Monterey uses budget surplus to ease this year’s deficit.

As record revenue from hotel taxes left the city of Monterey with a $2.4 million budget surplus last year, City Council is moving money around as it anticipates budget shortfalls for the next two fiscal years. The structural deficits are projected because of a drop in transient occupancy tax from hotels while the Monterey Conference Center is closed for remodeling.

At a meeting on April 19, there was no discussion on the money move as it quietly passed on the consent agenda, but the staff report outlines the city’s plan to ameliorate any potential negative impacts of two years in the red.

“These deficits are part of our five-year forecasts, we’ve definitely planned for them,” says City Manager Mike McCarthy. “They’re based on conservative revenue estimates, so revenue will likely be higher.”

The council allocated an extra $1.15 million to the 2015-16 budget, which ends June 30, to help make up for some of the $1.78 million deficit projected for the year. The move brings the city’s projected general fund to $1.89 million by the end of the fiscal year, down from $6.32 million the year before.

The city’s next projected surplus is the 2017-18 fiscal year, when the renovated conference center is back online.

In the $1.15 million adjustment, the council also moved $700,000 into a capital facilities renewal fund as the city still has nearly $100 million in backlogged building projects on the books. With the increase the renewal fund moves up to $1.2 million.

While the city might run in the red for two years, the council also added $270,124 to a reserve fund for economic uncertainty, bringing its total to $9.1 million. City policy requires that rainy day fund to total 15 percent of operating expenditures. It now stands at 13.5 percent.

The 2014-15 surplus will be a sticking point with the seven city employee unions as they look for new contracts. Negotiators have stated surpluses should be shared.