Removing the top sustainability post, according to the budget, reflects "the shift in resources from a single chief sustainability officer to a program that spans the organization."
Shikada also proposes in the budget to merge the city's Department of Planning and Community Environment, which oversees land-use policies, code enforcement and long-term visioning efforts, with the Development Services Department, which handles planning and building permits. He also plans to eliminate a deputy city manager position, which until recently was occupied by Rob de Geus, and to hold vacant the positions of deputy fire chief and division manager at the Community Services Department.
The Police Department, which currently has 13 vacancies, will keep four officer positions unfilled in the coming year, according to the budget.
Shikada told the council during his budget presentation that the document represents a balance between achieving "fiscal sustainability" and making investments in each of the council's priority areas (transportation, climate change and railway grade separation).
"These are difficult choices that had to be made to maximize the services provided to the community while recognizing fiscal constraints," Shikada told the council.
Savings from these moves would be partially offset by the need to fill several key jobs that are currently vacant, including an assistant city manager position and a utilities general manager. Before Shikada took over as city manager last December, he had held both of these roles. As such, his appointment as city manager thus left City Hall with two senior-level vacancies that he now hopes to staff.
Shikada also proposes to beef up the city's newly created Office of Transportation (formerly a division of the Department of Planning and Community Environment) by adding a parking manager and a planner to an understaffed and overextended department, which has struggled over the past year to meet the council's and community's demands for new residential parking programs and traffic-fighting initiatives.
"This new office will be better able to proactively engage the community and address critical transportation needs," the budget states.
Overall, the budget proposes a cut of 9.95 full-time equivalent positions in general fund budget, which will not require any layoffs, Shikada said. This includes the six positions that the city has recently cut as part of its new partnership with the nonprofit Pets In Need, which now operates the city's animal services.
The budget continues Palo Alto's multiyear effort to address a projected pension deficit by contributing $6.2 million into an irrevocable trust that the city created three years ago. Since then, Palo Alto has contributed $22 million toward the Section 115 trust, which is devoted to addressing the city's long-term pension liability.
Even with the proposed position cuts and program reductions, the general fund (which pays for most basic services aside from utilities) is set to increase by 9.5%, from $210.7 million in the current fiscal year to $230.7 million in fiscal year 2020, which begins on July 1. The increase is driven in part by growing labor costs, which are projected to rise by 9.2% between the current budget and the next, and by more investment in infrastructure. Shikada's budget proposes to transfer $29 million from the general fund in 2020 to infrastructure, about $3.8 million more than was transferred in the current year.
At the same time, the city's overall budget, which includes utilities, is set to decrease by 1.69%, from $711.2 million to $699.2 million, reflecting changes in the city's Capital Improvement Program and the shift of planned projects that were previously planned for 2020 to future years.
The budget also offers some good news on the revenue front, with staff projecting significant increases in all major tax categories. This includes a 9.9% increase in sales tax revenues (which are projected to go up from $31.2 million to $34.3 million), a 7.3% increase in property tax revenues (which would rise from $45.3 million to $48.6 million) and a 17% increase in the hotel-tax revenues (which are estimated to grow from $25 million to $29.3 million). The general fund includes revenues of $232.1 million, an 8.2% increase from the 2019 total of $214.5 million.
As part of its long-term effort to contain costs, city staff is also now compiling a "service inventory," which will evaluate all city programs and their associated costs. Shikada said the city is working with the consulting firm Concordia, which is leading the city's Cubberley Master Plan effort, to "take the 'budget-ese' and turn it into English" so that the community could easily interpret the document.
The council's Finance Committee plans to review the budget over three hearings, which are scheduled for May 15, May 23 and May 28. On Monday, several council members noted that the document will force them to strike a delicate balance between addressing community concerns and setting aside more funds for pensions.
"This budget reflects the very difficult straddle we have before us, in which we have continued cost escalation of everything in the Bay Area, the increase in demand for services and infrastructure as our community grows and our move to accurately recognize some of our cost structure, including our commitment to fund our long-term liabilities," Mayor Eric Filseth said. "Those things to some extent mutually exclude one another."
Vice Chair Adrian Fine, who sits on the Finance Committee along with committee Chair Tom DuBois and Councilwoman Alison Cormack, concurred and said the city will have to make some changes, particularly if it is interested in achieving the $4 million in savings that the council had previously discussed (the service inventory is expected to inform the council in making the cuts).
"They won't be easy, they won't be popular, but I think staff has set us up well to do it through the service inventory and other things that are in there," Fine said.
One avenue that the city is banking on for savings is new public-private partnerships. In addition to its new partnership with Pets In Need, the city is also working with Friends of Junior Museum and Zoo to expand and renovate the popular children's zoo at Rinconada Park, a project that is funded largely through private fundraising.
The new budget proposes $25,000 to help transition Project Safety Net away from the existing "community collaborative" model, in which the city plays a leading role, to a new structure in which Project Safety Net is either a separate nonprofit or part of an established nonprofit. This will reduce the city's annual spending on Project Safety Net from the current level of $270,000 to $100,000 on an ongoing basis, the budget states.
While this shift is expected to save money in the long-term, Cormack cautioned that the benefits of public-private partnerships usually require some time to produce benefits.
"It's not a switch we can flip quickly and it is something where everyone in the community will have to participate," Cormack said.
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