East Palo Alto staff outline $2.1M general‑fund structural deficit as budget process begins

City staff opened the first public hearing on the FY 2025–26 proposed budget, presenting a plan that combines $60.3 million in proposed expenditures with $77.1 million in projected revenues. "The total proposed budget is 60,300,000 in expenditures with 77,100,000 in projected revenues, yielding a $16,800,000 citywide surplus," City Manager Melvin told the council, adding that the surplus is driven mainly by capital and enterprise funds while the general fund remains in deficit.

Finance Director Tomo Oku and staff described the budget as conservative, with few ongoing staffing additions: the proposal contains no new full‑time ongoing positions but includes three limited‑term positions. Staff stressed that while enterprise and capital funds show surpluses, the general fund faces a structural shortfall. As Tomo Oku summarized for the council, "So I like to emphasize this, general fund budget deficit of $2,100,000." The administration recommended using reserves prudently and advancing a cost allocation and user fee study to reallocate overhead and recover costs where appropriate.

The budget schedule includes a second budget session on May 27 and the adoption hearing on June 17. Staff told council members that the East Palo Alto Sanitary District (EPASD) budget is being incorporated as a standalone enterprise fund and will be reviewed by the EPASD advisory committee on June 22 and by the City Council on June 27. The presentation emphasized limited capacity for new recurring programs given rising personnel costs and uncertain revenue streams.