The rubber meets the road for Monterey’s budget deficit.

In places powered by a tourism-based economy, there are some obvious pros and cons. The City of Monterey developed an elegant solution to this back in 1985 with the creation of the Neighborhood and Community Improvement Program, or NCIP. The program receives 16 percent of transient-occupancy tax, paid by hotel guests, every year. Neighborhood representatives appointed to the NCIP committee vote on projects – proposed by residents, often for residents – with some real financial muscle behind them. Over the last three years, City Council has approved 105 NCIP projects with a combined budget of $22 million.

But city officials simply cannot keep up. Of those 105, only 40 have been completed; 42 have not yet started or are inactive, with a balance of $8.6 million. The total NCIP backlog includes 86 approved projects that would cost $17 million.

Besides that delta between year-to-year dream and reality, there is an existential challenge facing the 40-year-old NCIP program. The City of Monterey is looking at a $10 million deficit projected in the 2026-27 budget year. It’s a structural deficit, meaning that the finance department’s analysis of revenues and expenses shows the gap continuing – it’s not a one-time freak situation (like a pandemic) that can be solved with a quick one-time transfer of funds.

All of that means city officials need to make tough decisions about how to generate more revenue and/or cut expenses to close the gap.

City Council is scheduled to discuss the issue and set policy direction in motion when they next meet on Tuesday, Oct. 21. Options on the table include a possible tax on private parking lots; a fee billed to insurance companies for first responder calls; a vacancy tax; or an admission tax on venues, which could generate an estimated $3.9 million per year, the overwhelming majority of that ($3.3 million) from the Monterey Bay Aquarium.

Council has already decided to hire a public polling research firm to evaluate the public’s openness to a potential measure on the June 2026 ballot for a 0.375-percent sales tax, the highest amount allowed without a special carve-out from the State Legislature, generating an estimated $4.5 million annually. They’ll also survey the public on a possible extension of Measure G, a 0.5-cent sales tax that sunsets in 2029.

City officials need to make tough decisions.

“We are looking for not only short-term solutions but also long-term solutions to stabilize the city’s budget to continue to provide the service residents expect and deserve,” Assistant City Manager Nat Rojanasathira says. “The focus is on ways to increase revenue while reducing impacts and taxes on Monterey residents.”

Knowing there may not be an appetite for new or extended taxes, part of that equation includes the hard part of the discussion: potential cuts. NCIP has risen to the top of the list, primarily because it falls in the category of nice-to-have rather than need-to-have. It will require at least four out of five council members to re-appropriate NCIP funds.

To get the conversation started, the NCIP Committee and City Council held a joint meeting on Monday, Oct. 13 to explore possible cuts. Mayor Tyller Williamson advocated for what he called a “rack and stack” approach, keeping projects on a list in case future revenue comes in, whether from taxes or from private sponsors.

The council direction was to cut about $4 million from NCIP, requiring those committee members to go back to their approved project list and reprioritize. Coupled with another projected $3 million in salary savings through things like staff attrition, “We’re left with a $4 million gap,” Rojanasathira told councilmembers on Oct. 13.

How to make up that $4 million gap will be the main topic of discussion when council reconvenes on Oct. 21. Councilmembers Jean Rasch and Ed Smith assured Rojanasathira that layoffs are not on the table, but still, council will have to make some tough decisions.

“The great part is we are really listening to each other and we’re really talking,” Rasch said. “I’m not sure where we’re going to end up.”

Nobody knows yet where they will end up, but we do now know where they start: Sacred cows like NCIP are no longer sacred.

SARA RUBIN is the Weekly’s editor. Reach her at sara@montereycountynow.com or follow her at @sarahayleyrubin.bsky.social