Novato voters to decide on sales tax increase to address city’s growing budget deficits

Voters in the city of Novato will decide on a 0.75% sales tax increase in November after the City Council voted last week to place the measure on the ballot.

The tax would increase the city’s 8.5% sales tax to 9.25% and raise an estimated $10.3 million annually that would be dedicated to maintaining city services.

The city is facing growing budget deficits over the next five years that are projected to be between $3.3 million and $3.8 million annually, according to the staff report prepared by City Manager Amy Cunningham.

“Without immediate financial change, the city will have depleted all reserves to preserve the existing suppressed level of service in just two years,” the report said.

The city’s precarious financial situation is a long-looming issue. A report from the Marin County Civil Grand Jury in 2023 said city officials had warned for years of the need to bring revenue in line with spending.

“For more than a decade, the City Manager’s letter accompanying every approved city budget has expressed concerns about the city’s long term fiscal sustainability,” the civil grand jury report said.

The report blamed the city’s low property tax rate and the City Council’s ongoing inaction as contributing factors, including the fact that the council lowered a previous sales tax increase from a half-cent to a quarter-cent when it was renewed in 2015.

It also said bad loans and inadequate record keeping were contributing to the lack of financial discipline. For example, the grand jury said the city was unable to provide a comprehensive list of all the properties it owns.

The grand jury and the city’s Financial Advisory Commission both suggested raising the sales tax as a potential solution to close the gap needed to maintain services.

Novato Mayor Mark Milberg attributed the problem to an increase in demand for services over the decades.

“We have the opportunity to make this right and I strongly believe that we need to give this team a chance,” Milberg said.

Mayor Pro Tem Tim O’Connor said in a statement that all the money raised would stay in the city for services like police, parks and public works.

“If the city receives this funding, it’s going to our roads, going to our police officers, going somewhere that needs it,” O’Connor said.

The measure includes oversight mechanisms including a reevaluation of the measure in 10 years, and then every 5 years after that, and having independent annual audits and oversight from a citizens’ oversight committee.

Sales tax rates range in the state from a low of 7.25% to a high of 10.75%. Most cities in Marin County have sales tax rates of 9.25%. Corte Madera and Fairfax rates are at 9% and the unincorporated areas of the county charge an 8.25% sales tax.

The measure needs a simple majority of voters’ approval to pass.