Novato weighs budget priorities for tax influx

Novato officials are contemplating how to allocate more than $10 million they expect from Measure M next fiscal year.

The City Council held a study session Tuesday on its budget and capital improvement projects for the next fiscal year, which begins July 1. The forecast includes funding from Measure M, the voter-approved sales tax increase meant to address city deficits.

Carla Carvalho-DeGraff, the city finance director, projected surplus general fund revenue of $6.6 million in fiscal year 2025-26 from Measure M.

“Prior to the passage of Measure M, the city had a systemic deficit,” Carvalho-DeGraff said. “This is why in 25-26, the surplus charts at $6.6 million. The systemic deficit means it’s not a one-and-done deficit, it’s ongoing, so we have to backfill that hole each year.”

The city expects to end this fiscal year with a $3.5 million deficit. The estimated Measure M revenue is $10.6 million in fiscal year 2025-26, but about $4 million will go to covering the deficit, leaving $6.6 million for reserves, compensation, pension trusts and capital projects.

Carvalho-DeGraff said some challenges the city faces in fiscal year 2025-26 include national economic uncertainty, rising costs that are outside of the city’s control, increased service demands and Novato’s increasing list of deferred maintenance.

Tim Burke, the public works director, proposed adding 16 new capital improvement projects totaling $6.5 million to the five-year plan. The city’s yearly pavement project will cost around $3 million, and Burke suggested using $1.8 million from Measure M income.

Burke said funding for such projects comes from a mix of tax revenue, developer fees and grants. He projected total revenue of $5.5 million in fiscal year 2025-26. The capital improvement plan has a budget shortfall, according to a staff report.

Several of the projects entail replacing heating, ventilation and air conditioning systems in city buildings. The Hill Community Room at 1560 Hill Road needs a new system that would cost about $125,000.

The air conditioning units, evaporation coolers and rooftop fans at the Margaret Todd Senior Center are near the end of their life cycles and break down regularly, according to the staff report. A new system could cost about $240,000, plus another $50,000 for new siding.

“Right now the senior center is experiencing some water damage and dry rot,” Burke said. “It’s a very complicated siding that is on the senior center, and so the 50K is just to really assess the situation and maybe get started on the design. The total cost to replace the exterior siding is closer to $1.2 million.”

The air system, boiler and chiller at the police station are past their lifespan. Officials estimate that full replacement will cost about $3 million. City staff budgeted $700,000 to hire an engineering firm to work on replacement plans. The station also has a water infiltration problem, and the city aims to budget $200,000 to hire a consultant to study it.

Another proposed project includes a potential $700,000 effort to replace and upgrade the playground at Hamilton Amphitheater Park to meet requirements under the Americans with Disabilities Act.

Mayor Tim O’Connor asked about the city’s capacity to handle existing projects while taking on the 16 new ones. Burke said city staff are trying to finish up a large backlog of projects, but some of the proposed new projects are just the beginning steps.

“Some of it’s just to get them started,” Burke said. “It’s not like a home improvement where you’re like, OK, it’s time to do the kitchen, let’s put some money towards it. OK, great, we’re going to go in and knock it out.’”

Councilmember Pat Eklund asked how much of Measure M revenue will go towards reducing the risk of wildfires. City Manager Amy Cunningham said staff will give a presentation on wildfire abatement in May.

“That’s one of the things that is near and dear to my heart as well as a lot of people who live in my area, and also because the city owns a lot of open space that needs to be buffered from the neighbors,” Eklund said.

O’Connor also asked staff to work to reinstate a downtown business property improvement grant program next fiscal year, with a starting allocation of $100,000.

“It was a valuable tool and it helped a lot of businesses invest some money in the downtown area,” O’Connor said.

The city plans to hold community forums about the budget from 11 a.m. to noon April 28 at Marin Coffee Roasters at 466 Ignacio Blvd.; 10 to 11 a.m. May 3 at the Creekside Bakery at 1719 Grant Ave.; and 4 to 8 p.m. May 6 at the farmers market on Sherman Avenue.

The City Council plans to hold a budget hearing on June 10.