Finance Committee advances FY26 budget recommendation, moves ‘parking‑lot’ items to Council

The Palo Alto City Council Finance Committee voted unanimously May 20 to forward a set of budget adjustments and placeholders — the committee’s so‑called "parking‑lot" items — to the full Council for inclusion in the final Fiscal Year 2026 budget deliberations on June 16.

The package the committee moved includes retaining a $6 million uncertainty reserve for FY26; a multi‑year balancing strategy that relies on a mix of one‑time and ongoing savings; placeholders for $3.2 million in deferred capital projects (the committee struck an earlier staff proposal to reallocate $1 million annually from Measure B local streets funding); and specific program recommendations such as funding for a single‑role ambulance in the Fire Department and increases to a nonprofit partnership work plan.

Why it matters: The Finance Committee’s recommendation narrows Council deliberations going into the June adoption by locking in several staff proposals and policy directions — in particular the decision to retain a material uncertainty reserve and to seek a mix of one‑time and ongoing savings to close multiyear shortfalls.

Committee members heard a staff presentation from Lauren Lai, the city’s chief financial officer, and Paul Harper, budget manager, who described the proposed balancing package and said the parking‑lot proposals together would produce roughly $5.1 million in General Fund savings or reduced expenses in FY26. Lai told the committee the proposals included blending one‑time solutions (deferred CIP and Measure B reallocation) and ongoing expense savings to meet Council direction to preserve a $6 million uncertainty reserve.

The package includes specific line items the committee will carry as placeholders while staff develops detail for August: an increase to the Nonprofit Partnership Work Plan appropriation (to $346,000), a $50,000 allocation for a Community Services Department events grant program, and $50,000 for Youth Community Services (YCI). On the revenue side, staff included updated ALS/BLS ambulance transport fee estimates (about $700,000) and first‑responder fee revenue; staff recommended conservatively recognizing $100,000 of the latter in FY26 despite a consultant study estimating roughly $400,000 at steady state.

Committee members debated fund sources and tradeoffs: several members expressed concern about a staff proposal to shift $1 million a year of Measure B local‑streets funding into the General Fund for three years, arguing the move could reduce funding available for bike/ped and street projects. After discussion the committee agreed to keep the Measure B allocation in deferred CIP as a placeholder rather than apply it as a General Fund offset. Staff said the Measure B funds would remain constrained by VTA guidelines and would require federal/agency approvals for repurposing.

The committee also affirmed staff direction to pursue a combination of $4 million one‑time savings and $2 million ongoing savings as part of the multiyear balancing approach; staff will return to the committee with specifics on August 19. Lai told the committee she did not intend staff to “sweep” an unidentified FY25 year‑end surplus into the $2.7 million placeholder listed in the packet and that any carryforward would be used only after projects or contracts were identified and properly de‑encumbered.

The motion to move the parking‑lot items and placeholders to a Finance Committee recommendation for Council consideration passed unanimously. Paul Harper and other budget staff will prepare the technical documents for the June 16 Council meeting, and staff said they will return with detailed follow‑ups — including historical filled‑vs‑authorized position data and project‑level deferred CIP lists — before the August 19 committee meeting.

The committee’s action is procedural: the items now go to the full Council for final adoption during the June budget hearings.