If the budget is truly a reflection of a city's priorities, as it is often said, then solving the city's daunting parking and traffic problems will remain a leading item on Palo Alto's agenda for the coming year, the proposed budget for fiscal year 2017 suggests.
The new budget paints a picture of a city scouring for solutions, from a $500,000 "planning and transportation contingency" account, to $100,000 to support the city's new Transportation Management Authority, a traffic-fighting nonprofit; more than $7 million for bicycle improvements (funds to be spent over the next two fiscal years); close to $3 million that will be spent on road improvements near Palo Alto High School (also a two-year project); and $1.9 million that the budget proposes to devote to studies involving rail/roadway separations.
The budget, which the City Council is preparing to adopt on June 13, also reflects the city's growing challenges in recruiting and retaining workers. Salaries and benefit costs are going up by $6.9 million, or 4.3 percent, thanks in large part to new agreements with the city's workforce -- contracts that include both across-the-board raises and upward salary adjustments aimed at bringing many positions to the market median.
Overall, operating expenditures in the General Fund (which pays for most city services, not including utilities) are set to rise by $12.3 million, or 6.7 percent, over the current fiscal year. And even with the city's tax revenues enjoying several years of healthy growth, the rising costs have prompted City Manager James Keene to propose dipping into a reserve fund to balance the books -- a recommendation that received a mixed reception from council's Finance Committee, which has been reviewing the budget document for the past month.
In his transmittal letter, Keene attributes the city's ongoing challenges to the general climate of "prosperity" and to the "growing job demand and appeal of Silicon Valley."
"These challenges include: increased traffic and congestion, expensive housing, increasing demand for services, and conflicting views of the nature and pace of change," Keene wrote. "And despite a positive revenue picture, we have had to include one-time funding strategies in order to address demands for policy interventions due to the impacts of growth and several ill-timed mandated funding shifts. These are temporary fixes that will require resolution in the Fiscal Year 2018 budget process."
During its review, the Finance Committee recommended a series of changes the budget, including deferring a few capital-improvement budgets to save money and obviate the need to dip into reserves. These include roof replacement at several facilities in the Municipal Services Center and improvements to Rinconada and Ramos parks.
Rob de Geus, director of the city's Community Services Department, told the Finance Committee this week that removing the Rinconada Park project (which has a $3.3 million price tag) from the coming budget should not have any real impact on the effort to revamp the prominent site, given all the planning that still has to be done before construction launches.
"In reality, it's not really shovel-ready for us to start in 2017," de Geus said.
The various deferrals prompted Keene to reduce the amount to be transferred from the General Fund toward capital expenditures by $4.3 million, according to the new report.
To further cut costs, the committee also recommended that Keene reduce the number of new positions proposed in the fiscal year from 10 to either nine or eight (there was no clear consensus).
At the same time, the four-member committee recommended several additional expenditures, including funds for two new "residential preferential parking" programs in neighborhoods that have been clamoring for parking relief, with Evergreen Park and Southgate atop the priority list.
In addition, based on the committee's input, staff is now proposing a $500,000 "planning and transportation contingency reserve." These funds would be used to retain an urban-design professional to help draft design guidelines for two-story homes in Eichler neighborhoods. They would fund traffic analysis and safety enhancements on the northernmost segment of Middlefield Road, where alarmed residents have been seeing a number of accidents in recent months.
A new report from the Administrative Services Department states that the city is committed to undertaking a review of turn restrictions at two Middlefield Road intersections. The review, the report states, will include a "comprehensive analysis of traffic safety in this area, community engagement, and analysis of options for the future."
Whatever funds, if any, remain in this contingency after these two initiatives could be used on other efforts, including a proposed expansion of the city's shuttle system and unanticipated expenditures of parking-permit programs.
In addition to making these adjustments, the committee pushed back against Keene's proposal to draw $4.9 million from from the Budget Stabilization Reserve to balance the books. It directed staff to produce two additional budget scenarios: one that would limit the draw from the reserve to $3.5 million and another that would obviate the need for any reserve funds.
"We're coming off a record revenue year, and if we can't balance the budget in a record revenue year, what are we going to do when we don't have record revenue years and good times?" committee Chair Eric Filseth said on June 7. "I think a lot of the expenses this year are structural, and it's preparation for the future."
But Greg Schmid argued that it's equally important to retain the city's commitment to fixing up local infrastructure, even if it means dipping into the reserves. He said that he strongly supports the scenario that includes some transfer from the reserve, provided the Budget Stabilization Reserve doesn't fall below 18.5 percent of General Fund budget. Keene's initial proposal would have dropped the reserve to 18 percent.
"The postponing of infrastructure (spending) while we have money does not make sense because it says that next year we will have twice the level of infrastructure payments," Schmid said at the June 7 meeting.
Filseth, Schmid and their two committee colleagues, Karen Holman and Cory Wolbach, also pushed back against staff's proposal to reduce the tree-trimming cycle from seven to 15 years. Concerned about the effect this would have on trees, they recommended that the city go to a 10-year cycle, which would require an additional $170,000.