Walnut Creek council accepts 10-year financial forecast; staff urges caution on Measure O commitments

The Walnut Creek City Council on Jan. 21 accepted a 10-year financial forecast that models two recession scenarios and reiterates the city’s limited capacity for additional ongoing spending.

The forecast, presented by Administrative Services Director Kirsten Lacasse, projects general-fund trends under a “mild” and a “moderate” recession beginning in fiscal 2027 and includes assumptions about property tax, sales tax, pensions and the November 2018 Measure O revenues. Council voted unanimously to accept the report.

The forecast models a mild recession with a 12‑month downturn and a two‑year recovery and a moderate recession with an 18‑month downturn and three‑year recovery. In the moderate scenario, revenue recovery is modeled to reach about 90% of prior growth at the end of the three‑year recovery period. Staff built in a 2% annual contribution for capital and assumed no use of reserves or the pension trust in the baseline models.

“Kirsten Lacasse said the forecast is a projection of trends based on a set of assumptions,” Mayor Cindy Darling said after the presentation. “It’s dynamic and updated based on changing conditions.”

Lacasse told the council the forecast assumes a 2% assessed-value growth tied to the Prop. 13 inflator, sales‑tax softening through fiscal 2025 and continued recovery of arts and recreation and transient occupancy tax revenues after the pandemic. For personnel costs, the model applies adopted MOU (memorandum of understanding) increases and a 2.9% CPI inflator beyond MOU expirations, 6% medical‑cost growth, a 5% assumed vacancy rate and the hypothetical addition of one full‑time employee per year.

The forecast also treats pension cost assumptions as material to long‑term fiscal health. Lacasse said CalPERS’ discount rate was held at 6.8% through the forecast period and noted that past automatic reductions in the discount rate have previously driven significant increases in employer pension contributions.

“Any changes to the discount rate would impact the city in fiscal year 2028,” Lacasse said.

Council members urged conservative use of Measure O funding — the sales‑tax measure the city placed on the ballot to expand services — noting that ongoing costs funded by Measure O will revert to the general fund when the measure expires and that the forecast already assumes roughly $3.8 million (inflated in the model) of ongoing Measure O‑funded costs would return to the general fund in fiscal 2034.

Dan Buckshi, city manager, told the council the forecast indicates Walnut Creek’s overall outlook is broadly near break‑even over the 10‑year horizon but that the city’s limited margin means it should avoid adding new ongoing commitments funded by Measure O without clear long‑term revenue backing.

Council voted unanimously to accept the report. The council also directed staff to return with a pension‑trust strategy in February–March to evaluate the timing and scale of any pension‑trust uses, and staff reminded the council that the formal balanced two‑year budget (fiscal 2026–27) will be brought forward in spring 2025.

The council discussed next steps in public comment and then recessed before continuing the agenda.