Walnut Creek council backs staff plan to use vacancy rate to cover $2.3M FY2027 shortfall

Administrative Services Director Kirsten Locast told the council March 3 that a reporting change at the California Department of Tax and Fee Administration reduced the city’s auto and transportation sales tax receipts, producing an estimated $2.3 million deficit for fiscal year 2027 (July 1, 2026–June 30, 2027). Locast said the change is under audit by CDTFA and staff are pursuing additional clarification and potential appeal options with state representatives.

Staff presented three strategies to close the projected deficit: (1) maintain the current elevated vacancy rate (about 10–11%) as a short‑term measure; (2) identify ongoing reductions equal to roughly 2% of general fund expenditures (which would have immediate service impacts); or (3) use one‑time reserves (the general fund contingency reserve balance cited as about $2.6 million). Locast said continuing the higher vacancy rate would preserve service levels to the community in the short term while staff refines projections, completes a citywide fee study, and updates the 10‑year forecast.

Council members asked whether the CDTFA change could be reversed and whether the city could appeal; staff said a final determination is pending and an appeal would be an option. City Manager Dan Buckshay and several council members said they had contacted state representatives; Mayor Wilk said staff had sent letters to Senator Tim Grayson and Assembly Member Rebecca Bauer‑Kahan about the auto sales tax treatment.

Council voted to adopt staff’s recommendation to maintain the 10–11% vacancy rate for fiscal year 2027 to close the projected shortfall while staff pursues additional information and options. The motion passed on a roll call vote.