Fiscal Sustainability: A Community Conversation

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Join the conversation on the City’s fiscal sustainability and annual budget process including upcoming discussions on potential revenue measures.

Introduction

A core City goal has been how to maintain a high quality of City services in a fiscally sustainable way, with many ongoing community conversations dedicated to the topic. The global pandemic has impacted the City’s ability to provide services such as library, recreation, and public safety programs at the levels residents expect and deserve.

As we all recover from the fiscal and health impacts of the pandemic together, we invite you to join a conversation about our future, and how we can maintain and deliver the services you need and expect. Even with improved service delivery, it will be a long time before fiscal sustainability is realized and full City service levels are restored.

To help inform the City’s annual budget process and discussions, the City Council is considering potential revenue measures. Potential revenue measures can help invest in the community's future, enhance priority services to the community and help build on Palo Alto's services as the community evolves and grows. Investing in fire and emergency services, affordable housing and support for the unhoused, parks and recreation, transportation and other public services have been identified by the community as being foundational to allowing Palo Alto to meet the future needs of our community.

What’s New 

In April, the City Council considered related ballot measure items and voted to:1) affirm of the current natural gas utility transfer, and 2) establish a new Business Tax. The first proposal will affirm the decades long practice of City gas ratepayers funded contributions to general City services to support a variety of City programs and services, including police protection, fire and emergency medical services, local parks, community centers and libraries. A great majority of municipal utilities in California make similar transfers to support these services. Affirmation by the voters through this potential ballot measure is necessary to reinvest in these services levels on a go forward basis.  

The second proposal is a Business Tax which if passed by voters, will generate revenue that will be allocated towards unfunded needs as identified by the community and Council. Staff and the Council are actively engaging with the community through Fiscal Sustainability: A Community Conversation, that includes online and mail-in surveys, focus groups geared towards community and business members, and a community-wide listening session. The City Council has refined the business tax proposal and intended spending plan based on this feedback. 

As of now, the proposed Business Tax structure being considered by Council is at a monthly rate of $0.10 or $0.12 per square foot, with a two-year phase in provision. The first 5,000 square foot of a business would be exempt, along with grocery stores and seasonal businesses. While the current proposed tax structure does not sunset, potential tax offsets for hotel tax and sales tax remittance are being explored. Based on the proposed tax rate and once the tax is fully implemented after two-years, the estimated generated revenue will be $22 million ($0.10/sf monthly rate) or $33 million ($0.12/sf monthly rate). This action does not affect the City’s Business Registry program, which will continue to operate and be required for all businesses except as exempted by the program ordinance. 

Even with improved service delivery, it will be a long time before fiscal sustainability is realized and full City service levels are restored. Some of the service priorities identified by your neighbors so far include:  

  • Maintain basic service 
  • Expand City services 
  • Add public safety services 
  • Invest in community-owned assets 
  • Fund affordable housing and homeless services 
  • Increase fire staffing/improve emergency response times 

Ongoing Community Conversations

To ensure long term planning continues to be rooted in the community, we have been asking residents to provide their input on service priorities. The City has hosted several opportunities for community feedback including focus group discussions and a community informational session. The online survey continues to be open to gain input. Thank you to the hundreds of community members who have shared input to date. 

Upcoming Meetings and Opportunities for Feedback 

May 2022: FY2023 Budget Conversations begin and Finance Committee Budget hearings commence. Helpful documents include: FY2023 Proposed Operating Budget and FY2023 Proposed Capital Budget. In addition, a third round of polling will take place to engage the community on this topic.  

June 2022: Council adoption of FY 2023 budget is planned as well as decisions regarding placement of potential ballot measures on November 2022 ballot. For upcoming Council meeting agendas and other meeting materials, go to www.cityofpaloalto.org/councilagendas 

The City is seeking community input on services most important to you.

The City is engaging in a community outreach effort to get feedback on service priorities, which will help inform the City Council decisions as part of the annual budget process and long-term fiscal sustainability strategies. 

Join the conversation in the following ways:

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For a complete history of this community conversation, see the Archived Documents.

Archived Documents

Summary of Prior Work on

Potential Revenue Generating Ballot Measures

The City of Palo Alto has been discussing its options for potential revenue-generating ballot measures through 2019 and 2020. This work was suspended at City Council direction in March 2020 in order to marshal available resources to manage through the COVID-19 pandemic. A timeline of the CMRs and discussions with the Finance Committee and the City Council since April of 2019, when staff was formally directed to begin working on this project by the City Council, is included below for additional context. The date, the forum of the meeting (Finance Committee or City Council), the summary title, and the CMR number are included for ease of reference.

Timeline

  • 4/22/2019 City Council, “2019 Fiscal Sustainability Workplan”, CMR 10267
  • 4/22/2019 City Council, “Approve Workplan for a Potential Revenue Generated Ballot Measure”, CMR 10261
  • 6/18/2019 Finance Committee, “Review, Comment, and Accept Preliminary Revenue Estimates for Consideration of a Ballot Measure”, CMR 10392
  • 8/20/2019 Finance Committee, “Evaluation and Discussion of Potential Revenue Generating Ballot Measures”, CMR 10445
  • 9/16/2019 City Council, “Evaluation and Discussion of Potential Revenue Generating Ballot Measures and Budget Amendment”, CMR 10615
  • 10/1/2019 Finance Committee, “Revised Workplan for Consideration of a Ballot Measure”, CMR 10712
  • 10/15/2019 Finance Committee, “Stakeholder Outreach, Initial Polling, and Discussion of a Potential Ballot Measure”, CMR 10743
  • 11/4/2019 City Council, “Potential Ballot Measure Polling/Outreach, Contract, Solicitation Exemption and Budget Amendment”, CMR 10792
  • 12/2/2019 City Council, “Structure and Scenarios of Initial Round of Polling for a Potential Local Tax Measure”, CMR 10891
  • 12/17/2019 Finance Committee, “Consideration, Evaluation, and Discussion of a Revenue Generating Local Tax Ballot Measure, Review of Refined Modeling, Analysis, Tax Structure and Recommendation to the City Council”, CMR 10655
  • 1/27/2020 City Council, “Update, Consideration, and Potential Direction on Possible Local Tax Measure for 2020 Election”, CMR 11019
  • 3/23/20 City Council, “Consideration of Analysis, Public Outreach, and Refined Polling and Further Direction on a Potential Local Business Tax Ballot Measure for 2020 Election”, CMR 11161
  • 3/23/20 City Council, “Consideration of Analysis, Public Outreach, and Refined Polling and Further Direction on a Potential Local Business Tax Ballot Measure for 2020 Election”, At-Places Memorandum
  • 6/15/2021, Finance Committee Staff Report, “Recommend the City Council Approve the Workplan for Pursuit of a Revenue-Generating Local Ballot Measure for the November 2022 General Election; Review and Potential Guidance to Staff on Affordable Housing Funding as Referred by the Council”, CMR 12299
  • 8/16/2021 City Council, “Approve the Workplan for Development of a Revenue-Generating Local Ballot Measure for the November 2022 General Election; Review and Potential Guidance to Staff on Affordable Housing Funds as Referred by the City Council”, CMR 12381
  • 9/21/2021 Finance Committee, “Discuss Updates and a Recommended Further Refinement of Potential Revenue Generating Local Ballot Measures,” CMR 13514
  • 10/19/2021 Finance Committee, “Discuss Updates and Recommend Further Refinement of Potential Revenue Generating Local Ballot Measures, and Review Draft Initial Polling Outline”, CMR 13648
  • 11/8/2021 City Council, “Discuss Updates and Recommend Further Refinement of Potential Revenue Generating Local Ballot Measures, and Review Draft Initial Polling Outline”, CMR 13687
  • 12/7/2021 Finance Committee, “Discuss Updates and Recommend Further Refinement of Potential Revenue Generating Local Ballot Measures”, CMR 13728
  • 1/18/2022 Finance Committee, “Discuss Poll Results Regarding Potential 2022 Revenue Generating Ballot Measures and Recommend Further Refinement of Business License Tax and Utility Tax Proposals,” CMR 13875
  • 1/24/2022 City Council, “Discuss Polling Results, Analysis, and Community Stakeholder Engagement Plan; Recommend Further Refined Parameters for a Possible Local Tax Ballot Measure for November 2022 Election (Business License Tax and Utility Tax Proposals); and Direct Staff on Related Items such as Community and Stakeholder Engagement Plan,” CMR 13770, p. 385 and CMR 13963, p. 462
  • 3/28/2022 Finance Committee, "Revenue Generating 2022 Ballot Measures: Review Feedback from the Ballot Measure Community and Stakeholder Engagement Plan and the Second Round of Polling; Review Draft Ballot Measure Language; and Recommend to Council Further Refinement of Potential Measures Adopting a Business License Tax and Confirming the Gas Utility General Fund Transfer," CMR 13981
  • 4/18/2022 City Council, "Revenue-Generating Ballot Measures for Fall 2022: Discuss 2nd-Round Polling Results and Feedback from Community and Stakeholder Engagement Activities; Review and Provide Staff Direction on Finance Committee Recommended Refined Parameters for a Business License Tax and an Affirmation of the Gas General Fund Transfer; and Provide Direction to Staff on Next Steps Including Launch of Third Poll, and Council's Non-Binding Intentions for Allocation of Potential Proceeds", CMR 13571, p. 162
  • 4/25/2022 City Council, " Revenue-Generating Ballot Measures for Fall 2022: Discuss 2nd-Round Polling Results and Feedback from Community and Stakeholder Engagement Activities; Review and Provide Staff Direction on Finance Committee Recommended Refined Parameters for a Business License Tax and an Affirmation of the Gas General Fund Transfer; and Provide Direction to Staff on Next Steps Including Launch of Third Poll, and Council's Non-Binding Intentions for Allocation of Potential Proceeds (Continued from April 18, 2022)", CMR 14316 p. 62