City Council - May 12, 2025

Council advances ADU ordinance and narrows further study

The City Council unanimously adopted an ordinance updating Palo Alto’s accessory dwelling unit and junior accessory dwelling unit rules at first reading, with seven recorded yes votes. A second motion passed 6-1, directing staff to explore options for allowing additional ADU square footage and condominium conversions.

The ordinance responds to HCD review and intervening state-law changes. Under the changes described by staff, single-family lots may allow one attached ADU, one detached ADU and one JADU, while multifamily lots may allow up to eight detached ADUs. The ordinance also addresses tree protections, historic resources and kitchen standards. Council included a staff correction deleting the phrase “underlying zoning” from a front-setback provision for detached ADUs.

The final direction was narrower than an earlier proposal that received no second. That proposal sought an Oct. 1 return with options including 1,200- to 1,600-square-foot ADUs with at least two bedrooms, basement floor-area exclusions, impact-fee waivers and condominium conversions. After staff said the work could not be completed during 2025, council removed the deadline and limited the study to square footage and condominium conversions. Any resulting legislation must first go to the Planning and Transportation Commission before returning to council.

Public speakers supported larger ADUs for multigenerational households and caregivers, separate ownership through condominium conversion and reduced impact fees. Staff said ADUs of 749 square feet or less do not pay impact fees, while fees apply at 750 square feet or more. Staff also reported that about 250 ADUs had been permitted in the past couple of years and that the city was on track for 1,000 by the end of the Housing Element cycle.

The ordinance must return for a second reading. Staff said it would take effect on the 31st day after that reading.

Budget review leaves reserve and climate-credit choices unresolved

Council took no vote on the proposed fiscal 2026 budget or the use of climate-related utility revenues. The approximately $1 billion all-funds proposal includes a $312 million general fund and a capital budget of about $316 million. Staff outlined a plan to preserve at least $6 million of the $12 million uncertainty reserve through savings, revenue changes, capital deferrals or other adjustments. A separate $54 million budget stabilization reserve, equal to 17.6% of the general fund, would remain in place.

Finance Committee direction contemplated about $5.9 million in fiscal 2026 savings and $7.3 million in fiscal 2027. Potential capital deferrals of 5%, 10% or 15% would free approximately $1.5 million, $3 million or $4.5 million, respectively. Council also discussed possible debt financing for Fire Station 4, whose estimated city share was $16 million, but took no action.

Public-safety options included a phased 12-hour, single-role ambulance beginning around April 2026, with an estimated $1.2 million ongoing cost. Proposed fire transport-fee changes were expected to raise about $700,000 in fiscal 2026. No final decision was made on the ambulance rollout or whether to continue peak-hour cross-staffing at Station 4.

The Finance Committee proposed increasing nonprofit funding by $211,000, from $335,000 to $546,000. Proposed direct allocations included $150,000 for Magical Bridge, $40,000 for Third Thursday, $45,000 for UNAF and $11,000 for Environmental Volunteers at Foothill Nature Preserve. Council discussion indicated those applicants should be evaluated through the same process as other nonprofits, with staff also identifying other City funding and any applications through the Human Services Resource Allocation Program.

In a related study session, several council members signaled reluctance to use climate revenues for broad gas-rate relief, favoring electrification, efficiency and climate programs while leaving open the possibility of targeted affordability assistance. Staff cited a $13 million gas cap-and-trade reserve and an estimated $25 million to $40 million need for electrification pilot programs through 2030. Members also discussed using approximately $300,000 to $400,000 in gas-utility interest income before drawing on cap-and-trade funds.

Several credit approaches remained under discussion. The budget proposal included a $2.2 million climate-credit and interest-income credit for G2 customers. Staff separately described a Utility Advisory Commission recommendation for a $1.6 million residential credit and a Finance Committee discussion leaning toward a $1.1 million credit for small and medium commercial customers. The record establishes no final Finance Committee action or recipient group. Two public speakers opposed a broad gas rebate and urged the city to prioritize electrification or target help to customers with demonstrated need.

The Finance Committee’s budget wrap-up was scheduled for May 20, with council adoption scheduled for June 16. Staff said unresolved savings could be included as placeholders at adoption, followed by detailed options on Aug. 19 and a formal recommendation to council in September. The nonprofit applications were scheduled for Policy and Services Committee review on June 10, while longer-term climate-revenue planning will continue through summer and fall.

Council members seek closed-session review of two federal lawsuits

Multiple council members expressed support for placing a closed session on a future agenda to consider possible participation in American Federation of Government Employees v. Trump and City and County of San Francisco v. Trump. The city manager said the time-sensitive matter could be added to the following week’s already-full agenda. Council did not vote or decide whether Palo Alto would participate in either case.

Council accepts Stanford medical center report and finds compliance

Council accepted the fiscal 2024 Stanford University Medical Center annual report and the City’s related supplements on consent, finding the development-agreement parties in good-faith compliance and not in default. One council member recused from the item because of ongoing legal work for Stanford University; the record does not provide a reliable item-specific vote tally.

The report materials showed approximately $44.3 million in public-benefit fees paid through fiscal 2023-24. Construction generated $5,497,299 in sales and use tax revenue from 2011 through 2023, toward an $8.1 million target by Dec. 31, 2025. The fiscal 2023-24 transfer to capital projects was $4,575,000, including $750,000 from the Expansion Cost Mitigation Fund for the Fire Station 4 replacement.

Council approves engineering and legal advertising contracts

Council’s consent vote authorized a three-year contract with Biggs Cardosa Associates Inc. for on-call structural engineering services, with spending capped at $750,000, or $250,000 per year. The council also authorized two legal advertising contracts with combined compensation capped at $425,000 over five years. Both approvals were included in the 7-0 consent-calendar vote.

Seven candidates advance to interviews for three architectural review seats

Council’s selection through an emailed survey advanced seven candidates to interviews for three Architectural Review Board vacancies. The city’s extended recruitment, conducted from March 27 through April 30, produced nine new applicants after council had interviewed three candidates on March 24. Interviews for the selected candidates are scheduled for May 27.

Primary sources

Watch the meeting on YouTube · Read the official meeting packet