City Council
Staff Report
From: City Manager
Report Type: CONSENT CALENDAR
Lead Department: Human Resources
Meeting Date: September 9, 2026
Report #:2608-6620
TITLE
Adoption of Side Letter Between the City of Palo Alto and Utilities Management and Professional Association of Palo Alto for a Hiring Incentive; CEQA Status - Not a Project.
RECOMMENDATION
Staff recommends that Council adopt the side letter of agreement (Attachment A) between the City of Palo Alto and Utilities Management and Professional Association of Palo Alto (UMPAPA) which authorizes Council Appointed Officers to authorize a hiring incentive for critical personnel vacancies.
BACKGROUND
The City's recruitment and labor strategies emphasize the successful recruitment of top-quality employees and maintaining competitive salaries to continue being an Employer of Choice.
Effective recruiting involves understanding the job market, industry trends, and adapting to current conditions by implementing strategic initiatives to successfully hire for specialized positions. These strategies also result in continuing to improve employee retention and decrease in turnover.
Utilities Department leadership and Human Resources (HR) recruitment reviewed classifications represented by UMPAPA that are difficult to fill. In such recruitments, a hiring incentive may be needed to finalize an employment offer. The proposed incentive structure authorizes the City Manager to provide a hiring incentive for critical personnel vacancies. This recruitment strategy aligns with the hiring incentive in the Management and Professional Compensation Plan approved in June 2025 and similar to the hiring incentive approved by City Council in June 2026 for the Palo Alto Police Officers Association.
ANALYSIS
The City has experienced recruitment challenges in filling certain critical positions within the Utilities Management group. Currently, the primary financial incentive available to attract qualified candidates is placement at a higher point within the established salary range.
A one-time hiring incentive would provide the City with an additional recruitment tool and greater flexibility in structuring a competitive total compensation package for selected candidates. The availability of a one-time incentive at the time of hire may also reduce the need to place candidates near the top of the salary range, thereby potentially slowing the growth of the City’s ongoing salary and related benefit costs. The proposed hiring incentive program is intended to address recruitment challenges associated with difficult-to-fill positions while maintaining a financially sustainable approach to employee compensation. Similar to the other incentive programs, the hiring incentive is not to exceed 5% of the authorized position, eligible recruitments are to be determined by the Human Resources and Utilities Departments, with approval of award to be authorized of the City Manager.
The City’s labor relations staff completed the meet and confer process required to initiate a hiring incentive program for Utilities management. The attached side letter authorizes the City Manager to provide a hiring incentive.
FISCAL/RESOURCE IMPACT
All expenses related to this incentive program for hard-to-fill positions must be funded through Utilities Department salary savings. This additional cost is offset by lost productivity due to prolonged vacancies and will be managed to ensure funds remain within existing budget appropriations.
STAKEHOLDER ENGAGEMENT
City staff engaged with internal stakeholders throughout the development of the side letter to ensure accurate alignment with organizational needs. The HR Department consulted with department leadership and labor representatives to review the proposed hiring incentive, assess operational impacts, and verify fiscal consistency with the FY 2027 Proposed Budget. All required meet and confer obligations were satisfied, and no outstanding labor issues remain related to the proposed Memorandum of Agreement revision. This side letter will be posted on the HR website for public viewing.
ENVIRONMENTAL REVIEW
Council action on this item is not a project as defined by CEQA because adopting side letters is a continuing administrative activity. CEQA Guidelines section 15378(b)(2).
ATTACHMENTS
Attachment A: UMPAPA Hiring Incentive Side Letter 2026
APPROVED BY:
Sandra Blanch, Human Resources Director