The Monterey City Council moves forward with ballot measures to increase revenue in light of the city’s structural budget deficit.

With a substantial budget shortfall in the current and subsequent fiscal years, the City of Monterey and the Monterey City Council are moving quickly to devise strategies to remedy its structural deficit, including potential tax initiatives to be decided in upcoming elections. 

At a special meeting of the City Council held on Wednesday, Jan. 28, the governing body received a report from Monterey Finance Director Rafaela King, describing how the city fell into the financial crisis.

“So how did we get here?” King said at the meeting. “We start with the general fund which has a structural deficit in 2025-26, in this fiscal year, which means that the current year’s revenue is not enough to cover the current year’s expenses. And this has been ongoing. It’s an ongoing issue as long as the growth and expenses outpace the growth in revenue.” 

King said that the current fiscal year budget was ultimately balanced with “one-time solutions,” including not funding vacant positions, and she is anticipating an approximate shortfall of roughly $12 million in the 2026-2027 fiscal year.

“As long as we don’t do anything or enough, that number will continue to grow,” King said. “In recognizing that this is an issue, council and staff, we started discussions early. We started in June, July and August of last year to determine ways to reduce the ongoing deficit and balance the 2026-27 budget by increasing revenues and decreasing expenses.” 

King outlined the factors that caused the city’s budget woes, which includes increased employee salary and benefit costs of about $6 million from the previous year—which comes from an increase in the the number of employees and cost-of-living adjustments—along with other increased expenses such as insurance-related costs for a total increase in expenses of about $11.6 million from fiscal year 2024-2025 to the current fiscal year.

To increase the city’s revenue, the council considered potential ballot measures for the June election, including a measure to increase sales tax by 0.375 percent, which sunsets in nine years, along with an 8-percent parking tax, and potential measures for the November election, such as an admissions tax and vacant home tax, among others. 

Following council discussion and questions, council voted unanimously to put the sales tax and parking tax initiatives on the June ballot.