Council Chamber
580 Pacific St.
Monterey, California
and Teleconference Location:
Hilton Garden Inn, Room 105
6070 Monterey Road
Gilroy, California
CITY COUNCIL AGENDA
Council Special Meeting
Wednesday, April 29, 2026
4:00 PM
Mayor
Tyller Williamson
Councilmembers
Kim Barber, District 1
Ed Smith, District 2
Jean Rasch, District 3
Gino Garcia, District 4
City Manager
Dante G. Hall
City Attorney
M. Christine Davi
HOW TO PARTICIPATE IN THIS MEETING:
• In-Person: At the meeting location listed above.
• Remotely via ZoomGov webinar:
o On a computer or smartphone: https://monterey-org.zoomgov.com/j/1613733318 Zoom software must be up-to-date. For help, please use our Zoom Meeting Instructions. o By telephone dial 833-568-8864 (Toll Free), 669-254-5252 (CA) or 646-828-7666 (NY). If one number doesn’t work, please try another. Enter Webinar ID: 161 373 3318 # If asked for participant ID, press #. To raise your hand (or lower it), dial *9. Once called upon, dial *6 to unmute.
• This meeting will also stream live for viewing only on youtube.com/cityofmonterey (~10 second delay) and on Comcast Channel 25 (up to 90 second delay). • Written comment: Emailed comments to [email protected] sent no later than ½ hour before the start of the meeting (sooner preferred) are not read aloud but are made available to the Council and public at monterey.gov/submitted-comments.
PUBLIC COMMENT PROCEDURES AND TIME LIMITS:
The total amount of time allocated for public comment on a particular issue and for each individual speaker is generally as follows:
1. Up to three minutes per speaker.
2. The total time allocated for public comment:
a. 30 minutes per item – Public Appearance and Public Hearing items b. 15 minutes per item – All other items (including, but not limited to, Consent, Closed Session, Presentations, and Requests to Agendize)
At the time an item is considered, the Mayor will ask those attending the meeting in person to line up at the podium or raise their hands, and for remote participants to use *9 on the telephone or the “raise hand” function in Zoom, if they wish to address the City Council. The maximum amount of time for each person to speak and the total amount of time allotted for each item will be determined based on the number of people indicating an interest in speaking and the amount of business to be conducted on the agenda. In exceptional circumstances and when necessary to ensure a full opportunity for public input, the Mayor may, with the legislative body’s consent, adjust the amount of time allowed for public input and/or the time allotted for each speaker.
CAMPAIGN CONTRIBUTION DISCLOSURE: Pursuant to the Levine Act (Govt. Code §84308), any party to a permit, license, contract, or other entitlement before the Council is required to disclose on the record any contribution, including aggregated contributions, of more than $500 made by the party or the party's agents within the preceding 12 months to any City official. Participants and agents are requested to make this disclosure as well. The disclosure must include the name of the 4/29/2026 4:00:00 PM
2 party, participant, or agent, and any other person making the contribution; the name of the recipient, the amount of the contribution, and the date the contribution was made.
Teleconference Notice
Pursuant to California Government Code Section 54953(b)(3), this City Council meeting will include teleconference participation by Councilmember Smith from the remote location listed above, which shall be accessible to the public pursuant to California Government Code Section 54954.3.
AFTERNOON SESSION: 4:00 p.m. to 6:00 p.m.
Call to Order
Pledge of Allegiance
Afternoon Session Items
Public Appearance (Afternoon)
Public Appearance items are on non-routine issues that might stimulate public interest and comments.
1. Study Primer for Fiscal Year 2026-27 Annual Budget and Provide Direction Regarding Alternative Budget Options (Not a Project under CEQA Article 20, Section 15378 and under General Rule Article 5, Section 15061)
Adjournment
Writings distributed for discussion or consideration on these matters within 72 hours prior to the meeting, pursuant to Government Code § 54957.5, are available at: monterey.gov/submitted-comments and in the City Manager’s Office at 580 Pacific St., Room 1, Monterey, CA 93940 during regular business hours. All comments and materials provided to the Council become part of the public record. Members of the public who comment in any fashion on an agenda item may be subject to the Levine Act which requires disclosure of campaign contributions of more than $500 to an officer of the City within the preceding 12 months.
INTERPRETATION: The Monterey City Council invites and encourages public participation at its meetings.
Requests for language interpretation may be made by contacting the City Clerk at [email protected] or 831-646-3935. The City Clerk will make every effort to accommodate requests for interpreter assistance.
Requests should be made as soon as possible in advance of any meeting of the City Council. The City is committed to addressing language interpretation requests swiftly in order to maximize public participation.
ACCESSIBILITY: The City of Monterey is committed to including people with disabilities in all of its services, programs and activities. In compliance with the Americans with Disabilities Act, if you need special assistance to participate in this meeting, including to coordinate the use of a hearing device, please contact [email protected] or (831) 646-3935. Notification 30+ hours prior to the meeting will enable the City to make reasonable arrangements to ensure accessibility to this meeting [28 CFR 35.102-
35.104 ADA Title II]. Later requests will be accommodated to the extent feasible. For communication-related assistance, dial 711 to use the California Relay Service (CRS) to speak to City offices. CRS offers free text-tospeech, speech-to-speech, and Spanish-language services 24 hours a day, 7 days a week.
CITY OF MONTEREY 24-HOUR SUGGESTION HOTLINES: (831) 646-3799 or [email protected] Upcoming city meetings are listed at monterey.gov/agendas For more information, call (831) 646-3935 Council
Agenda Report
№12/25
FROM: Rafaela T. King, Finance Director
Prepared By: Kyle R. Olsen, Finance Analyst
SUBJECT: Study Primer for Fiscal Year 2026-27 Annual Budget and Provide Direction Regarding Alternative Budget Options (Not a Project under CEQA Article 20, Section 15378 and under General Rule Article 5, Section 15061) RECOMMENDATION:
That the City Council receive a report on the status of the fiscal year (FY) 2026-27 Annual Budget and provide
direction on proposed changes.
VALUE DRIVERS:
Serve as stewards of the City’s financial resources
through sound economic vitality efforts, streamlining
operations, reasonable revenue enhancements,
visionary long-term planning, fiscal transparency,
and community partnerships.
POLICY IMPLICATIONS:
This request is consistent with City Charter Section
6.3, Budget: “Based on the recommendation of the
City Manager, the City Council shall adopt a budget
estimating the revenues and expenditures for the
City for the period covered.” This is a first look at the overall projected financial position for FY 2026-27 for Council consideration and feedback.
CAMPAIGN DISCLOSURE REQUIREMENT (LEVINE
ACT) APPLIES: No
FISCAL IMPLICATIONS:
There is no cost to present this update. The purpose
of this update is for City staff to inform City Council on the current projection for the FY 2026-27 budget, and receive their input and additional direction.
The following tables present the projected revenues and expenses for select City funds:
Agenda Report Highlights
• The City of Monterey is facing a
significant structural deficit, with
projected General Fund
expenditures of $121.6 million
exceeding projected revenues of
$114.2 million for FY 2026-27.
• To address the shortfall, the budget
team proposes freezing 30 currently
vacant positions to save
approximately $4.6 million.
• The proposed budget includes
cutting community contributions for
special events
• Rising costs continue to strain the
budget, particularly a 25%
compounded salary increase since
2022, a 70% increase in utility costs
since 2022, and a 153% increase in
liability and property insurance
premiums.
• A major part of the balancing
strategy involves transferring up to
$3.5 million from the Neighborhood
Community Improvement Project
(NCIP) fund to the General Fund.
Date: 4/29/2026
Item No.: 1.
Council Special Meeting, 4/29/2026, Item No. 1., Item Page 1, Packet Page 3 №12/25
General Fund (does not include Transfers In/Out)
Projected
Revenues
Projected
Expenses
101 – General
Fund
$113,915,193 $121,437,801
105 – Facility
Maintenance Fund
$344,524 $200,000
Total General
Fund
$114,259,717 $121,637,801
Select Special Revenue Funds (does not include the City’s Capital Improvement Program (CIP) or Neighborhood Community Improvement Program (NCIP) project funds):
Projected
Revenues
Projected
Expenses
216 – NCIP Fund $6,200,099 $573,340
252 – Measure
P&S
$12,470,184 $1,375,000
650 - Presidio of
Monterey Fund
$27,688,817 $27,720,262
807 – Tidelands
Fund
$4,022,413 $3,171,348
Enterprise Funds (does not include the City’s Capital Improvement Program (CIP):
Projected
Revenues
Projected
Expenses
279 – Sewer Line
Maintenance Fund
$4,575,879 $3,949,131
600 – Marina Fund $4,079,699 $2,532,280
610 – Cemetery
Fund
$354,500 $710,382
625 – Parking
Fund
$13,456,769 $10,127,488
Internal Service Funds:
Projected
Revenues
Projected
Expenses
708 – Vehicle
Maintenance Fund
$2,932,644 $3,110,770
710 – Information
Services Fund
$7,161,599 $6,590,903
715 – Worker’s
Compensation
Insurance Trust
Fund
$4,142,516 $4,081,279
716 – Liability &
Property Insurance
$6,256,956 $5,623,997
Council Special Meeting, 4/29/2026, Item No. 1., Item Page 2, Packet Page 4 №12/25
Fund
718 – Employee
Benefit Fund
$11,821,710 $11,821,545
ENVIRONMENTAL DETERMINATION:
The City of Monterey determined that the proposed action is not a project as defined by the California Environmental Quality Act (CEQA)(CCR, Title 14, Chapter 3 (“CEQA Guidelines”), Article 20, Section 15378). In addition, CEQA Guidelines Section 15061 includes the general rule that CEQA applies only to activities which have the potential for causing a significant effect on the environment. Where it can be seen with certainty that there is no possibility that the activity in question may have a significant effect on the environment, the activity is not subject to CEQA. Because the proposed action and this matter have no potential to cause any effect on the environment, or because it falls within a category of activities excluded as projects pursuant to CEQA Guidelines section 15378, this matter is not a project. Because the matter does not cause a direct or any reasonably foreseeable indirect physical change on or in the environment, this matter is not a project. Any subsequent discretionary projects resulting from this action will be assessed for CEQA applicability.
ALTERNATIVES CONSIDERED:
The City Council could elect not to receive a budget primer; however, this is not recommended as the City has many critical decisions to make in order to balance the FY 2026-27 budget.
DISCUSSION:
FINANCIAL HISTORY & PROGRESS
Performance from FY 2024-25
At the February 17, 2026 City Council meeting during staff’s presentation regarding the FY 2025-26 mid-year budget adjustments, the City presented the year-end FY 2024-25 financial position.
FY 2024-25 General Fund Revenue Highlights
Overall, the City’s revenue exceeded budget estimates in FY 2024-25. The General Fund (including the Facility Maintenance Fund) finished at 104% of budget, equaling $4.3M above projections. While some areas of the City’s revenues came in at or slightly below projections, the City’s five key revenue sources0F
1 met or exceeded expectations. Of note:
• Fees & Charges totaled 108%, equaling $1.6M above projected revenue. • Sales Tax totaled 102%, equaling $359K above projected revenue. • Property Taxes totaled 102%, equaling $319K above projected revenue. • Transient Occupancy Tax totaled 101%, equaling $336K above projected revenue. 1 Approximately 81% of the City’s General Fund Revenue comes from five key areas: 1) Transient Occupancy Tax; 2) Property Tax; 3) Utility users Tax; 4) Sales Tax; and 5) Fees & Charges Council Special Meeting, 4/29/2026, Item No. 1., Item Page 3, Packet Page 5 №12/25
Additionally, the City’s investment portfolio produced very strong returns. In FY 2024-25, the City earned a total of $2.7M, exceeding projected investment income by $1.2M (180%), in the General Fund.
FY 2024-25 General Fund Expenditure Highlights
Overall, the City spent 91.2% of the City’s amended budget, equaling $10.1M under the amended budget. Of note:
• Salaries and Benefits totaled 94%, equaling $4.9M under projected expenditures. • Services and Supplies totaled 83%, equaling $3.2M under projected expenditures. o Note: this is a higher rate of savings than previous years as a result of a CityWide spending freeze implemented in the Spring of 2025. In the previous fiscal year (FY 2023-24) spending in this category was approximately 89%. • Internal Service Charges totaled 95%, equaling $544K under projected expenditures (this is largely due to savings from Vehicle Rental charges throughout the City as the City’s use of vehicles was less than anticipated).
The year-end status of the General Fund (revenues exceeding expectations, expenses less than projected) is a net positive for the City. However, the FY 2024-25 budget savings were anticipated by City Staff and integrated into the City’s FY 2025-26 financial plans. The positive end to FY 2024-25 does not change the City’s overall structural deficit.
FY 2025-26 Adopted Budget & Year-to-Date Performance for FY 2025-26 FY 2025-26 $10M Structural Deficit
As discussed with City Council through the fall of 2025 and early 2026, the City has been facing a significant structural deficit. In FY 2025-26, the City’s adopted budget included $120M in expenditures and $109.8M in revenues, resulting in a $10M deficit, which was overcome through several different strategies including:
• A 7% reduction from the initial department budget request in Services and Supplies accounts.
• A reduction in the City’s contributions to the City’s reserve accounts, except for the Economic Uncertainty Reserve.
• Freezing (un-funding) hard to fill positions or positions which are not critical to City operations.
• Shifting expenses from the General Fund to the City’s Special Revenue Funds and/or Enterprise funds where allowable and proper.
• Reviewing Special Revenue Funds and Enterprise Funds transfers in and out to ensure the General Fund is not overburdened.
• Suspending contributions to CIP from the General Fund (except for contributions to CIP projects from the Facility Maintenance Fund and Sports Center Reserve) On February 17, 2026, City Council amended the City’s operating budget to increase revenues and expenditures to $112.4M and $124.7M respectively, resulting in a $12M deficit. The strategies above and estimated savings continue to keep the budget in balance.
Council Special Meeting, 4/29/2026, Item No. 1., Item Page 4, Packet Page 6 №12/25
Year-to-Date Performance
To date, ending March 31, 2026, the City has expended 70% of the City’s General Fund budget.
Overall, this is on target for the City and City Staff are projecting modest savings at the end of the fiscal year (see Estimated Year End section below). By category, the City has expended the following amounts:
Account Classification
FY 2025-26
Amended Budget
FY 2025-26 YTD (as
of March 31, 2026)
Expenditures &
Encumbrances
Percent
Spent
SALARIES/BENEFITS $87,991,234 $61,081,532
69.4%
SERVICES/SUPPLIES $21,469,801 $14,878,766
69.3%
SERVICES/SUPPLIES INCL
INTERNAL SVC CHGS $538,650 $368,915
68.5%
EQUIPMENT OUTLAY $905,215 $1,144,170
126.4%
INTERNAL SERVICE
CHARGES $13,877,110 $9,791,915
70.6%
SERVICES/SUPPLIES HPM
DIVISION $199,132 $189,175
95.0%
TOTAL $124,981,142 $87,454,473
70.0%
With regards to revenue, year-to-date as of March 31, 2026, the City has collected 68.8% of projected revenue. This is on target for this point in the year as there are many end-of-year payments the City receives. For example, approximately 40% of the Property Taxes are received from the County in late April or early May. By category, the City has collected the following:
Account Classification
FY 2025-26
Amended Budget
FY 2025-26
YTD (as of
March 31,
2026) Revenue
Collected
Percent
Collected
PROPERTY TAXES $17,074,474 $9,204,867 53.9%
SALES TAX $16,113,000 $9,473,509 58.8%
TRANSIENT OCCUPANCY
TAXES $29,687,000 $21,270,590 71.6%
BUSINESS LICENSE $5,300,000 $4,911,395 92.7%
UTILITY USERS TAXES $5,247,080 $3,454,943 65.8%
FRANCHISE FEES $2,765,500 $1,760,966 63.7%
OTHER TAXES $528,214 $333,568 63.2%
LICENSES & PERMITS $2,328,650 $2,013,708 86.5%
FINES & FORFEITURES $259,000 $204,560 79.0%
INTERGOVERNMENTAL $3,341,188 $1,679,202 50.3%
Council Special Meeting, 4/29/2026, Item No. 1., Item Page 5, Packet Page 7 №12/25
INTEREST $2,442,144 $2,121,698 86.9%
RENTS $2,690,166 $1,714,896 63.7%
FEES & CHARGES $24,406,621 $19,147,973 78.5%
OTHER REVENUES $554,101 $243,621 44.0%
TOTAL $112,737,138 $77,535,496 68.8%
Estimated Year End
Looking to FY 2025-26 fiscal year end, the City is projecting savings in the General Fund as well as a modest increase in revenue above budget projections. Overall, this is a net positive for the City; however, as noted previously in this report, savings were included as part of the City’s plan to balance the FY 2025-26 budget and maintaining these savings is essential to keeping the City financially viable. Details below:
• Estimated Salary Savings: $8M
• Estimated Services & Supplies Savings: $1.2M
• Estimated Revenue Overage: $1M
• Total Savings/Overage: $10.2M
A $10.2M total in savings and revenue is positive for the City; however, the FY 2025-26 Amended Budget has an operating deficit of $12.1M, meaning that the City will be required to utilize the Unassigned Fund Balance to make up the year-end deficit.
FY 2026-27 PROJECTED BUDGET
FY 2026-27 Budget Process
In early 2026, the Finance Department developed guidance for City departments for the FY 2026-27 Budget. As with previous fiscal years, departments were encouraged to conduct a complete review of their needs and request only what is truly necessary for City operations.
Additionally, departments were given the following direction:
• All departments were asked to reduce their operating budget by 10%. • A moratorium on new positions was put in place for FY 2026-27. Departments were given an opportunity to submit position changes and requests so long as the change had a net-zero impact on the budget.
• Departments were encouraged to limit requests for new IT products and services.
Throughout February, departments submitted their revenue and budget projections and throughout the month of March, the budget team met with each department to review their budget request, discuss areas of potential savings, and met as a budget team to develop a path forward which would maintain critical operations and set the City on a path towards a sustainable balanced budget.
FY 2026-27 Structural Deficit & Deficit Reduction Strategies As departments were developing their FY 2026-27 budget, the City’s budget team began the overarching process of estimating revenue and expenditures to set a starting point for the Council Special Meeting, 4/29/2026, Item No. 1., Item Page 6, Packet Page 8 №12/25
decision to come. Without course correction, the budget team estimated a deficit of $13M with expenditures potentially as high as $127M, with revenues only projected to be $114M. In order to address the structural issues with the budget, the budget team implemented a series of strategies to bring down expenditures. Along with the criteria for departments’ budget requests, the budget team:
• Reviewed vacant positions to be frozen as a cost savings measure. Occupied positions were not considered for freezing to avoid layoffs. Over the next year, City Staff will be engaged in a full review of staffing and operational needs to reorganize at an appropriate staffing level.
• Reviewed all contributions to community organizations or City sponsored events. • Reviewed the City’s Vehicle Replacement List to determine if there was a possibility to delay the purchase of new vehicles as cost savings measure.
Through a combination of these strategies and departments’ efforts to reduce their operating budget, the City has been able to make significant progress in reducing expenditures.
FY 2026-27 Expenditures
Historic View of General Fund Expenses (by Category)
FY 2026-27 General Fund Expenses
By utilizing the strategies listed above, the City is projecting $121,637,80 in expenditures. This is a 2.6% reduction from the FY 2025-26 Amended Budget, and 0.7% above the FY 2025-26 Adopted Budget. In total, City Staff and the budget team identified approximately $6M in expenses to be removed from the budget. This was accomplished through a number of strategies, including freezing positions, reducing community contributions, and reducing departments’ services and supplies requests.
$0
$20
$40
$60
$80
$100
$120
FY 2021-22
Adopted Budget
FY 2022-23
Adopted Budget
FY 2023-24
Adopted Budget
FY 2024-25
Adopted Budget
FY 2025-26
Adopted Budget
FY 2026-27
Projected Budget
SALARIES/BENEFITS SERVICES/SUPPLIES
EQUIPMENT OUTLAY INTERNAL SERVICE CHARGES
SERVICES/SUPPLIES HPM DIVISION
General Fund Expenses By Category (in millions)
Council Special Meeting, 4/29/2026, Item No. 1., Item Page 7, Packet Page 9 №12/25
Frozen Positions
As part of the City’s budget reduction strategy, staff implemented a standardized evaluation process to determine whether vacant positions should be frozen or refilled. Each Department evaluated all vacancies and provided an assessment of operational needs, legal obligations, potential risks, and actual fiscal impacts. This process ensured that recommendations presented to the City Council were informed, transparent, and aligned with both service expectations and fiscal constraints.
The process began with the Mandate Gate. Staff reviewed each vacant position to determine whether it supported statutory, regulatory, or compliance requirements. This included analysis of obligations such as state and federal reporting, minimum public safety staffing, financial controls, ADA and accessibility requirements, grant eligibility, and departmental mandates including POST, NFIRS, CEQA, NPDES, and building code compliance1. This step ensured that positions tied to mandated work were clearly identified before any reductions were considered.
Staff then completed the Baseline and Metrics Snapshot. This portion of the template required departments to document each position’s core responsibilities, quarterly or monthly work volumes, cycle times, backlog levels, and peak workload periods. By capturing these workload metrics, staff established whether service levels, statutory timelines, and community expectations could be met without filling the position. This analysis provided a factual foundation for determining which vacancies were operationally essential.
The next step was the Risk and Control Assessment. Staff identified potential consequences if a position remained vacant and assessed the likelihood and severity of those consequences. Staff also evaluated existing or potential safeguards to mitigate those risks, including preventive, detective, and corrective controls. This step ensured that any risks associated with vacancy decisions were thoroughly evaluated and that the City did not inadvertently create compliance gaps, service delays, or financial vulnerabilities.
The final component of the evaluation was the Hidden Costs and Substitution Analysis. Staff identified the true fiscal impact of leaving a position unfilled by examining potential overtime costs, contracting or temporary staffing needs, workload redistribution, training demands, and productivity impacts. This analysis ensured that the City had an accurate understanding of the net financial effect of not refilling a position, rather than relying solely on salary savings.
Through this evaluation, staff developed a disciplined and transparent approach to reviewing vacant positions in the context of budget reduction strategies. The completed analysis allowed staff to present informed recommendations that balanced legal requirements, service delivery expectations, operational risks, and long‑term fiscal responsibility. This process supported thoughtful decision‑making and helped ensure that staffing reductions did not compromise essential public services or the City’s regulatory obligations.
In total, the budget team identified a total of 30 positions (29.5 FTE) to be frozen. By freezing these 30 positions, City Staff project approximately $4.6M in total savings, of which 26 are funded through the General Fund (approximately $3.7M in savings). It is important to note; all identified positions are currently vacant. The positions proposed to be frozen are listed below (in alphabetical order):
• Accounting Assistant • Administrative Assistant (x2)
Council Special Meeting, 4/29/2026, Item No. 1., Item Page 8, Packet Page 10 №12/25
• Assistant Fire Chief
• Assistant Planner
• Associate Civil Engineer
• Automotive Mechanic
• City Traffic Engineer
• Custodian
• Deputy Fire Marshal
• Economic Development Manager
• Engineering Programs Analyst
• Engineering Projects Manager
• Engineering Technician
• Environmental Regulations Manager
• Firefighter (x3)
• Harbor Security Worker
• Homeless Navigator
• Management Analyst
• Park Maintenance Worker (x2)
• Police Officer (x2)
• Police Services Assistant
• Police Services Technician
• Recreation Specialist
• Senior Project Manager
• Street Maintenance Worker
Community Contributions
The Budget Team also reviewed City-sponsored events and other community contributions to reduce the City’s deficit. For the FY 2026-27 proposed budget, the Budget suggests the following funding levels:
• Rental Assistance: $125K ($125K decrease from FY 2025-26 Adopted Budget) • City-wide 2027 4th of July Event: $80K ($0 decrease from FY 2025-26 Adopted Budget) • First Night Monterey: $0 ($35K decrease from FY 2025-26 Adopted Budget) Per Council direction provided in early 2026, City Staff are not recommending funding of the Special Event Support Program (SESP). This was funded at $50K in the FY 2025-26 Adopted Budget.
Rising Costs
Despite efforts to bring down and control expenses, the City is forced to confront rising costs in many areas of the City’s budget. A detailed discussion on select items below:
Salaries & Benefits
• Full-Time (FT) and Regular Part-Time (RPT) Salaries: In FY 2024-25 the City entered into three-year agreements with each of the City’s labor groups, establishing a 4% salary increase for each fiscal year included in the agreements. These agreements followed two years of 4% salary increases in FY 2022 and FY 2023. Compounded, this equals a 25% salary increase for Full-Time and Regular Part-Time (RPT) positions throughout the City.
o Note: Since January 2021 inflation in the area is approximately 26%1F 2 - while a
25% salary increase impacts the bottom line for the City, it has barely kept up with inflation.
• Unfunded Actuarial Accrued Liability (UAAL): The FY 2026-27 Budget projects a total of $18.8M in UAAL costs, a $1.2M increase above the FY 2025-26 Adopted Budget across the City. Of this amount, approximately $14.7M is within the General Fund, a $1.1M 2 Per the U.S. Bureau of Labor and Statistics
Council Special Meeting, 4/29/2026, Item No. 1., Item Page 9, Packet Page 11 №12/25
(8%) increase above the FY 2025-26 Budget. Since 2022 UAAL has increased approximately $4.7M (48%) in the General Fund.
• Other Post Employment Benefits (OPEB): The FY 2026-27 Budget projects a total of $1.8M in OPEB, a $126K increase above the FY 2025-26 Adopted Budget across the City. Of this amount, approximately $1.5M is within the General Fund, a $100K increase (7%) increase above the FY 2025-26 Adopted Budget. Since 2022 OPEB has increased $590K (62%) in the General Fund.
• Overtime: The FY 2026-27 Budget projects a total of $5.4M in Overtime costs, a $130K increase above the FY 2025-26 Adopted Budget across the City. Of this amount, approximately $5.1M is within the General Fund, a $130K increase above the FY 2025- 26 Adopted Budget. Since 2022 Overtime costs have increased $2.9M (79%) in the General Fund.
Liability and Worker’s Compensation Insurance
• Liability & Property Insurance: The FY 2026-27 Budget projects a total $6.2M across the City in Risk Management Charges to pay for the City’s Liability and Property Insurance premiums. Of this amount, approximately $5.1M is within the General Fund, an $800K (18%) increase above the FY 2025-26 Adopted Budget. Since 2022 the City’s insurance premiums have increased $3.1M (153%) and $3.5M (235%) since FY 2020 in the General Fund.
o Note: as presented in previous fiscal year’s, the Liability and Property Insurance fund has a negative fund balance. Included in the $6.2M is a modest “overpayment” from City Funds to the Liability and Property Insurance fund to address this deficit over time.
• Worker’s Compensation Insurance: The FY 2026-27 Budget projects a total of $4.1M across the City in Worker’s Compensation charges to pay for the City’s Worker’s Compensation insurance premiums. Of this amount, approximately $3.3M is within the General Fund, a $300K (10%) increase above the FY 2025-26 Adopted Budget. Since 2022 the City’s Worker’s Compensation insurance premiums have increased $700K (27%) in the General Fund.
Utility & Fuel Increases
• Utilities: The FY 2026-27 Budget projects a total of $4.1M in Utility costs, a $140K increase above the FY 2025-26 Adopted Budget. Of this amount, approximately $3.1M is within the General Fund, a $75K (2%) increase above the FY 2025-26 Adopted Budget. While the City is projecting only a modest increase above FY 2025-26, it is partly due to the City’s efforts over the past several years to balance utility costs.
However, since 2022, Utility costs have increased $1.2M (70%) in the General Fund. • Fuel: Overall, the City is projecting fuel needs at approximately the same level as FY 2025-26; however, due to shocks to the global market, the City will be required to keep careful watch on oil prices to ensure sufficient funding to maintain day-to-day operations.
Council Special Meeting, 4/29/2026, Item No. 1., Item Page 10, Packet Page 12 №12/25
FY 2026-27 Revenue
The City continues to have consistent revenues, even if modest in terms of growth. For FY 2026-27, the City is projecting $114.2M in General Fund revenue, a 3.6% increase above the FY 2025-26 Adopted Budget and 1.4% above the FY 2025-26 Amended Budget.
Other FY 2026-27 Expenditures
Transfers In/Out
Below is the projected Transfer In/Out Schedule as it relates to the General Fund. In total, the City is projecting $1.4M in Transfers In and $615K in Transfers Out for a net positive transfer of $789K.
Note: This projection is subject to change in case the City determines to utilize any reserve funds to support CIP and/or utilize NCIP funds to support the General Fund (details below).
Additionally, City staff may need to adjust the Transfer Schedule pending the outcome of the upcoming Storm Water Utility fee ballot.
Debt Service
The City has two different categories of debt service in the City’s Operating Budget: Interfund Loans (also known as Advances) and External Loans (payments to external entities). Tables presenting the City’s FY 2026-27 debt schedule for both types of loans are below:
FY 2026-27 INTER-FUND LOAN SUMMARY (Advance To/From Funds) Loan
PAY-OFF
DATE
INITIAL
LOAN
AMOUNT
FY 2026-27
PAYMENT
(PRINCIPAL
AND
INTEREST)
YEAR END
BALANCE
Fire Truck Debt Service 7/1/2027 $356,500 $17,825 $1,485 Fire Truck Loan #1 12/31/2030 $705,000 $141,000 $423,000 Fire Truck Loan #2 12/31/2032 $1,719,371 $245,624 $1,228,122 Fire Truck Loan #3 12/31/2031 $980,438 $163,406 $653,625 Settlement Funding 12/1/2028 $2,000,000 $215,000 $400,000 Cemetery Columbarium 6/30/2027 $879,383 $59,383 $0
INTERFUND LOAN
TOTAL
$6,640,692 $842,239 $2,706,233
FY 2026-27 EXTERNAL LOAN SUMMARY (Principal & Interest) Loan
PAY-OFF
DATE
INITIAL
LOAN
AMOUNT
FY 2026-27
PAYMENT
(PRINCIPAL
AND
INTEREST)
YEAR END
BALANCE
2013 Financing
Agreement
5/1/2032 $7,170,000 $540,682 $2,430,000
Council Special Meeting, 4/29/2026, Item No. 1., Item Page 11, Packet Page 13 №12/25
2017 PG&E Financing
Loan
12/1/2027 $97,035 $9,704 $4,851
Fire Truck Loan #1 12/1/2029 $705,000 $79,093 $230,000
Fire Truck Loan #2 12/20/2029 $1,719,371 $305,710 $723,411 Fire Truck Loan #3 12/30/2029 $980,438 $222,949 $420,478 Conference Center Bond 12/1/2034 $50,000,000 $4,059,482 $19,789,562 Sewer Loan #110 8/30/2035 $3,352,782 $215,796 $1,753,000 Sewer Loan #120 3/12/2038 $10,872,248 $670,583 $6,525,721
EXTERNAL LOAN
TOTAL
$74,896,874 $6,103,999 $31,877,023
Reserve & Capital Improvement Project (CIP) Contributions Due to the financial constraints in the General Fund, City Staff recommend not contributing to the City’s reserves. Through fiscal discipline, the City will be able to maintain a balance equal to 20% of the General Fund’s expenditures in the Economic Uncertainty Reserve account.
Reduced and/or eliminated proposed recommendations means a dollar-for-dollar reduction to the Unassigned Fund Balance and Economic Uncertainty Reserve account.
Additionally, the Budget Team recommends no contributions to CIP from the City’s Unassigned Fund Balance. A full CIP proposal will be presented to City Council later in 2026.
The Path Ahead
The above proposal presents the path forward that positions the City for the years ahead. With a General Fund topline of approximately $121.6M the City is positioned to balance the budget through salary and operational savings, new revenue for the City, and a transfer from the Neighborhood Community Improvement Project (NCIP) fund. However, in the event that new revenue is not approved by voters, the topline of $121.6M is manageable while the City further reviews operations and identifies a long-term strategy to balance the City’s budget.
NCIP Transfer to the General Fund
As mentioned above, part of the overarching strategy for the FY 2026-27 budget is utilize up to $3.5M of FY 2026-27 revenue to transfer funds from the NCIP fund to the General Fund. These funds will provide much needed relief to the General Fund and bring down the operating deficit for the upcoming year while City leadership develops a long-term plan/strategy.
Budget Alternatives
The above proposal represents the City’s proposal to bring down expenditures and best position the City to set-up a long term strategy to bring down costs, eliminate the structural deficit and balance the budget for the long term. In the event that the above proposal is not preferred by Council, other options are outlined below – Council may direct staff to implement one of the below options, or portions of each option. Discussion on potential options below:
Council Special Meeting, 4/29/2026, Item No. 1., Item Page 12, Packet Page 14 №12/25
Alternative Budget Options
Any deviation from the above proposal would require the discussion of changes such as:
• Executing a dollar-for-dollar draw down from Economic Uncertainty Fund reserve and/or Unassigned Fund Balance (as available) for each reduction and/or changes. • Additional transfer from the NCIP fund FY26-27 projected revenues. • Further reductions to Community Contributions, Salaries and Operating and Maintenance accounts
• Furloughs, layoffs, or other concessions
Long-Term Financial Strategy
In the long-term, the City will engage in internal discussions around the organization and structure of the City and its Departments with the goal of capitalizing on savings and efficiencies gained throughout this process. This will take place throughout the remainder of 2026 and into 2027 and set the City up for long-term success.
RTK/kro
Writings distributed for discussion or consideration on this matter within 24 hours prior to the meeting, pursuant to Government Code § 54957.5, will be made available at the following link:
https://monterey.gov/Submitted-Comments
Council Special Meeting, 4/29/2026, Item No. 1., Item Page 13, Packet Page 15