Novato assesses budget changes in funding influx
Novato expects to significantly reduce its budget deficit and potentially add staff and services next year with the help of federal stimulus dollars and recent real estate sales.
The more optimistic budget outlook for 2021-22 comes after a tumultuous year for the city that included staff layoffs, service cuts and a projected budget deficit of $ 2.5 million.
In addition to better tax revenue projections, the city expects to see an influx of $ 16.1 million in one-time funding, including $ 9.1 million from the $ 1.9 trillion US bailout package. President Joe Biden and the rest of the city’s property sales, deals and previous budget savings.
While Novato initially planned to receive around $ 10.4 million in federal stimulus funding, the aid is “still a significant amount to help make up for our lost revenue,” said Amy Cunningham, chief financial officer of the company. city.
âSo while the news isn’t as good as we initially expected, it’s still very good news for us,â Cunningham told the board during his budget discussion on Tuesday.
The remaining $ 7.1 million in one-time funding comes from a variety of sources. The city received $ 5.6 million from the sale of the Hamilton Commissary’s 5-acre parcel to City Ventures LLC, which plans to build 75 townhouses. An additional $ 1 million in revenue comes from a previous agreement with the Buck Institute for Research on Aging this year on the future development of the institute’s campus. Additionally, a recent audit of the city’s finances for 2018-19 found it had $ 889,500 in additional savings.
Novato city council on Tuesday announced its support to spend nearly $ 7.3 million of the $ 16.1 million in one-time funds for a variety of services and to cover the shortfall.
Services and projects include:
- $ 280,000 for an online building permit system
- $ 1.2 million to replenish reserves for legal settlements and liabilities
- $ 500,000 for the city’s retirement trust to pay off unfunded debt
- $ 3.5 million for various urban projects
- $ 750,000 for long-term repairs delayed by lost revenue during the pandemic
- $ 125,000 to hire a demographer for the city’s electoral redistribution
If these are approved in the city’s 2021-2022 budget in June, that would leave around $ 8.8 million for council to decide how to use them in the years to come.
More than half of that amount would come from US bailout funds, which must be spent by the end of 2024 and can only be used to replace income lost due to the pandemic. The funds cannot be used to pay off retirement and liability costs, to pay off debt, for legal settlements and liabilities, or to disburse funds for rainy days.
The latter requirement has made agencies wonder why they can’t restore reserve funds used to make up for losses during the pandemic, Cunningham said.
âSo this is an area in which I’m curious to see where public opinion will manifest itself in terms of the use of these funds,â she said.
Mayor Pro Tem Eric Lucan said long-term investments from these one-time funds, such as paying down pension liabilities and the city’s debt, could help ease budget pressures over the next few years. One of those pressures is the city’s unfunded pension liability payments, which are expected to increase by nearly $ 620,000 over the next fiscal year, to $ 4.2 million.
While he originally projected a $ 2.5 million deficit last year, Cunningham said better-than-expected tax revenues – especially online sales – and updated spending forecasts bring closer that number of $ 990,400. The board ordered staff to reduce the deficit even further, to about $ 144,100, by reducing investments in maintenance arrears from $ 1 million to $ 750,000; using $ 650,000 in federal stimulus funds; and through savings from staff vacancies.
However, the city is in collective bargaining with various employee unions, which could increase current spending and projected deficits.
Last year, city staff also projected a continuing structural deficit of $ 2.1 million for years to come. However, Cunningham said that figure is a “moving target” and will be updated.
In addition, the board on Tuesday signaled its support for the arrival of two new staff, a deputy director of finance and an accountant, to the finance department. The move would cost around $ 303,700 per year.
The council may also consider adding new staff to the community development department, which includes the buildings division, in August.
âI’m concerned that as we start to bounce back from this, we have enough staff to manage the processes in the community development department,â said Councilor Susan Wernick.
Cunningham said the two finance staff would work to ensure adherence to state reporting standards, reduce the use of consultants and oversee audits.
âWhile this is an addition of staff, this number is still lower than most agencies our size given the complexity of the finances we have,â said Cunningham.
Mayor Pat Eklund expressed discomfort at adding new staff to the finance department, but also acknowledged past problems with the city’s financial oversight. She said she would not support hiring new staff from the community development department until council has a discussion of the city’s permit system, which has been criticized in the past for being too heavy and inefficient.
Councilor Amy Peele said the city will be backfiring not to recruit new finance staff.
âI would support continuing to build it appropriately so that one of the cornerstones of our city – financial stability and transparency – can continue to evolve under Amy Cunningham,â Peele said at the meeting.
If approved, the staff additions would increase the city’s total staffing from 188.5 full-time positions to 190.5 positions in total.
The city cut 17 positions in various departments last year in response to budget concerns, as well as 100 part-time positions in seasonal parks and recreation staff.
âWith the pandemic restrictions lifted and services restored, our current staffing levels will not be sufficient to maintain pre-pandemic service levels,â Cunningham told the board.
The council plans to hold a budget hearing on June 8 and is expected to adopt the budget on June 22.