CITY OF NOVATO
Revenue Measure – General Information
July 28, 2010
Overview
The recession and recurring State takeaways of local funds dramatically impact the City’s ability to maintain a high quality of services. City revenues are down 13 % over the past three years. During this time, the City Council has cut the General Fund budget by 23 % or $6.3 million, which has included elimination of over 50 city positions providing service to the public. With reductions approved for fiscal year 2010-11, staffing levels in the City will be 194, which returns the City to 1997-98 staffing levels, while the population has increased 13% from 46,000 to over 53,000. Despite these deep cuts, the City still has a $1.4 million structural deficit – meaning our expenditures exceed our revenues. There are two choices facing the City Council – either make additional reductions to city services or ask the community for an interim sales tax increase.
Key Points
On July 27, the City Council unanimously approved placing a half cent sales tax revenue measure, to sunset in 5 years, on the November 2, 2010 ballot. Below are some other key points that would be included in a potential measure.
• Citizen Oversight Committee – A Novato based citizen committee to review how the funds are spent. Also included, a yearly report to the community and mandatory financial audits.
• Local Control -- The funding for this revenue measure would stay local with local control to provide for local needs. A local finance measure, such as a sales tax, is a reliable revenue source that generates local funds for local needs and cannot be taken by the State. Dozens of cities throughout California have passed local sales tax increases to maintain and improve the quality of life in their communities.
• To offset and prevent additional budget cuts and maintain and restore essential general city services, the impact of the revenue measure is anticipated to be focused on the following:
o Neighborhood police patrols, crime prevention programs and 911 response times
o City street and pothole repair
o Park maintenance
o Preventing closure or elimination of youth and senior centers and services.
• Sunset Clause – It is anticipated that there will be a time limit on the revenue measure of only 5 years.
• Without this tax increase, the City Council will be forced to make additional staff cuts and service level reductions down to a level that the City believes is unacceptable to the community. Without the revenue measure, it is anticipated that additional reductions would come from the Police Department since it is 40% of the City’s budget. In addition, there would be further reductions in programs provided by the Parks, Recreation and Community Services Department including senior services and youth services. In order to maintain the high quality of services and facilities expected by the residents of Novato, additional revenues will be needed.
Financial Information
• After steady increases in sales tax revenue for the last decade, the City experienced a 15% decrease since FY 07/08. Due to the ongoing economic downturn, it is not clear when this revenue source will improve.
• Revenue from development activity has declined rapidly as development projects are either deferred or eliminated from consideration.
• Property Tax revenues declined by 3% last year after several years of growth due to the housing bubble and the build-out of Hamilton. For the first time since the passage of Proposition 13 in 1978, there will be an across the board reduction in property tax for all California cities and counties instead of the 2% statutory increase. As this point, we are expecting a further decline in property tax for fiscal year 2011-12.
• Reduction in 400 businesses applying for city business license renewals especially in home-based businesses and construction.
• All City departments have reduced their budgets by approximately 30% with the exception of Police which has been preserved as much as possible with an 11% reduction. The City has cut 50 positions in the last few years. Overall staffing levels have returned to the same base level as fiscal year 1997-98.
State Takeaways
• Over the last 10 years, the State has taken more than $15 million dollars from Novato to deal with the State budget deficit. In addition, last year, the State took $2.6 million from the Novato Redevelopment Agency and is proposing to take an additional $560,000 this year.
Service Reductions to Date
As a public service organization, the City is a service business. With General Fund reductions, services have suffered. To illustrate, here are some of the reductions in service that have been implemented to date.
• 50% reduction in the Parks, Recreation and Community Services budget
o Reduction in youth and adult programming for sports and recreation
o Closure of the Hamilton Boxing Program and Hamilton Community Center
o Reduction in services at the Margaret Todd Senior Center
o Elimination of the Boy’s Gymnastics Program
o Discontinuance of all preschool classes except Tiny Tots
o Reduction in teen focused recreation programs (cultural arts, music, theatre) and
athletic programs.
o Must find alternative provider for the Novato Independent Elder’s Program by June 30, 2010.
• Protected Police from direct Public Safety Impacts
o Elimination of the School Resource Officer Program in fiscal year 2011-12 which removes
a dedicated Police Officer from San Marin High School and Novato High School.
o Reduction in community outreach and education.
o Reduction in resources for emergency preparedness services, training and outreach.
o Elimination of Community Service Officer focused on Crime Prevention Programs.
o Elimination of the Citizens’ Academy Program.
• Community Aesthetics and Planning
o Reduction of 4 Maintenance Workers in streets and parks maintenance; less resources for
island maintenance, street and pothole repair, and proactive infrastructure maintenance.
o Elimination of the City’s Graffiti Prevention Program; clean-up response time significantly
increased.
o Staffing in the Planning Division has been reduced by 50% over the last two years.
Business Concerns
Most people do not think about the sales tax when making necessary purchases. There is no formal evidence of a loss of sales or revenue in cities where local sales tax measures have increased compared to surrounding cities.
It is also important to remember that sales tax does not apply to groceries or prescriptions. In addition, for large purchases that are delivered (such as appliances) and vehicles, the sales tax is determined on the location where the buyer lives – not on the location of the business.