The signs of success are striking: new libraries, a renovated City Hall, a rebuilt Art Center and a new downtown just a mile and a half south of the old one.

Plans for the future are even more ambitious: an iconic bridge, a golf course with a "Wow!" factor, new parking structures, an expanded children's zoo and a state-of-the-art police headquarters.

Projects that just five years ago seemed like pipe dreams are now being designed; ribbons are once again getting snipped by smiling dignitaries; and plans for a new waste-to-energy plant and for universal ultra-high-speed Internet are proceeding apace, obscuring the fact that just five years ago Palo Alto was in financial dire straits.

An equally striking economic resurgence has been taking place behind the scenes in City Hall, in the obscure world of budget amendments, reserve funds, salary adjustments and closed-door labor negotiations. After shedding leaves and branches in the years after the Great Recession, when about 60 positions were trimmed from the budget, the organizational tree in the City of Palo Alto is now regenerating with gusto. In the past month, City Manager James Keene hired two assistant city managers — two more than he has had over the past year — and this week the City Council signed off on a proposal to add a new "principal attorney" position to the City Attorney's office.

Though the city's budgeted workforce of 1,033 remains slimmer than it was a decade ago, when the city had 1,093 full-time workers, the rebound is unmistakable. Last June, with very little discussion, the council approved 14 new positions, including 11 in the General Fund, which pays for basic services like police, fire, parks and libraries. The Enterprise Fund, which includes Utilities and much of Public Works, added three new positions. On Monday night, Keene is preparing to propose a Fiscal Year 2016 budget that will include further staffing increases, the Weekly has learned.

The new positions have contributed to a $9.8-million spike in employee compensation in 2014, compared to the prior year. According to Administrative Services Department data, there were 25 new positions added to the city's budget in fiscal years 2013 and 2014. Other positions that had previously been vacant have been filled. Altogether, there were 52 more people on the city's payroll in 2014 than in 2013.

The additions are responsive to the needs of the city, Keene has said. During the lean years, he used a Swiss cheese metaphor to describe City Hall's staffing challenges, with each hole representing a key vacancy. This year, he switched to an iceberg metaphor and noted that most city workers operate "below the waterline": They are ensuring the city is running, whether by keeping streets safe or keeping the lights on. Only about 66 employees are above the water and available to work on the dozens of strategic initiatives, mostly in the realm of traffic, parking and land use.

Keene began filling the cheese holes last year, when he proposed new positions, including a senior planner, a land-use analyst, a Community Services manager and a metering technician.

The new positions are just part of the explanation for why the city's spending on employee compensation went up by 6.8 percent in one year. Rising salaries are another. After years of wage stagnation, more than 800 of the city's employees have received raises over the past year, with some salaries going up by nearly 20 percent. The Service Employees International Union, which represents more than half of the city's workforce, won in March 2014 an across-the-board salary increase of 4.5 percent spread out over two years. The Management and Professional group, which is not unionized, received a similar pay boost last July 1. Keene and City Attorney Molly Stump, the city's top earners in 2014, each received a 5 percent pay bump in the final month of the year. And in January, the newly reconstituted council voted to raise its own members' monthly stipend from $600 to $1,000.

On top of negotiated salary increases, the city undertook to bring underpaid staff — as determined by a survey of public wages in neighboring cities — up to the median. That led to scores of additional salary adjustments, some on the order of 10 to 20 percent.

The costs are reaching new heights: Overall spending on employee salaries and benefits in 2014 was $149.2 million, nearly $12 million more than the city had spent three years prior.

The trend is expected to further accelerate in the next year, as the city enters into new agreements with two other major labor groups: the Palo Alto Police Officers Association and International Association of Fire Fighters, Local 1319.

A new forecast of the city's long-term finances highlights the problem of the growing payroll. The Long Term Financial Forecast, which the city released earlier this month, projects an increase of more than $5 million in General Fund expenditures on salaries and benefits every year between now and 2025. The total spent on this category is predicted to go up from $107 million in the current fiscal year to $157.2 million in 2025, with benefits taking up an ever-increasing share of the pie.

"Although this Forecast projects healthy revenue growth, the revenue growth is barely keeping pace with the projected expenditure growth," the document states. "Further, the City Council approved Infrastructure Plan is not yet fully funded and does not contain any contingency for higher land acquisition or construction costs; and based on the latest valuation reports, the City's pension and retiree healthcare trust funds have an unfunded liability in the amount of $439.1 million."

Keene hardly needs a reminder of the risk of future hard times. He was hired in August 2008, right before Lehmann Brothers declared bankruptcy, "subprime mortgages" and "credit-backed securities" became common buzzwords and the global economy began its nosedive. Tax revenues began to plummet and, much like every other city, Palo Alto began to cut costs by slashing positions and reducing employee benefits. Between fiscal years 2009 and 2010, the city's expenditures across all funds dropped from $522.5 million to $485 million as pay cuts, position reductions and benefit reforms became the norm at City Hall.

Expenditures fluctuated slightly in the ensuing three years, going to $488 million in 2011, $513.5 in 2012 and $511 million in 2013. Then, in the last two years, they shot up to $527 million and the current budgeted amount of $558 million.

Salaries and benefits aren't the only force driving up the numbers, but they make up roughly a third of the total.

In his first five years at City Hall, Keene has been striving to contain employee expenditures by slashing positions and introducing benefit reforms, one employee contract at a time. Now, he's cautiously trying to right-size.

In May 2014, as Keene was introducing his annual budget to the council's Finance Committee, he noted that the city had given no pay increases during the prior few years. Now, however, the city needed to address that issue with employees by adjusting salaries so that they better match those in comparative jurisdictions. That would ensure the city remains a competitive employer offering attractive compensation.

"I have proposed some funding increases and position increases for the same reasons that years ago we were making the difficult cuts — that they are what the times require, both with our growing population, the demands of our bustling city and bursting economy and actually the expectation of the city and the council on the level of responsiveness you expect," Keene told the Finance Committee.

Those expectations include "what our community expects as far as services and (the) council expects in terms of effective information for policy analysis," Keene said.

The committee proceeded to discuss these changes, requested some more information and ultimately trimmed the position increases from 17 to 14, which includes 11 in the General Fund. The three council members present at the meeting — Marc Berman, Liz Kniss and Karen Holman — proved generally receptive to adding positions, though they requested more information about Keene's plan to also include in the budget a new system of pay bonuses for managers, based on performance.

After a few hearings, the committee gave the budget its blessing. The following month, the full council followed suit. Berman, who chaired the Finance Committee, noted that he was initially skeptical about adding positions but pointed out that the current staffing levels are now far below what they were in the mid-2000s, even as the city's population has increased.

"We still have fewer staff doing more work for more people since the mid-2000s," Berman said on June 9. "It's only responsible that we add staff to meet the needs that exist."

Next month, a new Finance Committee will begin deliberating on Keene's proposed budget for fiscal year 2016, which begins on July 1. Keene has declined to say, or estimate, how many new positions the proposed budget will have, but he made no bones about the fact that the number of employees would once again be going up, not down.

"I'll advance some suggestions so we can have free discussion about tradeoffs," Keene said. "I will be adding General Fund positions for sure. I don't think the demands that the community and the council is putting on the organization have decreased. They have increased and I have to be sure we can respond to the expectations the council has."

Click on the links below to read about each groups' employee compensation:

• Management and Professional group

• Police and firefighters union

• Service Employees International Union, Local 521