Shortly after the Palo Alto City Council adopted a budget with a $1.4 million projected surplus, Mayor Judy Kleinberg issued a dire warning.
The city is facing threats to its fiscal health, she said, citing risks such as the huge cost of paying for its aging infrastructure and for its retirees' lifelong medical benefits.
"The future scenario is not a good one," Kleinberg said. Next year alone, she predicted, the city will need an additional $7 million to face such challenges.
To that end, Kleinberg asked the council to consider forming a new subcommittee, which she will appoint, to study "revenue creation and enhancement."
The council unanimously voted to consider that request at its next meeting, on June 19. If the council approves the idea, as expected, the ad hoc committee will return with a report in October or November with a plan of action.
Part of the need for such a new subcommittee arises because half of the council's four-member Finance Committee cannot address issues related to Stanford University. Councilwoman Dena Mossar's husband and Councilman Larry Klein's wife both work for Stanford.
The city is considering ideas to increase revenue that relate to the university, such as allowing the Stanford Shopping Center to expand, thereby increasing sales and sales-tax revenue.
Earlier in the evening, the council unanimously approved a $127.5 million general fund budget for in 2006-07, which includes the projected $1.4 million surplus.
The new spending plan will eliminate funding for the summer Brown Bag concerts and impose utility rate increases on residents and businesses, but will make relatively few other noticeable changes.
"In the four years that I've been on (the council), it was the easiest budget to review," Vice Mayor Yoriko Kishimoto said.
Most of the projected surplus -- the result of previous years' cuts and an improving local economy -- will go into a reserve fund to help the city maintain its aging streets, sidewalks, parks, buildings and other infrastructure.
But City Manager Frank Benest said that at the rate the city is spending down that reserve it will run out of money in 2011.
"We have serious structural issues that we will continue to have to address," Kishimoto said.
In other related business, the council voted to staff a fire station in the Palo Alto foothills for the entire summer this year. Last summer, the city only staffed Fire Station 8 on high fire alert days, saving the city approximately $100,000.
But this summer, as in other previous years, the city will staff the station all 120 days, using three firefighters working overtime. The change came at the behest of neighbors living in the hills, who felt the city was taking a risk by only staffing the station on certain days.
"If we don't do this, we are gambling," Kleinberg said.
The council voted 7-2 to make the change, at the request of Council members Larry Klein and Peter Drekmeier. Council members Kishimoto and Bern Beecham opposed, hoping to save the money.
The council also asked Benest to meet with the firefighters' union to explore cheaper ways to staff the fire station in future summers.
(Posted on Palo Alto Online 6/13/06)