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Walnut Creek council adopts short-term budget rebalancing to cover $2.3 million sales-tax shortfall
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Summary
City staff told the council a California Department of Tax and Fee Administration reporting change reduced auto sales tax revenue, producing an estimated $2.3 million FY27 general fund deficit; the council approved staff's recommendation to maintain a 10–11% vacancy rate short-term while pursuing appeals and a fee study.
City staff told the Walnut Creek City Council on March 3 that a reporting change at the California Department of Tax and Fee Administration (CDTFA) reduced sales-tax revenue assigned to Walnut Creek in the autos and transportation category, producing a projected $2.3 million shortfall to the FY27 general fund.
Administrative Services Director Kirsten Locast explained the city adopted budgets for FY26 and FY27 that relied on a mix of ongoing reductions and one-time savings. After the CDTFA reporting change and the city's consultant review, staff now project a $2.3 million deficit for the July 1, 2026–June 30, 2027 fiscal year if no adjustments are made.
Locast presented three strategies for closing the gap: maintain the current higher vacancy rate (about 10–11%) used in practice and close the gap short-term; identify ~2% ongoing general fund expenditure reductions (which would have immediate service-level impacts); or use reserves for a one-time offset. Staff recommended maintaining the current 10–11% vacancy rate as a short-term measure while pursuing additional data (CDTFA audit outcome) and a forthcoming citywide fee study that could provide longer-term solutions.
Council members asked about appeal options, legislative fixes and timing. City Manager Dan Buckshay said staff and local legislators are working with CDTFA to understand the reporting change and explore appeals or legislative remedies. Councilmember Divini moved to adopt staff's recommendation to maintain the vacancy rate short-term; the motion was seconded and passed unanimously.
Locast said the city will continue monitoring department revenues and will return with additional recommendations for ongoing reductions or reserve use if the CDTFA decision or third-quarter results change the outlook.
No specific program cuts were adopted at the meeting; staff emphasized that maintaining the vacancy rate preserves service levels to the public while internal operations absorb the staffing impacts.
