City’s revised nonprofit funding process draws criticism from committee and applicants

Palo Alto’s Finance Committee spent substantial time May 20 examining how the city has organized its Nonprofit Partnership Work Plan Phase 1 and whether recent procedural changes created confusion for organizations that previously received ongoing or line‑item support.

The debate followed a staff presentation that inventoryed the city’s existing nonprofit funding across multiple budget lines and identified 20 applications received for this phase of the program. Paul Harper, the budget manager, told the committee 20 applications arrived by the stated deadline, totaling $797,000 in requests and leaving roughly $401,000 of the total package available after staff pulled out items previously listed as direct allocations.

Why it matters: Many Palo Alto nonprofit partners rely on predictable, recurring city support. Committee members said the city’s decision to fold some organizations and new applicants into a common competitive review created uncertainty for groups that had expected automatic or renewed allocations.

Council member Julie raised concerns that an organization long listed in the budget (Youth Community Services / YCI) was not clearly informed about how to be reinstated; staff said the omission resulted from a communication error and that YCI’s matter would be clarified. Several council members said they did not recall intending the four groups that had received direct allocations in the prior year to enter the same competitive pool as the 20 applicants.

Hamilton, a member of the public who spoke during public comment, urged the committee not to repurpose cap‑and‑trade funds for business rebates and said the rushed process made it difficult for the city to get the cost‑of‑service study and program rollout right; the speaker said some residents oppose shifting cap‑and‑trade funds away from greenhouse gas reductions.

Staff described the Phase 1 effort as a larger policy project to catalog and rationalize multiple channels of nonprofit support (direct allocations, HSRAP/HISRP grants, facility subsidies and one‑off co‑sponsorship). Lauren Lai, the chief financial officer, told the committee staff aims to bring policy clarity but acknowledged implementation missteps and said Policy & Services (P&S) Committee will review the applications on May 28 and return recommendations to Council during the June 16 budget hearing.

Several council members asked staff to clarify the evaluation criteria and whether P&S or Council should set the final criteria for which organizations are treated as ongoing partners versus those funded competitively. Committee members expressed concern about potential "double dipping" (entities that receive HSRAP funds also seeking additional awards) and asked staff to report back with clearer categories, an inventory of existing line‑item nonprofit allocations, and a timeline for when the policy work plan will be completed.

Staff said the P&S review will proceed next week; final recommendations and any budget adjustments will come to the full Council as part of the June 16 adoption process.