East Palo Alto adopts midyear budget amendments, staff warns gains include one-time revenue

The East Palo Alto City Council voted to adopt midyear budget amendments after a presentation from Finance Director Tomo Oku that detailed both a one-time surplus and several structural risks.

Tomo told the council the city closed FY24–25 with a $6.3 million surplus but cautioned those gains were driven largely by nonrecurring factors, including salary savings and higher-than-expected vehicle license fee and property tax receipts. "We have $6,300,000 surplus in general fund, but it's important to note that surplus largely resulted from one time or non recurring factors," Tomo said.

Tomo said the city’s unassigned fund balance was $20.2 million as of June 30, 2025, but that midyear changes — including carryforwards and new estimated expenditures — raise the projected use of reserves and push the projected structural deficit from $3.6 million to about $5.7 million for FY25–26. He highlighted a roughly $11.3 million reduction in projected impact-fee revenue for enterprise funds tied to a state law change (SB 937) that shifts the timing of when certain impact fees may be collected.

Council members pressed staff about the timing of grant reimbursements and whether the $25.4 million of CIP-related reimbursement revenue listed in the packet would materialize this fiscal year. Tomo said the $25.44 million relates to carryforward capital projects and that much of the revenue is reimbursement-based and may not be received in the current fiscal year. "This $25,000,000 revenue projection, is not necessarily coming into this fiscal year," Tomo said.

After discussion and public comment, councilmembers moved and seconded the resolution adopting the midyear amendments. The motion passed.