Council reviews FY26–27 proposed budget; directs staff to create $100,000 outdoor‑dining incentive
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Summary
Facing projected deficits, council reviewed the proposed two‑year operating budget and asked staff to include a roughly $100,000 competitive rebate program in the FY26 budget to encourage outdoor dining; council also asked staff to monitor homeless‑services funding shortfalls.
Walnut Creek — The City Council on June 3 reviewed a proposed two‑year operating budget that projects modest revenue growth but identifies an ongoing structural gap driven by slower revenues and rising costs, and directed staff to design a one‑time incentive to encourage outdoor dining.
Budget overview: Rindy Azzavito, the city’s budget and procurement manager, summarized the proposed FY26–27 general fund. The staff package forecasts modest revenue increases (roughly 2–4% excluding reserve uses) and proposed reductions in operations and maintenance and personnel to reduce a projected ongoing deficit (staff identified a projected ongoing deficit of approximately $4.97 million for FY26 before budget balancing actions). Personnel costs account for roughly 68% of general fund expenditures. The draft includes one‑time and ongoing additions that reflect council priorities, including an approximately $3.5 million allocation for a multi‑year general plan update, investments in development‑review process improvements, public‑safety software and body‑worn cameras, and funding related to housing and homelessness.
Why it matters: The budget discussion sets priorities for services and reserves, and the council must balance preserving core services while addressing rising pension, insurance and utility costs. Staff proposed using short‑term strategies — including limited use of pension reserves and higher vacancy rates — to close gaps while avoiding sharp service cuts.
Outdoor dining incentive directed: Council asked staff to include a one‑time incentive program in the FY26 budget to accelerate outdoor dining downtown. The motion, approved unanimously, directed staff to return with program details tied to a notional budget of $100,000 (the council asked staff to identify the funding source; parking‑fund revenues were discussed as a likely source) and to structure the program as a competitive rebate with a proposed per‑applicant cap of $10,000. Councilmembers emphasized that the program should be time‑limited, competitive and focused on offsetting start‑up costs rather than creating an ongoing subsidy.
Council concerns and follow‑up: Council members also flagged uncertainty over state homelessness funding and asked staff to provide a report on an identified shortfall (council noted an estimated $145,496 gap for homeless services funding). Staff said they will circulate the full budget packet, the fee schedule adjustments and requested follow‑up on several items including the “forced overtime” policy in the Police Department, the calculation underlying the parking spot valuation used in previous outdoor‑dining discussions, and detailed FTE reconciliations.
Context and next steps: Staff will return to the council on June 17 with the full budget package (including capital budget and any adjustments) for final adoption. Council preserved flexibility on reserves and asked staff to prioritize essential services while incorporating the direction to develop an outdoor‑dining incentive program.
Ending: Council voted unanimously to direct staff to develop an outdoor dining rebate program with an approximate $100,000 budget and a $10,000 per‑applicant cap, and to return with additional budgetary detail before final adoption on June 17.
