Palo Alto council members question city manager’s spending priorities

Two Palo Alto City Council members said Wednesday they’re worried that city revenue increases aren’t keeping pace with employee salary raises at a time when the city is considering placing a tax measure on the November ballot to pay for infrastructure improvements.

During a discussion of the proposed 2018-19 fiscal budget at Monday’s council meeting, City Manager James Keene reported that tax revenues have increased by 1.7 percent over the previous year.

But Councilman Greg Tanaka said Wednesday that percentage is well below the 5 percent raise Keene gave himself and his executive staff last year.

“How can you keep giving raises that are higher than the growth of our general fund?” Tanaka said.

Tanaka also took issue with staff’s request to draw almost $300,000 out of reserve accounts to balance next year’s budget. The council will hold further discussions before the new budget is approved in June.

“Right now, we’re in amazing economic times, it’s one of the longest boom times we’ve had in a long time,” he said. “During boom times, you should be building your reserves, not pulling from reserves.”

During the meeting, Vice Mayor Eric Filseth expressed concern about putting off payments for $8 million in pension costs to future years. He suggested the figure could reach $40 million in 25 years if it isn’t paid down

Tanaka said Wednesday he shares Filseth’s concern, saying that postponing the payments is akin to consumers accruing credit card debt.

“This is something we are going to have to increasingly deal with,” Fine said.

The council also discussed an estimated $76 million funding gap for infrastructure projects planned since 2014, including two parking garages, a new public safety building and a bicycle bridge over Highway 101. The city is considering a November ballot measure that would generate $64 million in extra revenue through increased hotel, real estate and/or parcel taxes.

“Voters may be tapped out and we need to begin realigning funds to use our own sources, instead of parcel taxes,” Fine said.

Tanaka said the council hasn’t even prioritized the infrastructure projects yet.

“Part of the budget process is to stay within budget and find out what we need and what we don’t need, and we haven’t done that,” Tanaka said. “In order to show residents we are trying best, we need to prioritize and show we are staying within budget.”

The proposed $704.5 million budget is $32.3 million or 4.8 percent higher than last year’s. Keene said the increase stems primarily from a 22.4 percent jump in funds budgeted for capital projects, including rail separations at four intersections.

Residents should expect an average 4.7 percent increase in water and electricity rates to pay for maintenance, management of services and infrastructure, Keene said.

Contact Kevin Kelly at 650-391-1049.