
Based on the Study (Attachment A) prepared by DTA, staff recommend updates to the Park,
Community Center, and Library Development Impact Fees. Finance Committee direction is
City of Palo Alto Page 2
requested to determine appropriate adjustments to the maximum fee levels presented for
recommendation to the City Council and for preparation of an ordinance to establish such fees.
Based on direction from Finance Committee and Council, staff may need to return with an
ordinance to make minor updates to the municipal code.
Background and Discussion
Impact fees are established based on the reasonable relationship, or nexus, between impacts
caused by new development and the improvements to mitigate those impacts that will be
funded by the fee. Although fees are updated annually to reflect increases in the Bay Area
Consumer Price Index or Engineering News Record Construction Cost Index, baseline fee levels
for some of the City’s impact fees have not been reviewed or updated in nearly 20 years, nor
has the actual cost inflation of land valuation in the City. In order to plan for new residential
and non-residential development and identify the costs associated with mitigating the impacts
of this development, the Community Services and Library departments worked with consultant
DTA.
The City’s Park, Community Center, and Library Development Impact Fees were initially
developed in 2001. Table 1 below shows the FY 2020 impact fees for new development based
on land use type.
Table 1. FY 2020 Park, Community Center, and Library Development Impact Fees
State law requires agencies to identify a reasonable relationship, or nexus, between an impact
fee and new development, and to make findings regarding: (a) the purpose of the fee; (b) what
mitigation projects the fee will be used to fund; (c) the nexus between the fee’s use and the
type of development on which the fee will be imposed; (d) the nexus between the need for the
public facility and the type of development on which the fee will be imposed; and (e) the nexus
between the amount of the fee and the cost of the public facility attributable to the
development upon which the fee is imposed. The Study is designed to support these findings
and is structured as shown in Table 2 below.
City of Palo Alto Page 3
Table 2. Summary of Nexus Study Methodology
Step 1 Demographic Assumptions: Identify future growth that represents the increased
demand for facilities
Step 2 Facility Needs and Costs: Identify the amount of public facilities required to
support the new development and the costs of such facilities
Step 3 Cost Allocation: Allocate costs per equivalent dwelling unit
Step 4 Fee Schedule: Calculate the fee per residential unit or non-residential square foot
In order to develop new impact fee levels, DTA utilized the Standards-Based Fee Methodology,
or Level of Service (“LOS”), which establishes impact fees based on “standards,” where costs
are based on the existing LOS provided to the community. The existing LOS is based on the
square feet of space, integrated unit, or number of volumes (in the case of Library) per 1,000
Persons Served for each facility, which is an industry-standard method of quantifying LOS for
facilities such as Parks, Community Centers, and Libraries. The Standards-Based Methodology
also relies on the concept of Equivalent Dwelling Units, or EDUs, to allocate benefit among each
of the land use categories. EDUs are a mechanism that equates varying land uses to residential
dwelling unit standards in order to equitably calculate fees. The Standards-Based Methodology
ensures that City facilities are appropriately developed and sized so that future residents and
employees do not cause a reduction in LOS by unduly burdening the infrastructure system, thus
leading to decay and deterioration.
To project future development and facility needs, DTA used projections of future population
and development within the City outlined in the City’s 2017 Parks, Trails, Natural Open Space
and Recreation Master Plan, as well as Scenario 3 of the 2017 Comprehensive Plan Update
Draft Environmental Impact Report (“2017 EIR”).
The attached report details the total fee amounts required to finance new residential and non-
residential development’s share of the costs of new facilities as summarized in Table 3 below.
The fees within this study reflect the maximum fee levels that may be legally imposed on new
residential and non-residential development; however, Council may decide to adopt fee levels
below this maximum.
Table 3. Proposed Maximum Fee Levels for Park, Community Center, and Library
Development Impact Fees
City of Palo Alto Page 4
New or increased development impact fees go into effect no sooner than 60 days after
adoption (Government Code § 66017). Development impact fees must be paid based on the
rate in effect at the time of payment. A developer may pay fees at any point after the planning
entitlement has been issued and must pay all applicable fees prior to the issuance of a building
permit, unless otherwise approved by Council.
It is especially important that the City’s fees are calculated based on correct assumptions
regarding the current market value of land. Using CoStar, a leading commercial real estate
database, DTA has analyzed historical sales data of vacant land in the cities of Campbell, Santa
Clara, Sunnyvale, Saratoga, Mountain View, San Jose, and Los Altos. DTA has provided in Table
4 and Chart 1 below a comparison of the proposed land valuation to those used in neighboring
cities and communities, as well as information approximating when these local agencies last
updated their land valuations.
Table 4. Comparable Land Valuation per Acre
City of Palo Alto Page 5
Chart 1. Comparable Land Valuation per Acre
DTA also reviewed Community Center and Library Development Impact Fees in the cities of
Morgan Hill, Brentwood, Paso Robles, Richmond, and Fremont. These cities were chosen for
their comparable size and because they each have both Community Center and Library
Development Impact Fees. DTA has provided in Table 5 and Chart 2 below a comparison of the
proposed Community Center and Library fees to those used in other cities and communities.
Table 5. Comparable Community Center and Library Development Impact Fees
Notes:
1. Reflects fees for Single Family homes greater than 3,000 sq. ft. and Multi-Family homes greater than 900 sq. ft.
2. Community Facilities Fee may include Library and Community Centers.
3. General Government Fee may include Community Facilities.
City of Palo Alto Page 6
4. General Capital Facilities Fee may include Library and Community Centers.
Chart 2. Comparable Library and Community Center Development Impact Fees
Timeline
If recommended by the Finance Committee, staff will prepare a proposed ordinance based on
the Committee’s discussion and recommendation(s) for consideration by the City Council, to be
adopted as part of the FY 2022 annual budget process. Impact fee ordinances require formal
public notice and do not become effective until 60 days after adoption on a second reading.
Resource Impact
Development Impact Fees provide funding for capital improvements to mitigate the impacts of
new development in the community. The revenues received each year vary based on the
amount of residential and non-residential development occurring in Palo Alto during that
timeframe. Recommended changes to the fees will be presented to Council for approval in
future meetings. Revenue adjustments will be brought forward in the annual budget process as
appropriate to recognize the impacts of any fee updated and adopted by the City Council.
According to the FY 2018-19 Annual Status Report on the Development Impact Fees Schedule
(CMR #10795), a total of approximately $1,138,802 was collected in Park, Community Center,
and Library fees. DTA projects that the total fee revenues will increase by a minimum of two
City of Palo Alto Page 7
times should the maximum fee levels be approved and adopted as new fees. Please see Table 6
below for more detail.
Table 6. Current and Projected Revenues
Notes:
1. Total revenues collected reflect last available report as of period ending June 30, 2019.
2. Figures are an approximation and subject to change.
Policy Implications
Council has the authority to charge new development for its relative share of the cost of
specific public facilities, as calculated based on a nexus study. Council also has the authority, for
policy reasons, to restructure fees based on articulated City policies. The information provided
in this report allows Council to take the next step towards reevaluating and adjusting the City’s
Development Impact Fees.
Environmental Review
Recommendation and adoption of new impact fees as recommended above is not a “project”
under CEQA pursuant to 14 CCR § 15378(b)(4) because this does not involve a commitment to
any specific project. In addition, CEQA does not apply to the modification or approval of
charges by public agencies when they are for the purpose of obtaining funds for capital projects
necessary to maintain service within existing service areas. (14 CCR § 15273(a)(4)). .
Attachments:
• Attachment A: Palo Alto Draft Park, Community Center, and Library Development
Impact Fee Justification Study
I. Inventory of Existing Park Facilities
Facility Facility Units Quantity
City Parks Acres 174.10
Natural Open Space Acres 4,030.00
Recreation Facilities (Courts, Play Areas, Ball Fields, etc.) Integrated Facilities 154.00
Special Recreation Facilities (Winter Lodge, Gamble Garden, King Plaza) Acres 4.33
Bayland Preserve Capital Improvements Integrated Facilities 1.00
Integrated Facilities 1.00
II. Existing Recreation and Park Facilities EDU Calculation
Land Use Type
Number of Persons Served Number of Units/Non-Res 1,000 SF [1]
Residents per Unit/
Persons Served per 1,000 Non-Res. SF [2]
EDUs per Unit/per 1,000 Non-Res SF Total Number of EDUs
Single Family 42,392 15,443 2.75 1.00 15,443
Multi-Family 24,992 12,310 2.03 0.74 9,104
Commercial/Industrial (per 1,000 SF)15,860 23,323 0.68 0.25 5,778
Hotel/Motel (per 1,000 SF)183 1,577 0.12 0.04 67
Total 83,426 52,653 NA NA 30,392
III. Existing Facility Standard
Facility Units
Facility Type Facility Units Quantity per 1,000 Persons Served
City Parks Acres 174.10 2.09
Natural Open Space Acres 4,030.00 48.31
Recreation Facilities (Courts, Play Areas, Ball Fields, etc.) Integrated Facilities 154.00 1.85
Special Recreation Facilities (Winter Lodge, Gamble Garden, King Plaza) Acres 4.33 0.05
Bayland Preserve Capital Improvements Integrated Facilities 1.00 0.01
Integrated Facilities 1.00 0.01
IV. Future Recreation and Park Facilities EDU Calculation
Land Use Type
Number of
Persons Served
Number of Units/
Non-Res 1,000 SF [1]
Residents per Unit/
Persons Served per
1,000 Non-Res. SF [2]
EDUs per Unit/
per 1,000 Non-Res SF
Total
Number of EDUs
Single Family 6,911 2,517 2.75 1.00 2,517
Multi-Family 4,074 2,007 2.03 0.74 1,484
Commercial/Industrial (per 1,000 SF)1,644 2,418 0.68 0.25 599
Hotel/Motel (per 1,000 SF)19 164 0.12 0.04 7
Total 12,648 7,106 NA NA 4,608
V. Future Facility Standard
Facility Units Facilities Units Funded
Facility Type [3] Facility Units per 1,000 Persons Served by Future Development
City Parks Acres 2.09 26.39
Natural Open Space Acres 48.31 610.97
Recreation Facilities (Courts, Play Areas, Ball Fields, etc.) Integrated Facilities 1.85 23.35
Special Recreation Facilities (Winter Lodge, Gamble Garden, King Plaza) Acres 0.05 0.66
Bayland Preserve Capital Improvements Integrated Facilities 0.01 0.15
Foothills Park Capital Improvements Integrated Facilities 0.01 0.15
VI. Park and Open Space Summary Cost Data
Facility Units Funded Total Facility Cost
Facility Type [4]Facility Units by Future Development Land Acquisition per Acre [5]Acres Being Developed Park Development per Acre [6]Planning and Design (per Acre) [7]Administration (5%) [8]for New Development Cost per EDU
City Parks Acres 26.39 $5,700,000 26.39 $1,406,530 $84,392 $70,327 $191,657,642 $41,596.37
Natural Open Space Acres 610.97 $57,000 610.97 $40,000 $2,400 $2,000 $61,952,533 $13,445.85
Total $253,610,176 $55,042.23
VII. Parks & Recreation Facility Cost Summary
Facility Units Facilities Funded Total Facilities for
Facility Type Facility Units Current Development Future Development Buildout Population per 1,000 Persons Served by Future Development Facility Cost Future Development Cost per EDU
Recreation Facilities (Courts, Play Areas, Ball Fields, etc.) Integrated Facilities 154 23.35 96,074 1.85 23.35 $663,173 $15,483,308 $3,360.42
Special Recreation Facilities (Winter Lodge, Gamble Garden, King Plaza) Acres 4.33 0.66 96,074 0.05 0.66 $6,693,925 $4,394,250 $953.71
Bayland Preserve Capital Improvements Integrated Facilities 1.00 0.15 96,074 0.01 0.15 $25,000,000 $3,790,147 $822.59
Foothills Park Capital Improvements Integrated Facilities 1.00 0.15 96,074 0.01 0.15 $15,000,000 $2,274,088 $493.56
Offsetting Revenues ($5,583,312) ($1,211.77)
Total $47,357,098 $20,358,482 $4,418.50
Parks LOS Facilities Fee Total $59,460.73
Notes:
[1]Population estimates based on California Dept. of Finance, Demographic Research Unit - Report E-5 January 1, 2020.
[2]Persons Served per Unit based on U.S. Census Bureau's American Community Survey (ACS) 2018.
[3]Estimates based on current Park inventory as identified within the Palo Alto Parks, Trails, Natural Open Space, and Recreation Master Plan.
[4]Estimates based on cost assumptions for Park improvement costs provided by City of Palo Alto.
[5]In light of the City's Quimby Fee, Land Acquisition Costs have been excluded from this analysis.
[6]Park development costs have been escalated to Fiscal Year 2019 according to the Construction Cost Index (CCI).
[7]Planning and Design Costs have been estimated to be approximately 6% of development costs, as seen in other California communities.
[8]Administration costs have been estimated at 5% to appropriately reflect City staff's time.
APPENDIX A-1
CITY OF PALO ALTO
PARK DEVELOPMENT IMPACT FEE CALCULATION
Foothills Park Capital Improvements
Foothills Park Capital Improvements
I. Inventory of Existing Community Center Facilities
Facility Facility Units Quantity
Cubberley Community Center Square Feet 65,046
Lucie Stern Community Center Square Feet 12,203
Mitchell Park Community Center Square Feet 15,000
Palo Alto Art Center Square Feet 23,000
Junior Museum and Zoo Square Feet 45,071
Improvements, Upgrades, and Renovations Integrated Unit 5
Building Master Plans Integrated Unit 5
II. Existing Community Center Facilities EDU Calculation
Land Use Type
Number of
Persons Served
Number of Units/
Non-Res 1,000 SF [1]
Residents per Unit/
Persons Served per
1,000 Non-Res. SF [2]
EDUs per Unit/
per 1,000 Non-Res SF
Total
Number of EDUs
Single Family 42,392 15,443 2.75 1.00 15,443
Multi-Family 24,992 12,310 2.03 0.74 9,104
Commercial/Industrial (per 1,000 SF)15,860 23,323 0.68 0.25 5,778
Hotel/Motel (per 1,000 SF)183 1,577 0.12 0.04 67
Total 83,426 52,653 NA NA 30,392
III. Existing Facility Standard
Facility Units
Facility Type Facility Units Quantity per 1,000 Persons Served
Cubberley Community Center Square Feet 65,046 779.68
Lucie Stern Community Center Square Feet 12,203 146.27
Mitchell Park Community Center Square Feet 15,000 179.80
Palo Alto Art Center Square Feet 23,000 275.69
Junior Museum and Zoo Square Feet 45,071 540.25
Improvements, Upgrades, and Renovations Integrated Unit 5 0.06
Building Master Plans Integrated Unit 5 0.06
IV. Future Community Center Facilities EDU Calculation
Land Use Type
Number of
Persons Served
Number of Units/
Non-Res 1,000 SF [1]
Residents per Unit/
Persons Served per
1,000 Non-Res. SF [2]
EDUs per Unit/
per 1,000 Non-Res SF
Total
Number of EDUs
Single Family 6,911 2,517 2.75 1.00 2,517
Multi-Family 4,074 2,007 2.03 0.74 1,484
Commercial/Industrial (per 1,000 SF)1,644 2,418 0.68 0.25 599
Hotel/Motel (per 1,000 SF)19 164 0.12 0.04 7
Total 12,648 7,106 NA NA 4,608
V. Future Facility Standard
Facility Units Facilities Units
Facility Type [3] Facility Units per 1,000 Persons Served Funded by New Development
Cubberley Community Center Square Feet 779.68 9,861.36
Lucie Stern Community Center Square Feet 146.27 1,850.05
Mitchell Park Community Center Square Feet 179.80 2,274.09
Palo Alto Art Center Square Feet 275.69 3,486.94
Junior Museum and Zoo Square Feet 540.25 6,833.03
Improvements, Upgrades, and Renovations Integrated Unit 0.06 0.76
Building Master Plans Integrated Unit 0.06 0.76
VI. Community Center Summary Cost Data
Facility Units Funded Total Facility Cost forFacility Type [4]Facility Units by Future Development Cost Per Unit Future Development Cost per EDU
Cubberley Community Center Square Feet 9,861.36 628.94$ $6,202,249 $1,346.10
Lucie Stern Community Center Square Feet 1,850.05 $629 $1,163,577 $252.54
Mitchell Park Community Center Square Feet 2,274.09 $629 $1,430,276 $310.42
Palo Alto Art Center Square Feet 3,486.94 $629 $2,193,090 $475.98
Junior Museum and Zoo Square Feet 6,833.03 $718 $4,909,057 $1,065.44
Improvements, Upgrades, and Renovations Integrated Unit 0.76 $12,469,894 $9,452,547 $2,051.53
Building Master Plans Integrated Unit 0.76 $171,692 $130,148 $28.25
Total
VII. Community Center Facility Cost Summary
Facility Units Facilities Funded Total Facilities for
Facility Type Facility Units Current Development Future Development Buildout Population per 1,000 Persons Served by Future Development Facility Cost Future Development Cost per EDU
Cubberley Community Center Square Feet 65,046 9,861.36 96,074 779.68 9,861.36 $629 $6,202,249 $1,346.10
Lucie Stern Community Center Square Feet 12,203 1,850.05 96,074 146.27 1,850.05 $629 $1,163,577 $252.54
Mitchell Park Community Center Square Feet 15,000 2,274.09 96,074 179.80 2,274.09 $629 $1,430,276 $310.42
Palo Alto Art Center Square Feet 23,000 3,486.94 96,074 275.69 3,486.94 $629 $2,193,090 $475.98
Junior Museum and Zoo Square Feet 45,071 6,833.03 96,074 540.25 6,833.03 $718 $4,909,057 $1,065.44
Improvements, Upgrades, and Renovations Integrated Unit 5 0.76 96,074 0.06 0.76 $12,469,894 $9,452,547 $2,051.53
Building Master Plans Integrated Unit 5 0.76 96,074 0.06 0.76 $171,692 $130,148 $28.25
Offsetting Revenues ($4,261,898) ($924.98)
Total $12,644,820 $21,219,046 $4,605.27
Community Center LOS Facilities Fee Total $4,605.27
Notes:
[1]Population estimates based on California Dept. of Finance, Demographic Research Unit - Report E-5 January 1, 2020.
[2]Persons Served per Unit based on U.S. Census Bureau's American Community Survey (ACS) 2018.
[3]Estimates based on current Community Center inventory as identified within the Palo Alto Parks, Trails, Natural Open Space, and Recreation Master Plan.
[4]Estimates based on cost assumptions for Community Center improvement costs provided by City of Palo Alto.
APPENDIX A-2
CITY OF PALO ALTO
COMMUNITY CENTER DEVELOPMENT IMPACT FEE CALCULATION
I. Inventory of Existing Library Facilities
Facility Facility Units Quantity
Children's Library (1276 Harriet)Square Feet 6,043
College Terrace Library (2300 Wellesley)Square Feet 2,392
Downtown Library (270 Forest Ave.)Square Feet 9,046
Mitchell Library (3700 Middlefield)Square Feet 41,000
Rinconada Library (1213 Newell)Square Feet 29,608
Furniture, Fixtures & Equipment Integrated Unit 5
Volumes Volumes 485,157
Technology Upgrades Integrated Unit 5
II. Existing Library Facilities EDU Calculation
Land Use Type Number of Persons Served
Number of Units/
Non-Res 1,000 SF [1]
Residents per Unit/
Persons Served per
1,000 Non-Res. SF [2]EDUs per Unit Total Number of EDUs
Single Family 42,392 15,443 2.75 1.00 15,443
Multi-Family 24,992 12,310 2.03 0.74 9,104
Commercial/Industrial (per 1,000 SF)15,860 23,323 0.68 0.25 5,778
Hotel/Motel (per 1,000 SF)183 1,577 0.12 0.04 67
Total 83,426 52,653 NA NA 30,392
III. Existing Facility Standard
Existing Impact Fee Schedule (from Fiscal Year 2020 Adopted Schedule):Facility Units
Facility Type Facility Units Quantity per 1,000 Persons Served
Children's Library (1276 Harriet)Square Feet 6,043 72.44
College Terrace Library (2300 Wellesley)Square Feet 2,392 28.67
Downtown Library (270 Forest Ave.)Square Feet 9,046 108.43
Mitchell Library (3700 Middlefield)Square Feet 41,000 491.45
Rinconada Library (1213 Newell)Square Feet 29,608 354.90
Furniture, Fixtures & Equipment Integrated Unit 5 0.06
Volumes Volumes 485,157 5,815.39
Technology Upgrades Integrated Unit 5 0.06
IV. Future Library Facilities EDU Calculation
Land Use Type Number of Persons Served
Number of Units/Non-Res 1,000 SF [1]
Residents per Unit/Persons Served per 1,000 Non-Res. SF [2]EDUs per Unit Total Number of EDUs
Single Family 6,911 2,517 2.75 1.00 2,517
Multi-Family 4,074 2,007 2.03 0.74 1,484
Commercial/Industrial (per 1,000 SF)1,644 2,418 0.68 0.25 599
Hotel/Motel (per 1,000 SF)19 164 0.12 0.04 7
Total 12,648 7,106 NA NA 4,608
V. Future Facility Standard
Facility Units Facilities Units
Facility Type [3] Facility Units per 1,000 Persons Served Funded by New Development
Children's Library (1276 Harriet)Square Feet 72.44 916.15
College Terrace Library (2300 Wellesley)Square Feet 28.67 362.64
Downtown Library (270 Forest Ave.)Square Feet 108.43 1,371.43
Mitchell Library (3700 Middlefield)Square Feet 491.45 6,215.84
Rinconada Library (1213 Newell)Square Feet 354.90 4,488.75
Furniture, Fixtures & Equipment Integrated Unit 0.06 0.76
Volumes Volumes 5,815.39 73,552.66
Technology Upgrades Integrated Unit 0.06 0.76
VI. Library Summary Cost Data
Facility Units Total Facility CostFacility Type [4]Facility Units Funded by Future Development Cost Per Unit for New Development Cost per EDU
Children's Library (1276 Harriet)Square Feet 916.15 $629 $576,211 $125.06
College Terrace Library (2300 Wellesley)Square Feet 362.64 $629 $228,081 $49.50
Downtown Library (270 Forest Ave.)Square Feet 1,371.43 $629 $862,552 $187.20
Mitchell Library (3700 Middlefield)Square Feet 6,215.84 $629 $3,909,421 $848.48
Rinconada Library (1213 Newell)Square Feet 4,488.75 $629 $2,823,174 $612.73
Furniture, Fixtures & Equipment Integrated Unit 0.76 $500,000 $379,015 $82.26
Volumes Volumes 73,552.66 $50 $3,677,633 $798.17
Technology Upgrades Integrated Unit 0.76 $500,000 $379,015 $82.26
Total
VII. Library Facility Cost Summary
Facility Units Facilities Funded Total Facilities
Facility Type Facility Units Current Development Future Development Buildout Population per 1,000 Persons Served by New Development Facility Cost for New Development Cost per EDU
Children's Library (1276 Harriet)Square Feet 6,043 916.15 96,074 72.44 916.15 $629 $576,211 $125.06
College Terrace Library (2300 Wellesley)Square Feet 2,392 362.64 96,074 28.67 362.64 $629 $228,081 $49.50
Downtown Library (270 Forest Ave.)Square Feet 9,046 1,371.43 96,074 108.43 1,371.43 $629 $862,552 $187.20
Mitchell Library (3700 Middlefield)Square Feet 41,000 6,215.84 96,074 491.45 6,215.84 $629 $3,909,421 $848.48
Rinconada Library (1213 Newell)Square Feet 29,608 4,488.75 96,074 354.90 4,488.75 $629 $2,823,174 $612.73
Furniture, Fixtures & Equipment Integrated Unit 5 0.76 96,074 0.06 0.76 $500,000 $379,015 $82.26
Volumes Volumes 485,157 73,552.66 96,074 5815.39 73,552.66 $50 $3,677,633 $798.17
Technology Upgrades Integrated Unit 5 0.76 96,074 0.06 0.76 $500,000 $379,015 $82.26
Offsetting Revenues ($214,779.00)($46.61)
Total $1,003,195 $12,620,322 $2,739.05
Library Facilities Fee Total $2,739.05
Notes:
[1]Population estimates based on California Dept. of Finance, Demographic Research Unit - Report E-5 January 1, 2020.
[2]Persons Served per Unit based on U.S. Census Bureau's American Community Survey (ACS) 2018.
[3]Estimates based on current Library inventory as identified within the Palo Alto Parks, Trails, Natural Open Space, and Recreation Master Plan.
[4]Estimates based on cost assumptions for Library improvement costs provided by City of Palo Alto.
APPENDIX A-3
CITY OF PALO ALTO
LIBRARY DEVELOPMENT IMPACT FEE CALCULATION
Service Factor (Residents and Employees)
Residents per Unit**
Number of Persons Served per EDUs per Unit Estimated Number of Units
Land Use Type Persons Served*1,000 Non-Res. SF / per 1,000 Non-Res. SF / Non-Res. SF Total EDUs
Single Family 42,392 2.75 1.00 15,443 15,443
Multi-Family 24,992 2.03 0.74 12,310 9,104
Commercial/Industrial (per 1,000 SF)15,860 0.68 0.25 23,322,578 5,778
Hotel/Motel (per 1,000 SF)183 0.12 0.04 1,577,422 67
Total 83,426 30,392
* Source: David Taussig & Associates; U.S. Census Bureau (ACS); City of Palo Alto Comprehensive Plan Update.
** Persons Served = Residents plus 50% of Employees, customary industry practice designed to capture the reduced levels of service demanded by employees. Subject to change.
Service Factor (Future Residents and Employees)
Residents per Unit**
Number of Persons Served per EDUs per Unit Estimated Number of Units
Land Use Type Persons Served*1,000 Non-Res. SF / per 1,000 Non-Res. SF / Non-Res. SF Total EDUs
Single Family 6,911 2.75 1.00 2,517 2,517
Multi-Family 4,074 2.03 0.74 2,007 1,484
Commercial/Industrial (per 1,000 SF)1,644 0.68 0.25 2,417,876 599
Hotel/Motel (per 1,000 SF)19 0.12 0.04 163,533 7
Total 12,648 4,608
* Source: David Taussig & Associates; California Dept. of Finance, Demographic Research Unit - Report E-5 May 1, 2020.
** Persons Served = Residents plus 50% of Employees, customary industry practice designed to capture the reduced levels of service demanded by employees. Subject to change.
Future EDU Calculation (FY 2040)
APPENDIX A-4
Existing EDU Calculation (FY 2020)
CITY OF PALO ALTO
EDU & EBU CALCULATION YEAR TO BUILD-OUT (2040)
City of Palo Alto (ID # 11844)
Finance Committee Staff Report
Report Type: Action Items Meeting Date: 12/15/2020
City of Palo Alto Page 1
Council Priority: Fiscal Sustainability
Summary Title: Preliminary General Fund Forecast Fiscal Year 2022
Title: Review and Recommend That the City Council Accept a Preliminary
Forecast for Fiscal Year (FY) 2022 and FY 2022 Budget Development
Guidelines
From: City Manager
Lead Department: Administrative Services
RECOMMENDATION
Staff recommends that the Finance Committee review and recommend that the City Council
accept the General Fund preliminary forecast for Fiscal Year (FY) 2022 and the FY 2022 annual
Budget Development Guiding Principles (Attachment A) and direct staff to use this forecast as
the starting point for the initiation of the FY 2022 budget process.
EXECUTIVE SUMMARY
Historically, the City has presented a ten-year General Fund Long Range Financial Forecast
(LRFF) in December that marks the beginning of the annual budget process. Based on the
current economic climate and continued unknown impacts of the COVID-19 pandemic, staff is
presenting a preliminary forecast that focuses on FY 2022 in order to highlight the near-term
view and begin discussions around the FY 2022 budget process. This preliminary forecast is
based on the most current information available, estimated revenues for FY 2021, and expected
experience through FY 2022. General Fund expenditures are based on current City Council
approved service levels compared to projected revenues over the next year.
This preliminary General Fund forecast projects a gap of $4.7 million in FY 2022. This forecast
should be used for planning purposes; a data point to assist the City Council as it considers any
policy changes and prospective impacts against a likely “status quo” version of the future. As to
be expected, the level of uncertainty in this forecast is at historically high levels. The City
continues to manage through a pandemic unlike any seen in modern history.
City staff will continue to review and refine these projections to establish the FY 2022 budget
and use this preliminary forecast to begin internal planning for budget balancing solutions.
City of Palo Alto Page 2
Based on this forecast, it is anticipated that the prioritization of spending and consideration of
reduction in costs are necessary to ensure continued financial stability. More detailed
guidelines or Budget Policies to inform the development of the FY 2022 budget are discussed at
the end of this document (Attachment A).
Looking forward, the City continues to face several fiscal pressures ranging from the financial
impacts of the COVID-19 shelter in place and stay at home orders and funding the 2014 Council
approved Infrastructure Plan projects, to the growing costs of pension benefits and labor costs
due to the current labor market and cost of living around Palo Alto. The continued policy
direction from the City Council regarding proactively addressing the pension obligations,
including the direction to assume a lower discount rate in calculating pension costs, is
contained in the forecast model. The City continues to face critical choices to balance short
term reductions in revenue projections based on the current economic situation and unknown
impacts of the pandemic, with future financial challenges including any unforeseen program
needs, and any additional proactive funding contributions to pension liabilities. The review of
this preliminary forecast and the fiscal and budget planning that follows is significant as the City
Council weighs current community requests like reducing rent to tenants and several key
programs that the community would like the City to fund and move forward.
Included in this report and subsequent documents are the following:
- Discussion of the current financial climate of the United States to the local economy of
the City of Palo Alto
- Preliminary forecast including Revenue and Expense assumptions in FY 2022
o Current financial status of the General Fund as of the FY 2021 Adopted Budget,
and a brief discussion of revised FY 2021 revenue estimates by category
- Alternate revenue assumptions to demonstrate a range of outcomes that could happen
depending on the resolution of many unknown factors surrounding the economic
impacts from the COVID-19 pandemic
- FY 2022 Budget Development Guidelines to inform the Budget process (Attachment A)
BACKGROUND
A preliminary forecast for FY 2022 is being presented instead of the normal ten-year General
Fund Long Range Financial Forecast (LRFF) based on the current economic situation and
continued unknown impacts of the COVID-19 pandemic. The forecast for FY 2022 reflects staff’s
best estimates on the projected revenues and expenditures based on the information that is
currently available at this time. It is important to note that this forecast is a planning document
and is separate and distinct from the development of the City’s annual Operating and Capital
Budgets. There are assumptions and parameters modeled in this forecast that will be revised
and refined as more information becomes available through the FY 2022 budget development
process. As the pandemic continues to evolve, and State and County restrictions change, it is
important that our planning continue to adapt to the changing elements of the pandemic and
potential for vaccine distribution.
City of Palo Alto Page 3
This preliminary forecast contains a comprehensive review of the costs to provide current City
Council approved service levels, including current contracts, updates to salaries and benefits
based on the current workforce, and the current labor contracts in effect. This forecast also
assumes the service changes approved in the FY 2021 Adopted Budget continue through FY
2022. Many approved budget adjustments assumed possible restoration after two years, and
this forecast assumes that direction continues based on ongoing impacts from the COVID-19
pandemic and subsequent review of the current economy and various economically sensitive
revenues such as Sales Tax, Documentary Transfer Tax, Property Tax, and Transient Occupancy
Tax.
Since the Great Recession, the City has approved many strategies to mitigate rising costs,
especially the growth in salaries and benefits. Strategies that have been used include: a second
pension tier, employees sharing in health plan cost increases, and shifting from employer-paid
member contributions to employee pick-up of a portion of the employer share for pensions.
These strategies have helped to create the financial capacity to invest proactively in the City’s
Pension Trust, supporting the City’s commitments to employees while ensuring fiscal
sustainability.
The City Council continues to invest in the community and approved significant improvements
in June 2014 with the Infrastructure Plan (IP) in the original amount of $125.8 million. However,
the nine projects identified in the plan are estimated to cost substantially more due to updated
designs, rising construction costs, and minimum and prevailing wage requirements. In addition,
a tenth project was approved by the Council to be added to the IP in the FY 2020 Adopted
Budget. These changes have led to an updated cost of approximately $260.5 million for the IP
projects. The largest of the IP projects is the New Public Safety Building budgeted at an
estimated cost of $118.0 million, is planned for construction award in FY 2021. The estimated
annual debt service costs associated with the bond funding for the project is a long-term cost
that will be evaluated by the City Council before awarding the construction contract. Capital
projects are one example of known items that are not fully included in this Forecast. Both the
capital cost to build and the operating and maintenance costs once projects are completed and
the new facilities are actively used, are estimated with the most current information available.
These estimates will be refined during the budget process as more information becomes
available and the projects are closer to award and completion.
The City Council provided direction on May 4, 2020 (staff report 11315) to assume a
conservative revenue estimate, a loss of $39 million in General Fund tax revenues, in the
development of the FY 2021 budget. This reflected the severity of the current public health
emergency and its impacts on the City’s financial status. The City Council reviewed the FY 2021
Proposed Operating Budget along with staff reports 11322 and 11376 and other at places
materials over the course of a series of public budget hearings that took place May 11 through
May 13, 2020 and provided tentative approvals, changes, and areas for further follow up. These
actions resulted in revenue and expense adjustments to the FY 2021 Proposed Budget. The City
City of Palo Alto Page 4
Council adopted a balanced budget that incorporated all feedback and changes from the
budget hearings in staff report 11330 on June 22, 2020. Approximately half of the expense
reductions were executed through service reductions in General Fund departments. Those
adjustments are summarized below and outlined in detail in staff report 11330. This forecast
assumes that these service reductions continue in FY 2022 as noted during the budget
deliberations and adopted by the City Council in June 2020.
Public Safety: FY 2021 adjustments included an increase of $1.55 million in program revenues
and a reduction of $7.3 million in expenses in the General Fund, including 33.27 full-time and
2.28 part-time staffing freezes. These actions included suspensions of specialized police units
such as the traffic enforcement and investigation units to maintain minimal police patrol
services and shift the priority of police services to urgent calls, lowering capacity to respond to
nonurgent calls. Limited officer training, promotional testing, uniform purchases and eliminated
or changed to full cost recovery for non-essential programming such as school resource officers.
Curtailed 9-1-1 dispatch, police communication and community engagement, and emergency
preparedness services, as well as modified fire emergency incident response and training and
work to adopt fees to increase revenue for first responder and ambulance subscription.
Community & Library Services: FY 2021 reductions included $0.3 million in program revenues
and $4.9 million in expenses in the General Fund, including 16.1 full-time and 21.02 part-time
staffing freezes. These actions reduced library hours at all branches, modified neighborhood
libraries operations (Children’s, Downtown, and College Terrace) open three days a week and
full-service branches (Mitchell Park and Rinconada) open six days per week. Other changes
include greater cost-recovery through changes in service delivery, charges for services, and/or
limiting operating hours for facilities such as the new Junior Museum and Zoo (JMZ),
community centers, open space preserves, the Children's Theatre, and the Art Center. These
actions also reduced or eliminated programming such as special events, art exhibits, human
services activities, and teen programs.
Planning, Transportation, and Infrastructure: FY 2021 reductions included $2.1 million in
program revenues and $6.1 million in expenses in the General Fund, including 8.25 full-time
and 1.44 part-time staffing freezes. Included were actions to reduce administration, code
enforcement, front counter support, and inspection services. Understanding that this could
delay services to approved construction, the building inspection and plan review team was
reorganized to minimize the impacts to lead times for inspections, progress on the Energy
Reach Code, and the ability to meet next day inspections. The Crosstown and Embarcadero
shuttle programs were eliminated. Additionally, funding for tree trimming and vehicle
replacement was reduced for one year and rate changes in various utility enterprise funds were
suspended for the coming year(s).
Internal Services & Council Appointed Officers: FY 2021 reductions included $2.9 million in
operating expenses in the General Fund, including 5.9 full-time and 0.96 part time staffing
freezes. Internal Services departments include the Information Technology, Human Resources,
City of Palo Alto Page 5
and Administrative Services Departments as well as the Council and appointed officers (City
Manager, City Attorney, City Auditor and City Clerk). Reductions in these areas align with the
changes in services, increasing timeframes for assistance and review in areas such as
recruitments, procurements, performance reporting, and risk management. Technology
solutions will be constrained to only essential contracts and systems and support equipment
needs as most of our workforce continues to work from home. The City Council, Innovation and
Special Events, and Human Recourses contingency accounts were eliminated in FY 2021 on a
one-time basis.
Since this time of course, staff has reported to the Council that as the City and the County move
through different phases of pandemic recovery, the City adapts operations to best support and
serve the community. As a result of County Public Health Orders and State Public Health
restrictions, these changes impact both the cost of delivering City services and the revenues
that pay for them (both taxes and fees). Often, staff finds that it takes increased resources to
deliver the same quantity of service in modified ways to ensure the safety of the community
and employees. For example, the library is offering sidewalk services at some City libraries. To
offer these services staff must manually process each item several times, where past practice
allowed use of automation to return and sort materials. (CMR #11596)
The Economy
National, state, regional and local economic indicators show promising third quarter calendar
year 2020 results and economic recovery relies on continued resumption of economic activity,
a viable vaccine, and containing the spread of COVID-19. The economic indicators discussed
below are as of the third quarter of calendar year 2020. The full economic effects of the COVID-
19 pandemic and its recent resurgence is difficult to predict and becomes less certain as the
new round of virus spread has led to activity restrictions in Santa Clara County and across the
Bay Area, state and nation. Although Federal stimulus packages have contributed to the
positive economic indicators at the end of the third quarter, two more months have passed
without a new federal stimulus package as some income and business supports will expire by
year end. More restaurants and other small businesses in Palo Alto have closed either
temporarily or permanently. While there has been recent positive news regarding a coronavirus
vaccine, major benefits are not expected until the next fiscal year when distribution is
widespread.
Staff will continue to monitor short-term economic trends and report back to the Council as
new information is available. At the time of the printing of this report, the statistics of
managing the spread of the virus continue to show alarming trends that may significantly
impact the date from third quarter calendar year 2020 and ultimately FY 2021 forecasts. This
uncertainty is clear in the daily communications throughout the state including the current stay
at home orders issued this week by the Governor.
According to the US Bureau of Economic Analysis, the U.S. economy’s national gross domestic
product (GDP) grew by 33.1 percent in the third quarter of calendar year 2020 following a
City of Palo Alto Page 6
record plunge of 31.4 percent in the second quarter. The increase in the third quarter reflects a
surge in personal spending as efforts to reopen businesses and resume activities that were
postponed or restricted due to the COVID-19 pandemic. The national consumer price index
(CPI), as of the third calendar quarter has grown 0.2 percent and trails behind larger increases
in July and August, respectively 0.6 percent and 0.4 percent. The following graphs depict the
GDP over the past few years.
Table 1:
The nation’s unemployment rate fell to 7.9 percent in the third quarter, compared to a record
high of 14.7 percent at the onslaught of the pandemic in April. It is expected that the
unemployment rate will remain higher as the labor market recovers from the pandemic shock
and signs of an economic slowdown are beginning surrounding the winter resurgence of virus
infections. In the California labor market, at the end of October the unemployment rate of 9.3
percent marks the first month since March 2020 that the State’s rate was below 10 percent and
the fifth straight month it fell below the all-time high of 16.4 percent in April and May of 2020.
The improved unemployment rates are driven by job gains in the leisure, hospitality and
accommodation; food services; arts, and entertainment and professional, scientific, and
technical services sectors. These trends are still far from pre-COVID-19 pandemic employment
levels and may continue to fluctuate in the near future as uncertainty of the pandemic impacts
persist through the winter months. Historically Bay Area job growth has been led by the
Peninsula for the past several years. The unemployment rate for the San Francisco Peninsula
improved to 6.5 percent in October 2020 compared to 7.7 percent in September 2020. At the
national level, job gains in leisure and hospitality, professional and business services, retail, and
construction are positive; these gains heavily rely on health orders and their impact on
business.
City of Palo Alto Page 7
Table 2: U.S. Unemployment Rate
DISCUSSION
As with all forecasts, there is uncertainty regarding the revenue and expenditure estimates
contained in this document. For example, General Fund revenues may exceed or fall below
expectations based on changes in economic or non-economic conditions. Various cost elements
can also vary from year to year.
The following table displays the actual General Fund revenues and expenditures for FY 2019
and FY 2020, the FY 2021 Adopted Budget, and forecasted revenue and expenditure amounts
for FY 2021 and FY 2022. The hard work of the City in FY 2021 to proactively balance the budget
due to estimated COVID-19 financial impacts is reflected in the forecast. However, due to the
continued public health crisis and recent surge that caused the State and County to issue more
restrictive “purple tier” orders and risk reduction orders, promising economic indicators seen in
the third quarter of calendar year 2020 are annulled and replaced by uncertainty. The
forecasted FY 2021 and FY 2022 amounts reflect this uncertainty, and the forecast
contemplates no restoration of service reductions implemented in FY 2021.
Alternative forecasted revenue scenarios are presented to illustrate how changes in the City’s
economically sensitive revenues, sales tax and transient occupancy tax (TOT), may impact the
General Fund’s bottom line surplus or budget gap. The table below models how a one, 10, and
15 percent increase in sales tax and TOT will change the City’s FY 2022 financial picture,
assuming expenditure levels remain the same.
When compared to the FY 2021 Adopted Budget, the revenue forecast for FY 2021 decreases
by 1.8 percent and is driven by decreases in economically sensitive tax revenues. It is estimated
that FY 2022 will result in a $4.7 million budget shortfall and this gap is mainly the result of
increases to Salary and Benefit costs including the restoration of concessions taken in FY 2021
City of Palo Alto Page 8
by Management/Professional employees and the City's Public Safety labor groups (Police
Officers Association, Police Management Association, International Association of Fire Fighters,
Fire Chief's Association). Further information and analysis of the constantly changing fiscal
impacts from the public health crisis will continue to inform the development of the FY 2022
Budget to proactively plan for changes and ensure a structurally balanced budget.
TABLE 3: FY 2021 and 2022 Forecasts
Actual
2019
Actual
2020
Adopted
2021
Forecast
2021
Forecast
2022 % Chg 1.0%10.0%15.0%
Total Revenue 225,756 209,516 196,475 192,928 198,848 3%199,235 202,716 204,650
Total Expenditures 223,475 227,015 196,949 192,570 203,555 6%203,618 204,185 204,499
Net One-Time Surplus/(Gap)$2,281 ($17,499)($474)$358 ($4,707)($4,383)($1,469)$151
The FY 2021 Adopted Budget is balanced. The budget gap shown in this table is offset by utilization of the Development Services Reserve Fund.
FY 2022 Revenue Sensitivity Models
Revenue Assumptions
On October 19, 2020, the City Council reviewed and discussed the preliminary Q1 FY 2021
financial status report (staff report 11596). This report provided a snapshot in time, with some
revenues expected to continue to do significantly worse than originally projected, others are
trending above expected levels, while uncertainty of the pandemic grows. Tax revenues
constitute slightly more than 60 percent of General Fund resources and the FY 2021 forecast
projects a 3.3 percent, or $3.4 million, decrease that is driven by TOT revenues being lower
than expected. In FY 2022, the forecast projects a $7.7 million, or 7.0 percent, tax revenue
increase compared to the FY 2021 forecast. These tax increases are partially offset by
reductions in other revenue categories.
At the present time, this preliminary forecast projects an increase in revenues of $5.9 million,
or 3.1 percent, in FY 2022. The FY 2022 forecast assumes that sales tax will rebound from
conservative levels assumed in the FY 2021 Adopted Budget and, in contrast, TOT will decrease
based on occupancy and room rate trends since April 2020. The changes by revenue category,
as well as the current expected FY 2021 status of many of the categories, are discussed in
greater detail below. The table below models alternative revenue scenarios for sales tax and
TOT revenues; if these tax revenues were to trend higher by one percent, 10 percent, and 15
percent compared to the FY 2022 Forecast.
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TABLE 4: General Fund Revenue Summary
Actual
2019
Actual
2020
Adopted
2021
Forecast
2021
Forecast
2022 % Chg 1.0%10.0%15.0%
Revenue & Other Sources 0 1 1
Sales Taxes 36,508 30,563 20,500 24,000 28,230 18%28,512 31,053 32,465
Property Taxes 47,327 51,089 52,000 53,173 50,223 -6%50,223 50,223 50,223
Transient Occupancy Tax
General Purpose 16,957 11,568 8,344 2,573 4,155 61%4,196 4,570 4,778
Infrastructure 8,692 6,986 6,556 2,177 6,295 189%6,358 6,925 7,240
Documentary Transfer Tax 6,923 6,903 4,700 6,577 6,828 4%6,828 6,828 6,828
Utility Users Tax 16,402 16,140 15,100 15,153 15,614 3%15,614 15,614 15,614
Other Taxes and Fines 1,888 1,172 1,925 1,925 1,925 0%1,925 1,925 1,925
Subtotal: Taxes 134,697 124,421 109,125 105,578 113,270 7%113,657 117,138 119,072
Charges for Services 26,669 23,557 25,418 25,418 24,934 -2%24,934 24,934 24,934
Permits and Licenses 9,088 8,038 8,336 8,336 8,273 -1%8,273 8,273 8,273
Return on Investments 2,018 1,419 1,100 1,100 894 -19%894 894 894
Rental Income 16,411 16,037 16,022 16,022 15,531 -3%15,531 15,531 15,531
From Other Agencies 951 1,529 551 551 551 0%551 551 551
Charges to Other Funds 10,684 11,099 11,992 11,992 11,494 -4%11,494 11,494 11,494
Other Revenue 5,084 2,848 2,572 2,572 2,539 -1%2,539 2,539 2,539
Total: Non-Tax Revenue 70,905 64,527 65,991 65,991 64,216 -3%64,216 64,216 64,216
Operating Transfers-In 20,154 20,568 21,359 21,359 21,362 0%21,362 21,362 21,362
Total Sources of Funds $225,756 $209,516 196,475 $192,928 198,848 3%$199,235 $202,716 $204,650
Total Expenditures 223,475 227,015 196,949 192,570 203,555 203,618 204,185 204,499
Net One-Time Surplus/(Gap)$2,281 ($17,499)($474)$358 ($4,707)($4,383)($1,469)$151
The FY 2021 Adopted Budget is balanced. The budget gap shown in this table is offset by utilization of the Development Services Reserve Fund.
FY 2022 Revenue Sensitivity Models
Sales Tax
Sales tax receipts have seen significant declines as the City’s revenue base is dependent on
many high-end goods and dining options at regional destinations, such as Stanford Shopping
Center. The City saw a greater decline in four categories than declines seen in the region and
statewide. These significant declines were partially offset by business to business sales, the one
sector that outpaced other areas with a small 1 percent growth. Based on activity and receipts
for the recent quarter, it is estimated that sales tax revenue will exceed the FY 2021 Adopted
Budget by $3.7 million, or 17.9 percent, and will generate a total of $24.0 million by year-end of
FY 2021. In FY 2022, sales tax is expected increase to $28.2 million, or 18.0 percent, above the
revised FY 2021 forecast. Segments contributing to this growth include restaurants, office
equipment, and auto sales and leases. Department and furniture/appliance sales experienced
declines.
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Property Tax
Property tax revenue is the General Fund’s largest revenue source and represents
approximately 25 percent total revenues. Historically, property tax has seen annual growth of
on average 6 percent. Although not in decline, trends currently indicate a delay in timing and
therefore are expected to remain flat through FY 2022 as that year will reflect activity in 2020,
where average and median home prices currently reflect a slight downward trend and the
expected CPI will remain below the two percent maximum. In addition, fiscal years 2018, 2019,
and 2020 included receipts of $1.4 million, $2.7 million, and $3.9 million respectively, for excess
Educational Revenue Augmentation Fund (ERAF) distributions from the County of Santa Clara.
ERAF is the fund used to collect and disburse property taxes that are shifted to/from cities, the
County, and special districts prior to their reallocation to K-14 school agencies. When the state
shifts more local property tax than required to support schools these funds are returned and
known as ‘excess ERAF.’ Because of the volatility of ERAF, it is not considered a permanent local
revenue source.
The FY 2021 Adopted Budget assumes $52.0 million in total property tax and is expected to
grow to $53.2 million, a $1.2 million increase, by year-end which includes $3.2 million in Excess
ERAF. FY 2022 property tax is expected to remain relatively flat (in alignment with prior
recessionary trends) and, considering the uncertainties surrounding the continued receipt of
Excess ERAF, these funds have been removed from the FY 2022 forecast, resulting in a net $3.0
million decrease in the Property Tax revenue category.
Transfer of ownership continues to be significant driver of growth and at a macro level, the
number of sales has been on the decline even pre-pandemic, and the growth in value, or the
difference between the assessed value before the sale and the assessed value after the sale has
also continued to decline. Through July 2020, the City of Palo Alto was one of the three cities in
Santa Clara County whose median sales price decreased (from $2.8 million to $2.7 million).
Transient Occupancy Tax (TOT)
TOT continues to be the most significantly impacted tax revenue, though revenues have
improved slightly above the activity seen in April and May 2020. Currently, receipts are tracking
approximately 80 percent below pre-pandemic levels. As a region where business and other
non-leisure travel is a driving impact, it is expected that until the virus is under control and both
domestic and international travel resumes, the City will continue to experience significantly
reduced TOT revenue. Rapid progression in vaccines as well as the expected opening of new
hotels in Palo Alto are positive developments that will drive recovery for this tax revenue.
Compared to the FY 2021 Adopted Budget, the FY 2021 estimate represents a decrease of 68.1
percent, or $10.2 million. The FY 2022 estimate assumes a 20 percent increase from the FY
2021 forecast. Year-to-date, daily average room rates decreased by 49.2 percent from $314.06
per day to $159.39 per day while occupancy rate declined by 37.0 percent from 79.8 percent to
42.8 percent. According to CBRE, demand for hotel rooms nationally was down by 36.8 percent
year-over-year from Q3 calendar year 2019 to 2020, and national hotel occupancy declined a
City of Palo Alto Page 11
corresponding 37.9 percent year-over-year. San Francisco saw a significant 84.1 loss in Revenue
Per Available Room (RevPAR), the third greatest decline in the continental U.S., behind Boston
and New York. San Jose saw a loss slightly greater than 70 percent from Q3 calendar year 2019
to 2020.
Utility User’s Tax (UUT)
The UUT is levied on electric, gas, and water consumption, as well as on telephone usage. In
total, FY 2021 revenue was budgeted at $15.1 million and is currently on target to be realized
by the end of the fiscal year. This estimate does not consider current litigation that the City
continues to work through.
Documentary Transfer Tax (DTT)
In FY 2015, DTT peaked at $10.1 million. This milestone was a consequence of several large
commercial transactions on Page Mill Road and in the Stanford Research Park. Since that time,
DTT has significantly moderated, with $6.9 million earned in FY 2020. Revenue from July
through October in FY 2020 is running 10.0 percent above the same period in FY 2019 and
anticipates that DDT revenues will exceed the FY 2021 Adopted Budget by 40 percent, or $1.9
million.
As in past years, this revenue source is challenging to forecast since it is highly dependent on
sales volume and the mix of commercial and residential sales. The number of transactions
through October 2020 (229) are running higher than those through October 2019 (186);
however, the total value of these transactions has decreased by 6.0 percent. Though the Palo
Alto housing market remains strong, as discussed in the Property Taxes section, residential
median sales price in Palo Alto has flatlined and property turnover has increased.
Rental Income
Rental Income of $15.5 million primarily reflects rent paid to the General Fund from the City’s
Enterprise Funds and the Cubberley Community Center. There is a slight decrease in rental
income from FY 2021 to FY 2022 of $0.5 million. This decrease represents the completion of the
payments from the Refuse Fund to the General Fund associated with the Landfill in FY 2021,
partially offset by a 2.0 percent CPI increase. The annual increase for rental revenue is based
on a review of the changes in the California Consumer Price Index (CCPI) in the San Francisco
Bay Area from the August to August period, and it is expected that revenues will be reviewed
and revised after this forecast based on updated information, typically the December to
December change in the CCPI.
It is important to note that the City is currently allowing the deferral of rental payment from
tenants in accordance with the Santa Clara County guidelines. Staff is also working on a referral
from the City Council requesting options for rent forgiveness or deferral program options that
was directed as part of the preliminary 1st quarter financial status review in October 2020.
City of Palo Alto Page 12
Charges for Services and Permits and Licenses
Revenues in the ‘Charges for Services’ and the ‘Permits and Licenses’ categories are anticipated
to be $24.9 million and $8.3 million, respectively, in Fiscal Year 2022. These amounts are
approximately $0.5 million lower than the FY 2021 amounts, mainly due to adjustments to
revenue from new Fire Department fees discussed below. Revenues in these categories were
impacted by changes in FY 2021 such as the planned opening of the newly remodeled Junior
Museum and Zoo with a ticketed entry fee and membership program. These budget categories
also include revenues associated with two newly proposed fees in the Fire Department, a first
responder fee (assessed on commercial insurance companies) and an ambulance subscription
fee (available for residents and businesses). These fees would cover the cost for initial response
for first due engine and secure co-pay free ambulance transport, respectively. Both fees
proposed by the Fire Department are still in development and have not generated revenue in
FY 2021.
The ambulance transport fee is currently scheduled to be discussed with the Finance
Committee in December 2020 before being brought forward for City Council consideration and
established as a new Municipal Fee. The revenue estimates in these categories are primarily
driven by the cost of staff to provide services to the community; therefore, revenues are
impacted by the City’s personal service costs. Typically, revenue estimates and corresponding
fees are increased by rates consistent with salary and benefits and general CPI trends. Staff
analysis year to date estimates that annual revenue collections in these categories will remain
within current budgeted levels in FY 2021. Additionally, the return of canceled or modified
services due to the pandemic are still uncertain. Revenue estimates in these categories have
therefore been kept generally consistent from FY 2021 to FY 2022. One exception to this is for
Development Services activities and related revenue. Development Services fees are fully cost
recoverable and the department has been modeled as cost-neutral in this forecast. Staff will
analyze municipal fee revenue activity as part of the FY 2022 Budget development process and
bring forward adjustments, as appropriate.
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Charges for Service - Stanford Fire and Dispatch Services
The City has two separate agreements with Stanford University to provide fire response
services and emergency dispatch services. The City and Stanford entered into a new agreement
for fire response services effective July 1, 2018 outlining both terms for service levels and a new
cost allocation methodology as the baseline for the contract costs. This contract extends
through June 30, 2023 with a renewal through 2028 unless otherwise terminated. The contract
included a new staffing deployment model for suppression and medical services, which was
approved by the City Council in October 2017 and deployed in January 2018. This forecast aligns
with the new staffing model and, in accordance with the contract, adjustments to revenue from
Stanford have been aligned with the year-over-year changes to the operating expenses in the
Fire Department for FY 2022. Similarly, changes to the revenue received for dispatching services
have been aligned with the FY 2022 adjustments to the operating expenses in the Technical
Services Division of the Police Department where the costs to provide these services are
budgeted.
Charges to Other Funds
The main source of revenues in this category is General Fund administrative cost allocation plan
charges to the Enterprise and Internal Service Funds. Internal support departments such as
Administrative Services, Human Resources, and Council Appointed Offices provide services to
Enterprise and Internal Service Funds. The costs for these services are recovered through the
administrative cost allocation plan charges. The FY 2022 estimate for Charges to Other Funds of
$11.5 million reflects a slight decrease of 4.2 percent from the FY 2021 estimate of $12.0
million; this is primarily attributed to fully adjusting the costs associated with the allocated
charges in the Internal Support Departments to the adjustments made as part of the FY 2021
Budget.
Return on Investment
The return on investment category reflects the interest earnings on the City’s investment
portfolio. This category is a combination of past investments, new investments at current
market rates, and available investable cash which fluctuates seasonally and annually. Staff had
anticipated the decline in interest rates would occur sooner and at a faster rate than it has
occurred, so the City experienced a higher than anticipated return on investments in FY 2021.
In addition, prudent investments further resulted in higher investment yields and earnings.
The average portfolio rate of return for the first quarter of FY 2021 was 1.85 percent, and a 2.0
percent average yield as of the fourth quarter of FY 2020. The revised FY 2021 interest earning
estimate of $0.9 million is $0.2 million lower than the Adopted Budget of $1.1 million. In FY
2022, the forecast is $0.8 million which reflects the declining interest rate environment.
City of Palo Alto Page 14
Operating Transfers-in
Operating Transfers-in materialize as expenses in other funds throughout the City and as a
revenue in the General Fund. This budget category includes repayment of a previous loan from
the General Fund to the Airport Fund, funding for police patrol in the downtown area, and the
equity transfer from the Electric and Gas funds. In accordance with a methodology approved by
the City Council in June 2009, the equity transfer is calculated by applying a rate of return on
the capital asset base of the Electric and Gas funds. This rate of return is based on PG&E's rate
of return on equity as approved by the California Public Utilities Commission (CPUC). Under
previously approved methodologies, the transfer amount is calculated based on the Utility
Department’s projections from the Electric and Gas Five Year Financial Forecasts, as approved
by the City Council in spring 2020. Overall, the Operating Transfers-in are estimated to remain
the same as the FY 2021 estimated level of $21.74 million. This estimate does not adjust for
current pending litigation.
Expense Assumptions
As part of developing the FY 2022 Forecast expenditure budget, the General Fund expense
categories have been adjusted by removing FY 2021 Adopted Budget one-time expenses and
updating major cost elements such as salary and benefits costs. The table below displays the
expense forecast and when compared to the FY 2021 estimated expenditures, growth of 5.7
percent is expected in FY 2022.
As discussed under the Revenue Assumptions section, alternative revenue scenarios have been
modeled to illustrate the impact of an additional one, 10 or 15 percent in sales tax and TOT
revenue would impact the General Fund financial picture. Consistent with City Council
direction, TOT revenue generated through the voter-approved 3.5 percent TOT increase and
the TOT revenue from new hotels that are dedicated to the Capital Improvement Fund to
support the 2014 Council Infrastructure Plan, is adjusted in the below table.
City of Palo Alto Page 15
TABLE 5: General Fund Expense Summary
Actual
2019
Actual
2020
Adopted
2021
Forecast
2021
Forecast
2022 % Chg 1.0%10.0%15.0%
Expenditures & Other Uses 0 1 2 3 4
Salary & Benefits 121,953 133,216 124,541 124,541 132,904 7%132,904 132,904 132,904
Contract Services 28,966 25,360 21,953 21,953 20,710 -6%20,710 20,710 20,710
Supplies & Material 3,181 2,710 2,975 2,975 3,027 2%3,027 3,027 3,027
General Expense 9,258 9,755 9,079 9,079 7,526 -17%7,526 7,526 7,526
Rents & Leases 1,640 1,520 1,862 1,862 1,913 3%1,913 1,913 1,913
Facilities & Equipment 576 462 427 427 435 2%435 435 435
Allocated Charges 20,382 21,771 18,311 18,311 19,310 5%19,310 19,310 19,310
Debt Service 431 - - - - - - - -
Total: Non-Sal/Ben Before Transfers 186,387 194,794 179,148 179,148 185,825 4%185,825 185,825 185,825
Operating Transfers-Out 9,574 8,049 4,334 4,334 4,428 2%4,428 4,428 4,428
Transfer to Infrastructure -
Base/Cubberley 1,864 1,864 6,911 6,911 7,007 1%7,007 7,007 7,007
Transfer to Infrastructure-TOT 25,650 22,308 6,556 2,177 6,295 189%6,358 6,925 7,240
Total Use of Funds 223,475 227,015 196,949 192,570 203,555 6%203,618 204,185 204,499
FY 2022 Revenue Sensitivity Models
Salary and Benefits
The table above (also included in Attachment A) depicts the estimated General Fund salaries
and benefits costs. Consistent with prior years, the FY 2022 salaries and benefits costs
represent approximately 65 percent of the General Fund budget expenditures.
Salary and Benefits are projected to increase by $8.3 million or 6.7 percent from the prior year,
from $124.5 million to $132.9 million. Discussed in the following sections, this is primarily
attributable to increases in salaries ($3.1 million or 4.5 percent), pension costs ($3.1 million or
9.6 percent), and workers’ compensation ($1.1 million or 33.2 percent).
Salary
Consistent with the City’s salary budget methodology for recent budgets, positions are
budgeted at the actual rate of pay of employees including benefits as of Fall 2020. Then, by
position, salary costs are updated in accordance with applicable Memorandum of Agreements
(MOA’s) between the City and its labor groups and the Management and Professional
Personnel and Council Appointees Compensation Plan(s).
In the prior year, the City engaged with various labor groups and successfully negotiated
concessions with some of its labor groups to generate cost savings. The FY 2021 Adopted
Budget includes compensation concessions with the unrepresented Management and
Professionals Group that consists of a wage freeze, furlough, and reduced flexible management
benefits. In total, this generated savings of $3.5 million in savings citywide ($2.3 million in the
General Fund). Agreements with safety groups include a deferral of wage increases for one year
in the Fire Chief’s Association (FCA), Police Management Association (PMA), and Palo Alto
Peace Officers’ Association (PAPOA), and deferral of wage and step increases for one year in
the International Association of Fire Fighters (IAFF) Group. The savings achieved in the safety
groups were used to fund retirement incentives and offset an attrition period that allows the
City of Palo Alto Page 16
Fire and Police Departments to delay the separation of filled positions identified to be held
vacant in FY 2021 (position freezes).
As part of these concessions, the City reached agreements with the management and safety
groups that extend the terms of the existing Memorandum of Agreements (MOA’s) to reduce
or postpone negotiated increases and other forms of compensation for one year. With these
extensions, agreements expire June 30, 2021 and June 30, 2022 respectively. The City has
negotiated labor agreements with the Service Employees International Union (SEIU) that
extends through December 2021 and anticipates developing new labor agreements with the
Utilities Management and Professional Association (UMPAPA) whose contract expired on June
30, 2020.
The FY 2022 forecast includes step increases for employees in applicable positions, including
SEIU, IAFF, and PAPOA and merit increases for Management and Professional employees.
Additional general wage adjustments of 2.0 percent are included when there is not a MOA in
effect. This is consistent with prior Council direction to use the 2.0 percent increase as a
forecasting model, not as a commitment to future negotiations.
Benefits
Pension: Pensions are budgeted based on CalPERS determined rates as of the June 30, 2019
valuation (CMR 11607) for the City’s Miscellaneous and Safety plans. CalPERS determines the
City’s total contributions for a given Fiscal Year as the sum of two factors: Normal Cost (NC) and
Unfunded Accrued Liability (UAL). Together the NC and the UAL expressed as a percentage of
payroll is the ‘blended rate’ and is used to represent total costs in the discussion below.
The Normal Cost (NC) is expressed as a percentage of payroll and is paid as part of the payroll
reporting process of active employees. Commonly referred to as the ‘pay-go’ cost, the NC is
variable and increases or decreases directly with the salary levels of the City. It represents the
necessary funding for the City to pay for employees presuming that CalPERS meets the current
set of assumptions.
In a year that CalPERS does not meet assumptions, due to plan changes, assumption changes,
method changes, or plan experience (including investment gains/losses), there is an increase or
decrease to the Unfunded Accrued Liability (UAL). Commonly referred to as the ‘catch-up’ cost,
the UAL is expressed as a dollar amount and is calculated over an amortized period with
defined annual payments, like a mortgage. The contributions for UAL are billed as a flat dollar
amount as opposed to a percentage of payroll due to potential funding issues that could arise
from a declining payroll or number of active members in the plan. However, CalPERS provides
an estimated percentage of payroll for UAL to allow a consistent comparison of total costs.
In the miscellaneous plan, total costs are projected to increase from the current 38.4 percent in
FY 2021 to 41.8 percent in FY 2022. In the safety plan, total costs are projected to increase from
the current 65.3 percent in FY 2021 to 69.6 percent in FY 2022. These rates do not consider the
City of Palo Alto Page 17
employee pick-up of the employer share; that pick-up materializes as savings in the City’s
pension costs. Consistent with applicable MOAs, the FY 2022 forecast presumes that the
miscellaneous plan will pick up 1 to 2 percent of the employer pension cost and that safety plan
members will pick up 3 to 4 percent.
Consistent with current practice, the FY 2022 forecast also includes supplemental contributions
to the City’s irrevocable Section 115 Pension Trust (“Pension Trust Fund”). In January 2017 the
City council authorized the establishment of a Pension Trust Fund with the Public Agency
Retirement Service (PARS) (CMR 7553). Through FY 2021, a total of $32.3 million in principal
contributions will have been made to the PARS Trust. Contributions were initially made on an
ad-hoc basis, using one-time savings or excess revenues. In October 2018, the City Council
directed staff to include in budget assumptions the NC for pension benefits at an equivalent of
6.2 percent discount rate and a transfer of the additional funding beyond CalPERS actuarial
determined contribution levels to the Pension Trust Fund (CMR 9740). This practice was
reinforced in the development of a Pension Funding Policy, adopted by the City Council on
November 30, 2020 (CMR 11722). In this forecast, an approximate $5.1 million ($3.0 million in
the General Fund) in supplemental contributions is assumed in FY 2022, relatively constant to
prior year contribution levels.
In the General Fund, it is anticipated the City will spend a total of $35.1 million on total pension
costs in FY 2022, including both CalPERS contributions and supplemental Pension Trust Fund
contributions. This is approximately $3.1 million higher than the prior year costs of $32.0
million, or a 9.6 percent increase. These expenses represent approximately 17 to 18 percent of
the General Fund’s total expenses.
Retiree Medical: Retiree Medical is based on the most recent actuarial study prepared by
Bartel Associates, which is completed every two years. The most recent study was completed in
FY 2020 and presented to the City Council as part of the Fiscal Year 2021 Adopted Budget (CMR
11330). Consistent with City Council direction, the City continues to budget for the full payment
of the Actuarial Determined Contribution (ADC) for retiree healthcare. Since CalPERS blends
active employees with pre-Medicare retirees and charges the same medical premium, even
though younger employees on average consume less healthcare and thereby subsidize older
employees and retirees, there is an implied subsidy that effectively lowers the funding
necessary to meet the ADC. In this forecast, an approximate $8.8 million is estimated in FY
2022, relatively constant to prior year contribution levels.
The City’s CERBT Trust, which contains prefunding for the City’s Other Post Employment Benefit
(OPEB) liabilities, maintains a very healthy fund balance. The CERBT Trust currently has over
$130 million in assets.
Healthcare: Consistent with the most recent labor agreements between the City and its
bargaining units funded by the General Fund, the City’s contribution amounts towards medical
costs for employees are based on a flat rate contribution from the City, with the employee
City of Palo Alto Page 18
contributing towards the remaining medical plan premium. Like salaries, healthcare costs are
updated in accordance with applicable Memorandum of Agreements (MOA) between the City
and its labor groups and the Management and Professional Personnel and Council Appointees
Compensation Plan(s).
Workers’ Compensation: The budget appropriation for workers' compensation includes an
estimate for claims incurred and reserves for current filings at an 85 percent confidence level,
based on actuary studies completed by Bickmore. In recent periods, claims costs have been
rising. In FY 2020, expenditures increased by $1.3 million or 26 percent from $5.1 million to
$6.4 million from the prior year, exceeding budgeted levels and requiring additional allocations
to departments to offset expenses and ensure a positive fund balance. Actuary estimates
completed in August 2019 informed FY 2021 budget levels of $5.7 million ($3.8 million in the
General Fund). As part of cost reduction strategies in FY 2021, department allocations for
workers' compensation were reduced by $625,000, from $5.7 million to $5.1 million, with costs
offset by fund balance. More recent actuary estimates completed in August 2020 project higher
than expected levels for FY 2021 at $6.5 million ($4.3 million in the General Fund). The fund
balance cannot support this expense level, and staff anticipates bringing forward any necessary
corrective actions in a subsequent budget process. Estimates for FY 2022 are $6.8 million ($4.5
million in the General Fund), representing a $1.6 million increase ($1.1 million in the General
Fund) or 33.2 percent increase over the Adopted FY 2021 Budget of $5.1 million ($3.4 million in
the General Fund).
Contract Services
This forecast assumes contract services of $20.7 million in FY 2022, a 5.7% decrease from the FY
2021 Adopted budget of $22.0 million. This decrease is driven primarily by the removal of one-
time costs adopted in FY 2021 including funding for legal dispute resolutions and funding to
address COVID-19 pandemic recovery efforts. These decreases are partially offset by a 2.0
percent CPI cost increase in FY 2022 based on a review of the changes in the California
Consumer Price Index (CCPI) in the San Francisco Bay Area from the August to August period. It
is expected that the estimated CPI increases will be substituted with department base budget
requests as part of the FY 2022 budget process.
Contract Services - Committed Additions
The Committed Additions included in this forecast account for anticipated operating and
maintenance (O&M) costs in the General Fund for capital projects anticipated to come online in
FY 2022. A preliminary estimate of $0.1 million for the cost of the maintenance agreement
between the City and Caltrans is included for the Highway 101 Pedestrian Bicycle Overpass that
is anticipated to come online in FY 2022.
City of Palo Alto Page 19
Supplies and Materials
The FY 2021 Adopted Budget for the General Fund included $3.0 million for Supplies and
Materials, which is anticipated to increase slightly by a 2.0 percent CPI cost increase in FY 2022
based on a review of the changes in the California Consumer Price Index (CCPI) in the San
Francisco Bay Area from the August to August period in FY 2022. It is expected that the
estimated CPI increases will be substituted with department base budget requests as part of
the FY 2022 budget process.
General Expense
This category includes costs for travel and meetings, telephone and non-city utilities,
contingency accounts, bank card service charges, and subsidies and grants provided through
the Human Services Resource Allocation Program (HSRAP). These figures do not include General
Expenses for the Cubberley Lease, which is explained in further detail below. The FY 2021
Adopted Budget of $5.4 million included $1.8 million in a Budget Uncertainty Reserve that has
been removed in FY 2022 and accounts for the reduction to $3.8 million in FY 2022. That
reduction is partially offset by a 2.0 percent CPI cost increase in FY 2022 based on a review of
the changes in the California Consumer Price Index (CCPI) in the San Francisco Bay Area from
the August to August period in FY 2022. It is expected that the estimated CPI increases will be
substituted with department base budget requests as part of the FY 2022 budget process.
General Expense - Cubberley Lease
In FY 2015, the City and Palo Alto Unified School District (PAUSD) agreed to an extension of the
Cubberley lease by five years starting January 1, 2015 and expiring December 31, 2019. On
October 7, 2019, Council directed Staff to negotiate with PAUSD to extend the lease agreement
an additional five years, though December 31, 2024 (CMR 10730). A new Cubberley lease was
approved by the City Council on June 23, 2020 (CMR 11460). The new lease is for a smaller
portion of the Cubberley site and has a correspondingly lower base rent payment, as detailed in
a report on June 15, 2020 (CMR 11386). As part of the original lease agreement, the City
Council approved creation of a fund for Cubberley infrastructure improvements. The new lease
continues the $1.9 million transfer to the Cubberley Property Infrastructure Fund, which is
classified as an Operating Transfer Out and discussed in further detail below. With the
Cubberley infrastructure funds set aside, the FY 2021 Budget funded $3.7 million for Cubberley
Lease payments; this includes extended child daycare sites and associated utility costs. This
agreement and cost estimate continue in FY 2022.
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Rents and Leases
The Rents and Leases expense category for FY 2022 is estimated to remain relatively consistent
to prior-year levels of $1.9 million. This category includes the lease agreement for Development
Services staff at locations outside City Hall (285 Hamilton and 526 Bryant). A new lease
agreement is anticipated for the Development Services office location at 526 Bryant Street,
limiting the space to the basement level. This will be included in the development of the FY
2022 budget, reducing Development Services rent by approximately $400,000, from $1.4
million to $1.0 million. As expenses for rent for Development Services are adjusted, a
corresponding revenue adjustment will be made to ensure Development Services maintains
cost recovery levels. Including the reductions to Development Services lease costs, the rent
category will be reduced by approximately 21.0 percent from FY 2021 to FY 2022.
Facilities and Equipment
The Facilities and Equipment expense category is expected to increase from the FY 2021
Adopted level of $427,000 to $435,000 by a 2.0 percent CPI cost increase in FY 2022 based on a
review of the changes in the California Consumer Price Index (CCPI) in the San Francisco Bay
Area from the August to August period in FY 2022. This budget category includes subscription
payments for equipment like public safety radios as well as other non-capital equipment.
Allocated Charges
Allocated Charges represent expense allocations by the City’s Enterprise and Internal Service
Funds for services and products they provide to General Fund departments. The FY 2021
Adopted Budget for the General Fund included $18.3 million for these expenses, including
utilities usage, general liability insurance, technology costs, vehicle equipment maintenance
and replacement costs and other charges. The FY 2022 allocated charges in the Forecast update
the revenues and expenses for these various allocations based on the information available at
the time of the Forecast development. FY 2022 is anticipated to experience an increase of 5.5
percent to a total of $19.3 million. This change is primarily due to a general CPI cost increase of
2.0 percent and rate increases applied to various charges.
Operating Transfers Out
Operating Transfers Out include transfers from the General Fund to Debt Service Funds, the
Technology Fund, and various other funds but excludes transfers to the Capital Improvement
Fund, which are detailed in the following Transfer to Infrastructure section. The FY 2021
Adopted Budget included Operating Transfers Out of $4.3 million. In FY 2022, Operating
Transfers Out are anticipated to increase to $4.4 million because of standard annual cost
escalators of transfers between the General Fund and the Electric and Technology funds.
City of Palo Alto Page 21
Transfer to Infrastructure
During the development of the FY 2021 budget, uncertainties from the COVID-19 pandemic
were anticipated to significantly decrease TOT revenues, which represents a significant portion
of the General Fund transfer to Capital Improvement Fund. The anticipated impact was
reflected in the FY 2021 Adopted General Fund transfer to the Capital Improvement Fund,
which was $12.8 million and comprised of $6.2 million base transfer including interest earnings
and $6.6 million from TOT revenue generated through an additional voter-approved 3.5
percentage point TOT increase. Incremental TOT increases from the voter-approved rate
increase and new hotels are dedicated to the Capital Improvement Fund to support the 2014
Council Infrastructure Plan, consistent with City Council direction. Transfers from TOT revenues
in FY 2021 are currently projected to decrease further to $2.2 million before increasing in FY
2022 to $6.3 million. This budget category also includes the separate $1.9 million transfer to the
Cubberley Property Infrastructure Fund, described earlier in this document.
Budget Stabilization Reserve
The City's Budget Stabilization Reserve (BSR) serves as the primary General Fund reserve. By
policy, the BSR is maintained in the range of 15 to 20 percent of General Fund operating
expenditures, with a target of 18.5 percent. Any reduction to the reserve below 15 percent
requires City Council approval. At the discretion of the City Manager, any BSR balance above
18.5 percent may be transferred to the Infrastructure Reserve (IR), which was established to
provide funding for maintenance and rehabilitation of the City’s capital assets. The BSR is used
to fund unanticipated one-time costs as opposed to ongoing or recurring operating
expenditures. The City's intent is to fund ongoing programs and services with ongoing dollars.
Maintaining the BSR at 18.5 percent also provides flexibility to the City to address unforeseen
issues that may arise. Furthermore, establishing, and following, sound fiscal reserve policies has
been a strong factor in the City being rated AAA by rating agencies, which also supports the
City’s fiscal position. Based on revenue and expense assumptions in this forecast, where
expense levels outpace revenue growth, maintaining the 18.5 percent BSR target will not be
achieved without further cost reductions in FY 2022.
Assumptions NOT Included in Forecast
It should be noted that this forecast does not include several potential impacts to the FY 2022
projected budget that are outlined below. This is not intended to be a comprehensive list nor in
any priority order.
Labor negotiations: The City has extended agreements with public safety units by one year,
through June 30, 2022. These public safety units are the Palo Alto Peace Officers Association
(PAPOA), the International Association of Fire Fighters (IAFF), Fire Chiefs Association (FCA), and
Palo Alto Police Management Association (PAPMA). Additionally, the City extended the
Management and Professional agreement by one year, through June 30, 2021. Agreements
with the Service Employees International Union (SEIU) extends through 2021 and new labor
agreements are anticipated with the Utilities Management and Professional Association
(UMPAPA) whose contract expired June 30, 2020. This forecast models only modest increases
City of Palo Alto Page 22
to salaries in FY 2022 where there is not a contract, and the region’s competition for a qualified
workforce remains a significant pressure on the City’s anticipated salary costs.
Capital Infrastructure Plan: As referenced earlier, the June 2014 Council approved
Infrastructure Plan of $125.8 million in projects was based on construction and design costs
with data from 2012. As construction costs have increased and the City is required to pay
prevailing wages, the Infrastructure Plan’s funding status has shifted. The FY 2021 Adopted
Capital Budget anticipated that these projects would cost $260.5 million. Staff is working to
maintain these projects within the current budget; however, project costs can fluctuate based
on market conditions at the time of construction award.
Grade Separation: The City is currently in the process of determining the number and type of
grade separations to pursue. Therefore, the financial impacts remain difficult to define.
Additionally, it may make sense to undertake a coordinated area plan for transit in the
downtown area to synchronize with the grade separation process. Costs for these items are not
included in this forecast. Measure B funds were expected to be a significant portion of the
funding for grade separation, but at the November 12, 2020 Valley Transportation Authority
(VTA) Policy Advisory Committee meeting there was a presentation of the Measure B Base Case
in which all funding in FY 2022 was allocated to BART Phase II instead of allocated to member
cities by project category, as initially planned. This decision would result in a revenue impact of
approximately $1.3 million to the capital improvement fund and a $1.0 million impact to the
grade separation project.
Parks Master Plan: The Parks Master Plan was finalized in 2017; however, when approved it
identified a need to develop a funding strategy and this is still in progress. As such, this forecast
does not yet contemplate the necessary investments to fully execute this plan.
Racial Equity Work: The Race & Equity Framework and action plan was approved in June 2020
(CMR 11441) and corresponding funding is available in FY 2021. As Council provides direction,
projects may emerge that require additional funding. These will be brought forward through
the FY 2022 budget process.
Foothills Park Opening to Non-Residents: In November 2020, the City Council approved opening
Foothills Nature Preserve to the general public (CMR 11706), lifting the resident-only access
restriction. The magnitude of impacts is uncertain at this time and depend on additional
analysis of visitor usage, , environmental analysis completed, potential implementation of entry
fees, and other park management options anticipating for Council consideration in spring 2021.
Staff will monitor these impacts and may request budgetary adjustments for Council’s
consideration, as appropriate.
Other Capital Improvement Projects: Ongoing discussion on major projects that may impact this
fund such as the Roth building, Public Safety Building, or Rail Grade Separation, are not factored
into the forecast.
City of Palo Alto Page 23
City owned assets operated by non-profit organizations: This Forecast does not include any
additional capital or operating investments for the Avenidas Senior Center, the Palo Alto History
Museum, the Ventura Child Care Center, the Junior Museum and Zoo, nor the Sea Scout
Building. As costs of potential capital or operating investments for these assets solidify, staff
will return to City Council to address them as appropriate.
Cubberley Community Center Concept Plan: The City is in the process of designing a Cubberley
Community Center Concept Plan; however, costs to implement that concept plan more than
the dedicated Cubberley infrastructure funding included in the existing agreement between the
PAUSD and the City are not assumed in this Forecast.
Loans for special projects: From time to time the City’s General Fund will assist other City
operations with modest cash flow loans to bridge fiscal years. For example, the City provided
over $3 million in loans to the Airport Fund as it works to secure significant grant funding from
the Federal Aviation Administration (FAA) for capital improvement costs. As of FY 2020, the
Airport Fund began paying back the loan to the General Fund. Additions and other initiatives
funded in other funds may need financial support from the General Fund to ensure they are
fully implemented. Additional loans from the General Fund are not assumed in this forecast.
Legislative Updates: Various actions at the state and federal level that could impact the City of
Palo Alto have not been incorporated into this forecast due to the changing context and
uncertainty of the quantitative impacts of potential legislative changes. This includes the
Cadillac Healthcare Tax at the federal level, property tax changes at a state level, and state-level
efforts focused on the provision of affordable housing. As uncertainty regarding the potential
impact of various legislative initiatives is clarified, appropriate adjustments will be identified
and brought forward as part of the development of the FY 2022 Budget.
Tax revenue alignment with updated Comprehensive Plan: The 2030 Comprehensive Plan was
adopted in FY 2018, including the potential fiscal impact of various land use scenarios. The fiscal
impact of this plan and various land use scenarios are not factored into this forecast.
FY 2022 Budget Development Guidelines
As discussed earlier in this document, this preliminary forecast represents the initial steps of
the FY 2022 budget development process. In the FY 2021 – FY 2030 Long Range Financial
Forecast, staff included budget development guidelines based on the trends that were
identified and the anticipated fiscal condition of the City. Due to the clear overlap of projecting
the City’s fiscal condition and the need to shape service level expectations, staff recommends
that the inclusion of Budget Development Guidelines be incorporated into the discussions at
the beginning of an annual budget process.
As the City and the County move through different phases of recovery from the COVID-19
pandemic, the City adapts operations to best support and serve the community. County Public
City of Palo Alto Page 24
Health Orders and State Public Health restrictions impact both the cost of delivering City
services and the revenues that pay for them (both taxes and fees). Often, staff finds that it
takes increased resources to deliver the same quantity of service in modified ways to ensure
the safety of the community and employees. This will continue as the public health situation
evolves.
The FY 2022 Budget Development Guidelines are detailed in Attachment A. They are meant to
reflect the anticipated fiscal condition of the City and to provide high-level budgetary direction
to the organization. These guidelines will shape and inform the annual financial planning and
the allocation of resources across the organization, especially in the General Fund. Further,
strategic work is underway focused on a Community and Economic Recovery Strategy. Staff
held a study session on November 30, 2020 (CMR 11790) for City Council discussion and
consideration of focus areas to inform and build a Palo Alto specific recovery strategy. Key to
the City Council’s and staff’s fiscal and recovery planning is the important work underway to
understand the fiscal implications of possible recovery scenarios. This includes the potential for
City actions to affect economic recovery and associated impacts on City revenues. This, in turn,
affects the level and nature of services the City can deliver to the community.
When the Fiscal Sustainability Workplan (CMR 10267) was approved by the City Council on April
22, 2019 drafting a budget development policy was listed as part of the “Newly proposed or
potential activities proposed to be completed”. The inclusion of Budget Development
Guidelines in with this forecast represents staff’s recommended method of addressing this
referral. Pairing Budget Development Guidelines with the forecast at the beginning of the
budget process links the anticipated fiscal condition of the organization with the necessary
context regarding service delivery prioritization and resource allocation that will be further
explored through the process. This also ensures that the City can proactively address
anticipated changes in its fiscal condition through the budget process.
Conclusion
The financial impacts of the COVID-19 pandemic and health orders have significantly restrained
consumer spending, resulting in a weakened job market, and uncertainty of how and when the
economy will rebound. This preliminary forecast provides context to begin discussions on how
to approach the budget constraints faced by the City for FY 2022, along with a view of how
changes in revenues that are sensitive to the impacts of public health restrictions may change
the City’s immediate financial picture. Although economic indicators in the past month show
some promise and have resulted in slightly improved estimates for FY 2021, the surge in COVID-
19 infections in the late fall reverted cities in Santa Clara County to a more restrictive “purple
tier.” The positive economic trends we have seen in September and October may not continue
as more restrictions are imposed and containment of the virus hinges on the viability of an
effective vaccine.
The forecast does not assume restoration of the service changes experienced in FY 2021 nor are
incoming resources enough to sustain the current expense levels in FY 2022. As the fiscal year
City of Palo Alto Page 25
progresses and as trends for this year materialize, prioritizing spending and services the City
wishes to continue will be paramount in the City’s financial stability.
STAKEHOLDER ENGAGEMENT
The preliminary forecast for FY 2022 represents the beginning of the fiscal year 2022 budget
development process. Information provided in this report will be discussed with the City
Council after Finance Committee and those conversations will provide direction to staff in the
budget development process. It is anticipated that conversations with City Council and the
community will occur through public budget hearings in Spring 2021, according to the standard
budget adoption process.
RESOURCE IMPACT
Financial implications from this report and input from the Finance Committee will be
considered in the City Manager’s development of the Fiscal Year 2022 budget.
ENVIRONMENTAL IMPACT
This report is not a project for the purposes of the California Environmental Quality Act.
Environmental review is not required.
Attachments:
• Attachment A: FY 2022 Budget Development Guidelines
Attachment A
1)Develop a structurally balanced budget that brings ongoing revenues and expenses into
alignment. Develop a plan for any structural imbalance to ensure that the City maintains
it fiscal sustainability over the short, medium, and long‐term.
2)Allocate one‐time resources for one‐time needs rather than committing one‐time
resources to ongoing services. Examine appropriate uses of revenue surpluses that
exceed forecasted levels including planning for recession needs.
3)Ensure appropriate resource allocation for City Council’s existing priorities.
4)Focus on business process redesign to enhance quality, flexibility, and cost‐effectiveness
of service delivery (include examining opportunities to streamline, simplify, reorganize,
and reallocate resources to avoid duplication of effort).
5)Explore alternative service delivery models (such as partnerships with non‐profits or
other public/private sector groups) to minimize overlap, maximize cost share, and
effectively use resources.
6)Continue to thoroughly analyze non‐personnel/equipment/other costs, such as contract
services, for cost savings opportunities.
7)Explore the expansion of existing revenue sources or the addition of new revenue
sources, including the alignment of existing charges for services and the opportunity to
establish new fees, when appropriate.
8)Continue to analyze and prioritize resource augmentations, seeking to offset
augmentations with reductions elsewhere for net‐zero impacts to the budget whenever
possible.
FY 2022 Budget Development Guidelines
City of Palo Alto (ID # 11743)
Finance Committee Staff Report
Report Type: Action Items Meeting Date: 12/15/2020
City of Palo Alto Page 1
Council Priority: Fiscal Sustainability
Summary Title: FY 2021 Finance Committee Referrals Update
Title: FY 2021 Finance Committee Referrals Update and Potential
Recommendations to the City Council
From: City Manager
Lead Department: Administrative Services
Recommendation
This report provides a status update of Council referrals requested, during the City Council Retreat and
annual Budget Process. Staff recommends the Committee review and accept this report, and potentially
provide any recommendation to the full City Council for additional action by staff.
Background and Discussion
This report provides an update to outstanding Council referrals to the Finance Committee as requested
during the February 2020 City Council Retreat and during the May 2020 Budget Process. The City Council
requested information on various items that are discussed in this report and is provided in coordination
with assigned departments. A summary table of the current referrals and status of them follows, with
additional information on the referrals after the summary table.
City of Palo Alto Page 2
Referral
Assigned
Department Status
FY2021 Budget:
Explore changing delivery
of services from a dominant
fire-oriented model to a
dominant medical-oriented
model.
Fire
Department
Nov 2020: See below
Included in the staff report is a summary of the
current status of Fire medical services delivery. Staff
recommends that considering the current medically
oriented agency status and complementary cross-
staffing model, that no immediate action be taken.
The Fire Department will continue to look for
efficiencies and methods for modernization of its
delivery of services.
FY2021 Budget:
A report or item on the JMZ
six months after it opens
and what it would look like
to eliminate the General
Fund Subsidy through a
fully cost recoverable
program.
Community
Services
Department
Nov 2020: The Junior Museum and Zoo (JMZ)
construction project is underway. In May 2020, staff
presented the preliminary operating plan to Council
(CMR 11222) along with adjustments to the municipal
fee schedule (memo). Due to the COVID-19 pandemic
re-opening for the new facility is anticipated in spring
2021. Staff will return with an analysis and modeling
of a fully cost recoverable program once JMZ is
completely operational.
FY2020 City Council
Retreat:
Direct the Finance
Committee to come up with
proposed thresholds for
Council to consider related
to Section 2.4.L, Consent
Calendar Categories, which
determines the eligibility
for items to be placed on
the Consent Calendar.
Administrative
Services
Department
Nov 2020: See below
Included in the staff report as well as further detailed
in Attachment A, staff in consultation with
Management Partners, has reviewed the contract
approvals by the City Council and the not to exceed
limits and whether they were approved as a consent
item or action item.
Options for potential recommendations that the
Finance Committee may consider for the full City
Council’s consideration and action:
1) Review the data analysis presented and affirm
current practice,
2) Clarify the types of purchase contracts that must
be placed on the Consent Calendar or as an Action
Item in the City Council Procedures and Protocols
Handbook,
3) Implement a contract dollar threshold for items
that must be placed on the Consent Calendar or as
an Action Item, and/or
4) Consider increasing thresholds for City Council
approval of contracts and/or include indexing
provisions for these thresholds.
City of Palo Alto Page 3
Explore changing delivery of services from a dominant fire-oriented model to a dominant medical-
oriented model.
Palo Alto Fire is currently recognized as a medically-oriented agency. In the most recent bi-annual report
(January 1, 2020- June 30, 2020), it was noted that Rescue and Emergency Medical Service (EMS) calls
account for sixty-two percent (62%) of total calls. Our ability to respond to EMS calls has exceeded our
response time standards:
• At least ninety percent (90%) of first responders arriving on scene to EMS calls within eight (8)
minutes. Palo Alto Fire arrived on the scene of EMS calls within eight minutes ninety-one
percent (91%) of the time,
• At least 90% of paramedic responders on scene to EMS calls within twelve (12) minutes. PAFD
paramedics arrived on the scene of EMS calls ninety-nine percent (99%) of the time.
The Palo Alto Fire Department exceeds the response time standards because of the following EMS
focused response models:
• Palo Alto Fire is the only fire agency in Santa Clara County that operates an emergency
ambulance transport service.
• Every fire unit (engine, truck, and ambulance) is always staffed with at least one paramedic.
• Multiple Palo Alto Fire engine crews simultaneously staff an ambulance, called “cross-staffing.”
This cross-staffing model allows a fire engine crew to put the fire engine out of service and
respond to the medical emergency based on need. Cross-staffing affords us the ability to rely on
County Ambulance resources to respond into Palo Alto to transport EMS patients to the
hospital, and consequently exceed the response time standards. Before the cross-staffing
model, County Ambulances were averaging sixty (60) responses a month into Palo Alto fire
patient transport. The cross-staffing model reduced County Ambulance responses into Palo Alto
to less than ten (10) responses a month, resulting in faster response times and a higher service
level to the Palo Alto community.
Direct the Finance Committee to come up with proposed thresholds for Council to consider related to
Section 2.4.L, Consent Calendar Categories, which determines the eligibility for items to be placed on
the Consent Calendar.
On February 1, 2020, the City Council conducted its annual retreat where the Council reviewed the
Council Meeting and Agenda Guidelines of the City Council Procedures and Protocols Handbook (Council
Handbook) was reviewed. The Council discussed Consent Calendar Categories and the following motion
was passed:
MOTION: Council Member Tanaka moved, seconded by Vice Mayor DuBois to direct the Finance
Committee to come up with proposed thresholds for Council to consider related to Section 2.4.L,
Consent Calendar Categories, which determines the eligibility for items to be placed on the
Consent Calendar. MOTION PASSED: 4-3 Cormack, Filseth, Fine no
Staff engaged the assistance of its Purchasing Special Advisor, Management Partners to review the
Council Handbook, analyze City Council awarded contracts and review average duration times for
meetings in Fiscal Years 2020 and 2019, and research typical agency practices. Results of this review can
be found in Attachment A.
City of Palo Alto Page 4
Specifically, Section 2.4.L of the Council Handbook outlines Consent Calendar Categories and describes
the Consent Calendar as “the section where administrative and non-controversial items shall be
presented. The Mayor and City Manager should be sensitive to high dollar value items and consider
placing those items in the action agenda section.” Furthermore, the Consent Calendar section may
include administrative matters that include contracts, appointments, approval of applications, and any
other matters. The focus of the analysis was placed on contracts associated with the purchase of goods
and services, as defined in the Council Handbook:
“A contract for goods, general services, professional services, public works projects, dark fiber
licensing contracts or wholesale commodities, purchases, as outlined in the Purchasing
Ordinance, provided such contracts represent the customary and usual business of the
department as included in the Adopted Budget. Examples include: routine maintenance
contracts, annual audit agreement; software and hardware support agreements, janitorial
services, copier agreements or postage machine agreements.” (Section 2.4.L.2)
Review and Analysis of Council Agendas
City Council Agendas were reviewed and each item, for both the Consent Calendar and Action, were
categorized into types of contracts and typical contract actions.
Table 1: Contract Types and Actions
Types of Contracts Contract Actions
Purchase of Goods, Services, and
Public Works Construction Initial approval and amendments
Wholesale utility commodities,
service purchase, and sale Time extensions
Intergovernmental Deferrals and removal from
agenda
Other (employment-related,
leases and licensing) Direction to staff, termination
Focus of the analysis was placed on contracts awarded for the purchase of goods, services and public
works construction. Within this contract type, initial approval and amendments contract action was
considered as this type of action has an associated dollar value impact that can be grouped into a
potential threshold for Consent Calendar Categories.
Table 2: Contracts on Council Agendas
Purchase Contracts Other Contracts/Actions
Total Scheduled
Agenda Items
FY 2019 FY 2020 FY 2019 FY 2020 FY 2019 FY 2020
Action Items 3* 4* 11 5 85 83
Consent
Calendar 75* 88* 43 31 229 200
Total 78 92 54 36 314 283
Table 2 summarizes discrete agenda items however there may be multiple contracts awarded in some
instances (as noted by the asterisk). In FY 2020, a total of 143 purchase contracts were awarded on
City of Palo Alto Page 5
consent and a total six contracts were awarded as an Action item, one of which was moved to the
Consent Calendar. For FY’s 2019 and 2020, City Council agenda items that were initial approval or
amendments of purchase contracts respectively total 25 percent and 32 percent of total scheduled
agenda items. Other Contracts/Actions includes intergovernmental agreements and wholesale
commodity purchases.
In addition to the presented in Table 2, Tables 3 and 4 illustrate the average number of purchase
contracts on Consent, Action, average elapsed time per Action item and groups these items by dollar
amount.
Table 3: Contract and Agenda Item Averages
FY 2019 FY 2020
Purchase Contracts on Consent 2.6 3.5
Consent Items per Meeting 6.7 5.9
Average Elapsed Time per Action Item 1:25 1:12
Action Items per Meeting 2.5 2.4
Table 4: Purchase Contracts on Consent by Dollar
Threshold
Dollar Value FY 2019 FY 2020
Up to $250,000 16 13
$250,001 to $500,000 16 20
$500,001 to $1,000,000 20 18
$1,000,001 to $5,000,000 15 28
Greater than $5,000,000 6 6
Total 73 85
In FY 2020, the average time per Action item was 1 hour and 12 minutes, with the actual time
distribution being between 31 minutes and 2 hours and 45 minutes. If a threshold of $1,000,000 were to
be selected, for example, based on FY 2020 activity, 34 additional Action items would be added to
Council agendas and would result in an additional 40 hours and 48 minutes across all Council meetings
throughout the year.
In addition to number of agenda times, time average, and grouping purchase contracts by dollar
amount, the distribution of these contracts is summarized by month in the below table.
City of Palo Alto Page 6
Table 6: Contracts on Consent Calendar by Month
As noted in the Council Handbook, “the Mayor and City Manager should be sensitive to high dollar value
items and consider placing those items in the action agenda section.” Considering this practice and
comparing it to potentially assigning a dollar threshold to whether purchase contract be placed as
Action, a chart comparing the elapsed time in minutes to the dollar value of the purchase contract was
compiled. It should be noted that discussion of these items focused on policy considerations, other
actions, and public comment and the time noted in this chart does not count the time focused on the
actual contract approval.
Table 7: Dollar Value and Action Agenda Time Duration
Based on the above chart, the contract having the lowest dollar value is the Independent Police Auditing
contract, totaling $75,000, that went to Council FY 2020; time spent on this item was 122 minutes. In
contrast, the largest dollar value contract, New California Avenue Garage, was discussed for 47 minutes
and totaled $48.4 million. Using the Independent Police Auditing and Pension Funding Policy items as
examples, both with much lower dollar values relative to the other contracts considered, the discussion
surrounding these items was focused on policy considerations and public comment.
City of Palo Alto Page 7
Agency Practices and Observations
The City’s current practice is aligned with the most common method used by California Cities, that is to
place contracts for approval on the Consent Calendar. These items are typically characterized as
administrative and/or routine in nature. Discretion is usually given to the City Manager, in consultation
with the Mayor and staff, to determine what contracts should be considered as Action items.
Comparable cities were selected through a combination of demographic information and proximity to
Palo Alto to review the contract approval process:
• Menlo Park
• Milpitas
• Mountain View
• Redwood City
• San Jose
• San Mateo
• Santa Clara
• Sunnyvale
In reviewing the contract approval practices of the cities listed above, all eight jurisdictions utilize the
consent calendar to award contracts. The City’s Purchasing Advisor also reviewed Council agendas from
several other Bay Area cities, all which place contracts on the consent calendar. These cities include
Campbell, Cupertino, Daly City, Fremont, Hayward, Pleasanton, Union City and Walnut Creek. While
some California cities may have policies or practices that require Council consideration of contracts as
action items, it appears to be uncommon.
In addition, some cities do not bring certain contracts forward for Council approval if funds are included
in the Adopted Budget. A summary of agency trends is summarized in the table below.
Table 8: Agency Trends
City Practice
Mountain View Goods and general service purchases do not require Council approval if budgeted
funds are available.
Redwood City Approval thresholds can be adjusted annually by lesser of CPI or 2%.
San Jose Goods and public works contracts less than $1,000,000 do not require Council
approval; approval thresholds can be periodically adjusted by CPI.
Santa Clara Goods procured with purchase orders do not require Council approval if budgeted
funds are available; increases to award thresholds and indexing anticipated.
In reviewing statistics of Council Agenda for the last two fiscal years together with agency trends, the
following observations should be noted:
Most California cities place contracts on the Consent Calendar. Contracts that are considered
administrative and routine in nature are placed on the Consent Calendar. Policies allow for members of
the public, Council, and staff to pull items from Consent to Action. Discretion is given to the City
Manager, in consultation with Mayor and staff to place items on Consent or Action. Used as an
important time management tool.
City of Palo Alto Page 8
Greater clarity could be provided in the Council Handbook. Current policy language focusing on high
dollar value contracts dilutes emphasis on controversial items and/or items of significant public interest
that may not come with substantial cost but are more appropriately considered as Action Items.
Agency Trends. Trends among the agencies noted increased thresholds for Council approval are being
reviewed and that indexing provisions are included in the policy; some have higher thresholds than Palo
Alto. Additionally, the periodic indexing of solicitation thresholds is a common practice done by federal
and state agencies.
Time Management Tool. Placing contracts of a predetermined high dollar value as Action Items will have
varying impacts on meeting scheduling and meeting times, and can impact operational effectiveness,
with more significant impacts occurring at critical times of the fiscal year. Contracts resulting from
competitive solicitations should come before Council when they are ready for award and may have time
sensitivity due to grant restrictions, timing for construction or service provision, timely receipt of goods,
or expiry. The high number of contracts presented near the end of the fiscal year typically includes
expiring contracts that must be renewed.
Stakeholder Engagement
This is an informational report to follow up on Council referral items and has been coordinated
internally among departmental parties.
Resource Impact
This is an information item to follow up on Council referral items and has no fiscal impact.
Environmental Impact
This is not a project under Section 21065 for purposes of the California Environmental Quality Act
(CEQA).
.
Attachments:
• Attachment A: Consideration of Potential Dollar Thresholds for Treating Contract
Awards as Action Items on City Council Agendas
City of Palo Alto
Finance Committee
Consideration of Potential Dollar Thresholds for
Treating Contract Awards as Action Items on City Council Agendas
December 15, 2020
Pete Gonda, Special Advisor
ATTACHMENT A
Areas of Focus
2
Background on
Council Referral
and Typical
Agency Practices
Analysis of Palo
Alto Contracts for
Two Fiscal Years
Observations
Gleaned from the
Analysis
A B C
ATTACHMENT A
City Council Referral
3
Research to include:
•Number of contracts awarded and dollar
“buckets”
•Review of other City policies
•Projection of additional Action items to be
added to Council agendas if Consent Calendar
approvals were limited by dollar value
Council Member Tanaka
moved, seconded by Vice
Mayor DuBois, to direct the
Finance Committee to come
up with proposed thresholds
for Council to consider related
to Section 2.4.L, Consent
Calendar Categories, which
determines the eligibility for
items to be placed on the
Consent Calendar.
ATTACHMENT A
City Council Procedures and Protocols Handbook
4
“The consent calendar portion is the
section where administrative and non-
controversial items shall be presented.
The Mayor and City Manager should be
sensitive to high dollar value items and
consider placing those items in the
action agenda section.”
ATTACHMENT A
Typical Consent Calendar Items
5
1.Ordinances and Resolutions
2.Administrative Matters Including Contracts, Appointments, Approval of
Applications, and Any Other Matter
3.Request to Refer Items to Any Council Standing Committee, Committee, Board,
Commission or Council Appointed Officer
4.Items Unanimously Recommended for Approval by a Council Committee Unless
Otherwise Recommended by the Committee, Mayor, City Attorney or City
Manager
5.Items Recommended for Approval by Council-Appointed Boards and
Commissions
ATTACHMENT A
Typical Consent Calendar Items: Contracts
6
•Contracts for which the subject or scope of work has been previously
reviewed by the City Council.
•A contract for goods, general services, professional services, public works
projects, dark fiber licensing contracts or wholesale commodities,
purchases, as outlined in the Purchasing Ordinance, provided such contracts
represent the customary and usual business of the department as included
in the Adopted Budget. Examples include:routine maintenance contracts,
annual audit agreement; software and hardware support agreements,
janitorial services, copier agreements or postage machine agreements.
ATTACHMENT A
Typical Agency Practices
7
➢Most common method by California cities for
approving contracts is to place them on the Consent
Calendar
✓Characterized as administrative and/or routine in nature
✓Discretion is usually given to the City Manager, in
consultation with Mayor and staff, to determine what
contracts are considered as Action items
ATTACHMENT A
Typical Agency Practices
8
➢Management Partners reviewed procedures for
eight Bay Area cities
➢Cities selected through combination of
demographic information, proximity to Palo Alto
ATTACHMENT A
Typical Agency Practices
9
All agencies reviewed use the Consent Calendar
for contract approvals:
Menlo Park, Milpitas, Mountain View,
Redwood City, San Jose, San Mateo,
Santa Clara, Sunnyvale
ATTACHMENT A
Trends in Agency Practices
10
✓Trends point to increased thresholds for Council
approval and including indexing provisions
✓Some cities do not bring certain contracts forward
for Council approval if funds are included in Adopted
Budget
ATTACHMENT A
Agency Trends
11
City Practice
Mountain View Goods, general services purchases do not require Council
approval if budgeted funds are available
Redwood City Approval thresholds adjusted annually by lesser of CPI or
2%
San Jose
Goods and public works contracts less than $1,000,000 do
not require Council approval; approval thresholds
periodically adjusted by CPI
Santa Clara
Goods procured with purchase orders do not require
Council approval if budgeted funds are available; increases
to award thresholds and indexing anticipated
ATTACHMENT A
Types of Contracts
Purchase of Goods, Services
and Public Works
Construction
Wholesale utility
commodities, services
purchase and sale
Intergovernmental Other (employment-related,
leases and licensing)
12
ATTACHMENT A
Contract Actions
Initial approval and
amendments
Time extensions
Deferrals and removal from
agenda
Direction to staff, termination
13
ATTACHMENT A
Contracts on Council Agendas
14
Purchase Contracts Other Contracts,
Actions
Total Scheduled
Agenda Items
FY2018-19 FY2019-20 FY2018-19 FY2019-20 FY2018-19 FY2019-20
Action Items 3*4*11 5 85 83
Consent Calendar 75*88*43 31 229 200
Total 78 92 54 36 314 283
*Represents discrete agenda items even though multiple contracts may have been
awarded in some instances. In FY 2019/20, a total of 143 purchase contracts were
awarded on Consent; 6 total purchase contracts were awarded from the Action
Calendar, with one moved to Consent.
ATTACHMENT A
Other Contracts –FY 2019-20
15
➢14 intergovernmental agreements
✓Cable-related, cost-sharing, grants, estimated costs/fiscal impacts
✓Three with direct award costs between $112,000 and $800,000
➢Four wholesale utility commodities and services purchase and
sale agreements
✓Annual expense cap of $5 million, no revenue limit (1)
✓Regulatory representation, program management (3)
➢16 of 18 on Consent
ATTACHMENT A
Palo Alto Contract Analytics -Two Fiscal Years
16
FY 2018-19
Average
FY 2019-20
Average
Purchase Contracts on Consent 2.6 3.5
Consent Items per Meeting 6.7 5.9
Average Elapsed Time per Action
Item 1:25 1:12
Action Items per Meeting 2.5 2.4
ATTACHMENT A
Contracts on Consent Calendar by Month
17
6
2
7
4
8
2 2 3
9
4
26
8
6
14
8 7
4
11
2 2 3
20
July August September October November December January February March April May June
FY 2018-19 FY 2019-20
0
ATTACHMENT A
Total Action and Consent Items by Month
18
1
22
10
26
19
34
7
14 10
16 16
54
0
23
11
25
19 19
13 17
9 8
14
42
3
11
2
6
6
10
8
7
4
9 5
14
0
3
7
5
7 8
9
8
7 4
5
20
4
33
12
32
25
44
15
21
14
25
21
68
0
26
18
30
26 27
22
25
16
12
19
62
FY 2018-19 FY 2019-20
Consent Action
ATTACHMENT A
Palo Alto Contract Analytics: Purchase Contracts
19
Purchase Contracts on Consent by Dollar Threshold
Dollar Value FY 2018-19 FY 2019-20
Up to $250,000 16 13
$250,001 to $500,000 16 20
$500,001 to $1,000,000 20 18
$1,000,001 to $5,000,000 15 28
Greater than $5,000,000 6 6
Total 73 85
ATTACHMENT A
“Number of additional
Action items to be
added to Council
agendas if Consent
Calendar approvals
were limited by dollar
value “
•Average of 1:12 hours per Action Item, with
actual distribution between 0:31 and 2:45
hours
•Number of Consent Calendar contracts greater
than $1,000,000 = 31
•Average number of Consent Calendar Items per
meeting greater than $1,000,000 = 3
•Uneven distribution of Consent Calendar
contracts greater than $1,000,000: Zero to 8
across all meetings; 1 to 12 by month
20
FY 2019-20
ATTACHMENT A
Hwy 101 Bike Bridge,
41 Minutes,
$15,549,772
Pension Funding Policy,
92 Minutes, $230,000
Independent Police Auditing,
122 Minutes, $75,000
New California Avenue
Garage, 47 Minutes,
$48,396,817
GreenWaste Agreement, 99 Minutes,
$22,183,000
Downtown Garage Final EIR,
120 Minutes, $2,287,866
0
5,000,000
10,000,000
15,000,000
20,000,000
25,000,000
30,000,000
35,000,000
40,000,000
45,000,000
50,000,000
0 20 40 60 80 100 120 140
Do
l
l
a
r
A
m
o
u
n
t
(
$
)
Elapsed Time (Minutes)
RPP Old Palo Alto,
43 Minutes,
$3,223,857
Dollar Value and Agenda Item Duration
(Action Calendar Contracts)
21
FY 2018-19
FY 2019-20
Legend
ATTACHMENT A
Observations
22
1. Most California cities place contracts on the Consent Calendar.
•Considered administrative and routine in nature.
•Allow for members of the public, Council and staff to pull items.
•Provide discretion to the City Manager to consult with Mayor and staff to place
controversial items, high value contracts and contracts with significant public
interest on the Action agenda.
•Used as an important time management tool.
ATTACHMENT A
Observations from Analysis
23
2. Greater clarity could be provided in the Council Procedures and
Protocols Handbook.
•Current policy language focusing on high dollar value contracts dilutes emphasis on
controversial items and/or items of significant public interest that may not come
with substantial cost but are more appropriately considered as Action Items.
ATTACHMENT A
Observations from Analysis
24
3. Trends point to increasing staff level contract approval thresholds (and
indexing them) that would reduce the number of contracts considered by
City Councils.
•Reflection of the impact of inflation.
•Viewed as efficiency tool at all levels of government.
ATTACHMENT A
Observations from Analysis
25
4. Placing contracts of a predetermined high dollar value on the Action
Calendar will have varying impacts on meeting scheduling and meeting
times, as well as operational effectiveness, with more significant impacts
occurring at critical times of the fiscal year.
•Contracts resulting from competitive solicitations come before Council when they are
ready for award and may have time sensitivity due to grant restrictions, timing for
construction or service provision, timely receipt of goods, or expiry.
•The high number of contracts presented near the end of the fiscal year typically
include expiring contracts that must be renewed.
ATTACHMENT A
Other Practical Considerations
26
•Analysis focused on purchase contracts of goods, services and public works
construction with enumerated dollar values and does not include:
▪Contracts with other governmental agencies
▪Contracts related to hiring or wages, hours and working conditions
▪Purchase and sale agreements for wholesale utility commodities and services
▪Revenue generating contracts or bond financings
•Most of these items are placed on the Consent Calendar and can have
significant fiscal impacts.
•Moving these types of contracts to the Action Calendar based on maximum
dollar value of fiscal impact will further impact meeting scheduling.
ATTACHMENT A
Questions and Comments
Pete Gonda, Special Advisor| pgonda@managementpartners.com
ATTACHMENT A
City of Palo Alto (ID # 11750)
Finance Committee Staff Report
Report Type: Action Items Meeting Date: 12/15/2020
City of Palo Alto Page 1
Summary Title: First Quarter Financial Report FY2021
Title: First Quarter FY 2021 Financial Report
From: City Manager
Lead Department: Administrative Services
Recommendation
This report is informational and does not require an action by the Finance Committee.
Background
The purpose of this report is to provide information on the financial condition of the City’s
General Fund and Enterprise Funds as of the end of the first (1st) quarter of fiscal year (FY) 2021
(September 30, 2020). The figures presented here are unaudited.
On October 19, 2020, staff presented to Council preliminary Q1 financial status and discussed
next steps in monitoring, modeling, and addressing the City’s economic recovery plan (CMR ID
11596). The report detailed key tax revenue highlights and the strategic work for a Community
and Economic Recovery strategy. This staff report is a follow up to the preliminary Q1 financial
status that provides Q1 results and analysis.
Discussion
The FY 2021 1st quarter ended on September 30, 2020. This report summarizes the actual
financial activity of the General and Enterprise Funds for the three-month period and compares
those amounts to the same period of the prior year and to the FY 2021 Adjusted Budget. These
results are still not conclusive because it is still early to predict a trend with insufficient data for
FY2021 and with continuing uncertainty brought by the COVID-19 pandemic.
Attachment A provides a breakdown of revenues by source and expenses by function, with
separate columns for Adopted Budget and Adjusted Budget. The Adjusted Budget column
includes prior year commitments that were carried forward into this fiscal year and
amendments to the FY 2021 Adopted Budget through September 30. Encumbrances and actual
expenses for the three-month period are also reported.
City of Palo Alto Page 2
General Fund revenues (excluding operating transfers) for the 1st quarter of FY 2021 totaled
$20.2 million, which is 21.2 percent lower than the same period of the prior year and comprises
11.6 percent of the current year Adopted Budget. Cash receipts as expected declined in all
General Fund revenues except Documentary Transfer Tax over prior year’s 1st quarter. The
General Fund revenues are 11.6 percent of the Adjusted Budget, but it is not indicative of the
annual expected receipts in FY 2021 due to timing of major revenues received over the fiscal
year.
General Fund expenses (excluding operating transfers) for 1st quarter are 5.4 percent lower
than prior year and are tracking at 22.4 percent of Adjusted Budget (excluding encumbrances).
The following is a detailed discussion of the most significant revenue and expense items.
Revenue Highlights for 1st Quarter FY 2021
The following is a table which highlights the City’s major revenue sources for the 1st Quarter,
compared to 1st Quarter of the prior year. Each quarter’s revenue is expressed as a percentage
of the Adjusted Budget for each year.
Table 1
% change FY 2021 %FY 2020 %
Property Tax 59.6%$52,000 0.3%$48,634 0.2%
Sales Tax -30.3%20,500 8.3%34,346 7.1%
Charges for Services -16.5%25,984 14.8%30,267 15.2%
Transient Occupancy Tax -86.1%14,900 3.0%29,309 10.9%
Utility User Tax -5.8%15,100 22.0%17,581 20.1%
Permits and Licenses -11.4%7,770 20.1%8,667 20.3%
Documentary Transfer Tax 5.7%4,700 43.3%8,369 23.0%
All Other Revenue Sources -11.8%34,088 21.1%33,997 24.0%
Total Revenue -21.2%$175,042 11.6%$211,170 12.2%$20,244 $25,701
1,560 1,761
2,036 1,926
7,202 8,170
3,837 4,595
446 3,199
3,325 3,528
$142 $89
1,696 2,433
1st Quarter Actuals Adjusted Budget
FY 2021 FY 2020
General Fund Revenue
FY 2021 1st Quarter
(000's)
Property tax revenue in the 1st quarter of the fiscal year is only a nominal amount as property
tax receipts are paid by the County over three months beginning in the month of November
and then again beginning in March. The FY 2021 secured and unsecured property tax assessed
values growth rates are 7.6 percent and 12.7 percent, respectively, an average of 7.8 percent.
These higher assessed values reflect continued strength in commercial and residential real
estate markets.
City of Palo Alto Page 3
Typically, during a recession, property tax impact is delayed by a year. Based on trends from the
last two recessions (Great Recession and Dot-Com Bust), because of the stability of the City’s
assessed value and retention of properties by owners during economic recessions, this revenue
source plateaus rather than steeply decline. However, there are two items that have created
uncertainty to this historical trend in FY 2021 and beyond. First, COVID-19 has upended many
historical trends including on how the new workforce structure will look like in the future (e.g.
working from home versus office) and its potential impacts to commercial secured and
unsecured property tax.
The second is the continued receipt of excess Educational Revenue Augmentation Fund (ERAF)
distributions from the County of Santa Clara. Excess ERAF is the fund used to collect and
disburse property taxes that are shifted to/from cities, the County, and special districts prior to
their reallocation to K-14 school agencies. When the state shifts more local property tax than
required to support schools these funds are returned and known as excess ERAF. Due to the
uncertainty of whether local agencies will continue to receive excess ERAF funds, it is not
considered a permanent local revenue source. The FY 2021 Adopted Budget assumes $2.8
million in excess ERAF revenue, in FY 2020 and FY 2019, actuals were $3.9 million and $2.7
million, respectively. The County of Santa Clara’s revised estimate for FY 2021 is $5.0 million. In
addition to the uncertain amount of ERAF revenue the City is to receive, the State is claiming
that five counties (Marin, Napa, San Francisco, San Mateo, and Santa Clara) are calculating
excess ERAF in way that that is contrary to state law where too much property tax revenue is
being shifted from schools to other local agencies. The final resolution of this dispute, both in
timing and amount, creates further uncertainty in the current and future fiscal years. Taking all
these factors into consideration, actual FY 2021 property tax revenue is expected to be at or
slightly above the FY 2021 Adopted Budget.
Sales tax revenue cash receipts for the 1st quarter has decreased by $737,000 or 30.3 percent,
from the same period of last year. This only represents one month’s sales tax activity due to
delay in sales tax collection by the State and remittance to the City. In performance terms, this
decline is overstated due to the State offering certain businesses the option to defer sales tax
payments through interest free payment plans. This plan allows large businesses to delay their
sales and use tax remittances for 90 days and small businesses to defer remittance over 12
months. For example, for the fourth quarter of FY 2020, cash receipts declined by 37.7 percent,
however, if the businesses remitted the sales tax on time, the cash receipt decline is 23.4
percent only. Although this revenue continues to be significantly impacted by COVID-19, the
forecast at this time expects receipts to be above the adopted budget but this is expected to be
revised as additional actual receipts occur and performance data is received.
Charges for services revenue is down $758,000 or 16.5 percent, compared to the same quarter
of last year is due to the following:
• Paramedic service fees decreased $330,000 over the same period of last year due to
fewer trips.
City of Palo Alto Page 4
• Program and classes decreased $381,000 due to limited operations caused by COVID-19
restrictions.
Transient occupancy tax (TOT) revenue of $446,000 represents about one and half month of
collections which is a decrease of $2.8 million or 86.1 percent, compared to the same period of
last year. Four hotels that closed in late FY 2020 have re-opened while ten hotels representing
26.5 percent of available rooms remain closed. The two new Marriott hotels with 301 rooms
are expected to open in mid-December.
During this first quarter period, the open hotels average daily room and occupancy rates were
$130.72 per day and 44.5 percent, respectively. For the open hotels, occupancy percentage
ranges from 8.0 percent to over 70 percent, however, the higher occupancy was at the expense
of a deep decline in average room rates (declines range from 25 percent to 65 percent). The
shelter in place order that restricted the travel and hotel businesses impact continues. The
staff estimates that revenue will fall between $5.5 million to $11 million below the adopted
budget. At this time, staff is closely monitoring sales tax, property tax, and documentary tax
revenues which combined may mitigate the loss of TOT revenue. However, this is unknown at
this time, especially as the Santa Clara County along with over 90 percent of the state of
California returns to the most severe tier of restrictions with additional county specific
restrictions as well.
Utility User Tax receipts total $3.3 million, or 22 percent of the FY 2021 budgeted amount. This
is $203,000, or 6 percent, lower than the prior year’s receipts of the same period due to lower
business consumption of water, gas, electric, and telephone services as a result of continued
COVID-19 impacts. The expectation is that the FY 2021 total adopted budget will be realized.
Documentary transfer tax cash receipts for two and half months total $2.0 million, or 43.3
percent of the FY 2021 adjusted budget and are $110,000 or 5.7 percent higher than prior year
receipts for the same period with the number of transactions being 20 percent higher.
However, based on four months receipts of FY 2021, documentary transfer tax has increased
$268,000, or 10.3 percent, compared to the same period of prior year and with the number of
transactions being 23.1 percent higher. This revenue source is volatile since it is highly
dependent on sales volume and the mix of commercial and residential sales, but if this trend
continues, it is expected that receipts will exceed the adopted budget.
Permits and licenses revenue is down by $201,000 or 11.4 percent, compared to the same
quarter of last year primarily due to a decrease in new building and two-story homes
construction permit revenues.
All other revenue sources cash receipts for the 1st quarter has decreased $968,000 or 11.8
percent, from the same period of last year primarily due to the following:
• Facility and property rentals decreased $1.1 million due to lower number of tenants and
late payments.
City of Palo Alto Page 5
• Parking violations decreased $263,000 due to suspended parking enforcement.
• The decreases were partially offset by the receipt of $427,000 COVID-19 Relief Fund
Cares Act, this is approximately half of the nearly $850,000 in relief funds expected to
be received in FY 2021.
Expense Highlights for 1st Quarter FY 2021
The following is a table which highlights the City’s expenses by function for the 1st quarter,
compared to 1st quarter of the prior year. Each quarter’s expense is expressed as a percentage
of the Adjusted Budget for each year.
Table 2
Expenditures FY 2021 FY 2020 % change FY 2021 %FY 2020 %
Police 10,274$ 10,588$ -3.0%40,590$ 25.3%44,822$ 23.6%
Fire 8,608 8,414 2.3%33,917 25.4%35,261 23.9%
Community Services 6,583 7,598 -13.4%30,090 21.9%32,481 23.4%
Public Works 4,014 3,887 3.3%19,843 20.2%20,302 19.1%
Planning and Development Services 3,566 3,977 -10.3%18,719 19.1%23,258 17.1%
Library 2,198 2,562 -14.2%8,572 25.6%10,532 24.3%
Administrative Services 1,755 1,925 -8.8%8,645 20.3%8,755 22.0%
All Other Departments 4,662 5,109 -8.7%25,555 18.2%29,274 17.5%
Total Expenses 41,660$ 44,060$ -5.4%185,931$ 22.4%204,685$ 21.5%
1st Quarter Actuals Adjusted Budget
FY 2021 1st Quarter
General Fund Expenses
(000's)
Total expenses for the 1st quarter of the fiscal year are down $2.4 million or 5.4 percent from
the same quarter of last year and are right in line at 22.4 percent of full-year budgeted amount.
The overall decreased is expected as a result of budgetary reductions including service delivery
reductions and concessions resulting from the COVID-19 and its impacts on the City’s financial
situation.
Attachment A showed that the total expenses, including encumbrances for the 1st quarter are
31 percent of the adjusted budget primarily due to the purchase orders for Community Services
and Public Works. The Community Services purchase requests / orders are for golf course
management, childcare subsidy, senior services and others while Public Works orders are for
janitorial services, tree trimming services and others. These purchase requests / orders cover
the entire year. From these encumbered funds, invoices are drawn down, or paid against them.
Police and Fire comprises 45.3 percent of the total General Fund expenditures for the 1st
quarter, which is 2 percent higher compared to the prior year. Following is a table which
highlights some Police and Fire salaries and overtime for the 1st quarter.
City of Palo Alto Page 6
Table 3
Police and Fire
Salaries and Overtime Expense
FY 2021 1st Quarter YTD
(000's)
FY 2021 FY 2020 % change FY 2021 %FY 2020 %
Police - Salaries $4,468 4,426$ 0.9%$17,321 25.8%$19,514 22.7%
Police - Overtime 351 717 -51.0%944 37.2%1,842 38.9%
Total Police 4,819 5,143 -6.3%18,265 26.4%21,356 24.1%
Fire - Salaries 3,513 3,378 4.0%13,530 26.0%14,131 23.9%
Fire - Overtime 794 572 38.8%1,931 41.1%1,673 34.2%
Total Fire 4,307 3,950 9.0%15,461 27.9%15,804 25.0%
Total Public Safety
Salaries & Overtime $9,126 $9,093 0.4%$33,726 27.1%$37,160 24.5%
1st Quarter YTD Actuals Adjusted Budget
Police overtime is 51 percent lower than the prior year due to suspension of specialized police
units such as the traffic enforcement and investigation units. Suspension of these specialized
units resulted in reduced service levels and ability to respond to non-urgent calls. The actual
Police overtime is 37.2 percent of adjusted budget due to additional staffing of retail patrol
detail which will be reimbursed by the local retailers in the current fiscal year. Excluding the
$96,000 estimated retail patrol overtime cost, overtime would have been 27 percent of the
adjusted budget. On a combined basis, salaries and overtime are at 26.4 percent of budget
through the 1st quarter of the fiscal year. The Department’s overtime analysis is included in
Attachment B.
Fire overtime is 38.8 percent higher than FY 2020 and 41.1 percent of the adjusted budget
primarily due to strike team deployment to multiple California wildfires (August Complex, Glass,
Fire, CSU, North Complex, Creek Fire and others) which will be reimbursed by the State. In addition,
the department staffed Station 8 for over 1,000 hours on red flag danger days. Fire salaries is 26
percent of the adjusted budget is partially attributable to the extension of the Fire
Department’s FY 2021 staff reduction plan to March 2021. During the 1st quarter, five FTE
Firefighters still working at the beginning of the quarter and subsequently reduced to three FTE
towards the end of the quarter. On a combined basis, salaries and overtime are 27.9 percent of
the budget through the 1st quarter of the fiscal year. The Department’s overtime analysis is
included in Attachment B.
City of Palo Alto Page 7
The Police and Fire salaries increases are minimal due to reductions in the unrepresented
Management and Professionals Group at the equivalent of a 10 percent ‘give-back’ that
consists of a wage freeze, furlough, and reduced flexible management benefits. Agreements
with safety groups include a deferral of wage increases for one year in the Fire Chief’s
Association (FCA), Police Management Association (PMA), and Palo Alto Peace Officers’
Association (PAPOA), and deferral of wage and step increases for one year in the International
Association of Fire Fighters (IAFF) Group.
General Fund Budget Stabilization Reserve (BSR) Balance
As reported to the Finance Committee on December 1, the General Fund ended with a Budget
Stabilization Reserve of $35.9 million which is $0.5 million below the Council’s 18.5 percent
target of the FY 2021 Adopted expenses of $36.4 million. Through the first quarter there have
been no changes to the BSR.
Enterprise Funds
Following is a summary of change in net position for each of the Enterprise Funds for the three
months ended September 30, 2020, including a comparison of results from the same period last
year.
Table 4
City of Palo Alto
Enterprise Funds Change in Net Position
FY 2021 1st Quarter
1st Qtr 1st Qtr Increase
FY 2021 FY 2020 (Decrease)% Change
Water $8,898 $8,630 $268 3%
Electric 3,644 6,941 (3,297)-48%
Fiber Optic 356 415 (59)-14%
Gas (530)(261)(269)103%
Wastewater collection 222 687 (465)-68%
Wastewater treatment 1,316 1,302 14 1%
Refuse 2,539 3,440 (901)-26%
Storm Drainage 737 650 87 13%
Airport 57 522 (465)-89%
Total Change in Net Position $17,239 $22,326 ($5,087)-23%
Electric Fund decreased $3.3 million from prior year due to lower operating revenues as a
result of lower energy consumption.
City of Palo Alto Page 8
Gas Fund decreased $0.3 million due to lower operating revenues as a result of lower
consumption offset by the decreased in operating expenses.
Wastewater Collection Fund decreased $0.5 million from prior year due to decrease in
revenues and increased in operating costs.
Refuse Fund decreased $0.9 million from prior year due to lower operating revenues as a result
of reduction of commercial and industrial services caused by COVID-19.
Airport Fund decreased $0.5 million from prior year due to decrease in federal grant
reimbursement for the Airport Apron Reconstruction Project.
Stakeholder Engagement
This effort to manage and monitor the financial status of City funds continues to be a citywide
effort coordinated among all departments. Outside consultants for expertise on major revenues
categories including Sales Tax and Property Tax are consulted regularly to provide updates to
the forecasted revenue collections.
Resource Impact
At this time, this report does not recommend an action amending the City’s financials,
however, depending on trends and further input from Council, actions may be necessary later
in the year to better align revenues with expected collections. In addition, actions with financial
impacts may result from Council direction on areas such as rent/lease forgiveness, usage of the
$744,000 reserve, as well as attrition ramps necessary for public safety personnel. The City has
prudently planned for this economic recessionary period and at this time, continues to monitor
activities closely.
Environmental Review
The action recommended is not a project for the purposes of the California Environmental
Quality Act.
Attachments:
• Attachment A: General Fund 1st Quarter Report FY 2021
• Attachment B: Public Safety Overtime 1st Quarter FY 2021
11/20/20208:05 AM
(in thousands)
BUDGET ACTUALS (as of 9/30/2020)
Adopted Adjusted Pre % of Adj
Categories Budget Budget Encumbr Encumbr Actual Budget*
Revenues & Other Sources
Sales Tax 20,500 20,500 - - 1,696 8%
Property Tax 52,000 52,000 - - 142 0%
Transient Occupancy Tax 14,900 14,900 - - 446 3%
Documentary Transfer Tax 4,700 4,700 - - 2,036 43%
Utility Users Tax 15,100 15,100 - - 3,325 22%
Motor Vehicle Tax, Penalties & Fines 1,925 1,925 - - 108 6%
Charges for Services 25,984 25,984 - - 3,837 15%
Permits & Licenses 7,770 7,770 - - 1,560 20%
Return on Investment 1,100 1,100 - - 280 25%
Rental Income 15,949 15,949 - - 3,098 19%
From Other Agencies 2,448 2,448 - - 549 22%
Charges To Other Funds 11,992 11,992 - - 3,008 25%
Other Revenues 674 674 - - 159 24%
Total Revenues 175,042 175,042 - - 20,244 12%
Operating Transfers-In 21,359 21,359 - - 5,340 25%
Encumbrances and Reappropriation 5,676 - - - -
Contribution from Development Services Reserves 500 500 - - - -
Total Sources of Funds 196,901 202,577 - - 25,583 13%
Expenditures & Other Uses
City Attorney 3,485 3,753 50 460 761 34%
City Auditor 828 869 0 31 167 23%
City Clerk 1,245 1,297 5 49 268 25%
City Council 419 509 21 89 56 33%
City Manager 3,161 3,332 32 271 919 37%
Administrative Services 8,362 8,597 20 224 1,755 23%
Community Services 28,362 29,662 1,254 5,171 6,583 44%
Fire 33,607 33,776 132 655 8,608 28%
Human Resources 3,554 3,660 17 104 880 27%
Library 8,421 8,525 - 362 2,198 30%
Office of Emergency Services 1,356 1,532 33 303 267 39%
Office of Transporation 1,904 2,212 0 173 467 29%
Planning and Development Services 17,386 18,569 199 2,569 3,566 34%
Police 40,377 40,590 400 449 10,274 27%
Public Works 18,397 19,625 2,533 1,181 4,014 39%
Non-Departmental 8,235 8,267 - 69 878 11%
Total Expenditures 179,100 184,775 4,697 12,158 41,660 32%
Operating Transfers-Out 4,334 4,334 - - 1,087 25%
Transfer to Infrastructure 13,467 13,468 - - 3,367 25%
Total Use of Funds 196,901 202,577 4,697 12,158 46,114 31%
Net Change to BSR 0 (0)
Budget Amendments in the General Fund Authorized by Council thru 9/30/2020
Total Budget Amendments Authorized by Council - -
BSR Balance 33,045 35,870
BSR % of Adopted Total Use of Funds 16.8%18.2%
* Adopted BSR reflects FY 2020 Year-End Estimate at the time of the FY 2021 Budget Adoption. Adjusted BSR reflects FY 2020 Year-End Actuals based on the CAFR.
ATTACHMENT A
CITY OF PALO ALTO
GENERAL FUND FIRST QUARTER FINANCIAL REPORT
FISCAL YEAR ENDING JUNE 30, 2021
Attachment B
Q1
2019 2020 2021
POLICE DEPARTMENT
Overtime Expense
Adopted Budget (A)$1,776,500 $1,842,231 $944,186
Modified Budget 1,812,931 1,842,231 944,186
Net Overtime Cost - see below 185,811 441,197 87,715
Variance to Budget 1,627,120 1,401,034 856,471
Overtime Net Cost
Actual Expense $2,604,366 $2,566,590 $350,764
Less Reimbursements
California OES/FEMA (Strike Teams)36,431 - -
Stanford Communications 91,001 110,177 21,170
Utilities Communications Reimbursement 46,158 54,086 10,782
Local Agencies (B)12,172 9,329 826
Police Service Fees 125,025 205,126 49,364
Total Reimbursements 310,787 378,717 82,141
Less Department Vacancies (A)2,107,768 1,746,677 180,908
Net Overtime Cost $185,811 $441,197 $87,715
Department Vacancies (number of days)7,538 6,192 584
Workers' Compensation Cases 24 30 8
Department Disabilities (number of days)217 700 250
FIRE DEPARTMENT
Overtime Expense
Adopted Budget (C)$1,911,761 $1,672,872 $1,931,121
Modified Budget (D)2,093,761 2,086,872 1,931,121
Net Overtime Cost - see below 2,403,254 1,831,059 739,401
Variance to Budget ($309,493)255,813 1,191,720
Overtime Net Cost
Actual Expense $3,047,510 $2,018,548 $793,859
Less Reimbursements
California OES/FEMA (Strike Teams) 182,000 114,000 -
Total Reimbursements 182,000 114,000 -
Less Department Vacancies (C)462,256 73,489 54,457
Net Overtime Cost $2,403,254 $1,831,059 $739,401
Department Vacancies (number of days)1,229 173 208
Workers' Compensation Cases 26 33 9
Department Disabilities (number of days)343 227 98
NOTES:
(A)The FY 2021 Police Department budget was reduced by the equivalent of 11.0 Police Officers (position "freezes") and $900,000 in overtime.
(B)Includes Animal Control Services contract with Los Altos and Los Altos Hills.
(C)The FY 2021 Fire Department budget was reduced by the equivalent of 8.0 sworn positions (position "freezes"). The overtime budget
was increased over the prior year by approximately $200,000 to extend the cross-staffing of Medic 61 one year.
(D)The FY 2020 Modified Budget includes overtime adjustments recommended as part of the FY 2020 Mid-Year review for
Strike Team reimbursements ($114,000) and to extend the cross-staffing of Medic 61 for six months on overtime ($300,000).
Public Safety Departments
Overtime Analysis for Fiscal Years 2019 through 2021