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Home My WebLink AboutStaff Report 2511-5431CITY OF PALO ALTO CITY COUNCIL Special Meeting Monday, March 02, 2026 Council Chambers & Hybrid 5:30 PM Agenda Item 3.Palo Alto Link Program & Transit Futures Review; CEQA status – not a project. Staff Presentation City Council Staff Report From: City Manager Report Type: STUDY SESSION Lead Department: Transportation Meeting Date: March 2, 2026 Report #:2511-5431 TITLE Palo Alto Link Program & Transit Futures Review; CEQA status – not a project. RECOMMENDATION Review service performance and transit funding options as Palo Alto Link services conclude June 30, 2026. EXECUTIVE SUMMARY Palo Alto Link began as an 18-month pilot program funded by a Valley Transportation Authority (VTA) Measure B Innovative Service grant on March 7, 2023. The service has provided on- demand weekday micro-transit services throughout most of Palo Alto. The service currently operates on weekdays from 7 a.m. to 7 p.m., with school exclusion zones. Additional grant and partner funding, and City Council approvals, have extended the pilot term to June 30, 2026. With committed grant funding winding down, City Council directed staff in June 2025 to review options for (1) winding down the service; (2) continuing Palo Alto Link with less reliance upon the City General Fund; (3) focusing the service to prioritize vulnerable riders; or (4) supplanting the program with a shuttle or fixed routes services. Staff reviewed current operating model and considered possible fare and service changes to reduce costs and prioritize vulnerable populations, such as senior and disabled riders. Staff also considered options to resume fixed route shuttle services or replace the Link with TNC or taxi vouchers. No options were found that completely eliminate costs to the City. BACKGROUND In 1998, City Council adopted the City’s Comprehensive Plan, which included Goal T-2: A Convenient, Efficient Public Transit System that Provides a Viable Alternative to Driving. Palo Alto Shuttle Program, 1999 – 2020 Based on this goal, the City began a Shuttle Program in December 1999 with two fare-free services: 1) Crosstown shuttle between Crescent Park, Midtown and Charleston Road, which was funded by the City and operated via a turnkey arrangement with MV Transportation1; and 2) Embarcadero shuttle between Palo Alto Transit Center and East Embarcadero Road, which was initially managed by Caltrain with a partial subsidy from the City of Palo Alto that increased as Caltrain funding diminished over time. These shuttle services operated Monday through Friday, with a special school commute service on both routes on school days. 2 to advance local transit options. Table 1: Shuttle Alternatives Presented in the 2017 Palo Alto Transit Vision Route Variant Service Hours and Headways Annual Service Hours Escalated Annual Cost ($2026))3 1 SR 10281, June 24, 2019 https://www.cityofpaloalto.org/files/assets/public/v/1/agendas- minutesreports/reports/city-manager-reports-cmrs/year-archive/2019/id-10282.pdf 2 See summary of Transit Vision alternatives in the table above; approved by City Council in March 2017: https://www.cityofpaloalto.org/files/assets/public/v/1/transportation/misctransportation/ 3 Since 2019, transit service costs have increased considerably as a result of inflation, supply chain issues, operate shortages in the Bay Area and other factors. Figure 1: Palo Alto Shuttle (Photo: City of Palo Alto) Weekends: 8am–8pm @ 45-min B2 Weekdays: 6am–10pm @ 30-min Weekends: 8am–8pm @ 45-min 14,640 $1,330,000 A Weekdays: 6:50am–7pm @ 20-min peak, no midday, 40-min evenings Weekends: No service 5,228 $475,000 Embarc- adero Route B Weekdays: 7am–9pm @ 15-min peak, 30-min midday & evenings Weekends: 8am–8pm @ 60-min 11,400 $1,036,000 A Weekdays 7am–7pm @ 30-min daytime, 60-min evenings Weekends: No service 8,670 $788,000 South Palo Alto B Weekdays: 7am–9pm @ 15-min peak, 30-min midday, 60-min evening Weekends: 8am–8pm @ 60-min 14,240 $1,294,000 Following the pandemic shutdown that abruptly reduced transit ridership and City financial resources, Palo Alto Shuttle services were discontinued on July 1, 2020. Palo Alto Link, 2023 – 2026 To fill the resulting gap in transit access, City staff submitted a successful application for $2,000,000 in VTA Measure B Innovative Transit program funds for an On-Demand Transit Service, with a $500,000 local match. The City subsequently selected Nomad Transit, LLC, (aka Via) to operate “Palo Alto Link” with an initial $2,043,550 contract for an 18-month term beginning on March 7, 2023. The City also executed a $744,000 cost sharing agreement with Stanford University to recoup cost of trips originating or ending in Stanford Research Park (SRP). Palo Alto Link employed hybrid and electric vehicles (EVs) to provide on-demand rides booked via mobile app or phone with initial service hours from 8am to 6pm, Monday-Friday. The initial fare for single rides was $3.50, with a discounted price of $1 for disabled, low-income, senior, and youth riders. The cost of this service to the City is dependent upon allocated driver hours and is not necessarily correlated with trips provided. On October 21, 2024, Council authorized an amendment to extend services through June 2025, with an additional $1,200,000 (bringing the total Via contract to $3,801,000) and an additional $600,000 cost-sharing amount from Stanford for trips to and from SRP. Based on Figure 2: Palo Alto Link (Photo: City of Palo Alto) Council discussion, staff also sought out additional grant funding from the Air District’s Transportation Fund for Clean Air (TFCA) program, which resulted in a grant award of $441,000. 7. Since June 2025, staff confirmed a second TFCA award of $456,500, and received information that the service would not receive a second Measure B Innovative Transit grant. Table 2: Palo Alto Link Funding Milestones Date Milestones Non-Fare Revenues (Grants & Partnership Funding) Cumulative Service Cost 8 9 10 11 nd Transportation Fund for Clean Air (TFCA) award 7 SR 2506-4761, June 16, 2025 https://cityofpaloalto.primegov.com/viewer/preview?id=8427&uid=b976b160- b836-4718-8270-36f25c823c8d&type=2 8 SR 14959, December 12, 2022 https://cityofpaloalto.primegov.com/portal/item/?meetingItemId=20f80994-de00- 4d1a-aa0b-9e37365ba583 9 SR 2303-1128, April 10, 2023 https://cityofpaloalto.primegov.com/portal/item/?meetingItemId=5a61ff58-8c43- 48a2-ac4d-8b6814a65816 10 SR 2408-3387, October 21, 2024 https://cityofpaloalto.primegov.com/portal/item/?meetingItemId=2a1814e2- 47ed-4386-9b5a-26d412807895 11 Council motion on June 16, 2025 item https://cityofpaloalto.primegov.com/viewer/preview?id=16856&type=3 Palo Alto Link Performance Today, Palo Alto Link services include on-demand transit service Monday-Friday for a 12-hour service span 7am-7pm, with school exclusion zones and slightly increased fare prices ($4 standard and $2 discounted for seniors, disabled, low-income, and youth riders). Weekly and monthly passes are also available. The service operates within most of the City, except areas to the east and west that are primarily characterized by large open spaces and conservation lands. The service uses a nine (9) vehicle fleet to provide virtually positioned pick-up and drop-off locations within an acceptable walking distance. Door-to-door service and a wheelchair accessible vehicle is available for riders who may require extra assistance. Between March 7, 2023, and September October 30, 2025, Palo Alto Link served 137,450 rides, (3,011 to 6,072 per month), averaging 3.3 miles and 13.3 minutes long. Based on a survey by Via in late 2024, 60% of riders identify as minorities, 57% earn less than $100,000 per year, and 53% are seniors, disabled, or economically challenged. A large proportion of monthly rides (40% to 58%) included multiple bookings, where rider trips are shared with other riders. Top destinations include the Palo Alto Transit Center, Stanford Research Park destinations, Cubberly Community Center, Midtown shopping locations, Rinconada Park area, Stanford Shopping Center, the VA Hospital, and Stanford Health locations, though trips are also distributed across the entire service area, including many residential locations. Through the service’s application or a booking agent, riders receive a Seat Unavailable message if there is no available capacity for a new passenger booking a trip at that specific time or in that particular service area. In the first 12 months of service, the monthly Seats Unavailable service metric ranged from 3.8% to 9.1%. As committed funding has diminished over the last seven months, staff have directed Via to scale down service costs. In response, Seats Unavailable messages have ranged from 15.1% to 19.6% of all rides requested, as the vendor has had to make less Vehicle Driver Hours available to the public. Typical wait times have also increased, Figure 3: Palo Alto Link Mobile Application from 12-15 minutes when the service began to 18-25 minutes since Fall 2024. Average pickup walking distance has also been increased to pool rider trips more efficiently. Figure 4: Palo Alto Link Popular Destinations ANALYSIS Table 3: Summary of Alternative Service and Funding Options Strategy Type Description Ridership Impact Cost Impact Table 3: Summary of Alternative Service and Funding Options Strategy Type Description Ridership Impact Cost Impact pilot with higher fares funding partners or allow emerging options to progress Continue Palo Alto Link As Is On-demand rides @ $4/trip ($2 discount) 18-25-minute wait, 15-20% unavailable, school exclusion Continue current 3,000- 6,000 trips / month $1.2 million/year ($26/trip); continue Stanford partnership (up to $600k /year) Increase fares ($10 general, $3 concessions)Decreases ridership Limited decrease in total cost Retain fare structure, but reduce total driver hours Decreases ridership Limited decrease in total cost Restrict eligibility to disabled, low-income, seniors, youth 50-80% decrease in trips No decrease in total cost unless fewer driver hours allocated Prioritize & allow pre-booking by disabled, low-income & seniors; public only travel as seats available 20-40% decrease in trips No decrease in total cost unless fewer driver hours allocated Continue Palo Alto Link with Lower Subsidy Shift ridership to existing fixed route bus routes where available Only ~6% of trips can be completed via bus network No cost reduction available Embarcadero shuttle: 4+ vehicles @ 30-minute headway, 12 hour Unknown potential increase in ridership $1.1 million; No fund partnerships currently available Crosstown shuttle: 4+ vehicles @ 30-minute headway, 12 hour Unknown potential increase in ridership $0.8 million; Caltrain no longer offers funding partnership Resume Fixed Route Shuttle Services (~16 person vehicle)South Palo Alto (Cal Ave to VA) shuttle: 4+ vehicles @ 30- minute headway, 12 hour Unknown potential increase in ridership $0.8 million; No funding partnerships currently available Subsidize TNC or Taxi Service Could be prioritized for vulnerable users and desired availability Lack of control over rider safety & availability of wheelchair-accessible vehicles Releases Stanford Research Park cost share Discontinue Palo Alto Link Concludes pilot program on June 30, 2025 Users will pay more for alternative TNC or taxi services and users with disabilities will need to book 24 hours in advance for paratransit Saves City General Fund from any ongoing committed funds Continue Palo Alto Link as a Pilot Service This strategy allows the City to buy time by extending the program offerings for an additional year while other options emerge and staff continue to explore additional potential partnerships. This option would involve re-programming committed FY 2026 General Fund dollars to FY 2027 ($250,000), renewing the Stanford Research Park partnership through FY 2027, and utilizing awarded TFCA funds spread over the remainder of FY 2026 and across FY 2027. This approach could also be paired with service or ridership changes or reprioritizations described. Maintaining current service design would be the most cost-effective way to sustain transit accessibility to the existing community of predominantly elderly and economically challenged riders. While the total cost would not decrease, a continued focus on efficiency would continue to minimize costs. Based on Via’s survey of similar services in Bay Area cities, Palo Alto Link spends less per trip than other Bay Area on-demand micro-transit services. Various options were considered as potential opportunities for reducing subsidies for Palo Alto Link. The most promising options were increasing fares or reducing driver hours. Increasing fares (with need-based discounts) may be expected to reduce general ridership, which may reduce total savings. To test the impacts of fare increases on ridership, If Council wishes to continue the Palo Alto Link service beyond June 2026, the City could potentially pilot a fare increase for the remainder of FY 2025-26. Increased fares would generate additional revenue and would likely not reduce the current funding gap of $250,000 (covered by awarded TFCA funds in the current FY 2026), while also testing the effects of a fare increase on ridership. Beyond June 2027, however, the funding gap would increase to $700,000 per year if the City is unable to secure additional TFCA or other grants. This increase could be graduated by reduced driver hours. Other options that were explored as potential mechanisms to lower subsidies included restricting access or prioritizing elderly and economically challenged riders. These options may provide a higher quality of service for a limited rider base, but it would cause a spike in cost per ride and may result in some wasted capacity in the form of empty deadhead trips that would otherwise be occupied. The concept of redirecting ridership to bus routes was not considered to be effective since existing bus route only serve a fraction of the current rider base and the strategy would increase cost per trip. Community members have expressed interest in fixed route shuttles as an alternative to Palo Alto Link; however, this option is financially infeasible. As shown in Table 1, fixed route shuttle services are more expensive than Palo Alto Link. Furthermore, prior shuttle funding partnerships such as Caltrain and Stanford Health Care are no longer available, and a shift from Palo Alto Link to a fixed route shuttle would likely result in the loss of the funding partnership with Stanford since SRP trips are distributed throughout the City and not along shuttle routes. Subsidize Transportation Network Companies (TNC) or Taxi Services Discontinue Palo Alto Link (Default Option) Funding Partnership Opportunities Planning and Transportation Commission Review In December 2025, the Planning and Transportation Commission reviewed information on Palo Alto Link.17 Commissioners generally praised the value brought to Palo Alto Link users and expressed a desire for better transit-like services in the City. PTC did not provide a specific recommendation for continuing the service or supplanting it with any other option. Palo Alto Link services are currently programmed to wind down at the end of the current fiscal year, with the last date of service expected to be June 30, 2026. The Palo Alto Link program currently operates at a fully burdened cost of approximately $26 per trip, with rider fares recovering less than 5% of total operating expenses. Since early 2023, staff utilized funds from the Measure B Innovative Transit Program, Stanford Research Park, and TFCA to fund approximately 95% of service costs through December 2025. Measure B funds totaled $2,000,000 through June 2024. While external grants and the Stanford Research Park (SRP) partnership successfully funded approximately 95% of service costs through 2025, one-time resources such as VTA Measure B funding are now concluding. The SRP contribution to funding has ranged from 33% to 50% of monthly costs since the funding partnership began in March 2023, totaling approximately $1.2 million through December 2025. Additional funds, including a second award valid through June 2027, from the Bay Area Air Quality Management District's Transportation Fund for Clean Air (TFCA) have decreased the impact on City dedicated funds, allowing an extension of the original pilot term to June 30, 2026. Rider fares have currently contributed less than 5% of program costs. If Council chooses to winddown service by June 30, 2026, the City will achieve a gross cost saving of approximately $250,000 in Fiscal Year 2026-27 and approximately $700,000 in subsequent years. However, the net fiscal benefit is reduced to approximately $125,000– $275,000 after accounting for the loss of $425,000 to $575,000 in annual Stanford cost-sharing revenue for services that connect to SRP. This decision must be weighed against the City’s broader fiscal reality, including a $14.9 million structural deficit. This program should align with the City's cost recovery objectives and preserve General Fund stability. Any extension of general on-demand service would require a significant subsidy level which the City Council should consider in context with other General Fund supported services. 17 SR 2510-5293, November 12, 2025 https://cityofpaloalto.primegov.com/Portal/Meeting?meetingTemplateId=16610 STAKEHOLDER ENGAGEMENT ENVIRONMENTAL REVIEW ATTACHMENTS APPROVED BY: Palo Alto Link Program & Transit FuturesStudy Session March 2, 2026 – City Council Meeting Item #3 www.paloalto.gov 2 Regional Transit Context •Federal funding has long prioritized highways •PA’s location at the edge of Santa Clara County presents unique first / last-mile challenges •Regional coordination needed 3 Shuttle Program Background •1999-2014, 2016-2020 (Crosstown & Embarcadero routes only) •2014-2016 (EPA route added) •2017 Draft Transit Plan (Expansion plan / options, including SPA, not shown) 4 Palo Alto Link Background •Aug. 14, 2017 Council direction to explore flex transit model •Nov. 8, 2022 Receipt of VTA Innovative Transit Service Grant •Mar. 7, 2023 Service Start with Via (Nomad) •Various service refinements made in response to Council and public feedback •Jun. 16 and 17, 2025, Council discussed service continuation considering unknown grant funding awards 5 •On demand •7am to 7pm M-F •Point-to-point or door-to- door (seniors / people with disabilities) •Serves most of Palo Alto (exc.Baylands, Palo Alto Hills) Palo Alto Link Service 6 Recent Policy Direction •Jun. 16,2025 Council authorized funding extension of the Palo Alto Link (PAL) On Demand Transit Services program for up to 6 months (assuming all grant funds expended) •Jun. 17, 2025 Council authorized contract renewal with Nomad Transit through June 30, 2026 (considering potential VTA Innovative Transit and Air District TFCA awards) •Directed staff to consider and present termination implications and alternate service options by end of 2025. 7 Recent Funding History •Initial VTA Innovative Transit funding expired 6/30/2024 •Final round of TFCA funding will be expended by 6/30/2026 •General Fund share would need to substantially increase beyond 6/30/2026 7/1/2025-6/30/2026 Grants (TFCA)$456,500 Stanford Research Park (SRP)Up to $600,000 Fares $35,000 - $50,000 General Fund $0 - $250,000 Estimated Expenses $960,000 Strategy No change Palo Alto Link with Lower Subsidy Resume Palo Alto Shuttle TNC subsidy 8 Service Options Strategy Description Ridership Impact Cost & Funding No change $4/trip, 18-25 minute wait, 15-20% unavailable No change $1.2M/year, ~$0.5M from SRP Palo Alto Link with Lower Subsidy Increase fares Decrease Limited reduction Retain fares, reduce driver hours Decrease Limited reduction Restrict to discounted fares 50-80% decrease Limited reduction Prioritize discounted fares and pre-booking 20-40% decrease Limited reduction Prioritize shifting riders to available transit 6% available No cost reduction Resume Palo Alto Shuttle Embarcadero shuttle Unknown increase $1.1M, No funding partnership Crosstown shuttle Unknown increase $0.8M, No funding partnership South Palo Alto (Cal Ave to VA) shuttle Unknown increase $0.8M, No funding partnership TNC subsidy 24/7 Service for Just Vulnerable Users Unknown Discontinues SRP partnership 9 Feedback on Palo Alto Link PTC – November 2025 Values •Meets many community member needs (especially families with special needs) •Prioritize vulnerable users •Capture lessons learned for future services Community Members / Users •Service availability and accurate time estimates are important •App based service can be difficult for seniors with disabilities •Increased span of coverage desired (beyond City borders) •Increased span of service desired (weekend and evenings) 9 Fiscal Impact / Summary •Current fiscal implications o Per trip cost: $26 o 5% of operating costs covered by fares o Key funding partnership (~$500,000 per year) with SRP •Winding down by June 30, 2026 o Saves ~$250,000 in FY 2026-27 o Saves ~$700,000 per year in FY 2027-28 & beyond o Results in loss of ~$425,000 to $575,000 in SRP partnership 10 Discussion for Transit Future •What feedback do you have on service performance and transit funding options as Palo Alto Link concludes June 30, 2026? Nate Baird Transportation Planning Manager Office of Transportation nathan.baird@paloalto.gov 650-329-2340