Policy and Services Committee approves pilot nonprofit grant program for FY26

The Policy and Services Committee on March 11 approved a Phase 1 nonprofit partnership work plan that establishes a pilot one‑time grant program and recommends a $185,000 allocation in the city manager’s FY26 budget for awards to 501(c)(3) nonprofit organizations.

The work plan, presented by Lupita Ramos, assistant to the city manager, aims to align nonprofit partnerships with council priorities while emphasizing fairness, inclusion, scaled reporting requirements and the agility to respond to evolving community needs. Ramos said the pilot focuses on process improvements for requests that fall outside currently established grant programs.

Ramos said, "Our recommendation from our previous month of February 11 meeting was to review and recommend a council approval of a phased approach to enhancing nonprofit partnerships," explaining that Phase 1 would establish a near‑term pilot for one‑time grant requests and that staff proposed a scaled application and reporting rubric for different award sizes.

Under the proposal, the $185,000 would be a single pool to cover all awards in FY26. The grants would be available to any qualified 501(c)(3) organization, whether newly applying or a current recipient. Staff recommended disbursing funds on a reimbursement basis and offered to provide an initial staff evaluation of applications before items are brought to Policy and Services for recommendation to the full council.

The committee reviewed two timing options for the application window. Option 1 was a shorter (39‑day) application period with awards approved as part of the budget process; Option 2 allowed a longer (about 90‑day) application window with awards potentially made after the budget adoption. Ramos said staff solicited nonprofit feedback; she reported six nonprofits expressed a preference for the shorter Option 1, including a response from the Chamber of Nonprofits, which represents about 30 organizations, and one organization preferred Option 2.

JobTrain government affairs liaison Larry Moody spoke during public comment to confirm eligibility, noting JobTrain serves Palo Alto residents and is expanding facilities in East Palo Alto. Moody asked whether organizations must be physically headquartered inside Palo Alto to apply; Council Member Lue clarified, "there are no restrictions for groups that are not headquartered in Palo Alto physically to apply for these grants," and said service to Palo Alto residents will be an evaluation criterion.

Committee members discussed whether the pilot should limit use of funds to programming or allow some overhead. Council Member Stone said she did not want the city to be overly prescriptive: "I don't like taking kind of a paternalistic approach to telling nonprofits ... telling them how they can and cannot use it." Other members said they expected the evaluation rubric and council review to favor programming while allowing some flexibility for modest overhead when justified.

Staff and the committee also discussed reporting thresholds and financial documentation for larger awards. The packet proposed tiered reporting—lighter requirements for smaller awards and CPA‑review or compilation reports for larger awards—and staff explained that a compilation or CPA review is a lower‑cost financial review than a full audit. Staff also noted that if the pilot expands substantially, administrative staffing needs could increase, and staff estimated an additional administrative resource could cost about $125,000 annually if required.

After discussion, a motion to approve the Phase 1 nonprofit work plan with the committee’s recommendations was moved and seconded. The committee voted unanimously to approve the recommendation and to forward it to the full council; the motion was placed on consent if the full council vote is unanimous.

Votes at the committee: Council Member Liu — yes; Council Member Stone — yes; Vice Mayor Venker — yes. The committee recorded the motion as carried.

Looking ahead, staff will finalize the application and rubric, implement the shorter application window preferred by responding nonprofits, and return materials as needed for council budget deliberations and award decisions.