WALNUT CREEK — City officials are bracing for a budget deficit of $12.1 million for the next fiscal year unless they can find ways to balance the budget for the revenue lost due to the coronavirus-induced sheltering orders.
The city relies heavily on sales tax from its vibrant shopping district, and its arts and recreation department gets nearly half its revenue from the Lesher Center for the Arts theater venue, which has been closed during the sheltering order and is not expected to open up until at least January 2021, according to the city’s administrative services director, Kirsten LaCasse.
City staff have estimated that there has been about an 80 percent drop in sales tax and a 100 percent reduction in transit occupancy tax (gained from hotel stays) and arts and recreation revenues during the shelter-in place, which LaCasse said represents about a $13 million loss in revenue for this fiscal year.
In creating projections for the next fiscal year, which begins in July, the city staff used certain assumptions, including that the shelter in place order will be lessened by the end of June, and that arts and recreation programming, hotel taxes and sales taxes will recover at a slow or medium pace.
Sales tax accounts for about 28 percent of the city’s s General Fund revenues, and the Walnut Creek received $26.5 million in sales tax in the 2019 fiscal year. During the first half of the 2020 fiscal year, sales tax revenue was growing, but the sheltering order that has closed non-essential retail stores since mid-March has led to about an 80 percent drop in sales tax for the last quarter of the fiscal year, likely bringing the total sales tax revenue to $20.5 million for the 2020 fiscal year, city staff predict.
To compare it to the Great Recession that started in 2008, the city lost about 28 percent in sales tax over four years, which was recovered over about the same time period. This time, staff is projecting a 23 percent decline in sales tax from the last fiscal year to this, which occurred in less than four months.
“We cannot live without the sales tax,” said councilmember Cindy Silva during the Tuesday City Council meeting.
The transit occupancy tax revenues account for about 3 percent of Walnut Creek’s general fund money, and since travel has been hard hit during the pandemic, staff are assuming none of that tax will be collected for the remainder of the sheltering order. And since spring arts and recreation classes were cancelled, and the Lesher Center closed — likely for the rest of the year — staff expects about a $4.5 million loss in revenue for the arts and recreation department.
Mayor Pro Tem Kevin Wilk during Tuesday’s meeting called on residents to help, noting that “citizens will need .. to come shop and dine and spend money here.”
Walnut Creek staff will propose strategies to balance the budget t the finance committee in the next few weeks and then to the City Council in June. In April, the Council approved a set of budget-balancing measures to apply to the current 2020 fiscal year, ranging from cancelling staff travel and training to freezing hiring for vacant positions to administering staff furloughs and layoffs. Those will likely be used in balancing the next year’s budget, but will need approval from the City Council.
