HomeMy WebLinkAbout2024-11-12; City Council; ; Economic and Financial Update for the First Quarter of Fiscal Year 2024-25CA Review AZ
Meeting Date: Nov. 12, 2024
To: Mayor and City Council
From: Scott Chadwick, City Manager
Staff Contact: Zach Korach, Finance Director
zach.korach@carlsbadca.gov, 442-339-2127
Matt Sanford, Economic Development Director
matt.sanford@carlsbadca.gov, 442-339-5987
Subject: Economic and Financial Update for the First Quarter of Fiscal Year
2024-25
Districts: All
Recommended Actions
Receive a report on the economic and financial update for the first quarter of fiscal year 2024-
25 and provide direction as appropriate.
Executive Summary
The City Manager has committed to providing quarterly updates to the City Council on the city’s
economic outlook and finances. The update reviews the city’s economic and fiscal health and
serves as a measure of budgetary performance.
In this report, staff will provide a presentation on:
•National, state, regional and Carlsbad-specific economic data
•The city’s most recent financial data
This report also details recent economic trends and information on current impacts on our local
economy. In line with regional trends, Carlsbad experienced increases in revenues in almost all
categories when compared to the same quarter in the previous fiscal year, and expenditures
are in line with the prior year’s rate of spending.
Explanation & Analysis
Economic update
Carlsbad’s economy is diverse, has strong industry clusters and is a leader in innovation. The
city is home to five key industry clusters that are driving growth:
•Life sciences
•Information and communications technologies
•Clean technology (Technologies focused on the environment and natural resources)
•Sports innovation and design
•Hospitality and tourism
Nov. 12, 2024 Item #10 Page 1 of 29
In 2023 Carlsbad had a gross regional product of $17.2 billion, indicating that Carlsbad has the
largest economy in the county behind the City of San Diego. This reflected growth over the
previous year of $600 million – a growth rate of 3.6% over the previous year. In addition,
among the county's 18 cities, Carlsbad’s hospitality and tourism industry generates the second-
highest amount of transient occupancy tax, the tax assessed on local hotel, motel and short-
term vacation rental stays.
Carlsbad’s unemployment rate has remained steady between 3% and 4% for the past year,
ending the latest quarter at 4.4%. Overall, unemployment in Carlsbad has remained low. Job
opportunities continue to outnumber available workers, keeping overall unemployment in
Carlsbad and the San Diego region down. There were 9,056 unique job postings in Carlsbad
between July and September, a similar number of postings as the previous quarter. Over the
quarter, 1,478 different Carlsbad employers posted open positions.
Despite a slow-down period in hiring and increased layoffs through the previous two quarters,
the labor market remains tight, though employers have expressed optimism for the future.
Overall, regional economic indicators suggest a healthy economy with a positive outlook for the
coming year, underpinned by strong labor demand and strategic adjustments within key
industries.
Commercial office and industrial vacancies have fluctuated over the past year. On the industrial
side, a few notable leases accounted for a drop in the overall vacancy, which is now 6.8%, and
commercial brokers have not expressed any concern about future leasing. A continued increase
in the office vacancy rate can be attributed to employers reducing office space to meet their
current needs, a trend that commercial real estate experts expect to continue over the next
12-18 months. Carlsbad has fared better than most cities in this area, which have experienced a
hollowing out in office tenants, but staff will continue to monitor this trend.
As of the last quarter, the U.S. economy remained in a period of moderate growth, with gross
domestic product increasing by an estimated 2.1%. Consumer spending continues to be a key
driver of this growth, buoyed by a resilient labor market and wage gains. However, this
persistent consumer demand has also contributed to inflationary pressures. Inflation nationally
has been going in the right direction, hovering around 2.4% as of September, while in San Diego
County, inflation rates have eased to 2.5%, reflecting some localized relief in housing and
energy costs.
The Federal Reserve has begun to lower interest rates, cutting the benchmark interest rate by
50 basis points, or .5%, in September, as economic output began to show signs of slowing and
inflation remained in check. The Fed has signaled potential further rate reductions this year, but
it is unclear when specifically it will choose to do so and by how much.
Overall, the U.S. economy is still navigating inflationary challenges, but the outlook remains
cautiously optimistic as growth persists, the labor market remains strong and there is seemingly
no immediate risk of contraction.
Nov. 12, 2024 Item #10 Page 2 of 29
Carlsbad home prices have remained relatively steady over the past six months. Consumer
demand and low inventory have kept mortgage rates elevated. Real estate experts have
suggested that further rate drops will be needed before mortgage rates drop further and
transactions pick up. The current median home price is $1.52 million, an increase of 5% over
the last year.
To ensure the city remains responsive to the changing landscape, staff have capitalized on
greater in-house economic data capabilities and analytics developed over the past year to
publish a quarterly economic scan. The complete economic scan for the first quarter of fiscal
year 2024-25 is provided as Exhibit 1.
Staff also publish relevant data on the city’s economic development site,
carlsbadca.gov/doingbusiness.
Financial update
The COVID-19 pandemic created immense uncertainty in the city’s revenues, most notably
those from the sales tax and transient occupancy tax. The fiscal year 2021-22 adopted budget
anticipated continued adverse impacts from the pandemic with moderate recovery. However,
General Fund revenues, specifically property, sales and transient occupancy tax revenues,
reached historically high levels in fiscal years 2021-22 and 2022-23. This was mainly due to the
staggered removal of pandemic restrictions, coupled with pent-up demand and inflationary
increases.
When the city was developing the fiscal year 2022-23 adopted budget, unprecedented
inflationary increases and its anticipated impacts on disposable income, personal savings,
tourism and the housing market drove a need for conservative revenue estimating and budget
tightening. As fiscal year 2022-23 ended, the primary revenue sources for the city’s General
Fund continued to persevere through the high inflationary period, sustained by strong
consumer demand.
Fiscal year 2023-24 experienced strong growth and revenue performance, specifically with
property tax and sales tax. However, as the year progressed, indications of an economic
slowdown became more evident. The total amount of taxable receipts began to decline when
compared to previous periods, and transient occupancy tax revenues ended the year very
similarly to the prior year.
Although the General Fund’s base revenues increased above original expectations in fiscal year
2023-24, as the city continues through fiscal year 2024-25, it will be critical to monitor the city’s
revenues and expenditures and take necessary proactive steps to try to mitigate economic
uncertainties.
The September 2024 Financial Status Report is provided as Exhibit 2.
Nov. 12, 2024 Item #10 Page 3 of 29
Revenues
Revenues from the General Fund’s top three revenue sources – property, sales and transient
occupancy taxes – reached historic highs in fiscal year 2023-24. However, there were
indications that some revenue streams were beginning to level off, which is expected to
continue through the current fiscal year. The table below shows the differences in revenue
when comparing the first quarter of fiscal year 2024-25 with the same period in the prior fiscal
year.
Fiscal year 2024-25 year-to-date revenues as of September 2024
compared to fiscal year 2023-24 as of September 2023
Revenue category Change ($) Change (%)
Transient occupancy tax $452,709 4%
Property tax $589,765 14%
Sales tax -$22,688 -0.1%
Charges for services $595,002 16%
Investments, property income $837,203 49%
Interdepartmental charges -$180,239 -12%
Licenses and permits $146,483 20%
Other revenue sources -$125,762 -53%
Fines and forfeitures $4,947 5%
Intergovernmental -$243,014 -38%
Other taxes $47,624 1.8%
Total revenues $2,102,030 5%
Major revenue sources
Property tax
The majority of property tax revenue is collected in December and April each year. Increases of
$590,000 for the first quarter of the fiscal year are due to an 4.99% increase in assessed
property values when compared to last year. Revenue from aircraft taxes has also increased
due to an increase in aircraft assessed values from the aircrafts housed at the county’s
McClellan-Palomar Airport.
Sales tax
For the first quarter of the fiscal year, sales tax revenue was $22,700, or 0.1%, lower than the
same period in the previous fiscal year. To date, sales tax revenue represents receipts that were
collected for the second quarter of calendar year 2024 as well as the first advance of the city’s
sales tax revenue from the third calendar quarter of 2024.
In fiscal year 2021-22, the city experienced accelerated recovery after the impacts of the
COVID-19 pandemic. Fiscal year 2022-23 had historically high levels of sales tax revenues driven
by inflation and sustained by consumer demand. Although fiscal year 2023-24 saw another
historical high, much of the growth was driven by inflation as well as a correction of an error
made by one particular auto dealer, which has since been remedied. Fiscal year 2023-24
Nov. 12, 2024 Item #10 Page 4 of 29
revealed a leveling off of sales growth and a slowdown in consumer activity. This leveling off
continues into the current fiscal year as revenue trends remain slightly lower than a year ago
overall. Consumers are more likely to wait for greater improvement of household economic
conditions before extending themselves again, inspiring the next sales tax growth cycle.
The largest economic segments in the city are automobile dealers, general consumer goods and
restaurants. Together, they generate approximately 78% of the city’s sales tax revenue. For
sales occurring in the fourth calendar quarter of 2024, the most recent data available shows
Carlsbad’s sales were down 6.1% when compared to the second quarter of 2023.
The city’s largest sector, auto dealers, showed weakened new car sales, which are largely
attributed to continued high-interest rates that have caused consumers to hesitate on high
dollar purchases, like vehicles. Solid activity from local restaurants, including quick-service and
fast-causal establishments, partially offset the declines. General consumer goods saw mixed
results with growth from specialty stores and others outpacing diminished receipts from other
consumer good categories.
Transient occupancy tax
Year-to-date transient occupancy tax figures represent taxes collected on overnight hospitality
stays through August 2024. The revenue received in the first quarter of the fiscal year
represents an increase of $450,000, or 4%, when compared to the same year-to-date period
last year.
Average occupancy rates over the most recent 12 months have been 71.6%, which is slightly
higher when compared to this time last year, when they were 70.1%. Average daily room rates
in July, August and September of 2024 were 1% higher than the previous year on average.
While occupancy rates remain stable, it will be important to monitor the impact of average
daily room rate fluctuations on occupancy rates moving forward.
Expenditures and encumbrances
Overview
Total General Fund expenditures and encumbrances – those funds either spent or committed
for specific expenses – through the month of September 2024 are $81.0 million, compared to
$72.4 million at the same time last year. The remaining budget available through the fiscal year
ending June 30, 2025, is $172.3 million, or 68% of the total.
Excluding transfers out, contingencies and non-departmental charges, the percentage of
available budget that is not earmarked for specific expenses, as of Sept. 30, 2024, is 65.7%,
which is slightly less than the 67.5% available on Sept. 30, 2023.
Pension funding
The costs of CalPERS, the state pension system for government employees and pension
funding, has been and will continue to be a challenge for participating agencies like the City of
Carlsbad. CalPERS administers the city’s defined benefit pension plan, and costs have been
increasing in past years as CalPERS addresses a structural shortfall in the plan’s assets to cover
unfunded liabilities.
The city actively manages its unfunded pension liability to support CalPERS’ strategies for plan
sustainability and as part of the city’s strategic, long-term approach to financial management.
The City Council has approved additional discretionary payments of $56.4 million since
Nov. 12, 2024 Item #10 Page 5 of 29
fiscal year 2016-17 to decrease future costs related to the city’s unfunded actuarial liability and
strive to achieve a pension-funded status of 80% in accordance with City Council Policy 86.
As of June 30, 2023, CalPERS’ latest actuarial valuation report indicated the city had a combined
pension funded status of 73.7%, reduced from the prior year’s status of 74.6%. This reduction
was predominantly driven by CalPERS’ fiscal year 2022-23 investment return of 5.8%, which was
below its target of 6.8% and will be reflected in the city’s required contributions until fiscal year
2024-25.
The City Council approved the establishment of a post-employment benefits trust available to
public agencies – known as a Section 115 Trust – on Sept. 12, 2023. This trust allows the city to
stabilize pension cost volatility, maintain local control over the city’s assets and earn a
potentially higher rate of return than if the assets were kept within the General Fund. The City
Council approved an initial trust contribution of $10 million on Sept. 26, 2023.
As of Sept. 30, 2024, the city’s Section 115 Trust had a balance of $11,556,700, which includes
the initial $10 million contribution. Considering the assets held by CalPERS as well as the assets
held in the city’s trust, the combined pension funded status as of September 2024 is 75%.
Staff will continue to monitor the activities in the trust and report the city’s pension-funded
status to the City Council each quarter.
Enterprise funds
The city’s water and wastewater enterprise funds1 continue to operate in line with budgeted
expectations. Operations at the city’s municipal golf course, The Crossings at Carlsbad, have
remained relatively consistent year-over-year.
Fiscal Analysis
There is no fiscal impact associated with the first quarter economic and financial update.
Next Steps
Staff will continue to develop tools to understand the economy, attract businesses and cultivate
talent and provide quarterly updates to the City Council on the economic outlook and the city’s
finances.
Environmental Evaluation
This action does not require environmental review because it does not constitute a project
within the meaning of the California Environmental Quality Act under California Public
Resources Code Section 21065 in that it has no potential to cause either a direct physical
change or a reasonably foreseeable indirect physical change in the environment.
Exhibits
1. Carlsbad Economic Scan - Fiscal Year 2024-25 - Q1
2. September 2024 Financial Status Report
1 Enterprise funds are government funds usually used to account for operations that are financed and operated in
a manner similar to private business enterprises, with the services provided paid for primarily through user
charges.
Nov. 12, 2024 Item #10 Page 6 of 29
1
First Quarter, Fiscal Year 2024-2025
The following scan provides an overview of key economic indicators for July, August, and September 2024
for the City of Carlsbad. This economic scan is updated quarterly to provide information that is relevant to
the health of Carlsbad’s economy. For regularly updated information regarding the Carlsbad economy and
economic development visit carlsbadca.gov/doingbusiness.
GROSS REGIONAL PRODUCT
Carlsbad GRP (Source: Lightcast, 2024)
$17.2B In 2023, Carlsbad had the second largest gross regional product in
San Diego County at more than $17.2B, only trailing the City of San
Diego. From 2022 to 2023, Carlsbad’s GRP grew by $600 million representing a growth rate of 3.6%. This growth was seen across
almost all industry categories, and was led by manufacturing,
wholesale trade, hospitality, and professional, scientific, and
technical services.
JOBS
Unemployment Rate (Source: California Employment Development Department, Sep. 2024 Report)
Carlsbad’s unemployment rate has remained steady between 3% and 4% for the past year, ending the latest quarter at 4.4%.
Overall, unemployment in Carlsbad has remained low and employers have expressed confidence in hiring. Job opportunities
continue to outnumber available workers, keeping overall unemployment in Carlsbad and the San Diego region down. The
unemployment rate in September was 5.3% at the state level and 4.6% at the county level.
0
1
2
3
4
5
6
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Carlsbad Unemployment Rate 2022 -2024
2022 2023 2024
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
Unemployment Rate Comparison
Last 12-Months
San Diego County California
North County Avg w/o Carlsbad Carlsbad
Innovation + Economic Development Department
Gross Regional Product
Released Nov 12, 2024
Exhibit 1
Nov. 12, 2024 Item #10 Page 7 of 29
Economic Scan
~ ft ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ 0¢' "<"o ~:>"' ..,,.❖ '<~ .;:,'I} .,.~' ..;:,"'->i. ..,.,,❖ '>~ .,_.::,% '4-<:[
----
{city of
Carlsbad
2
Job Postings (Source: Lightcast, July - September 2024)
9,056
There were 9,056 unique job postings in Carlsbad between July and September, a similar number of postings as the previous quarter.
Over the quarter, 1,478 different Carlsbad employers posted
open positions, a decrease of about 200 employers. The median
advertised salary for these postings was $52,400, continuing a
trend of higher wages. Of jobs posted, 70% indicated an education requirement of High School/GED or no requirement listed. 67% of
postings indicated less than a year of experience or no experience
was required, indicating there are a number of entry-level jobs
being posted.
In-Demand Skills (Source: Lightcast, September 2024)
Job Postings This Quarter
Marketing, Project Management, and Finance skills are currently among the most in-demand skills for Carlsbad employers,
showing rapid projected growth of over 19%. However, a noticeable gap remains in the availability of these skills, as seen by
the lower frequency in job postings compared to professional profiles.
Nov. 12, 2024 Item #10 Page 8 of 29
• Frequency in Job Postings
Marketing
Marketing (Profiles)
Project Management
Project Management (Profiles)
Merchandising
Merchandising (Profiles)
Selling Techniques
Selling Techniques (Profiles)
Auditing
Auditing (Profiles)
Accounting
Accounting (Profiles)
Finance
Finance (Profiles)
Restaurant Operation
Restaurant Operation (Profiles) L___J
New Product Development
New Product Development (Profiles)
Housekeeping
Housekeeping (Profiles)
0%
Skills Postings
Marketing 765
Project Management 685
Merchandising 626
Selling Techniques 614
Auditing 509
Accounting 456
Finance 455
Restaurant Operation 400
New Product Development 392
Housekeeping 388
I
•
I
I
% ofTotal Profiles Postings
8% 9,820
8% 6,993
7% 1,726
7% 2,276
6% 2,017
5% 2,897
5% 2,829
4% 721
4% 3,800
4% 118
• Frequency in Profiles
I
5% 10% 15%
% of Total Projected Skill Skill Growth Relative to
Profiles Growth Market
16% +23.0% aIBTillili1!Hl1ll11t
12% +19.8% &Mri\W♦
3% +15.0% 43i++•
4% ·1.2% CID .
3% +21.8% aIBTillili1!rll1ll1lt
5% +24.0% aIBTillili1'H~1l11t
5% +27.3% aIBTillili1'M~ll11t
1% +28.0% MMH\fol♦
6% +24.1% &Mri\W♦
0% +13.3% 4iirhAt
3
CAPITAL
Interest Rates (Source: U.S. Department of the Treasury, September 2024)
The Federal Reserve has begun to lower interest rates cutting the benchmark interest rate by 50 basis points, or .5%, as
economic output began to show signs of slowing and inflation remained in check. The Fed has signaled potential further
rate reductions this year but it is unclear when specifically they will choose to do so and by how much. In September, one-
year rates were 3.98%. Ten-year rates were 3.81%. 30-year rates were 4.14%. As of September, inflation figures for the San
Diego area decreased to 2.5% (3.4% less food and energy) over the past year. Nationally, inflation in September was 2.4%
(3.3% less food and energy).
September 2023
One-year interest rate 5.46%
10-year interest rate 4.59%
30-year interest rate 4.73%
September 2024
One-year interest rate 3.98%
10-year interest rate 3.81%
30-year interest rate 4.14%
COMMERCIAL REAL ESTATE
Market Vacancy Rates and Rent per Square Foot (Source: CoStar, September 2024)
Commercial vacancy rates continued to fluctuate across all three
categories this quarter. The industrial vacancy rate in September
dropped to 6.8%. The office vacancy rate in September rose to
14.4%. Retail vacancy in September remained steady at 5.5%.
Rental rates were relatively steady across all categories. Average
market rents per square foot, per year for office rates in
September were $37.94. Industrial rates in September were
$22.29. Retail rates in September were $47.78.
The Carlsbad office market continues to see a rise in available
space as remote and hybrid work continue impacting office
leases. With uncertain workforce dynamics and tight capital
markets, commercial developers are still largely holding off on
new office developments. This trend is predicted to continue for
the coming 12 - 18 months.
6.8%
Industrial vacancy rate
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
14.00%
16.00%
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
2021 2022 2023 2024
Carlsbad Commercial Vacancy Rates
Carlsbad Retail Carlsbad Office Carlsbad Industrial
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
14.00%
16.00%
Retail Office Industrial Retail Office Industrial
Carlsbad North County w/o Carlsbad
Vacancy Rate Comparison
Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
Nov. 12, 2024 Item #10 Page 9 of 29
I I .. ,-
■ • ■ ■ ■ ■ ■ ■ ■ ■ ■ ■
4
TOURISM
Occupancy averaged 79.33% in the first quarter, which is an increase over the same quarter for 2023 (77.07%). September in
particular had an occupancy rate of 74.2%, which was a 4% increase over September 2023.
42 With 42 hotels in Carlsbad, tourism is a major industry in terms of
employment and economic impact. It is also a major contributor
to city revenue, through TOT and sales tax generation. Below
are several indicators reflecting the health of the city’s tourism economy.
Hotel Occupancy (Source: Smith Travel Research, September 2024 Report)
Carlsbad’s average daily room rate (ADR) for the quarter was a strong $257.58 an increase over 2023 levels ($255.43). This
upward trend highlights Carlsbad’s continued demand as a tourist destination, with higher room rates demonstrating the region’s
resilience and appeal. These figures suggest that Carlsbad continues to perform well compared to similar markets, bolstered by
both individual and family tourism and its role as a business travel hub.
Hotel Average Daily Room Rate (Source: Smith Travel Research, September 2024 Report)
0.00
50.00
100.00
150.00
200.00
250.00
300.00
350.00
Ju
l
Se
p
No
v
Ja
n
Ma
r
Ma
y
Ju
l
Se
p
No
v
Ja
n
Ma
r
Ma
y
Ju
l
Se
p
No
v
Ja
n
Ma
r
Ma
y
Ju
l
Se
p
No
v
Ja
n
Ma
r
Ma
y
Ju
l
Se
p
2021 2022 2023 2024
Hotel Average Daily Rate Trend
0
10
20
30
40
50
60
70
80
90
100
Ju
l
Se
p
No
v
Ja
n
Ma
r
Ma
y
Ju
l
Se
p
No
v
Ja
n
Ma
r
Ma
y
Ju
l
Se
p
No
v
Ja
n
Ma
r
Ma
y
Ju
l
Se
p
No
v
Ja
n
Ma
r
Ma
y
Ju
l
Se
p
2021 2022 2023 2024
Hotel Occupancy Trend
0
1020
3040506070
8090
Hotel Occupancy Last 12 Months
San Diego County, CA City of Oceanside, CA
City of Newport Beach, CA City of Carlsbad
050
100150200
250300350
400450
Average Daily Rate Last 12 Months
San Diego County, CA City of Oceanside, CA
City of Newport Beach, CA City of Carlsbad
Hotels in Carlsbad
Nov. 12, 2024 Item #10 Page 10 of 29
r
5
INCOME + HOUSING
Median Household Income (Source: 2022 ACS 5-Year Estimates, the latest year available)
Median household income in Carlsbad continues to exceed county income levels. The median income for a household in
Carlsbad in 2022 was $146,596, (adjusted for inflation), which was $21,927 higher than the previous year, and $47,668
more than the county median household income. Carlsbad has generally outpaced the region in terms of household
income growth.
Median Home Price (Source: Zillow Home Value Index - September 2024)
Carlsbad home prices have remained relatively steady over the past six months. Consumer demand and low inventory
have kept mortgage rates elevated. Real estate experts have suggested that further rate drops will be needed before
mortgage rates drop further and transactions pick up. The current median home price is $1.52 million, an increase of 5%
over the last year.
$600,000.00
$700,000.00
$800,000.00
$900,000.00
$1,000,000.00
$1,100,000.00
$1,200,000.00
$1,300,000.00
$1,400,000.00
$1,500,000.00
$1,600,000.00
2020 2021 2022 2023 2024
Carlsbad Median Home Price
$-
$200,000.00
$400,000.00
$600,000.00
$800,000.00
$1,000,000.00
$1,200,000.00
$1,400,000.00
$1,600,000.00
$1,800,000.00
Median Home Price Comparison, Last 12-Months
Carlsbad Escondidio Oceanside San Marcos Vista
Nov. 12, 2024 Item #10 Page 11 of 29
2017 2018 2019 2020 2021 2022
City of Carlsbad
Median Household Income $102,722 $107,172 $123,409 $112,933 $124,669 $146,596
County of San Diego
Median Household Income $70,588 $74,855 $79,324 $82 ,426 $91,003 $98,928
City of Carlsbad
per Capita Income $52,560 $55,518 $63,079 $57,607 $65,430 $66,944
County of San Diego
per Capita Income $34,350 $36,156 $40,389 $39,737 $44,377 $46,957
6
BUSINESS ACTIVITY
Building Permits (Source: City of Carlsbad, September 2024)
Between July and September, permit activity continued a
general decreasing trend for residential building permits
(879).
Commercial permits issued (101) marked a slight decrease
over the same quarter of 2023.0
200
400
600
800
1000
1200
1400
1600
Co
m
m
e
r
c
i
a
l
Re
s
i
d
e
n
t
i
a
l
Co
m
m
e
r
c
i
a
l
Re
s
i
d
e
n
t
i
a
l
Co
m
m
e
r
c
i
a
l
Re
s
i
d
e
n
t
i
a
l
Co
m
m
e
r
c
i
a
l
Re
s
i
d
e
n
t
i
a
l
2021 2022 2023 2024
Building Permits Issued
Q1 Q2 Q3 Q4
Business Licenses (Source: City of Carlsbad, September 2024)
There were a total of 2,498 business licenses issued last
quarter, including 1,020 non-residential, 603 residential, and 875
outside-the-city licenses. This is an overall increase of 62 total
businesses over the same quarter of 2023. The total number of
active Carlsbad business licenses is 9,899.
The number of licenses issued does not reflect the number of businesses
in Carlsbad as a business may carry multiple licenses, short-term
vacation rentals are required to get a license, and businesses outside of
Carlsbad that do business in the city or with the city are required to get
a license. It is estimated that there are approximately 6,594 businesses
in Carlsbad, an increase of 241 total businesses over the previous year.
0
500
1000
1500
2000
2500
3000
Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
2022 2023 2024
Business Licenses Issued by Quarter
Non-Residential Residential Outside City Total
Carlsbad Businesses by City Council District
Business License Activity by District
Nov. 12, 2024 Item #10 Page 12 of 29
---
New Businesses
Renewed Businesses
Total Businesses
Legend
-C.,....,.0.h:1:2 ,_. ..... ,
• • • •
District 1 District 2 District 3 District 4 Shared
32 31 11 15 0
464 646 221 195 0
496 677 232 210 0
7
BUSINESS ACTIVITY Continued
Largest Employers (Source: City of Carlsbad, September 2024)
The following is a list of the largest employers by City Council district based on information about total employment as
submitted by a business during the business license process.
New Businesses in Carlsbad (Source: City of Carlsbad, September 2024)
New business are defined as entities that have received a license for a location where they previously did not exist. This could also include existing businesses that have changed ownership or business license type. The information below
includes new non-home-based businesses in the city according to business license filings.
District 1
• Pretty Please Fashion
• Carlsbad Village Yoga Co-Op• Laguna Estates
• Carlsbad By the Sea
• Bayshore Carlsbad
District 2
• Viasat Inc
• Legoland California• Thermo Fisher
• lonis Pharmaceuticals
• North Coast Medical
District 3
• Costco
• Aerotek
• Hilton Garden Inn
• The Neurology Center of SoCal• Vons
District 4
• Omni La Costa
• La Costa Glen Carlsbad CCRC
• Glenbrook HC
• Ralphs Grocery Company• Vons
Everything BrandingReef Dermatology
Rinjanie Batik and Accessories
LAZ Parking - Carlsbad Village
Ah Hair
I Had Those ToysToni Gee and Co
The Shop
FOU Water
Route Manager Software and Development Inc
Natalie Lopez
Pamela Katheryn
HeyDude
Lawgistics Inc
Surplus Breakers and Motor Control
Studio Money
Discovery Children’s Dentistry
and Orthodontics
Columbia Sportswear
PrideStaff Carlsbad
Surf Up Chicken
Summer23 Inc
Brooke’s Nails
Indigo Civil Engineering Inc
SBMC Carlsbad LLC
Precious Metals Refinery LLC
Coastal Patent PC
Royal Hospitality Holdings LLC
Dr. Gary Loos Brain Body Reset
Sabor a Vida Cafe and Deli
Phoenix Jasmine
Entos Pharmaceuticals US Inc
Caliber Auto Glass Honey Palm Psychotherapy Inc
Oak Optometric Care CA NakedMD Inc
District 1
District 4
District 3
District 2
Nov. 12, 2024 Item #10 Page 13 of 29
8
INDUSTRY CLUSTERS
Life Sciences (Source: 2022 Biennial Business Survey and Industry Cluster Update)
The Life Sciences industry cluster employs 6,657 workers across 134 firms and experienced a 2.6% increase in employment
between 2018 and 2020. The cluster is 5.51 times more concentrated in Carlsbad than the national average and annual
wages per worker average $123,702.
San Diego County and California have experienced parallel employment growth in the Life Sciences cluster between
2010 and 2020. In the same ten-year period, employment in Carlsbad grew by 75%. Between 2016 and 2018, Carlsbad
experienced over 40% growth. Over the past two years (2018-2020), however, employment growth tapered off compared
to years prior.
Technology (Source: 2022 Biennial Business Survey and Industry Cluster Update)
The Information and Communications Technologies (ICT) cluster employs 9,008 workers across 343 firms in Carlsbad and is
2.75 times more concentrated in Carlsbad than the national average. Annual wages per worker average $136,254, and the
ICT industry cluster experienced a 3.3% increase in the number of jobs between 2018 and 2020.
San Diego County and California experienced steady parallel growth in the ICT cluster between 2010 and 2020. In the same ten-year period, Carlsbad experienced an initial decline in employment between 2012 and 2015; between 2015 and 2020,
employment in the ICT cluster has steadily trended upwards.
Cleantech (Source: 2022 Biennial Business Survey and Industry Cluster Update)
Between 2018 and 2020, the number of workers employed at Cleantech firms increased by 22.2%. By 2019, the 48
Cleantech firms in Carlsbad employed more than 872 people. The average annual wage per worker is $109,779, and the
Cleantech industry cluster in Carlsbad is 4.66 times more concentrated than the national average.
Between 2010 and 2012, Carlsbad experienced an initial employment drop for the Cleantech industry followed by steady
growth between 2012 and 2020. Employment growth in California peaked in 2013 and has been on a steady decline since.
Growth in San Diego County also peaked in 2013, dropping by over 25% between 2013 and 2017. Since 2017, employment
in the Cleantech cluster for San Diego County has been on a steady increase.
Sports Innovation & Design (Source: 2022 Biennial Business Survey and Industry Cluster Update)
The Sports Innovation & Design industry cluster employs 1,804 workers across 116 firms and experienced a 16.3% decrease
in employment between 2018 and 2020. The cluster is 5.06 times more concentrated in Carlsbad than the national average
and annual wages per worker average $75,652.
Employment in the Sports Innovation & Design cluster has steadily declined since 2013 in Carlsbad. Both San Diego County
and California have declined steadily since 2015 and experienced sharp declines between 2019 and 2020, likely due to the
COVID-19 pandemic.
Hospitality & Tourism (Source: 2022 Biennial Business Survey and Industry Cluster Update)
Carlsbad’s Hospitality & Tourism cluster is about 1.35 times more concentrated in Carlsbad than the national average and
employs 9,179 people across 467 businesses. Hospitality & Tourism experienced a sharp 34% decrease in employment
between 2018 and 2020, driven by the effects of the COVID-19 pandemic between 2019 and 2020. Average annual wages
per worker remain low relative to other key industry clusters, with workers earning $31,315 on average.
Carlsbad, San Diego County, and California experienced sharp declines between 2019 and 2020, during which sub-clusters
like Theater Companies and Dinner Theaters, Amusement and Theme Parks, and Amusement Arcades were shut down to
mitigate the effects of the COVID-19 pandemic.Nov. 12, 2024 Item #10 Page 14 of 29
9
INDUSTRY IMPACT
Largest Industries (Source: Lightcast, September 2024)
Carlsbad’s economy significantly exceeds the national average for jobs in manufacturing, accommodation & food services,
and professional, scientific & technical services. These sectors, which would include tech, life sciences, and other innovation
industries are generally more resilient to recessions, also represent significant job growth in the economy.
GRP by Industry
Industry size by employment
Nov. 12, 2024 Item #10 Page 15 of 29
• Gross Regional Product
Manufacturing
Professional, Scientific. and Technical Services
Wholesale Trade
Government
Retail Trade
Finance and Insurance
Information
Accommodation and Food Services
Health Care and Social Assistance
Real Estate and Rental and Leasing
Administrative and Support and Waste Management and
Remediation Services
Construction
Arts, Entertainment, and Recreation
Management of Companies and Enterp.-ises
Other Services (except Public Administration)
Utilities
Transportation and Warehousing
Educational Services
Agriculture, Forestry. Fishing and Hunting
• Industry Jobs
Manufacturing
Professional, Scientific. and Technical Services
Accommodation and Food Services
Retail Trade
Gove.-nment
Health Care and Social Assistance
Wholesale Trade
Administrative and Support and Waste Management and
Remediation Services
Other Services (except Public Administration)
Arts, Entertainment, and Recreation
Construction
Finance and Insurance
Real Estate and Rental and Leasing
Educational Services
Transportation and Warehousing
Information
Management of Companies and Enterprises
Utilities
Agriculture, Forestry, Fishing and Hunting
-■I
I
0
--
I
I
I
2 .000
S1.000B
• National Average
I
I
I
I
I
4.000 6 .000
$2 000B S3.000B
1•
I
I
8 .000 10.000 12.000
10
INNOVATION
Patents (Source: 2024 Carlsbad Patent Study)
The Carlsbad innovation economy is powered by the key industry clusters of Life Sciences, Information & Communications
Technology, Sports Innovation & Design and Clean Technology. The figure below shows consistently strong patent activity
over the past decade with an elevated level from 2017-2020. Patents are a key indicator of economic competitiveness and
growth. In the case of Carlsbad it also demonstrates the diversity of the economy along with other economic drivers such
as tourism.
Carlsbad Patents by Industry
0
200
400
600
800
1000
1200
1400
1600
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Carlsbad Patents by Year, 2013-2023
The highest number of patents
are issued in the broad
manufacturing category which
includes technology, electronics,
apparel, sporting goods, and
transportation. Complimenting
this are the patents issued in
the information category which
includes satellite, wireless, and
wired telecommunications.
Patents in these two categories
demonstrate a vibrant innovation
ecosystem.
Released November 12, 2024
The quarterly economic scan is developed by the City of Carlsbad Innovation & Economic Development Department.
For more information, visit carlsbadca.gov/doingbusiness, or contact the team at business@carlsbadca.gov.
0
100
200
300
400
500
600
700
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Patent Count per Year by Industry (2013-2023)
Administrative and Support and Waste Management and Remediation Services Agriculture, Forestry, Fishing and Hunting
Arts, Entertainment, and Recreation Construction
Educational Services Health Care and Social Assistance
Information Manufacturing
Professional, Scientific, and Technical Services Real Estate and Rental and Leasing
Retail Trade Transportation and Warehousing
Nov. 12, 2024 Item #10 Page 16 of 29
+
+
+ +
Exhibit 2
This report summarizes the City of Carlsbad’s General Fund revenues and expenditures through September
30, 2024. It compares revenues and expenditures for the first three months of fiscal year 2024-25 and fiscal
year 2023-24. In addition, the financial status of the Water, Wastewater and Golf Course Enterprise Funds are
included. This report is for internal use only. The figures presented here are unaudited and have not been
prepared in accordance with Generally Accepted Accounting Principles.
General Fund Revenues
Property Taxes ($4.8 million) – The majority of property tax revenue is collected
in December and April each year. According to the County of San Diego
Assessor’s Office, assessed values in Carlsbad have increased by 4.99% for fiscal
year 2024-25. This is the 12th year in a row that Carlsbad’s assessed values have
increased from year to year, and in line with assessed value increases with other
cities in San Diego County for the year. The increase in this year’s assessed values
is due to increases in the assessed values of residential, 4.8%, and industrial, 7.4%, properties in the city; the city
saw a smaller increase, 1.5%, in commercial property values for the year. This is the 10th year in a row since the
Great Recession ended that the city saw increases in assessed values in all three property components
(residential, commercial and industrial). Although increases in residential assessed values were recorded for
fiscal year 2024-25 and for-sale home prices are remaining steady, the county is experiencing historically low
for-sale housing inventory as higher interest rates are decreasing home affordability.
The property taxes for the first three months of the fiscal year have increased by 14% as compared to the prior
fiscal year. The primary reasons for the increase are:
•Current taxes are up by $156,600 or 11.4% mainly due to increased assessed property values. The first
installment of taxes will be received by the city in December.
•A higher dollar amount of prior year’s property taxes was collected in the first three months of the
current fiscal year ($365,800) when compared to this time last year ($262,700).
•Aircraft taxes are also up $370,000 or 15% due to an increase in aircraft assessed values.
Sales Taxes ($15.6 million) – For the three months of the fiscal year, sales tax
revenues are $22,700, or 0.1%, lower than the same period in the previous fiscal
year. Sales tax revenues to date for the current fiscal year represent the city’s
sales tax revenues for the second calendar quarter of calendar year 2024 as well
as the first advance for the third calendar quarter of 2024.
In fiscal year 2021-22, the city experienced accelerated recovery after the impacts
of the COVID-19 pandemic. Fiscal year 2022-23 saw historically high levels of sales tax revenues driven by
inflation and sustained by consumer demand. Fiscal year 2023-24 revealed a leveling off of sales growth and
slowdown in consumer activity. This leveling off continues into the current fiscal year as revenue trends remain
slightly lower than a year ago overall. Consumers are more likely to wait for greater improvement of household
economic conditions before extending themselves again, inspiring the next sales tax growth cycle.
September 30, 2024
14%
-0.1%
Nov. 12, 2024 Item #10 Page 17 of 29
PRE.P,AREO BY THE Fl:NANCE 01EPAR:TMENT
Financia l Status Report
FOR
SALE
{city of
Ca,rlsbad
Quarterly Financial Report _______________________________________________________________ 2
The largest economic segments in the city are automobile dealers, general consumer goods, and restaurants.
Together, they generate approximately 78% of the city’s sales tax revenues. For sales occurring in the second
calendar quarter of 2024 (the most recent data available), Carlsbad’s sales were down 6.1%, when compared to
the second quarter of 2023. The city’s largest sector, auto dealers, showed weakened new car sales, which are
largely attributed to the continued high-interest rate environment resulting in consumers hesitating on high
dollar purchases, like vehicles. Solid activity from local restaurants, including quick-service and fast-causal
establishments, partially offset the declines. General consumer goods saw mixed results with growth from
specialty stores and others outpacing diminished receipts from other consumer good categories.
Transient Occupancy Tax ($12.1 million) – The city’s third highest General Fund
revenue source on an annual basis is Transient Occupancy Tax (TOT or hotel tax),
estimated at $34.8 million for the current fiscal year. A tax of 10% of the rent
amount is collected on all occupancies less than 30 days (transient) in duration.
Year-to-date TOT figures represent taxes collected on hotel receipts through the
month of August 2024. TOT collected for the first three months of the fiscal year
reflects an increase of $450,000 or 4%, when compared to the previous year.
Currently, there are 5,059 hotel rooms in the city and 449 registered short-term vacation rentals. The average
occupancy of hotel rooms over the most recent 12 months has been 71.6% which is slightly higher when
compared to this time last year (70.1% last year). Average daily room rates in July, August and September of
2024 were 1% higher than the previous year on average. While occupancy rates remain stable, it will be
important to monitor the impact of average daily room rate fluctuations on occupancy rates moving forward.
Business License Tax ($1.5 million) – All entities doing business in the City of
Carlsbad are required to have a valid business license. Business license revenue is
estimated at $6.5 million for the current fiscal year. Business license revenues are
down slightly by $3,000, or 0.2%, from the previous fiscal year. The decrease is
due to a 3% increase in license renewal revenue offset by a reduction in penalty
revenue from overdue business license renewals when compared to the prior
year.
There are currently 9,899 active business licenses, 504 more than the prior year. The majority of taxed
businesses (6,721 businesses) are located in Carlsbad, with 2,550 of these businesses home-based.
Interdepartmental Charges ($1.3 million) – Interdepartmental charges are down
by $180,000 or 12% when compared with the same period last year. These
charges are generated through engineering services charged to capital projects;
reimbursed work from other funds; and miscellaneous interdepartmental
expenses charged to funds outside the General Fund for services performed by
departments within the General Fund. The decrease this year is the result of the
budgeted decrease in the miscellaneous interdepartmental expense charged
from the General Fund to other funds, which is based on the city’s most recent cost allocation plan.
Income from Investments and Property ($2.5 million) – For the first three
months of the fiscal year, income from investments and property is up $837,000
compared to the previous fiscal year. This increase is due to several factors
including a 26% rise in yield from 2.33% as of September 2023 to 2.93% as of
September 2024 along with a 2.3% increase in the average cash balance held in
the General Fund as well as interest earned of $716,000 fiscal year to date on
the city’s Section 115 Pension Trust. The City Council approved the establishment of a Section 115
Pension Trust in 2023 for purposes of mitigating CalPERS’ volatility, maintaining local control over city assets and
-12%
49%
-0.2%
4%
Nov. 12, 2024 Item #10 Page 18 of 29
Quarterly Financial Report _______________________________________________________________ 3
preparing for potential future decreases in CalPERS’ discount rate. An initial contribution of $10 million was
authorized by the City Council and deposited to the trust.
Throughout the pandemic, the Federal Reserve had maintained an effective benchmark interest rate between 0
and 0.25%. However, inflation which had been on a historic rise for much 2022 and into 2023 which resulted in
the Federal Reserve increasing benchmark rates all the way to a target range of 5.25%-5.5% as of July 2023, the
highest it has been in more than 20 years. This target remained until September 2024 when the reserve reduced
the target range to 4.75%-5.0%. Recent indicators suggest that economic activity has continued to expand at a
solid pace, the unemployment rate has moved up but remains low. Inflation has made further downward
progress, but still remains elevated. While many experts predict even more rate cuts in the months ahead, the
Federal Reserve has indicated it will proceed with caution.
Recreation Fees ($1.5 million) – Recreation fees are generated through
instructional classes, camps, youth and adult sports, special events, parent
participation preschool, senior programs, and various aquatic programs.
Recreation revenues are up by $53,400 compared to last year at this time. This
increase is attributable to an increase in instructional class revenue.
Development Related Revenues ($1.1 million) – Development related
revenues, which include building permits, planning fees, building department
fees, and engineering fees, reflect a 16% increase, or $156,900, for the first three
months of the fiscal year when compared to the same time last year.
Development related fees are paid by developers to cover a portion of the cost
of reviewing and monitoring development activities, such as plan checks and
inspections. Engineering plan check fees are one of the first fees paid during the initial stages of development.
Activity during the first quarter fiscal year 2024-25 included permits associated with the new residential
construction of 14 second dwelling units across the city, 29 condominiums (Coral Springs at Marja Acres), 11
apartments at Romeria Pointe and various homeowner improvements. Commercial building permit activity
included Toyota of Carlsbad (26,665 sq. ft.) and industrial permit activity included three shell buildings (61,753
sq. ft.) in the Carlsbad Oaks North Industrial Park.
One source of development related revenue is building permits, which are $425,900 for the current fiscal year
compared to $497,500 from the prior fiscal year, an 14% decrease. The year-to-date valuation of new
construction in the current fiscal year is $60.3 million. This represents a $45.3 million, or 42%, decrease in
valuation over the previous fiscal year.
Franchise Tax ($922,000) – Franchise taxes are generated from public utility
sources, such as San Diego Gas & Electric (SDG&E), trash collection franchises,
and cable franchises conducting business within city limits. Franchise tax
revenue is estimated to be at $8.9 million for the current fiscal year. Year-to-
date franchise taxes are $4,600 higher, or 1%, when compared to the same
period last year.
Cable television franchise revenues (Spectrum and AT&T) are down $36,000 representing a decrease in the
number of subscription service subscribers (premium video, equipment rental, on-demand, and programming
services) as more customers continue to move to streaming services. An increase in trash collection revenue
accounts for the increase in the $155,700 franchise fee, which resulted from the city’s most recent contract with
Republic Services, the city’s waste services provider.
SDG&E pays franchise taxes for the use of public land over which they transport gas and electric services. In
addition, SDG&E pays an “in-lieu” franchise tax based on the value of gas and electricity transported through
SDG&E lines but purchased from another source. The “in-lieu” tax was put in place to capture the franchise taxes
4%
16%
1%
Nov. 12, 2024 Item #10 Page 19 of 29
Quarterly Financial Report _______________________________________________________________ 4
on gas and electricity that is transported using public lands, but which would not otherwise be included in the
calculations for franchise taxes. Approximately 48% of the city’s franchise taxes are anticipated to be received
from SDG&E in April 2025.
Ambulance Fees ($1.9 million) – The city bills any individual who is transported
in one of the city’s ambulances. Through September 2024, receipts from
ambulance fees are up $286,000 million, or 18%, compared to last fiscal year.
The increase in revenue for the three months of the fiscal year is mainly due to
changes to the ambulance fee schedule that the City Council approved in June
2023 based on an updated cost of service study (increases effective Sept 1,
2023). Billable transports totaled 1,893 in the first three months of fiscal year
2024-25 versus 2,002 at the same time in the prior fiscal year.
Other Revenue Sources ($112,000) – Other revenue sources have decreased by
$126,000 when compared to the prior year and include revenues received by
the city to offset the costs of special studies or projects for developers;
reimbursements for damage done to city streets, rights-of-way, and other city-
owned property; donations; and miscellaneous reimbursed expenses. The
decrease to date is related to a decrease in general reimbursed expenses when
compared to the prior year.
Other Licenses and Permits ($447,000) – Other licenses and permits consist of
fire protection services, right-of-way, lagoon, grading, hazardous uses, and other
miscellaneous permit revenues. These permits usually increase/decrease along
with increases/decreases in development activity. Other licenses and permit
revenues can vary throughout the year. To date, the increase of $218,000 over
the prior year is primarily a result of increased right of way ($103,000), coastal
development and grading permits ($87,700) and fire inspection services
($18,900) when compared to the same period last year.
Fines and Forfeitures ($109,000) – Fines and forfeitures represent fees
collected for code violations, parking citations, overdue fines, and returned
checks. The city recognizes revenues when the citizen pays the fine or forfeiture,
as opposed to when the fine is imposed. The increase to date of $5,000 is due
to increases in code violation assessments when compared to the previous fiscal
year.
Intergovernmental Revenues ($390,500) – Intergovernmental revenues include
homeowners property tax exemption revenue and miscellaneous receipts and
grants received from the state or federal governments, as well as local school
districts. Various miscellaneous receipts comprise the $390,500 received this
year which represents a decrease of 38% over the same period last year. This
decrease is due to state reimbursements received for two planning related state
grant awards in the prior year. These grants were completed in the prior year
and no additional receipts this fiscal year will be received.
18%
95%
-53%
-38%
5%
Nov. 12, 2024 Item #10 Page 20 of 29
~·~
Quarterly Financial Report _______________________________________________________________ 5
Transfer Taxes ($204,000) – When real property is sold, the County Assessor’s
Office charges a transfer tax. The transfer tax rate in San Diego County is $0.0011
multiplied by the selling price of the property. The city receives 50% of the
transfer tax charged for sales within the City of Carlsbad. Revenues have
increased over the same period last year due to an increase in property transfers.
Other Charges or Fees ($149,600) – Other charges or fees are generated through
the sale of city documents, such as staff reports, blueprints and copies; general
fees collected for false alarms, easements and agreements, weed abatement
and kiosk signs; and general services, such as mutual aid response, mall police
services, emergency response services, reports, etc. These fees are up by
$26,800, or 22% mainly due to an increase in mutual aid response
reimbursements when compared to the prior fiscal year.
A detailed schedule of General Fund revenues is provided below:
29%
22%
Nov. 12, 2024Item #10 Page 21 of 29
nl
Quarterly Financial Report _______________________________________________________________ 6
REVENUE
REVENUE EXPECTED ACTUAL ACTUAL CHANGE FROM
BUDGETED THROUGH FY 2024 FY 2025 YTD 2024 TO PERCENT
FOR FY 2024-25 09/30/24 AS OF 09/30/23 AS OF 09/30/24 YTD 2025 CHANGE
TAXES
PROPERTY TAX $94,901,892 $4,332,673 $4,254,488 $4,844,253 $589,765 14%
SALES TAX 59,382,534 16,099,928 15,685,796 15,663,108 (22,688) 0%
TRANSIENT OCCUPANCY TAX 34,776,940 11,900,339 11,648,275 12,100,984 452,709 4%
FRANCHISE TAX 8,883,315 1,010,046 917,206 921,847 4,641 1%
BUSINESS LICENSE TAX 6,560,060 1,543,846 1,517,020 1,514,031 (2,989) 0%
TRANSFER TAX 1,676,136 196,494 157,882 203,854 45,972 29%
TOTAL TAXES 206,180,877 35,083,327 34,180,667 35,248,077 1,067,410 3%
INTERGOVERNMENTAL
VEHICLE LICENSE FEES 140,000 0 0 0 0 0%
HOMEOWNERS EXEMPTIONS 245,000 0 0 0 0 0%
OTHER REIMBURSEMENT 544,000 227,787 633,560 390,546 (243,014) -38%
TOTAL INTERGOVERNMENTAL 929,000 227,787 633,560 390,546 (243,014) -38%
LICENSES AND PERMITS
BUILDING PERMITS 2,400,000 648,108 497,495 425,869 (71,626) -14%
OTHER LICENSES & PERMITS 973,500 186,116 229,200 447,309 218,109 95%
TOTAL LICENSES & PERMITS 3,373,500 834,225 726,695 873,178 146,483 20%
CHARGES FOR SERVICES
PLANNING FEES 813,000 148,630 156,746 292,383 135,637 87%
BUILDING DEPARTMENT FEES 924,000 230,531 186,209 157,740 (28,469) -15%
ENGINEERING FEES 872,000 146,155 141,848 263,169 121,321 86%
AMBULANCE FEES 7,650,000 1,862,235 1,597,552 1,883,790 286,238 18%
RECREATION FEES 3,459,066 1,506,299 1,437,308 1,490,736 53,428 4%
OTHER CHARGES OR FEES 1,690,500 124,196 122,728 149,575 26,847 22%
TOTAL CHARGES FOR SERVICES 15,408,566 4,018,045 3,642,391 4,237,393 595,002 16%
FINES AND FORFEITURES 351,700 87,915 103,898 108,845 4,947 5%
INCOME FROM INVESTMENTS & PROPERTY 7,041,490 1,307,078 1,705,816 2,543,019 837,203 49%
INTERDEPARTMENTAL CHARGES 5,427,750 1,339,136 1,500,405 1,320,166 (180,239) -12%
OTHER REVENUE SOURCES 348,500 149,101 237,692 111,930 (125,762) -53%
TRANSFERS IN 0 0 0 0 0 0%
TOTAL GENERAL FUND $239,061,383 $43,046,614 42,731,124 $44,833,154 $2,102,030 5%
(1)
(1) Calculated General Fund revenues are 4% above estimates as of September 30, 2024.
GENERAL FUNDREVENUE COMPARISON
Nov. 12, 2024 Item #10 Page 22 of 29
Quarterly Financial Report _______________________________________________________________ 7
Expenditures
Total General Fund expenditures and encumbrances – those funds either spent or committed for specific
expenses – through the month of September 2024 (the first three months of the fiscal year) are $81.0 million,
compared to $72.4 million at the same time last year. The remaining budget available through the fiscal year
ending June 30, 2025, is $172.3 million, or 68%. If funds were spent in the same proportion as the previous year,
the General Fund would have 70% or $168.7 million available. Excluding transfers out, contingencies, and non-
departmental charges, the percentage available on September 30, 2024, is 65.7%, 1.8% less than the 67.5%
available on September 30, 2023.
The fiscal year 2024-25 budget was developed with a focus on resiliency over the long-term during a time of
continued economic uncertainty. The adopted budget prioritizes the goals in the City Council’s 5-Year Strategic
Plan, which was based on input from thousands of community members and approved in 2022.
The adopted budget eliminates the projected General Fund deficit from the five-year financial forecast that had
been previously forecasted since 2019. A structural deficit describes a situation when projected ongoing
spending is greater than anticipated ongoing revenue. The city’s five-year financial forecast now shows a
balanced budget through 2031.
Healthy revenues, increased efficiencies, cost reductions and new budget policies and practices over the past
several years have worked together to close the gap. However, economic uncertainty remains as the city
transitions from focusing on building and development to maintaining what has been created. As such, the
adopted budget for fiscal year 2024-25 continues to focus on finding new cost savings and reducing ongoing
spending while continuing to grow city reserves, prioritizing capital project funding and maintaining high quality
service levels.
The adopted General Fund budget for fiscal year 2024-25 increased by 10.0% or $21.5 million when compared
to last fiscal year due to:
• Increased personnel costs (increase of $4.6 million or 3.6%):
o $1.3 million in salaries and wages due to negotiated salary increases offset by a reduction in total full-
time equivalent positions of 9.7.
o $2.1 million in retirement benefits costs.
o $0.2 million in health insurance costs.
o $0.9 million increase in other personnel costs (Medicare, unemployment and disability benefits).
• Increased maintenance and operations costs (increase of $0.7 million or 1.3%):
o Overall, total maintenance and operations costs were projected with small increase, Fiscal year 2021-22
and 2022-23 experienced inflationary increases ranging between 4.1% and 8.3% which drove the city’s
need to contain costs and identify areas for reduction with minimal service level impacts. Although
inflation has declined compared to previous periods, it was still ranging between 3.6% and 5.2% when
the FY 2024-25 budget was being developed. As a result, the fiscal year 2024-25 budget adopted a
minimal increase to maintenance and operations given the lingering inflation in the economy.
• Increase in transfers to other city funds (increase of $15.6 million or 71.4%):
o Per Council Policy 91, Long Term General Fund Capital Funding Policy, the city annually budgets 6% of
General Fund revenues as a transfer to the Infrastructure Replacement Fund, General Capital
Construction Fund and the Technology Investment Capital Fund to help fund major new construction,
maintenance and replacement of city infrastructure and facilities and the city’s future technology needs.
For FY 2024-25 this amounted to $14.4 million, split evenly between these three capital project funds.
o $13.8 million in additional transfers, compared with $7.4 million last year, was budgeted for the General
Capital Construction Fund resulting from the estimated General Fund surplus. The General Capital
Construction Fund is funded by the General Fund and includes many capital projects programmed in the
Nov. 12, 2024 Item #10 Page 23 of 29
Quarterly Financial Report _______________________________________________________________ 8
future. The level of funding necessary to fully fund these projects is an increasing concern. This one-time
transfer amount will assist with funding the city’s general capital construction into the future.
CalPERS and pension funding has been and will continue to be a challenge for participating agencies. CalPERS
administers the city’s defined benefit pension plan and costs have been increasing in past years as CalPERS
addresses a structural shortfall in plan assets to cover unfunded liabilities. In support of CalPERS strategies for
plan sustainability and as part of the city’s strategic, long-term approach to financial management, the city
actively manages its unfunded pension liability. Since fiscal year 2016-17, the City Council has approved
additional discretionary payments of $56.4 million to decrease future costs of the city’s unfunded actuarial
liability and strive to achieve a minimum pension-funded ratio of 80% funded, with a target funded ratio range
of 80% to 85%, in accordance with City Council Policy Statement No. 86.
CalPERS latest actuarial valuation report (as of June 30, 2023), the city had a combined pension funded status of
73.7%, reduced from the prior year’s status of 74.6%. This reduction was predominantly driven by CalPERS’ fiscal
year 2022-23 investment return of 5.8%, below their target of 6.8% and will be reflected in the city’s required
contributions in fiscal year 2025-26.
The City Council approved the establishment of a Public Agencies Post-Employment Benefits Trust (Section 115
Trust) in September 2023. This trust allows the city to stabilize pension cost volatility, maintain local control over
the city’s assets and earn a potentially higher rate of return than if the assets were kept within the General Fund.
The City Council approved an initial trust contribution of $10 million on September 26, 2023. As of September
30, 2024, the city’s Section 115 Trust had a balance of $11,556,700. Considering the assets held by CalPERS as
well as the assets held in the city’s trust, the combined pension funded status as of September 2024 is 75%.
Identifying a potential structural deficit early has allowed the city to take a thoughtful approach to solutions,
exploring new ways to reduce spending and increase revenue. While the projected future deficit has been
pushed out beyond the 5-year forecasted period, city staff will continue to monitor financial and economic
trends and provide regular updates to the City Council throughout fiscal year 2024-25.
A detailed schedule of General Fund expenditures is provided on the next page.
Nov. 12, 2024 Item #10 Page 24 of 29
Quarterly Financial Report _______________________________________________________________ 9
ADOPTED WORKING
BUDGET BUDGET AMOUNT AVAILABLE %
DEPARTMENT DESCRIPTION FY 2024-25 FY 2024-25 (a)COMMITTED (b)BALANCE AVAILABLE (c)
POLICY AND LEADERSHIP GROUP
CITY ATTORNEY $2,179,705 $2,179,705 $674,206 $1,505,499 69.1%
CITY CLERK 1,273,604 1,339,731 369,548 970,183 72.4%
CITY COUNCIL 599,047 601,542 140,179 461,363 76.7%
CITY MANAGER 2,105,683 2,169,188 643,882 1,525,306 70.3%CITY TREASURER 279,522 279,522 62,332 217,190 77.7%
COMMUNICATIONS & ENGAGEMENT 2,010,091 2,103,122 686,170 1,416,952 67.4%
TOTAL POLICY AND LEADERSHIP GROUP 8,447,652 8,672,810 2,576,317 6,096,493 70.3%
ADMINISTRATIVE SERVICES
ADMINISTRATION 796,196 819,540 196,467 623,073 76.0%
FINANCE 5,631,964 5,940,913 1,827,365 4,113,548 69.2%
HUMAN RESOURCES 5,136,218 5,475,539 1,485,180 3,990,359 72.9%
ECONOMIC DEVELOPMENT 891,866 1,149,065 482,549 666,516 58.0%
TOTAL ADMINISTRATIVE SERVICES 12,456,244 13,385,057 3,991,561 9,393,496 70.2%
PUBLIC SAFETY
POLICE 60,193,850 61,288,044 19,831,041 41,457,003 67.6%
FIRE 41,793,630 43,479,500 15,593,093 27,886,407 64.1%
TOTAL PUBLIC SAFETY 101,987,480 104,767,544 35,424,134 69,343,410 66.2%
COMMUNITY SERVICES
COMMUNITY SERVICES ADMINISTRATION 592,261 740,652 314,412 426,240 57.5%
COMMUNITY DEVELOPMENT 10,998,825 13,168,772 5,129,266 8,039,506 61.0%
HOUSING & HOMELESS SERVICES 3,232,287 3,565,212 1,606,517 1,958,695 54.9%
LIBRARY & CULTURAL ARTS 14,522,844 14,880,569 4,116,469 10,764,100 72.3%
PARKS & RECREATION 22,759,082 23,082,519 9,007,496 14,075,023 61.0%
TOTAL COMMUNITY SERVICES 52,105,299 55,437,724 20,174,160 35,263,564 63.6%
PUBLIC WORKS
PUBLIC WORKS ADMINISTRATION 1,533,038 1,543,404 445,997 1,097,407 71.1%
CONSTRUCTION MANAGEMENT & INSPECTIONS 3,068,292 3,152,583 928,612 2,223,971 70.5%
ENVIRONMENTAL SUSTAINABILITY 1,210,630 1,510,379 594,484 915,895 60.6%
FACILITIES 7,191,930 8,232,952 3,231,591 5,001,361 60.7%
TRANSPORTATION 10,741,202 11,198,697 3,930,123 7,268,574 64.9%
TOTAL PUBLIC WORKS 23,745,092 25,638,015 9,130,807 16,507,208 64.4%
NON-DEPARTMENTAL & CONTINGENCY
(d)OTHER NON-DEPARTMENTAL 1,679,000 2,192,740 357,738 1,835,002 83.7%
VILLAGE TRENCHING 0 5,220,000 0 5,220,000 100.0%
OPERATING TRANSFERS OUT 37,547,678 37,547,678 9,386,922 28,160,756 75.0%
CONTINGENCY 500,000 500,000 0 500,000 100.0%
TOTAL NON-DEPT & CONTINGENCY 39,726,678 45,460,418 9,744,660 35,715,758 78.6%
TOTAL GENERAL FUND $238,468,445 $253,361,568 $81,041,639 $172,319,929 68.0%
(a) Working budget includes the adopted budget, open encumbrances from the end of the prior fiscal year,
approved carry forwards of the prior fiscal year and all other mid-yearcouncil approvals.
(b) Actual expenditures on a budgetary basis include encumbrances and exclude non-budgeted items.
(c) Amount available would be 70% if funds were spent in the same proportion as the previous year.
(d) Other non-departmental includes property tax administration fees, assessment district administration, citywide litigation expenses,
and other items not attributed to a specific department.
AS OF 09/30/24
EXPENDITURE STATUS BY DEPARTMENTGENERAL FUND
Nov. 12, 2024 Item #10 Page 25 of 29
Quarterly Financial Report _______________________________________________________________ 10
Council Contingency
The City Council has allocated $500,000 out of the General Fund budget for unanticipated emergencies or
unforeseen program needs. Below is a listing of the City Council’s contingency:
Donations
Carlsbad Municipal Code 2.08.100 authorizes the city manager to accept donations on behalf of the city in an
amount or of value of up to $5,000 per donation. These donations shall be used in accordance with the donor’s
intent or added to the city’s contingency account. Below is a listing of all donations, that have been accepted by
the city manager to date during fiscal year 2024-25:
CONTINGENCY ACCOUNT
USE OF FUNDS
EXPLANATION AMOUNT
ADOPTED BUDGET $500,000
USES:
No uses during first quarter of fiscal year 2024-25
TOTAL USES 0
AVAILABLE BALANCE $500,000
Note 1 - City Council Policy 51 gives authorization to the City Manager, or designee,
to approve Winning Teams and Community Spirit Grants up to $5,000 per grant.
Department Intention July Aug.Sept.Total
Parks & Recreation Leo Carrillo Ranch Cash Donations $574 $558 $629 $1,761
Parks & Recreation Opportunity Grant Donations 689 730 348 1,767
Parks & Recreation Senior Center Cash Donations 0 56 3 59
Parks & Recreation Senior Meals Cash Donations 2,359 2,437 1,465 6,261
Parks & Recreation Senior Transportation Cash Donations 268 211 185 664
Parks & Recreation Special Events Cash Donations 0 0 1,000 1,000
Parks & Recreation Teen Program Cash Donations 0 1 0 1
Parks & Recreation Parks Maintenance Cash Donations 0 0 0 0
Subtotal - Parks & Recreation $3,890 $3,993 $3,630 $11,513
Library & Cultural Arts Support Library Programs and Services $42 $100 $0 $142
Subtotal - Library & Cultural Arts $42 $100 $0 $142
Fire Food gifts for crews $0 $215 $300 $515
Subtotal - Fire $0 $215 $300 $515
Total Donations $3,932 $4,308 $3,930 $12,170
Donations Fiscal Year 2024-25
Nov. 12, 2024 Item #10 Page 26 of 29
Quarterly Financial Report _______________________________________________________________ 11
Water Enterprise
Revenues
• Increase in water operating revenues due to increase in user rates effective January 2024,
combined with a 5.8% increase in water volume sales.
• Interest earnings increased due to a 26% increase in the yield of the Treasurer’s portfolio offset
by an 14.7% decrease in the monthly average cash balance.
• The increase in property taxes is primarily due to an increase in assesed property values.
• The increase in fines, forefitures and penalities is from rate increase of late and door hanger
fees.
• The increase in other revenues is from higher revenue due to a loss recovery.
• The decrease in miscellaneous service charges driven by private development requests.
Expenses
• The increase in staffing expenses due to negotiated salary adjustments, along with the timing
of pay periods, which includes an additional pay period in the current year.
• Lower interdepartmental expenses resulted from the annual update of the citywide cost
allocation.
• Purchased water expenses have increased from the prior year due to a 11.26% rate increase in
the variable cost of water purchased from the San Diego County Water Authority (SDCWA)
combined with a 7.1% increase in the amount of water purchased.
• Outside services increase from asphalt repairs in current year.
• Miscellanous expense decreased due to decrease in chemicals and supplies purchased.
• Captial outlay decrease due to higher costs in piror year for excavator purchase.
CHANGE FROM
BUDGET YTD*YTD*YTD 2023-24 TO PERCENT
FY 2024-25 9/30/2023 9/30/2024 YTD 2024-25 CHANGE
REVENUES:
WATER DELIVERY 45,000,000$ 11,385,376$ 12,200,972$ 815,596$ 7.2%
INTEREST 660,456 163,692 185,315 21,623 13.2%
MISC. SERVICE CHARGES 413,600 105,302 94,429 (10,873) -10.3%
PROPERTY TAXES 3,119,800 98,806 111,506 12,700 12.9%
FINES, FORFEITURES & PENALTIES 378,500 93,049 108,708 15,659 16.8%
OTHER REVENUES 513,000 110,740 120,933 10,193 9.2%
TOTAL OPERATING REVENUE 50,085,356 11,956,965 12,821,863 864,898 7.2%
EXPENSES:
STAFFING 4,904,778 1,223,068 1,531,814 308,746 25.2%
INTERDEPARTMENTAL SERVICES 3,475,547 941,222 868,953 (72,269) -7.7%
PURCHASED WATER 33,850,000 8,114,418 8,667,218 552,800 6.8%
MWD/CWA FIXED CHARGES 7,710,000 1,699,401 1,813,047 113,646 6.7%
OUTSIDE SERVICES/MAINTENANCE 2,943,455 86,970 118,495 31,525 36.2%
DEPRECIATION/REPLACEMENT 5,100,000 1,239,458 1,275,000 35,542 2.9%
MISCELLANEOUS EXPENSES 1,068,191 117,516 105,983 (11,533) -9.8%
CAPITAL OUTLAY 29,211 60,936 25,111 (35,825) -58.8%
TOTAL OPERATING EXPENSES 59,081,182 13,482,989 14,405,621 922,632 6.8%
OPERATING INCOME/(LOSS)(8,995,826)$ (1,526,024)$ (1,583,758)$ (57,734)$ 3.8%
*Adjusted to reflect timing differences for water purchases and depreciation.
WATER OPERATIONS FUND
September 30, 2024
6.8%
7.2%
Nov. 12, 2024 Item #10 Page 27 of 29
Quarterly Financial Report _______________________________________________________________ 12
Wastewater Enterprise
Revenues
• Charges for current services are higher than in the prior year due primarily to a 20% rate increase
that went into effect in January 2024.
• Interest earnings increased due to a 26% increase in the yield of the Treasurer’s portfolio
combined with a 6.6% increase in the monthly average cash balance.
• The decrease in other revenues reimbursement of charges received from Vista in prior year.
Expenses
• The increase in staffing expenses is due to negotiated salary adjustments, along with the timing
of pay periods, which includes an additional pay period in the current year.
• Lower interdepartmental expeneses resulted from the annual update of the citywide cost
allocation.
• Depreciation increased from replacement of infrastructed has reached end of useful life.
• Lower miscellaneous expenses from purchase of parts.
CHANGE FROM
BUDGET YTD* YTD*YTD 2023-24 TO PERCENTFY 2024-25 9/30/2023 9/30/2024 YTD 2024-25 CHANGE
REVENUES:
CHARGES FOR CURRENT SERVICES 25,206,000 5,558,309 6,912,530 1,354,221 24.4%
INTEREST 288,780 59,065 81,137 22,072 37.4%
OTHER REVENUES 395,700 105,731 92,316 (13,415) -12.7%
TOTAL OPERATING REVENUE 25,890,480 5,723,105 7,085,983 1,362,878 23.8%
EXPENSES:
STAFFING 3,355,547 839,807 1,041,138 201,331 24.0%
INTERDEPARTMENTAL SERVICES 1,952,905 481,667 487,479 5,812 1.2%
ENCINA PLANT SERVICES 6,124,537 1,972,764 2,712,873 740,109 37.5%
OUTSIDE SERVICES/MAINTENANCE 1,768,726 117,705 67,486 (50,219) -42.7%
DEPRECIATION/REPLACEMENT 8,000,000 1,312,479 2,000,000 687,521 52.4%
MISCELLANEOUS EXPENSES 848,199 143,149 107,478 (35,671) -24.9%
CAPITAL OUTLAY 4,087 245 2,287 2,042 833.5%
TOTAL OPERATING EXPENSES 22,054,001 4,867,816 6,418,741 1,550,925 31.9%
OPERATING INCOME/LOSS 3,836,479 855,289 667,242 (188,047) -22.0%
* Adjusted to reflect timing differences for Encina quarterly invoices and depreciation.
WASTEWATER OPERATIONS FUND
September 30, 2024
23.8 %
32 %
Nov. 12, 2024 Item #10 Page 28 of 29
Quarterly Financial Report _______________________________________________________________ 13
Golf Course Enterprise
Revenues
• Primary operating revenues at the golf course have remained relatively consistent year over
year. Slight increase in demand combined with increase in rates.
• Other revenues decrease over the prior period due to timing adjustments related to interest
earnings on cash and investments on hand.
Expenses
• Course and grounds increase driven by higher water use.
• Cost of sales decrease corrlated to sales in pro shop and focus on lower margins in food and
beverage.
• Depreciation has decresed by 56% when compared to the prior year. This is due to the fact that
the original course land improvements are now fully depreciated.
• Miscellaneous expenses slightly decreased from prior year invoices for utility cost savings.
• Capital outlay higher in prior year from replacement of mower in addition to patio furniture.
CHANGE FROM
BUDGET YTD YTD YTD 2023-24 TO PERCENT
FY 2024-25 9/30/2023 9/30/2024 YTD 2024-25 CHANGE
REVENUES:
GOLF COURSE 5,588,000 1,630,506 1,651,595 21,089 1.3%
FOOD & BEVERAGE 4,633,000 1,222,047 1,310,145 88,098 7.2%
PRO SHOP 451,000 122,361 104,557 (17,804) -14.6%
PRACTICE CENTER 462,000 135,511 145,467 9,956 7.3%
OTHER REVENUES 209,000 330,136 300,996 (29,140) -8.8%
TOTAL OPERATING REVENUE 11,343,000 3,440,561 3,512,760 72,199 2.1%
EXPENSES:
GENERAL & ADMINISTRATIVE 6,507,000 1,502,830 1,511,805 8,975 0.6%
COURSE & GROUNDS 1,264,000 375,883 418,879 42,996 11.4%
FOOD & BEVERAGE 384,000 92,942 105,393 12,451 13.4%
PRO SHOP 101,000 16,340 9,863 (6,477) -39.6%
COST OF SALES 1,308,000 357,103 315,838 (41,265) -11.6%
DEPRECIATION/REPLACEMENT 1,000,000 187,500 83,333 (104,167) -55.6%
MISCELLANEOUS EXPENSES 348,000 48,502 43,002 (5,500) -11.3%
CAPITAL OUTLAY 889,266 303,270 76,213 (227,057) -74.9%
TOTAL OPERATING EXPENSES 11,801,266 2,884,370 2,564,326 (320,044) -11.1%
OPERATING INCOME/LOSS (458,266) 556,191 948,433 392,243 70.5%
GOLF COURSE FUND
September 30, 2024
2.1%
-11%
Nov. 12, 2024 Item #10 Page 29 of 29