City Fiscal Report Isn't All Doom and Gloom

Considering the sigh-inducing economy, Novato is in better fiscal shape than it could be.

Brian Cochran, finance director for the city of Novato, joined City Manager Michael Frank in providing an update to the Novato City Council on Tuesday, and the prognosis is nowhere near as bleak as some other municipalities.

Cochran said expenditures are about $600,000 better than forecast, allowing the city to cancel a $300,000 transfer of funds from emergency reserves to keep the budget balanced.

The city closed out fiscal 2010-11 about $1 million ahead of what was expected, he added.

The past eight or nine fiscal quarters have produced upticks in sales tax revenue, a key source of income for the city, Cochran reported. With the exception of the $700,000 hit that resulted in the dismantling of the Novato Redevelopment Agency in February, the city is on track with the budget approved last summer.

"Revenues appear to be on track," he said. "We're seeing some positive results with our sales tax, our transient occupancy tax, and some of the building and planning fees are budgeting out well."

Frank said, "We've made great strides to date."

Yet even with a slight improvement in the local economy, Novato is looking at a $1.5 million deficit in 2011-12 — which includes the $700,000 due to redevelopment — and is looking squarely at an additional $200,000 deficit each year over the next five years. About $200,000 of the total deficit will be traced to increased pension liability starting in 2013-14, Cochran said.

According to an ABC news report, only about 650 municipalities in the United States have declared bankruptcy since it became an option in 1937. Vallejo was one of them, and now Stockton is on the brink. It would become the largest city ever to hit the financial reset button, according to news reports.

Measure F, Novato's half-cent annual sales tax increase over five years, was approved in November 2010 and will generate about $3.8 million annually to offset additional budget cuts and restore some city services that had been eliminated. As of April 1 of this year, Measure F cash has rolled in and provided slightly more than budgeted, Cochran said.

The most recent tax figures show a 1 percent growth in property tax revenues from assessed valuation changes, and Cochran said that is expected to grow to 2 or 2.5 percent over the next few years. Frank mentioned that only 6.8 cents per dollar from property taxes end up in city coffers, the lowest rate in Marin.

Inflation rate estimates for Novato range from 1.7 percent to 3.5 percent, he said.

Frank reminded the council that city staffing has been reduced 20 percent across the board, and the general fund budget has been cut 13 percent (about $5 million) since 2006-2007. Altogether, about 50 full-time staff positions have been cut.

"This is going to be a balancing act despite what some folks have mentioned over the past couple of years," Frank said. "There are no simple or clear solutions."

Unlike many other cities, Novato does not have a refuse franchise fee, a road impact cost-sharing fee, a utility user tax or a long-term local voter-approved sales tax increase. He said revenue could be generated by smart use of Novato's remaining land that is zoned for commercial or industrial use. Only 5 percent of land within the city limits is zoned that way and still available for development.