CONSIDERATION OF LOCAL SALES TAX MEASURE –
NOVEMBER 2024CITY COUNCIL MEETING - JULY 23, 2024
2023-2025 STRATEGIC PLAN
Fostering fiscal strength and addressing systemic budget deficits: Work Plan Initiatives:
• #14 – As resources become available, develop a targeted plan to address deficiencies and deferred maintenance in our existing parks,recreational facilities and City-owned infrastructure; • #15 – Initiate a review and modernize the 2013 Fiscal Sustainability Plan with an emphasis on increasing City revenues, including aninteractive model if possible; and • #16 - Address long-term revenue shortfalls: explore a November 2024 ballot initiative to increase sales tax by ¾ cent.
FINANCE ADVISORY COMMISSION RECOMMENDATIONS
1. Unanimously recommend sales tax approval - place 0.75% increase on November 2024 ballot, until repealed by voters, with independent financial oversight by the Commission.
2. Commission to continue receiving quarterly reports - including new sales tax accounted for in a separate fund; and annual reports to the City Council and taxpayers.
3. Sales tax is absolutely essential and part of a larger solution. Recommend Fiscal Sustainability Plan include:
A) Cost-effective use of City properties – compile detailed information for each property and use for realistic cost-benefit assessments to inform the development of practical, rational options.B) Identify factors impacting economic development - vigorously pursue innovative economic policiesand minimize the obstacles to growth.C) Identify and aggressively apply for any and all grants; for FY2025/26 allocate a dedicated resource to seek grant funds
BUDGET DEFICITS – 5 YEARS
General Fund
Budget Deficits
Proposed
Budget
FY24/25
Amended
Budget
FY23/24
Adopted
Budget
FY22/23
Adopted
Budget
FY21/22
Revised
Budget
FY20/21*
Adopted
Budget
FY20/21
($5.7M) ($2.5M) ($0.2M) ($1.7M) ($3.3M) ($4.3M)
Surplus /(Deficit)*September 2020 Budget Revise
GRAND JURY REPORT
“NOVATO’S CHRONIC FISCAL DEFICITS: A CALL TO ACTION”
Findings: Despite over a decade of warnings, sufficient measures have not been taken to resolve the City’s ongoing and chronic fiscal challenges.
Novato’s low property tax rate at just 7% - “is one of the City’s most severe impediments to its financial stability.”
Cost-containment and expense reduction measures taken over the past decade have had a detrimental impact on the community’s quality of life:
“For example, budget cuts designed to reduce staffing levels left fewer people to perform the same or greater workload, resulting in overburdened staff members, low wages, difficulties in hiring andretaining employees, and reduced services for Novato’s approximately 53,000 residents.” Conclusion:City Council has not adequately pursued options for ongoing sources of revenueRecommendation:City “begin strategic planning to increase the City’s sales tax.”
FISCAL SUSTAINABILITY PLANNING
New ongoing funding is needed to:
Preserve current priority services by bridging the systemic operating deficit and address community demand;
Replenish emergency reserves; Address mounting deferred infrastructure and capital needs; Mitigate financial and other liabilities; and Invest in innovation to generate reliable ongoing revenue.
PROPERTY TAX DISTRIBUTION
LIMITED LOCALLY CONTROLLED FUNDING:
SALES TAX
8 Of the 8.5% sales tax
collected in Novato,
only 1.25% returns to
the City of Novato
LIMITED LOCALLY CONTROLLED FUNDING:
SALES TAX
9 Marin County Rate:• Applies to all agencies without local transaction tax • Includes TAM, SMART, MPOS Marin Cities & Towns:• 4 Agencies at the State cap of 9.25% • Novato has 0.75% cap space • Remaining cap space could be used by city/town or for countywide purpose
(e.g. county, transportation agencies)
COST CONTAINMENT – PERSONNEL ~70%
10 Highest Personnel Allocation:FY2002/03 = 234Personnel Allocation(Pandemic Service Reductions)FY2021/22 = 190.5Current Personnel Allocation:FY2024/25 = 198
INFRASTRUCTURE
Over $51M in deferred maintenance needs
$38M – Roads backlog
To maintain current conditions +$5M per year needed
$13M – Parks backlog
Does not capture deferred need for:
Facilities Storm Drains Sidewalks
SERVICE DELIVERY & STAFFING
SERVICES DELIVERED THROUGH STAFFStaffing Levels - 20 year Low 8% Workforce Reduced in 2020 Consultant Study – +19.5 Positions Needed Immediate staffing needs to address greatest risk = +7.5 Added FTE = +6, Temporary/Contract = +1.5
Meet Existing Community Need = +12 FTE
Recruitment and Retention Challenges = Inefficiencies
Competitive compensation Workload
5-YEAR FINANCIAL FORECAST
-$.2M -$1.7M -$3.3M -$4.3M -$3.3M -$3.4M -$3.4M -$3.8M -$3.5M $12.7M $12.5M $10.5M
$7.4M
$2.9M
-$.5M
-$3.9M
-$7.6M
-$11.1M
21/22 22/23 23/24 24/25 25/26 26/27 27/28 28/29 29/30
$$$$$$$
GENERAL FUND FORECAST
Operating Deficit Fund Balance
SURVEY RESULTS
14 Survey Conducted May 2024 Likely Novato Voters polled by phone, email, text
80% Life is Good in Novato 66% Satisfied with City Services ~60% approval rate for potential revenue measure
PROPOSED BALLOT LANGUAGE
Shall the measure continuing locally controlled funding, that the State cannot take away, and maintainingCity of Novato’s services, such as:
fixing potholes/ streets; maintaining 9-1-1 emergency response, crime/ gang prevention; attracting/ retaining small businesses; maintaining parks/ recreation facilities; enhancing wildfire prevention; and repair aging storm drains; by establishing a 3/4c sales tax in the City of Novato, until ended by voters, for general government use, providing an additional $10,300,000 annually, with independent citizens’ oversight, annual audits be adopted?
LOCALLY-CONTROLLED SALES TAX SAMPLE IMPACT
16 Groceries, medications, medical, dental,
real estate, rent, education, utilities,
personal services and labor are all
exempted from sales tax
FISCAL ACCOUNTABILITY
Fiscal Accountability Protections Existing independent oversight committee (FAC) continue to review and report on the use of revenue to ensure that all funds are spent responsibly on general City services consistent with the community’s priorities.Strict fiscal accountability protections, including:
All funds must stay in Novato for local services only and cannot be taken by the State, the County or other agencies; and
All funds would be subject to independent annual audits and mandatory public spending disclosure.
BALLOT PLACEMENT - CALENDAR
2024 Key Dates:
City Council passes resolution, formally placing the measure on theNovember 2024 ballot. July 23 -
Deadline to submit Resolution regarding ballot measure to CountyBoard of Supervisors and Registrar ofVoters. August 9 -
Deadline to submit primary arguments to the Elections Departmentthrough the City Clerk. August 19 -
August 26 - Deadline to submit rebuttal arguments to the Elections Department. November 5 - Election Day
COMMUNITY OUTREACH
Extensive Engagement Activities: Community budget survey, available online and by mail, resulting in over 1,000 responses. In-person and online Community Budget Workshop Presentations to community groups and at community events (e.g. Concerts on the Green) Councilmember district pop-ups & at Downtown Community Farmers’ Market Polling conducted through emails, phone calls and text messages Posts to the City’s website at novato.org/localfunding Citywide direct mailers (4) Mailer #4: Notice of July 23rd Council meeting
Email notifications and e-newsletter updates to subscribers Posts to the City’s social media channels: Facebook, Instagram, X, and Nextdoor Tonight’s meeting noticing - per standard agenda noticing procedures
STAFF RECOMMENDATION
Adopt Resolution approving Ordinance
0.75% local transactions and use tax, for general government use, until repealed by voters Consolidate election with General Municipal Election – Nov. 5, 2024 Next Steps – Fiscal Sustainability Plan
Specify spending priorities Specify accountability provisions QUESTIONS OR COMMENTS?