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City Council
Supplemental Report A
From: Lauren Lai, Administrative Services Director
Meeting Date: June 16, 2025
Item Number: 23
Report #:2506-4822
TITLE
PUBLIC HEARING: Presentation on Status of Vacancies and Recruitment and Retention Efforts and Adoption of Budget Ordinance for Fiscal Year 2026, Including the Operating and Capital Budgets and Municipal Fee Schedule; Adoption of a Resolution determining the Appropriations Limit for Fiscal Year 2026; Vacancies and Recruitment Update (AB2561 Compliance); and Approval of FY 2026 Non-Profit Workplan Phase I Awards as Recommended by the Policy & Services Committee; and Adoption of a Resolution to Extend and Amend the Development Services Reserve Fund Policy; CEQA Status – Not a Project
RECOMMENDATION
This supplemental report amends the agenda title, staff recommendation, and report attachments to Item #23 on the City Council June 16, 2025 agenda to include the adoption of a resolution to extend and amend the Development Services Reserve Fund Policy. The below redlines reflect the recommended changes:
Title Amendment:
Adoption of Budget Ordinance for Fiscal Year 2026, Including the Operating and Capital Budgets and Municipal Fee Schedule; Adoption of a Resolution determining the Appropriations Limit for Fiscal Year 2026; Vacancies and Recruitment Update (AB2561 Compliance); and Approval of FY 2026 Non-Profit Workplan Phase I Awards as Recommended by the Policy & Services Committee; and Adoption of a Resolution to Extend and Amend the Development Services Reserve Fund Policy; CEQA Status – Not a Project
Recommendation Amendments:
The Finance Committee and Staff recommend that the City Council hold a public hearing to:
1. Adopt the Fiscal Year 2026 Budget Ordinance (Attachment A), which includes:
a. City Manager’s Fiscal Year 2026 Proposed Operating and Capital Budgets, previously distributed at the May 5 City Council Meeting (Attachment A, Exhibit 1) b. Amendments to the City Manager’s Fiscal Year 2026 Proposed Operating Budget (Attachment A, Exhibit 2)
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c. Amendments to the City Manager’s Fiscal Year 2026 Proposed Capital Budget (Attachment A, Exhibit 3)
d. Fiscal Year 2026 City Table of Organization (Attachment A, Exhibit 4) e. Fiscal Year 2026 Municipal Fee Changes (Attachment A, Exhibit 5) f. Planning and Development Services Cost of Service Study and Municipal Fee Adjustments (Attachment A, Exhibit 6)
g. Citywide Cost of Services Study and Municipal Fee Adjustments (Attachment A, Exhibit 7)
2. Accept the Fiscal Year 2026 – 2030 Capital Improvement Plan
3. Adopt a Resolution determining the Appropriations Limit for Fiscal Year 2026 (Attachment B)
4. Comply with Assembly Bill 2561 / Government Code § 3502.3Receive information regarding vacancies and recruitment efforts as required by Assembly Bill 2561/Government Code section 3502 (Attachment D).
5. Approval of FY 2026 Non-Profit Workplan Phase I Awards (To be released as a supplemental memorandum after the June 4, 2025 Policy & Services Committee.)
6. Adopt a Resolution to Extend and Amend the Development Services Reserve Fund (DSRF) Policy Resolution of the Council of the City Palo Alto to Extend and Amend the Development Services Reserve Fund Policy, previously adopted by Resolution No. 10142
BACKGROUND
In November 2017, the City council established the Development Services Reserve Fund through a 5% surcharge intended to ensure financial stability to address unexpected budget shortfalls. The target of the reserve is equal to three months of average recurring operating costs. Reserve funds were expended in FY 2020 and FY 2021 to cover pandemic-related operating losses and to maintain continuity of services.
In January 2024, the City Council adopted Resolution No. 10142 to extend and amend the Development Services Reserve Fund Policy. The amended policy continued the City’s practice of maintaining a dedicated reserve for the Planning and Development Services Department through FY 2025.
As part of the Fiscal Year 2026 budget process, the City completed a new Cost of Services Study for the Planning and Development Services Department. The proposed FY 2026 Fee Schedule, which is being brought to Council on June 16, 2025, as part of this agenda item #23, assumes continuation of the 5% surcharge and the ongoing application of the DSRF policy. Therefore, the resolution is recommended to be updated to extend the reserve policy through FY 2034 to align with the expected timeline for the next Cost of Services Study. This was mistakenly not included in the original item materials.
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ATTACHMENTS
Supplemental Attachment A: Resolution to Extend and Amend the Development Services Reserve Fund (DSRF) Policy Previously Adopted by Ordinance No 10142 APPROVED BY:
Lauren Lai, Administrative Services Director