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Committee reviews phased nonprofit partnerships work plan, staff recommends FY26 pilot funded from events budget
Summary
Staff presented a two-phase work plan to standardize nonprofit request funding and increase transparency. For Phase 1, staff recommends using $185,000 from an existing $235,000 events/programming allocation to fund nonprofit awards in FY2026; two timing options offered and committee asked for public input and return in March.
City staff on Feb. 11 presented a phased work plan to the Policy and Services Committee to standardize how the city reviews and funds nonprofit requests, recommending a pilot in the FY2026 budget cycle funded from an existing city events and programming allocation.
Assistant to the City Manager Lupita Alamos and Vinca Vanderswag of the Office of Human Services summarized the plan, which responds to a 2022 City Auditor recommendation that nonprofit partnership processes lacked consistency, transparency and accountability. Staff framed the initiative as two phases: Phase 1 would cover nonprofit funding requests outside of established grant processes and Phase 2 would apply revised nonprofit principles to existing grant, service and lease programs.
Staff recommended seeding Phase 1 with $185,000 drawn from the $235,000 ongoing City Events and Programming line in the FY25 budget; $50,000 of that was proposed to continue funding community events while the $185,000 would be available for the pilot. Staff proposed that eligible applicants be 501(c)(3) nonprofits in Phase 1, with evaluation criteria aligned to council priorities and additional best-practice factors such as community reach, equity impact and nonprofit capacity.
Two timeline options were presented: Option 1 would provide a 39-day application window to fit the awards into the June budget adoption, while Option 2 would offer a 90-day application window with awards made after budget adoption in August. Staff said they heard nonprofit feedback on timing and that some organizations prefer earlier availability of funds; committee members generally favored a longer application period for the pilot year (Option 2) but asked staff to return next month with refinements.
Staff also proposed tiered monitoring and reporting: small grants (under $5,000) would use a simple report or self-certification; medium grants ($5,000 to $100,000) would submit semiannual outcomes and independently prepared compilation financial reports; and large grants (over $100,000) would require quarterly or semiannual outcomes and compilation or reviewed financial statements.
Public comment came from Charley Wybant of the Palo Alto Chamber of Commerce, who said the Chamber represents more than 30 local nonprofits that support the proposed phased approach, and from Dale Calhoun of Downtown Streets Team, who urged continued partnership support for unhoused neighbors. Committee members asked staff to refine eligibility, consider the balance of new and existing grantees, and return March 11 with details. No final award decisions were made at the meeting.
