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HomeMy WebLinkAboutStaff Report 2507-4972CITY OF PALO ALTO Policy & Services Committee Special Meeting Wednesday, November 19, 2025 6:00 PM     Agenda Item     3.Nonprofit Partnership Workplan: Direction on Phase I (Grant Funding for Non-Profits Providing Services to the Community) and Discussion on Phase II, as well as recommendation that Council approve Gamble Garden, Winter Lodge, and Lawn Bowls lease extensions within the context of the proposed framework. Presentation Policy & Services Committee Staff Report From: City Manager Report Type: ACTION ITEMS Lead Department: City Manager Meeting Date: November 19, 2025 Report #:2507-4972 TITLE Nonprofit Partnership Workplan: Direction on Phase I (Grant Funding for Non-Profits Providing Services to the Community) and Discussion on Phase II, as well as recommendation that Council approve Gamble Garden, Winter Lodge, and Lawn Bowls lease extensions within the context of the proposed framework. RECOMMENDATION That the Policy & Services Committee Discuss the Nonprofit Partnership Workplan bodies of work including nonprofit long-term leases and recommend direction on continuation of the Phase I funding approach, as well as recommendation to Council to approve renewal of leases with Gamble Garden, Winter Lodge, and Lawn Bowls. EXECUTIVE SUMMARY This report provides an update on the City’s Nonprofit Partnership Workplan, which seeks to strengthen consistency, transparency, and accountability in the City’s engagement with nonprofit organizations that deliver services to the community. Phase I, completed with the adoption of the FY 2026 Budget, piloted a process for evaluating nonprofit funding requests and resulted in the allocation of $506,464 in grants to 16 nonprofit organizations. Staff requests that the Policy and Services Committee recommend to Council whether to continue this process for FY 2027, in which case process refinements can be developed, or to consider alternative approaches for managing funding requests outside of established programs. Phase II initiates the next phase of the Workplan, focused on nonprofit lease agreements, beginning with a discussion of upcoming lease extensions with Gamble Garden, Winter Lodge, and the Palo Alto Lawn Bowls Club. The report outlines a framework for considering nonprofit leases based on public benefit, financial relationship, and partnership sustainability, consistent with the Nonprofit Partnership Guiding Principles and the 2022 City Auditor’s recommendations. Staff requests the Committee’s feedback on this proposed framework to guide future Council consideration and approval of long-term nonprofit lease agreements. BACKGROUND On June 14, 2022, the Policy and Services Committee received a report from the City Auditor focused on identifying risks related to nonprofit agreements and provided corresponding recommendations for improvement.1 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. The City of Palo Alto’s nonprofit partnerships play a vital role in delivering essential community services, yet the existing policies and processes for managing these relationships would benefit from enhanced consistency, transparency, and accountability. The absence of consistent service level agreements, performance metrics, and predictable funding processes has resulted in inefficiencies and unclear expectations for both the City and nonprofit partners. Additionally, flexibility in funding emerging needs must be balanced with long-term stability for nonprofit organizations. The nonprofit partnership workplan seeks to establish a clear framework that aligns nonprofit partnerships with Council priorities, ensures fairness and inclusion in resource allocation, and strengthens financial and performance accountability while maintaining the agility to respond to evolving community needs. On October 28, 2024, the Council held a study session to provide feedback on a framework for strengthening the City’s practices in nonprofit partnership engagement, funding, support, and evaluation.2 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. Through their discussion, the Council provided feedback on principles presented, and revised accordingly: 1.Impact-oriented Focus and Accountability: Partnerships will identify intended outcomes and prioritize unmet needs, and incorporate appropriate measures and reporting, while reflecting the nature of the engagements and avoiding unnecessary administrative processes. 2.Service Alignment: Programs and services should align with the Council's priorities and identified community needs. 3.Fairness, Open Access, Equity, and Inclusion: The City will maintain visibility and consistency in its partnership processes, to both the nonprofit community and public at large. Resource allocations will consider and prioritize accessibility of the resulting 1 June 14, 2022, Policy and Services Committee Meeting: https://cityofpaloalto.primegov.com/Public/CompiledDocument?meetingTemplateId=6282&compileOutputType= 2 October 28, 2024, Council Study Session: https://cityofpaloalto.primegov.com/Portal/Meeting?meetingTemplateId=14449 services to all community members, with particular attention to underserved and vulnerable populations. 4.Flexibility for Special Circumstances: The City Council will need the ability to act quickly when needed to respond to special circumstances. As discussed at the study session, next steps would include returning to Council with recommendations for policy adjustments and new process and procedures. The Council referred refinement of the principles to the Policy and Services Committee. A phased approach began in 2024, grounded in the four outlined principles. 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 report presents the opportunity for the Policy and Servies Committee to provide direction to staff on whether to continue the Nonprofit Partnership Workplan Phase I process beyond the pilot phase recently completed. This report continues the discussion on the Nonprofit Partnership Workplan and begins discussion of the next phase, focusing on nonprofit lease agreements. Specifically, it introduces a discussion of long-term lease agreements, such as those with Gamble Garden, Winter Lodge, and the Palo Alto Lawn Bowls Club, and their alignment with the Nonprofit Audit findings and the City’s nonprofit partnership guiding principles. Committee feedback will advance this work by confirming the context and framework for approval of these leases and recommending Council approval of lease renewals with Gamble Garden, Winter Lodge and Palo Alto Lawn Bowls Club. ANALYSIS Nonprofit Partnership Workplan Phase I Phase I of the Nonprofit Partnership Workplan, designed to support the Council in decision- making on nonprofit funding requests that fall outside of an established program concluded with the adoption of the FY 2026 Budget. The Phase I process allocated $506,464 in grant funds to 16 nonprofit organizations that deliver services to the Palo Alto community. Throughout the 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. Should the Committee recommend the process continue for FY 2027, staff will return with a set of proposed refinements for consideration in early 2026. Potential refinements will include addressing application to multiple grant programs, identification of community needs and funding categories, and application process improvements, among others. However, if the Committee recommends that the process not continue, staff will evaluate alternative strategies for managing nonprofit funding requests. Nonprofit Partnership Workplan Phase II- Nonprofit Lease Agreements Public Benefit of the Partnership- The development and operation of facilities on City-owned property should advance public use and provide a tangible community benefit. When evaluating partnerships, the City should consider the organization’s capacity to construct (if applicable), operate, and maintain the proposed facilities and services throughout the term of the agreement. Guiding Principles: Service Alignment- Programs should align with City Council priorities and community needs, ensuring that services provided by nonprofit partners directly benefit the public. Impact-oriented Focus- Partnerships should prioritize unmet community needs and include clear, measurable outcomes for accountability. Audit Recommendations: The actual benefit to the city should serve as a basis for reduction of rent amount when lease agreements are renewed. Leading Examples: Financial Relationship- The financial structure of each partnership should consider both monetary and non-monetary contributions to ensure fairness and transparency. Guiding Principles: Fairness and Equity: Financial allocations must prioritize accessibility and inclusivity, particularly for underserved populations. Encourages transparency and consistency in resource allocation processes. Audit Recommendations: Lease agreements with significantly reduced rent amounts should include performance and reporting requirements for services being provided on the premises . High-risk agreements should include a project manager for overseeing performance. Both Gamble Garden and Winter Lodge maintain and operate their facilities without cash financial assistance from the City but do not pay rent. Palo Alto Lawn Bowls Club pays a reduced rent of approximately $14,000 annually, in addition to covering water costs, taxes, and assessments. The City remains responsible for the maintenance and repair of the Lawn Bowls Clubhouse Building, which is one distinguishing characteristic from Gamble Garden and Winter Lodge. In the case of the three leading examples, staff recommends continuing the partnerships, however all long-term leases should periodically be evaluated for use and value to the community. In alignment with the Audit recommendations, staff recommends that any lease agreement renewals include clear and measurable outcomes to support accountability and ensure that community needs and access to the services provided on the premises are maintained. Performance measures should be co-created with each organization and should address community access, programming and services provided as well as qualitative measures. Staff recommends that new agreements, including those with the three listed nonprofit organizations, incorporate performance metrics that clearly communicate community benefits. As this new practice is implemented, staff further recommends using simple metrics that reflect work already being performed on the premises. Stability of the Partnership- Long-term nonprofit relationships help preserve community resources while providing stability for both the City and its partners. Multi-year service and lease agreements promote predictability, support program continuity, and protect public resources. When considering lease terms, quantitative measures such as rent, appraised value and cost saving could be considered but should be balanced by the opportunity cost of the public benefit provided. Flexibility to respond quickly to changing circumstances while ensuring long-term stability and protection of public resources. Propose frameworks for evaluating estimated fair market value against non-monetary benefits provided by nonprofits, which can ensure the sustained delivery of public benefits. Leading Examples: The Audit recommends that the City assess fair market value to determine the level of subsidy received by each nonprofit. Staff agrees that establishing an estimated fair market value provides an important baseline for evaluating these partnerships. However, fair market value should be considered alongside qualitative measures that capture the broader community benefits provided by organizations such as Gamble Garden, Winter Lodge, and the Palo Alto Lawn Bowls Club. These organizations deliver programs and amenities that enhance cultural, recreational, and environmental vitality, offering spaces that promote education, wellness, and social connection. Together, fair market and qualitative assessments offer a more complete understanding of the public value these partnerships provide. Staff recommends that future nonprofit partnership agreements, including long-term leases, incorporate both estimated fair market value and qualitative community benefit measures when determining the appropriate length and stability of the partnership. Establishing an estimated fair market value will provide a consistent baseline for understanding the level of City support, while qualitative measures will capture the broader community benefits, such as cultural, educational, recreational, and environmental contributions, that extend beyond monetary value. Balancing these factors will allow the City to ensure fiscal responsibility while recognizing the significant public value derived from these longstanding partnerships. The table below shows an example of qualitative benefits that could be considered for each of the three leading examples. Staff will quantify estimated fair market value and will be reflected in the new lease agreement as way to demonstrate the level of subsidy provided. Nonprofit Partner Annual Rent Qualitative Measures / Public Benefit Gamble Garden $0 Tenant pays all utilities, maintenance and repairs, taxes and assessments - Public access to historic gardens and open green space - Educational programs (horticulture classes, youth workshops) - Preservation of cultural and historic heritage - Inclusive volunteer engagement and community participation - Hosting public events that foster civic pride and environmental awareness Palo Alto Lawn Bowls Club $13,839 Tenant pays for all utilities except for water, taxes - Recreational opportunities for all ages (low-impact sport) - Intergenerational participation (youth, adults, seniors, veterans) and assessments - Community building through leagues, tournaments, and social events -Free public accessibility and low-cost participation - Preservation of cultural/recreational heritage Winter Lodge $0 Tenant pays all utilities, maintenance and repairs, taxes and assessments - Year-round recreational access (ice-skating, winter activities, tennis) - Youth programs, skating and tennis instruction - Community engagement and gathering opportunities - Inclusivity and affordability of programs - Activation of City-owned property for valued public use Staff requests the Committee’s feedback on the proposed framework and criteria for evaluating long-term lease agreements. In particular, to support partnership stability, staff seeks a recommendation to the City Council to approve long-term lease renewals with Gamble Garden, Winter Lodge and Palo Alto Lawn Bowls. The lease renewals will describe and set agreed-upon expectations regarding the public benefits to be provided by each of the non-profit partners, and will establish annual performance measures and reporting, ensuring alignment with the Guiding Principles and Audit recommendations. FISCAL/RESOURCE IMPACT No resource impact is expected at this time. Long-term lease terms will be presented for City Council approval and will reflect Committee recommendations as directed during this meeting. STAKEHOLDER ENGAGEMENT Staff met with several long-term tenants to discuss preliminary concepts and gather input on the proposed approach. In addition, notice of this meeting was provided to all long-term lease tenants to ensure they had the opportunity to participate and provide feedback as part of the ongoing stakeholder engagement process. ENVIRONMENTAL REVIEW This is not considered a project as defined by CEQA and no review is required. ATTACHMENTS None APPROVED BY: Ed Shikada, City Manager November 19, 2025 www.paloalto.gov Nonprofit Partnership Workplan: Direction on Phase I and Discussion on Phase II 2 Agenda •Overview of Nonprofit Partnership Workplan •Direction on Nonprofit Partnership Workplan Phase I •Discuss Nonprofit Partnership Workplan Phase II •Recommendation on Long-Term Lease Leading Examples •Gamble Garden •Winter Lodge •Palo Alto Lawn Bowls 3 Policy & Services Committee Referral Refinement of the nonprofit guiding principles, as they relate to policy adjustments and new process and procedures: 1.Impact-oriented Focus and Accountability: Partnerships will identify intended outcomes and prioritize unmet needs, and incorporate appropriate measures and reporting, while reflecting the nature of the engagements and avoiding unnecessary administrative processes. 2.Service Alignment: Programs and services should align with the Council's priorities and identified community needs. 3.Fairness, Open Access, Equity, and Inclusion: The City will maintain visibility and consistency in its partnership processes, to both the nonprofit community and public at large. Resource allocations will consider and prioritize accessibility of the resulting services to all community members, with particular attention to underserved and vulnerable populations. 4.Flexibility for Special Circumstances: The City Council will need the ability to act quickly when needed to respond to special circumstances. 4 Nonprofit Workplan Major Areas of Work •Nonprofit Partnership Workplan Phase I Funding Requests •Nonprofit Lease Agreements •Nonprofit Multi-Year Service Agreements •Comprehensive review of all grant programs including Human Services Resource Allocation Process (HSRAP) and Community Development Block Grants (CDBG) 5 Nonprofit Workplan Phase I Funding Requests - Staff Recommendation Staff recommends that the Policy & Services Committee provide direction on whether the Phase I process continue for FY 2027. •Staff collected feedback from stakeholders throughout the process (Council, P&S Committee, nonprofits, staff) and could recommend adjustments: •Application requirements and guidelines (e.g. HSRAP overlap) •Improved pre-application nonprofit engagement and support •Application evaluation criteria and analysis, including building-in applicant interviews •Improved grant implementation 6 Nonprofit Workplan Phase II •Nonprofit Partnership Workplan Phase I Funding Requests •Nonprofit Lease Agreements •Long-Term Lease Agreements •Nonprofit Multi-Year Service Agreements •Comprehensive review of all grant programs including Human Services Resource Allocation Process (HSRAP) and Community Development Block Grants (CDBG) 7 Long-Term Lease Agreements Framework for evaluating and considering nonprofit long -term lease agreements: Public Benefit of the Partnership- The development and operation of facilities on City -owned property should advance public use and provide a tangible community benefit. When evaluating partnerships, the City should consider the organization’s capacity to construct (if applicable), operate, and maintain the proposed facilities and services throughout the term of the agreement. Financial Relationship- The financial structure of each partnership should consider both monetary and non - monetary contributions to ensure fairness and transparency. Stability of the Partnership- Long-term nonprofit relationships help preserve community resources while providing stability for both the City and its partners. Multi-year service and lease agreements promote predictability, support program continuity, and protect public resources. 8 Long-Term Lease Leading Example: Gamble Garden Nonprofit Partner Annual Rent Qualitative Measures / Public Benefit Gamble Garden $0 Tenant pays all utilities, maintenance and repairs, taxes and assessments -Public access to historic gardens and open green space -Educational programs (horticulture classes, youth workshops) -Preservation of cultural and historic heritage -Inclusive volunteer engagement and community participation - Hosting public events that foster civic pride and environmental awareness 9 Long-Term Lease Leading Example: PA Lawn Bowls Nonprofit Partner Annual Rent Qualitative Measures / Public Benefit Palo Alto Lawn Bowls $13,839 Tenant pays utilities except for water, taxes and assessments City pays for Club House and landscape maintenance, including irrigation, on both interior and exterior of the facility, and includes two yearly turf renovations. -Recreational opportunities for all ages (low-impact sport) -Intergenerational participation (youth, adults, seniors, veterans) and assessments -Community building through leagues, tournaments, and social events -Free public accessibility and low- cost participation -Preservation of cultural/recreational heritage 10 Long-Term Lease Leading Example: Winter Lodge Nonprofit Partner Annual Rent Qualitative Measures / Public Benefit Winter Lodge $0 Tenant pays all utilities, maintenance and repairs, taxes and assessments -Year -round recreational access (ice- skating, winter activities, tennis) -Youth programs, skating and tennis instruction -Community engagement and gathering opportunities -Inclusivity and affordability of programs -Activation of City -owned property for valued public use 11 Staff Recommendation •Staff requests the Committee’s feedback on the proposed framework and criteria for evaluating long-term lease agreements. •And that Policy & Services Committee recommend to Council approval of lease renewals with Gamble Garden, Winter Lodge and Palo Alto Lawn Bowls. ➢Lease renewals should describe and set agreed-upon expectations regarding the public benefits to be provided, establish annual performance measures and reporting, ensuring alignment with nonprofit guiding principles and Audit recommendations. Lupita Alamos, Assistant to the City Manager November 19, 2025