News

Divided City Council approves budget, avoids service cuts

Despite economic uncertainty, budget increases spending by $12M

The Palo Alto City Council approved a $209.2 million budget for fiscal year 2022 on June 21, 2021. Embarcadero Media file photo by Veronica Weber.

When Palo Alto City Manager Ed Shikada first presented his budget proposal in late April, the document was littered with unpopular proposals, from closing three library branches and defunding the Palo Alto Art Center to reducing the police force and shutting down a fire station.

That proposal bore little resemblance to the budget that the City Council passed on Monday night. Buoyed by federal funds, the city's cash reserves and increasingly optimistic revenue projections, a divided council approved a budget for fiscal year 2022 that restores most of the cuts that had previously been considered. It also increases funding for local nonprofits and creates a $500,000 "uncertainty reserve" that the council will be able to tap into over the course of the year to address unforeseen issues.

To avoid the types of cuts that Shikada had proposed, the council majority agreed to balance the budget in part by tapping into 60% of the city's allocation from the American Rescue Plan Act of 2021, as well as by dipping into the city's Budget Stabilization Reserve.

The 2022 budget includes $209.2 million in expenditures, an increase of $12.2 million from the current fiscal year, which ends on June 30. While it includes an elimination of 87 full-time positions and 102 part-time positions, nearly all of these are positions that the council froze last year, when the city's revenues began to plummet and the council approved nearly $40 million in budget cuts.

But unlike last year, when the council was united in the face of the pandemic, members on Monday split into two camps. Four council members, Mayor Tom DuBois, Vice Mayor Pat Burt and council members Lydia Kou and Greer Stone, pointed to positive economic signs — including recent projections about rising sales- and document-tax revenues — and advocated for restoring services and advancing a long-awaited and repeatedly delayed infrastructure project: the rehabilitation of the Roth Building. Three of their colleagues — council members Alison Cormack, Eric Filseth and Greg Tanaka — favored a more fiscally conservative approach, including delaying the project long eyed as the site of a new city history museum.

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The approved budget avoids some of the most contentious proposals in Shikada's budget, including a full "brownout" of Fire Station 2 in College Terrace and the closure of the Downtown, College Terrace and Children's libraries. The city is no longer looking to cut five police officer positions or eliminate popular Palo Alto Art Center programs such as Project Look and Cultural Kaleidoscope.

College Terrace Library would be open three days per week under the budget that the City Council approved on June 21, 2021. Embarcadero Media file photo by Magali Gauthier.

Some of these actions, however, may take some time to come about. Even though the council voted to reopen the three libraries that were slated for closure, staff warned that the Library Department doesn't have the personnel to operate these branches.

Library Director Gayathri Kanth said Monday that department has seven vacant positions.

"Those positions need to be filled before we would be able to open all the libraries," Kanth said.

Once the city recruits the needed staff — a process expected to take between three and six months — the libraries would be open three days per week. The Mitchell Park and Rinconada libraries would remain open six days per week.

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Burt, who serves on the council's Finance Committee, had advocated during the committee's budget review for using 60% of the city's $13.7 million allocation from the federal government (Shikada had initially recommended 50%) and using the city's Budget Stabilization Reserve to close the gap. In making the motion to approve the budget, he acknowledged that the city still has many fiscal challenges ahead in the ensuing years.

"We are not projecting to restore the cuts fully that were made last year, even in the coming few years, without a stronger recovery than we're projecting and or help from a business tax or another source," Burt said.

'It looked really bleak in the beginning and I think we made a lot of smart changes.'

-Greer Stone, city council member, Palo Alto

Some of his colleagues agreed that the brightening financial outlook warrants a reconsideration of the proposed cuts. In explaining their support for the budget, Dubois pointed to the "rapidly changing economic environment" since late April, while Stone observed that where the city is "ending up right now is far better than where we began."

"It looked really bleak in the beginning and I think we made a lot of smart changes," Stone said.

Others, however, cautioned that the budget is too optimistic. Both of Burt's colleagues on the Finance Committee — Cormack and Filseth — have argued over the course of the review that the city is merely deferring difficult decisions by using one-time funding sources to close the gap. Cormack suggested that the city's revenues may not be returning to their prepandemic levels any time soon.

"I feel what the majority is going to do today is based on hope and it doesn't match my value of fiscal sustainability," Cormack said.

Tanaka agreed and noted that many employees will not be returning to the office full-time, with some opting for remote work and others shifting to a hybrid model. By avoiding cuts, he argued, the city is "stealing from the future to make it look better for today."

Tanaka also criticized the city's proposal for spending too much on employee compensation and singled out the city's managers and professionals — the only major labor group that does not have union representation. While the managers and professionals are the only employee group that is slated to receive no raises in the next fiscal year, Tanaka suggested that the proposed agreement with the group remains too generous.

'The expectation that our revenue will come bouncing back — I don't know if it's realistic. I think it's hopeful.'

-Greg Tanaka, city council member, Palo Alto

Meanwhile, the city has failed in its mission to obtain $1.6 million in concessions from its labor unions. Last year, the Palo Alto Peace Officers' Association, which represents most police officers below management level, had agreed to defer its negotiated raises. This year, none of the public safety unions were willing to do so.

Tanaka pointed to the city's rising expenditures and unpredictable revenue sources as reasons to be cautious on the budget.

"The expectation that our revenue will come bouncing back — I don't know if it's realistic. I think it's hopeful," Tanaka said.

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Divided City Council approves budget, avoids service cuts

Despite economic uncertainty, budget increases spending by $12M

by / Palo Alto Weekly

Uploaded: Mon, Jun 21, 2021, 11:48 pm

When Palo Alto City Manager Ed Shikada first presented his budget proposal in late April, the document was littered with unpopular proposals, from closing three library branches and defunding the Palo Alto Art Center to reducing the police force and shutting down a fire station.

That proposal bore little resemblance to the budget that the City Council passed on Monday night. Buoyed by federal funds, the city's cash reserves and increasingly optimistic revenue projections, a divided council approved a budget for fiscal year 2022 that restores most of the cuts that had previously been considered. It also increases funding for local nonprofits and creates a $500,000 "uncertainty reserve" that the council will be able to tap into over the course of the year to address unforeseen issues.

To avoid the types of cuts that Shikada had proposed, the council majority agreed to balance the budget in part by tapping into 60% of the city's allocation from the American Rescue Plan Act of 2021, as well as by dipping into the city's Budget Stabilization Reserve.

The 2022 budget includes $209.2 million in expenditures, an increase of $12.2 million from the current fiscal year, which ends on June 30. While it includes an elimination of 87 full-time positions and 102 part-time positions, nearly all of these are positions that the council froze last year, when the city's revenues began to plummet and the council approved nearly $40 million in budget cuts.

But unlike last year, when the council was united in the face of the pandemic, members on Monday split into two camps. Four council members, Mayor Tom DuBois, Vice Mayor Pat Burt and council members Lydia Kou and Greer Stone, pointed to positive economic signs — including recent projections about rising sales- and document-tax revenues — and advocated for restoring services and advancing a long-awaited and repeatedly delayed infrastructure project: the rehabilitation of the Roth Building. Three of their colleagues — council members Alison Cormack, Eric Filseth and Greg Tanaka — favored a more fiscally conservative approach, including delaying the project long eyed as the site of a new city history museum.

The approved budget avoids some of the most contentious proposals in Shikada's budget, including a full "brownout" of Fire Station 2 in College Terrace and the closure of the Downtown, College Terrace and Children's libraries. The city is no longer looking to cut five police officer positions or eliminate popular Palo Alto Art Center programs such as Project Look and Cultural Kaleidoscope.

Some of these actions, however, may take some time to come about. Even though the council voted to reopen the three libraries that were slated for closure, staff warned that the Library Department doesn't have the personnel to operate these branches.

Library Director Gayathri Kanth said Monday that department has seven vacant positions.

"Those positions need to be filled before we would be able to open all the libraries," Kanth said.

Once the city recruits the needed staff — a process expected to take between three and six months — the libraries would be open three days per week. The Mitchell Park and Rinconada libraries would remain open six days per week.

Burt, who serves on the council's Finance Committee, had advocated during the committee's budget review for using 60% of the city's $13.7 million allocation from the federal government (Shikada had initially recommended 50%) and using the city's Budget Stabilization Reserve to close the gap. In making the motion to approve the budget, he acknowledged that the city still has many fiscal challenges ahead in the ensuing years.

"We are not projecting to restore the cuts fully that were made last year, even in the coming few years, without a stronger recovery than we're projecting and or help from a business tax or another source," Burt said.

Some of his colleagues agreed that the brightening financial outlook warrants a reconsideration of the proposed cuts. In explaining their support for the budget, Dubois pointed to the "rapidly changing economic environment" since late April, while Stone observed that where the city is "ending up right now is far better than where we began."

"It looked really bleak in the beginning and I think we made a lot of smart changes," Stone said.

Others, however, cautioned that the budget is too optimistic. Both of Burt's colleagues on the Finance Committee — Cormack and Filseth — have argued over the course of the review that the city is merely deferring difficult decisions by using one-time funding sources to close the gap. Cormack suggested that the city's revenues may not be returning to their prepandemic levels any time soon.

"I feel what the majority is going to do today is based on hope and it doesn't match my value of fiscal sustainability," Cormack said.

Tanaka agreed and noted that many employees will not be returning to the office full-time, with some opting for remote work and others shifting to a hybrid model. By avoiding cuts, he argued, the city is "stealing from the future to make it look better for today."

Tanaka also criticized the city's proposal for spending too much on employee compensation and singled out the city's managers and professionals — the only major labor group that does not have union representation. While the managers and professionals are the only employee group that is slated to receive no raises in the next fiscal year, Tanaka suggested that the proposed agreement with the group remains too generous.

Meanwhile, the city has failed in its mission to obtain $1.6 million in concessions from its labor unions. Last year, the Palo Alto Peace Officers' Association, which represents most police officers below management level, had agreed to defer its negotiated raises. This year, none of the public safety unions were willing to do so.

Tanaka pointed to the city's rising expenditures and unpredictable revenue sources as reasons to be cautious on the budget.

"The expectation that our revenue will come bouncing back — I don't know if it's realistic. I think it's hopeful," Tanaka said.

Comments

ALB
Registered user
College Terrace
on Jun 22, 2021 at 6:18 am
ALB, College Terrace
Registered user
on Jun 22, 2021 at 6:18 am

Thank you CC for saving the our branch libraries. Filseth and Stone are commended for impressing upon the city manager the residents’ support for these community assets. When pressed the city manager said it will be three to six months to hire personnel. The city needs to accelerate this process to better serve Palo Altans.


Online Name
Registered user
Embarcadero Oaks/Leland
on Jun 22, 2021 at 8:13 am
Online Name, Embarcadero Oaks/Leland
Registered user
on Jun 22, 2021 at 8:13 am

"The Mitchell Park and Rinconada libraries would remain open six days per week."

I hope this means that Rinconada WILL really be open six days a week rather than 4 days Wednesday-Saturday as it is now.

RE the PA police refusing to defer their raises, how about making the raises contingent on the police having gotten vaccinated, something too many refused to do and thus endangering US rather than protecting us. Shameful the city let this persist.


Phil Carmody
Registered user
Barron Park
on Jun 22, 2021 at 8:23 am
Phil Carmody, Barron Park
Registered user
on Jun 22, 2021 at 8:23 am

The libraries at Rinconada and Mitchell should open 7 days a week with afternoon Sunday hours.

The downtown and College Terrace libraries are too small to be taken seriously and a bookmobile would suffice in those two areas.

It is about time the PACC took a stand against Mr. Shikada's tight-fisted authoritarian management style and besides, city managers come and go. They are replaceable.

And speaking of the police force...they are easily replaceable as well and the current officers should consider taking a pay cut given that they don't do a whole lot around here.


Online Name
Registered user
Embarcadero Oaks/Leland
on Jun 22, 2021 at 8:42 am
Online Name, Embarcadero Oaks/Leland
Registered user
on Jun 22, 2021 at 8:42 am

"t is about time the PACC took a stand against Mr. Shikada's tight-fisted authoritarian management style and besides, city managers come and go. They are replaceable."

Totally agree on opening Rinconada and Mitchell Park 7 days a week.

As for Mr. Shikada, he's not tight-fisted when it comes to his own employment contract, growing his personal staff, double-staffing the solar permitting inspections as a "solution" for the known bad performance of a single staffer who should be replaced, when handing out consulting contracts to tell residents we're wrong in protesting traffic "improvements" that are dangerous or for approving multi-million-dollar contracts in areas like Fiber-To-The-Home where the city has NO expertise and can't even provide normal customer service during power outages.

Sure, he cam be replaced; check out how much it will cost us the first year if he's fired for cause or forced to resign and thereafter since he gets an addition full year of pension vesting further inflating our unfunded pension liabilities for years to come.


Name hidden
Downtown North

Registered user
on Jun 22, 2021 at 10:39 am
Name hidden, Downtown North

Registered user
on Jun 22, 2021 at 10:39 am

Due to repeated violations of our Terms of Use, comments from this poster are automatically removed. Why?


white male Palo Altan
Registered user
Another Palo Alto neighborhood
on Jun 22, 2021 at 10:52 am
white male Palo Altan, Another Palo Alto neighborhood
Registered user
on Jun 22, 2021 at 10:52 am

Although I agree that it’s good news that additional cuts were not made to the Library budget, I think it’s now time to ask some important questions about the library services being provided to Palo Alto residents. Using the 2021 approved budget as the base, I calculate that the Library has close to 44 FTE employees (40.5 FTE benefits-eligible and 3.3 FTE hourly) since positions were frozen a year ago. Between March 2020 and April 2021, none of the Palo Alto libraries were open to residents, although some services continued (such as book reserves and checkouts). Despite that, all staff continued their regular employment and were paid their regular salaries. Since April 2021, there has been some reopening to residents, with the current number of open hours now totalling about 67 hours per week (28 at Mitchell Park, 27 at Rinconada and 12 at Childrens). Again, all 44 FTE staff have been fully paid. Library users must now go to a library to pick up reserved books, check them out using the automated machines and then typically check them back in using the automated machines. Given the number of staff hours available (44 FTE times 40 hours/week) there is no reason that the libraries cannot open for more hours. The basic question that needs to be asked of the Library and City staff is why the hours are being reduced so significantly? What are the staff doing? The abolishment of the Library Advisory Commission was conveniently timed so there is no obvious group with the charge to ask such questions. And a footnote: No Library jobs were posted on the Palo Alto Human Resources website as of this morning.


Weifeng Pan
Registered user
Midtown
on Jun 22, 2021 at 11:21 am
Weifeng Pan, Midtown
Registered user
on Jun 22, 2021 at 11:21 am

Why is the City Hall still closed for service as of yesterday 06/21 when the entire California is open for business?


Online Name
Registered user
Embarcadero Oaks/Leland
on Jun 22, 2021 at 11:57 am
Online Name, Embarcadero Oaks/Leland
Registered user
on Jun 22, 2021 at 11:57 am

"although some services continued (such as book reserves and checkouts). Despite that, all staff continued their regular employment and were paid their regular salaries."

Actually they were also answering COVID questions left unanswered by the City Manager's Covid newsletter which was largely compiled unquestioningly from county press releases who could only read back info they'd already published. When assured that I could indeed read what was written and still needed my questions answered, they referred me to the head RESEARCH LIBRARIAN who did actually get answers.

Why not also question the fact that all the other NON-library staff "also continued their regular employment and got their full salaries??" They're paid a lot more than the librarians and often fail to do their jobs -- solar permitting, community outreach, Planning Dept research etc.

Just recently Public Works endangering Crescent Park residents and pets by negligently releasing a huge swarm of bees while removing a diseased tree and residents are still unsuccessfully trying to reach anyone in authority.

Paying and employing librarians is the least of our worries.


Annette
Registered user
College Terrace
on Jun 22, 2021 at 12:25 pm
Annette, College Terrace
Registered user
on Jun 22, 2021 at 12:25 pm

Editor: please reinstate the "like" feature. Online Name made some excellent points.

Since we are talking budget - for staff who opt to work remotely, does this choice/convenience impact salary? Those who do not work remotely incur numerous work-related expenses (commute costs, parking, wardrobe, etc) that those working from home do not. These expenses add up quickly; some adjustment may be in order.

I appreciate most of the final budget decisions, but Cormack and Tanaka made some good points last night. We could have waited on the Public Services building and we could wait on the Roth building. Why not have a queue for projects that are wanted and needed but not time critical?


rsmithjr
Registered user
Duveneck/St. Francis
on Jun 22, 2021 at 2:34 pm
rsmithjr, Duveneck/St. Francis
Registered user
on Jun 22, 2021 at 2:34 pm

The Roth building is deteriorating and some work is really needed.

I could have waited a long long time for the public safety building. No one I know thinks it is really needed.


Rodney Bloom
Registered user
Greenmeadow
on Jun 23, 2021 at 8:10 am
Rodney Bloom, Greenmeadow
Registered user
on Jun 23, 2021 at 8:10 am

Another potential revenue source which could provide supplemental funding for all of these municipal services would be for Palo Alto to allow an Indian gambling casino on the outskirts of town, perhaps on the east side off 101 near the Palo Alto Yaught Harbor and former city dump yard site.

It could be called the Ohlone Casino and Resort...operated by tribal descendants with full-fledged gaming, dining, and lodging.

This would attract many potential customers both local and from abroad + provide additional employment opportunities in both the service industry and management of information systems (MIS) sectors.


Francisco Alacante
Registered user
Stanford
on Jun 23, 2021 at 10:15 am
Francisco Alacante, Stanford
Registered user
on Jun 23, 2021 at 10:15 am

Regarding a hypothetical Palo Alto casino...if you build it, they will come.


Wilhelm Gerhardt
Registered user
Old Palo Alto
on Jun 23, 2021 at 3:42 pm
Wilhelm Gerhardt, Old Palo Alto
Registered user
on Jun 23, 2021 at 3:42 pm

I'd drive across 101 regularly to play blackjack or craps if the casino were only a mile or two away.

The gambling would all go towards a worthwhile cause...either winning a bundle for myself or losing and helping out the city of Palo Alto and the Native Americans.

It's a win-win for everyone.

Adding a good floor show and expansive buffet would also be a plus.


Online Name
Registered user
Embarcadero Oaks/Leland
on Jun 23, 2021 at 4:21 pm
Online Name, Embarcadero Oaks/Leland
Registered user
on Jun 23, 2021 at 4:21 pm

Re additional sources of revenue, given that the number of commuters here has tripled since 2017 to 2020 from 32,300 to 100,000+, I'd like to know how much money the city's left on the table by failing to impose a business tax like surrounding communities WHILE asking us, the residents who DO pay tax, to bear the burdens of all the cuts, the money it costs to debate the cuts and to maybe reinstate some of the threatened cuts.


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