1 Order of Proceedings
1. Staff presentation of AB 2561 and any labor group presentations
2. City Council Questions
3. Staff presentation of the FY 2026 Budget
4. One round of technical questions from City Council, excluding Attachment C
5. Public Comments
6. Recusal
7. Council discusses and approves items in Attachment C
8. Those recused from Attachment C rejoin
9. Council discuss and approve the remaining FY 2026 Budget
June 16, 2025 www.paloalto.gov
Public Hearing: AB2561
Vacancies, Recruitment,
and Retention
City Council
Item #23
• New legislation adopted in 2024
• Requires a public hearing once per fiscal year on:
• Current vacancies
• Recruitment and retention efforts
• Barrier to hiring and process improvements
• Must occur before budget adoption
• Recognized labor groups are offered opportunity to present AB2561 – Vacancy and Recruitment
3 Vacancy by Bargaining Unit
4 Bargaining Unit FTE Vacancies %
SEIU 605.35 75.25 12%
UMPAPA 54 10 18%
IAFF 96 8 8%
FCA 4 0 0%
PAPOA 78 9 12%
PMA 7 0 0%
Data as of May 2025
Vacancies Rate Citywide – 11%
• Comprehensive Recruitment Strategic Plan presented to Council May 6, 2024
• City Auditor Report to Policy and Services December 10, 2024
• Phase I completion of comprehensive strategic plan,
Phase II currently under way
• Positive Work Environment Initiatives
• Competitive target market-based compensation
Recruitment and Retention
5 • This concludes our presentation for AB2561
• Staff are available to answer any additional questions from Council • We invite any of our labor partners who are present to let us know if they have an interest in speaking.
Conclusion
6 7
Order of Proceedings
1. Staff presentation of AB 2561 and any labor group presentations
2. City Council Questions
3. Staff presentation of the FY 2026 Budget
4. One round of technical questions from City Council, excluding Attachment C
5. Public Comments
6. Recusal
7. Council discusses and approves items in Attachment C
8. Those recused from Attachment C rejoin
9. Council discuss and approve the remaining FY 2026 Budget
June 16, 2025 www.paloalto.gov/budget8
ADOPTION OF FY 2026
OPERATING & CAPITAL
BUDGETS, MUNICIPAL FEE
SCHEDULE, &
APPROPRIATION LIMITS
Item #23
CITY COUNCIL FY 2026 BUDGET ADOPTION OVERVIEW
Tonight’s meeting concludes the FY 2026 budget process
• Staff report provides summary of Finance Committee
deliberations to date
• Review final balancing actions
• Summarize referrals
• Other Actions: approve municipal fees, Non-Profit
Workplan Phase I Awards, appropriation limits, and
extend the Development Services Reserve Fund Policy
GOAL: Adopt the FY 2026 Operating & Capital Budgets and Municipal Fee Schedule and other actions above.
9 BUDGET CONVERSATIONS & CALENDAR
10 MAY 5 MAY 6 & 7 MAY 12 MAY 20 JUNE 4 JUNE 16
Finance Committee Budget
Workshops:
Review the proposed
budgets and recommend
amendment(s)
Study Session City
Council:
Finance Committee check-
in with the City Council
Non-Profit Workplan Phase I:
May 9 - Proposal deadline
May 28 & June 4 – Policy & Services review
& recommend awards
City 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
FY 2026 BUDGET SUMMARY
11 • Citywide Operating budget totals $1.0 billion
• Capital budget totals $312.9 million in FY 2026 and $1.1 billion over the five-year CIP General Fund Reserves
• Budget Stabilization Reserve (BSR) - $54.0 million projected FY 2026 balance (17.6% of expenses) • Uncertainty Reserve - $6.0 million remaining for future budget planning Staffing Levels: +18 Full-time FTE or 1.6% increase over the FY 2025 Budget (Citywide) • Includes +11 FTE in the General Fund or 1.8% increase over the FY 2025 Budget FY 2023
Actuals
FY 2024
Actuals
FY 2025
ADOPTED
FY 2026
ADOPTED
GF Revenue $254.8 $278.3 $287.5 $301.5
GF Expense $243.8 $281.1 $306.9 $313.4
GF Full-time Staffing
Citywide FT Staffing
553
1,018
586
1,063
603
1,092
614
1,110
12 FY 2026 Finance Committee Recommendations
(General Fund Sources or Revenues)
Dept
FY 2026 General Fund
Recommended Adjustments
FY 2026
Revenue or
Savings/ (Cost)
FY 2027
Revenue or
Savings/ (Cost)
General Fund Beginning Balance – Surplus/(Deficit) $- ($9,600,000) NON Use of Uncertainty Reserve (from FY 2026) - 4,000,000 FIR Paramedic transport fee revenue update 700,000 700,000 FIR First responder fee new revenue 100,000 200,000
CSD Rental and reservation fee revenue 100,000 100,000
Subtotal Sources (Revenue) $900,000 $5,000,000
13 FY 2026 Finance Committee Recommendations
(General Fund Uses or Expenses)
Dept
FY 2026 General Fund
Recommended Adjustments
FY 2026
Revenue or
Savings/ (Cost)
FY 2027
Revenue or
Savings/ (Cost)
NON Restore Uncertainty Reserve (6,000,000) -
FIR Single role ambulance model (600,000) (1,200,000)
NON Nonprofit Workplan Phase I (From $235k to $346k) (111,000) (111,000) CSD Grants community events program (50,000) (50,000)
CSD Youth Community Services YCI funding (50,000) (50,000) NON Defer capital projects & reduce General Fund transfer to Capital Fund (Placeholder)
3,200,000 1,000,000
NON General Fund expense savings (Placeholder) 2,711,000 1,011,000 Subtotal Uses or Expenses ($900,000) $600,000
General Fund Ending Balance – Surplus / (Deficit) $ - ($4,000,000) Uncertainty Reserve Balance $6.0M $2.0M
Budget Stabilization Reserve (BSR) Balance
BSR % of General Fund Expenses
$54.0M
17.6%
$54.0M
17.0%
14 FY 2026 Finance Committee Recommendations
Reserves and Placeholders
Finance Committee Reserve Recommendations:
1) Combine Uncertainty Reserve & Budget Stabilization Reserve 2) Achieve 18.5% or $60M in Fiscal Year 2027
3) Reduce ongoing budget deficit
Timeline to discuss and approve placeholder for $6 million budget savings
1) A least $6M, minimum $2M ongoing and $4M one-time
2) Finance Committee review on August 19, 2025
3) Council review and approval in September 2025
15 Capital Funding, Table of Organization & Municipal Fees • Capital Funding
• Reappropriations to continue capital projects in FY 2026 • Table of Organization
• Fire Single Role Ambulance Model: Add 6.00 FTE Full-time positions and 1.00 FTE Hourly positions
• Transportation Engineering: Add 1.00 FTE Principal Transportation Engineer and Eliminate 1.00 FTE Senior Engineer position
• Municipal Fees
• Adopt fees effective FY26
• Rental Registry Program Registration Fee Exemption for 2 categories • Planning and Development Services Reserve Fund Policy 16 Nonprofit Partnership Workplan Phase I
Funding Award
• P&S Committee Recommendation - Recommended by a
majority of the P&S Committee (2 of 3 members) with total award amount of $426,646, which is $30,646 above budget. • Should the Council wish to allocate funding above $396,000, options include:
• City Council Contingent account ($125,000 annually),
• Budget Stabilization Reserve (BSR) or Uncertainty Reserve, • Further increase the directed $6 million General Fund reductions
Organization
P&S
Recommendation
Ada's Café 10,000$
Children's Health Council 10,000$
Dance Action Inc -$
DreamCatchers 15,000$
Environmental Volunteers 10,780$
JobTrain 45,000$
Karat School Project 20,000$
LifeMoves 48,366$
Loaves & Fishes Family Kitchen -$
Magical Bridge Foundation 100,000$
Midpen Media Center -$
Momentum for Health 15,000$
Museum of American Heritage -$
Musical Memories Foundation, Inc 5,000$
Neighbors Abroad 12,500$
Palo Alto Chamber Foundation: Third
Thursday 40,000$
Palo Alto Museum Not Discussed
Palo Alto Special Education PTA 5,000$
Partners & Advocates for Remarkable
Children & Adults (PARCA) -$
Peninsula Healthcare Connections Inc 20,000$
UNAFF 20,000$
Vista Center for the Blind and Visually
Impaired -$
Youth Community Service 50,000$
Subtotal 426,646$
Balance (of $396,000 recommended
target budget) (30,646)$
*
*Palo Alto Museum Proposal for $55,000
funding not included in recommendation
17 Referrals for Fiscal Year 2026 Finance Committee Workplan • Cost Recovery Policy
• Update the City Cost Recovery Policy to include a new 100% cost recovery category
• Update Fee Cost Recovery Category
• Summarize the current fee cost recovery category by fee type and update to reflect current policy direction on cost recovery and revenue enhancement objectives.
18 DRAFT MOTION FOR CITY COUNCIL CONSIDERATION
(Based on Supplemental Memo)
1) Adopt the Fiscal Year 2026 Budget Ordinance which includes the Operating and Capital Budgets, Table of Organization, and Municipal Fee Schedule, as amended by the actions outlined in this report;
2) Accept the FY 2026-2030 Capital Improvement Plan as amended by the actions outlined in this report;
3) Adopt a Resolution determining the Appropriations Limit for Fiscal Year 2026; 4) Receive information regarding vacancies and recruitment efforts as required by Assembly Bill 2561/Government Code section 3502;
5) Approval of FY 2026 Non-Profit Workplan Phase I Awards; and 6) Adopt a Resolution to Extend and Amend the Development Services Reserve Fund (DSRF) Policy Resolution, previously adopted by Resolution No. 10142. 19 Order of Proceedings
1. Staff presentation of AB 2561 and any labor group presentations
2. City Council Questions
3. Staff presentation of the FY 2026 Budget
4. One round of technical questions from City Council, excluding Attachment C
5. Public Comments
6. Recusal
7. Council discusses and approves items in Attachment C
8. Those recused from Attachment C rejoin
9. Council discuss and approve the remaining FY 2026 Budget