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Finance Committee forwards ACFR, recommends keeping $2M above BSR target
Summary
Staff presented the FY2025 Annual Comprehensive Financial Report, showing total governmental fund balance of $317.6M and a Budget Stabilization Reserve (BSR) of $58.8M; the committee unanimously voted to forward the ACFR and recommended keeping $2M above the 18.5% BSR target and to revisit BSR allocation policy.
The Palo Alto Finance Committee reviewed the FY2025 Annual Comprehensive Financial Report (ACFR) and year‑end budget adjustments on Dec. 2 and voted unanimously to forward the report and recommended budget changes to City Council.
Finance Manager Yvonne Collings summarized the ACFR, reporting total governmental fund balance of $317.6 million, a decline of $1.8 million from the prior year, and an unassigned fund balance of $52.8 million (about 16.6% of the total). “The budget stabilization reserve is $58,800,000,” Collings told the committee, and staff recommended retaining the roughly $2.0 million above the 18.5% policy target for future budget balancing.
Staff also outlined major revenue drivers and contingencies. Major tax revenue increases over the five‑year window were driven by property taxes and other major taxes, but staff noted a reserved $7.0 million ERAF contingency related to an ongoing dispute over the Educational Revenue Augmentation Fund calculation.
On business tax revenue, staff reported $5.7 million in FY25 revenue with allocations among transportation, housing affordability and public safety; committee members pressed staff to clarify what portions were earmarked for Homekey and unhoused services. Staff said roughly $2.5 million remained in the business tax affordable housing/unhoused services balance and that some expenditures approved by Council in October (about $157,000) were funded from business tax reserves for policy and program work.
Committee members asked whether investment gains that helped revenue would be sustained after outsourcing portfolio management. Staff said the city recently engaged Chandler as investment manager and expects returns to grow over time but that staff would provide more concrete projections as they update the investment policy.
The committee unanimously voted to forward the ACFR and the FY25 budget appropriation amendments to City Council and approved a referral to review the formula and process for allocating excess BSR funds.
