Small nonprofit groups that lease space at Cubberley Community Center and that were forced to curb their operations because of the COVID-19 pandemic will get three months of rent relief, the City Council decided on Monday night.

At the same time, the council balked at providing similar assistance to larger tenants, including for-profit companies that provide valuable services such as child care and music classes. Instead, the council directed its Policy and Services Committee to further explore measures that could assist these businesses.

The council decided to offer tenant relief during a broad discussion of the city's ongoing budget challenges, which include an anticipated shortfall of about $7 million in fiscal year 2022, which begins on July 1. The city is also facing a shortfall of $4.8 million in the current fiscal year — a gap that the council addressed in large part by drawing from a special reserve that it had set up last year to deal with unanticipated pandemic impacts, as well as by eliminating the travel budget for city staff and by reducing spending on management development.

The council's Monday actions followed through on its decision last June to freeze dozens of positions throughout City Hall to account for plummeting revenues. The council formally recognized on Monday that these positions aren't coming back any time soon by voting to eliminate 83 full-time positions and 107 part-time positions across the organization.

Despite the budget crunch, council members agreed to forego about $203,000 in rent payments from the 19 tenants who qualify for relief under the approved rules. The waiver applies only to "small" tenants — those that had revenues of less than $2.5 million in 2019 — and to those who have been forced to halt operations because of the pandemic.

"We have asked other landlords to be flexible; I think we have the responsibility to do that ourselves," council member Alison Cormack said during the Monday discussion.

While the council voted 6-1, with Greg Tanaka dissenting, to offer the relief to nonprofits, some argued that the move doesn't go far enough. Wei Chen, whose company, ACME Education Group, has been providing child care and preschool programs at Cubberley since 1998, noted that the organization would not qualify for tenant relief under the city's rules, both because it's not a nonprofit and because it has multiple locations and, as such, had revenues of more than $2.5 million in 2019. The school had lost two-thirds of its enrollment and cannot afford to pay the full rent, given the COVID-19 restrictions.

"We really need help for the rental so we can continue to serve Palo Alto families," Chen said.

Clara Chang, board chair at the nonprofit Palo Alto Community Child Care, which provides child care services at 11 elementary schools, said her organization would similarly be excluded because it had more than $2.5 million in revenues in 2019. Over the course of the pandemic, the organization has been losing $200,000 per month and has been trying to stay afloat through federal Payment Protection Program loans and by depleting its reserves.

"Rent forgiveness would significantly help us to sustain financial viability until the COVID situation stabilizes and we're allowed to increase enrollment to healthier levels again," Chang said.

Council member Tanaka suggested that the city hold off on approving the relief program and spend more time determining who should qualify. A revenue threshold, he said, is just one possible criterion. Another factor that the city should consider, he said, is how widely it is used in Palo Alto.

"If the program is pretty large, but lots of people in the city use that program, maybe that's actually OK," Tanaka said. "Vice versa, if it's a small operation but no one in the city actually uses that service, maybe that's less benefit."

As the council was preparing to send the entire issue to the Policy and Services Committee for further discussion, council member Lydia Kou proposed providing immediate relief to the qualifying nonprofit tenants. Kou, who chairs the committee, also supported having the three-member panel discuss relief for other tenants, including for-profit groups and nonprofits with revenues higher than the $2.5 million threshold.

Any additional measures, however, would add to the city's budget shortfall. Approving three months of rent forgiveness for all 68 tenants would cost the city about $875,000, according to staff. Limiting it to the 58 tenants that have had to halt operations during the pandemic would add $751,000 to the revenue shortfall.

Several council members also raised the prospect once again of deferring some of the city's planned infrastructure projects, including proposed park improvements at Rinconada Park and at several neighborhood parks, including Ramos and Cameron parks. Vice Mayor Pat Burt and council member Greer Stone both urged staff to return in the coming months with additional information about projects that can be deferred.

The request came exactly a month after the council approved the construction contract for the city's largest infrastructure project in years: a $118 million public safety building that will go up at 250 Sherman Ave.

Stone said that when he voted for the public safety building, that was "under the assumption that we are really trying to triage the most critical projects," which for him included the new building. He said he would need to see a very strong nexus between future capital projects and the city's critical need for these projects.

Burt suggested that the city can save some money by deferring or reducing the scope of proposed playground improvements and street repairs in the coming months. Some of the improvements, including those proposed for Rinconada, are nice to have in the long term but not urgently needed at this time, he said.

One project that several residents urged the council not to delay is the final phase of the Charleston-Arastradero streetscape improvements. The city is scheduled to approve in the coming months an $8 million contract for the project, which focuses on the portion of the corridor near El Camino Real and includes enhanced bike lanes, traffic signal improvements and new landscaped median islands.

Resident Penny Ellson noted that the city has been pursuing the Charleston-Arastradero project for two decades now, with an initial goal of having it completed in 2007. She noted that the streetscape improvements are not "optional" but are a necessary mitigation for the many developments that have since gone up along the busy corridor.

"I hope that the City Council will not cut the project or cause further delay to it after many, many delays over subsequent years," Ellson 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.