HomeMy WebLinkAboutStaff Report 2511-5561CITY OF PALO ALTO
CITY COUNCIL
Monday, December 15, 2025
Council Chambers & Hybrid
4:30 PM
Agenda Item
24.Adoption of an Ordinance Amending the Fiscal Year 2026 Municipal Fee Schedule to
Implement Technical Corrections. CEQA Status: Not a Project
City Council
Staff Report
From: City Manager
Report Type: CONSENT CALENDAR
Lead Department: Planning and Development Services
Meeting Date: December 15, 2025
Report #:2511-5561
TITLE
Adoption of an Ordinance Amending the Fiscal Year 2026 Municipal Fee Schedule to Implement
Technical Corrections. CEQA Status: Not a Project
RECOMMENDATION
Staff recommends that the City Council adopt an ordinance amending the Fiscal Year 2026
Municipal Fee Schedule to reflect the following technical corrections:
1) Implementing Council-directed subsidies for Day Care Centers,
2) Reinstating authority to the Chief Building Official to establish alternative fee
arrangements for appropriate Development Services permits,
3) Reinstating the Noise Exception permit, and
4) Amending the title of the Building Demolition Permit to Demolition Permit.
BACKGROUND
As part of the adoption of the FY 2026 Operating Budget, the City Council voted to adopt the
municipal fee schedule, which brought FY 2026 fees for services into alignment with a fee study
presented to the Finance Committee on March 4, 2025. However, the Finance Committee
recommended that the City continue to subsidize the cost of a conditional use permit for Day
Care Centers as well as certain sustainability programs. These were not reflected in the final fee
schedule as adopted. Additionally, a few sections were inadvertently omitted that need
correction.
ANALYSIS
The recommended action of this report brings the FY 2026 Municipal Fee Schedule into
alignment with the Finance Committee’s recommendation regarding Day Care Centers. Staff
anticipate returning to the Finance Committee in early 2026 to further discuss subsidies for
activities that support sustainability initiatives. This report also recommends reinstating, and
slightly broadening, language that appeared in previous fee schedules related to alternative fee
arrangements that was inadvertently excluded in the adopted resolution.
Day Care Center Subsidy
Day Care Centers require a conditional use permit and this permit cost was subsidized in
previous years. The Finance Committee unanimously recommended continuation of this
subsidy in the FY 2026 Municipal Fee schedule as part of its March 4, 2025, discussion. The
subsidy was inadvertently omitted from the final schedule of fee changes for FY 2026. Table 1
shows the FY 2025 Fee for Day Care Use Centers as well as its actual cost to the City along with
the current and revised FY 2026 fees for this Conditional Use Permit.
Fee Title Category
FY 2025
Fee*Actual Cost
FY 2025 Cost
Recovery %FY 2026 Fee
Cost Recovery
Level to Apply
Revised FY 2026
Fee
Day Care
Center
Conditional
Use Permit
$218.59 $ 8,429.94 2.6% $ 9,280 2.6% $241
As seen in Table 1, if the FY 2025 subsidy was applied to the current FY 2026 Municipal Fee, it
would generate a new fee of $241 representing a subsidy (discount) of $9,039 or 97.4% of the
total cost. This supports the Finance Committee’s recommendation to continue subsidizing this
important aspect of community development. Although this is a substantial subsidy, this
subsidy would not have significant impacts on the department’s cost recovery levels based on
the average annual volume of applications.
As part of the Planning and Development Fee Services study, a new fee model was proposed
and adopted for building permits. These costs are largely based on the construction value (cost)
of the project for commercial or multi-family projects, and on square footage for residential
projects, and stand-alone fees are applied for miscellaneous permits. Construction value and
square footage are used in commercial and residential costing since they each represent
proximate indicators for the complexity of the project. Previous fiscal years’ fee schedules
included additional language for building permit fees that conferred authority to the Chief
Building Official to establish alternative fee arrangements. They previously stated:
“...if project is out of scope from a traditional building structure and/or additional
services are required then an alternative fee arrangement may be established by the
Chief Building Official to achieve cost recovery.”
This language was inadvertently omitted when the list of proposed FY 2026 Municipal Fees was
presented to City Council for adoption.
Although construction value is an industry standard for determining building permit fees,
indicating the approximate complexity of the project and thereby time needed to review, there
are instances when an alternative fee arrangement would be warranted. For example, when a
permit fee exceeds the project construction cost, or the provided construction cost valuation
disproportionately creates an unreasonable permit fee for a project scope, an alternative fee
arrangement could be used.
Technical Clean-Up Actions
FISCAL/RESOURCE IMPACT
STAKEHOLDER ENGAGEMENT
referenced in CMR 2501-4019.1 No additional stakeholder engagement was conducted for this
report since it aligns FY 2026 Municipal Fees with previous feedback and intent and implements
technical corrections.
ENVIRONMENTAL REVIEW
Council action on this item is not a project as defined by the California Environmental Quality
Act (CEQA) because the proposed amendment to the 2026 Municipal Fee Schedule is a
government funding mechanism which does not involve any commitment to any specific
project which may result in a potentially significant physical impact on the environment. CEQA
Guidelines section 15378(b)(4).
ATTACHMENTS
Attachment A: Ordinance Amending the FY 2026 Municipal Fee Schedule to Update Fees for
Service in the Planning and Development Services Department
APPROVED BY:
Jonathan Lait, Planning and Development Services Director
1 https://recordsportal.paloalto.gov/Weblink/DocView.aspx?id=64766
***NOT YET APPROVED***
1
0160153_kb_20251125_ay
Ordinance No. _____
Ordinance of the Council of the City of Palo Alto Amending the Fiscal Year 2026
Municipal Fee Schedule to Update Fees for Service in the Planning and
Development Services Department
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 Department of Planning and Development Services charges user fees to applicants
requesting planning entitlements and related services.
B. On June 16, 2025, the City Council adopted the Fiscal Year 2026 Municipal Fee Schedule,
reflecting updated fees for the Planning and Development Services Department.
C. The City of Palo Alto has an interest in encouraging day care uses; this interest was
inadvertently not reflected in the Adopted FY 2026 Municipal Fee Schedule.
D. The Adopted FY 2026 Municipal Fee Schedule also inadvertently omitted a provision for
alternative fee arrangements and the fee for a noise exception permit.
E. The City now desires to amend the FY 2026 Municipal Fee Schedule.
F. In accordance with the provisions of Chapter 8 of Division 1, of Title 7, commencing with
Section 66016 of the Government Code, as applicable, the Council did on December 15,
2025, hold an open and public meeting on the proposed amendments to the Municipal
Fee Schedule, after publication of notice and after availability of the data supporting the
amendments was made available to the public at least 10 days prior to the hearing.
G. Fees in the Municipal Fee Schedule are for government services provided directly to the
payor that are not provided to those not charged. The amount of this fee does not exceed
the reasonable costs to the City of providing the services. Consequently, pursuant to Art.
XIII C, Section l(e)(2), such fees are not a tax.
H. The amount of new or increased fees and charges is no more than necessary to cover the
reasonable costs of the governmental activity, and the manner in which those costs are
allocated to a payer bears a fair and reasonable relationship to the payer's burden on, or
benefits received from, the governmental activity.
SECTION 2. The Council of the City of Palo Alto amends the Fiscal Year 2026 Municipal
Fee Schedule by adopting service fees for the Planning and Development Services Department
as set forth in Exhibit “A” and incorporated here by reference to reflect its interest in encouraging
day care uses.
***NOT YET APPROVED***
2
0160153_kb_20251125_ay
SECTION 3. The Council finds that this ordinance is not a “project” under CEQA
because it has no potential for resulting in either a direct or reasonably foreseeable indirect
change in the environment.
SECTION 4. This ordinance shall be effective upon adoption as an amendment to the
City’s Fiscal Year 2026 budget. Pursuant to Government Code Section 66017, all Planning and
Development Services Department fees relating to a “development project,” as defined in
Government Code Section 66000, shall become effective no sooner than sixty (60) days from
the date of adoption.
INTRODUCED and PASSED:
AYES:
NOES:
ABSENT:
ABSTENTIONS:
ATTEST:
____________________________ ____________________________
City Clerk Mayor
APPROVED AS TO FORM: APPROVED:
____________________________ ____________________________
Assistant City Attorney City Manager
____________________________
Director of Planning and
Development Services
***NOT YET APPROVED***
3
0160153_kb_20251125_ay
Attachment A
Fee Category and Fee Title FY 2026 Cost ($) Unit Note:
Building Permit Fees
and/or additional services are required, then an alternative fee
arrangement may be established by the Chief Building Official to
achieve cost recovery. This exception may apply in cases when
construction valuation (commercial), square footage (residential),
Construction and Demolition
Use Permit