Sherman R. Frederick
Every city faces budget woes stemming from the COVID-19 pandemic. And Novato is no different.
The city’s Council heard a report from city staff last week and hardly any of it was encouraging.
As he turned the meeting over to new Finance Director Amy Cunningham to rundown the city’s bleak financial condition, City Manager Adam McGill told the Council that there are an “awful lot of unknowns. We just don’t know how fast the economy will return. Are we in a depression? Or a recession?”
The bottom line facing the city is a daunting $5.71 deficit going forward. Already the city has tightened its belt with the implementation of a voluntary early retirement program, a hiring freeze, layoffs and deferred capital spending.
Novato has about $12 million in its rainy day fund and some of those reserves could be used to make up for some of the deficit.
“Reserves are certainly there for a rainy day. And it is raining,” Cunningham said .”But we don’t have to use all of them.”
One thing is certain: “Some difficult decisions will be coming our way.”
The hard decisions will come in September, she said.
Cunningham also reminded the Council that while the pandemic has influenced the budget woes, Novato was already in a tight financial spot.
“We knew we were going into a deficit situation before COVID-19,” she said.
While a $5.7 million budget is daunting, City Manager McGill said Novato’s financial woes are pretty much in the middle where other Marin cities find themselves.
There are some smaller cities with bigger deficits, he said. And some cities better off because they derive most of their revenue from property taxes.
“I’d say we’re in the middle,” he said.
The financial woes comes after a contentious battle with the Novato business community over raising the minimum wage on city businesses ahead of the state’s schedule.
At the time several in the business community warned that mandating higher wages would kill some local businesses and further cement the perception that Novato is not a small-business friendly town.
Whether that threat would have come true is now clouded by the COVID-19 shutdown, which has already killed a handful of Novato businesses and reducing sales tax revenue dramatically.
Nationally, small businesses are the main engine of employment growth and account for roughly half of all private-sector jobs. If they fail en masse, the whole U.S. economy will collapse.
The city has not made any moves to reverse its minimum wage decision, which takes effect in July, but it has partnered with others to give handouts to struggling Novato businesses.
McGill reported at the meeting last week that Novato has about $380,000 in donated funds to be distributed to struggling businesses.
There have been 107 businesses asking for money, McGill said. Those applications for help will be reviewed and made in the next week or so. The maximum a business can receive is $5,000.
Sherman R. Frederick can be reached at email@example.com.