City Council
Staff Report
From: City Manager
Report Type: CONSENT CALENDAR
Lead Department: Transportation
Meeting Date: November 17, 2025
Report #:2508-5125
TITLE
Approval of Funding Agreements with Stanford University to Receive up to $600,000 and VTA for up to $456,000 to Partially Fund Palo Alto Link through June 2026, and Related Budget Amendments in the General Fund; CEQA status – not a project.
RECOMMENDATION
Staff recommends that the Council:
1. Approve and authorize the City Manager or their designee to execute a Cost Sharing Agreement to receive funding from Stanford University to fund Palo Alto Link Services to Stanford Research Park up to $600,000 through June 30, 2026 (Attachment A);
2. Approve and authorize the City Manager or their designee to approve a Funding Agreement with VTA to Receive $456,500 from the Transportation Fund for Clean Air (TFCA) grant program to Fund Palo Alto Link in FY26 (Attachment B);
3. Amend the Fiscal Year 2026 Budget Appropriation for the General Fund in the Office of Transportation (requires 2/3 approval) by:
a. Increasing the revenue estimate from Stanford University by $340,000; b. Increasing the revenue estimate for grants by $456,500; c. Increasing the Office of Transportation contract services appropriation by $796,500.
EXECUTIVE SUMMARY
The recommended action to approve funding agreements with Stanford University for $600,000, along with confirmed additional grant funds awarded from the VTA’s Transportation Fund for Clean Air (TFCA) program ($456,500), to support Palo Alto Link (PAL) services through June 2026, while maintaining the service’s reliance upon the General Fund at $250,000 for FY 2026.
BACKGROUND
On December 12, 2022, City Council approved the contract for Palo Alto Link (PAL) service.1 This service addresses first-/last-mile access in Palo Alto and provides a convenient and affordable transportation option for residents, employees, and vulnerable or transit-dependent populations. PAL currently provides on-demand service Monday-Friday for a 12-hour service span 7:00 am-7:00 pm. The service operates within most of the City, except the areas of open space in the Foothills and East Bayshore areas and very low-density housing at the urban-wildland interface. With the help of a web application, PAL utilizes a ten (10) vehicle fleet to provide virtually positioned pick-up and drop-off locations within an acceptable walking distance of origins and destinations. Door-to-door service a booking agent available by phone is available for riders who require extra assistance.
On April 10, 2023, Council approved a cost sharing agreement with Stanford University for service to the Stanford Research Park, extending the program service area and providing full fare and trip cost coverage for all riders‘ trips into and out of the Park, with Stanford reimbursing 30% of the monthly operating costs of the total Palo Alto Link program. 2 On October 28, 2024, the cost sharing agreement was updated to a usage-based agreement, such that Stanford would cover the portion of the total operating costs reflective of their monthly percentage of trips to/from the Stanford Research Park. 3 Since that agreement, Stanford’s cost sharing portion has ranged between 35% and 50% per month, calculated as a percentage of each month’s total costs for the service.
While the initial Measure B Innovative Transit Grant funds of $2,000,000 have been spent down, staff have partnered with Via to pursue additional grant funds to extend the term of service of Palo Alto Link and decrease reliance upon City funds. As a result of these grant writing efforts, the City has successfully obtained two successive rounds of the Bay Area Air Quality District’s (BAAQMD) Transportation for Clean Air (TFCA) fund, which is administered by VTA. The initial $441,000 grant was utilized for services provided from January 1, 2025 through June 30, 2025. A second award has been granted in the most recent round, and is available for services through the current fiscal year.
As part of the annual budget process, City Council considers and approves PAL service levels and funding. As part of the FY 2026 Adopted Operating Budget, 4 the Council approved funding of $550,000 in the General Fund for six months of PAL Services on June 16, 2025. On June 17, 2025 1 City Council meeting 12/12/2022, Item#8:
https://cityofpaloalto.primegov.com/portal/item/?meetingItemId=20f80994-de00-4d1a-aa0b-9e37365ba583 2 City Council meeting 4/10/2023, Item#7:
https://cityofpaloalto.primegov.com/Portal/Meeting?meetingTemplateId=1109 3 City Council meeting 10/28/2024, Item#10:
https://cityofpaloalto.primegov.com/Portal/Meeting?meetingTemplateId=14449 4 FY 2026 Adopted Operating Budget - Office of Transportation pages 347-358:
https://www.paloalto.gov/files/assets/public/v/1/administrative-services/city-budgets/fy-2026-city- budget/adopted/fy-2026-adopted-operating-budget_final.pdf an amendment to authorize $1.1 million in Palo Alto Link services for Fiscal Year 2026 pending support from other sources 9 was approved. This contract was expected to be partially offset by revenue from Stanford (up to $600,000) and fare revenue from riders ($40,000) for a cost to the General Fund of $250,000. The contract enables service through June 2026 were grants to be received to fund services.
Council also directed staff to explore options for decreasing the use of City General Funds for PAL ongoing, such as grant funding, replacing the service with more cost-effective transit options, or helping existing users to find alternatives if service is discontinued in June 2026.
ANALYSIS
Finding and securing funding partnerships such as the cost sharing agreement for trips to Stanford Research Park (SRP) has been integral to funding PAL services. The cost sharing agreement provided in Attachment A allows the City to continue offering PAL service throughout the service area for the remainder of FY 2026, with trips that start, are internal to, or end in SRP fully subsidized by SRP.
This funding agreement and the most recent award of TFCA grant funds, of $456,500, will allow the City to continue PAL services through the end of FY 2026 with the currently contracted $1.1 million.
NEXT STEPS
Based on this cost sharing agreement, the City will continue to provide PAL service to and from Stanford Research Park with costs reimbursed by Stanford through June 30, 2026.
In Fall 2025, staff will present future service and funding options for PAL to PTC and to City Council in early calendar year 2026. Specifically, staff will provide options for decreasing the use of City General Funds for PAL ongoing, such as grant funding, and/or replacing the service with more cost-effective transit options and the resulting transition to aid existing users to find alternatives if service is discontinued in June 2026
FISCAL/RESOURCE IMPACT
As part of the FY 2026 Adopted Operating Budget, the Council approved funding of $550,000 in the General Fund for six months of PAL Services. These costs were partially offset by revenue from Stanford ($260,000) and fare revenue from riders ($40,000) for a cost to the General Fund of $250,000. The up to $600,000 cost sharing agreement and the $456,500 TFCA grant funding increases revenue to support the previously approved $1.1 million PAL contract. This maintains the use of City General Fund for PAL in FY 2026 at $250,000.
Funding for PAL services in future years will be subject to funding appropriation by the Council as part of the annual budget process; however, as part of the FY 2026 Adopted Budget the Council 9 City Council meeting 6/17/2025, Item#AA2:
https://cityofpaloalto.primegov.com/Portal/Meeting?meetingTemplateId=17567 only approved funding through June 2026 11, indicating that General Fund support may not be provided in future years.
STAKEHOLDER ENGAGEMENT
This cost-sharing agreement reflects engagement with stakeholders and potential funding partners on Palo Alto Link (PAL). Since PAL service launched on March 7, 2023, community engagement and marketing activities has also included tabling at community events and destinations, social media campaigns, and online campaigns provided by the vendor to existing users. Additional community engagement will occur in Fall 2025 to discuss options for the future of the program.
ENVIRONMENTAL REVIEW
Council action on this item is not a project as defined by CEQA under CEQA regulation 15061(b)(3).
ATTACHMENTS
Attachment A: Cost-Sharing Agreement between the City of Palo Alto and Stanford for On- Demand Transit Services (Sept. 2025-June 2026)
Attachment B: Santa Clara Valley Transportation Authority Congestion Management Program Transportation Fund For Clean Air Agreement FY2025/26
APPROVED BY:
Ria Hutabarat Lo, Chief Transportation Official