• CalPERS imposed significant financial requirements for local jurisdictions to backfill the pension shortfalls when CalPERS (California’s Public Employee Retirement System) lost significant investments during the Great Recession.
• Changing consumer patterns such as the increase in online sales caused substantial loss of sales tax and reductions in gas tax due to more fuel efficient vehicles.
• Aging infrastructure and outdated equipment require significant investments into City’s assets such as Fire Stations, Police Station, Library, Community Centers and Sport Center.
• Costs increase due to core higher operational costs (which include services like police, fire and parks and recreation).

• Economic Development –  Conference center renovation, Downtown improvements, Cooper-Molera project, other projects
• Fee Updates – refuse, cemetery, conference center, parks & recreation
• Grants – homeless, transportation, public safety, affordable housing
• Cash Management  – higher investment Income
• Revenue audits – business license, sales tax, Transient Occupancy Taxes (TOT)

• Cost Recovery – overhead & direct costs for capital projects, PMSA, Tideland 
• Automation & Data-Driven Decisions – DocuSign, Adastra, Simpler Systems, OnBase, Parkmobile
• Regional Partnerships – homeless HEAP grant, public safety regional solutions
• Program Augmentation & Privatization (where appropriate) – parking facility security (Condor), MCC facility security (Uretsky)
• Effective labor negotiations and hiring chills
• 2% Salary Savings in the FY20 budget – assumed staff vacancies or other program savings
• Police Hiring Incentive Program – to get police department to full staffing level

• Start planning to significantly cut services totaling $2.8 million effective May 2020. Then additional cuts of $3.8 million in 2021 and $5.2 million in 2022. 
• Begin conversations with neighborhood groups about service priorities.
• Identify areas of service cuts (for example, library hours, community centers, park maintenance, public safety, etc.)
• Gather data and community feedback
• Build cuts into mid-year budget
• Implement service cuts and staff reductions

• Research shows that non-residents pay 62% of Monterey sales tax. A sales tax increase represents an opportunity to share the cost of services with non-residents who also use valuable City services such as police, fire, library, roads, parks, trails, beaches, and other city services.
• The ½-cent sales tax would be kept local with 100% of the revenues going to the City for our services, without any mandatory allocation to the State or County.
• The ½ cent sales tax would raise about $5 million per year and solve the operating deficit for the next few years.

8.75% is the current Monterey sales tax rate. This includes the Statewide rate of 7.25%, City of Monterey’s Measure P & S rate of 1.00%, Transportation Agency for Monterey County rate of 0.375%, and Monterey-Salinas Transit rate of 0.125%. The State of California statutorily limits sales tax at the local/county level to no more than 2.00%, except where allowed by the State legislature. A City of Monterey General Sales Tax increase of 0.50% in March 2020 would bring the City to the maximum sales tax allowed under state law. A September 2019 article in The (Salinas) Californian reported that the County of Monterey is considering a sales tax measure to fund the County’s park system and potentially other cities. This is a developing matter between the County and cities that may have significant implications upon the remaining 0.50% available to the City of Monterey.

A fiscal emergency is a formal declaration by resolution of the unanimous City Council. State law requires a fiscal emergency to be declared in order for a municipality to seek a general tax ballot measure during a special election (not during the Municipal General Election, which is November of even-numbered years).

• The general fund operating budget is forecast to have operating deficits that are increasing in magnitude. Operating deficit forecasts for FY19/20 of ($0.6) million, FY20/21 of ($2.8) million, FY21/22 of ($3.8) million and FY22/23 of ($5.2) million. These are optimistic scenarios which assumes continued growth economy and revenue growths, such as TOT (hotel tax) +4%, property tax +3%, and higher fees.
• Immediate needs - Even with annual revenue growth projections, operating deficit exists. Operating costs are increasing due to staffing costs (such as minimum wage, pension), utility costs, contracts, insurance, fire engines, equipment and deferred maintenance.
• Long term needs - Long-term needs include needs to fund quality of life services, pension liability, facility repairs and updates, fire engines and technology

• Timing Factor 1 - A fiscal emergency declaration allows the city council to place a general tax on a special election ballot.
• Timing Factor 2 - Specifically, findings to support a fiscal emergency are evident as significant cuts to City services will need to be made if a general sales tax measure is placed on the ballot in November 2020 rather than in March 2020.
• Timing Factor 3 - If a general tax measure was to be submitted to and approved by the voters in the General Municipal Election held in November 2020, actual receipt of the revenue would be delayed to June 2021, which is too late.
• Timing Factor 4 - By May/June 2020, the Council would need to make decisions to eliminate the ($2.8) million deficit for FY20/21 and that could include drastic service cuts.
• Timing Factor 5 - Alternatively, having a general tax on a March 2020 ballot, if approved by a majority of the voters, would allow collection of General Fund revenues in a timely manner that avoids cuts to critical city services. With knowledge of the results of the March 2020 election, the Council will have the information needed to determine whether the City has the revenues to maintain or cut City services.

The city council has the authority to declare a fiscal emergency and that is successful by a unanimous vote by city resolution.

• Change the way we do business to be more streamlined.
• Operational reductions or services provided by someone else, where appropriate.
• Revenue enhancements through economic development, fees, taxes, cost recoveries.
• Employee contracts that attract and retain talent and are financially sustainable.

• April 2018 –  Start of Fiscal Health Response Plan (FHRP) - Study Session
• July 2018 – Budget Amendment - Council Meeting
• Feb 2019 – Fiscal Year End Report & Updated FHRP/Finance 101 - Study Session
• May 2019 – Proposed FY2019/21 Biennial Budget - Study Session
• June 2019 – Adopt FY2019/21 Biennial Budget - Study Session
• Sept 2019 – City Fee Update - Study Session
• Oct 2019 – Fiscal Health Response Plan Update - Study Session
• Oct 2019 – Explore Fiscal Emergency and 0.50% sales tax – Council Meeting

• Fix and maintain Monterey streets – Thanks to your support of Measure P and Measure S, we are fixing and maintaining Monterey streets. Pavement Condition Index (PCI) demonstrate improvement from PCI of 54 to 64.
• Reduce traffic - Thanks to grants and regional agency collaborations, we are implementing new adaptive traffic control systems and innovating multi-model commute options, to help reduce congestion on our main streets
• Provide long-term financial stability - 71% (2014 poll) and 72% (2018 poll) said that long-term financial stability is "extremely important” or “very important.” A general sales tax measure on the March 2020 ballot, if successful, is a step toward achieving financial stability.