City Council - February 23, 2026

Budget update lowers revenue forecast and authorizes $10 million pension payment

The Palo Alto City Council voted 7-0 to approve its FY 2026 midyear budget adjustments, consolidate the remaining $6 million Uncertainty Reserve into the Budget Stabilization Reserve and authorize a $10 million additional discretionary payment from the PARS Pension Trust to CalPERS.

The review revised expected General Fund revenue downward by $10.3 million, including $9 million in sales tax and $1.3 million in property tax. During the discussion, Councilmember Ed Lauing said the sales-tax change was attributed primarily to changed state allocation treatment for leasing and new-auto sectors rather than a decline in routine retail activity. Staff said General Fund expenditures were tracking within adopted levels while revenue was below budget.

Staff projected a $54.7 million ending balance in the Budget Stabilization Reserve, equal to 17.8%, and forecast a $14.9 million structural deficit for FY 2027. That deficit is a forecast for the forthcoming budget process, not an adopted unbalanced budget. Staff will develop the FY 2027 proposal with measures addressing operations, contracts, revenue and facility use.

Councilmembers also asked staff to consider financial support for Al Cove North County and provide a consolidated accounting of city youth mental-health spending in the next budget. Councilmember Keith Reckdahl discussed a possible $200,000 contribution, but the adopted motion included no Al Cove appropriation.

Council funds one year of round-the-clock Track Watch

The City Council voted 7-0 to authorize a $1,623,314 amendment with Yosh Enterprises Inc., doing business as Orion Security, for one year of continuous security coverage at the Churchill Avenue, Meadow, Charleston and Palo Alto Avenue rail crossings. The amendment increases the contract’s total not-to-exceed amount to $1,708,314.

The approval also allows the city to negotiate and execute a cost-sharing agreement under which the Palo Alto Unified School District would contribute $854,157. Councilmember Julie Lythcott-Haims said the district had agreed in principle to share the cost and that guards had begun deployment before the vote.

Public comment was mixed. The Council was told that a petition supporting a human presence at the crossings had collected more than 3,700 signatures, while some speakers questioned the expense and urged greater emphasis on quiet-zone infrastructure or youth mental-health interventions.

Separately, Lythcott-Haims reported that staff planned about 60 days of analysis, agency review and community engagement concerning a possible temporary closure of the Churchill Avenue crossing. Council consideration was projected as possible by mid-April. Officials also reported anti-trespassing panels installed first at Churchill, with installations planned at Meadow, Charleston and Palo Alto Avenue.

Oversized-vehicle permit pilot and safe-parking expansion remain under study

A possible oversized-vehicle permit pilot and an expansion of managed safe parking remain under study after the Council held a study session without adopting a motion or selecting an option. The Oversized Vehicles Ad Hoc Committee presented no recommendation requiring a vote, and no permit program or expansion of the Geng Road site was approved.

Committee members Ed Lauing, Julie Lythcott-Haims and Keith Reckdahl supported continued work on enforcement, managed parking and regional solutions. Unresolved permit questions include eligibility, duration, geographic distribution, conduct requirements and whether participation should be capped using historical vehicle counts. Reckdahl described a pilot as a potential way to limit and distribute vehicles while setting conduct conditions. He also said outright bans could face legal challenges; agenda materials estimated potential defense costs at $500,000 to more than $1 million.

Lythcott-Haims emphasized that many people living in vehicles are workers unable to afford local housing or recreational-vehicle lot costs. A countywide discussion about possible land and services was anticipated in April, and the committee and staff plan to continue looking for affordable managed sites.

Staff reported that 33 oversized vehicles had been towed after outreach and notification did not produce compliance, while 17 street segments had been deep cleaned. Towing remains constrained by limited storage, which may be required for 60 to 90 days for large vehicles. At the Geng Road safe-parking program, 69 of 129 participants over five years reportedly moved to permanent housing, transitional housing or shelter beds, a 53% rate. Staff identified parkland restrictions as a barrier to using an adjacent underutilized lot for a modest expansion.

Many public speakers opposed permitting oversized vehicles in commercial or residential areas, citing visibility, blocked bicycle lanes and driveways, sanitation, safety and business impacts. Others supported managed off-street parking, safe-parking expansion or a regional, housing-focused response.

Council approves substation, leak-detection and fire-watch spending

In separate consent-calendar actions, the Council unanimously authorized a $389,862 purchase order with ABB Inc. to retrofit 10 circuit breakers at the Maybell Electric Substation. The total includes $354,420 for equipment and installation and a $35,442 contingency.

The Council also approved a three-year water-system leak-detection survey contract with M.E. Simpson Co. Inc. The staff report listed a $642,609 not-to-exceed amount, while the attached contract listed maximum total compensation of $638,609. The consent-calendar vote did not resolve that discrepancy.

For City Hall fire-watch services, the Council approved an $80,915 amendment with Universal Security Company, increasing the contract’s total not-to-exceed amount to $301,667. The associated FY 2026 budget amendment increases Public Works contract appropriations by $80,915, offset by an equal reduction in the Budget Stabilization Reserve. The consent calendar passed 7-0.

Primary sources

Watch the meeting on YouTube · Read the official meeting packet