Palo Alto adopts $1B budget, revamps ambulance service

Facing a turbulent financial outlook, Palo Alto adopted on Monday a $1-billion budget that revamps the Fire Department’s ambulance service, expands funding for nonprofit groups and delays decisions on budget cuts until later this year.

The spending plan that the City Council adopted by a 6-0 vote, with Councilmember Greer Stone absent, includes one major wildcard — $6 million in unspecified cost savings. What exactly those will be remains to be seen, but the council directed staff to take $2.7 million from operating expenses and $3.2 million from capital projects.

This will likely means delaying infrastructure maintenance in Utilities and Public Works departments.

Otherwise, most departments will largely retain their existing staffing and service levels. The general fund, which pays for most expenses not relating to utilities, is set to go up from $306.9 million in the current fiscal year to $313.4 million in 2026, which begins July 1.

A glaring exception is the fire department, which will now have a civilian division handling medical calls, a function that for the past half century has been performed by firefighters. The budget will add six full-time paramedic positions, a nod to the fact that medical calls now make up the vast majority of fire department responses.

The budget also adds three fire captains for Station 4 near Mitchell Park, positions that will supervise a three-person crew that is charged with cross-staffing a fire engine and an ambulance at the station. The change mean that nine of 11 new full-time positions that are proposed in the general fund this year are in the fire department.

To address a funding gap, the budget proposed by City Manager Ed Shikada taps into the “uncertainty reserve” that the council established during the pandemic. In reviewing the proposal in May, the council Finance Committee pushed back against that strategy and recommended maintaining $6 million in that reserve for future years. This means that after its summer break, councilmembers will be looking for ways to trim costs and restore that $6 million.

The biggest debate on Monday came over an item that takes up a relatively low proportion of the budget: funding for nonprofit. The council recently revamped its process for funding nonprofits by requiring aspiring grantees to submit applications and partake in a competitive process that is adjudicated by the council’s Policy and Services Committee.

In theory, the change was supposed to make the process simpler and fairer. In practice, it had the opposite effect, as some nonprofits that for years had received dedicated city funding now found themselves competing with other groups. The 22 nonprofits for which the committee approved $426,646 in funding ranged from Neighbors Abroad, which administers the city’s sister city program, to Dreamcatchers, which supports middle school students from disadvantaged neighborhoods.

Sarah Burgess, president of Neighbors Abroad, lamented the fact that her group, which was formed around 62 years ago, now has to compete for public funding with nonprofits that provide critical social services. Being a nonprofit is “a tax category not a budget category,” she said.

“We stand out as the most egregious example of why the nonprofit catch-all doesn’t work,” Burgess said.

City leaders acknowledged that the process is far from perfect. Councilmember Julie Lythcott-Haims, who sits on the Finance Committee, called it a “complex conundrum.” Councilmember Pat Burt, who chairs the committee, went further and likened it to the “Hunger Games of nonprofits.”

“Where they’re really having to fight amongst each other for these funds with rules that were developed on the fly after the game started,” Burt said.

The council ultimately adopted the funding plan proposed by Policy and Services Committee and supplemented it with funding from the council’s contingency fund, which they can tap into for discretionary spending. This allowed the council to increase funding for Magical Bridge Foundation and the United Nations Association Film Festival, two nonprofits whose allocations were below what they had initially requested.

The proposal from Burt, which the council unanimously adopted, also pulls two nonprofits — Neighbors Abroad and Environmental Volunteers — out of the competitive pool and into other sections of the budget. The change effectively treats the city’s partnerships with these two nonprofits as service agreements with guaranteed annual payments rather than grant applications.

Another program that can see some change, or even potential elimination, is Palo Alto Link, the city’s rideshare program. While staff had proposed extending the contract with the driving vendor, Nomad Transportation, for another year, councilmembers wondered if the program should continue at all.

Councilmember Keith Reckdahl was the first to suggest that Palo Alto Link is not sustainable and suggested that the city keep the service on a “very short leash,” with a contract term shorter than a year. Several of his colleagues quickly concurred, with Mayor Ed Lauing and Burt both supporting a six-month contract with Nomad as the city explores other grants that could extend the program. The council endorsed that approach.

Even though the council had already trimmed some expenses last year by making minor service changes, the program is still projected to cost the city $500,000 over the next year, according to staff.

“Palo Alto Link is likely not sustainable and likely not something we want to subsidize as a car trip,” Lu said. “But I think we also need to terminate it gracefully. We need to give people at least a few months of heads-up so people can make their plans — people who rely on it.”

The council is scheduled to consider the Nomad contract on Tuesday, at its final meeting before its summer recess.

This story originally appeared in Palo Alto Weekly. Gennady Sheyner is the editor of Palo Alto Weekly and Palo Alto Online. As a former staff writer, he has won awards for his coverage of elections, land use, business, technology and breaking news.