May 11, 2026 www.paloalto.gov/budget
1 FY 2027 PROPOSED
OPERATING AND
CAPITAL BUDGETS
Finance Committee Update
&
Council Discussion
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 Council
City Council: FY 2027
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
• Balanced budget utilizing multi-
year strategies to navigate fiscal
challenges over several years
• Preserves most valued City
services, Council priorities, and
once in a generation investments
• Reflects staff’s hard look at all
services, service delivery
approaches and efficiencies, and
use of contracts as a starting
point for Council deliberations
3 OVERVIEW
Preserving valued city services
Community Centers, teen center, Palo Alto Junior
Museum & Zoo, parks, playgrounds, open space
preserves remain open and maintained
Police & Fire response to all priority emergency
calls, ensuring health and safety, and implementing
single-role EMS
Five libraries will remain open with a single day
closure of Children’s library
Ensure health and safety measures are addressed
on our streets, sidewalks, and trees
Utility services - water, electric, gas, wastewater, and sewer services will continue including key
investments and maintenance
Support the Development Center and planning
requests, building permits, and code enforcement
Manage traffic signals maintenance and timing and
youth education through safe routes to school
www.paloalto.gov/budget
• Operating budget totals $1.05 billion (1.9% increase), with General Fund totals $310.98 million (1.1% decrease)
• Capital budget totals $313.6 million in FY 2027 and $1.20 billion over the five-year Capital Improvement Program (CIP)
• Multi-year strategy to solve projected General Fund $17.1 million (or 5.5%) budget deficit.
• Continues the FY 2026 budget reductions.
• Projects Budget Stabilization Reserve between 17.4% to 18%. 4 PROPOSED BUDGET OVERVIEW
MULTI-YEAR GENERAL FUND BALANCING
• Current service level and revenue portfolio
• Disciplined ongoing costs with limited one-time funds use, including ADC in FY27 to FY30 • BSR within range of 15% to 20% but projected to decline to bottom of range (15%) 5 PROJECTIONS ($ million) FY 2027 FY 2028 FY 2029 FY 2030 FY 2031
GENRAL FUND
Revenue $ 310.98 $ 318.69 $ 329.12 $ 341.75 $ 353.94 Expense $ 309.40 $ 319.83 $ 333.93 $ 339.13 $ 344.74 Transfers (designated revenues) $ 1.59 $ (0.03) $ (2.16) $ 1.29 $ 1.51 Projected Surplus/(Deficit) $ 0.00 $ (1.12) $ (2.65) $ 1.33 $ 7.68
BUDGET STABILIZATION RESERVE
BSR projected balance $ 53.70* $ 52.58 $ 49.93 $ 51.26 $ 58.94 15%, 18.5%, 20% 17.4% 16.4% 15.0% 15.1% 17.1%
BSR @18.5% - Policy Target $ 57.24 $ 59.17 $ 61.78 $ 62.74 $ 63.78 Delta to 18.5% $ (3.54) $ (6.59) $ (11.85) $ (11.48) $ (4.84) *Sales Tax prior year adjustment may be more favorable increasing BSR by $2 M to $55.7 M or 18%
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
6 *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
SUMMARY OF FINANCE COMMITTEE
As of May 6th
May 11, 2026 www.PaloAlto.gov/budget 7
8 ADJUSTMENT(S) AND PARKING LOT
OVERVIEW
• Used as a running list of items Committee approves adjusting, items for further discussion (parking lot), and recommended use of funds available.
• Status reviewed at the end of each day
• Will inform the basis of the discussions with Finance Committee at budget wrap
9 FC RECOMMENDED BUDGET ADJUSTMENTS (as of May 6, 2026, 5pm) Date Finance Committee Adjustments to Budget
FY 2027 GF
(cost)/source
Potential
FY 2028 GF
(cost)/source Dept
Subtotal Sources (Revenue) $ - $
5/5/2026JMZ Conservation Costs and explore utilizing existing conservation programs to fulfill the AZA requirements to the extent possible | Reduce Hourly Positions
64,000 CSD
5/6/2026School Crossing Guards | 50% of Cost - Contingent upon match from PAUSD
(51,250) POL
5/6/2026Track Watch | 50% of Cost - Contingent upon match from PAUSD (March - June)
(307,715) POL
5/6/2026OSV - 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) CMO
6-MayNon-Profit Work Plan - Option C (see other details in motion) (124,000) CMO Subtotal Costs (Expense) $ (802,965) -
Potential Funds Remaining Net (cost) / source $ (802,965) $ TBD - 10 FC RECOMMENDED BUDGET ADJUSTMENTS (as of May 6, 2026, 5pm) Date FY 2027 Council Contingency
5-MayBeginning Balance $ 125,000
5/5/2026City Council Executive Assistant position funding. * Consider exception of CC Contingency carryforward to fund for 6 months ($30k)
30,000
Remaining: $ 155,000
11 Date Parking Lot Items
FY27 GF
(cost)/ source
Potential
FY28 GF
(cost)/source
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 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 To 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)
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
FINANCE COMMITTEE - “PARKING LOT” (as of May 6, 2026, 5pm) 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. 7) Referral to staff to evaluate potential efficiency opportunities in Fire Dept during the FY 28 budget process. 12 BUDGET HEARING RECOMMEND - REFERRALS (as of May 6th 5:00PM) www.PaloAlto.gov/budget
Finance Committee Request for Council MAY 11, 2026 (via this presentation) 1) Employee Childcare Pilot Program within the Long Range Financial Forecast (No near-term financial impact, recommend adjust forecast ongoing costs, include in May 11 CC memo) 2) CIP – KPIs: track delays, cost increases and deferred spending by program areas (Include the additional information in CC Memo May 11, include summary in the CIP budget transmittal/publication) (see CMR attachment)
3) Roth Building Maintenance *Park Drain Improvements (PG-21000) – (update CIP project text to prioritize Roth water intrusion)
Tree Trimming objectives (see CMR attachment)
13 BUDGET HEARING REQUEST – CONVEY TO COUNCIL
www.PaloAlto.gov/budget
1 Nonprofit Funding Levels Options for Consideration
Option A: No
Additional Funding
Option B: Keep Total
Nonprofit $’s Flat at
FY2026 Level $6.74M
Option C: Add Specific
Additional Direct
Allocations
Option D: Maintain
FY2026 Phase I Grant
Funding Levels
Includes:
• FY27 budget direct
allocations*
($78,280)
• $111k partially
funds add’l Direct
Allocations**
• No
funding for
NPW Phase I grant
process
Includes:
• FY27 budget direct
allocations* ($78,280)
• $165,418 partially
funds add’l Direct
Allocations**
• No funding for NPW
Phase I grant process
Includes:
• FY27 budget direct
allocations*
($78,280)
• $235k fully funds
add’l Direct
Allocations**
• No
funding for NPW
Phase I grant
process
Includes:
• FY27 budget direct
allocations*
($78,280)
• $235k fully funds
add’l Direct
Allocations**
• $193,366 to allocate
to NPW Phase I
grant process
Funding Gap $0 $54,418 $124,000 $317,366
*FY2027 Proposed Budget Direct Allocations (Ongoing) = Environmental Volunteers ($10,780), Neighbors Abroad ($17,500) & YCS YCI ($50k)
**Additional Direct Allocations = Magical Bridge ($150k), Cal Ave Music/PARF ($40k) & UNAFF ($45k) 1 Nonprofit Funding Levels Options for Consideration
Option A: FY 2027
Proposed Budget
Option B:
Add $54,418
Option C:
Add $124,000
Option D:
Add $317,366
Description Proposed budget
assumptions
Keep Total Nonprofit $’s Flat at
FY2026 Level $6.74M
Make Specific Additional
Allocations
Maintain FY2026 Phase I
Grant Funding Levels
HSRAP & CDBG &
Operating Services
$6,492,914
$942,971 HSRAP + $152k CDBG + $5,397,943 Operating Services (includes $200k for allcove) FY 27 Budget Direct
Allocations
$78,280
Ongoing $: Environmental Volunteers ($10,780), Neighbors Abroad ($17,500) & YCS YCI ($50,000) Additional Direct
Allocations**
$111,000
For partial direct
allocations &/or
Phase I
$165,418 (Partial funds)
($111k + $54,418)
$235,000
($111k + $124k)
$235,000
($111k + $124k)
$0 $0 $193,366
(remainder of the $317k)
NPW Phase I grant
process
Total Nonprofit $’s $6,682,194 $6,736,612 $6,806,194 $6,999,560 Funding Gap from Proposed Budget $54,418 $124,000 $317,366 **Additional Direct Allocations $235k = Magical Bridge ($150k), Cal Ave Music/PARF ($40k) & UNAFF ($45k) 1 Finance Committee Recommendation - Nonprofit Funding Levels MOTION: Councilmember Lauing moved, seconded by Councilmember Burt, to recommend the City Council tentatively approve:
• Option C for the appropriation modified the budget column; Add $124,000 funding for additional direct allocations to Magical Bridge, Cal Ave Music and Special Events, and UNAFF; • Parking lot item for the Council to approve Finance Committee recommendation that any additional grant funding that may be authorized by the Council be processed through HSRAP .
MOTION PASSED: 3-0
Note, for FY27 budget, the Canopy nonprofit contract is reflected at $368,450, a reduction of $43,550.
It was previously noted at $412,000 to Council in an April 6, 2026 study session, prior to publication of the proposed FY27 budget.
17 Technical Adjustments
Given 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 full list will be provided to Finance Committee on May 19th. • Utility – gas & electric: adjust duplicate entry for SCAP program and debt financing • Adjust FY 2026 reductions made ongoing (FTE impacts erroneously omitted) • Based on final reductions, reconciliation to ensure all allocations across internal service funds (e.g. benefit costs, vehicles, etc.) are balanced • Realignment of revenues/costs to align with revised utility rates • Staff will strive to ensure the General Fund fiscal impact for technical adjustments remains de minimis or net zero.
The community is encouraged to join the budget
conversations:
• Finance Committee Budget Hearings:
May 5 at 9:00 A.M.
May 6 at 9:00 A.M.
May 19 at 1:00 P .M. – Wrap-up
• City Council Budget Discussion:
May 11 at 5:30 P .M.
• City Council Budget Adoption:
June 15 at 5:30 P .M.
All meeting details listed at https://www.paloalto.gov/budget
JOIN THE BUDGET CONVERSATION
18 • Receive update on the detailed work
reviewing the budget documents
• Clarify understanding of current status
and policy decision the Committee seeks
feedback on
• Provide guidance to Finance Committee
colleagues for their final recommended
adjustments scheduled on May 19
th.
City Council FY 2027 Budget Adoption
scheduled on June 15
th.
• Budget and meeting details listed at
www.paloalto.gov/budget
COUNCIL DISCUSSION
19 Conclude
May 11, 2026 www.paloalto.gov/budget