Monterey staff outline $11.6 million shortfall and propose hiring freeze, O&M cuts and one‑time NCIP use

City Manager Dante Hall told the Monterey City Council on April 29 that the city faces an $11.6 million structural shortfall in the proposed FY 2026–27 budget and presented an emergency “repair” package to buy time for longer‑term fixes.

“Balancing the budget this year is almost like an emergency repair to that bridge that keeps it safe,” Hall said, urging the council to review staff recommendations and provide direction. Staff emphasized they were not asking the council to adopt the budget tonight but to give feedback on the proposed approach.

The staff proposal includes freezing 30 currently vacant positions (26 of them funded from the general fund) to generate about $3.7 million in savings; an additional 10% reduction in operations and maintenance on top of prior cuts; delaying vehicle replacements; and a proposed one‑time use of $3.5 million from the Neighborhood & Community Investment Program (NCIP) to close most of the gap while preserving the city’s economic uncertainty reserve.

Director King and finance staff laid out the numbers underpinning the recommendations. Staff estimated FY 2026–27 general fund revenues at about $114 million and expenditures at roughly $125 million, producing the $11.6 million gap. Staff also cited rapidly rising personnel costs — including pension costs they said have increased roughly 48% since 2022 — a large rise in liability insurance (described as up about 153% since 2020), and higher utility and fuel costs as primary drivers.

Assistant City Manager Nat reviewed longer‑term options and council‑directed strategies. Among the possible revenue measures he flagged was a proposed 0.375 percentage‑point sales tax measure on the June ballot, which staff estimated would generate about $4.5 million annually if approved by voters; staff noted that ballot measures are subject to voter approval and not council authority.

Council members pressed staff for more detail on several technical points: how many overtime dollars are reimbursable; which vacant positions are critical to operations (noting potential tradeoffs between vacancy savings and higher overtime); the composition and timing of the roughly 60+ vacancies in the city’s personnel report versus the 30 positions proposed for freeze; and the status of special funds such as NCIP and the cemetery fund. Staff said positions in active recruitment were excluded from the freeze and that a midyear review would reassess any decisions.

Staff committed to returning to council with additional detail and analysis at the June 2 budget meeting. That session will be used to refine which positions remain frozen, assess operational impacts, and present any final budget directions before the FY 2026–27 adoption process.