A municipal finance consultant’s assessment of Novato City Hall’s budgetary challenges shouldn’t come as a surprise to residents and business leaders who have been paying attention.
Think of the city as a household – with a very large family – talking about making ends meet.
For Novato’s “household,” the outlook is bleak.
The city is on a path of spending about $3 million more than its annual income over the next five years if it doesn’t come up with new revenue.
There are no more state and federal economic bailout funds to help keep city services financially afloat.
City Hall is facing an ongoing 6% shortfall – and diminishing “emergency” reserves.
That’s after the city has already cut personnel and services. The dilemma sets the stage for more ongoing cuts.
But Novato residents and local businesses should expect levels of services and city programs available in other cities across Marin.
At a recent City Council meeting, financial consultant Andy Heath presented city leaders with a sober assessment of the city’s budgetary future. He called the deficit “systemic.”
The city is projected to spend more than its revenue provides. That’s been Novato’s fiscal pattern over the past five years with the city tapping its emergency disaster response fund to cover the deficit.
Financially, the city cannot sustain that pattern.
City Hall has been saying the same. The civil grand jury’s look at the city’s finances reached a similar conclusion, while also noting the city’s problems stemming from turnover in its finance department.
These warnings are setting the stage for the city to ask voters to approve an increase in its local sales tax. Novato has one of the lowest sales taxes in Marin – 8.5%. Most Marin cities are at 9%.
The sales tax in San Rafael, Marin’s largest city and one that’s comparable in size and commerce, is 9.25%. In 2020, San Rafael voters approved raising its local sales tax for nine years.
The time limit requires the city to return to voters to extend the tax and a chance for voters to judge the city’s use of the revenue.
A voter survey commissioned by the Novato City Council shows that there is strong voter support – 57.4% – for raising the sales tax to San Rafael’s level, estimated to generate more than $10 million annually.
The city needs to respect the fact that they are asking Novato residents to raise their taxes at a time when they are dealing with inflation. Their grocery bills have gone up. The cost of power and water has risen. And filling a gas tank is costing a lot more.
Comparatively, the suggested sales tax increase will be less painful.
In 2010, Novato voters were asked to extend the city’s sales tax, but at a quarter-cent lower. With a huge majority – 73% – voters renewed that tax, but the reduction set the stage for the budget problems the city has faced in recent years.
While the city’s recent voter survey shows support for raising the sales tax, the City Council now faces the decision to put the measure on the ballot.
It has to be sent to Novato voters with a strong, unified support from council members.
It also needs a defined “sunset’’ and clear commitment from the council that every year it will publicly account for how the revenue has been spent.
The city will also need to commit to stronger fiscal management and come up with plans for selling, leasing or using its long list of “white elephant” properties, most of them in downtown and at Hamilton.
Voters can come up with a lot of valid reasons for not wanting another tax increase. The challenge for Novato’s leadership will be to rally broad-based support for its passage and increase and then prove that it’s made a significant difference.
