Monterey faces budget deficit in millions over next few years

MONTEREY, Calif. (KION) The Monterey City council declared a "fiscal emergency" Tuesday night over budget deficits staff are forecasting in the coming years.

With that declaration, the city is now able to place a sales tax increase up for vote in the 2020 ballot in March. The increase would raise the city's current 8.75 percent sales tax rate to the state's maximum cap rate of 9.25 percent.

"Beginning July of next year, we're facing $2.8 million dollars in deficit. This is our operating deficit," said Lauren Lai, the Monterey finance director. "And that increases to $3.8 million to $5.2 million in the subsequent two years."

The city council is now looking to voters next March to see they will allows a half cent sales tax increase affecting all purchases in town except for groceries and medicine.

If approved, the higher sales tax would have a life span of nine years before ending.

"We're hoping it'll bring in five million dollars a year. It'll certainly help us shore up this operating budget, which is focused on our programs," said Lai.

"I'm used to having sales affected by taxes, but I also appreciate the city needs the money, they need the money," said Dick Crispo, a Monterey resident.

The city believes having a sales tax increase is one of the few ways to negate a deficit without having to cut services and programs. But they will also look into cost saving measures as well.

62 percent of Monterey's sales taxes are paid by tourists and non-residents.

"The sales tax is just a great revenue source that is shared by all those who consume our public services," said Lai.

If you bought a $1000 couch in Monterey now, you would be paying about $87 in sales taxes, but you would pay about $92 with the increase.

Some businesses say they are not excited for more taxes, even though the taxes would only affect customers, but at least one says they will have to wait and see what impacts it has.

"It's an evil you cannot live without. Hey, that's a good description," said Nader Agha, a business owner.

The city says they did a study on whether a higher sales tax would deter customers from shopping in Monterey. They found that it will not.

If passed, the sales tax in Monterey would place the city on par with sales taxes in San Mateo and Los Angeles Counties, making it among the highest in the state.