Clayton Confronts $820K Budget Deficit, Backs Permanent Sales Tax for November Ballot

The Clayton City Council on April 21 squared off over a rapidly deteriorating budget picture — with the mayor publicly rejecting staff's characterization of city finances as "sound and stable" — and began laying the groundwork for a permanent 1% sales tax measure that could reshape the city's revenue base this November.

• $820K FY26 deficit forces hard questions about lost revenue, police overtime, and how the city communicates fiscal reality to residents

• Council signals unanimous support for a permanent 1% sales tax on the November ballot, estimated to generate roughly $1M annually

• LMD renewal debate splits council over whether commercial properties should pay per acre or per parcel

• Ed Miller reappointed to CCTA committee (4-0-1) after contentious exchange reveals $600K in uncollected Measure J transportation funds and no formal reporting for any external representative

• City has quietly eliminated $400K in annual contract costs by replacing outsourced services with in-house workers

Clayton's $820K Budget Hole: One-Time Problem or Structural Crisis?

Why it matters: Clayton is burning through reserves at a pace the mayor called unsustainable, with the city's fiscal cushion projected to drop from $6.1 million to under $5 million — pushing closer to the 40% reserve policy floor and adding urgency to the November ballot measures.

Where things stand: City staff presented a year-end projection showing FY26 will close with an $820,000 general fund deficit, driven by two main forces. On the revenue side, the closure of the city's successor agency eliminated $500,000 in annual income — 8% of total city revenue — as the Redevelopment Property Tax Trust Fund (RPTTF) payments ended permanently. A $35,000 loss from water well revenue and the elimination of fiduciary fund transfers added to the shortfall.

On the spending side, police overtime surged from $7,000 to $22,000 per pay period as officer vacancies, injuries, and the field training program for two newly hired officers generated an unanticipated $199,000 overrun. Councilmember Kim Trupiano questioned the dramatic jump, stating that two weeks ago the number was only $80,000. She traced the deficit's escalation from $130,000 at adoption through $410,000 in March to $820,000 now.

Vice Mayor Richard Enea noted the structural nature of the overtime problem:

"When you have officers leave, that's automatic overtime to cover those shifts."

Administrative Services Director Dennis Bozanich acknowledged the revenue loss as the dominant story:

"Losing $500,000 in revenue is impactful. It's 8% of our total revenue in the city. That's the big story here."

He also conceded oversight failures on the overtime spike, pledging not to allow it to happen again.

The other side: Mayor Jeff Wan pushed back hard on how the budget was being framed to the community.

"I wouldn't in good conscience say that this is sustainable," he said.

Wan argued that an $820,000 deficit consuming more than 10% of reserves in a single year demands honesty, not reassurance. He also challenged the presentation format, requesting one-time capital spending be separated from recurring operational deficits so the council and the public can see the true structural gap.

Councilmember Holly Tillman agreed:

"I concur. I'm glad that you actually vocalized that."

Trupiano went further, expressing doubt about the reliability of the numbers themselves:

"I'm personally starting to feel like I don't even know if I believe the numbers."

Bozanich offered a blunt outlook for FY27, which projects a $1.165 million deficit including one-time capital projects directed by the council at a prior meeting:

"We can't contract our way out of this. And we're going to have to have continued discipline on the expenditure side and we're going to have to have more revenue."

Decisions: The council declined to vote on the FY27 budget revisions, directing staff to bring back a clearer presentation with footed columns, narrative context, and a clean walk from the adopted budget to the adjusted budget — separating one-time capital spending from operational shortfalls.

What's next: Staff will return with a revised budget presentation at a future meeting. The structural deficit adds direct urgency to the November ballot measures discussed later in the evening.

Permanent 1% Sales Tax and LMD Renewal Head Toward November Ballot

Why it matters: With the budget deficit exposing a structural revenue gap, the proposed 1% transaction and use tax is the city's primary lever to close it — while the Landscape Maintenance District renewal determines how Clayton funds trail upkeep and fire-related vegetation management for the next decade.

Where things stand: The council workshopped two ballot measures for November 2025. On the sales tax, consensus coalesced quickly around key design choices: the tax would be permanent (not time-limited), would flow to the general fund with no separate oversight body, and staff was directed to draft ballot language within the 75-word limit. The measure is estimated to generate roughly $1 million annually.

Mayor Jeff Wan dismissed the idea of a dedicated oversight committee:

"I would say having an oversight body of general fund money is silly."

Since the revenue would carry no spending restrictions, oversight would fall to the council itself through the normal budget process. Councilmember Jim Diaz offered a note of caution about the revenue estimate:

"1% equals $1 million is optimistic. In times of economic turndown, people are not going to be spending and buying things that incur a tax."

The LMD Split: Pay by Parcel or by Acre?

The Landscape Maintenance District (LMD) renewal sparked a genuine policy disagreement. The current ordinance charges commercial properties per acre, while residential properties pay a flat per-parcel rate. Wan argued for equity, saying larger parcels shouldn't automatically face higher assessments:

"If you own a large parcel, you're going to pay more than the person next to you. That's in a residential parcel."

Councilmember Holly Tillman countered that commercial properties with larger footprints draw more visitors to trails and public landscaping and should pay proportionally more.

Those commercial properties are drawing people to the town," she said.

Tillman pushed for maximizing revenue given deferred weed abatement and new fire maps.

Staff estimated switching commercial properties to a per-parcel rate would reduce LMD revenue by roughly $75,000, partially offset by a proposed 10% base increase generating approximately $140,000.

During public comment, Ed Miller, a longtime Clayton resident who has served on the CCTA Citizens Advisory Committee for seven years, suggested commercial properties should pay slightly more based on size since they don't provide residential housing for trail users, and requested a breakdown of all commercial LMD assessments be made publicly available.

Decisions: Council reached consensus on a 10-year LMD extension, a five-member Trails and Landscape Committee oversight body, and inclusion of a CPI escalator. The commercial parcel assessment methodology was deferred for further analysis.

What's next: Staff will bring refined ballot language back on May 19, with a final deadline of Aug. 7 for both measures.

$600K in Uncollected Transit Funds Surfaces During CCTA Reappointment Debate

Why it matters: Clayton has roughly $600,000 in uncollected Measure J transportation funds sitting with the Contra Costa Transportation Authority (CCTA) — and the discussion that uncovered it also revealed the city has no formal reporting requirements for any of its external committee representatives.

Where things stand: Ed Miller, CCTA Citizens Advisory Committee Member, came before the council seeking reappointment. The committee reviews biennial Measure J return-to-source fund applications — the mechanism by which cities receive their share of the countywide transportation sales tax.

Councilmember Kim Trupiano opened with pointed questions:

"And I do not ever remember you reporting out to us. And I'd like to hear your reasoning for that. You've also been on an expired term since 2023."

Clayton is the only municipality on the committee without a current appointment.

Miller acknowledged the gap but said he had made informal reports during public comment and communicated via email. He noted the uncollected funds:

"We have $292,000 awaiting us from the last cycle, and we are entering the next cycle."

Combined, approximately $600,000 is available to Clayton. He also said he had proactively recommended the city create a reporting structure when he applied for reappointment.

Councilmember Jim Diaz raised a separate concern — that the Central Contra Costa County Transit Authority (CCCTA), which oversees County Connection bus service, is a more impactful body for local transit decisions, and Clayton's seat there has been vacant for six or more years.

Public commenter Lauren Kindorf defended Miller, arguing no formal reporting mechanism exists for any external representative and that holding Miller to a nonexistent standard is unfair.

Trupiano proposed a broader fix:

"Is there a possibility, excluding this application, to put a reporting system in place for everyone that represents us out in the beyond our own council reports?"

The council agreed to bring this back as a future agenda item.

Decisions: Miller was reappointed to a four-year term. The vote was 4-0-1, with Diaz abstaining. Diaz cited his desire for a formal reporting structure and resolution of the reporting gap before reappointment.

What's next: The council will consider establishing formal reporting requirements for all external committee representatives at a future meeting. Staff and Miller will work to collect the approximately $600,000 in unclaimed Measure J funds.

City Quietly Cuts $400K in Annual Contract Costs

Why it matters: As Clayton grapples with budget deficits, the consent calendar revealed a significant shift in how the city delivers services — replacing outsourced contracts with in-house workers — that has saved an estimated $400,000 on an annualized basis.

Where things stand: During discussion of the contract list included in the consent calendar, the council learned the city has eliminated approximately seven to eight contracts in recent months. A key example: a building maintenance contract costing more than $100,000 was replaced with a seasonal worker. The council also reviewed the Bel Air Mechanical HVAC contract ($98,000 budgeted, $22,000 spent year-to-date), the All City Management school crossing guard contract (funded partly by the quarry, not the school district), and several contracts without expiration dates, including Apex, Rural Pig, and Workers.com. Staff indicated Workers.com would be eliminated in Q4 and the Apex contract may go out to bid.

Mayor Jeff Wan requested future contract reports include narrative context — the "so what" — explaining why information matters and what actions staff is taking.

Administrative Services Director Dennis Bozanich cautioned that cost discipline has limits. Rising labor and fuel costs will make maintaining savings increasingly difficult.

Decisions: Consent calendar approved 5-0 (For: Wan, Trupiano, Tillman, Diaz, Enea).

Minor Items

• Karen Case appointed to the Trails and Landscape Committee for a two-year term (5-0). The committee still has one vacancy and oversees the LMD assessment up for renewal on the November ballot.

• Anita Stranik appointed as Clayton's representative to the Contra Costa County Advisory Council on Aging (5-0), filling a seat left vacant after the previous representative's passing.

• Officers Jacob McPherson and Gabriel Phelps sworn in to the Clayton Police Department. McPherson, a Chico State graduate, joined in January and is completing field training. Phelps came from the Concord Police Department and previously served with the Honolulu Metropolitan Police Department. The field training for both officers is a primary driver of the $199,000 police overtime overrun.

• The police chief announced "Coffee with the Cops" on April 30 at Roadside 22 — the department's first community engagement event of its kind.

• Seven students honored through the Do the Right Thing self-discipline awards from Mount Diablo Elementary and Diablo View Middle School.

• National Library Week proclaimed (April 19–25). The library renovation has been rescheduled from September to October/November to accommodate library programming, with furniture ordering in June.

• City operations update: A second landscaping contractor has been added for weeds, trees, and medians; weed abatement crews are working to meet the June 1 fire deadline with 30-foot clearances; public works director finalists are being interviewed this week; and the assistant city manager/city clerk position has opened for recruitment.

• Resident Glenn Miller, citing his degree in soils mechanics, presented photos during public comment documenting active slope movement near a high-pressure pipeline (confirmed by inclinometer data), road embankment sloughing blocking curb gutters, fire hazards from vegetation, and a V ditch drain inlet uncleaned for three to four years. He said he had raised the issues for years without resolution.

• Councilmember Trupiano announced Concerts in the Grove starting May 16.