Measure L

Palo Alto Natural Gas Utility General Fund Transfer

CITY OF PALO ALTO—Would affirm the City of Palo Alto’s existing and decades-old practice of annually transferring no more than 18% of the gross revenues from the City’s natural gas utility (generated by the City’s retail natural gas rates) to its general fund to support general city services such as roads; parks; libraries; climate change reduction; police, fire, emergency medical, and 9-1-1 response. Measure L requires a simple majority (50% + 1) to pass.

Fiscal Impact: Would generate approximately $7 million annually.

See Endorsements for Measure L

Pro:

Proponents of Measure L argue that this measure is needed to fund services and programs for the residents of Palo Alto and it will not change your natural gas utility rate. They argue that It maintains funding for city services, updates the legal language in the City Charter, and is good environmental policy.

A YES vote on this measure means: The City of Palo Alto’s existing and decades-old practice of annually transferring no more than 18% of the gross revenues from the City’s natural gas utility to its general fund would be affirmed.

Con:

Opponents of Measure L argue that it would endorse the practice of mixing funds collected for two different purposes, allowing them to be used for other purposes, vven though this is a long-standing practice in the case of gas service in Palo Alto. They argue that diversion of funds can lead both to higher prices than necessary and failure to be prepared for future investments, e.g., in safety and expansion upgrades.

A NO vote on this measure means: The City of Palo Alto’s existing and decades-old practice of annually transferring no more than 18% of the gross revenues from the City’s natural gas utility to its general fund would not be affirmed.

Background

City voters adopted Article VII of the City Charter in 1950 to authorize the transfer of utility revenues to the General Fund after other obligations are paid, such as operating and maintenance expenses, debt payments, capital expenditures and reserve funding. Under this authority, the City Council has for decades approved yearly transfers of natural gas utility revenue to the General Fund. The transfer provides approximately $7 million each year toward City services maintained by the General Fund, such as roads, parks, libraries, climate change reduction, police, fire, emergency medical and 9-1-1 response. About half of the transfer is paid by the gas utility’s commercial customers, and half is paid by residential customers.

The City designs its natural gas rates so the utility will have enough money to cover its expenses as well as the General Fund transfer. In 2015, a lawsuit challenged this longstanding practice. In 2021, the Santa Clara Superior Court ruled that a portion of the natural gas transfer is a tax that requires voter approval to continue. Both sides appealed and are exploring a settlement that would likely cover 2015 to 2022. This measure, if approved, will apply prospectively, from 2023 onward.

The Measure

The measure would amend the Municipal Code to authorize the City’s current practice of yearly transfers of up to 18% of the revenues of the natural gas utility to the General Fund to support general City services. The cost of the transfer will be incorporated into customers’ gas rates, as it is now, and it will be a general tax.

Source: City Attorney's Impartial Analysis of Measure L

Palo Alto Office of the City Clerk

Pro:

Con:

2026 Propositions

2026 Local Ballot Measures

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