Agenda packet — Monterey City Council, July 21, 2026 (part 2 of 2)

February 3, 2026
This letter constitutes an offer to compromise the ongoing dispute and constitutes a settlement communication protected under California Evidence Code section 1152.

Sincerely,

NOLAND, HAMERLY, ETIENNE & HOSS
A Professional Corporation
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ATTACHMENT 1
Council Regular Meeting, 7/21/2026, Item No. 16., Item Page 3, Packet Page 253 ATTACHMENT 2
Council Regular Meeting, 7/21/2026, Item No. 16., Item Page 4, Packet Page 254 ATTACHMENT 2
Council Regular Meeting, 7/21/2026, Item No. 16., Item Page 5, Packet Page 255 Council
Agenda Report
№11/25
FROM: Rafaela King, Finance Director
SUBJECT: Call an Election to Ask the Voters of the City of Monterey to Approve the Continuation of the Existing Special Transaction and Use Tax of One Cent per Dollar for Eight More Years, with the Use of the Tax Revenue to be Used Exclusively for Street Infrastructure Rehabilitation and Requesting that the County of Monterey Board of Supervisors Consolidate the Election with the Established Election to be held on November 3, 2026 and Conduct the Election on the City’s Behalf ( Not a Project under CEQA Article 20, Section 15378 and under General Rule Article 5, Section 15061)
RECOMMENDATION:

That the City Council place a revenue measure
continuing Measure S on the November 2026 ballot
by:

Approving an ordinance amending the Monterey City
Code to continue the street infrastructure rehabilitation transactions and use tax for eight years subject to twothirds voter approval.

Adopting a resolution calling an election to ask the
voters of the City of Monterey to approve the
continuation of the existing special transactions and
use tax of one cent per dollar for eight more years,
with the use of the tax revenue to be used exclusively
for street infrastructure rehabilitation.

Other than extending the sunset date by eight years,
no other changes to the current ordinance are
recommended.

VALUE DRIVERS:

In collaboration with our community partners, work to
improve the quality of life of all of our community
members by fostering diversity, equity, and inclusion;
championing equitable access to affordable housing;
and maintaining a safe environment.

POLICY IMPLICATIONS:

This recommendation honors the City Council’s civic engagement and economic vitality Agenda Report Highlights
• The City Council is recommended to
place a measure on the November
2026 ballot to extend the existing
one cent per dollar sales tax for
eight additional years.
• This extension would generate
approximately $12 million annually
dedicated exclusively to the repair
of streets, sidewalks, and storm
drains.
• Without voter approval the current
funding will expire on March 31,
2027 and local street conditions will
steadily decline.
• The measure requires two-thirds
voter approval and ensures fiscal
accountability through independent
audits and a citizens oversight
committee.

Date: 7/21/2026
Item No.: 18.

Council Regular Meeting, 7/21/2026, Item No. 18., Item Page 1, Packet Page 256 №11/24
drivers. It is consistent with the Council’s long-term policy to ensure that City operations are conducted as efficiently and effectively as possible and remain focused on community needs.

It also reflects adopted value drivers of meeting the City’s infrastructure requirements and quality of life goal of ensuring that Monterey remains a safe and welcoming place to live, work and visit.

CAMPAIGN DISCLOSURE REQUIREMENT (LEVINE ACT) APPLIES: No.

FISCAL IMPLICATIONS:

Continuing a one-cent per dollar sales tax measure for eight years by two-thirds voter approval in November 2026 would enable the City to continue generating approximately $12 million in revenue annually dedicated solely to investing in streets, sidewalks and storm drains. If this revenue source is not continued, this dedicated funding will end on March 31, 2027, and street conditions will again decline unless other sources are found to backfill this loss. Given the significant financial challenges facing the City, obtaining alternate funding sources is unlikely.

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 street infrastructure rehabilitation projects that may be funded using sales tax revenue received from the referenced special transactions and use tax resulting from this action will be assessed for CEQA applicability.

Lastly, CEQA Guidelines Section 15378 (b) (4) specifically states that the creation of government funding mechanisms or other government fiscal activities which do not involve any commitment to any specific project as ‘not a project.’
ALTERNATIVES CONSIDERED:

Do Not Continue Measure S. The Council could decide not to place a revenue measure on the November 2026 for voters to consider continuing Measure S. This would result in discontinuing this dedicated revenue source for street, sidewalk and storm drain infrastructure on March 31, 2027. This means that street conditions will again decline unless other sources are found to backfill this loss. Given the significant financial challenges facing the City, finding other sources to backfill this loss is not possible. Street Maintenance and repairs to maintain a Pavement Condition Index (PCI) of 75 is estimated at $5M to $6M per year. The only dedicated funds available are Gast Tax and SB 1, which amount to less than $2M per year.

Council Regular Meeting, 7/21/2026, Item No. 18., Item Page 2, Packet Page 257 №11/24
Other Sunset Terms. The Council could consider other sunset terms, ranging from no sunset at all to a more limited term. The longer terms are intended to provide stable funding that will improve City streets to “good or very good” condition.

Broader Scope of Projects. The Council could consider broadening the scope of projects beyond those currently included under Measure S, which are focused on streets, sidewalks and storm drains. This alternative is not recommended as there is strong support for continuation of the same scope of the Measure S language. If the definition is broadened, there may be a loss of support for this continuation.

Increase the Rate to 1.0375%. The fact that the measure will not increase taxes was a compelling argument in favor of the measure in the public opinion research. Additionally, with an eight-year term, the current 1% rate will be adequate in meeting the goal of putting the City’s streets in good or very good condition.

DISCUSSION:

Background
To address Monterey’s essential infrastructure needs including the repair of deteriorating streets, sidewalks, and storm drains, the City of Monterey deemed it necessary and essential to submit the question of a special one cent per dollar transactions and use (“sales”) tax for essential infrastructure needs to qualified voters within the city at an election held on November 4, 2014.

At the November 4, 2014, election, the voters of the City of Monterey overwhelmingly approved the Street Infrastructure Rehabilitation Transactions and Use Tax (Measure P), with 74.34% of Monterey residents voting in favor of the measure. At the November 2018 election, the voters of the City of Monterey overwhelmingly approved an extension of the Street Infrastructure Rehabilitation Transaction and Use Tax (Measure S), with 82% of Monterey residents voting in favor extending the tax through March 31, 2027.

With funding from the Street Infrastructure Rehabilitation tax, the City has: repaired 1,012 street segments (blocks), and an additional 90 street segments are currently under construction or out to bid; made $7,419,410.68 in sidewalk repairs; and made $5,869,554.75 in repairs and upgrades to storm drain pipes natural channels, gutters, swales, inlets, manholes, and pump stations, as of June 2026.

This funding for critical repairs to streets, sidewalks, and storm drains will expire on March 31, 2027, if the voters of the City of Monterey do not approve a continuation of the tax. Without the continuation of the one cent per dollar revenue measure, the City of Monterey will not be able to adequately maintain basic infrastructure necessary for street and sidewalk repairs that contribute to a safe community. Without the continuation of the revenue measure, the City of Monterey will face inadequate funding for essential infrastructure needs to repair deteriorating streets, sidewalks, and storm drains.

The cost to maintain the street network into a state of good repair is estimated between $5 and $6 million dollars annually. This investment should maintain the pavement condition index (PCI), an industry standard method of evaluating pavement condition, to a rating of 75 and above. The investment of Measure P brought the PCI to 67 and the investment of Measure S brought the PCI to 79 (as of the time of this report). If this measure does not pass, the progress Council Regular Meeting, 7/21/2026, Item No. 18., Item Page 3, Packet Page 258 №11/24
that was made will be lost and the city will see the PCI begin to fall as street conditions deteriorate.

If the revenue measure is continued, the City will be able to address remaining street repair deferred maintenance and would allow important pedestrian safety improvements to signalized intersections. Sidewalks would continue to be repaired pursuant to City ordinances and policies for such repairs, and additional storm drain repair work could be performed.

All funds collected by this tax will continue to be deposited into a special fund and expended only to repair and rehabilitate the City’s streets, sidewalks, and storm drains. All funds from this local revenue measure are required to stay in the City of Monterey and cannot be taken by the State. Fiscal accountability will be ensured by requiring independent citizens’ oversight, an annual independent financial/performance audit, and yearly reports to the community. The continuation of this measure is expected to generate $12 million in revenue.

Proposed Ordinance
It is recommended that the City Council continue Measure S for eight years by placing a revenue measure doing so on the November 2026 ballot. No other changes are recommended other than extending the sunset by another eight years. Accordingly, the proposed ordinance provides a very simple amendment to Article 7 of Chapter 35, Section 86 of the Municipal Code as follows:
“Termination Date. The authority to levy the tax imposed by this ordinance shall expire on March 31, 2035, unless extended by the voters of the City.”
This means that other than extending the sunset, all other provisions remain the same, including the scope, which is focused solely on street infrastructure rehabilitation; the tax rate at one-cent per dollar; independent audits; and continuation of the Measure P Oversight Committee. The full Municipal Code section regarding Measure S is available on the City’s web site at:
http://www.codepublishing.com/CA/Monterey (Select Chapter 35, Article 7 from the menu) Next Steps
The City has broad discretion in using its resources for research, community outreach and public education when considering a possible revenue measure. However, no City resources can be used in advocating for its passage once it is placed on the ballot. This means that gaining the needed two-thirds voter approval will largely depend on the efforts of a committed, community-based group advocating for its passage.

RK
Attachments: 1. Resolution with Exhibit A
Writings distributed for discussion or consideration on this matter within 72 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 Regular Meeting, 7/21/2026, Item No. 18., Item Page 4, Packet Page 259 RESOLUTION NO. __-___ C.S.

A RESOLUTION OF THE COUNCIL OF THE CITY OF MONTEREY
№011/24

CALLING AN ELECTION FOR THE CONTINUATION OF THE EXISTING

SPECIAL TRANSACTIONS AND USE TAX
WHEREAS, the City Council wishes to submit the transactions and use tax ordinance attached hereto as Exhibit A (the “Ordinance”) to the City’s voters for their approval; WHEREAS, the Ordinance imposes an extension of the existing special tax, the revenues from which shall be deposited into a special fund and expended only to repair and rehabilitate the City’s streets, sidewalks, and sewers. All funds from this local revenue measure are required to stay in the City of Monterey and cannot be taken by the State. Fiscal accountability will be ensured by requiring independent citizens’ oversight, an annual independent financial/performance audit, and yearly reports to the community; WHEREAS, under Article II of the Monterey City Charter, the election contemplated by this Resolution is governed by the general laws of the State of California; WHEREAS, the City Council wishes to receive the services of the Monterey County Elections Department to conduct the election on the Ordinance; and WHEREAS, because the Ordinance concerns a transactions and use tax, this Resolution must be approved by two-thirds of the City Council (Rev. & Tax. Code § 7285.9).

NOW, THEREFORE, BE IT RESOLVED BY THE COUNCIL OF THE CITY OF MONTEREY as follows:

SECTION 1. RECITALS. The foregoing recitals are true and correct and are hereby adopted by the City Council.

SECTION 2. CALL OF GENERAL MUNICIPAL ELECTION. By prior action, this Council adopted Resolution 26-076 to call a general municipal election in the City to be held on November 3, 2026 (the “Election”). Pursuant to the Monterey City Charter and the laws of the State of California, the City Council of the City of Monterey hereby calls and notices the following measure to be considered at the municipal election to be held on November 3, 2026.

CONTINUATION OF STREET INFRASTRUCTURE
REHABILITATION TAX. Without increasing tax rates, shall the City of Monterey measure to fix streets, potholes, and sidewalks, repair storm drains to keep beaches/Monterey Bay clean, improve street safety and access for senior citizens, disabled residents, and others by renewing the existing one-cent per dollar sales tax for 8 years, providing $12 million annually, requiring public disclosure of funds/independent audits, and all funds spent locally, be adopted?
Yes ___
No ___
Council Regular Meeting, 7/21/2026, Item No. 18., Item Page 5, Packet Page 260 The Ordinance imposing this measure is attached hereto as Exhibit A and is incorporated into this Resolution by this reference. The Ordinance requires the approval of twothirds of qualified electors of the City voting in the election on the issue and its proceeds may only be used for the specific purposes stated therein.

SECTION 3. REQUEST TO CONDUCT ELECTION AND CANVAS RETURNS.

The City Council hereby asks the County of Monterey Board of Supervisors to authorize the County of Monterey Elections Department to render services necessary for the conduct of the General Municipal Election. Pursuant to Elections Code section 10402, the City Council hereby requests that the County of Monterey Board of Supervisors consolidate the General Municipal Election with any other election the Elections Department is to administer on November 3, 2026, and order the Municipal Election to be conducted by the County of Monterey Elections Department. The City Council acknowledges and requests that the consolidated election be held and conducted in the manner prescribed in Elections Code section 10418. The ballots to be used in the election shall be in form and content as required by law.

The City Clerk is authorized and directed to work with the County of Monterey Elections Department and to procure and furnish all official ballots, notices, printed matter and all supplies, equipment and paraphernalia as needed to properly and lawfully conduct the election.

In all particulars not recited in this Resolution, the election shall be held and conducted as provided by law for holding municipal elections. Pursuant to Elections Code section 10002, the City will reimburse the County of Monterey County for the actual cost incurred in conducting the election upon receipt of a bill stating the amount due.

The notice of the time and place of holding the election is hereby given, and the City Clerk and the County of Monterey Elections Department are authorized to give further notice of the election, as required by law, and the City Clerk shall forward a certified copy of this resolution to the Clerk of the County of Monterey Board of Supervisors not later than 88 days before November 3, 2026.

SECTION 4. IMPLEMENTATION. The City Clerk is directed to file certified copies of this Resolution with the County of Monterey Board of Supervisors, with a copy to the County of Monterey Elections Department, pursuant to Elections Code section 10402. The City Clerk is further authorized and directed to perform all other acts necessary or required by law to implement this Resolution and related to the General Municipal Election.

The City Clerk is hereby authorized to cause notice of the Ordinance to be published once in the Monterey Herald in accordance with Elections Code section 12111 and Government Code section 6061. The City Clerk is authorized to request that the Monterey County Elections Department prepare and publish the required notice. The full text of Measure can be found Council Regular Meeting, 7/21/2026, Item No. 18., Item Page 6, Packet Page 261 online at https://monterey.gov/elections If you desire a copy of the measure, please call the election official’s office at 831-646-3935 and a copy will be mailed at no cost to you.” SECTION 5. IMPARTIAL ANALYSIS. The City Clerk is directed to transmit a copy of the Ordinance to the City Attorney, who shall prepare an impartial analysis of the Ordinance in accordance with applicable law. The impartial analysis shall indicate that the measure was placed on the ballot by the City Council.

SECTION 6. BALLOT ARGUMENTS. The City Clerk shall set the deadline for submission of arguments in favor of or against the Ordinance and provide notice of that deadline. The City Clerk may do this in coordination with the County of Monterey Elections Department, as necessary. In all respects, the process to choose these arguments shall accord with Elections Code sections 9280 et seq. and 9600 et seq.

The City Council hereby authorizes the Mayor to prepare and file the primary written argument on behalf of the City Council in support of the Ordinance. At the discretion of the Mayor, the argument may also be signed by other members of the City Council, bona fide associations of citizens, or by individual voters who are eligible to vote on the measure. (Elec.

Code, § 9282(b).)
Further, the City Council hereby adopts the provisions of Elections Code section 9285(a) authorizing rebuttal argument only as to a rebuttal argument for the General Municipal Election.

This adoption is repealed, and the provisions of Section 9285(a) shall not apply, thereafter.

SECTION 7. CEQA. The adoption of this Resolution is exempt from the California Environmental Quality Act (CEQA), Public Resources Code section 21000 et seq. and California Code of Regulations, title 14, section 15000 et seq. (CEQA Guidelines). The calling of a municipal election is not a project within the meaning of CEQA Guidelines section 15378.

Further, the general tax proposed by this Resolution is a government funding mechanism that does not involve any commitment to any specific project which may result in a potentially significant physical impact on the environment, and thus adopting this Resolution is not a project under CEQA Guidelines section 15378(b)(4).

SECTION 8. SEVERABILITY. If any section, subsection, sentence, clause, phrase or portion of this Resolution or its application to any person or circumstance is for any reason held to be invalid or unconstitutional by the decision of any court of competent jurisdiction, such decision shall not affect the validity of the remaining portions of this Resolution or its application to other persons and circumstances. The City Council hereby declares that it would have adopted this Resolution and each section, subsection, sentence, clause, phrase or portion thereof irrespective of the fact that any one or more sections, subsections, sentences, clauses, phrases, or portions be declared invalid or unconstitutional and, to that end, the provisions hereof are hereby declared to be severable.

Council Regular Meeting, 7/21/2026, Item No. 18., Item Page 7, Packet Page 262 SECTION 9. EFFECTIVE DATE. The City Clerk shall certify the adoption of this Resolution, which shall be effective upon its adoption, and shall give notice of the measure to be voted on in the manner provided by law.

PASSED AND ADOPTED BY THE COUNCIL OF THE CITY OF MONTEREY this _____ day of _______, 202_, by the following vote:

AYES: COUNCILMEMBERS:

NOES: COUNCILMEMBERS:

ABSENT: COUNCILMEMBERS:

ABSTAIN: COUNCILMEMBERS:

APPROVED:

ATTEST:

Mayor of said City
City Clerk thereof
Council Regular Meeting, 7/21/2026, Item No. 18., Item Page 8, Packet Page 263 ORDINANCE NO. ____ C.S.

AN ORDINANCE OF THE COUNCIL OF THE CITY OF MONTEREY
№12/12
AMENDING ARTICLE 7 OF CHAPTER 35 TO THE MONTEREY CITY CODE TO CONTINUE

THE STREET INFRASTRUCTURE REHABILITATION TRANSACTIONS AND USE TAX

SUBJECT TO THE APPROVAL OF THE VOTERS AND TO BE ADMINISTERED BY THE

CALIFORNIA DEPARTMENT OF TAX AND FEE ADMINISTRATION
THE COUNCIL OF THE CITY OF MONTEREY DOES ORDAIN, as follows:

Section 1. FINDINGS.

A. To address Monterey’s essential infrastructure needs including the repair of deteriorating streets, sidewalks, and storm drains, the City of Monterey deemed it necessary and essential to submit the question of a special one cent per dollar transactions and use (“sales”) tax for essential infrastructure needs to qualified voters within the city at an election held on November 4, 2014.

B. At the November 4, 2014 election, the voters of the City of Monterey overwhelmingly approved the Street Infrastructure Rehabilitation Transactions and Use Tax (Measure P), with 74.34% of Monterey residents voting in favor of the measure.

C. At the November 2018 election, the voters of the City of Monterey overwhelmingly approved an extension of the Street Infrastructure Rehabilitation Transaction and Use Tax (Measure S), with 82% of Monterey residents voting in favor extending the tax through March 31, 2027.

D. With funding from the Street Infrastructure Rehabilitation tax, the City has:
repaired 1,012 street segments (blocks), and an additional 90 street segments are currently under construction or out to bid; made $7,419,410.68 in sidewalk repairs; and made $5,869,554.75 in repairs and upgrades to storm drain pipes natural channels, gutters, swales, inlets, manholes, and pump stations, as of June 2026.

E. This funding for critical repairs to streets, sidewalks, and storm drains will expire on March 31, 2027 if the voters of the City of Monterey do not approve a continuation of the tax.

F. Without the continuation of the one cent per dollar revenue measure, the City of Monterey will not be able to adequately maintain basic infrastructure necessary for street and sidewalk repairs that contribute to a safe community. Without the continuation of the revenue measure, the City of Monterey will face inadequate funding for essential infrastructure needs to repair deteriorating streets, sidewalks, and storm drains. The cost to maintain the street network into a state of good repair is estimated between $5 million and $6 million dollars annually. This investment should maintain the pavement condition index (PCI), an industry standard method of evaluating pavement condition, to a rating of 75 and above. The investment of Measure P brought the PCI to 67 and the investment of Measure S brought the PCI to 79 (as of the time of this report). If this measure does not pass, the progress that was made will be lost and the city Council Regular Meeting, 7/21/2026, Item No. 18., Item Page 9, Packet Page 264 2 will see the PCI begin to fall as street conditions deteriorate.

G. If the revenue measure is continued, the City will be able to address remaining street repair deferred maintenance and would allow important pedestrian safety improvements to signalized intersections. Sidewalks would continue to be repaired pursuant to City ordinances and policies for such repairs, and additional storm drain repair work could be performed.

H. All funds collected by this tax will continue to be deposited into a special fund and expended only to repair and rehabilitate the City’s streets, sidewalks, and storm drains. All funds from this local revenue measure are required to stay in the City of Monterey and cannot be taken by the State. Fiscal accountability will be ensured by requiring independent citizens’ oversight, an annual independent financial/performance audit, and yearly reports to the community. The continuation of this measure is expected to generate $12 million in revenue.

I. 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 street infrastructure rehabilitation projects that may be funded using sales tax revenue received from the referenced special transactions and use tax resulting from this action will be assessed for CEQA applicability. Lastly, CEQA Guidelines Section 15378 (b) (4) specifically states that the creation of government funding mechanisms or other government fiscal activities which do not involve any commitment to any specific project as ‘not a project.’ Section 2. AUTHORITY. The City Council enacts this ordinance in accordance with the authority granted to cities by Article XI, Section 7, of the California Constitution.

Section 3. AMENDMENT OF THE MONTEREY CITY CODE. Monterey City Code Chapter 35, Article 7, Section 86 is amended to read:

Termination Date. The authority to levy the tax imposed by this ordinance shall expire on March 31, 2035, unless extended by a two thirds majority vote of the voters of the City.

Section 4 CODIFICATION. Upon adoption of this ordinance pursuant to the voter approval referenced herein, the City Clerk, in consultation with the City Attorney, is hereby authorized and directed to codify this ordinance in the Monterey City Code.

Section 5 EFFECTIVE DATE. If this ordinance is approved by two thirds of the voters voting on the issue at the November 3, 2026, election pursuant to Elections Code section 9217, this ordinance shall become effective ten (10) days after the City Council declares the results of the election.

Council Regular Meeting, 7/21/2026, Item No. 18., Item Page 10, Packet Page 265 PASSED AND ADOPTED BY THE COUNCIL OF THE CITY OF MONTEREY this _____ day of _______, 2026, by the following vote: