MONTEREY >> With another budget cycle come and gone, the city of Monterey is forging a financial path forward of discipline and prudence.

The city of Monterey’s fiscal year 2023-24 operating budget, which received a unanimous stamp of approval from the Monterey City Council at its regular meeting Tuesday night, is cautiously optimistic — still a sign of hard work ahead for the city to balance its books, but a positive place to be after a rocky few years.

It wasn’t long ago that the city was reeling from $32 million in pandemic losses, a hit Monterey could only survive through massive cost reduction measures. The city laid off more than 70 full-time employees, de-appropriated already funded infrastructure projects and slashed department budgets across the board. COVID’s impact on Monterey, as City Manager Hans Uslar described at Tuesday’s meeting, was an “almost immediate devastation of our solidly planned future.”

“It was kind of a fall down into a deep, deep dark abyss,” he said. But after shock, came recovery. “(The abyss) wasn’t bottomless,” Uslar added.

Stronger than expected transient occupancy tax and sales tax returns, plus salary savings and judicious financial decisions, left the city with a positive ending balance for FY 2021-22.

Now, with the end to FY 2022-23 fast-approaching on June 30, the city, according to its financial department, is entering a period of relative stability — a manageable, even encouraging position, so long as the city stays financially prudent.

“(We recognize) the difficulty of balancing the city’s checkbook and its long-term fiscal health, given the community’s ongoing needs and wants,” staff wrote in an agenda report for Tuesday’s meeting. “Staff believes the proposed FY 2023-24 budget allows for the restoration of key services, funds the City Council’s priorities and sets aside necessary reserves while keeping the city of Monterey on the road toward enhanced fiscal sustainability.”

Simply looking at dollars coming in versus dollars going out, Monterey’s adopted budget projects anticipated operating general fund revenues to reach $99.6 million for the upcoming fiscal year, and expenditures to top $97.8 million. Against other costs and financial needs — paying back debt or funding capital improvement projects, for example — the big picture projection for FY 2023-24 is a year-end deficit of just under $1.3 million.

Believe it or not, that’s good news.

Though anticipating a shortfall, 2023-24 projections are an improvement over the year before, which is expected to close out with an operating deficit of $4.6 million and a signal for further improvement in years to come, staff say.

Per an outlook of Monterey’s finances through the next half-decade, the city is expected to see year-end operating deficits incrementally diminish, dwindling down to $74,000 by FY 2027-28 if all goes according to plan.

“We’re watching that deficit go down every year,” Monterey Finance Director Rafaela King said Tuesday night. “That’s a good sign that our revenues… and expenses are starting to level out.”

As a continued nod to recovery, transient occupancy tax returns — Monterey’s largest source of income — are expected to yield $30 million in general fund revenues through the next fiscal year, while sales tax receipts are projected to bring in revenues totalling $15.5 million. Compare that to FY 2022-23, which recorded $21.9 million in TOT returns and just over $10 million in sales tax revenue as of April 30.

“Today, we are in a much better position than we were at the beginning of 2020,” Uslar said, taking part in his sixth budget cycle as Monterey’s City Manager Tuesday night. “Our revenues are looking very good. We have expenditures under control.”

Better but not best. Staff say Monterey still faces a litany of major long-term, underfunded expenses that need addressing. Those include over $130 million in unfunded city infrastructure improvements, and the city’s unfunded pension liability, which has fluctuated between $140 million to $170 million over the past two years.

To address standing needs, the City Council, as part of a separate agenda item Tuesday night, approved various policies for restoring the city reserves. Policies will help establish and maintain long-term funding for the Monterey Sports Center, the Monterey Conference Center, technology infrastructure, city facilities, public safety, the Monterey Public Library, parking garage facilities and protections against rising sea levels.

As a further assurance, the council also voted to up the amount of general fund reserves kept on hand for economic uncertainty from a current policy minimum of 16.6% to 20%.

“This gets us in a great position to really plan for the future,” Councilman Ed Smith said Tuesday. “I won’t be here forever. None of us will be here forever. And this places us in a position to modernize, look to the future and assist others when they join the city family to know what the policy is and to know what we do is not just public service but that (service) requires funds.”

Cannabis retail

While budgetary talk took up a bulk of Tuesday’s Monterey City Council meeting, the seven-hour affair tied up with familiar discussions over cannabis retail. Namely, nailing down a project description for establishing the business within city limits so that staff can move the venture along to next steps, like environmental review and devising an application for interested retailers.

Initially brought forward in May, but delayed by council feedback, staff returned this week with a revised project description that finally got the go ahead. Approved plans include four cannabis shops placed throughout the city, each in a different business district; one non-storefront operation for medicinal cannabis delivery only; an unlimited number of cannabis testing laboratories; and two temporary cannabis event permits for the Monterey County Fairgrounds.

More information about commercial cannabis in Monterey, and next steps from here, can be found at https://haveyoursaymonterey.org/cannabis.