Council approves midyear budget amendments, authorizes short-term staffing for Fire Station 4 and asks staff to include alternatives for FY26

The Palo Alto City Council on Feb. 24 approved a midyear fiscal 2025 budget report that includes technical adjustments and a set of urgent needs staff said require near-term funding, most notably steps to improve response capacity in South Palo Alto by restoring a staffed engine at Fire Station 4.

The council approved staff recommendations by unanimous roll-call vote to amend the fiscal 2025 appropriation, adjust the table of organization and authorize short-term staffing measures while directing staff to return with options to incorporate longer-term staffing in the fiscal 2026 proposed budget.

What the council approved: Staff recommended and the council approved adjustments across funds that staff said are largely technical but also address identified urgent needs. Key actions in the adopted midyear package include:

- Authorization for overtime and an over‑strength captain position to cross‑staff a fire engine and ambulance at Fire Station 4 on a 24/7 basis through the end of fiscal year 2025 as a near‑term solution; staff estimated the remainder of FY25 cost at roughly $300,000 and an annualized cost near $1,000,000 if maintained.

- Table‑of‑organization changes: add 1 FTE senior buyer and 1 FTE program assistant, eliminate 1 FTE contract administrator, and authorize an over‑strength 1 FTE fire captain position.

- Capital and reserves adjustments including reductions to the Budget Stabilization Reserve (BSR) from $63.1 million to $54.0 million as part of reallocations; staff said $8.9 million reflected council direction from the FY24 annual comprehensive financial report to use above‑target BSR funds for an uncertainty reserve and capital projects.

- Additional technical adjustments across enterprise and internal service funds, including a reallocation of electricity usage charges, insurance premium adjustments and minor gas‑tax reductions affecting street maintenance projects.

Why staff asked for the change: Chief Geo Blackshire and budget staff described Station 4’s service area and said the unit’s historical configuration had changed over time. Director of Finance Lauren Lai and Budget Manager Paul Harper told council that the midyear report is primarily technical but recommended targeted near‑term actions to maintain services and to address urgent needs that could not wait until the annual budget cycle.

Fire operations: Chief Blackshire told the council Station 4 can accommodate four beds but typically staffs three personnel; historically the station housed an engine but later shifted to an ambulance-only model. Staff recommended use of one of two reserve engines to restore an engine to service and implement cross‑staffing in the short term while the council considers longer‑term options. Council and staff discussed alternatives that could include fully staffing an engine and ambulance (estimated in discussion at roughly $3–4 million annually), or moving to a civilian “single‑role” ambulance model that budget staff estimated could be lower cost but would require design work and possible labor negotiations.

Budget footing and reserves: The midyear report shows general fund revenues tracking in line with the long‑range financial forecast but flagged a decline in sales tax that staff adjusted for. The adopted FY25 general fund had a $6 million deficit; staff’s long‑range forecast projects a $12 million deficit in FY26 and additional pressure in FY27. To address near‑term shortfalls, the report increases the uncertainty reserve to $12 million and reduces the BSR to $54.0 million (about $400,000 below the council’s 18.5% target band), staff said.

Council direction and next steps: Council member Burt moved the staff recommendations and the motion passed unanimously. The council also directed staff to return in the upcoming FY26 budget process with alternative funding and staffing scenarios — including the option to include permanent FTEs to staff Station 4 — so the council can weigh tradeoffs during its May budget hearings. Staff said they will bring a follow‑up to the Finance Committee and include options for purchase timing of replacement apparatus (staff reported hybrid engines carry shorter lead times than diesel, but hybrid units are more expensive).

Public input: Dozens of public speakers — including current and former Palo Alto firefighters and residents — urged council to fully staff Station 4 rather than rely on permanent cross‑staffing or overtime. Firefighters described cross‑staffing as an unreliable long‑term model and urged the council to approve permanent hires to restore pre‑pandemic staffing levels; others called for immediate action to reduce response times in South Palo Alto.

Why it matters: Council members said the decision balances urgent community safety needs against constrained general‑fund capacity and longer‑term budget deficits. The short‑term move restores additional capacity quickly, while the council asked staff to return with the costed, durable alternatives so members can decide whether to fund permanent hires as part of the FY26 budget.

What to expect: Staff will return to the Finance Committee in April to continue the fire‑services discussion, finalize proposals for apparatus procurement and present recommended FY26 budget scenarios for council deliberation in May.