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Home My WebLink AboutStaff Report 2511-5587, Staff Report 2512-5661CITY OF PALO ALTO CITY COUNCIL Monday, December 15, 2025 Council Chambers & Hybrid 4:30 PM Agenda Item 8.Approve Policy & Services Committee Recommendation to Continue the Nonprofit Partnership Workplan Phase I funding process for FY 2027 Budget Cycle, with Additional Refinements to be Developed by the and refer refinement of the program to the Policy & Services Committee in January 2026 and Return to Council for Approval per their recommendation Title Updated, Late Packet Report added City Council Staff Report From: City Manager Report Type: CONSENT CALENDAR Lead Department: City Manager Meeting Date: December 15, 2025 Report #:2511-5587 TITLE Approve the Nonprofit Partnership Workplan Phase I funding process for FY 2027 Budget Cycle, and refer refinement of the program to the Policy & Services Committee per their recommendation This report will be a late packet report published on December 11, 2025. City Council Staff Report From: City Manager Report Type: CONSENT CALENDAR Lead Department: City Manager Meeting Date: December 15, 2025 Report #:2512-5661 TITLE Approve Policy & Services Committee Recommendation to Continue the Nonprofit Partnership Workplan Phase I Funding Process in the FY 2027 Budget Cycle, with Additional Refinements to be Developed by the Policy & Services Committee in January 2026 and Returned to Council for Approval RECOMMENDATION The Policy & Services Committee recommends that the City Council approve continuing the Nonprofit Partnership Workplan Phase I funding process in the FY 2027 Budget Cycle and refer refinement of the process to the Policy & Services Committee, with a return to Council in early 2026. BACKGROUND On November 19, 2025, the Policy and Services Committee discussed and recommended the continuation of the Nonprofit Partnership Workplan Phase I pilot (Phase I) into FY 2027.1 The process is designed to support the City Council in decision-making on nonprofit funding requests that fall outside of an established program. In FY 2026, the Phase I process allocated $506,646 in grant funds to 17 nonprofit organizations that deliver services to the Palo Alto community. The effort resulted in four new public/private partnerships and support to 13 existing nonprofit partners. As background to the Phase I process, on August 15, 2022, the City Council approved a report from the City Auditor2 which focused on identifying risks related to nonprofit agreements and 1 11/19/2025, Policy & Services Committee Meeting https://cityofpaloalto.primegov.com/meetings/ItemWithTemplateType?id=9499&meetingTemplateType=2&comp iledMeetingDocumentId=17629 2 8/15/2022 City Council Meeting: https://cityofpaloalto.primegov.com/Public/CompiledDocument?meetingTemplateId=9028&compileOutputType= 1 provided corresponding recommendations for improvement.3 Key recommendations included defining clear service level expectations and performance management and evaluation on all nonprofit service and lease agreements, as well as quantifying non-monetary support to determine appropriate compensation for nonprofits’ use of City-owned properties. 4 The framework laid out a set of foundational principles that reflect fundamental goals and values that guide the establishment and pursuit of partnerships, as well as the key recommendations from the 2022 Nonprofit Audit. The City Council provided feedback on the principles and delegated their refinement to the Policy & Services Committee. 5 As part of this effort, a process was established for the City Council to consider nonprofit funding requests during the budget adoption period that fall outside established grant programs. This represented a first phase toward reconciling City budget decisions with recommendations of the 2022 audit. 3 June 14, 2022, Policy & Services Committee Meeting https://cityofpaloalto.primegov.com/Public/CompiledDocument?meetingTemplateId=6282&compileOutputType= 4 10/28/2024 City Council Meeting: https://cityofpaloalto.primegov.com/meetings/ItemWithTemplateType?id=6042&meetingTemplateType=2&comp iledMeetingDocumentId=12083 5 3/24/2025 City Council Meeting: https://cityofpaloalto.primegov.com/meetings/ItemWithTemplateType?id=7453&meetingTemplateType=2&comp iledMeetingDocumentId=13613 ANALYSIS Throughout the six-month development and implementation of the Phase I process, staff gathered feedback from nonprofit partners, support staff, the City Council, and the Policy and Services Committee to identify opportunities for improving the program in future cycles. Additionally, the Policy & Services Committee at its November 19, 2025 meeting expressed interest in clarifying and improving various aspects of the program, including: Whether/how to include multi-year contracts in Phase I Whether nonprofits eligible for other City grant programs (i.e. Human Services Resource Allocation Process) may apply for phase I funding Funding priorities (including relationship to Council Priorities) Improve application evaluation process by categorizing nonprofit services to clarify service alignment and reduce redundancy in funding Role clarity between Finance and Policy & Services Committees, for example Finance to propose total amount of funding available each year in the annual budget process, and Policy & Services to review applications and propose awards Early communication and engagement with nonprofits on application expectations Structure grant funding to complement, rather than fully cover nonprofit program costs Application timeframe adjustments to allow for nonprofit interviews If continuing a nonprofit funding process is approved by Council, staff will provide a set of recommendations regarding how to improve the process to the Policy & Services Committee at its January 14, 2026 meeting. As directed by Council, in addition to Phase 1 the Policy & Services Committee will continue to flesh out the guiding principles through the Nonprofit Partnership Workplan framework, and focus on four major areas of work: 1. Nonprofit Partnership Workplan Phase I Funding Requests 2. Nonprofit Lease Agreements 3. Nonprofit Multi-year Service Agreements 4. Comprehensive review of all grant programs including Human Services Resource Allocation Process (HSRAP) and Community Development Block Grants (CDBG) Recommendations will be brought for Council approval throughout the process. No resource impacts expected at this time. Council may delegate that the Finance Committee set the Fiscal Year 2027 Phase I total fund amount for consideration in advance of the FY 2027 Budget Adoption. Throughout the development of the Nonprofit Workplan Phase I process, staff held various engagement and informational meetings with nonprofits and gathered feedback on the process along the way. Staff also noted nonprofit feedback during the various public meetings. Staff will also survey grant recipients to gather feedback on improving the program implementation process. ENVIRONMENTAL REVIEW ATTACHMENTS APPROVED BY: