Coming off a three-year period of austerity and anxiety, Palo Alto City Council members jubilantly adopted on Monday a budget that restores most of the services that they had cut during the pandemic and that kick-starts expensive efforts such as upgrades of the city's electrical grid and redesign of its rail crossings.

The $1-billion budget, approved by a 6-1 vote with Council member Greg Tanaka dissenting, reflects the city's strong recovery from the economic downturn that began in the early days of the pandemic and prompted council members to cut $40 million from the budget.

Now, things are looking up. With tax receipts on the rise in every major category and voters approving two revenue measures last November, the council adopted a fiscal year 2024 budget that includes longer library hours, more police officers and dispatchers and additional funding for art programs, transitional housing and grants to nonprofits.

The budget includes a $279-million general fund, which pays for most city services aside from utilities — an expected increase in revenues of more than 9% over last year.

The budget's five-year capital program devotes more than $1 billion to near-term projects like the reconstruction of Fire Station 4 at Mitchell Park and longer-term ones like grade separation at Churchill Avenue, Meadow Drive and Charleston Road.

"This budget represents a pivot point from the pandemic recovery to a steady state of operations for the city," Paul Harper, the city's budget manager, told the council during his presentation Monday.

In some cases, it goes well beyond the pre-pandemic levels. The budget adds 45 new positions, of which 33 would be in the general fund. Altogether, it sets the city's staffing level at 1,063 full-time-equivalent positions, more than 1,018 in the current year and more than 1,034 just before the pandemic. The new positions include, among others, engineers who will help implement the expansion of the city's dark fiber optic network, librarians who will enable extended hours local libraries and planners who will assist with permit reviews and code enforcement.

The budget also provides another $2.5 million for planned transitional housing at 1237 San Antonio Road, near the Baylands. This will allow the city and its partner, LifeMoves, to pay for features such as a photovoltaic system and decorative fencing, which had been removed from the plan earlier this year to contain costs. And it adds $150,000 to the Human Services Resource Allocation Process, the city's grant program for local nonprofits.

Council offers praise and some criticism

With the exception of Tanaka, who continued on Monday his habit of voting against the city budget, council members endorsed the document with great cheer and little debate. Council member Ed Lauing pointed at the strong growth in key revenue categories, with sales, hotel and property taxes all on an upward trajectory. Staff is projecting that the general fund revenues will grow by $22.2 million, or 9.3%, between 2023 and 2024, according to the budget.

"We're in a good place starting this budget year because revenues have popped now," Lauing said. "Since the pandemic, they're coming back. And our forecasts on ongoing revenue look quite positive."

But while tax revenues have helped the council balance the books, so did the voters. Last November, residents passed two revenue measures that instituted a business tax and reaffirmed the city's historic practice of transferring revenues from the gas utility to the general fund. Council member Pat Burt, who helped review the budget as chair of the council's Finance Committee, expressed appreciation to voters for approving Measures K and L and, in doing so, allowing the council to restore and maintain service levels.

"This is really a budget that returns our services to our prior levels and addresses some of the key forward-looking needs that we have," Burt said.

Tanaka balked at the budget proposal and criticized it for excessive spending. He specifically criticized the document for including too many management positions and suggested that the city's new positions should be in areas that are "directly serving the public."

"Our expenses are growing faster than our revenues and that's not a good situation," Tanaka said. "Really, we should figure out how to make ends meet, but I know I'm in the minority here."

But others argued that the budget, while optimistic, isn't overly ambitious. While revenue projections are looking good at this moment, the council plans to return in six months and reconsider some elements of the spending plan in light of the economic situation at that time.

Lauing acknowledged the risk of a recession denting the city's economic outlook but noted that the city will have a chance to adjust the budget mid-year if necessary. Some of the new expenditures, he said, were necessary to advance "generational" projects that the city has to undertake. These include upgrading the electrical grid to keep pace with the greater use of electricity and the lesser use of natural gas in the city (a key component of the city's sustainability plan); redesigning the rail crossings to prepare for more frequent trains; and adding more legal and planning staff to handle work resulting from recent housing mandates from Sacramento.

"We're adding significantly to staff to manage that and I think that's the right thing to do because we have to do it," Lauing said.