WALNUT CREEK — Vacant city staff positions in Walnut Creek will remain unfilled through at least the next two years, a decision meant to fend off a $2 million budget shortfall.
Because of slow revenue growth and the increased costs of doing business, budget projections showed a $4.98 million deficit for fiscal year 2026, and a $6.33 million deficit in fiscal year 2027. Those gaps already were closed with a number of short- and long-term solutions, including staff and overtime reductions and an increase in budgeted staff vacancies.
But a loss in revenue from a sales tax involving the city’s largest industry group, auto dealerships, has created another $2 million hole in the fiscal year 2027 budget. Projections show fiscal year 2026 will remain balanced because staff vacancies are at about 11%, nearly double the 6% approved by the City Council last June.
The council voted unanimously Tuesday to keep that vacancy level through fiscal year 2027.
Alternative solutions for rebalancing the fiscal year 2027 budget included finding other areas where $2.3 million could be cut or drawing from the city’s General Fund Contingency Reserve, which currently has a balance of $2.6 million.
“Service levels to the community would largely remain unchanged. However, internally staff would need to sustain these levels with fewer resources,” said Administrative Services Director Kirsten LaCasse.
Staff has spent months trying to understand what caused revenue from auto and transportation sales taxes to dip so substantially, City Manager Dan Buckshi said. It was ultimately determined a reporting change for used car dealerships implemented by the California Department of Tax and Fees Administration in 2025 was to blame, and not a reporting error.
A final decision on possibly reversing the change that drove down auto sales tax revenue for the city has not been made, LaCasse said, but once it has, the city can appeal.
Mayor Kevin Wilk said letters raising concerns about the change were sent to two state legislators, Sen. Tim Grayson and Assemblymember Rebecca Bauer-Kahan. Wilk said they were “received well.”
Buckshi said the city is now trying to understand what drove the California Department of Tax and Fees Administration to make the change. The regulatory power to make such a change is within the administration’s authority, but Buckshi said finding a legislative fix is now part of the discussion.
“It’s extremely frustrating that CDTFA makes this change without any communication whatsoever,” Buckshi said. “It’s been extremely frustrating working with the state bureaucracy with this and I’m really hoping our state legislators can help untangle that bureaucracy for us.”
Other than a final decision on the auto and transportation tax reporting change, a citywide fee study is also in the works and could present solutions for increasing city revenue.
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