City’s Fiscal Year 2020 Budget features operating cuts and a slew of utilities rate hikes

June 18, 2019 – Palo Alto Matters

On June 17, City Council voted 6-1 (Tanaka dissenting) to adopt the city’s Fiscal Year 2020 Budget Ordinance. The final budget recommended by the Council Finance Committee reflects a 2.8 percent increase ($19.4 million) over the proposed budget presented in April, primarily due to reappropriations to continue ongoing capital projects. However, the FY 2020 Budget also imposes a multi- million dollar reduction in the city’s operating budget, marking the second year of continued reductions in the General Fund necessitated in large part by council’s decision to proactively fund the City’s long-term pension obligations.

Other notable elements of the adopted FY 2020 Budget include:

  • Increased city investment of $270,000 in the Transportation Management Association (TMA) to shift commuters out of single occupancy vehicle modes ($180,000 derived from increasing parking fees by 7.5 percent and $90,000 from the University Avenue Fund), bringing the city’s 2020 investment to $750,000;
  • Addition of an Automated Parking Guidance System as part of the city’s priority Infrastructure Plan (replacing the sidelined Downtown Parking Garage);
  • Dedication of new hotel Transient Occupancy Tax (TOT) revenues and voter approved TOT rate increase revenues towards funding the Infrastructure Plan.

Click here for the staff report on the FY 2020 City Budget.

Also on June 17, the council approved the Fiscal Year 2020 Utility Financial Plans and adopted customer rate increases across the utilities system, including electric, gas, wastewater, water, and storm water and surface water drainage. Each of those rate changes received the recommendation of both the Utilities Advisory Commission and the Council Finance Committee and were included in the assumptions underlying the city’s FY 2020 Budget. Here’s how the rate increases break down:

  • Electric: Total increase of 8 percent across electric rates, including an approximate 4 percent increase for residential customers. Additional annual rate increases of 4 percent are projected through FY 2023.
  • Gas: Gas distribution-related rates will rise by an average of 8 percent (following 6 percent increase in July, 2018), including a 13.25 percent hike for residential customers. When combined with supply-related rates, the overall system rate increase for natural gas will be 5 percent, with 8.1 percent attributed to residential customers. Additional annual rate increases of four to eight percent are projected through 2024.
  • Wastewater: 7 percent increase in wastewater collection rates for 2020, with projected additional increases of 6 percent annually through FY 2024.
  • Water: Water costs are projected to rise by an average of 3 to 4 percent annually over next several years. Proposed overall rate increase of one percent in FY2020, followed by annual increases of 2 to 6 percent in later years. On average, residential customers will see an increase of 2 percent.
  • Storm Drain: Storm water and surface water drainage rates will rise by 4.5 percent, consistent with the annual Consumer Price Index adjustment approved by ballot measure in April 2017.

Click here for the staff report on utilities rate increases.

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