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Monterey council directs staff to pursue 0.375% sales tax and 8% parking tax for June ballot to help close budget gap
Summary
Facing a projected structural general‑fund gap, the council voted unanimously to move a 0.375% sales tax (staff discussed a nine‑year sunset) and an 8% parking tax onto the June 2, 2026 ballot and asked staff to advance ballot language and schedule required actions for the tight timeline.
The Monterey City Council voted unanimously Jan. 28 to direct staff to place two revenue measures on the June 2, 2026 ballot — a 0.375% sales tax (staff discussed a nine‑year sunset) and an 8% parking tax — as part of a package of options to address a multi‑million‑dollar structural general‑fund deficit.
Finance Director Rafaela King told the council the city faces a structural deficit driven by rising salary and benefit costs, higher insurance premiums and retirement liabilities, and an increase in authorized full‑time equivalents. King said recent labor agreements and compensation adjustments account for a significant portion of the gap and that the city had used one‑time solutions to balance FY25‑26.
"We started with the general fund; we now have a structural deficit in FY25‑26," King said, describing labor‑cost increases, higher internal service charges and rising actuarial liabilities. Staff projected a roughly $10.5 million shortfall for the current fiscal year and preliminary estimates of about $8.4 million for FY26‑27 if no new revenue or cuts are adopted.
Staff presented a range of ballot options and revenue estimates. For the parking tax, staff recommended an 8% rate — comparable with lower‑end comparator cities — that was estimated to raise approximately $447,000–$633,000 annually depending on occupancy assumptions. Council discussed polling and outreach; one councilmember said early polling showing modest support is an opportunity for voter education rather than a reason to withdraw proposed measures.
Councilmembers said trimming unfunded or frozen positions and continuing to review departmental needs are part of the longer‑term solution, but they emphasized that new revenue measures are needed to prevent painful cuts and sustain essential services. Staff outlined a near‑term schedule: draft measure language, send sales‑tax language to the California Department of Tax and Fee Administration for review, adopt a fiscal‑emergency declaration (if needed) and return for final action in February–March to meet election deadlines.
The council passed a motion to place the 0.375% sales tax and an 8% parking tax on the June ballot; the motion passed unanimously.
