JEANNE MACLEAMYMayorPAT EKLUNDMayor Pro TemCAROLE DILLON- KNUTSONERNIE GRAYJIM LELANDCouncilmembers Presented by DANIEL E. KEEN City Manager City of Novato
ADOPTED BUDGET
FISCAL YEAR
2007/ 2008 Questions And Answers
How to Read The City of Novato’s Budget
Q. This document is very large. Where should I start?
A. Start with the City Manager’s budget message on Page 1. This outlines the priorities for the year and identifies major issues facing the City.
Q. What are the City’s goals? What did the City accomplish last year?
A. The City Council identifies goals each year and these are summarized on Page 364 in the Appendices section of the budget. A summary of the department FY 2006/ 07 highlights begins on Page 7.
Q. Where do I find where the City gets its money?
A. A summary of City revenues begins on Page 33. This summary explains each of the different revenue sources and its outlook for the future. On Page 58 is a chart that breaks down the general fund revenues by type. Then, on Page 80 is a summary of revenues for all funds by type.
Q. How does the City spend its money?
A. A chart that breaks this down for the general fund is located on Page 61. A summary of expenditures for all funds by type is on Page 83. Then, beginning on Page 107 is a breakdown by department and program of each of the City’s services. A comprehensive list of these services is found in the Table of Contents, beginning on Page TOC- ii. Each of the services ( programs) is detailed by how much each one costs, any revenue that the service brings in, and how many people it takes to provide the service.
Q. What about capital projects like streets and parks?
A. A summary of capital improvement projects is on Page 323. A separate Capital Improvement Budget has more detail on these projects. Copies of this budget can be obtained from the Novato City Clerk’s Office, 75 Rowland Way # 200, ( 415) 899- 8986.
Q. Where do I find information about redevelopment spending in Novato?
A. The Redevelopment Agency Budget is found starting on Page 269. The California Society of Municipal Finance Officers ( CSMFO) presented an Excellence in Budgeting Award to the City of Novato for its annual budget for the fiscal year beginning July 1, 2006.
The CSMFO Budget Awards Program recognizes those agencies that have prepared a budget document that meets certain standards.
The award is valid for one year only. We are submitting our current budget to CSMFO to determine its eligibility for another award. The Government Finance Officers Association of the United States and Canada ( GFOA) gave a Distinguished Budget Presentation Award to the City of Novato for its annual budget for the fiscal year beginning July 1, 2006.
In order to receive this award, a governmental unit must publish a budget document that meets program criteria as a policy document, as an operations guide, as a financial plan, and as a communications device.
The award is valid for one year only. We believe our current budget continues to conform to the program requirements, and we are submitting it to GFOA to determine its eligibility for another award.
THE CITY OF
NOVATO
CALIFORNIA
MISSION STATEMENT
hedebybe
Mission of the employees of the City of Novato is to provide effective services signed to enhance the well- being and overall quality of life for residents and visitors creating and supporting a healthy, safe and attractive community. We take pride in ing a responsive, compassionate and innovative team providing the highest level of quality services and communication in all City programs and activities. T
We are committed to the purposeful recognition of the inherent worth and uniqueness of each individual and cultural background, the highest professional and ethical standards and continuous quality assessment and improvement of our efforts.
VISION STATEMENT
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employees of the City of Novato endeavor to be a premier municipal organization managing resources productively and creatively. As a team, we take pride in our rk, in assisting our customers, and in our ability to adapt to the changing needs of community. Our vision is to be a model agency known for our friendliness, fairness, excellence and professionalism. We strive to be an employer of choice. T
VALUES STATEMENT
FAIRNESS
We show fairness, respect and courtesy to others.
INNOVATION
We encourage imaginative and creative thinking to arrive at solutions. We use our best judgment.
INTEGRITY
We are ethical and maintain the public trust.
PERFORMANCE
We are solution oriented.
We respond quickly to issues, concerns and problems.
We recognize and reward good work.
RESPONSIBILITY
We are responsible for our actions and commitments, individually and as a member of a team.
TEAMWORK
We believe in using teams to solve problems.
We communicate openly and listen actively.
We encourage each other to learn new skills.
TRUST
We commit ourselves to building trust and being trustworthy.
We are loyal to the City and each other.
Table of Contents
City of Novato Adopted Budget 2006/ 07 C Page TOC- i
CITY OF NOVATO
Adopted Budget
Fiscal Year 2007/ 08
Page
Questions & Answers............................................................................................ inside front cover
Budget Message........................................................................................................................ ... 1
Department Highlights.............................................................................................................. 7
Community Profile...................................................................................................................... 11
Novato at a Glance.................................................................................................................. 16
Budget Process and Budget Calendar....................................................................................... 17
Capital Improvement Budget Overview..................................................................................... 19
Financial Policies & Practices.................................................................................................... 20
Debt Administration & Policies................................................................................................. 26
Gann Appropriations Limit....................................................................................................... 31
Revenue Description & Overview............................................................................................. 33
Financial Trends...................................................................................................................... 44
Employee Compensation & Benefits......................................................................................... 48
Budget Tables......................................................................................................................... .... 49
Fiscal Year Budget Chart......................................................................................................... 50
General Fund Summary........................................................................................................... 53
General Fund Revenue Detail................................................................................................... 54
General Fund Revenue by Category Chart................................................................................. 58
General Fund Appropriation Detail............................................................................................ 59
General Fund Appropriation by Category Chart......................................................................... 61
General Fund Appropriation Summary by Function.................................................................... 62
General Fund Appropriation by Function Chart.......................................................................... 63
General Fund Revenue Detail History....................................................................................... 64
General Fund Revenue History & Projections by Source Chart.................................................... 67
General Fund Appropriation Detail History................................................................................ 68
Revenue History by Fund......................................................................................................... 70
Revenues by Category – All Funds........................................................................................... 80
Expenditure History by Fund.................................................................................................... 81
Department Expenditure Report – All Funds............................................................................. 83
Comprehensive Funds Summary.............................................................................................. 84
Department/ Function Matrix.................................................................................................... 86
Expenditures by Department, FY 1961/ 62 – FY 2007/ 08............................................................ 88
Five Year Revenue and Appropriation Projections...................................................................... 90
Personnel Allocation History..................................................................................................... 93
Personnel Changes from FY 2006/ 07...................................................................................... 103 Table of Contents
Page TOC- ii C City of Novato Adopted Budget 2006/ 07
Operating Budget
Central Administration............................................................................................................. 105
City Council........................................................................................................................ . 110
City Manager........................................................................................................................ 112
City Clerk ............................................................................................................................ 114
City Attorney....................................................................................................................... 116
Administrative Services........................................................................................................... 119
Administration................................................................................................................. .... 126
Human Resources................................................................................................................. 128
Finance........................................................................................................................ ....... 130
Information Technology Services........................................................................................... 132
Reprographics.................................................................................................................. .... 134
Citywide Programs................................................................................................................ 136
Police......................................................................................................................... .............. 139
Administration................................................................................................................. .... 146
Technical Services................................................................................................................. 150
Personnel and Training.......................................................................................................... 152
Crime Prevention.................................................................................................................. 154
Investigations................................................................................................................. ..... 156
Patrol......................................................................................................................... ......... 158
Traffic........................................................................................................................ ......... 162
Special Police Services........................................................................................................... 164
Community Development........................................................................................................ 169
Administration................................................................................................................. .... 178
Code Enforcement................................................................................................................ 180
Planning....................................................................................................................... ....... 182
Clerical Services.................................................................................................................... 186
Building....................................................................................................................... ........ 188
Public Works.......................................................................................................................... .. 193
Traffic & Engineering Administration ..................................................................................... 209
Special/ Mandated Programs................................................................................................... 210
Street Lighting...................................................................................................................... 212
Project Development............................................................................................................. 214
Project Design & Construction Management............................................................................ 216
GIS & Mapping..................................................................................................................... 218
Maintenance Administration................................................................................................... 220
Street Maintenance............................................................................................................... 222
Traffic Operations................................................................................................................. 224
Street Trees & Parkway Maintenance..................................................................................... 226
Parks Maintenance................................................................................................................ 228
Building Maintenance............................................................................................................ 230 Table of Contents
City of Novato Adopted Budget 2006/ 07 C Page TOC- iii
Equipment/ Vehicle Maintenance............................................................................................. 232
Equipment/ Vehicle Replacement............................................................................................ 234
Hamilton CFD....................................................................................................................... 238
Pointe Marin CFD.................................................................................................................. 240
Parks, Recreation & Community Services.............................................................................. 243
Administration................................................................................................................. .... 252
Child Care & Enrichment........................................................................................................ 254
Cultural Programs................................................................................................................. 256
Senior Citizens...................................................................................................................... 258
Youth & Teen Programs........................................................................................................ 262
Athletics Programs................................................................................................................ 264
Redevelopment Agency........................................................................................................... 269
Agency Programs.................................................................................................................. 276
Housing........................................................................................................................ ....... 278
Miscellaneous Funds................................................................................................................. 281
Special Revenue Funds ( 211- 299).......................................................................................... 282
Capital Project Funds ( 301- 450)............................................................................................. 309
Debt Service Funds ( 501- 502)............................................................................................... 315
Internal Service Funds ( 601- 606)........................................................................................... 318
Trust & Agency Funds Summary............................................................................................ 321
Capital Improvement Projects Budget................................................................................. 323
Project Budgets & Schedules................................................................................................. 333
Project Funding Source Summary........................................................................................... 339
Glossary....................................................................................................................... ............... 341
Acronyms....................................................................................................................... ..... 346
Appendices..................................................................................................................... ........... 349
Budget Resolutions ( City, RDA, NPFA).................................................................................... 349
Gann Appropriations Limit Resolution..................................................................................... 355
Assessment Districts Fee Resolutions..................................................................................... 356
City Council Three- Year Goals/ Srategic Planning Retreat.......................................................... 364
Outstanding Inter- Fund Loans............................................................................................... 378
Index.......................................................................................................................... .................. X- 1 Table of Contents
Page TOC- iv C City of Novato Adopted Budget 2006/ 07
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MEMORANDUM
DATE: July 1, 2007
TO: City Council
FROM: Daniel E. Keen, City Manager
SUBJECT: Budget Message for Fiscal Year 2007/ 08
THE CITY OF NOVATO
CALIFORNIA
75 Rowland Way # 200
Novato, CA 94945- 5054
( 415) 899- 8900
FAX ( 415) 899- 8213
www. ci. novato. ca. us
It is my pleasure to present the Fiscal Year ( FY) 2007/ 08 City of Novato Operating Budget for your consideration. This Budget is a balanced budget, continuing City services at essentially current levels, and maintaining prudent reserve balances in each of the primary funds. In preparing the General Fund budget for FY07/ 08, staff analyzed revenue and expenditure trends, economic indicators, anticipated development activity and cost recovery ratios. All City departments examined service levels, staffing needs, contractual obligations and increased costs for goods and services. The result is a budget that recognizes increased tax revenue and investment earnings, provides funds to cover the cost of previously negotiated labor agreements, maintains programs and services but does little to address long term maintenance obligations or future unfunded liabilities. As will be noted later in this memorandum, the inability of the City to address its long- term maintenance needs and future service demands remains the crucial challenge for the City of Novato in the coming year and those to follow.
General Fund Budget Summary
The proposed operating budget projects revenues and transfers in of $ 33,402,341 and expenditures and transfers out of $ 33,753,912. In addition, nonrecurring expenditures include funds previously appropriated for the Corporation Yard project that will not be expended until FY07/ 08, purchases to be made from end of year fund balance that will be included in department budgets for FY 07/ 08; and the loan approved on May 8 from the General Fund to the Hamilton CFD Fund to complete the levee raising project. A vacancy factor of $ 300,000 acts as a credit against expenditures to bring the budget into balance.
Fund balance remaining at June 30, 2008 is estimated at $ 35,252.
Available Fund Balance 7/ 1/ 07 $ 1,098,175
Reserved for encumbrances ( 200,000)
Revenues and transfers in 33,402,341
Expenditures and transfers out 33,753,912
One- time purchases 161,090
Carryover for Corp Yard 500,012
Total Use of Funds ( 34,415,014)
Vacancy Factor 300,000
Remaining Fund Balance 185,502
Loan to Hamilton CFD ( 150,250)
Available Fund Balance 6/ 30/ 08 $ 35,252 Department Highlights
Fiscal Year 2006/ 07
2
The coming year’s budget outlines a spending plan that maintains the status quo but offers little opportunity to enhance programs or improve service levels. Although property tax revenue remains strong, sales tax revenue, which accounts for 20% of the budget, is relatively flat. Service charges and fees for service are expected to increase 4% overall, due primarily to the second and final year of increases in engineering fees to fully implement the User Fee Study conducted in 2006. Development activity citywide is trending toward small, infill projects that pay for themselves through the entitlement process, but fail to generate sufficient revenue over time to meet the additional demand for city services.
One bright spot in the budget is the Hamilton Trust Fund, now fully funded at $ 32 million. Eighty percent of the interest earnings from the Trust are transferred to the General Fund annually and are projected at $ 1.3 million in the upcoming budget year, an increase of 10.6% from FY 06/ 07. Future earnings should grow by 7- 8% annually. Per the Trust Agreement, these funds are to be used to pay for “ the cost of municipal services” and “ for purposes of mitigating general city impacts caused by the development” at Hamilton.
Department Budgets
Each year, departments carefully review current expenses and prepare budgets that make the best use of available funds in furtherance of their department goals and objectives. Allowances are made to fund contractual obligations and increases in the cost of supplies and services. This year, we were able to address some of the most pressing unmet needs by recommending additions to department budgets to augment specific programs/ services. Those recommendations have been included in the base budget and are outlined below.
Central Administration/ Administrative Services
These departments manage expenses related to the City Council/ City Manager/ City Clerk functions as well as the staff of the Administrative Services Department ( finance, personnel, information technology) and citywide programs such as animal control, property and liability insurance, telecommunications systems, agreements with other agencies ( LAFCO, County of Marin) and the lease expense for Rowland Way. The only new program proposed for this budget is to add Employment Practices Liability Insurance to our insurance portfolio which will protect the city against claims for such things as sexual harassment, discrimination, wrongful termination, hostile work environment, etc.
Police
The Police Dept. currently operates with a staff of 80.63 full time employees ( FTE), 58 of which are sworn officers, down considerably from its peak in FY 02/ 03 when the department budget funded 86.5 FTE. This year, the addition of one sworn officer is recommended as well as funding to expand the intern program at the department. Funding for new audible voice software and a new HVAC system for the report writing and traffic rooms is also included in the department budget.
3
Community Development
The Community Development Dept. has been without a Planning Manager since Dave Wallace was promoted to Director in January of 2006. It is recommended that this position be reinstated, based in part on the findings of the Entitlement Process study completed last year. The only other recommended addition to this budget is funding for a nuisance abatement program that will allow the city to proceed with abatement activity and then recoup expenses from the property owner, rather than having to wait for the property owner to initiate the action.
Public Works
This department’s budget for FY 07/ 08 will absorb anticipated increases in construction materials, utilities and outside services ( such as street light maintenance). This budget recommends adding one maintenance worker to the Streets Division to be assigned to traffic and reclassifying one maintenance worker in the Parks Division to a lead worker so crews assigned to different sections of the city will receive adequate oversight. One time purchases for this department include furniture and equipment for the new Corporation Yard offices, a new vehicle for the traffic staff, a push camera system to inspect storm drains and replacement lights for Indian Valley College athletic fields.
Parks, Recreation & Community Services
For FY 07/ 08, it is recommended that part time staff in PRCS receive a 4% cost of living increase in salary and that additional funds be allocated to improve marketing materials for department programs and to fund new programs/ activities for at- risk youth throughout the community. The department budget also includes funding to replace the chairs in the Margaret Todd Senior Citizens Center auditorium.
Reserves
Reserves are fully funded per City Council policy. The Emergency Response Reserve is set at 15% of the General Fund, or $ 4.96 million. The current cash balance in that fund is $ 5.052 million. The Self- Insurance Reserve was fully funded last year at $ 1 million and now has a cash balance of $ 1.047 million. The new Long Term Maintenance Reserve received initial funding last year of $ 600,000 and will end the year with a balance of $ 607,491. A new Pension Reserve has been established with an initial deposit of $ 50,000 to provide a hedge against potential future increases in pension expenses.
Interfund Loan Status and Recommendations
The City has a number of interfund loans that staff tracks and audits each year. Action is recommended on the loans as follows:
The 1991 Owner Participation Agreement between the Redevelopment Agency ( RDA) and the developer of Vintage Oaks required $ 4.5 million be provided to the City by the developer for off- site community facilities. The agreement states “ the location, size, nature and use of the Community Facilities shall be determined in the sole and absolute discretion of the Agency and the City.” At the time, the City opted to track expenditures through the use of a series of Community Facilities Funds: Teen/ Gymnastics Center Fund, Performing Arts Fund, Pool Fund and Maintenance Fund. The Teen/ Gymnastics Center Fund borrowed $ 1.5 million of the funds originally allocated to Performing Arts and Maintenance to purchase and rehabilitate the Teen/ Gymnastics Center. The Teen/ Gymastics Department Highlights
Fiscal Year 2006/ 07
4
Center Fund has a cash balance of $ 90,200 and does not generate sufficient income to repay the debt. In light of the fact that the funds were used for the original purpose and there is no income for repayment, staff is recommending these loans be forgiven.
The Underground Utilities Fund loaned money to the Chapter 27 Assessments Fund and the Clean Stormwater Fund. These loans are being repaid through the CIP budget process.
The Community Facilities- Performing Arts Fund loaned money to the Development Impact Fees Fund. This loan is being repaid through the CIP budget process.
The General Fund owes money to the Equipment Replacement Fund ($ 323,800) and the Emergency Response Fund ($ 169,800). The Emergency Response Fund is fully funded per Council policy. Staff recommends this loan be forgiven. The Equipment Replacement Fund loan should be repaid in the future from RDA funds due to the General Fund.
The Novato Public Financing Authority ( NPFA) owes money to the Equipment Replacement Fund ($ 328,300) and the Emergency Response Fund ($ 50,300). The Emergency Response Fund is fully funded per Council policy. Staff recommends this loan be forgiven. The Equipment Replacement Fund loan should be repaid in the future from RDA funds due to the NPFA.
Redevelopment Agency
In 2004, the Agency issued $ 34 million in bonds to fund the construction of more than 750 affordable homes at Hamilton. In most Agencies, housing projects are paid for from the Housing Fund, but because this Agency’s Housing Fund could not afford to borrow the total amount, $ 24.8 million of the debt was made an obligation of the Non- Housing Fund with the understanding that over time, the Housing Fund would take on progressively more of the debt payments, freeing up non- housing money for other types of redevelopment activity.
The Agency is planning to issue another series of bonds in the Fall and in order to prepare for that transaction, the Housing Fund must begin to repay the Non- Housing Fund. As noted above, staff is recommending that the available fund balance in the Housing Fund ($ 2.8 million) be transferred to the Non- Housing Fund in FY 07/ 08, thereby reducing the debt from $ 25.7 million to around $ 22.9 million, and that a payment schedule be established transferring the annual surplus from the Housing Fund ( estimated this year at $ 472,315) to the Non- Housing Fund in order to maximize the Agency’s bonding capacity.
The RDA budget for FY 07/ 08 includes the addition of a Project Manager and a Management Analyst I, positions that will provide much needed administrative and project specific support to the Agency. The rest of the budget is essentially unchanged, but will be revisited in the Fall when the council discusses the bond issue and proposed use of the bond proceeds.
The RDA has a number of loans recorded against it that are owed to other city funds. While it may be possible to address some of these loans in the near future, staff is recommending that action be deferred until after bonds are issued this Fall. Any debt repayment schedule that obligates tax increment could negatively impact the interest rate, cost of bond insurance and total bond proceeds of the upcoming issue. 5
Long Term Budget Outlook
The long term outlook for the City of Novato budget continues to suggest that the City will face significant challenges in the future, unless new revenues can be obtained. Using a set of relatively simple assumptions about revenues ( 6% growth in property tax, 5% growth in sales tax, 3% growth in hotel and franchise taxes, 2% growth in permit and service charge revenues, and 7.5% growth in Hamilton Trust Fund earnings) along with a 5% assumed growth rate for expenditures, staff has developed a 5- year budget projection. This effort paints a fairly bleak picture, with a deficit of $ 799,939 projected for FY 08/ 09 and an annual shortfall of $ 1,357,000 by FY 11/ 12. The cumulative impact over the next five years will be a negative fund balance at June 30, 2012 of almost $ 4 million. Further, this projection provides for virtually no increases in service levels above current levels. Compared to other nearby cities, this means that Novato would continue to receive much less revenue per capita ($ 618, versus $ 692 in San Rafael1, and $ 645 in Santa Rosa), and accordingly, provide lower levels of service even as service demands continue to increase. A recent analysis of staffing needs by all City departments suggests that, with a population now exceeding 52,000, the City of Novato needs at least an additional $ 5.7 million in annual ongoing revenue, and $ 1.1 million in one- time costs, in order to properly address the service needs of the community.
In addition to service needs, there are also a large number of capital projects that are not included in the current budget. Many of these projects have resulted from the lack of long- term, ongoing maintenance programs, while others are the result of new federal and state laws imposing greater responsibilities on the City. These projects include: an ongoing slurry seal program for all streets, replacement of hundreds of wooden street light poles, replacement of storm drain pipes and compliance with Federal stormwater runoff laws, upgrading and replacement of traffic signal controllers, compliance with the Americans With Disabilities Act, bridge repairs, and restrooms in many City parks. In addition, the City currently has no ongoing program of open space maintenance for fire protection purposes, and lags in its ability to keep up with street striping and sign maintenance. Altogether, these “ missing” capital project and maintenance programs would cost in excess of $ 6 million annually if sufficient revenues could be secured.
In summary, while the City continues to provide a very basic level of City services, its ability to do so in the future will be severely limited if current projections of revenues and expenditures are accurate, and no growth in revenues from new sources is found. Economic development, which could provide additional sources of stable sales tax and property tax revenues, is one method which the City could use to address this problem. This points to the importance of continuing to maintain a strong economic development program as one of the City’s major strategic goals.
Thanks
Each year, an enormous amount of effort is put into the task of developing the annual budget. This year’s budget is the result of moths of effort by the citywide budget team, led by Assistant City Manager Mary Neilan, Finance Manager Debbie Lauchner and Accountant/ Analyst Maureen Chapman. Members of the
1Per capita revenues for San Rafael and Santa Rosa were adjusted downward to account for fire expenditures, which are not part of the City of Novato’s budget. Department Highlights
Fiscal Year 2006/ 07
6
budget team include: Tom Adams in Central Admin/ Administrative Services, Janell Hampton in Community Development; Patrice Valdivieso in Public Works/ Engineering; Sandy Stohler in Parks, Recreation and Community Services; and Nancy Andrews in Police. Assistant to the City Manager Jennifer Goldfinger developed the budget for the Redevelopment Agency and Word Processor Maureen McNiff was responsible for the preparation of various supporting documents included in the Operating Budget. Finally, production of the document was coordinated by Reprographics Aide Marjorie Thompson. I know you join me in thanking these individuals for a job well done.
Department Highlights
Fiscal Year 2006/ 07
City of Novato Adopted Budget 2007/ 08 – Page 7
Department Highlights
Central Administration
During FY 2006/ 07, work continued on completion and adoption of the Economic Development Master Plan ( EDMP). An update to the Community Strategic Plan was developed with increased community input.
The City Council began video streaming its meetings in January 2007. Council meetings are now available live on the Internet through the City’s website, www. ci. novato. ca. us.
Administrative Services
During FY 2006/ 07, two new positions were added to the Department: a Human Resources Analyst and an Information Technology Manager. The Human Resources Division completed labor negotiations with four bargaining units, resulting in multi- year agreements. The City started work on a comprehensive upgrade of its website, which should be completed by the end of 2007.
The City received an unqualified audit opinion for FY 2005/ 06 and, in concert with the Citizen’s Budget Committee, produced the first of four “ Budget in Brief” flyers. The Finance Division also received Excellence in Budget awards from the Government Finance Officers Association ( GFOA) for the ninth consecutive year, and California Society of Municipal Finance Officers ( CSMFO) for the eighth consecutive year.
Redevelopment Agency
At the east end of Grant Avenue a major vertical, mixed- use project was approved which will include a 53,000 sq. ft. Whole Foods, a three level parking structure and 125 for- sale housing units, which will include very low- income units.
At Hamilton, the 220- unit Bay Vista apartment complex was completed and rented to very low and low- income residents. Another senior project at Atherton Ranch consisting of 40 low- income units was completed in 2004. This project is the third low- income housing project for seniors built under the auspices of the Novato Rotary Club. Fairfield Housing acquired a 136- unit apartment complex on Diablo Avenue, which it hopes to rehabilitate over the next three to four years. All 136 units will be deed restricted as affordable housing for 55 years.
Novato has become a leader in the construction of affordable housing. In less than five years, 1,100 deed- restricted units were built in Novato. All but 176 of these units were built in Hamilton or in the Downtown Redevelopment Area. Novato’s commitment to affordable housing is further demonstrated by the unparalleled commitment of redevelopment funds to affordable housing. Under California State redevelopment law, 20% of all redevelopment funds must be set- aside for affordable housing. 718 affordable units at Hamilton were financed with $ 34 million in redevelopment funds. Out of 418 redevelopment areas in California, Novato was the only redevelopment agency to commit all 100% of its funds to affordable housing.
During FY 2006/ 07 the program hired its first full time Housing Coordinator to administer all facets of the Housing Program. Department Highlights
Fiscal Year 2006/ 07
Page 8 – City of Novato Adopted Budget 2007/ 08
Police
The commitment and dedication of the Department’s personnel and volunteers, and the support of Novato’s citizens, have formed a partnership that is the foundation of the Department’s Community Oriented Policing Philosophy. This partnership has helped make the City of Novato a safer and more desirable place to live and work. The Police Department prides itself on being a strong part of the community that we serve. We participate in, or organize, numerous programs to enhance the quality of life in Novato. Some programs have existed for many years while others are new ventures. We involve the public in decision- making and encourage their input into possible solutions to problems.
The Department undertakes community- oriented initiatives daily, such as:
•
“ Avoid the 13” and anti- drinking and driving campaigns
•
Seatbelt enforcement programs to promote driver and passenger safety
•
“ Share the Road Program” to enhance safety between motorists and bicyclists
•
Offers an annual Citizen Academy for citizens and merchants.
•
Participates in Special Olympic Torch Run
•
Participates in “ Safe Route to Schools” programs
•
Supports the Police Advisory and Review Board, to provide community participation in Police Department policies and procedures.
•
Supports the Multicultural Commission to promote diversity.
Community Development
During FY 2006/ 07, the Community Development Director participated in the analysis of the City Hall and Community House facilities in downtown Novato and contributed to the planning studies for continued use of the site. A consultant study was conducted to analyze ways to improve the entitlement process. Staff has begun implementing the study recommendations. The Department was consolidated into a single location with a larger lobby area to better serve the public.
Commercial development begun during FY 2006/ 07 included the Gateway office building at the end of DeLong Avenue that should be near completion by early spring 2008. The Costco expansion is scheduled to be complete this spring. Hamilton Market Place, which includes the old Nave Bowling Lanes site, should begin construction early in the second quarter of the fiscal year.
In March 2006 the City Council adopted a new ordinance for the inspection of multi- family housing, hotels and motels. The multi- family housing inspection program has been in effect since 1973, when the City of Novato established an agreement with the County of Marin to conduct these inspections. As in other Marin jurisdictions, multi- family inspection programs are being brought back to local administration. Our multi- family housing program is now staffed and planning is underway for scheduling inspections.
In FY 2006/ 07, the Planning Division facilitated the approval of a key new retail project for the community: Hamilton Marketplace, where a new Safeway store will anchor the site. This project was expedited through the review process while staff continued to process a range of other private development proposals. The Division also began review of another significant retail project consisting of a Home Depot store and ancillary retail/ restaurant uses.
Department Highlights
Fiscal Year 2006/ 07
City of Novato Adopted Budget 2007/ 08 – Page 9
148 families participated in the June 1, 2006, through May 31, 2007, Youth Financial Assistance Program. Last year, 122 families received funding assistance during the 2005/ 06 funding period. Provided funding is available, eligible families receive $ 200 per year. Financial assistance is allocated
Public Works
Engineering
During FY 2006/ 07, the construction management division implemented the first pavement rehabilitation project utilizing a rejuvenating scrub seal followed by slurry seal. The section also utilized a foam injection process to reconstruct streets that had fallen below an acceptable condition for rehabilitation. Both of these processes maximized the reuse of existing materials on the roadway, thereby reducing costs. The section has begun implementation of these new technologies in an effort to better utilize existing funding and potentially upgrade additional facilities with cost savings, while providing a more than satisfactory product for the public. A number of CIP projects were completed or undertaken during FY 2006/ 07 to improve the City’s transportation and drainage systems.
The mapping and GIS function has increased delivery of products and services to both internal and external customers and continues to automate, expand, and sustain mapping systems and capabilities.
Key products and services include increased availability of the Geographical Information Systems ( GIS) to all City workers.
Maintenance Division
The Maintenance Division continued to adapt in FY 2006/ 07, as new responsibilities were added to its workload. During the last fiscal year, the maintenance of the Hamilton Meadows and the Meadow Park subdivisions ( which involve a large area of landscaping, a creek, and additional pathways) were added to division duties. Another recent addition to the maintenance inventory is the median island landscaping along Ignacio Boulevard, the linear park on Ignacio Boulevard near the Pointe Marin housing development and the creek right- of- way near Palmer Drive on Ignacio Boulevard. The Pointe Marin housing subdivision has also been completed and accepted for maintenance.
The division continues to have maintenance responsibility for the Hamilton CFD properties, which includes roadside landscapes, Hangar Avenue drainage, and the two storm water pump stations. The landscaping along the perimeter wall at Pointe Marin as well as the remainder of the subdivision has now been turned over to the Maintenance Division. The Maintenance staff also continues to take care of Grant Avenue improvements, the Redwood Boulevard improvements and several other public improvements at the parks, including a new bridge and playground improvements at Miwok Park.
Parks, Recreation & Community Services
Administration
The Scottsdale Pond restoration and enhancement project received an Award of Excellence in Park Planning from the California Park and Recreation Society. This is the highest statewide award that can be received in this category for cities with populations of approximately 50,000. The award was presented to the City at the annual 2007 California and Pacific Southwest Recreation and Park Training Conference.
Department Highlights
Fiscal Year 2006/ 07
Page 10 – City of Novato Adopted Budget 2007/ 08
on a first come, first served basis. Most of the funding assistance is used for cultural and enrichment classes, gymnastics, Teen Center activities, and children’s athletic programs.
Community Services Division
The year- round Lu Sutton Child Care program provides before and after school care for elementary school- aged children, and offers daily homework assistance, sports, arts and crafts, music, drama, sewing, and other programs. Ethnic cooking to educate and celebrate cultural diversity continues to be a favorite activity, along with the inter- generational craft projects presented to seniors from the Margaret Todd Senior Center around various holidays. Annual holiday food, senior blankets, and toy drive programs help support other community organizations serving low- income families, such as the Novato Human Needs Center.
The Margaret Todd Senior Center ( MTSC) offers a variety of programs that promote wellness by encouraging staying active, both mentally and physically. Classes, programs, and activities are selected to appeal to the diverse interests of individuals aged 50 to 100. Fitness courses, such as aerobics, strength training, tai chi, yoga, and tap dance continue to be popular. Computer, Spanish language, and AARP Safe Driving classes are still in high demand. New specialty classes have been introduced including Documenting Your Personal History and Kitchen Remodel 101. In September 2006, MTSC partnered with the Dominican University Osher Lifelong Learning Institute to offer classes at MTSC. Eighteen people registered for the first class titled “ Cracking the Genetic Code”. “ Intelligence in a Post 9/ 11 World” began in February 2007.
Recreation Programs Division
In March 2007, the City began its eighth year of partnership with the Marin YMCA to provide seasonal aquatics programs for Novato residents. The Hamilton Pool, Novato High School Pool, and Indian Valley Pool continue to be used for swim lessons, swim teams, and recreational swim programs for the community.
The division has streamlined practices and information delivery systems to take advantage of the Internet as a tool, and a resource for participants. All athletic programs now offer online access to scheduling, up- to- date game scores, and information for coaches. The Adult Sports Manual, which includes rules, regulations and contact information, is also available online. There are more than 3,000 registrations per year for adult basketball, softball, and volleyball programs.
Novato Gymnastics program continues to grow and improve. In spring 2007, the center hosted its fifth annual Northern California competition. Approximately 340 gymnasts from Northern California and other states participated in this meet, as the final competition before the State Championships. Bi- annual recreational shows also continue to be popular and well received by participants and their families. The gymnastics program continues to attract more Novato families, with over 1,000 participants registered for the summer 2007 session. Novato Gymnastics has expanded to include summer camps, and special events including clinics and recreational meets.
Community Profile
General Information
City of Novato Adopted Budget 2007/ 08 – Page 11
Government/ Public Utilities
Novato is the northernmost city in Marin County, California, and is located approximately 29 miles north of San Francisco and 37 miles northwest of Oakland. Marin County’s population as of January 2007 is 255,982. Novato, which covers 28 square miles, has a population of 52,426 and 20,881 households. Novato is currently the fastest- growing city in Marin, with a 2.5% increase in population during 2006. Novato’s population is 76.3% White, 13.1% Hispanic, 5.2% Asian, 1.9% Black and 3.5% all other; the median age is 39.6 years.
The City of Novato was incorporated on January 20, 1960 as a general law city. The City Council is made up of five members, elected at large, serving four- year terms. The Mayor is selected for a one- year term from among the members of the City Council. The City operates under a council- manager form of government. The City Council appoints the City Manager, City Attorney and City Clerk.
Former Novato City Hall ( 1st Presbyterian Church) Built 1896
The City of Novato has 232 authorized full- time equivalent employees and delivers municipal services through six departments: Central Administration ( City Manager, City Clerk, City Attorney, Redevelopment, Housing Services), Administrative Services ( Finance, Human Resources, Information Technology, Reprographics, Citywide Programs), Police, Community Development ( Planning and Building), Public Works ( Engineering and Maintenance), and Parks, Recreation and Community Services. Fire services are provided in Novato by the Novato Fire Protection District; refuse, recycling services and sewage systems are provided by the Novato Sanitary District; water services by the North Marin Water District; public transit services by the Golden Gate Bridge, Highway and Transportation District; animal control services by the Marin Humane Society; and library services by the Marin County Free Library.
Pacific Gas & Electric provides gas and electric services in Novato. Telephone service in Novato is provided by Verizon in the northern and central sections of Novato and by AT& T in the southern section. Cable television service is provided by Comcast Cable Corporation throughout most of Novato and by Horizon Cable TV Inc. in certain areas of Hamilton.
Employment
According to the State Employment Development Department, as of June 2007 the Marin County labor market provided 129,700 wage and salary jobs and had an unemployment rate of 3.7%. Of this total, 18,900 jobs ( 15.1%) were in trade, transportation, and utilities. Other leading sources of wage and salary employment in the County were professional and business services ( 14.7%), educational and health services ( 12.7%), government ( 11.8%), leisure and hospitality ( 10.1%) and finance, insurance and real estate ( 7.5%).
Novato’s labor market currently provides 25,200 jobs and has an unemployment rate of 4.4%.
Community Profile
General Information
Page 12 – City of Novato Adopted Budget 2007/ 08
Education
The Novato Unified School District serves over 7,800 students in kindergarten through high school in eight elementary, three middle, two high, and four alternative schools.
College of Marin serves more than 20,000 students each year at its two campuses in Kentfield and Indian Valley in Novato. The college offers more than 60 academic programs leading to an Associate of Arts or Associate of Science degree, as well as a wide range of community education classes.
The Buck Institute is one of the foremost non- profit, biomedical research institutes in the world and the first independent research facility in the United States to focus solely on aging and age- related conditions. The Institute offers a postdoctoral research training program, in partnership with Lawrence Berkeley National Laboratory and the University of California, Berkeley. The Institute began its biomedical research program in 1999.
Business and Industry
The City of Novato successfully mixes corporate headquarters, state- of- the- art technology companies and a variety of retail centers in its business community.
Fireman’s Fund Insurance Company is the City’s largest employer ( and Marin County’s 4th largest) with 1,152 employees at its Novato campus. Founded in 1863, Fireman’s Fund has been providing business and personal insurance for over 140 years. Novato is also home to a number of high- tech companies, including Sonic Solutions, Scene7, Visual Concepts, and Spatialight.
Retail business in Novato takes many forms. The Vintage Oaks Shopping Center is a regional mall that serves as home to Costco, Target, Macy’s Furniture Center, Pier 1, and Novato Toyota. There is an active retail area in downtown Novato with shops and restaurants as well as other shopping areas located throughout the City. Novato is also home to TravelSmith, a successful company that sells travel clothing and accessories throughout the world through its catalog business and on the Internet. Smith & Hawken, a leading American marketer of outdoor products, is also headquartered in Novato. Trader Joe’s opened in the Village in downtown Novato in 2006 and Whole Foods will be the anchor tenant in a new mixed- use development in the downtown area within the next two to three years.
Trader Joe’s at The Village Grant Avenue, Downtown
Community Profile
General Information
City of Novato Adopted Budget 2007/ 08 – Page 13
In 2007 over 4,300 businesses were registered for business licenses with the City of Novato. The larger businesses within Novato are listed below and have more than 200 employees.
Major Novato Employers
( Ranked by Employment Size)
Company/ Organization
Type of Industry
Number of Employees
Fireman’s Fund
Insurance
1,152
Novato Unified School District
School District
830
Greenpoint Mortgage
Mortgage Company
513
BioMarin Pharmaceuticals
Pharmaceuticals
402
Novato Community Hospital
Hospital
356
Safeway Stores
Grocery Market
252
Costco Wholesale
Bulk Food Outlet
240
W. Bradley Electric
Electrical Contractors
234
City of Novato
Government
232
Target Store
Retail
219
Marin Independent Journal
Daily Newspaper
203
Brayton and Associates
Law Office
201
Recreation and Leisure
Novato has a rural atmosphere largely because of its low population density and the high amount of open space and parks in and near the City. Novato= s population density is about one- half that of San Rafael, and is nearly one- third that of Petaluma or Vallejo.
Novato= s sphere of influence contains seven county- maintained open space preserves with more than 2,600 acres of open space, including 1,600 acres surrounding Mt. Burdell in Northern Novato. Olompali State Park, just north of Novato, comprises 900 acres, bringing the total to nearly 3,500 acres. The City itself is home to a total of 27 parks, including three major city parks. The North Marin Water District also maintains an open space preserve near Loma Verde.
Scottsdale Pond and Gazebo Community Profile
General Information
Page 14 – City of Novato Adopted Budget 2007/ 08
Major community events include the Novato Festival of Art, Wine and Music each June, Nostalgia Days, the Salsa Festival, the annual 4th of July Parade, the Classic Car Show in downtown Novato, the City= s Labor Day picnic and laser light show at Stafford Lake, and the Downtown Farmers’ Market held throughout the summer.
4th of July Parade
Novato Community Profile
General Information
City of Novato Adopted Budget 2007/ 08 – Page 15
Community Profile
General Information
Page 16 – City of Novato Adopted Budget 2007/ 08
Novato at a Glance
General Information
Incorporated January 20, 1960
Government Council/ Manager
Bond Rating ( Standard & Poor’s) AA-
Land Area 28 square miles
Population
Population 52,426
Median Age 39.6
Population by Ethnic Group
White 76.3%
Hispanic 13.1%
Asian 5.2%
Black 1.9%
Other 3.5%
Labor Market
Total Employment 25,200
Unemployment Rate 4.4%
Largest Employers
Fireman’s Fund 1,152
Novato Unified School District 830
Greenpoint Mortgage 513
Biomarin Pharmaceuticals 402
Novato Community Hospital 356
Safeway Stores 252
Education
Graduate or Professional Degree 10.2%
Bachelor’s Degree 21.6%
Some College/ Associate Degree 37.5%
High School Graduate 22.4%
Non High School Graduate 8.3%
Schools
Elementary Schools ( K- 5) 8
Middle Schools ( 6- 8) 3
High Schools ( 9- 12) 2
Alternative Schools ( K- 12) 4
Projected Enrollment 7,833
Student/ Teacher Ratio: 22.1: 1
Household Characteristics
Single, No Children 20.9%
Single with Children 2.2%
Married, no Children 39.5%
Married with Children 37.4%
Note: Population figures are for January 1 of each year.
Housing
Housing Units 20,881
Persons Per Household 2.53
Vacancy Rate 2.47%
Single Family Homes 14,845
Multiple Family 5,318
Mobile Homes 718
Owner Occupied Households 67.0%
Average Home Price $ 772,222
Median Home Price $ 712,000
Median Household Income $ 67,731
Sources:
California Department of Finance
California Employment Development Department
Novato Chamber of Commerce
Novato Unified Schol District
oU. S. Census Bureau Novato Population44,00045,00046,00047,00048,00049,00050,00051,00052,00053,000' 99' 00' 01' 02' 03' 04' 05' 06' 07 Community Profile
The Budget Process
City of Novato Adopted Budget 2007/ 08 – Page 17
The Budget Process
The City Manager= s recommended operating budget is presented as the City of Novato Budget of Municipal Services for the period beginning July 1, 2007 and ending June 30, 2008. The 2007/ 08 Budget of Municipal Services is divided into three sections: budget tables identifying the City= s overall financial plan; operating plans for all City departments, including Redevelopment; and summary tables of all miscellaneous funds.
The development, evaluation and production of the annual operating budget is a lengthy process involving many different steps and many members of staff. The schedule that follows outlines the major elements in the operating budget development process. The schedule is approximate and covers one complete budget cycle.
October - December
The budget for the current fiscal year is reviewed by staff to determine if any modifications in format or content should be considered for inclusion in the next year= s budget document. Finance staff works with the City Manager to design the budget, with the goal of presenting to the Council a document that is easily understood and contains the information necessary for the Council to make reasoned policy decisions.
December
The Finance Division develops budget guidelines for City departments to use in preparing their budget requests.
The City Council adopts a calendar for the next budget cycle.
January
A budget kick- off meeting is held for all management and department staff involved in the budget process. Finance staff presents a financial picture of the current fiscal year and prepares a beginning base budget for each department. The City Manager asks the Department Heads to begin preparing their budget proposals for the upcoming fiscal year.
February
Staff presents a preliminary budget summary and department issues to Council in a workshop setting. Council meets to set its priorities and goals and establish policy direction. Instructions for budget development based on Council policy are provided to the departments as necessary. Departments submit mandatory base budget increases.
Budget CalendarOctoberModificationstotheformatofthebudget are reviewed. DecemberBudgetmanualandguidelinesaredeveloped. JanuaryFinancialconditionofcurrentfiscalyearprepared. Budgetkick- offmeeting. Financepreparesbasebudgets for departments. FebruaryCouncilsetsitsprioritiesandgoals. Departmentssubmitmandatorybasebudget increases. MarchMid- year fiscal review to Council. CIP budget reviewed. AprilDepartmentssubmitsupplementalrequests. MayCityManagersubmitsbudgetstoCityCouncil. Public workshops. JunePublic hearings. Budget adopted. JulyNew fiscal year begins. August- SeptemberFinal budget document prepared.
Community Profile
The Budget Process
Page 18 – City of Novato Adopted Budget 2007/ 08
March
The Finance staff presents to the City Council a mid- year fiscal review report which addresses General Fund revenues and expenditures and projects their status to the end of the fiscal year with respect to the budget. The City Manager and Finance staff refines funding resources for the subsequent fiscal year and meets with the Department Heads to review each department= s base budget. Program reductions are developed if necessary.
During this month, departments also review program narratives and their performance measure statements. These measurements assess the quality and performance levels of programs.
Finance and Engineering staff meet to discuss the Capital Improvement Program ( CIP) budget and review proposed expenditures for major construction or repair of City facilities and buildings. This work team also determines the time frames of the projects, the sources of the projects= funding, and the operating impacts on the General Fund. The Capital Improvement Projects budget is based on a five- year program for investment in the City= s infrastructure.
April
Departments submit supplemental budget requests. These requests outline new programs and personnel needs and their funding requirements. The City Manager then meets with the Department Heads to discuss the merits of these requests and the impact to the General Fund.
The fee schedule is reviewed and a corresponding staff report is developed.
May
The City Manager submits the Proposed Budget of Municipal Services and the Proposed Capital Improvement budget to the City Council to review in mid- May.
May - June
Citizen input into the budget process is encouraged at several public workshops and public hearings held by the City Council. Council adopts resolutions implementing the operating, capital improvement projects, Redevelopment Agency, and Novato Public Finance Authority budgets, as well as revised fee schedules. The resolutions reflect any changes to the proposed budgets and fee schedule as directed by the Council based on its budget deliberations.
July
The new fiscal year begins on July 1; the budget becomes effective.
August - September
The final budget document is prepared. Community Profile
Capital Improvement Budget
City of Novato Adopted Budget 2007/ 08 – Page 19
Capital Improvement Budget - Overview
The Capital Improvement Budget is a five- year program. The list of planned projects is reevaluated, modified and adopted annually for the next five- year period. As part of the City Council deliberations on the CIP budget, the public hearing process enables citizens to request specific projects. Staff prepares the draft CIP budget based on the following factors:
a) Updates to the projects already identified in the most recent CIP budget.
b) New grant funds obtained from specific sources. The City Council pre- authorizes projects to be submitted for grant funding.
c) Project requests submitted by citizens if funding is available. If partial funding is available, project sheets are prepared so that Council can see the requests and the scope and cost of the projects.
d) When a large amount of funding is available such as from bond funding, a project priority list is presented to Council for determination of the priority of projects to be approved and funded.
The FY 2007/ 08 Capital Improvement Budget includes $ 1,999,114 of new appropriations, as well as $ 11,383,280 in carried over funding. Project costs through FY 2011/ 12 are estimated at $ 29,852,396.
The current major projects include:
• Novato Boulevard Improvements between Diablo & Grant - $ 13,165,843
• Measure B Pavement Rehabilitation - $ 6,765,708
• Alameda del Prado Improvements, Measure B Groups 5 & 6, and Measure A Group 1 - $ 2,505,221
• Corporation Yard Improvements - $ 3,606,712
• Ignacio Boulevard Rehabilitation between Laurelwood Drive ( east) to Sunset Parkway - $ 1,029,727
• 901 Sherman Avenue Renovation - $ 5,545,609
CIP projects that have recently been completed or are currently under construction impact the City’s operating budget by increasing the Maintenance Division's annual streets and park maintenance budgets by approximately $ 50,000.
The Capital Improvement Projects section beginning on page 323 of this document provides additional detail. Complete project costs and funding information can be found in the Capital Improvement Projects Budget.
Proposition 218
Proposition 218 requires majority voter approval as a precondition to the imposition, extension or increase of any local general tax. Additionally, Proposition 218 requires that any local general tax imposed, extended or increased without voter approval between January 1, 1995 and November 5, 1996, must have been submitted to the voters by November 5, 1996 in order to continue imposing the general tax.
To date, the impact of Proposition 218 on the City has been limited to the City's Landscape and Lighting Assessment Districts. To comply with the new legislation, elections of the parcel owners within these districts have been held in order to confirm or continue the collections of taxes or fees. Community Profile
Financial Policies & Practices
Page 20 – City of Novato Adopted Budget 2007/ 08
Financial Policies & Practices
The material in this section is based on longstanding City policies and practices, and recommendations developed by the National Advisory Council on State and Local Budgeting whose founding members include the International City/ County Management Association ( ICMA), Government Finance Officers Association ( GFOA) and California Society of Municipal Finance Officers ( CSMFO). Financial practices implement financial policy and form the City= s internal control systems. This includes budget control, modified accrual basis of accounting, debt management, and risk management.
Financial Reporting Policies
a) A financial report will be prepared monthly to show the month= s revenue and expenditure activity.
b) The City will submit quarterly reports to the City Council comparing actual revenues and expenditures to budget amounts, which will include a written analysis.
c) A financial report will be prepared at the end of each fiscal year to show details of the actual revenue received and appropriations expended.
d) In accordance with State law, an investment report will be prepared on a quarterly basis to account for the amounts, placements, and yields of the City= s invested funds.
e) In accordance with State law, an independent accounting firm will perform an annual audit of the financial statements of the City and will publicly issue an opinion thereon.
Basis of Budgeting/ Basis of Accounting
The City of Novato prepares its budget and maintains its accounting records on a modified accrual basis. This basis is consistent with Generally Accepted Accounting Principles ( GAAP) applicable to local government as recommended by the Governmental Accounting Standards Board ( GASB). The City’s accounts are organized on the basis of funds, each of which is considered a separate accounting entity, and which are required by State or Federal law or proper accounting practice. The operations of each fund are accounted for with a separate set of self- balancing accounts that comprise its assets, liabilities, fund equity, revenues, and expenditures. Governmental resources are allocated to and accounted for in individual funds based upon the purposes for which they are to be spent and the means by which spending activities are controlled.
The operating budget includes proposed spending from many different funds. Depending on the type of service provided by a department, expenditures may be authorized from a number of funds. The majority of traditional city services are funded through the General Fund.
Expenditures are recognized in the period in which the liability is incurred, if measurable, except for non- matured principal and interest on general obligation debt, which is recognized when due. Expenditures may not legally exceed appropriations at the departmental level in the Governmental Fund types. Grant funds, special revenue funds, and capital funds are maintained according to the specific requirements of the project and may have different accounting treatments. Community Profile
Financial Policies & Practices
City of Novato Adopted Budget 2007/ 08 – Page 21
The City’s financial system treats encumbrances as budgeted expenditures in the year the commitment to purchase is made. Encumbrances outstanding at year- end are reported as reserved fund balances since they are neither expenditures nor liabilities. All appropriations lapse at fiscal year end, which means the authority to spend the money for that certain purpose has expired. Fund balances may be encumbered for use at some future date.
Revenues are recognized in the accounting period in which they become both measurable and available. Accordingly, revenues are recorded when received, except that revenues subject to accrual are recognized when due. Revenues susceptible to accrual are property taxes, sales taxes, franchise taxes, intergovernmental revenue, interest revenues and other taxes.
Cost Accounting & Allocated Costs
The City of Novato uses both cost accounting and allocated cost methods to track expenditures. The City's budget is arranged in a cost center format with cost centers being defined as program elements. For example, the City's police department has been divided into eight major programs— administration, technical services, personnel and training, crime prevention, investigations, patrol, traffic, and special police services. Each program is then further subdivided into program elements representing the services to be delivered by the program. For example, the technical services program's budget is distributed to four program elements — administration, evidence, records management, and communications/ dispatch. Direct costs of delivering the service such as materials and supplies, contract services, equipment and other capital outlays are budgeted in each program element. Personnel costs are budgeted at the program element level based upon estimated number of hours to be spent in delivering the program service.
The use of cost center budgeting aids the City in its resource allocation decision- making process and promotes management accountability, as well as facilitating the use of budgeting to achieve the City Council's goals and objectives.
Governmental Funds
All governmental funds are accounted for on a spending or " financial flow" measurement focus, which means that only current assets and current liabilities are generally included on their balance sheets. Their reported unreserved fund balance is considered a measure of " available spendable resources". Governmental fund operating statements present increases ( revenues and other financing sources) and decreases ( expenditures and other financing uses) in net current assets. Accordingly, they are said to present a summary of sources and uses of " available spendable resources" during a period. Non- current portions of advances to other funds, deposits and notes receivable are reported on their balance sheets, regardless of their spending measurement focus. Special reporting treatments are used to indicate, however, that they should not be considered " available spendable resources" since they do not represent net current assets. Non- current portions of advances, deposits and notes are offset by fund balance reserve accounts.
General Fund - The general fund is the general operating fund of the City. It is used to account for all financial resources except those that require accounting in another fund.
Special Revenue Funds - The special revenue funds are used to account for the proceeds of specific revenue sources that are legally restricted to expenditures for specified purposes. Community Profile
Financial Policies & Practices
Page 22 – City of Novato Adopted Budget 2007/ 08
Debt Service Funds - The debt service funds are used to account for the accumulation of resources for, and the payment of, general long- term debt principal, interest, and related costs.
Capital Projects Funds - The capital projects funds are used to account for financial resources to be used for the acquisition or construction of major capital facilities ( other than those financed by proprietary funds), including urban redevelopment.
Proprietary Funds
The proprietary funds are accounted for on a cost of services or “ capital maintenance” measurement focus, which means that all assets and all liabilities, whether current or non- current, associated with each fund’s activity are included on its balance sheet. The reported fund equity is segregated into reserved and unreserved retained earnings components. Proprietary fund type operating statements present increases ( revenues) and decreases ( expenses) in total assets.
Internal Service Funds - The internal service funds are used to account for, and finance, services and commodities furnished by a designated department of a governmental unit to other departments of the same governmental unit.
Fiduciary Funds
Trust and Agency Funds - The Trust and Agency Funds are used to account for assets held by the City in a trustee capacity or as an agent for individuals, private organizations, other governments, and/ or other funds. These include expendable trust funds, non- expendable trust funds ( permanent funds), pension trust funds, and agency funds.
Financial Policy Statements
Financial policy statements articulate City policies on various financial transactions encountered in the course of its day- to- day operations. These policy statements are listed below by subject area.
Capital Improvement and Asset Policies
a) The City will make all capital improvements in accordance with an adopted capital improvement program.
b) The City will develop a five- year plan for capital improvements and update it annually.
c) The City will adopt an annual capital budget based on the five- year capital improvement plan, subject to available funds. Future capital expenditures necessitated by changes in population, changes in real estate development, or changes in economic base will be calculated and included in capital budget projections.
d) The City will coordinate development of the capital improvement budget with development of the operating budget. Future operating costs associated with new capital improvement will be projected and included in operating budget forecasts.
Community Profile
Financial Policies & Practices
City of Novato Adopted Budget 2007/ 08 – Page 23
e) The City will use intergovernmental subventions to finance only those capital improvements that are consistent with the capital improvement plan and City priorities, and whose operating and maintenance costs have been included in operating budget forecasts.
f)
The City will adopt practices and procedures for capital asset acquisition, maintenance, replacement and retirement.
g) The City will strive to maintain all of its assets at a level adequate to protect the City= s capital investments and minimize maintenance and replacement costs.
h) The City will identify the estimated costs and potential funding sources for each capital project proposal before it is submitted to the City Council for approval.
i) The City will consider alternative means to finance all new capital improvement projects to determine the least costly financing method.
Budget Reserve Policies
a)
The City shall maintain an Emergency and Disaster Response Reserve Fund to provide a financial buffer during significant economic downturns affecting revenues or for severe emergencies. It is the City’s goal to have this fund balance equal 15% of the annual General Fund budget. The first priority of year- end fund balances is to transfer needed money to meet the 15% goal.
b)
The City shall maintain a Self- Insurance Fund of $ 1 million to meet uninsured losses to City facilities and property. The second priority of year- end fund balances is to transfer money to meet this goal.
c)
The City shall maintain a Pension Reserve Fund to help stabilize the volatility of pension costs. It is the City’s goal to deposit into this reserve any amount of the PERS Required Contribution that is less than the Normal Cost as determined annually by PERS. The reserve funds will be used to fund the PERS Required Contribution when it is in excess of the Normal Cost. The third priority of year- end fund balances is to support this reserve.
d)
The City shall maintain funds for vehicle/ equipment maintenance, long- term facility maintenance, and furniture, fixtures, and equipment to meet future replacement costs of capital equipment not already provided for in the Vehicle/ Equipment Replacement Fund. The fourth priority of year- end General Fund balances is to transfer money to these funds, once the higher priorities have been met.
e)
The City shall maintain a Civic Center Fund to finance the costs of a proposed renovated or new Civic Center campus.
Investment Policies
a)
The collection, deposit, and disbursement of all funds will be appropriately scheduled to ensure the timely investment of funds and payment of expenditures.
Community Profile
Financial Policies & Practices
Page 24 – City of Novato Adopted Budget 2007/ 08
b)
The accounting system will provide regular information concerning cash positions and investment performance.
c)
In accordance with the provisions of the California Government Code, the City shall prepare a Statement of Investment Policies to be formally adopted by the City Council.
Operating Budget Policies
The City operates under the general laws of the State of California and annually adopts a budget for its governmental and proprietary funds to be effective July 1 for the ensuing fiscal year. From the effective date of the budget, which is adopted and controlled at the departmental level, the amounts stated therein as adopted expenditures become appropriations to the various City departments. Debt service on bond issues constitutes a legally authorized “ non- appropriated budget”. Budget information is presented for general, special revenue, debt service, and capital projects funds on a one- year budgetary basis.
Additional Budget Policies are:
a) The City will avoid budgetary procedures that balance current expenditures at the expense of meeting future years= expenses, such as postponing expenditures, accruing future years= revenues, or rolling over short- term debt.
b) Provisions will be made for adequate maintenance of capital plant and equipment and for their orderly replacement, within budgetary limits.
c) The budget will provide for adequate funding of all retirement systems in accordance with contractual commitments.
d) The City will maintain a budgetary control system to help City staff adhere to the budget.
e) The City will be held accountable for ensuring that department expenditures stay within budget appropriations.
f) All requests for City Council action which have a financial impact on the City and/ or its various funds shall be reviewed and approved by the Assistant City Manager before such requests can be included in the City Council agenda.
g) Requests for additional positions will only be considered during the City= s annual budget process, except in those areas deemed to be of an emergency nature by the City Manager.
h) New positions and/ or reclassified positions approved as part of the budgetary process shall be reviewed to determine the appropriateness of the assigned classification and/ or salary structure.
i) Each year, the City will update expenditure projections for the next five years to include estimated operating costs. These projections will be included in a financial forecast to be submitted to the City Council during budget review.
Community Profile
Financial Policies & Practices
City of Novato Adopted Budget 2007/ 08 – Page 25
j)
Where possible, the City will integrate performance measurement, service level, and productivity indicators in the City= s published budget document.
k)
The City will provide a financial impact analysis of all policy initiatives, service changes, and new programs or projects.
l) The City will aggressively seek State and Federal funds that are available for capital projects.
m) Budget amendments or transfers between funds for $ 15,000 or less require department head authorization, verification of available funding from the Finance division, and approval from the City Manager, or the Assistant City Manager as his designee. Transfers in excess of $ 15,000 and all budget amendments that expand service levels require Council authorization in the form of an amending budget resolution.
Purchasing Policies
a) Purchases will be made in accordance with all Federal, State and municipal requirements. If there are no specific requirements, purchases will be made in the best interest of the City.
b) Purchases will be made in an impartial, economical, competitive, and efficient manner.
c) Purchases will be made from the lowest- priced and most responsible vendor. Qualitative factors, such as vendor reputation and financial condition will be considered, as well as price.
d) Preference will be given to purchase of like quality to vendors who maintain a place of business within the City.
Revenue Policies
a) The City will endeavor to maintain a diversified and stable revenue stream to shelter it from short- term fluctuation in any single revenue source.
b) The City will estimate annual revenues through an objective, conservative, analytical process.
c) The City will annually prepare five- year revenue projections as part of a financial forecast.
d) The City will calculate the full direct costs of activities supported by user fees and consider such information when establishing user charges. The City will strive to establish user charges and fees to recover the cost of providing the services and annually review fees.
e) Non- recurring revenues will be used only to fund non- recurring expenditures.
Community Profile
Financial Policies & Practices
Page 26 – City of Novato Adopted Budget 2007/ 08
Debt Administration and Policies
All long- term debt obligation requires City Council approval before obligation is incurred. The City Municipal Code states that a majority vote of the voters of Novato is required before the City acquires real property. A majority vote would be required if:
a)
The property would have a total cost of construction or fair market value in excess of one million dollars, adjusted by changes in the Consumer Price Index ( CPI);
b)
The lease or other transaction would continue in excess of four years; and
c)
When the lease is completed or transaction terminated, title to the property would vest to the City without the City paying fair market value for the property.
Debt Policies
a) The City shall not use long- term debt for current operations.
b) The City will confine long- term borrowing to capital improvements or projects that cannot be financed from current revenues.
c) When the City finances capital projects by issuing bonds, it will repay the bonds within a period not to exceed the expected useful life of the project.
d) The City will maintain good communications with bond rating agencies about the City= s financial condition. The City will follow a policy of full disclosure on every financial report and bond prospectus.
e) Where possible, the City will use special assessment revenue, or self- supporting bonds instead of general obligation bonds.
General long- term debt issued and outstanding at June 30, 2007, is comprised of the following:
Type of Indebtedness
Outstanding at
June 30, 2007
General Obligation Bonds:
Series 2007 ( Measure B)
Series 2004 ( Measure B)
Series 2000 ( Measure B)
Series 1997A
Series 1993A
$ 5,000,000
4,870,000
4,080,000
9,755,000
2,360,000
C
ompensated Absences
406,353
Pension Obligation Bonds
18,266,066
V
ehicle Code Promissory Note
537,881
Redevelopment Agency Debt:
Hamilton Tax Allocation Bonds
CIEDB Loan
OPA Notes Payable
RDA Memorandum of Understanding
33,225,000
3,447,821
4,176,788
50,108
TOTAL GENERAL LONG- TERM DEBT
$ 86,175,017 Community Profile
Financial Policies & Practices
City of Novato Adopted Budget 2007/ 08 – Page 27
Long- term debt of the fiduciary fund ( nonexpendable trust) at June 30, 2007 consisted of the following:
Type of Indebtedness
Outstanding at
June 30, 2007
Novato Financing Authority
Promissory Note - Senior Note
$ 13,185,000
P
romissory Note - Subordinate Note
1,340,000
TOTAL FIDUCIARY LONG- TERM DEBT
$ 14,525,000
The City has five outstanding general obligation bond issues: $ 5 million Series 1993A, dated May 28, 1993; $ 14.245 million Series 1997A dated July 1, 1997; and three issues of Measure B street bonds: $ 5 million Series 2000 dated July 1, 2000; $ 5 million Series 2004 dated November 1, 2004, and $ 5 million Series 2007 dated March 5, 2007. Additional information regarding the Measure B bonds is provided below.
On July 1, 1997, the City issued $ 14.245 million of refunding bonds ( Series A) to advance refund General Obligation Bonds, Series 1989A, Series 1990A, and Series 1992A ( collectively the " Prior Bonds"). The Prior Bonds were issued to finance the acquisition and construction of various streets, storm drains, and parks and recreational facilities throughout the City.
The Prior Bonds were deposited in trust with an escrow agent to provide debt service payments until the bonds mature. The advance refunding meets the requirements of an in- substance debt defeasance and the Prior Bonds were removed from the City's General Long- Term Debt Account Group.
On June 28, 2004, the City entered into a Site and Facility Lease Agreement with the City of Novato Public Finance Authority ( Authority) for the lease of the Corporation Yard ( Property) to the Authority, for the consideration of a lump sum payment of $ 1.745 million made by the Authority to the City, which enables the City to finance improvements to the Property and to pay certain related costs. The Authority ( lessor) leased the Property back to the City ( lessee) and the City will make semi- annual lease payments to the Authority, for its use and occupancy of the Property.
On December 13, 2005, the City of Novato was notified that Marin County Superior Court had made incorrect distributions to various cities. The amount overpaid to the City of Novato was $ 602,299, covering the period of July 1999 through June 2006. The Court provided the option of either making a lump sum payment or repaying the amount owed over a five- year period. The City chose the latter option. The annual interest rate is 3.873% and equates to total interest of $ 61,167. The scheduled monthly payment, including principal and interest, is $ 11,057.
Measure B Bonds
The citizens of Novato voted on March 7, 2000 to authorize the City of Novato to issue bonds, in an amount not to exceed $ 15 million, to finance the acquisition, construction and completion of improvements to streets, storm drains and sidewalks within the City.
Measure B consists of $ 15 million of work primarily addressing 34 miles of pavement rehabilitation, resurfacing and associated work on more than 200 separate street segments. The project is estimated Community Profile
Financial Policies & Practices
Page 28 – City of Novato Adopted Budget 2007/ 08
to include $ 11.9 million of street work, $ 1.2 million of drainage improvements, $ 1.3 million of sidewalk repair, and $ 600,000 of access improvements. Overall, the project is estimated to encompass 22 sub- projects with completion between 2001 and 2009 with one to five of these sub- projects being completed each year. The first $ 5 million of bonds was issued in August 2000, the second $ 5 million was issued in November 2004, and the final $ 5 million was issued in March 2007.
Pension Obligation Bonds
On June 29, 2006 the City issued $ 18.3 million of taxable Pension Obligation Bonds, Series A- 1 and A- 2. Proceeds from the bonds were used to pay for the cost of issuance and to pay off the City’s Miscellaneous and Safety Plans Unfunded Accrued Actuarial Liability ( UAAL) with the California Public Employees Retirement System ( CalPERS) in the amounts of $ 8,000,000 and $ 9,815,883, respectively. Interest rates on the bonds range between 5.67% and 6.12% and payments are due on June 1 and December 1 of each year. Principal payments are due on June 1 of each year. The bonds mature on June 1, 2036. The bonds are obligations of the City and are payable from legally available funds.
Hamilton Tax Allocation Bonds
On February 2, 2005 the Redevelopment Agency issued $ 24,835,000 ( Agency) and $ 9,520,000 ( Housing) of Hamilton Field Redevelopment Project Tax Allocation Bonds ( TAB), Series 2005 and Series A. These bonds paid the obligation incurred by the Agency under an owner participation agreement with respect to the project area. The bonds are payable from and secured by tax increment revenues allocated to the Agency from the project area. The bonds mature in 2035.
In- Substance Defeased Debt Outstanding
There was no aggregate in- substance defeased debt outstanding at June 30, 2007.
At June 30, 2007, compensated absences expected to be liquidated with expendable, available resources totaled $ 1,336,108 and are recorded in the governmental funds. The non- current portion totaling $ 406,353 is recorded in the General Long- Term Debt Account Group.
In 1994, the Redevelopment Agency entered into a $ 9 million promissory agreement with HNH Associates for the construction and financing of certain on- site and off- site public improvements of the Vintage Oaks Retail Complex. The promissory note bears interest of 8.525% per annum and matures in the fiscal year ending June 30, 2014. Payments consist of two semi- annual installments which began in 1994 and end in the year 2014. The payments are financed by the property tax increments generated by this retail complex.
The Novato Financing Authority ( NFA) has agreed to two promissory notes with the California Local Government Financing Authority. On March 1, 1997 the California Local Government Financing Authority issued Senior Revenue Bonds, Series 1997A in the amount of $ 15.485 million and Subordinate Revenue Bonds, Series 1997 in the amount of $ 1.585 million for the benefit of the Novato Financing Authority. The Senior Promissory Note ($ 15.485 million) and the Subordinate Promissory Note ($ 1.585 million) were agreed to by the NFA on March 1, 1997. The proceeds were used to permanently finance the acquisition of certain real property constituting the Marin Valley Mobile Home Country Club Park and any structures, site improvements, facilities and fixtures on the site. The real property serves as collateral for the promissory note. Community Profile
Financial Policies & Practices
City of Novato Adopted Budget 2007/ 08 – Page 29
In addition to principal and interest payments, the promissory notes also have scheduled bond expenses through the year 2028. These bond expenses are fees paid to fiscal agents and for insurance costs. Anticipated payments are as follows:
Fiscal Year
Ending June 30
2008
78,150
2009
76,185
2010
74,130
2011
71,970
Thereafter
737,910
TOTAL
$ 1,038,345
This information was taken from the General Purpose Financial Statements of the City of Novato. For further information regarding the City's accounting and debt management practices, please consult that document.
Annual Debt Service
The following chart illustrates the annual debt service obligations for the next 10 years. Community Profile
Financial Policies & Practices
Page 30 – City of Novato Adopted Budget 2007/ 08
Special Assessment Bonds
The City acts as a collecting agent for certain special tax bonds. The City is not obligated in any manner for the special assessment debt, and is in no way liable for the repayment. The City collects the assessment revenue and delivers the appropriate funds to the bond escrow agent. Following is a list of the bonds:
Bond Description
Balance at June 30, 2007
Golden Gate Plaza, Assessment District No. 93- 1
$ 1,775,000
Vintage Oaks Public Improvements,
Community Facilities District No. 1
$ 22,450,000
Hamilton Field, Community Facilities District No. 1994- 1
$ 21,140,000
Pointe Marin, Community Facilities District No. 2002- 1
$ 11,335,000
Debt Limit
Under California State law, the City has a legal debt limit not to exceed 15% of the total assessed valuation of taxable property within City boundaries. Within the meaning of California Government Code, section 43605, only the City’s general obligation bonds are subject to this debt limit. The table below summarizes the City’s debt limit margin.
Computation of Debt Limit Margin
Fiscal Years 2003/ 04 through 2006/ 07
2003/ 04
2004/ 05
2005/ 06
2006/ 07
Total Assessed Valuation
$ 5,894,947,615
$ 6,431,774,568
$ 7,172,598,064
$ 7,917,436,448
Debt Limitation ( 15% of Assessed Valuation)
884,242,142
964,766,185
1,075,889,710
1,187,615,467
Less GO Bonds Outstanding
19,285,000
23,315,000
22,285,000
26,065,000
Legal Debt Margin
864,957,142
941,451,185
1,053,604,710
1,161,550,467
Community Profile
Financial Policies & Practices
City of Novato Adopted Budget 2007/ 08 – Page 31
“ Gann” Appropriations Limit
In November 1979, the voters of the State of California approved Proposition 4, commonly known as the “ Gann Initiative”. The Proposition created Article XIIIB of the State Constitution, placing certain limits on the amount of revenue that can be appropriated each fiscal year. The limit is based on actual appropriations during the 1978/ 79 fiscal year. Only revenues that are considered to be “ Proceeds of Taxes” are subject to the limit. The limit is recalculated each fiscal year based on certain inflation and population growth factors. Proceeds of taxes can, however, be spent on several types of appropriations that do not count against the limit, including voter approved debt, the costs of complying with court orders and Federal mandates, and expenditures for qualified capital outlays. The table below lists budgeted revenues that comprise “ Proceeds of Taxes” for purposes of ensuring that the City will not exceed its legal appropriation limit.
Proceeds of TaxesFY 07/ 08Real Estate Property Tax$ 5,579,294Property Tax in Lieu of Sales Tax2,128,194 Property Tax in Lieu of MVLF3,989,217 ERAF Refund1,318,872 RDA Property Tax Increment155,304 In- Lieu Property Tax - MVMHCC62,000 Unsecured Property Taxes145,000 Supplemental Property Taxes442,000 Real Property Transfer Tax400,000 Sales Tax6,678,635 Hotel Tax1,161,140 Business License Tax840,790 Franchise Tax1,314,277 Residential Development Tax21,200 Motor Vehicle License Fees303,600 Secured Homeowners Exemption43,000 Gas Tax992,583 Total Proceeds from Taxes$ 25,575,106
For FY 2007/ 08 the City= s appropriation limit is $ 75,380,512, an increase of $ 4,855,184 from the prior year= s limit of $ 70,525,328. The City= s amount of tax proceeds are estimated to be $ 25,575,106 for FY 2007/ 08. Currently, the City is at 34% of its limit and therefore will not exceed the appropriation limit in the near future. The table that follows identifies the City= s legal appropriation limit as required by Proposition 4 compared to actual appropriations for the fiscal years shown. Community Profile
Revenue Description &
Overview
City of Novato Adopted Budget 2007/ 08 – Page 33
General Fund Revenue
Property Taxes
Description: Property Tax is imposed on real property ( land and permanent improvements) and tangible personal property ( furniture, fixtures and equipment). The general tax levy rate is 1% of assessed value, adjusted by an annual inflation factor not to exceed 2%. Property in the State of California is generally reassessed only upon change of ownership. Property in Novato is assessed by the Assessor for the County of Marin, except for certain public utility property, which is assessed by the State Board of Equalization. Cities and other local agencies, such as schools, special districts, and the County of Marin share in the Countywide property tax pool for purchases made within the County, but not within a specific jurisdiction. Property Tax Revenues10 Year Actual and Projected$ 0$ 2$ 4$ 6$ 8$ 10$ 12$ 14$ 1699- 0000- 0101- 0202- 0303- 0404- 05 05- 0606- 0707- 08Budget08- 09ProjectedMillions
Overview: Approximately 22% or $ 5.8 million of the City= s General Fund revenue is derived from local property taxes. The Property Tax is a major source of revenue for critical City services such as police, public works, recreation and parks. Prior to the passage of Proposition 13 in 1978, property tax revenues accounted for approximately 27% of all General Fund revenues. Other revenues have been used to augment the decrease in this revenue source.
As a result of two State legislative actions, Proposition 57 ( also known as the “ Triple Flip”) and the Vehicle License Fee Swap ( VLF Swap), property tax revenues increased and sales tax and vehicle license fee revenues decreased beginning in FY 2004/ 05. The passage of Proposition 57 reduced the City’s sales tax revenue by .25% and replaced it with an equal amount of property tax revenue. The VLF Swap permanently reduced vehicle license fees from 2% to .67% and replaced the resultant revenue loss with an equal amount of property taxes. In FY 2006/ 07, property tax revenue increased by $ 1.97 million relating to replaced sales tax revenue, and $ 3.63 million relating to the VLF Swap. The chart above reflects property tax revenues both before and after the passage of Proposition 57. Community Profile
Revenue Description &
Overview
Page 34 C City of Novato Adopted Budget 2007/ 08
The City also receives excess ERAF ( Education Revenue Augmentation Fund) from the County based on property taxes shifted from the City to the State. Based on increases in the ERAF shift for FY 2005/ 06, the City’s excess ERAF ( refund) has more than doubled.
The City’s Redevelopment Agency receives tax increment revenue based on increases in property value as a result of redevelopment projects. The revenue is generated from three redevelopment project areas: Vintage Oaks, Downtown, and Hamilton. By agreement with the County of Marin, 1% of the property value over a base amount is allocated to the Redevelopment Agency. This allocation is reduced by a required distribution of 20% to the Housing Set Aside Fund and 25.2% to other taxing agencies as pass thru amounts.
The City has benefited from increased property taxes over the last several years with the sales and revaluation of homes in Novato. However, the City continues to suffer from the impacts of property tax shifts from the State. Beginning in the early 1990s, the State began a permanent transfer of property tax revenue ( ERAF) from cities to school districts to make up for the State’s failure to meet its legal obligation to fund education. This has resulted in a cumulative loss of over $ 10 million over the past 15 years.
Outlook: Assuming there is no downturn in the economy and interest rates remain stable, property tax revenue is expected to grow approximately 6% annually over the next several years. This assumption includes an annual 2% County adjustment and an additional 4% due to new construction and sales of existing homes in the City. While there has been substantial new residential construction occurring in Novato over the past few years, many of the new homes are located in Hamilton, which is a Redevelopment project area and which receives the increased tax increment.
For Every Dollar of Property Tax Paid in Novato...
˜ $ 0.30 goes to the Novato Unified School District
˜ $ 0.16 goes to the County of Marin
˜ $ 0.15 goes to the State of California
˜ $ 0.14 goes to the Novato Fire Protection District
˜ $ 0.07 goes to the College of Marin
˜ $ 0.07 goes to the City of Novato
Remaining 11 cents split among...
˜ Marin County Free Library
˜ Flood Control Zone 1
˜ Marin County Open Space District
˜ Marin/ Sonoma Mosquito and Vector Control
˜ Bay Area AQMD
˜ Novato Sanitary District
˜ North Marin Water District
˜ Marin County Office of Education
˜ Marin County Transit Community Profile
Revenue Description &
Overview
City of Novato Adopted Budget 2007/ 08 – Page 35
Assessed Valuations
The County Assessor of Marin County assesses all real and personal property in the City of Novato for tax purposes except public utility property, which is assessed by the State Board of Equalization. California law exempts $ 7,000 of the assessed valuation of an owner occupied dwelling. Effective with the 1980/ 81 fiscal year, State law has also exempted 100% of the value of business inventories from taxation, rather than 50% as in prior years. The law provides for reimbursements to local agencies based on their share of the revenues derived from the application of the maximum tax rate applied to business inventories in the 1979/ 80 fiscal year, with adjustments to reflect increases in population and the consumer price index. The chart below provides a graphical representation of the growth in the City’s real property assessed valuation over the past 10 years.
Revenue estimated to be lost to local taxing agencies due to such exemptions is reimbursed from State sources. Such reimbursement is based upon total taxes due upon such exempt values and is not reduced by any amount for estimated delinquencies. The chart below and two tables on the following page present the City= s 2006/ 07 net taxable valuation and the amount of reimbursable exemptions by assessment roll and a ten- year history of ( secured) assessed valuations.
Community Profile
Revenue Description &
Overview
Page 36 C City of Novato Adopted Budget 2007/ 08
CITY OF NOVATO
2006/ 07 Assessed Valuation
Secured
Unsecured
Total
$ 7,699,711,806
$ 217,724,642
$ 7,917,436,448
CITY OF NOVATO
Ten- Year History of ( Secured) Assessed Valuations
Fiscal Year
Assessed Valuation
Percentage Change
1
997/ 98
3,518,105,709
3.1%
1
998/ 99
3,675,199,967
4.5%
1
999/ 00
3,957,872,948
7.7%
2
000/ 01
4,494,685,983
13.6%
2001/ 02
4,996,270,959
11.2%
2002/ 03
5,389,426,406
7.9%
2003/ 04
5,650,541,355
4.8%
2004/ 05
6,199,969,092
9.7%
2005/ 06
6,954,982,129
12.2%
2006/ 07
7,699,711,806
10.7%
CITY OF NOVATO
Source of Net ( Secured) Assessed Valuation
In 2006/ 07 by Type of Property
Type of Property
2006/ 07 ( Secured) Assessed Valuation
% of Total
Single- Family Unimproved Lots
$ 40,577,633
0.53%
Single- Family Homes
5,984,845,959
77.73%
Multi- Family Homes & Lots
354,369,048
4.60%
Rural and Agricultural
303,498
0.00%
Industrial Unimproved
1,378,458
0.02%
Industrial Improved
198,514,308
2.58%
Commercial Unimproved
44,151,689
0.57%
Commercial Improved
1,073,491,784
13.94%
Other
2,079,429
0.03%
TOTAL
$ 7,699,711,806
100.00%
Source: Marin County Assessor’s Office
Community Profile
Revenue Description &
Overview
City of Novato Adopted Budget 2007/ 08 – Page 37
Sales Taxes
Description: Sales and Use tax is imposed on most retail transactions. The Sales Tax rate in the County of Marin is 7.75%. Of this, .75% is allocated for City and County general operations, .25% to the County Transportation Fund, .50% for Countywide street improvements, and 6.25% is allocated to various State funds. In addition to the .75% sales tax allocation, the City receives an additional .50% for Police services, following voter- approval of Proposition 172 in 1993.
Sales Tax Revenues10 Year Actual and Projected- 1234567899- 0000- 0101- 0202- 0303- 0404- 0505- 0606- 0707- 08Budget08- 09Projected
Overview: With the passage of Proposition 57 ( the Triple Flip) in March 2004, the State shifted .25% of the City’s sales tax allocation to the State to pay for recovery bonds. The sales tax take- away was replaced with an equal amount of property taxes. In FY 2006/ 07, this amount equated to $ 1.97 million. As a result, the City’s sales tax revenue has remained below the pre- Proposition 57 levels; however, this was partially offset by a slight increase in overall sales tax revenues of 0.75%. Sales tax revenue is expected to account for $ 6.7 million, or 22% of all General Fund revenues for 2007/ 08.
Outlook: Based on continuing signs of economic recovery, it is projected that sales tax revenue will continue to grow approximately 5% over the next year. With the addition of Trader Joe’s and Pharmaca Integrative Pharmacy, and Whole Foods in the near future, as well as the completion of the Grant Avenue improvement project and Costco expansion, the City is expecting its sales tax base to expand. The City’s sales tax revenue, however, continues to be endangered by the increase in Internet sales. Community Profile
Revenue Description &
Overview
Page 38 C City of Novato Adopted Budget 2007/ 08
Hotel Tax
Description: The Hotel ( or Transient Occupancy) Tax is imposed on occupants of hotels, inns, motels and other lodging facilities for occupancy of 30 days or less. The tax is applied to a customer= s lodging bill. Taxes are remitted quarterly for all approved lodging operators in the City of Novato.
Overview: The current hotel tax rate is 11%. In 1997, the tax was raised by voter approval from 8% to 10%. On April 1, 2004, the tax was increased an additional 1% that directly goes to help support tourism efforts throughout Marin County. From the remaining 10%, 1% is remitted to the Novato Chamber of Commerce to support tourism and convention trade within Novato. The other 9% is used by the City for general purposes. This tax revenue grew significantly in the late 1990s with the opening of a Courtyard by Marriott in early 1999 and the annexation into the City limits of the Days Inn located in northern Novato. Projected hotel tax revenue for FY 2007/ 08 is $ 1.16 million, of which $ 116,000 is allocated for tourism and convention trade programs.
Hotel Tax Revenues10 Year Actual and Projected- 200,000400,000600,000800,0001,000,0001,200,0001,400,00099- 0000- 0101- 0202- 0303- 0404- 0505- 0606- 0707- 08Budget08- 09Projected
Outlook: After ending a three- year declining trend in FY 2002/ 03, hotel taxes have been increasing between 2% and 5% annually. The City is anticipating that this increase will continue in FY 2007/ 08, as the national and local economies improve, hotel rooms fill closer to capacity and room rates increase. Community Profile
Revenue Description &
Overview
City of Novato Adopted Budget 2007/ 08 – Page 39
Other Taxes
Description: The City also receives tax revenue from other sources including Business Licenses and Franchises. The City charges specific taxes on businesses in Novato depending on their type and number of employees. The City also receives Franchise Tax revenue from Pacific Gas and Electric ( PG& E), Comcast Cable Corporation, and Horizon Cable TV Inc.
Overview: The City receives a 5% franchise fee from the gross revenues for cable television services from Comcast Cable Corporation and Horizon Cable TV Inc. Cable franchise fees are estimated to be $ 702,000 for FY 2007/ 08; PG& E franchise fees are estimated at $ 612,000, an increase of 3% for both.
Outlook: Revenues received from both PG& E and cable franchise fees are expected to show modest annual increases over the next few years.
Licenses and Permits
Description: This revenue comes to the City from a variety of licenses and permits. The largest sources of this revenue are from issuance of building permits, building plan check fees, encroachment and grading permits and resale inspection fees.
Outlook: After several years of growth, particularly with the conversion of the former military base at Hamilton, residential construction in Novato has begun to slow down as the City approaches build- out on the remaining parcels available for development. This revenue source is expected to flatten over the next two years and then increase slightly as homeowners make improvements to their properties.
Fines, Forfeitures and Penalties
Description: The City receives revenues in this category primarily from vehicle code fines, parking citations, and penalties associated with building permits. As part of its budget act several years ago, the State diverted 50% of cities’ vehicle code fines to State uses.
Outlook: Beginning in FY 1998/ 99, the State returned these vehicle code fines to cities. In addition, cities for the first time have received revenue derived from those individuals who attend traffic school. As a result of this State action, Novato receives approximately $ 95,000 annually. Vehicle code fines were $ 269,000 in FY 2006/ 07 and are estimated at $ 234,000 for FY 2007/ 08.
Revenue from Use of Money and Property
Description: The City is able to generate income from its current assets. This includes interest earned on investments, land and facility rental within the City. This category also includes the City= s operating contingency reserve.
Outlook: The City= s investment portfolio continues to perform above the State Investment Pool and the County of Marin Investment Pool, and the percentage income on the portfolio is predicted to increase slightly by 5% in FY 2007/ 08. Community Profile
Revenue Description &
Overview
Page 40
Revenue from Other Agencies
Description: The General Fund receives revenues from other cities, the County of Marin, and the State of California. The largest of these revenues is the Motor Vehicle in Lieu Tax ( VLF) received from the State of California. VLF is paid initially at the date of purchase of new or used vehicles. In subsequent years, it is remitted as part of the vehicle registration process. Other miscellaneous State funds are provided for abandoned vehicles, peace officer training, and various grants.
Overview: Until 1998, the VLF rate in California was 2% of a vehicle’s assessed value. At that time, the State reduced the VLF in two stages to 0.65%. This portion of the fees is a property tax, so this reduction is a property tax relief for the people of California. Until FY 2003/ 04, the State had backfilled this loss of City revenue. As a result of Proposition 1A ( Local Government Agreement) passing in November 2004, VLF will remain permanently at 0.65% of assessed value and the State will no longer backfill the revenues to local government. Instead, beginning in FY 2004/ 05, the City has been receiving additional property tax revenues to compensate ( known as the VLF Swap).
Of the total VLF received by the State, cities receive 17.7%. The fees are distributed as follows:
Local Governments
57.1
%
Cities 17.7% Counties 39.4%
California Highway Patrol
12.4
Department of Motor Vehicles
9.0
State Highways
10.6
State General Fund
8.7
Other Agencies
2.2
Outlook: Since this revenue represents taxation of vehicles, new auto sales are a critical component to growth of this revenue source. Beginning in FY 2005/ 06, the VLF Swap amount has been increasing at a similar rate to property taxes, and is based on property assessed value increases in the City of Novato. It is estimated that VLF revenues will increase slightly by 1.2% in FY 2007/ 08. This chart represents VLF revenues, excluding the VLF Swap. Motor Vehicle In- Lieu Fees10 Year Actual and Projected- 500,0001,000,0001,500,0002,000,0002,500,0003,000,0003,500,00099- 0000- 0101- 0202- 0303- 0404- 0505- 0606- 0707- 08 Budget08- 09Projected C City of Novato Adopted Budget 2007/ 08 Community Profile
Revenue Description &
Overview
City of Novato Adopted Budget 2007/ 08 – Page 41
Other Charges and Revenues
Description: These miscellaneous charges include recreation fees, business license application fees, planning and engineering- related fees and sales of publications.
Overview: The two largest components of these charges are for building permits ( budgeted for FY 2007/ 08 at $ 485,000) and Parks, Recreation and Community Services Fees ( budgeted at $ 1.75 million). Building permits are assessed on individuals and companies that come to the City requesting land use entitlements for business or residential property. Parks, Recreation and Community Services fees are for classes, team sports and other activities offered by the City.
Outlook: With the build- out at Hamilton in FY 2006/ 07, and only minor in- fill development projects, building permit fees have begun to decline. Revenues from recreation programs are estimated to increase slightly in FY 2007/ 08. A comprehensive fee study undertaken in FY 2005/ 06 indicated that many of the City’s fees should be adjusted to more correctly reflect costs incurred in providing the various programs and services. The revised fees were implemented in September 2006 and are updated annually.
Service Charges10 Year Actual and Projected- 123456799- 0000- 0101- 0202- 0303- 0404- 0505- 0606- 0707- 08Budget08- 09ProjectedMillions Community Profile
Revenue Description &
Overview
Page 42 C City of Novato Adopted Budget 2007/ 08
Other Fund Revenues
Gas Tax - In 1998/ 99, the City Council directed that the annual $ 600,000 transfer to the General Fund be reduced by $ 300,000 to fund the underground utility district on South Novato Boulevard. This transfer to the General Fund reverted back to $ 600,000 the following year. In 2000/ 01 this amount was adjusted for inflation to $ 650,000. In 2007/ 08, this transfer will be $ 817,000.
Affordable Housing Trust - The Affordable Housing Trust Fund receives monies from developers as may be negotiated to assist in providing below market rate housing. Future ongoing revenues are limited to interest earnings.
Landscape Assessment Districts - Special assessments are collected for the Landscape Assessment Districts in San Marin, Hillside, Wildwood Glen, San Pablo, Downtown, and Scottsdale, which are used for median island landscaping and maintenance in these districts.
Quimby Fees - Subdivision Park Trust or Quimby Fees are in- lieu fees paid by residential subdivision developers. Collected fees are restricted to Parks and Recreation purposes and are to be used to serve residents of the subdivision from which the fees were received. As fees are received, individual capital projects are recommended to Council for funding. For FY 2007/ 08 Quimby fees are projected to be $ 1.5 million, mostly as a result of the residential development at Hamilton.
Chapter 27 - Assessment revenues are used by the City to finance assessment district proceedings, typically to complete missing frontage improvements such as curbs, gutters and sidewalks.
Development Impact Fees - The City of Novato established public facility impact fees by Resolution 89- 97 in order to make reasonable provisions for new facilities. As required by the City's General Plan, new development should provide for adequate public facilities and new development would bear the fair share of providing such facilities. Such fees may include charges for drainage improvements, traffic and roadway improvements and other capital improvements such as parks and public buildings. The City Council approved increases to the City= s development impact fees in May 2002. These Impact Fees are projected to be $ 4.6 million for FY 2007/ 08. However, projection of Impact Fees to be collected in the future is somewhat risky since money is not collected until occupancy of a structure. Therefore, projection of impact fees in the CIP budget should generally be recognized as an estimate subject to fine- tuning as the year of construction draws closer.
Redevelopment Agency Housing - Tax increment funds for the housing program are generated from all parcels within the Redevelopment Project Areas: No. 1— Novato ( Vintage Oaks), Hamilton, and Downtown. These reserved funds have been used for the interim housing and homelessness prevention programs addressing Novato= s at- risk population. With development complete at Hamilton, the City has met its affordable housing requirements for years to come. In FY 2005/ 06 the RDA general fund loaned $ 23 million to the housing fund, which will begin repaying this debt with the FY 2006/ 07 available fund balance. Going forward, the housing fund will repay a minimum of $ 500,000 from available funds at fiscal year end. Community Profile
Revenue Description &
Overview
City of Novato Adopted Budget 2007/ 08 – Page 43
Clean Storm Water - Novato is a participant in the Marin County Storm Water Pollution Prevention Program. Storm water fees are collected on parcels of land within the City of Novato to fund activities of the Clean Storm Water Program. Fees are collected by the County Auditor/ Controller and forwarded to the City. Revenues help fund capital projects that prevent pollutant discharge from entering street and storm drains and flowing into creeks and wetlands. Assessments are projected at $ 347,000 for FY 2007/ 08.
General Fund Operating BudgetRevenue and Expenditures10 Year Actual & Budgeted- 510152025303598- 9999- 0000- 0101- 0202- 0303- 0404- 0505- 0606- 07Projected07- 08BudgetMillionsRevenuesExpenditures Community Profile
Financial Trends
Page 44 C City of Novato Adopted Budget 2007/ 08
Financial Trends FY 2007/ 08 through FY 2011/ 12
Revenues - One- Time
The City received the final payment of $ 11 million in FY 2006/ 07 from Novato Community Partners, the master developer of the Hamilton Field Navy Housing Property ( Pointe Marin, Meadow Park, and Villa Entrada). This payment brought the total received from NCP to $ 32 million. The funds are held in trust and have been invested. The earnings are being used to mitigate the impact of the development on the City’s operating budget.
Revenues – Ongoing
The City expects that most major revenue sources will not see significant increases over the next few years. There remains the potential for a small retail development at Hamilton Field containing a supermarket and drugstore, which will produce some new sales tax revenue. London- based Grosvenor Properties purchased a 9.5- acre site at Hamilton that was formerly owned by Albertson’s and is expected to break ground for a Safeway lifestyle store in FY 2007/ 08 that will be the anchor for the retail center. The Costco store at Vintage Oaks has begun an expansion project, with completion expected within the next year.
With the adoption of a redevelopment project area and a Business Improvement District in the downtown in 1999, it is estimated that some additional sales tax revenue will come from downtown businesses, especially as the Grant Avenue improvement project is now complete. Several new stores have opened on Grant Avenue in the past two years, including Flourchyld Bakery, Five Little Monkeys, Powell’s Candy, and Sweet Potatoes. Other major retail stores in the downtown area that have opened in the past two years include Trader Joe’s and Pharmaca Integrative Pharmacy. Whole Foods is developing a site adjacent to the railroad depot at the east end of Grant Avenue, to include its store, residential apartments above, and a parking garage, and is anticipated to open in FY 2008/ 09.
As part of the Development Agreement for Hamilton Field, a trust fund was established, the interest income of which is used to support City operations The trust was fully funded in FY 2006/ 07 and should generate nearly $ 1.3 million in income to the City in FY 2007/ 08. Earnings are expected to grow by 7% annually.
The housing developments in the Hamilton Redevelopment Project Area are now generating property tax increment to the Redevelopment Agency.
The City Council approved increases to the City= s Development Impact Fees in May 2002. These fees have generated close to $ 1 million in additional revenue each year.
Following an extensive fee study undertaken in FY 05/ 06, the City Council approved increases to service charges that will generate an estimated $ 475,000 in additional revenue for FY 07/ 08 and subsequent years.
Community Profile
Financial Trends
City of Novato Adopted Budget 2007/ 08 – Page 45
Expenditures - One- Time
The City is faced with the challenge of building a new Civic Center and undergoing a substantial rehabilitation of, or building a new, Community Center. The current estimated cost is approximately $ 26 million. The City is looking at a variety of options for financing the project including placing an initiative on the ballot asking for voter approval to borrow funds. Currently, Measure D limits the amount of funds that can be borrowed for a new Civic Center without voter approval to approximately $ 1.7 million. The only other source of funding for this project is the Civic Center fund, which has a balance of $ 4.5 million. Until a new Civic Center is built, the City has been and will continue to incur leasing expenses of approximately $ 500,000 annually to temporarily house City employees.
Expenditures – Ongoing
The City Council's efforts to achieve salary parity for its employees has had a significant impact on expenditures. Without significant changes in the City's revenue forecasts, the City will be faced with considerable expenditure reductions in order to continue to fund salary parity in future years.
In 1999, the City agreed to pay approximately $ 2.1 million toward the purchase of a new countywide radio system as part of the Marin Emergency Radio Authority ( MERA), which Police and Community Development staff are using. The first bond payment of $ 220,000 to MERA for the City= s share of the system was made in FY 2002/ 03. Annual bond payments of approximately $ 222,000 will be due for 20 years. The City has included this payment in the budget.
The City has seen large increases in payments in several “ mandatory” areas in recent years: payment to the County of Marin for animal control services provided by the Marin Humane Society and payments to joint powers authorities for City workers= compensation and general liability insurance coverage. The Legislature recently passed a law that should slow the increase of workers’ compensation costs to employers, although the City probably won’t benefit from it for a year or more. It is therefore unclear at this time how this and other mandatory costs will impact the City’s budget in future years.
Another unknown is the ongoing expense of community facilities that the City has inherited at Hamilton Field as well as the capital costs of new facilities to be developed. Development impact fees and funds generated through the reuse of the Navy housing properties will provide some assistance, but it will be difficult to identify needed funding for these expenses until the facilities are completed.
Budgeted general fund expenditures are expected to grow approximately 4% in FY 2007/ 08, partly due to increased personnel and utility costs.
The recent issue of $ 18 million of Pension Obligation Bonds has reduced the City’s annual contribution to CalPERS by approximately $ 1.1 million. After debt service payments, the net savings to the City is projected to be approximately $ 190,000 each year.
Community Profile
Financial Trends
Page 46 C City of Novato Adopted Budget 2007/ 08
Novato Per Capita General Revenue Information
June 30, 2005
Novato was ranked 18th out of 20 cities within Sonoma and Marin Counties, having a per capita general revenue income of $ 400.61 for fiscal year ending June 30, 2005. The average per capita general revenue income for towns and cities within Marin and Sonoma Counties was $ 764.46.
General Per Capita RankCityPopulationRevenueGen. Rev. 1City of Belvedere2,128 3,217,487 1,511.98 2Town of Ross2,345 3,444,496 1,468.87 3Town of Corte Madera9,364 13,035,315 1,392.07 4City of Sausalito7,363 9,890,156 1,343.22 5City of Mill Valley13,667 14,557,667 1,065.17 6City of Larkspur11,995 11,240,782 937.12 7City of Tiburon8,760 6,697,773 764.59 8City of Sonoma9,834 7,237,635 735.98 9Town of San Anselmo12,368 8,984,623 726.44 10City of San Rafael57,224 40,879,273 714.37 11City of Santa Rosa156,268 86,345,673 552.55 12Town of Fairfax7,298 3,817,381 523.07 13City of Sebastopol7,794 4,066,238 521.71 14City of Healdsburg11,711 5,769,016 492.62 15City of Rohnert Park42,445 20,646,708 486.43 16City of Petaluma56,632 26,476,485 467.52 17City of Cotati7,337 3,183,987 433.96 18City of Novato50,586 20,265,060 400.61 19Town of Windsor25,475 9,878,669 387.78 20City of Cloverdale8,241 2,993,289 363.22
Source: State Controller’s Report
Community Profile
Financial Trends
Page 48 C City of Novato Adopted Budget 2007/ 08
Employee Compensation and Benefits
The City of Novato= s employees are represented in the following bargaining units:
Unit A:
Novato Police Managers Association ( Police Managers)
Unit B:
Novato Police Officers Association ( Police Officers)
Unit C:
Marin Association of Public Employees/ SEIU Local 949 ( Middle Managers)
Unit D:
Marin Association of Public Employees/ SEIU Local 949 ( Miscellaneous mployees)
E
Unit E:
Western Council of Engineers ( Engineers)
Unit F:
Confidential Employees ( Management Analysts and Executive Staff)
Unit G:
Exempt Employees ( Department Directors and Deputy Department Directors)
Unit H:
Novato Police Civilian Employees Association ( Dispatchers, Records Specialists, Community Services Officers and Evidence Technician)
City employees choose from a number of benefit plans ( dental, health, life insurance, long- term disability, 125 Plan medical and/ or dependent care) available to them through the City using the monthly fringe benefit contribution from the City. The fringe benefit ranges between $ 675 and $ 875, as agreed to in the Unit’s MOU or Resolution. Employees receive any remaining balance of their fringe benefit contribution not spent on benefits as an addition to their gross salary each month.
The City contributes 7% ( 9% for Safety members) of annual salary on behalf of each employee into the California Public Employees Retirement System ( CalPERS). The City participates in PERS’ " 2% at 55" Local Miscellaneous Members Retirement Program and " 3% at 55" Local Safety Members Retirement Program. For FY 2007/ 08, the City’s contribution to CalPERS is budgeted at $ 3.2 million. $ 3 million is budgeted in the General Fund and the balance is budge