Dick Spotswood: Novato facing tax proposal as financial scrutiny continues

Novato’s financial affairs are in disarray. The difficulty includes an annual structural budget deficit of $2.6 million. The marquee example of mismanagement is that the city hasn’t had an audited annual financial statement in years.

The Marin County Civil Grand Jury focused on this reality in its 2023 report, “Novato’s Chronic Fiscal Deficit, A Call to Action.” As California law requires, the target of those reports must issue a response. Their replies are included in the grand jury’s recently released review of the positive results, if any, of the 2023 reports: “What have they done? An Update on the Responses to the 2022-2023 Marin Grand Jury Reports,” lays out Novato’s dilemma.

“The City Council has known for more than a decade about looming financial challenges and deficits, it has not taken sufficient measures to resolve them. In recent years, the City of Novato’s revenues have not covered its operating expenses. … Warnings regarding chronic fiscal deficits have been provided in writing by City Managers every year for over a decade.”

One example of the city’s approach to the civil grand jury, is the third recommendation: “By December 31, 2023, require the Finance Advisory Commission to issue quarterly financial reports on the City’s financial condition and require that the reports be discussed at City Council meetings.”

The city has a council-appointed seven-member advisory commission. Regular, scheduled, public interaction between the five-member elected city council and its own commission seems obvious, as it would focus attention on means to resolve Novato’s fiscal woes.

The city’s official response is discouraging. “The City Council responded that this recommendation will not be implemented. The Finance Advisory Commission’s role is advisory in nature; its responsibility is to review financial information, not prepare it.” The jury issued a sardonic update, saying “The Finance Advisory Commission does not issue quarterly financial reports on the City’s financial condition.”

Recommendation 4: “By December 31, 2023, develop a schedule to install and maintain comprehensive records management systems for all City operations by June 30, 2025.”

The official response was, “The City Council responded that this recommendation needs further analysis. The City Council dedicated one-time funding in the amount of $26,000 to implement a comprehensive records management system in fiscal year 2021-2022.”

Further analysis is needed? A comprehensive records management system is needed now.

The fifth recommendation is actively being pursued: “By October 1, 2023, begin strategic planning to increase the City’s sales tax.”

The underlying cause of Novato’s finances being out of whack is a combination of past city managers lacking needed fiscal skills and lax council oversight. Novato now has only two choices: Reducing city services by cutting employee headcount or raising taxes.

The council is showing political courage by implementing this recommendation. The grand jury’s update indicates, “Plans are in place for a November 2024 ballot initiative to increase the City’s sales tax by $0.75. A campaign is underway to educate the community that of the 8.5% sales tax currently collected in Novato, only 1.25% is returned to the City.”

To secure the needed supermajority voter approval to increase the existing municipal services sales tax, it’s crucial to restore public confidence in Novato’s fiscal management. Amy Cunningham, the interim city manager, is earning a first-class reputation. Cunningham and members of the council need to get out of City Hall and into the community to personally explain why past mistakes won’t be repeated.

Novato must submit their sales tax measure to the county clerk by Aug. 9. Time is short. If the sales tax increase is to achieve the needed supermajority vote, the city must include intense public outreach before the ballot language is finalized.

Columnist Dick Spotswood of Mill Valley writes on local issues Sundays and Wednesdays. Email him at spotswood@comcast.net.