HomeMy WebLinkAboutStaff Report 2605-6339CITY OF PALO ALTO
Finance Committee
Regular Meeting
Tuesday, May 19, 2026
Agenda Item
1.FY 2027 Budget Wrap-up and recommended FY 2027 Budget including FY 2027 Municipal
Fee Schedule Agenda Item Reordered, Late Packet Report Added, At-Places Supplemental
Report Added, Staff Presentation
Finance Committee
Staff Report
Report Type: ACTION ITEMS
Lead Department: City Clerk
Meeting Date: May 19, 2026
Report #:2605-6339
TITLE
FY 2027 Budget Wrap-up and recommended FY 2027 Budget including FY 2027 Municipal Fee
Schedule
This will be a late packet report published on May 14, 2026.
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Finance Committee
Staff Report
From: City Manager
Report Type: ACTION ITEMS
Lead Department: Administrative Services
Meeting Date: May 19, 2026
Report #:2512-5677
TITLE
FY 2027 Budget Discussion Wrap-up and Recommend City Council Adopt FY 2027 Budget
Including FY 2027 Municipal Fee Schedule
RECOMMENDATION
This memorandum will be used to facilitate the discussion of the Finance Committee
(”Committee”) budget wrap-up for the FY 2027 Operating and Capital Budgets.
1) Staff recommends the Finance Committee:
a. Review and discuss:
i. Additional information provided as requested by the Committee or staff
ii. Summary of current budget adjustments to the Fiscal Year 2027 Proposed Operating
and Capital Budgets and Municipal Fee Schedule as directed by the Committee on May 5
and 6, 2026, and the full Council on May 11, 2026; and
b. Recommend to the City Council:
i. Adoption of the FY 2027 Proposed Operating and Capital Budgets and Municipal Fee
Schedule (Staff Report #:2604-6297)1, amended by the actions outlined in this report in
“Table: Summary of Parking Lot Items for Potential Adjustments to the FY 2027
Proposed Budget,” and as further amended in the wrap-up discussion; and
ii. Approve the FY 2027-2031 Capital Improvement Program, amended by the actions
outlined in this report and as further amended in the wrap-up discussion
EXECUTIVE SUMMARY
This memorandum follows the Committee review of the FY 2027 Proposed Operating and
Capital Budgets and Municipal Fee Schedule and includes additional information and
recommended changes for further review in this Committee wrap-up session, to submit formal
Committee adjustments to the City Council for adoption on June 15, 2026.
1 Finance Committee, May 6, 2026; Agenda Item #4; Staff Report# 2604-6297
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While the Committee's "Parking Lot" items represent valued investments and services,
increased expenditures will have financial impacts in the short and long term. Based upon
Committee Parking Lot items and further financial and operational analysis, the revised Parking
Lot listing is included in this memorandum.
BACKGROUND
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During budget deliberations on May 5 and 6, 2026, the Finance Committee completed a
detailed review of the FY 2027 Proposed Budgets with public comment incorporated for each
service area to provide opportunities for community input in the decision-making process. The
Committee reviewed individual budget sections by department for tentative approval, moved
potential amendments to the Parking Lot, and requested additional information to aid in their
review. Much of the additional information was provided by staff during the hearings as part of
the recap presentations to the Committee. This report provides the status of the Committee’s
review as well as feedback from a check-in with the full City Council on May 11, 2026, that
focused on the Committee’s parking lot items.
ANALYSIS
Table 1: Finance Committee Budget Adjustments as of May 6, 2026
Table 2: Parking Lot Items as of May 6, 2026
Table 3: Information Referrals items requested by Finance Committee that were not
addressed on May 5 or May 6 and Staff will work on during FY 2027, subject to Council
approval.
Table 4: Budget Rebalancing and Technical Adjustments (preliminary to date).
Finance Committee Budget Adjustments to date:
th, the Finance Committee has taken motions for the following items in Table 1 to be
added in the budget for FY 2027.
Table 1: Finance Committee Budget Adjustments as of May 6, 2026
Finance Committee Adjustments to Budget FY 2027
GF (cost)/source
Potential FY 2028 GF
(cost)/source
JMZ Conservation Costs and explore utilizing
existing conservation programs to fulfill the AZA requirements
to the extent possible | Reduce Hourly Positions
64,000
School Crossing Guards | 50% of Cost - Contingent upon
match from PAUSD (51,250)
Track Watch | 50% of Cost - Contingent upon match
from PAUSD (March - June)(307,715)
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OSV - recommend the City Council approve budget
allocation and consider potential alternative funding methods
for the Geng Road parking site from Sept-June ($200k) and
additional towing capacity to include ($184K) for enforcement
and street sweeping.
(384,000)
Non-Profit Work Plan - Option C (124,000)
Subtotal Costs (Expense)$ (802,965)$ -
Potential Funds Remaining Net (cost) / source $ (802,965)$ -
The result of these actions is the General Fund projected FY 2027 expenditures increase by $0.8
million to $311.8 million. Moreover, the budget stabilization reserve (BSR) is projected to
continue at $53.7 million or 17.2% within the policy range of 15% to 20%, however less than
18.5% target level.
Updates for the Committee since May 6th include the following:
OSV Geng Road Parking Site & Additional Towing Capacity – During the May 6, 2026, Finance
Committee meeting, a $384,000 recommendation was proposed to sustain the Oversized
Vehicle (OSV) program. This total includes $200,000 to bridge a funding gap for Geng Road Safe
Parking, ensuring the site remains operational after its current budget expires in September.
The remaining $184,000 is allocated for Phase 1 maintenance and enforcement, supporting
quarterly storm drain cleaning, specialized enforcement staffing, and targeted towing of non-
compliant vehicles. Collectively, these funds aim to maintain established sanitation standards
and regulatory oversight throughout the upcoming fiscal year. Per the Committee’s suggestion
staff has investigated the availability of funds from the Measure K Housing category to cover
this expense in FY 2027 and have determined that there is sufficient fund balance for the
expenditure in FY 2027.
School Crossing Guards – The Committee also addressed the proposed 10% reduction in school
crossing guard coverage by tentatively approving a $51,250 budget adjustment. The City
Council on May 11th concurred with this recommendation. This allocation restores half of the
funding for the proposed reductions to the program, provided that the Palo Alto Unified School
District (PAUSD) matches the contribution. Committee members emphasized student safety as
a top priority and sought to formalize a cost-sharing partnership with the district. This decision
aims to maintain critical intersection coverage while targeting a collaborative funding
commitment from PAUSD. Based upon this recommendation, as of July 1, 2026, there will be no
reduction in current School Crossing Guard sites. If matching funds are not secured by the end
of the calendar year, the City Council would need to consider alternative funding during the FY
2027 Midyear Budget.
Track Watch – The Committee approved a motion for the rail crossing monitor program by
tentatively approving a $307,715 budget adjustment. The proposed budget included funding
the agreement through February 2027. This budget adjustment allocation specifically extends
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the program through the end of FY 2027, covering the months of March - June 2027. This
$307,715 represents the City’s 50% share of the projected $615,430 total cost for the four-
month extension, provided that the Palo Alto Unified School District (PAUSD) matches the
contribution. The current program, which utilizes Orion Security for 24/7 human monitoring at
all four grade crossings, operates under a 50/50 cost-sharing agreement originally approved in
February 2026 for a total contract value of $1,708,314 ($854,157 per agency). Committee
members emphasized that maintaining these safety measures is a vital priority, seeking to
formalize the collaborative funding commitment from school leadership. If matching funds are
not secured by the end of the calendar year, the City Council would need to consider
alternative funding and appropriation by December 2026 to allow time to fully fund and
implement the contract extension.
Non-Profit Workplan – The Finance Committee made a motion to recommend “Option C”,
recommending a $124,000 budget adjustment. This action provides a direct allocation to:
Magical Bridge ($150,000), California Avenue special events ($40,000), and the United Nations
Association Film Festival ($45,000).
Parking Lot Items to date:
Table 2: Parking Lot Items as of May 6, 2026
Parking Lot Items
Quiet Zones Construction, direct staff to return with revised timing figures. Evaluate funding sources for Grade
separation. (Accelerate funding to FY27-FY28 with Measure K (OOT will return May 19 FC Budget Wrap Up)
Direct staff to add the Chimalus Right of Way (ROW) as a project in CIP. (OOT will return May 19)
Information regarding the marginal benefit of restoring Office of Transportation staffing to work on critical City
priorities. (OOT will return FC May 19)
Consider lateral hiring bonuses in the Police Department as part of the FY 27 budget process (PD will return May 19)
Non-Profit – Council to approve finance committee recommendation that any additional grant funding that may be
authorized by the Council be processed through HSRAP.
Balancing strategy will prioritize reduction to CIP
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Additional updates for the Committee since May 6th include the following:
Quiet Zones Construction – During budget deliberations on May 5, May 6, and May 11, 2026,
the Finance Committee and the City Council prioritized the expedited implementation of Quiet
Zones at all four rail crossings, with a specific focus on Churchill Avenue. To advance this
initiative, the Committee directed the use of Measure K funds starting in Fiscal Year 2027 for
design, with construction scheduled for 2028. The details of the advancing of funds are shown
below.
Chimalus Right of Way (ROW) – The Finance Committee requested that the Office of
Transportation (OOT) investigate how to include the Chimalus Right-of-Way as a new project
within the Capital Improvement Program. Following an evaluation by the OOT, staff is
recommending that it be added to the CIP as a FY 2028 project with an initial allocation of
$600,000 to include project management and planning. Funding for the planning work would
come from Measure B Funds for Local Streets and Roads. The first phase of work will support
the City's ability to secure grants for the project such as the Caltrans Sustainable Transportation
Planning Grant Program and TDA Article 3 funds, which specifically support bicycle and
pedestrian infrastructure.
OOT Staffing – The Finance Committee requested that the Office of Transportation (OOT)
evaluate its staffing and present the marginal benefit of position adds. Upon review, OOT
recommends converting an existing limited 0.50 full-time equivalent Assistant Engineer position
designed to support OSV engineering work into a permanent, full-time benefited role. This
conversion requires an annual budget of approximately $190,000 for salary and benefits, with
the incremental cost in FY 2027 covered by Measure B funding. 1.0 FTE Assistant Engineer
would be added to the Table of Organization. The full-time Assistant Engineer would continue
to provide essential technical engineering support and field verification for the design and
installation of signage and striping required to implement the Oversized Vehicle Program. In
addition to these regulatory tasks, the position would support the design of bicycle, pedestrian
and street safety projects including a performance goal to daylight 200 intersections during
fiscal year 2027. By formalizing this role, the City increases its technical capacity to deliver high-
priority transportation safety projects while utilizing regional funds to manage the increased
workload associated with both safe parking oversight and citywide visibility improvements.
Police Lateral Hiring Bonus – The Committee requested additional information regarding the
police lateral hiring bonus incentive program, placing the item in the budget parking lot for
further review during the May 19th wrap-up session. On May 11th, the City Council was briefed
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on this recommendation to evaluate recruitment tools designed to fill sworn officer vacancies.
Previously during Committee budget hearings, the Department reported seven sworn vacancies
but the number is nine as of this writing. The City initiated a $25,000 hiring bonus for lateral
officers in FY 2018, with three bonuses accepted in 2019. Current tools supporting lateral
recruitment include service credit toward higher vacation accrual rates, accelerated eligibility
for career incentive pay, and an employee referral incentive program. Potential options for
consideration include a modest hiring incentive for successful completion of probation,
relocation expense reimbursements, vacation leave bank incentives, and deferred
compensation contributions. These recruitment expenses could be absorbed through Police
Department salary savings without requiring new General Fund appropriations.
Table 3 includes items requested by the Committee that were not addressed on May 5 or May
6 and staff will work on during FY 2027, subject to Committee recommendation and Council
approval.
Table 3: Information Referrals items requested by Finance Committee
Finance Committee Recommendation for Council Referrals
1)Referral to staff to return with a summary of the City’s AI strategy.
2)Referral to staff to return with a consultant best practices narrative, including impacts to date as part of
Council Priority Workplan for the item
3)Referral to staff to present Palo Alto Golf Course P&L in a more complete way and evaluate golf fees,
including senior resident rates
4)Referral to staff to explore increase in proportion of outdoor recreation programs located at Cubberley.
5)Cubberley - Evaluate acceleration of certain capital repair needs for Cubberley including potentially utilities
infrastructure.
6) Referral to staff to bring back refine overtime budgeting for the Police Dept during the FY 28 budget process.
Staff also reflected this in the response to the recent City Auditor’s report on public safety overtime.
7)Referral to staff to evaluate potential efficiency opportunities in Fire Dept during the FY 28 budget process.
Proposed Amendments to the FY27 Municipal Fee Schedule
Budget Rebalancing and Technical Adjustments
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further reviewed the CIP, revenue forecasts, and technical adjustments in order to propose an
option to rebalance the General Fund. This budget balancing is shown for Committee
consideration, noting that these technical adjustments will be finalized along with the Council
budget adoption resolution on June 15th. This incorporates the Table 1 Committee budget
adjustments, increases TOT revenues, includes technical adjustments and does not further
reduce CIP nor BSR. An At Places Memo will be provided on May 19 that details the budget
adjustments and technical adjustments (to date) for all funds. Below is a summary of General
Fund budget adjustments for consideration:
Table 4: Budget Rebalancing and Technical Adjustments (as of May 19, 2026)
Finance Committee Adjustments to Budget
FY 2027
GF (cost)/source
Potential FY 2028 GF
(cost)/source
JMZ Conservation Costs and explore utilizing
existing conservation programs to fulfill the AZA requirements
to the extent possible | Reduce Hourly Positions
64,000
School Crossing Guards | 50% of Cost - Contingent upon
match from PAUSD
(51,250)
Track Watch | 50% of Cost - Contingent upon match
from PAUSD (March - June)
(307,715)
OSV - recommend the City Council approve budget
allocation and consider potential alternative funding methods
for the Geng Road parking site from Sept-June ($200k) and
additional towing capacity to include ($184K) for enforcement
and street sweeping.
(384,000)
Non-Profit Work Plan - Option C (124,000)
Subtotal Costs (Expense)/Source $ (802,965)$ -
Measure K funding – OSV 384,000
TOT Revenue – increase projection 542,000
TOT Infrastructure Transfer to CIP – increase (542,000)
General Fund Base Transfer to CIP – decrease 218,347
Technical Adjustments (aggregated)200,618
Potential Funds Remaining Net (cost) / source $ -$ -
Additional Clarifications and/or Consideration:
Employee Childcare Pilot Program – On May 6, Committee recommended this be continued in
the Long Range Financial Forecast and it was conveyed to Council on May 11.
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PG-21000 Heritage Parks CIP - The Finance Committee provided direction during its May 5 and
6, 2026 meetings to prioritize evaluating and utilizing the remaining funding in PG-21000
Heritage Parks Site Amenities Replacement for Heritage Park drainage improvements related to
Roth Building water intrusion.
Document Transfer Tax (DTT) – Future revenue projections could be affected by the passage of
the Local Taxpayer Protection Act to Save Proposition 13 (aka “Save Prop 13”), a state initiative
that recently qualified for the November 2026 ballot. In pertinent part, the initiative would
amend the State Constitution to repeal local real estate transfer taxes adopted by charter cities
and render any previously adopted transfer tax null and void as of December 31, 2028.
per year, with
lost revenues increasing to $10.2 million per year by FY 2036. The City would be prohibited
from adopting a local real property transfer tax to replace the lost revenue.
Administrative Assistant to the City Council – On May 11, 2026, it was noted that the pilot part-
time administrative assistant to the City Council would end December 2026 before the FY27
Mid-Year Budget Review in February 2027. The Finance Committee may consider increasing
the City Council contingency carryforward from FY26 to FY27. That would require $45,000 total
carryforward (from FY26 to FY27) to fund the pilot position from July 2026 through March
2027. These additional costs ($15,000 over prior estimates) should be considered in the context
of the remaining available Council Contingent funds.
Tree Trimming and Canopy – The proposed budget for FY27 includes cuts in funding and staffing
for all aspects of the City’s Urban Forestry operations. Proposed reductions were strategically
spread across all aspects of the Urban Forestry budget with the goal of minimizing the long-
term impact to the City’s urban canopy. Urban Forestry Staffing is being reduced by two
positions for a 12.5% reduction in staffing. Funding for the Street Tree Maintenance Contract
(West Coast Arborist) is being reduced by $50,000 for a 3.5% reduction. The Urban and
Community Forestry Services Contract (Canopy) is being reduced by $43,550 for a 10.5%
reduction. When proposing potential Canopy contract reductions, Staff focused on protecting
contract scope for Basic Service items and focused proposed cuts to Urban Forest Master Plan
implementation items, as they would have fewer long-term impacts to the City’s urban forest.
Staff met with Canopy on May 14th to clarify that if City Council approves reductions to the
budget for the Canopy contract, final decisions on specific reductions to the contract scope of
work can be made collaboratively between Staff and Canopy after the budget is finalized.
Irrigation at Foothill – Of approximately 15 acres of irrigated turf throughout Foothills Nature
Preserve, staff plans to focus irrigation reductions primarily on the 8-acre lawn in Las Trampas
Valley and surrounding lawn areas by the Interpretive Center that serve mostly aesthetic and
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passive recreational functions. Irrigation frequency on irrigated turf at the Preserve is currently
twice per week from Mid-May through Mid-November. While staff are finalizing the details, the
tentative plan is to maintain the existing two days per week schedule and reduce run times by
10-15%. As a result, turf may have some dry spots but is not anticipated to experience
substantial decline or loss of functionality.
Stormwater Management Oversight Committee Review of the FY 2026 Stormwater
Management Fund Budget (Attachment B)
Planning and Transportation Commission Review of the New Projects in the 2026-2030
FISCAL/RESOURCE IMPACT
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consider fulfilling the City vision, Council priorities, City policies, and City core services,
balancing non-core services and programs within limited financial resources.
STAKEHOLDER ENGAGEMENT
ENVIRONMENTAL REVIEW
ATTACHMENTS
APPROVED BY:
Attachment A
Summary of Finance Committee Review of FY 2027 Proposed Budget
(Actions & References)
Attachment B - 1
Action Minutes to the Finance Committee Hearings can be found on the City’s webpage here:
https://www.paloalto.gov/Departments/City-Clerk/City-Council-Standing-Committees/Finance-
Committee. In addition, throughout the Finance Committee Budget Hearings, various memoranda were
distributed “At Places” in order to respond to inquiries made by the Committee or provide additional
pertinent information at staff’s behest. In addition, summary presentations were given at each hearing
providing high-level overviews of each item. Specific meetings and reference links to materials are
outlined below.
May 4, 2026 City Council Meeting
Action Minutes:
•https://cityofpaloalto.primegov.com/Public/CompiledDocument?meetingTemplateId=18710&c
ompileOutputType=1
Presentations:
•FY 2027 Proposed Budget Overview:
https://cityofpaloalto.primegov.com/viewer/preview?id=0&type=8&uid=a760a3d3-1400-45f3-
92c1-32e078bdd810
•Video: https://youtube.com/watch?v=vM0GY2Rdnow?feature=share
May 5, 2026 Finance Committee
Action Minutes:
•https://cityofpaloalto.primegov.com/Public/CompiledDocument?meetingTemplateId=18569&c
ompileOutputType=1
Presentations:
•FY 2027 Proposed Operating and Capital Budgets: 75af5a3b-12e2-402d-aa23-b70c583c3515.pdf
-OneMeeting
•Video: https://youtube.No/watch?v=a2TkKDhnK5Y?feature=share
May 6, 2026 Finance Committee
Action Minutes:
•https://cityofpaloalto.primegov.com/Public/CompiledDocument?meetingTemplateId=18575&c
ompileOutputType=1
Presentations:
•FY 2027 Proposed Operating and Capital Budgets Continuation: 8cb228a8-37a1-4ed6-96fa-
f69133eb9846.pdf - OneMeeting
•Video: https://youtube.com/watch?v=jfYssT7v5bM?feature=share
Attachment A
Summary of Finance Committee Review of FY 2027 Proposed Budget
(Actions & References)
Attachment B - 2
List of Supplemental Information provided during Budget Deliberations
During the Finance Committee hearings and the City Council update, staff provided additional
information to Committee members to assist in the review of the Fiscal Year 2026 Proposed Budget.
Below is a list of links to those memoranda:
•May 5: At Places Memo: Capital Reappropriations, staffing & vacancies, and contract spend
Storm Water Management Oversight Committee
MEMORANDUM
Date: April 13, 2026
To: Honorable Finance Committee of the Palo Alto City Council
From: Members of the Storm Water Management Oversight Committee
Subject: Review of the Proposed Fiscal Year 2027 Stormwater Management Fund Budget
As directed by the City Council, the Committee met to discuss the Fiscal Year 2027 proposed
Stormwater Management Fund budget on Monday, April 13, 2026. Prior to the meeting, Public Works
staff provided informational materials about the approved 2017 ballot measure and the proposed budget
for the Committee’s review. During the meeting, staff presented information and answered questions
from the Committee members.
We have reviewed the proposed budget for Fiscal Year 2027 and compared it with the provisions of the
Storm Water Management Fee approved by Palo Alto property owners in 2017. We find that the attached
spreadsheet describing the proposed budget for Fiscal Year 2027 fairly describes the relationship
between the budget and the ballot measure. Staff and the Committee concur that funding generated by
the Storm Water Management Fee will be applied solely to fund the capital improvement projects, green
stormwater infrastructure projects, innovative stormwater projects, enhanced maintenance of storm drain
system, and storm water quality protection programs specified for implementation in the ballot measure
in Fiscal Year 2027. The committee is aware that staff continues to evaluate funding and cost projections
for future projects included on the ballot measure. Because funds available for green stormwater
infrastructure and innovative projects are not being utilized fully, the Committee supports efforts by staff
to continue to identify and promote new projects that meet the goals associated with the ballot measure,
such as the proposed Green Stormwater Infrastructure capital improvement project.
Attachment: Fiscal Year 2027 Proposed Budget
Attachment B
Attachment B
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Finance Committee
At-Places Supplemental Report
From: Lauren Lai, Chief Financial Officer/ASD Director
Meeting Date: May 19, 2026
Item Number: 1
Report #:2605-6396
TITLE
At Places Supplemental Report: FY 2027 Budget Wrap-up and recommended FY 2027 Budget
including FY 2027 Municipal Fee Schedule
RECOMMENDATION
In previous meetings on May 5 and May 6, Committee recommended to Council certain budget
adjustments for the FY 2027 Proposed Budget. This table includes those adjustments and also
reflects the fiscal impact of the Committee’s “Parking Lot” items.
BACKGROUND
Staff would like to provide the Finance Committee (Committee) with additional information for
the May 19th FY 2027 Budget Hearing meeting. This material includes the Finance Committee
recommendations and technical adjustments to date.
Technical Adjustments
Given the complexity, volume and timing of the proposed budget, subsequent to publication,
staff have found technical adjustments necessary to ensure accuracy in the adopted budget. A
list is provided to Committee on May 19 (Attachment A) and the final listing will accompany the
budget adoption for Council on June 15.
Supplemental Attachment A shows the preliminary budget adjustments to the FY 2027 Proposed
Budget for Committee recommendations and technical adjustments.
ATTACHMENTS
Supplemental Attachment A: Preliminary Technical Adjustments
APPROVED BY:
Lauren Lai, Chief Financial Officer/Administrative Services Director
FY 2026 - 2027 Proposed Budget
Preliminary - Budget Adjustments Technical Adjustments
Type Dept Description
FY 2027
GF Revenue
FY 2027
GF Expense
GF
FT FTE
FY 2027
NON-GF Revenue
FY 2027
NON-GF Expense
Non-
GF
FT FTE
Non-
GF
PT FTE
FC CSD JMZ Conservation Costs and explore utilizing existing conservation
programs to fulfill the AZA requirements to the extent possible |
- (64,000) - - - - -
FC POL School Crossing Guards | 50% of Cost - Contigent upon match from
PAUSD
- 51,250 - - - - -
FC POL Track Watch | 50% of Cost - Contigent upon match from PAUSD
(March - June)
- 307,715 - - - - -
FC CMO OSV - Geng Road parking site from Sept-June ($200k) and additional
towing capacity to include ($184K) for enforcement and street
- 384,000 - - - - -
FC NON Non-Profit Work Plan - Option C - direct allocation - 124,000 - - - - -
FC CIP Quiet Zones - Move design to FY27 & construction to FY28 - 1,000,000 - 1,000,000 1,000,000 - -
FC CIP Chimalus Bikeway - New CIP with $0.6M in FY28 (Measure B LSR
funding)
FC Measure K funding for Quiet Zones (1,000,000)
FC Measure K funding for OSV (384,000)
FC CIP General Fund - Transfer to CIP (reduction)(402,464) (402,085) - - -
A2P ASD TOT Revenue - 2.6% increase from FY26 revised revenue forecast
and offset with Transfer to Infrastructure
542,000 542,000 - 542,000 - - -
A2P ASD Pension UAL technical adjustment associated with Section 115 ADP -
with confirmation from CalPERS actuary (favorable)
- (499,658) - - (401,000) - -
A2P CIP CIP TR-26000 Embarcardo Improvements - include second year of
funding (Ref FY26 CMR#2604-6269)
- - - 260,000 260,000 - -
A2P CIP Annual CIP Adjustment to Art in Public Spaces AC-86017 - - - - (5,100) - -
A2P CIP Foothills Rebuild (Fire Mitigation, Utility Fund) EL-21001,
appropriation needed to complete by December 2026
- - - - 1,750,000 - -
A2P OOT 1.00 FTE Planner - OOT Position #7544 (technical adjustment) - 72,156 0.40 - 108,234 0.60 -
A2P PDS 1.00 FTE Planner - Planner Position #790 (technical adjustment)- 183,545 1.00 - - - -
A2P PDS REC Exchange Rebate Program to offset permit fees for building code
inspections limited by State Caps
225,000 - - 275,000
A2P PWD Fuel Contract Reduction - budget true-up - - - - (225,000) - -
A2P PWD General Fund FTE Allocation for Tree Program - technical adj.- 4,077 0.03 - (4,077) (0.03) -
A2P PWD Wastewater Collection Fund (#527) true up allocated charges
(appropriation) to Wastewater Treatment Fund (#526)
- - - - 2,814,640 - -
A2P PWD/UTL Street Cut appropriation to offset the associated General Fund
revenue. (paid by project applicants)
- - - - 200,000 - -
A2P UTL City utility costs (water) - technical adjustment - 119,000 - (2,000) - - -
A2P UTL Electric rate true-up (1) FY27 rate of 4.5% (instead of 6%) for the
Utilities Charges for Services and (2) General Fund Utility Costs to
include PSB Facility.
- 141,379 - (195,584) (178,455) - -
A2P UTL Equity Transfer - true-up (140,000) (140,000)
A2P UTL General Fund (UUT) Utility Users Tax - City Utility - true-up with new
FY27 rate forecast
(340,000) - - - - - -
A2P UTL General Fund (UUT) Utility Users Tax - Cable Franchise - true-up,
assumes 4% growth based upon historical trends
292,000 - - - - - -
A2P UTL Hourly staff to promote customers' uses on alternative resources
2508-5090 (Management Specialist - 6 Month)
- - - - 100,000 - 0.48
A2P UTL SCAP (Duplicate entries, previously discussed with FC May 5)- - - - (14,503,759) - -
Total 579,000$ 579,000$ 1.43 1,202,331$ (8,949,517)$ 0.57 0.48
May 19, 2026 www.paloalto.gov/budget1
FY 2027 PROPOSED OPERATING & CAPITAL BUDGETS & MUNICIPAL FEE SCHEDULE WRAP-UP
Finance Committee
BUDGET CONVERSATIONS & CALENDAR
2
MAY 4 MAY 5 & 6 MAY 11 MAY 19 JUNE 15
Finance Committee
Budget Workshops:
Review the proposed
budgets and recommend
amendment(s)
Study Session City Council:
Finance Committee check-
in with the City CouncilCity Council: FY 2026
Proposed Budget Overview:
Discuss guidance for Finance
Committee colleagues
City Council Budget
Adoption:
Adopt Operating & Capital
budgets (as amended by
the Finance Committee)
Finance Committee Budget Wrap-up:
Based on the input from the May
budget meetings, recommend final
adjustment(s) to proposed budgets
for Council adoption
3
REMINDER: BUDGET HEARING GUIDELINES
•Meeting proceedings were organized by agenda item:
o Combined presentation from departments by City service area (CSA)
o Highlighted budgetary information and areas of focus
o Finance Committee discussion with a 5-minute timer for Councilmember comments
and questions
•Recommended Motions:
o “Tentative Approval of [insert item]”: majority vote
o Recommend to be placed in the “parking lot”: majority vote
o Request additional information/staff follow up: majority vote
Budget
Hearings
Council
Update
Budget
Wrap
Council
Adoption
www.paloalto.gov/budget
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•Received Council feedback (May 11) and additional Staff analysis and information
•Revised Parking Lot
•Multi-Year Budget Balancing Strategies
•Staff Recommended Technical Adjustments
•Consideration for Referrals
UPDATES SINCE MAY 6th BUDGET HEARING
www.paloalto.gov/budget
5www.paloalto.gov/budget
FC BUDGET ADJUSTMENTS – Table 1
Finance Committee Adjustments to Budget
FY 2027
GF
(cost)/source
FY 2028
JMZ Conservation Costs and explore utilizing existing conservation programs to fulfill the AZA
requirements to the extent possible | Reduce Hourly Positions 64,000
School Crossing Guards | 50% of Cost - Contingent upon match from PAUSD (51,250)
Track Watch | 50% of Cost - Contingent upon match from PAUSD (March - June)(307,715)
OSV - recommend the City Council approve budget allocation and consider potential alternative
funding methods for the Geng Road parking site from Sept-June ($200k) and additional towing
capacity to include ($184K) for enforcement and street sweeping.
(384,000)
Non-Profit Work Plan - Option C (124,000)
Subtotal Costs $ $ -
Potential Funds Remaining Net (cost) / source $
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Parking Lot Items
Quiet Zones Construction, direct staff to return with revised timing figures. Evaluate funding sources for
-FY28 with Measure K (OOT will return May 19 FC Budget Wrap Up)
staff to add the Chimalus Right of Way (ROW) as a project in CIP. (OOT will return May 19)
regarding the marginal benefit of restoring Office of Transportation staffing to work on critical City priorities.
lateral hiring bonuses in the Police Department as part of the FY 27 budget process (PD will return May 19)
-Profit – Council to approve finance committee recommendation that any additional grant funding that may be
strategy will prioritize reduction to CIP
FINANCE COMMITTEE - “PARKING LOT” Table 2 (as of May 6, 2026, 5pm)
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Technical Adjustments & Budget Balancing Table 4 (as of 5/19/2026)
Finance Committee Adjustments to Budget FY 2027GF (cost)/source
Potential FY GF
and explore utilizing existing conservation programs to fulfill the AZA 64,000
School Crossing Guards | 50% of Cost - Contingent upon match from PAUSD
Track Watch | 50% of Cost - Contingent upon match from PAUSD (March - June)
OSV - Geng Road parking site from Sept-June ($200k) and additional towing capacity to include
for enforcement and street sweeping.
Non-Profit Work Plan - Option C
Subtotal Costs $ $ -
Quiet Zone – accelerate design to FY27 and construction to FY28
K funding – Quiet Zone
K funding – OSV
Bikeway – new CIP with $0.6M in FY28 (Measure B LSR funding)
Revenue – increase projection
Infrastructure Transfer to CIP – increase
Fund Base Transfer to CIP – decrease
Adjustments (net aggregated to balance)
Potential Funds Remaining Net (cost) / $ $ -
*Other technical adjustments may occur between now and June 15th
8www.paloalto.gov/budget
($ in millions)
FY 2027
Proposed Budget
FY 2027 FC
(Revised)
Increase/
Decrease
FY 2027
(Revised)
Revenues $311.0 $311.6 $0.6 $311.6
Expenses $309.4 $311.4 $2.0 $311.4
Transfers $1.6 $0.2 ($1.4)$0.2
Savings / (Cost)----
General Fund Reserves
Uncertainty Reserve at Year-End $0 $0 $0 $0
Budget Stabilization Reserve $$53.7 $53.7 $53.7 $53.7
Budget Stabilization Reserve %17.4%17.2%17.2%17.2%
BSR Impact of FC Recommendations & Technical Adjustments
*Sales Tax prior year adjustment may be more favorable increasing BSR by $2 M to $55.7 M or 17.9%
9www.paloalto.gov/budget
•Employee Childcare Program
•PG – 21000 Heritage Parks CIP
•Document Transfer Tax (DTT)
•Administrative Assistant to the City Council
•Tree trimming and Canopy
•Irrigation at Foothill
Additional Clarification and/or Consideration
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•Technical Adjustments
•Refer to At-Places Memo
•Annual Re-appropriations
•Various utility funds including 5-year CIP – as noted on May 7
•Final detail will be incorporated into FY27 adopted budget action on June 15
•Oversight Committee Reviews – 2027-2031 Capital Improvement Plan (CIP)
•Stormwater Management Oversight Committee Review of the FY 2026 Stormwater Management
Fund Budget (Attachment B)
•Planning & Transportation Commission – CIP alignment with Comprehensive Plan
•Meeting will occur on May 27, 2026
•Letter will be directed to City Council and attached to June 15th item.
Technical Adj & Oversight Committee Reviews
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Finance Committee Recommendation for Council Referrals
1)AI strategy.
2)consultant best practices narrative, including impacts to date as part of
3)Palo Alto Golf Course P&L in a more complete way and evaluate golf fees,
4)outdoor recreation programs located at Cubberley.
5)- Evaluate acceleration of certain capital repair needs for Cubberley including potentially utilities
6) overtime budgeting for the Police Dept during the FY 28 budget
7)efficiency opportunities in Fire Dept during the FY 28 budget process.
BUDGET HEARING RECOMMEND – REFERRALS Table 3
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OTHER FUNDS
FY 2026 Adopted FY 2027 Proposed
Electric 6%6%**
Gas 12%*9% **
Water 10%8%
Wastewater 20%16%
Refuse 0%3%
Storm Drain 2%3%
Monthly Bill Amount $441.50 $477.80
Monthly Bill Change 9%*
$37.80
8%
$36.30
Additional actions included in the Proposed Budget address non-General Fund activities including but not limited to:
•Parking Funds
•Utility rate changes to the right
*Rates reflect rate change update in February 2026 due Cost of Service Analysis (COSA).
**On 4/21 Finance Committee recommendation Electric from 6.0% to 4.5%, Gas split 2:1 vote
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COMMITTEE RECOMMENDATIONS -
MOVE ITEMS FROM “YELLOW” TO “GREEN”
FY 2027 BUDGET PROCESS
Date to Budget ce
Potential
FY 2028 GF
ce Dept Date Parking Lot Items
FY 2027
GF
(cost)/sou
rce
(cost)/sou
rce Dept
Subtotal Sources (Revenue)$- $- Subtotal Sources (Revenue)$$
Subtotal Costs (Expense)$-$-Subtotal Costs (Expense)$$
Potential Funds Remaining Net
(cost) / source
$-$-Potential Funds Remaining Net
(cost) / source
$$
(1)Move items to
FC Adjustments to Budget
(2) Confirm Referrals
recommended to Council
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RECOMMENDED ACTION
DRAFT MOTION:
Recommend to the City Council:
1.Adoption of the FY 2027 Operating and Capital
Budgets and Municipal Fee Schedule, amended by:
a.the Table of Finance Committee Adjustments to
the Budget, including the Staff technical
adjustments
2. Approve the FY 2027-2031 Capital Improvement Plan,
amended by
a.Changes approved in the wrap-up discussion
Budget and meeting details listed at www.paloalto.gov/budget