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HomeMy WebLinkAboutFIN Voter-Approved Tax Oversight Committee Annual Report & Bylaws Amendment____________________________________________________________________________________ FOR CITY CLERK ONLY Council Meeting: January 20, 2026 Disposition: Resolution 15496 Agenda Item No: 2.d Meeting Date: January 20, 2026 SAN RAFAEL CITY COUNCIL AGENDA REPORT Department: Finance Prepared by: Paul Navazio, Finance Director City Manager Approval:____________ TOPIC: VOTER-APPROVED TAX OVERSIGHT COMMITTEE (VATOC) ANNUAL REPORT AND BYLAWS AMENDMENT SUBJECT: PRESENTATION OF VOTER-APPROVED TAX OVERSIGHT COMMITTEE’S (VATOC) ANNUAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2025 AND RESOLUTION AMENDING THE BYLAWS OF THE VOTER-APPROVED TAX OVERSIGHT COMMITTEE ESTABLISHED BY RESOLUTION NO. 15118, ADOPTED ON SEPTEMBER 6, 2022 RECOMMENDATION Staff recommend that the City Council: 1) Accept the Annual Report from the Voter-Approved Tax Oversight Committee for the fiscal year ended June 30, 2025, and 2) Adopt a Resolution amending the bylaws of the Voter-Approved Tax Oversight Committee established by Resolution 15118, adopted on September 6, 2022 BACKGROUND The Voter-Approved Tax Oversight Committee (VATOC) was formed in September 2022 to consolidate oversight of the City’s voter-approved tax measures into one five-member committee. The committee provides independent oversight of all San Rafael voter-approved tax measures, Measures D, E, G, and R, to ensure the funds have been expended in accordance with the authorized purposes and prepares and submits to the City Council an annual report on the audited expenditures and revenues from each tax measure from the previous fiscal year. For the upcoming FY2025-26 fiscal year, the newly approved Measure P parcel tax will be included as part of the Committee’s review. At their meeting of October 27, 2025, the Voter-Approved Tax Oversight Committee reviewed the unaudited financial results for the fiscal year ended June 30, 2025, for all tax measures under the committee’s oversight purview. The VATOC met again on December 11th to review final, audited financial results for each of these tax measures. There were no changes or revisions to the financial results between the unaudited results reported on October 27th and the audited results presented at the December 11th meeting. VOTER-APPROVED TAX OVERSIGHT COMMITTEE ANNUAL REPORT / Page: 2 At the December 11th meeting, the VATOC also considered its Annual Report to the City Council, and public which fulfills the requirement of Section 1.3.4 of the Committee’s bylaws, as adopted by the City Council on September 6, 2022 via Resolution No. 15118. As part of its annual report to the City Council the Committee is recommending, for Council consideration, a modification to the Committee’s bylaws. The recommended revision serves to clarify the VATOC’s oversight role in relation to general purpose tax measures. ANALYSIS Measure D: Library Parcel Tax In 2016, San Rafael voters renewed an annual parcel tax to fund opening hours and services for the San Rafael Public Library. As a special-purpose tax, the revenues from Measure D can only be spent for library services in San Rafael to maintain hours of operation and provide services, equipment, programs and materials at the San Rafael Public Library. Measure D is scheduled to expire in 2026. The audited financial statements for FY 2024-25 show Measure D revenues of $1,225,316, expenditures of $1,283,185 and an ending fund balance of $794,877. The accumulation of fund balance is a result of two primary factors over the life of the tax: vacant staff positions funded by the Parcel Tax, and the growth of small amounts being underspent in various line items over the life of the tax. The audited capital set-aside fund balance was $100,338. This capital set-aside was earmarked for new and improved library facilities as directed by the City Council as part of the previous Measure C, and was capped at $500,000. For FY25-26, Council has allocated $48,070 of the Measure C-Capital Set Aside fund balance to support the Downtown Library renovation and $51,930 to support the Pickleweed Branch renovation. For FY 2025-26, staff have budgeted for $1,259,143 in revenues and $1,863,121 in expenditures. The FY 2025-26 budget would result in year-end fund balance of $191,650. In addition to ongoing operations and programs, staff plan to implement additional service and facility improvements. Measure G: Cannabis Industry Tax In 2018, San Rafael voters approved Measure G, a business excise tax on cannabis businesses. Measure G allows for a tax on cannabis businesses operating in the City of up to 8% on gross receipts, and taxes different types of businesses at different rates. Current rates can be found on the City’s website. Measure G funds can be used for a variety of purposes, including police and fire services, street repair and improvements, and enhancing community centers. Measure G does not have an expiration date. During FY 2024-25, total revenues reported in the Measure G Fund (216) were $170,698, including $132,716 in tax revenues and $37,983 in interest earnings. Expenditures charged to Measure G for the fiscal year totaled $167,133. The decrease in Measure G revenues from FY 2023-24 to FY 2024-25 can be attributed to ongoing challenges in the cannabis market as well as the temporary decrease in the cannabis tax rate from 4% to 2% for delivery non-storefront license types, effective January 1, 2023. The cannabis tax rate for these license types was further reduced to 1%, effective January 1, 2025. For FY 2025-26, staff have budgeted for $110,000 in Cannabis Industry Tax revenues and $145,373 in expenditures. On January 27, 2023, the San Rafael City Council committed the majority of the existing fund balance of $968,251 to support the pilot Specialized Assistance For Everyone (SAFE) Team, which began in late FY 2022-23. The program has been initially supported using funds from the VOTER-APPROVED TAX OVERSIGHT COMMITTEE ANNUAL REPORT / Page: 3 City’s opioid settlement and grant funds, after which cannabis tax revenues are being utilized. Staff plan to return to Council at mid-year based on actual program needs and adjust transfers out to support the program’s operations. Measure E: Transactions and Use Tax (0.75%) San Rafael voters passed Measure E in 2013. Measure E is a three-quarter cent general purpose transaction and use tax. In 2014, the City Council directed that $0.25 (or one-third) of Measure E proceeds be earmarked to support essential facilities in San Rafael, including critical improvements to our public safety facilities. Construction of the Public Safety Center was completed in 2020, and a variety of other facility construction and improvements identified in Phase 1 of the Essential Facilities master plan were completed in FY 2023-24, including renovation of Fire Station 54. Measure E is scheduled to expire in 2034. During FY 2024-25, a total of $14,739,752 of Measure E revenues collected by the City. The majority of Measure E tax proceeds ($9,826,501) are considered discretionary general fund revenues. This funding makes up a significant portion of the City’s General Fund revenues supporting general government, public safety, community development and library/recreation programs and services. The City does not track expenditures specific to Measure E revenues collected within the General Fund. For FY 2024-25, $4,913,251 in tax proceeds (one-third) represents funding earmarked for essential facilities. A majority of the funds allocated for essential facilities are utilized to pay debt service for the Public Safety Center, totaling $4,398,250. Since debt service payments are presently budgeted within the General Fund, the remaining portion of Measure E funds earmarked for essentially facilities, net of debt service payments, are in turn transferred to the Measure E – Essential Facilities Fund (420). For FY 2024-25 a total of $353,500 was transferred to the Essential Facilities Fund. The FY 2024-25 budget included $883,450 in Capital Project appropriations within the Essential Facilities Fund. Capital expenditures recorded at year-end totaled $744,275 or $139,175 below budget. Capital expenditures included funding to complete renovations at Fire Stations 54 & 55 as well as re-purposing of space within City Hall. The balance of funds are anticipated to be carried-over to complete projects identified in the Phase 1 Essential Facilities Master Plan. For FY 2025-26, staff have budgeted for total Measure E revenues of $14,609,000 based on projections from HdL. A transfer of $290,417 net of debt service payments, is budgeted within the Essential Facilities Fund for FY 2025-26. The FY 2025-26 Capital Budget includes appropriations of $880,000 to support ongoing projects as well as a new project to upgrade the Public Safety Building antennae and communications network. Measure R: Transactions and Use Tax (0.25%) Measure R was passed in 2020 by San Rafael voters. Measure R is a one-quarter cent general purpose transactions and use tax, often referred to as a local sales tax. Funds from this measure go to the General Fund and support a variety of City operations, including public works, recreation and library, administrative services, and public safety. Measure R is scheduled to expire in 2030. FY 2024-25 was the fourth full fiscal year of Measure R tax receipts, during which $4,865,497 of revenues were received. For FY 2025-26, staff have budgeted $4,870,000 in Measure R revenues based on projections from the City’s sales tax consultants, Hdl. VOTER-APPROVED TAX OVERSIGHT COMMITTEE ANNUAL REPORT / Page: 4 Measure P: Main Library and Community Center Special Tax In November 2024, San Rafael voters passed Measure P, a citizen’s initiative to fund a new main library and community center at Albert Park. Measure P represents a significant investment in our cultural and civic institutions and will be one of the largest capital projects that San Rafael has undertaken in recent years. The new library and community center will be a vibrant community resource for San Rafael, providing a hub for civic, cultural, and social enrichment and connection. For FY 2025-2026, staff have budgeted for $6,320,000 in Measure P revenues based on projections from the City’s sales tax consultants, NBS, and $1,625,000 in expenditures to support capital project management services. Recommended Revisions to Voter-Approved Tax Oversight Committee Bylaws. As part of the Voter-Approved Tax Oversight Committee’s Annual Report to the City Council, the VATOC is requesting consideration of amending its bylaws to clarify applicability of the bylaws and to assist the Voter-Approved Tax Oversight Committee in the exercise of its responsibilities, as it relates to oversight of expenditure of voter-approved tax measures that are approved as general taxes. These revenues are deposited into the General Fund to be used for any general government purposes and expended as the City Council shall, in its discretion, determine. Absent a mechanism to separately track and report the expenditure of individual general purpose tax revenues, the oversight role is largely limited to reviewing the revenues collected and the deposit of these revenues to the General Fund. As such, the Committee recommends that Section 1.3.3 of the Voter-Approved Tax Oversight Committee bylaws be amended as follows: 1.3.3 Review annual reports prepared by the City’s Finance Department that track a) the receipt and spending of each Measure’s tax funds revenues, b) the expenditure of funds for each special tax measure and c) any funds from general tax measures that are specifically earmarked by the City Council for a particular purpose through the annual budget process. Staff is supportive of the VATOC’s recommended amendments to its Committee bylaws. A resolution has been prepared for City Council consideration to implement the proposed language revisions (See Attachment 2). RECOMMENDATION Staff recommend that the City Council: 1) Accept the Annual Report from the Voter-Approved Tax Oversight Committee for the fiscal year ended June 30, 2025, and 2) Adopt a Resolution amending the bylaws of the Voter-Approved Tax Oversight Committee established by Resolution 15118, adopted on September 6, 2022 ATTACHMENTS: 1. Voter-Approved Tax Oversight Committee Annual Report FY2024-25 2. Resolution Amending the Voter-Approved Tax Oversight Committee Bylaws A. Voter-Approved Tax Oversight Committee Bylaws (as proposed) 3. Redline version of proposed amendments to Voter-Approved Tax Oversight Committee bylaws RESOLUTION NO. 15496 RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SAN RAFAEL AMENDING THE BYLAWS OF THE VOTER-APPROVED TAX OVERSIGHT COMMITTEE ESTABLISHED BY RESOLUTION NO. 15118, ADOPTED ON SEPTEMBER 6, 2022 WHEREAS, the Voter-Approved Tax Oversight Committee was established by the City Council through adoption of Resolution 15118, adopted on September 6, 20233; and WHERAS, Resolution 15118 also adopted bylaws of the Voter-Approved Oversight Committee, including its responsibilities and duties; and, WHEREAS, among the responsibilities and duties of the Voter-Approved Tax Oversight Committee is a provision that required the Committee to “review annual reports prepared by the Finance Department that track the receipt and spending of each Measure’s tax funds; and, WHEREAS, the Voter-Approved Tax Oversight Committee, through its Annual Reports to the City Council, has identified the challenge in reviewing the expenditure of general tax revenues that are deposited and expended through the City’s General Fund; and, WHEREAS, in its review of the Voter-Approved Tax Oversight Committee’s Annual Report for the 2023-24 fiscal year the City Council’s Finance Subcommittee suggested that the Committee consider recommending language revisions to the bylaws to clarify the oversight role as it relates to general tax revenues; and WHEREAS, at their meeting of December 11, 2025 the Voter-Approved Tax Oversight Committee adopted its Annual Report for the 2024-25 fiscal year, which included proposed revisions to section 1.2.3 of its bylaws to provide this clarification; and, WHEREAS the Voter-Approved Tax Oversight Committee’s Annual Report for fiscal year 2024-25 has been transmitted to the City Council via the agenda for the meeting of January 20, 2026 to include the recommended revision to the Committee’s bylaws. NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of San Rafael hereby adopts the amended bylaws of the Voter-Approved Tax Oversight Committee, as specifically delineated in Exhibit “A” attached hereto and incorporated herein. I, LINDSY LARA, CLERK of the City of San Rafael, hereby certify that the foregoing resolution was duly and regularly adopted by the City Council of the City of San Rafael, Marin County, California, at a regular meeting, held on the 20th day of January 2026, by the following vote, to wit: AYES: COUNCILMEMBERS: Bushey, Hill, Kertz, Llorens Gulati & Mayor Kate NOES: COUNCILMEMBERS: None ABSENT: COUNCILMEMBERS: None Lindsay Lara, City Clerk EXHIBT “A” Voter Approved Tax Oversight Committee Bylaws Page 1 of 2 VOTER APPROVED TAX OVERSIGHT COMMITTEE BYLAWS ARTICLE I. NAME AND PURPOSE Section 1.1. Name. The name of this body shall be the City of San Rafael Voter Approved Tax Oversight Committee, hereinafter referred to as the “Committee.” Section 1.2. Purpose. The Committee’s purpose is to review the collection and expenditure of voter approved tax revenues collected under the authority of voter-approved City tax measures and Resolution 15118 adopted by the San Rafael City Council on September 6, 2022. Section 1.3. Committee Responsibility. The Committee’s authority is oversight only. The responsibilities and duties of the Committee shall be limited to: 1.3 Review expenditures of Measure tax revenues to ensure the monies have been expended in accordance with the authorized municipal purposes of each Measure. To complete this review, the Committee shall: 1.3.1 Understand allowable expenses of each existing Measure’s tax funds (as identified in the enacting Municipal Ordinance) 1.3.2 Review documentation from City Council and from City Council-appointed advisory committees that pertain to the prioritization of use of each Measure’s tax funds. 1.3.3 Review annual reports prepared by the City’s Finance Department that track a) the receipt of each Measure’s tax revenues, b) the expenditure of funds for each special tax measure, and c) any funds from general tax measures that are specifically earmarked by the City Council for a particular purpose through the annual budget process. 1.3.4 Prepare and submit to the City Council and the community an annual public report on the expenditures of each Measure’s tax revenues for the previous fiscal year. 1.3.5 Fulfill the final responsibilities of each Measure’s responsibilities at the Measure’s termination, repeal or extension: Before submitting a final report: Review and report on the final expenditures of each Measure during the previous fiscal year, through its termination, to ensure that monies have been expended consistent with the authorized purposes of the Measure. EXHIBT “A” Voter Approved Tax Oversight Committee Bylaws Page 2 of 2 The Committee shall not: 1. Have any budgetary decision authority, shall not allocate financial resources, and shall not make budget or service recommendations to the City Council. 2. Have authority to direct, nor shall it direct, City staff or officials. ARTICLE II. MEMBERSHIP Section 2.1. Number of Members. The Voter Approved Tax Oversight Committee shall consist of five (5) voting members. Section 2.2. Eligibility. Members of the Committee shall be at last 18 years of age and reside within the City limits. Section 2.3. Appointment of Committee Members. Members shall be appointed by the City Council. Appointments shall be published on the website for the City of San Rafael in accordance with Government Code Section 54973, as amended from time to time. Section 2.4. Terms of Appointment. Each member shall serve a minimum term of four (4) years. An effort will be made to ensure that the terms are staggered, and not all of the appointments expire in the same year. Section 2.5. Term Limits. Members shall be limited to two (2) consecutive four-year terms. Additional terms may be served if there is a break between terms. Section 2.6. Absence and Removal. An unexcused absence from two (2) consecutive Committee meetings without notification to the Staff Liaison will constitute an immediate vacancy and shall be considered a voluntary resignation from the Committee. Previously dismissed Committee members may be eligible for reappointment. Section 2.7. Compensation. Members shall serve without compensation. ARTICLE III. MEETINGS Section 3.1. Time and date of Regular Meeting. Notification of meeting place, date, and time shall be rendered to the public through posting on the City of San Rafael website. Voter Approved Tax Oversight Committee Bylaws Page 1 of 2 VOTER APPROVED TAX OVERSIGHT COMMITTEE BYLAWS ARTICLE I. NAME AND PURPOSE Section 1.1. Name. The name of this body shall be the City of San Rafael Voter Approved Tax Oversight Committee, hereinafter referred to as the “Committee.” Section 1.2. Purpose. The Committee’s purpose is to review the collection and expenditure of voter approved tax revenues collected under the authority of voter-approved City tax measures and Resolution 15118 adopted by the San Rafael City Council on September 6, 2022. Section 1.3. Committee Responsibility. The Committee’s authority is oversight only. The responsibilities and duties of the Committee shall be limited to: 1.3 Review expenditures of Measure tax revenues to ensure the monies have been expended in accordance with the authorized municipal purposes of each Measure. To complete this review, the Committee shall: 1.3.1 Understand allowable expenses of each existing Measure’s tax funds (as identified in the enacting Municipal Ordinance) 1.3.2 Review documentation from City Council and from City Council-appointed advisory committees that pertain to the prioritization of use of each Measure’s tax funds. 1.3.3 Review annual reports prepared by the City’s Finance Department that track a) the receipt and spending of each Measure’s tax funds revenues, b) the expenditure of funds for each special tax measure, and c) any funds from general tax measures that are specifically earmarked by the City Council for a particular purpose through the annual budget process. 1.3.4 Prepare and submit to the City Council and the community an annual public report on the expenditures of each Measure’s tax revenues for the previous fiscal year. 1.3.5 Fulfill the final responsibilities of each Measure’s responsibilities at the Measure’s termination, repeal or extension: Before submitting a final report: Review and report on the final expenditures of each Measure during the previous fiscal year, through its termination, to ensure that monies have been expended consistent with the authorized purposes of the Measure. Voter Approved Tax Oversight Committee Bylaws Page 2 of 2 The Committee shall not: 1. Have any budgetary decision authority, shall not allocate financial resources, and shall not make budget or service recommendations to the City Council. 2. Have authority to direct, nor shall it direct, City staff or officials. ARTICLE II. MEMBERSHIP Section 2.1. Number of Members. The Voter Approved Tax Oversight Committee shall consist of five (5) voting members. Section 2.2. Eligibility. Members of the Committee shall be at last 18 years of age and reside within the City limits. Section 2.3. Appointment of Committee Members. Members shall be appointed by the City Council. Appointments shall be published on the website for the City of San Rafael in accordance with Government Code Section 54973, as amended from time to time. Section 2.4. Terms of Appointment. Each member shall serve a minimum term of four (4) years. An effort will be made to ensure that the terms are staggered, and not all of the appointments expire in the same year. Section 2.5. Term Limits. Members shall be limited to two (2) consecutive four-year terms. Additional terms may be served if there is a break between terms. Section 2.6. Absence and Removal. An unexcused absence from two (2) consecutive Committee meetings without notification to the Staff Liaison will constitute an immediate vacancy and shall be considered a voluntary resignation from the Committee. Previously dismissed Committee members may be eligible for reappointment. Section 2.7. Compensation. Members shall serve without compensation. ARTICLE III. MEETINGS Section 3.1. Time and date of Regular Meeting. Notification of meeting place, date, and time shall be rendered to the public through posting on the City of San Rafael website.