Naftali Harris

Day-to-Day Operations of Palo Alto

February 20, 2017

Palo Alto runs a pretty open city government, with a number of interesting documents available for download on their website. Of particular interest are their annual budgets and annual financial reports, both of which are for the fiscal year ending June 30. These documents are a few hundred pages long each and full of accounting tables, but with a bit of persistence and the help of some friendly city employees I think I was able to figure out much of what is going on. In this post I give an overview of what the city of Palo Alto does on a day-to-day basis--(i.e., excluding long-term capital projects).

What is Palo Alto?

For background, Palo Alto is a small city of about 70,000 in the South San Francisco Bay. It was incorporated in 1894 by Timothy Hopkins and Leland Stanford a little after the opening of Stanford University in 1891. The city resembles a gerrymandered congressional district, with a large northern and a southern part separated by a thin strip. The north part is the main part of the city, with most of the residences, businesses, and offices. The southern part has a country club, some large parks and open land. Although Stanford borders Palo Alto, most of the university and its land is not contained in the city, contributing substantially to the "gerrymandered" shape.

Although only about 70,000 people live in Palo Alto, many more people work there, including at Tesla, Palantir, VMWare, SAP, the two Hewlett Packard successors, the Palo Alto VA, and Stanford Medical Center (which, unlike the most of the university, is in Palo Alto). This pushes the daytime population to 110,000-130,000 people, depending on the estimate.

So what does the City of Palo Alto do?

Firstly, the city runs a police and fire department. The police department employs about 150 cops, headquartered downtown, and cost the city $35 million in Fiscal Year 2016. The fire department has about 110 firefighters spread over seven fire stations, costing the city $28 million. The Palo Alto fire department also serves Stanford, which pays the city about $6.5 million each year for this, though Palo Alto and Stanford have been disputing the amount Stanford should pay for the last few years.

In addition to the public safety programs, the city also provides various utility services: water, electricity, gas, sewer system, and trash collection among others, collectively employing about 350 people. Interestingly, it also provides a fiber-optic connection to commercial customers. As you'd expect, the operating costs of these utilities are paid for by their users through their utility bills. Running these utilities cost the city about $250 million in 2016, and earned the city about $275 million in revenue. Electricity was the biggest program, costing $120 million to run, followed by sewage collection and treatment ($38 million), water ($35 million), trash ($30 million), and gas ($21 million). Palo Alto's sewage treatment plant also treats the wastewater of several other nearby cities, (all of which compensate the plant on a pro-rata basis depending on both the quantity and chemical content of their wastewater).

The city also builds and maintains infrastructure like its streets, sidewalks, buildings, parking garages, and 35,000 trees. Collectively this cost the city $25 million in Fiscal Year 2016 and employed about 50 people.

Palo Alto also runs various quality of life programs for residents and the public. The city runs a library system with 50 employees, 250,000 physical books (460,000 total items) across five branches, and--according to their annual report--boasts 1.4 million checkouts each year. The library costs the city $11 million per year, although also benefits from over a hundred volunteers donating 3000 total volunteer-hours a year.

The city also runs various parks, a pool, an art center, a golf course, and even a small zoo. These it collectively refers to as "community services", which employ 80 people and cost the city $29 million per year.

The city then runs planning and development departments, which cost about $21 million per year. These departments, which employ 70 people, guide the city's urban planning and transportation plans, issue building permits, and enforce the building code.

Finally, management of the city costs about $19 million per year. This consists of functions like human resources, finance, accounting and purchasing, and the city attorney, for example.

Here's a nice pie-chart of spending from the annual financial report. They have combined Fire and Police into their "Public Safety", whereas I combined their "All Other" and "Administrative Services" into "management of the city" and their "Planning and Community Environment" and "Development Services" into my "planing and development departments". They don't include utilities here, which as discussed above are self-funded through service fees charged to their users.

Palo Alto non-utility expenses

One thing that the city of Palo Alto does not do, though, is run the local public schools. These are run by the Palo Alto Unified School District, which is funded separately and whose borders do not exactly coincide with Palo Alto's. (According to their budget, PAUSD will spend $231 million this school year for 12,261 students ($18.8k/student), about 81% of which comes from property or parcel taxes and about 86% is spent on staff). This kind of separation is not uncommon--in most of the US, school districts are separate from local governments.

Thanks to Assistant City Manager Ed Shikada and to Assistant Director of Resource Management Jonathan Abendschein for answering some questions I had about Palo Alto's utilities. Undoubtedly, despite their help I'm sure my characterization of what the city does still has some errors in it--the fault for any such mistakes is mine and not theirs. In addition, to the extent there are any opinions expressed in this post, they are mine and not necessarily theirs.

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