In adopting the $153 million budget for fiscal year 2013, which begins July 1, the council avoided some of the most severe recommendations in City Manager James Keene's initial proposal, including one that would have shuttered the local animal shelter on East Bayshore Road and outsourced animal services to another agency. But the budget, while preserving the popular shelter, leaves it under a cloud of financial uncertainty. The city plans to save $449,000 in animal services this year through staff cuts and revenue increases.
The operation is in dire financial straits because of Mountain View's decision last year to terminate its partnership with Palo Alto and to join the Silicon Valley Animal Control Authority in Santa Clara. The move will deprive Palo Alto of the $470,000 in annual contributions it has been receiving from Mountain View.
Several animal-services employees and members of the nonprofit Friends of the Palo Alto Animal Shelter made a pitch for keeping the operation intact — or at least making a smaller cut to its budget.
Hillary Stangel, a member of the Friends group, urged the council to cut only $300,000, saying the sum is "absolutely possible to reproduce through private donations, improving efficiencies, higher fees and strengthened marketing."
But the city's deficit in the animal-services operation is not a one-time hole but an ongoing funding gap, Keene said. He stressed the need to achieve "structural" savings.
"We need to get on this soon," Keene said. "The more we delay, the more the cost increases."
The council vote Monday also means that starting July 1, monthly water rates in Palo Alto will go up by $8.52 on an average residential bill. The increase is driven by major infrastructure projects on both the regional and the local level. The San Francisco Public Utilities Commission, which provides water from the Hetch Hetchy system to Palo Alto and 27 other cities, is in the midst of repairing and seismically retrofitting the water system. At the same time, Palo Alto is performing its own infrastructure upgrades, including construction of a new emergency reservoir at El Camino Park.
Refuse, storm drain and wastewater rates are also slated to go up for residential customers in July, though the city's Chief Financial Officer Lalo Perez said that these hikes would be offset on the average monthly utility bill by the $18.03 drop in gas rates. Overall, Perez said, the average residential bill is set to drop by about $4.20, from $235.94 to $231.74.
At the same time, the city is raising most of its fees, including the rates for renting garden plots at community gardens and art studios at Cubberley Community Center. Palo Alto's newly approved fee schedule raises fees citywide by about 3 percent to help cover the cost of providing services, Perez said.
The approved budget also makes major changes in the city's Fire Department. It eliminates six firefighter positions and adds a second full-time ambulance (the city currently has one ambulance staffed full time and a second one that is staffed through overtime for 12 hours a day). The department is also closing Station 7, which serviced the SLAC National Accelerator Laboratory in Menlo Park. The U.S. Department of Energy, which operates SLAC, decided that the center no longer needs an on-site fire station and switched to the Menlo Park Fire Protection District. These changes, along with others including a new labor contract, amount to a budget savings of $2.2 million.
The budget was passed after a month of vetting by the council's Finance Committee and two public hearings by the full council. And while the council approved it with no arguments or dissenting votes, members warned that next year's budget could prove to be more difficult. The city's pension and health care costs are projected to continue to rise. At the same time, the council is awaiting the results of a new cost-of-service study that could lead to a revamping of city fees.
Keene noted that the city has reduced its General Fund — the part of the budget that supports most city services other than utilities — by 11 percent over the past four years and that its workforce has been cut by about 10 percent.
Keene also said that of the $26 million the city trimmed off its General Fund since fiscal year 2010, $17 million has been made in structural cuts.
Several council members acknowledged the budget challenges that lie ahead. Councilwoman Nancy Shepherd, who chairs the Finance Committee, said that next year the city will also be moving ahead with its takeover of Palo Alto Airport operations from Santa Clara County (the new budget introduces an enterprise fund for the airport). It will thus further increase the already broad array of services the city provides, she said.
Councilman Larry Klein said he and his colleagues know that "our route to the future isn't going to be much easier,"
"Unless something dramatic occurs in our city, we'll have some very tough decisions to make when we consider the 2014 budget a year from now," Klein said at the conclusion of the meeting. "But I think we're on the right track."