On Tuesday, the Walnut Creek City Council agreed to a staff recommendation to close the gap on a $2.3 million deficit in Fiscal Year 2027 by maintaining the 10-11% vacancy rate.
The 5-0 vote was part of its budget re-balancing act it had been working through for both FY 2026 and Fiscal Year 2027 with a combined $6.33 million deficit.
The deficit prompted the city to eliminate 1.25 FTE, reduce hourly staff and overtime and reduce operations and maintenance (cutting $3.31 million). They also did short-term and one-time responses which resulted in another $3.02 million – utilize pension trust and reserve, increased budgeted vacancy rate and reduced general fund contribution to capital projects.
According to Services Director Kirsten LaCasse , in 2025, the city of Walnut Creek began seeing a reduction in sales tax – which shows the city projected deficit for 2027 at $2.3 million. She says 2026 will stay balanced, but a re-balancing for 2027 was needed.
According to the staff report, the budget was developed from a baseline that incorporated cost increases for insurance premiums, utilities, animal services, legal services, and subscription-based services. Required contributions to pension obligations, and increases related to labor agreements and minimum wage were included, alongside revenue projections based on historical trends and development activity.
Sales Tax: Beginning in FY25, the City experienced a reduction in sales tax revenue for what was thought to be a reporting error in the City’s largest industry group, Autos and Transportation. In FY25 his group saw a decline of 11% which the City’s sales tax consultant has since identified as a reporting change in the group, implemented by the California Department of Tax and Fee Administration (CDTFA). This reporting change is currently under audit, however it is impacting revenue in FY26, and will very likely continue in FY27
Three strategies to re-balance:
- Maintain a 10% to 11% vacancy rate (covers the sales tax shortfall)
- Ongoing reductions of approximately 2%
- Use of reserves
- Recommendation: Staff recommends maintaining the 10-11% vacancy rate to achieve the necessary savings to close the deficit in FY27. This approach provides a short-term solution that preserves community service levels while allowing time for key financial uncertainties to be resolved, including CDTFA’s sales tax reporting changes, completion of the Citywide Fee Study, and updates to the 10-year General Fund forecast. While service levels to the public would remain largely unchanged, internal operations would require sustaining these levels with fewer staff. Compared to ongoing reductions of about 2%, which would have immediate and significant service impacts, maintaining vacancies offers flexibility and minimizes disruption.
Councilmember Cindy Darling asked if they could see a reversal of the tax decision on auto sales.
LaCasse shared they had not received any new information from the State but also have not made a final decision—which would give them an opportunity to appeal the decision.
Mayor Kevin Wilk noted that they sent a letter to Senator Tim Grayson along with Assemblymember Rebecca Bauer-Kahan on the auto sales tax change by the California Department of Tax and Fees Administration. Wilk said the letter was “well received” in an effort to keep the conversation going.
City Manager Dan Buckshi added they were also trying to work through the changes at the State – along with a dozen other cities who had agreements with auto dealerships –noting something caused this to change.
“What we are really wanting to know is what was the driver of that? What was the thinking? And the rational for doing so?” stated Buckshi. “It’s extremely frustrating for CDFTA to make this change without any communication whatsoever. It took us months to decipher the report to understand if this was an error, what was occurring. That is why it’s nearly a year later reporting this issue… it really took that long to unwind and really get answers. It’s been extremely frustrating working with the state bureaucracy on this and I am really hoping our state legislators can help untangle that bureaucracy for us.”
Councilmember Cindy Silva asked if this had to be a legislative fix.
Buckshi said they were working through that process.
The council agreed in a 5-0 vote to approve the staff recommendation maintaining the 10-11% vacancy rate to achieve the necessary savings to close the deficit in FY27.
To watch the meeting, click here.
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