With local businesses struggling to survive the pandemic, Palo Alto is preparing to launch a relief fund to assist those that have been decimated by the economic shutdown.

The city is preparing to start the fund with $500,000 in public funds, though it is hoping that large companies and foundations will step up and help raise and distribute funds. The program would be modeled after the one Mountain View started last month but with one key difference: Council members made it clear on Monday that they are not in favor of the first-come, first-served approach adopted by Mountain View and would rather see a lottery system determine who receives the funds.

The city also is preparing to convene a series of roundtable meetings with dozens of local businesses to gather feedback on how it can assist them during this period of economic distress. City Manager Ed Shikada said he plans to hold three to four such events in the next two or three weeks, with up to 20 participants in each meeting.

While the details of the new business-relief program have yet to be sketched out, the council agreed Monday on some basic parameters: The program should start with $500,000 in public funds and apply to businesses that have up to 50 employees. Council members also agreed that the city should partner with a third party to administer the funding – as seen in Mountain View and Oakland – and that it should try, to the extent possible, to obtain matching funds from corporations, foundations and other institutions in the community.

Mayor Adrian Fine, who made the motion to include the parameters in the new program, said that by assisting businesses, the council is helping to maintain vital services and protect the city budget from even steeper revenue declines.

"These businesses provide valuable services to our neighborhoods, whether it's a cobbler, a grocery store, a restaurant or a bar," Fine said. "Those are all important to our residents and quality of life."

At the same time, he added, businesses provide the city with critical sales tax revenue — a critical component to maintaining services at a time when Palo Alto is staring at a budget shortfall of $20 million in the current fiscal year and potentially more than $30 million in 2021. The city, Fine said, should use the funds to "bridge the gap and keep as many businesses as possible alive through this crisis."

Councilman Greg Tanaka urged staff to get the program running as quickly as possible, given the dramatic impact that the shutdown is having on local businesses. Many of them are now deciding whether to stick it out or shut down entirely, he said.

"I'm really concerned that if we wait too long, it's going to matter less and less because people are making decisions right now, as we speak," Tanaka said.

Vice Mayor Tom DuBois took a more cautious approach and argued that the city's funding should only be used to match contributions from others. He said he is not enthusiastic about using taxpayer funding to pay rent unless the landlord also offers some relief, in which case the city can match it. He also suggested that committing $500,000 to the program is premature at this time, given the city's financial outlook.

"It's on one hand, not enough. On the other hand, it's a lot. We're going to have a $20 million shortfall just this quarter," DuBois said.

His attempt to make matching a requirement of the new program failed by a 3-4 vote, with Fine and Councilman Eric Filseth joining him.

While the council voted unanimously to direct staff to move ahead with creating the relief program, both Filseth and Councilwoman Alison Cormack wavered in their support. Filseth said it seems "incongruent to me that we'll go throw around money now," given the "massive shortfall" in the budget.

Cormack suggested that the relief that the program would provide would be the "proverbial drop in the bucket," given the number of businesses and the limited pool of funds. She said the city also needs to consider funding for nonprofits, which also have been strained during the economic recession. DuBois spoke in favor of adding funding for nonprofits, but said this should be done through a separate program so that nonprofits would not have to compete with businesses for funds.

The council largely agreed with Cormack's proposal for a "lottery system," which the city has long used to manage registrations for its recreation programs. Councilwoman Liz Kniss, who is serving with Cormack on an ad hoc committee to support businesses, suggested that a lottery system would preclude the type of rush for applications that has become synonymous with other relief programs and, as such, alleviate some anxiety among applicants.

While the federal government has created several programs for small businesses, most notably the $359 billion Paycheck Protection Plan, most local businesses were not able to access these funds before the program ran out of money last week.

Speaking in favor of the program, Kniss said there are "some businesses that we would be just heartbroken if they go away."

"I think regardless of who we end up supporting, we're going to support somebody who makes an enormous difference to the community," Kniss said.

Find comprehensive coverage on the Midpeninsula's response to the new coronavirus by Palo Alto Online, the Mountain View Voice and the Almanac here.