Monterey leaders outline $10M structural deficit and say 3.75% sales tax (Measure D) would close part of gap

City officials told a public town hall that Monterey’s general fund faces a structural shortfall of roughly $10 million for the current fiscal year and that a combination of expense reductions and new revenue would be needed to avoid cuts to services such as library hours, park maintenance and public‑safety staffing.

Finance Director Rafella King presented the city’s budget picture, tracing the deficit to higher salary and benefit costs, increases in insurance and retirement liabilities, added debt service for recently purchased fire equipment and an increase in authorized full‑time equivalents. “So in order to fix it there’s two things to do: you need to either increase your revenue and decrease your expenses,” King said.

King told attendees the preliminary FY 26–27 forecast projects revenues of about $115 million and expenditures near $125 million, leaving a multi‑million dollar gap. She said the city has already enacted a series of expense actions — multi‑year line‑item reviews, department budget reductions, hiring freezes, earlier year‑end spending holds and higher vacancy savings assumptions — but that those measures alone are unlikely to eliminate the shortfall.

To address the gap, staff outlined Measure D, a proposed permanent 3.75% local sales tax. King said the city estimates the tax would generate about $3 million in the first year and roughly $4.5 million annually thereafter, and that those proceeds would be used to sustain core services and reduce reliance on one‑time reserves. “If this does not pass … we’re going to have to look at services — how do we provide needed services within what we can afford,” the opening moderator said, adding that staff will continue evaluating organizational changes to match service levels to resources.

Public commenters at the town hall expressed skepticism about adding permanent local taxes and asked for greater transparency on staffing, program costs and capital needs. Resident Charlene Carter said she had “never heard of a large deficit until now,” and questioned new programs and hiring levels; others pressed staff for clearer full‑cost accounting of facilities such as the sports center.

City staff answered that some positions were added to support reimbursable contracts (for example, ambulance and contract cities) and that certain capital and grant‑funded projects are driven by outside funding. Staff also presented reserve‑drawdown scenarios showing that using reserves could temporarily cover gaps but would rapidly deplete the city’s economic‑uncertainty fund if no revenue change occurs.

Next steps: staff said Measure D will be placed on a future ballot (calendar and formal placement were explained during the meeting). The town hall materials, including budget slides and brochures on Measure D, are available on the city website; staff encouraged residents to ask follow‑up questions at posted contact points.