With expenses outpacing revenue, the Monterey City Council is exploring numerous strategies to address the city’s structural deficit, including raising taxes and defunding neighborhood improvement projects.
At a special council meeting on Wednesday, Jan. 28, City Finance Director Rafaela King outlined the circumstances that contributed to the city’s budgetary shortfall. “It’s an ongoing issue as long as the growth in expenses outpace the growth in revenue,” King said.
She mentioned that although city staff had come up with creative “one-time solutions” to balance the current year’s roughly $11.6 million shortfall by not funding vacant positions, for example, they anticipate that expenses will outweigh income by about $12 million again in the next fiscal year.
The biggest expense is the city’s growing workforce, which increased from under 420 full-time employees in 2021 to 488 in 2025. King pointed out that from fiscal year 2024-2025 to 2025-2026, salary and benefits expenses for the city went up by about $6 million due to regular cost of living increases of about $3 million, overtime, retirement and other factors. Operating and technology expenses also increased by about $5.7 million in that time period.
After considering multiple avenues out of the structural deficit, the City Council voted on Wednesday, Jan. 28 to move forward with two tax measures on the June ballot. Those include a measure to increase sales tax by 0.375 percent, which sunsets in nine years, and an 8-percent parking tax.
Later the same day, the city’s Neighborhood and Community Improvement Program Committee considered a charge from the City Council to provide recommendations to defund between $3 million and $4 million in projects that are inactive or not yet started.
The committee members were asked to rate projects from 1 to 10, with 10 equating to a project that should remain funded and 1 being a project that should be unfunded. The task was not welcomed by many committee members, who suggested they rate every project as a 10 and let the council decide, such as Skyline neighborhood representative Dennis Duke.
“My recommendation is that we vote high numbers on all of these projects other than the ones that are low-lying fruit and recommend that they take our $3.5 million from next year,” he said. “And frankly, they need to clean up their own budget because they won’t get a tax increase. They won’t get other sources of revenue and they need to clean up their expense house.”
Despite the pushback, the NCIP Committee ultimately scored the projects 1-10, and unanimously approved a motion made by Duke stating the committee’s position: “While we have voted on these projects as directed, our preference is for the previously approved NCIP motion to utilize the $3.5 million of the 2026-27 cycle funding as needed to assist the city in the budgetary shortfall.”