City to cut $39 million from budget

BY SARA TABIN
Daily Post Staff Writer

Palo Alto City Council will be making $39 million worth of budget cuts in three special meetings next week in anticipation of the recession that is expected as the result of the coronavirus shutdown.

Chief Financial Officer Kiely Nose told council the city expects a $20-$39 million loss in the fiscal year that begins July 1, depending on how long the stay-at-home order continues. The $39 million loss reflects losses if the order continues through December.

And while the council considers cuts, the city’s payroll will increase by $5.8 million a year on July 1 because of raises unionized employees will be receiving. These raises, between 2% and 3%, were negotiated last year before the coronavirus outbreak. The unions include SEIU, police and firefighters.

Council has been meeting behind closed doors to talk to its negotiators who deal with the unions, but little public information has emerged about whether the city can stop the raises.

Officially, the city’s position has been that it will honor the contracts, but the city has some leverage with the unions. The city can tell the unions that if they skip the raises, the layoffs of unionized employees won’t be as deep. The city could also cancel the raises and let the unions sue, leaving the issue to a judge with the Public Employment Relations Board.

Big losses anticipated

At Monday’s council meeting, Councilman Greg Tanaka said he thinks the losses might be close to $39 million even if things open back up soon. He said he thinks the $39 million estimate might be optimistic and the city needs to be realistic in setting a budget.

Councilman Eric Filseth agreed. He pointed out that the city is expecting a $20 million loss in the current fiscal year that ends on June 30. He said if the city loses that much in one quarter, it makes sense that they would lose $40 million across all of the next fiscal year (July 1 to June 30, 2021).

“Hope is not a plan and we need to plan appropriately,” said Councilwoman Alison Cormack.

She said next week will be hard for everyone. She said she thinks the city can’t lose sight of long-term financial issues like pensions.

The council will discuss the budget and where to make cuts on Monday, Tuesday and Wednesday.

Councilwoman Liz Kniss said it will be a really unpleasant week.

Tanaka suggests cutting salaries

Tanaka suggested cutting salaries while DuBois suggested shifting more services to nonprofits. Palo Alto city government has had a tradition of turning over social services to nonprofits, such as child care, senior services and public housing.

Mayor Adrian Fine said that given the amount council needs to cut, everything will be considered. He said people shouldn’t expect to preserve anything.

Fine also said Palo Alto is in a worse position that neighboring cities like Mountain View and Redwood City because those cities allowed residential and commercial buildings over the past few years while Palo Alto did not. Fine said those projects generated tax revenue for the cities.

Despite the city’s financial hardships, it is putting $500,000 toward small business loans. Those loans will be handed out using a lottery for Palo Alto storefront businesses that have lasted at least a year.