Novato has passed a balanced budget for the first time in years with help from the Measure M 3/4% sales tax increase.

The City Council voted unanimously Tuesday to adopt a plan that outlines $57.7 million in revenue and $57.7 million in expenses for fiscal 2026.

“Congratulations; we have a balanced budget,” Mayor Tim O’Connor said.

“I’m thrilled where we’re at,” Councilmember Mark Milberg said.

City Manager Amy Cunningham said the balanced budget is the beginning of an endeavor to restore service levels and staffing, invest in deferred maintenance and infrastructure and reestablish the emergency reserve fund. The balanced budget is an essential step in securing long-term fiscal sustainability and stability, she said.

The city’s revenue includes $41.9 million from taxes — excluding Measure M — plus $4.3 million from service charges and $3.7 million from licensing and permit fees. Expenses include $39.3 million for salaries and benefits, $5.83 million for professional services and consultants and $3.2 million in materials and supplies, said Jennifer Maldonado, a city analyst.

Maldonado said the proposed full-time employee count for the next fiscal year is 205, only about two people short of the staffing in fiscal 2020. In fiscal 2021, the number fell to 188 people, but it has risen every year since.

The budget includes allocations for two new positions, one for street maintenance and the other for park maintenance.

Cunningham noted that the city is still in labor negotiations with employee groups, and the budget will likely have to be adjusted later to address increased expenses.

Carla Carvalho-DeGraff, the city finance director, said there’s been an average systemic deficit of around $3.9 million in recent years. Measure M is expected to bring in around $10 million in revenue per year.

About $3.9 million of the Measure M funds will go toward backfilling prior deficits; $1.2 million to restoring staffing and resources; $1.3 million to the emergency disaster and recovery reserve; $1.9 million to capital improvements; $1 million to the city’s pension reserve; $500,000 to deferred maintenance; and $250,000 to innovation and investment.

Though $1.8 million is going toward increasing the city’s annual paving program, it won’t be enough to change Novato’s pavement condition index score, Carvalho-DeGraff said.

“It is a start to rebuilding infrastructure,” Carvalho-DeGraff said.

The City Council’s budget adoption included approving the capital improvement program, which lists 76 projects. It includes 16 new projects totaling an estimated $6.5 million and 15 ongoing projects that need an additional $2.6 million.

Councilmember Pat Eklund asked to add one last project to the program: an investigation into why the concrete and bricks around the Hamilton Field History Museum are moving. She said there seems to be some settlement happening.

Cunningham said city staffers need to do some exploratory research. Depending on the cause of the damage, the response may fit into the existing operating budget, or staff might need to return with a larger project request. A review was added to the work plan.

“All I know is that we need to investigate it before it gets worse,” Eklund said.

The new fiscal year starts Tuesday.