Palo Alto concluded one of its most brutal budget seasons in recent memory on Monday night, when the City Council approved over $40 million in cuts and agreed to eliminate more than 70 City Hall positions.

Responding to plummeting revenues as a result of the economic shutdown, the council concluded a process that began in early May and that left just about everyone disappointed in one way or another.

"This is not a budget that makes anybody happy," Councilman Eric Filseth said near the conclusion of the meeting. "Everyone's been hurt by this."

The budget represents a $41.8 million reduction from the current year, which includes $4.9 million in cuts from community services and libraries, $7.3 million from public safety and $3.26 million from planning and transportation, including the elimination of the city's shuttle program. The general fund includes $197 million in expenditures and reduces staffing levels by 74 full-time positions.

The budget leaves the city with 960 employees on the payroll in the coming year, dropping the staffing level to under 1,000 for the first time in at least two decades, according to city staff.

"This is a tough budget, there's no question about it," Vice Mayor Tom DuBois said. "I think we defunded every department this year … It's not something any of us wanted to do."

That said, the city's public safety departments won't see most of their cuts just yet. Even though the budget reduces the staffing levels in the police and fire departments by a total of 32 positions, some of these cuts won't kick in until the end of the year because of the concessions that Palo Alto's police and fire unions had agreed to accept. All sworn personnel will forego the 3% cost-of-living adjustments they are entitled to in their contracts. There will also be a special overtime rate for police dispatchers that will reduce costs, as well as a flexible staffing model in the Fire Department.

These cost reductions will allow the Police and Fire departments to defer the budget cuts until September and the end of the year, respectively. They create what staff is calling an "attrition ramp" by allowing — and proactively encouraging — the two departments to reduce staffing levels through retirements of veterans rather than layoffs of recently recruited staff members.

The city's labor negotiators had far less success in its dealings with the roughly 600 employees represented by Service Employees International Union, Local 521. The two sides had failed to reach a deal for cost reductions, which means that the union will suffer the bulk of layoffs but will retain the 3% raises that its workers are set to receive in December under its contract.

Margaret Adkins, SEIU chapter chair, said the union had offered $3 million in savings but the city rejected its offer. She did not specify on Monday night how the money would be saved but lamented the council's failure to reach a compromise.

"After wasting thousands of dollars on many hours of concession discussions and an outside attorney, I don't understand how the council can say, 'Thank you but no thank you,' to our offer of $3 million-plus in concessions, which is about the same amount that the management group is considering," Adkins said.

The city's failure to get concessions from the SEIU employees also cut into management's negotiation with the roughly 200 employees in the "management and professionals" group, the only labor group that is not represented by a union. Normally, these employees see similar salary adjustments to those negotiated by the SEIU. Now, with the SEIU negotiations failing to bear fruit, the management group is backing off its earlier offer to accept 15% in salary savings, which would be realized by 26 days of furloughs. This will now be reduced to 13 days, according to Kiely Nose, the city's chief financial officer.

"Without any sort of agreement with our largest labor workforce, implementing something like that seemed impractical and infeasible," Nose said, referring to the reduced concessions.

The council voted 5-2, with council members Lydia Kou and Greg Tanaka dissenting, to approve the budget for fiscal year 2021, which begins on July 1. In doing so, it concluded an exercise that City Manager Ed Shikada described as managing "a multi-point balancing act of bad choices." This includes reducing productions at the Children's Theatre and exhibitions at the Palo Alto Art Center, cutting hours at libraries, paring back on park maintenance and decreasing capital spending.

Some residents argued that the city should find further savings in the Police Department. Rohin Ghosh criticized the council for making only "delicate" cuts to the police and said the city should do more to address "police militarization."

"It's honestly ridiculous what the city is doing with the budget this year," Ghosh said. "There are places we can find funding for programs that actually benefit the community."

Others suggested that the city reduce its capital budget to preserve community services. Jeremy Erman noted the fact that the city is budgeting $400,000 to replace the seats in the Lucie Stern Theatre even as it plans to cut $700,000 in the Children's Theatre budget. The seats are still functional, he said, and they've been getting much less use than expected in recent months because of social-distancing mandates.

But after more than a month of public hearings, which totaled more than 30 hours, the council refrained from making any last-minute changes to the budget. Kou and Tanaka have complained about the cuts to community services and argued throughout the budget process that the city should save money by delaying major capital projects, such as the proposed bike bridge over U.S. Highway 101 and the reconstruction of the Mitchell Park fire station.

Tanaka reiterated on Monday his prior arguments the city has too many managers and too many employees devoted to areas like "public relations" and recruiting. He also lamented the city's failure to negotiate salary reductions with its largest labor union.

"We're giving raises. It's just mind-boggling," Tanaka said.

The council also left open the possibility of restoring some of the positions that are being cut later in the year. The budget includes a $744,000 fund for COVID-19 related expenditures, money that the city can tap into later to restore shuttle services, boost funding for recreation programs and pay for any unexpected services associated with the pandemic or the economic recovery.

Mayor Adrian Fine was one of several council members who thanked the city's labor force, particularly those workers who are facing layoffs.

"None of us wanted to see this happen, but we're dealing with some really hard situations," Fine said.