HomeMy WebLinkAbout2025-02-25; Municipal Water District; 07; Economic and Financial Update for the Second Quarter of Fiscal Year 2024-25 and Midyear Budget ReviewCA Review AZ
Meeting Date: Feb. 25, 2025
To: Mayor/President and City Council/Board Members
From: Geoff Patnoe, 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 Second Quarter of Fiscal Year
2024-25 and Midyear Budget Review
Districts: All
Recommended Actions
1.Receive a report on the economic and financial update for the second quarter of fiscal year
2024-25 and provide direction as appropriate.
2.Receive a report on the results of the fiscal year 2024-25 mid-year budget review.
3.Adopt a City Council resolution authorizing the City Manager or designee to appropriate
$1,214,000 from the General Fund, $1,260,294 from the Fleet Replacement Fund, $466,860
from the Housing Trust Fund, $150,000 from the Stormwater Enterprise Fund, $55,000 from
the Public Facilities Fee Fund, and $24,038 from the Wastewater Operating Fund to the
Fiscal Year 2024-25 Operating Budget for various operational needs.
4.Adopt a Carlsbad Municipal Water District Board of Directors resolution authorizing the
Executive Manager or designee to appropriate $428,179 from the Potable Water Operating
Fund, $504,165 from the Recycled Water Operating Fund and $504,165 from the Recycled
Water Replacement Fund for various operational needs.
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 information on national, state, regional and Carlsbad-specific
economic data and 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, from October to
December, and expenditures are in line with the prior year’s rate of spending.
Feb. 25, 2025 Item #7 Page 1 of 43
The City Manager is also presenting the City Council with requests for additional appropriations
at this mid-point of the fiscal year, including:
• Opening the City Library on Dove Lane and the Georgina Cole Library on Sundays from
1 to 5 p.m. ($40,000)
• Expanding Habitat Management and Fire Mitigation measures to improve wildfire
safety:
o Immediate actions
Clearing of additional non-native brush in city open space (Environmental
Sustainability, $250,000)
Expediting and increasing tree pruning/trimming at specific locations
across the city (Parks & Recreation, $300,000)
o Future planning
Developing a long-term fire mitigation plan for all Carlsbad open
space (Fire Department, $300,000)
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
• Technology
• Clean technology (Technologies focused on the environment and natural resources)
• Sports and active lifestyle
• Hospitality and tourism
In 2024 Carlsbad had a gross regional product of $16.8 billion. The Carlsbad economy saw a $50
million contraction from an adjusted $16.85 billion in 2023, representing a modest .30%
decline. The impact was mixed, as some industries saw growth, such as hospitality and tourism,
real estate, and health care, while others saw declines, such as manufacturing, professional,
scientific and technical services (commonly known as research and development), and office
administrative services.
Carlsbad remains the second largest economy in San Diego County, behind the City of San
Diego, which also saw a modest decline.
Carlsbad’s unemployment rate has remained relatively steady, peaking at 4.8% in August
before coming back down through the remainder of 2024.
Unemployment in December was 4%. Job opportunities continue to outnumber available
workers, keeping overall unemployment in Carlsbad and the San Diego region down. There
were 5,441 unique job postings in Carlsbad between October and December, roughly 400 fewer
than the previous quarter, but up about 400 positions from the same quarter last year. Over
the quarter, 1,100 Carlsbad employers posted open positions.
Commercial office and industrial vacancies remained relatively consistent over the past quarter.
Industrial vacancy ticked up by .8%, office vacancy fell by .1% and retail vacancy dropped
by .7%.
Feb. 25, 2025 Item #7 Page 2 of 43
Carlsbad home prices dropped slightly over the past quarter. The current median home price is
$1.48 million. Despite several federal reserve rate cuts in the second half of 2024, consumer
demand, financial markets and low inventory 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 high cost of living remains a significant challenge for workers. Limited housing supply and
rising costs compel employers to either increase wages or expand their search radius to attract
qualified talent. These financial pressures have led some employees to move, often with longer
commutes, in pursuit of more affordable living options, further straining the local labor market.
As of the last quarter, the U.S. economy remained in a period of moderate growth, with gross
domestic product increasing by an estimated 2.3%. Inflation nationally continued in the right
direction last quarter, hovering around 2.7% as of November, while in San Diego County,
inflation rates remained at 2.6%.
Nationally, the new administration’s direction has created a period of uncertainty as businesses
and organizations work to understand the impacts of new policies and rules being put in place.
Among other areas, new directives around diversity, equity, and inclusion may impact federal
contractors and their respective workforces, while discussions of tariffs may hurt Carlsbad
manufacturers that rely on international supply chains or sell their products abroad. The
broader economic implications of tariffs have raised concerns among financial institutions and
market analysts. For instance, JPMorgan Chase has expressed apprehension that such trade
policies might inadvertently become business-unfriendly, potentially leading to economic
slowdowns in North America.
Further impacts to the local economy could occur as the administration has signaled halting all
federal grants and have limited agency staff members’ ability to travel and meet with external
audiences. In a region like San Diego, which receives billions in federal research grants,
destabilizing funding and the ability for scientific research to continue could have an outsized
impact on the life sciences and healthcare industries.
This volatility contributes to uncertain economic conditions, and could have an impact on
inflation, interest rates and employment, especially in fields that receive federal grant funds or
in manufacturing.
Staff will continue to monitor economic conditions and provide quarterly updates to the City
Council. The complete economic scan for the second quarter of fiscal year 2024-25 is provided
as Exhibit 3. Economic indicators are tracked on a dashboard available at
carlsbadca.gov/economy.
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 tax collected on hotel overnight stays.
The fiscal year 2021-22 adopted budget anticipated continued adverse impacts from the
pandemic with moderate recovery. However, the city’s main revenue sources, 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.
Feb. 25, 2025 Item #7 Page 3 of 43
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 continue mitigating economic
uncertainties.
The December 2024 Financial Status Report is provided as Exhibit 4.
Revenues
The city’s General Fund is its primary operating fund, used to account for all financial activities
that aren't specifically designated for another fund, and primarily covers the costs of essential
services like police, fire, parks and recreation, general government operations, and other basic
city functions. The General Fund’s top three revenue sources – the property, sales and transient
occupancy taxes – reached historic highs in fiscal year 2023-24.
The current fiscal year’s adopted budget took a conservative approach at estimating these
revenue sources, because revenue growth appears to be leveling off. However, total revenues
are up $3.5 million or 3% over the prior year, despite the amount of uncertainty in the
economy. The table below shows the differences in revenue when comparing the first half of
fiscal year 2024-25 with the same period in the prior fiscal year.
Fiscal year 2024-25 year-to-date revenues as of December 2024
compared to fiscal year 2023-24 as of December 2023
Revenue category Change ($) Change (%)
Property tax $1,682,397 5%
Investments, property income $757,061 21%
Transient occupancy tax $611,689 3%
Intergovernmental $413,494 42%
Licenses and permits $308,334 20%
Charges for services $254,909 4%
Sales tax $159,669 1%
Fines and forfeitures -$3,411 -2%
Other revenue sources -$108,682 -32%
Other taxes -$121,118 -32%
Interdepartmental charges -$437,127 -2%
Total revenues $3,517,215 3%
Feb. 25, 2025 Item #7 Page 4 of 43
Major revenue sources
Property tax
The majority of property tax revenue is collected in December and April each year. Increases of
$1.7 million for the first half of the fiscal year are due to a 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 combined with an increase in the number of aircraft housed
at the county’s Palomar-McCellan Airport.
Sales tax
For the first half of the fiscal year, sales tax revenue is $0.2 million higher than the same period
in the previous fiscal year. To date, sales tax revenue represents receipts that were collected for
the third quarter of calendar year 2024 as well as the first advance of the city’s sales tax
revenue from the fourth calendar quarter of 2024.
The city experienced accelerated recovery in fiscal year 2021-22, after the impacts of the
COVID-19 pandemic. Fiscal years 2022-23 and 2023-24 had historically high levels of sales tax
revenue driven by inflation and sustained by consumer demand as well as the correction of a
taxpayer error. The city is anticipating that growth in sales will continue leveling off and slow
down in fiscal year 2024-25.
For sales occurring in the third calendar quarter of 2024, the most recent data available shows
key year-over-year gains in new auto sales. The largest economic segments in the city are
automobile dealers, general retail stores and restaurants. Together, they generate
approximately 63% of the city’s sales tax revenue.
A significant portion of the year-over-year increase is attributed to the auto sales sector and a
correction in methodology for how respective sales were being assigned and reported for a
particular taxpayer. Without considering the error correction, on an economically adjusted
basis, the city’s third quarter sales tax receipts were down about 6% compared to the third
quarter in the previous year. This decline indicates declining consumer demand in response to
sustained inflationary increases since 2021 as well as heightened economic uncertainty with the
new administration. Staff will continue to monitor sales tax trends closely and keep the report
to the City Council informed of any significant changes.
Transient occupancy tax
Year-to-date transient occupancy tax figures represent taxes collected on overnight stays at
lodging businesses through the month of November 2024. The revenue received in the first half
represents an increase of $0.6 million, or 3% when compared to the same year-to-date period
last year.
Occupancy rates over the last 12 months has been 71.6% on average, which is slightly higher
compared the prior year of 70.3%. Average daily room rates in October, November and
December of 2024 were 3% higher than the previous year on average.
Feb. 25, 2025 Item #7 Page 5 of 43
Expenditures and encumbrances
Overview
The city’s total General Fund expenditures and encumbrances – those funds either spent or
committed for specific expenses – through the month of December 2024 are $131.1 million,
compared to $129.5 million at the same time last year. The remaining budget available through
the fiscal year ending June 30, 2025, is $122.2 million, or 48%.
Excluding transfers out, contingencies and non-departmental charges, the percentage available
on Dec. 31, 2024, is 46.3%, slightly more than the 45.7% available on Dec. 31, 2023.
Pension funding
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.
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 related to the city’s unfunded actuarial
liability and strive to achieve a funded status of 80% in accordance with City Council
Policy No. 86.
CalPERS’ latest actuarial valuation report (as of June 30, 2023) 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 gain of 5.8%,
below its target of 6.8%. This performance will not impact the city’s required contributions until
fiscal year 2025-26.
The City Council approved the establishment of a public agencies post-employment benefits
trust (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 Dec. 31, 2024, the city’s Section 115 Trust had a balance of $18,798,863, including the
initial $10 million contribution and second annual contribution of $7.5 million. Since the trust
was established, the investments have earned $1.3 million, or 7.64%. Considering the assets
held by CalPERS as well as the assets held in the city’s trust, the combined pension funded
status as of December 2024 is 75.8%. Staff will continue to monitor the activities in the trust
and report the city’s pension-funded status to the City Council quarterly.
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.
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.
Feb. 25, 2025 Item #7 Page 6 of 43
Mid-year budget update
The city initiated a mid-year budget review of the Fiscal Year 2024-25 Operating Budget in
November 2024. The Finance Department led this effort in collaboration with city departments
to forecast changes to revenues and expenditures compared to their current budgets. The mid-
year budget review was based on the first five months of actual activity in fiscal year 2024-25.
Departments were directed to update their revenue and expenditure projections for the rest of
the fiscal year based on the observed trends.
A key component of the mid-year review was the analysis of spending within departments’
personnel budgets. In fiscal year 2022-23, the adopted budget for the city’s General Fund
included a new item of $2 million for “vacancy savings.” This represents the estimated amount
of budgeted personnel savings that will be realized by the end of the fiscal year. Vacancy
savings are realized when vacant or new positions take longer than expected to fill or when
they are filled at a lower cost than budgeted. As of mid-year, the city anticipates being able to
meet the budgeted vacancy savings figure by the end of the fiscal year. Staff will determine
whether the General Fund is able to fully meet its budgeted vacancy savings figure of $2 million
by the fiscal year's end.
There were no substantial updates to departments’ revenue budgets that would require
changes to previously budgeted amounts. While some of the General Fund’s major revenue
sources have come in higher than originally estimated, given the level of economic uncertainty,
staff do not recommend changes to the original estimates other than a minor adjustment to the
interdepartmental chargeback revenue collected based on the revised cost allocation plan as
described in the next section.2 Several departments identified modest savings anticipated at
fiscal year-end; at this point, no budget transfers are being proposed related to these
anticipated savings as a result of this review.
General fund requests for City Council approval
Several departments made requests for mid-year funding various operational needs. These
requests are presented below for the City Council’s consideration.
Fire mitigation - $850,000
• The Fire Department requests $300,000 to contract with an Environmental Planning
firm to create implementable fire protection plans, hazard reduction plans and fuel
management plans that will help prevent wildfire damage by accounting for
Carlsbad’s unique topography, vegetation and climate issues. In addition to working
with a cross section of city departments, the firm will work closely with biological
and environmental professionals to accomplish fire protection plans that avoid
excessive habitat impact while protecting neighboring structures. About $100,000 of
this request includes temporary staffing of a fire mitigation expert to manage the
project and coordinate efforts with the engineering firm and city departments and
work groups, including Fire, Parks & Recreation, Environmental Sustainability and
the GIS mapping team. The long-term plan will be presented to the City Council
upon its completion.
2 Interdepartmental chargeback revenue refers to income generated when one department within the city charges
another department for its services.
Feb. 25, 2025 Item #7 Page 7 of 43
• Environmental Sustainability is requesting $250,000 to assist with immediate brush
management in the city’s preserves. The work must be performed by a qualified
contractor with experience working in habitat areas on privately owned parcels to
avoid impacts to sensitive species and habitats. The city already has master service
agreements in place for these professional services on an as-needed basis.
• The Parks & Recreation Department requests $300,000 to assist with immediate
brush management efforts in city-owned urban forests (e.g., Hosp Grove, Woodbine
Banks, Batiquitos Lane, Village H and other areas). This would involve a three-
pronged management approach with priorities for:
o Maintenance pruning of the canopies of inventoried trees within high public
occupancy areas, such as those immediately adjacent to homes and major
roadways
o Selective removal of non-inventoried trees in the interior of the urban forests
that are dying or significantly declining
o Weed abatement throughout the urban forests to reduce ground level
vegetation
Electric-powered vehicle for Fire Marshal - $95,000
The city appointed a new Fire Marshal in December 2024. The previous fire marshal
received an annual automobile allowance for the use of a personal vehicle in business
activities. The Fire Department identified the necessity to acquire and outfit a city
vehicle for this essential leadership role. Purchasing an electric powered vehicle is
consistent with the city’s 5 Year Strategic Plan.
Increase in interest paid to developers - $100,000
As of January 2025, nearly $96,000 of the city’s $100,000 annual budget for interest
paid on developer deposits had been used. The city collects and holds developer
construction deposits, which earn interest income. Per California Government Code
Section 53079, the city is required to return a portion of the interest income to the
developer at the completion of the project. This year’s adopted budget was based on
historical trends which were lower than expected, and recent project completions,
including the Marja Acres project, have resulted in higher-than-expected interest. The
timing of the return of interest income year to year varies and is driven by the
completion of the developer projects.
Police Department operational needs - $84,000
The Police Department has identified a need for an additional $40,000 in its ammunition
budget, $24,000 in its training budget, and $20,000 related to its K-9 Program.
o The cost of ammunition has significantly increased due to inflation, and the
current budget is not sufficient to meet the current need. Approving the
request would bring the ammunition budget up to the level of average
ammunition purchases over the last several years. Purchases include both
duty and practice ammunition, including mandatory quarterly weapons
training, monthly open range events, and firearms qualifications.
Feb. 25, 2025 Item #7 Page 8 of 43
o An addition of $24,000 to the department’s training budget, an increase of
10%, is needed to ensure the continued development of personnel and
compliance with departmental and legislative mandates. In recent years, the
department has added personnel and had many recent promotions and
departmental re-staffing of specialized assignments. As a result, a substantial
amount of introductory and ongoing training is necessary.
o The department requests $20,000 for its K9 Program: $13,000 for a new k-9
dog and $7,000 in canine handler academy costs. The funds would cover the
costs if one of the current canines retire, has a medical emergency and
unexpectedly has to be retired, or if a current K9 handler is promoted out of
the program.
Parks impact fee study - $45,000
The city collects a general, non-parks specific, public facilities fee for certain new
development projects within the city. The requested funding would be used to hire a
government financing consultant to study the potential creation of a park impact fee for
new rental residential development projects. The proceeds of this fee would be spent
on Parks & Recreation Department capital expenditures. This fee would be different
from the recently updated park-in-lieu fee, in that the park-in-lieu fee is legally only
assessed on new residential development projects involving subdivisions. Multi-family
rental residential development projects are not subject to the park-in-lieu fee but would
be subject to a parks impact fee.
Library Sunday hours - $40,000
Service hours curtailed because of the COVID-19 pandemic have not been expanded to
restore Sunday hours. This budget request will support the reopening of the city’s main
libraries, the City Library on Dove Lane and the Cole Library, on Sundays from 1-5 p.m. It
will take approximately three months to identify and allocate staff and adjust schedules.
If this request is approved, the Library & Cultural Arts Department will request $90,000
on an ongoing basis to support the expanded Sunday hours. Once Sunday operations
recommence, the department will evaluate service levels and any potential future part-
time staffing needs to maintain the expanded hours. Current budget estimates are
based on also opening the Cannon Gallery during these hours but does not include
staffing programs or rentals in the Gowland meeting room or the Schulman Auditorium.
Adding four hours on Sunday at Carlsbad’s main libraries (adjusting from 56 to 60 hours
per week) will place Carlsbad in the top 5% of branches in the county in the number of
open hours.
Non-General Fund requests for City Council/CMWD Board approval
Out of cycle replacement for two city vehicles - $1,260,294
Additional budget is being requested in the Fleet Replacement Fund because of two out-
of-cycle replacements for an ambulance ($360,294) and a sewer jetter truck ($900,000).
Both vehicles will take two years to be built, according to the manufacturer. The
department has been collecting funds for the replacement of these vehicles and would
have collected the final balance by the end of the vehicle build time. There are sufficient
funds available in the Fleet Replacement Fund for this request.
Feb. 25, 2025 Item #7 Page 9 of 43
Increase to the operating budget for Vallecitos Water District recycled water
purchases and corresponding transfer of funds from the Recycled Water Replacement
capital fund - $500,000 (CMWD)
The city’s Recycled Water operating budget for fiscal year 2024-25 was established
during a period of unknowns: the Vallecitos Water District has an ongoing construction
project with unknown impacts on recycled water production and the new recycled
water purchase agreement with the district is not yet finalized. For example, if
production is interrupted due to the construction project, the city may have higher costs
for electricity to pump more water uphill from Carlsbad Water Recycling Facility and to
purchase potable water for irrigation use. This request ensures the Recycled Water
Operating Fund has adequate budget to compensate for these unknowns. Because the
Recycled Water Operating Fund balance is insufficient to support this additional
appropriation, staff are requesting a corresponding transfer of funds from the Recycled
Water Replacement Fund into the operating fund. A public hearing is scheduled for April
22, 2025, to increase rates as needed to ensure the operating fund maintains an
appropriate fund balance moving forward. Staff will reassess budget needs as the fiscal
year continues.
Housing Trust Fund affordable housing property acquisition - $391,860
The City Council approved the acquisitions of several affordable housing properties in
fiscal year 2023-24, including 6172 Colt Place, #103. At the time of the city’s fiscal year
2023-24 year-end budget carryforward process, it was not known whether budget
would be needed for any of these approved property acquisitions. For various reasons,
the city has not proceeded with the acquisitions of three of the four approved
purchases. The escrow for Colt Place is currently paused, and it’s uncertain the purchase
will take place. Staff request to add the original funding appropriated in FY 2023-24 to
FY 2024-25, to avoid potential delay if the city proceeds with the purchase.
Increase to the demand-based water charges budget - $350,000 (CMWD)
The city’s Potable Water budget for fiscal year 2024-25 was established before the San
Diego County Water Authority voted on rates for calendar year 2025 in July 2024. Staff
updated its financial model incorporating the new rates and determined an additional
$350,000 is necessary in the budget to cover the variable water charges. There are
sufficient available potable water funds to support the budget increase.
Increase to operational costs in storm drain maintenance - $150,000
During the mid-year review process, staff identified the need to increase the storm drain
maintenance budget because of operational costs that have grown over the past several
years. The department reduced its budget to comply with citywide directives, but due to
increasing costs, including contracted maintenance services (e.g., litter removal,
pressure washing and storm drain high priority inspections services), intense storm
response demands and needed repairs to aging assets, is unable to keep pace with the
existing budget level. Staff request a $150,000 appropriation from the Stormwater
Enterprise Fund to support the city’s storm drain maintenance program. A request for
additional budget on an ongoing basis will be made during the fiscal year 2025-26
budget process. Staff are also currently working with a consultant to assist with
completing a funding strategy for the city’s stormwater program, which includes the
Feb. 25, 2025 Item #7 Page 10 of 43
Storm Drain Maintenance Fund. The study should be completed this summer and will
then be presented to City Council with options and next steps.
Increase to the city’s General Fund chargeback to the utilities funds - $106,382
Staff recently completed the city’s cost allocation plan, which in part is used to allocate
certain General Fund costs to enterprise or other funds that receive a benefit from
support services from other General Fund-funded departments. At the time the fiscal
year 2024-25 budget was being finalized, allocated costs from the draft document were
used to calculate chargebacks. The final version of the cost allocation plan contained
several revisions and resulted in the need to increase the chargeback to the Utilities
Department’s funds accordingly:
o Potable water $78,179 (CMWD)
o Recycled water $4,165(CMWD)
o Wastewater $24,038 (City)
Because the Recycled Water Operating Fund balance is insufficient to support this
additional appropriation, staff are requesting a corresponding transfer of funds from the
Recycled Water Replacement Fund into the operating fund. Coupled with the reduction
in the total chargeback to several other funds, the General Fund will increase its total
revenue collection for interdepartmental chargebacks by $76,213.
Housing Trust Fund increase in legal fees - $75,000
Staff request an increase to the fund’s budget for legal fees related to approved
litigation efforts. The Housing Trust fund is an appropriate and available source of funds
to pay for outside counsel because the litigation pertains to affordable housing
preservation. If the city prevails, there is a possibility that some funds could be
recouped for legal fees.
Additional design and permitting costs, Capital Improvement Program Project No.
4612 - Pickleball Courts - $55,000
On Feb. 13, 2024, the City Council approved using $300,000 from the Public Facilities
Fee for the scoping, initial design, and final design phases of a project to construct four
new outdoor pickleball courts at Calavera Hills Community Parks and four new outdoor
pickleball courts at Stagecoach Community Park. The planning and design phase started
in summer of 2024, and is anticipated to conclude before the start of fiscal year 2025-
26. During the design phase, staff identified a sewer line that must be modified to
accommodate the new pickleball courts. Staff also received additional clarification on
specific permitting fees that must be applied to the project. The $55,000 request
includes:
o $45,000 for additional design services
o $5,000 for staff time
o $5,000 for permitting fees not included in the original appropriation request
This brings the total initial appropriation from $300,000 to $355,000
Feb. 25, 2025 Item #7 Page 11 of 43
Fiscal Analysis
• The requests to appropriate $100,000 for a one-time increase in budget for interest paid
to developers, $45,000 for a Parks Impact Fee study, and $84,000 for the Police
Department to accommodate various operational needs will not result in any citywide
fiscal impact in the current year other than using the existing General Fund reserve
balance.
• The $95,000 request for a vehicle for the Fire Marshal will result in future ongoing
budget increases in the Fleet Replacement and Fleet Maintenance funds’ internal
service chargeback to the General Fund. Increased budget needs for this vehicle will be
programmed into the fiscal year 2025-26 operating budget.
• The ongoing budget need for Library & Cultural Arts to reopen on Sunday hours at the
city’s two main libraries, currently estimated at $90,000, will be requested in the fiscal
year 2025-26 operating budget process. Staff will reassess the potential need for part-
time staff as operations ensue.
• The $850,000 request for immediate brush management and the development of fire
mitigation plans is mostly considered one-time spending, but subsequent funding may
be needed based on the results and findings incorporated into the fire mitigation plan.
• The request of $1,260,294 for the out-of-cycle replacement of two city vehicles from the
Fleet Replacement Fund will have an impact on this fund alone. The fund has already
accumulated substantial portions of the replacement values for these two vehicles. Due
to the extended build timeline from the manufacturers, the remaining collections
needed to pay for the entire replacement values will be collected over the time the
vehicles are built, estimated at 24 months for both.
• The requests to appropriate a combined $466,860 from the Housing Trust Fund will not
result in any citywide fiscal impact in the current year other than using the existing fund
balance. The fund has sufficient reserves to support this appropriation. If the city
completes the affordable housing purchase at Colt Place, the proceeds of the city’s
subsequent sale of the property would then be returned to the Housing Trust Fund.
• The request to appropriate $150,000 From the Stormwater Enterprise Fund to Storm
Drain Maintenance will have an impact on this fund alone. The fund is partially operated
by using its fund balance, and this additional appropriation will further utilize these
funds. The Environmental Sustainability Department is currently working with an
outside consultant to conduct a comprehensive fee study of this program. Once the
funding strategy study is complete, based on identified funding strategies, staff intend
to recommend options to the City Council on how to ensure the Stormwater Enterprise
Fund’s revenue is sufficient to cover its operations on an annual basis. In the interim,
staff will need to request a General Fund transfer during the fiscal year 2025-26
operating budget process to help cover the costs of this program.
• The request to appropriate $55,000 for additional design and permitting costs for
Capital Improvement Program Project No. 4612, the Pickleball Courts at Stagecoach
Community Park, from the Public Facilities Fee Fund will not result in any citywide fiscal
impact in the current year other than using the existing fund balance. Additionally,
those funds will not be available for other future potential purposes.
• The request to appropriate a combined $106,382 for revised interdepartmental
chargebacks across the Utilities Department’s potable water, recycled water, and
Feb. 25, 2025 Item #7 Page 12 of 43
wastewater operating fund budgets will impact these funds alone. The funds have
sufficient fund balances to support these costs. As a result of the cost allocation plan
revision, chargebacks across several other funds will incur decreased chargebacks from
the General Fund. The total increase to General Fund revenue because of these
revisions is $76,213.
• The request to appropriate a combined $428,179 from the Potable Water Operating
Fund will not result in any citywide fiscal impact in the current year other than using the
existing fund balance. Because of the Recycled Water Operating Fund’s insufficient
current fund balance, the request to appropriate $504,165 will necessitate a $504,165
appropriation and transfer in from the Recycled Water Replacement Fund. These cost
increases will be built into the pending cost study being completed by the Utilities
Department to calculate future utility rates.
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. Staff will return to the City Council in May 2025 with a third-quarter financial and
economic review.
The city’s vacancy savings will be re-evaluated at the fiscal year’s end to determine if the city
will meet the $2 million target in the adopted fiscal year 2024-25 budget.
With the City Council’s approval, funds for the various operational and capital needs cited by
departments will be appropriated to the General Fund, Fleet Replacement Fund, Housing Trust
Fund, Stormwater Enterprise Fund, Public Facilities Fee Fund, and Wastewater Operating Fund.
With the CMWD Board of Directors’ approval, funds for the increase in demand-based water
charges, General Fund chargebacks and transfer out will be appropriated to the Potable Water
and Recycled Water operating funds.
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. City Council resolution
2. Carlsbad Municipal Water District Board of Directors resolution
3. Carlsbad Economic Scan - FY 2024-25 - Second Quarter
4. December 2024 Financial Status Report
Feb. 25, 2025 Item #7 Page 13 of 43
RESOLUTION NO. 2025-054
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CARLSBAD,
CALIFORNIA, AUTHORIZING THE CITY MANAGER OR DESIGNEE TO
APPROPRIATE $1,214,000 FROM THE GENERAL FUND, $1,260,294 FROM
THE FLEET REPLACEMENT FUND, $466,860 FROM THE HOUSING TRUST
FUND, $150,000 FROM THE STORMWATER ENTERPRISE FUND, $55,000
FROM THE PUBLIC FACILITIES FEE FUND, AND $24,038 FROM THE
WASTEWATER OPERATING FUND TO THE FISCAL YEAR 2024-25 OPERATING
BUDGET FOR VARIOUS OPERATIONAL NEEDS
WHEREAS, the City Council of the City of Carlsbad, California, has determined that various
operational needs in the Environmental Sustainability, Fire, Library & Cultural Arts, Police, and Parks &
Recreation departments, and the Non-Departmental General Fund budget, exceed the current fiscal
year 2024-25 operating budget; and
WHEREAS, the General Fund requires additional operating budget appropriations of $1,214,000
to account for these needs as outlined in Attachment A; and
WHEREAS, certain vehicle replacements are facing extended build timelines from
manufacturers that necessitate making early replacement purchases; and
WHEREAS, the Fleet Replacement Fund requires additional appropriations of $1,260,294 in
order to complete these purchases; and
WHEREAS, the city is currently involved in both potential litigation concerning affordable
housing preservation and affordable housing property acquisition; and
WHEREAS, the Housing Trust Fund requires additional appropriations of $466,860 to complete
these activities as outlined in Attachment A; and
WHEREAS, the Storm Drain Maintenance program is facing rising costs for contracted
maintenance services, intense storm response demands and needed repairs to aging assets; and
WHEREAS, the Stormwater Enterprise Fund requires additional appropriations of $150,000 to
account for these needs as outlined in Attachment A; and
WHEREAS, during the design phase of Capital Improvement Project No. 4612 Pickleball Courts,
staff identified a sewer line that needs modification to accommodate the new pickleball courts as well
as additional specific permitting fees that must be applied to the project; and
WHEREAS, the Public Facilities Fee Fund requires additional appropriations of $55,000 in order
to complete the project while accommodating these requirements; and
WHEREAS, revisions to the city's cost allocation plan have increased the miscellaneous
interdepartmental chargeback to the Wastewater Operating Fund; and
WHEREAS, the Wastewater Operating Fund requires additional appropriations of $24,038 in
order to meet these needs.
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Carlsbad, California, as
follows:
1. That the above recitations are true and correct.
2. That the City Manager, or designee, is authorized to appropriate $1,214,000 to the
General Fund's 2024-25 operating budget for various operational needs as shown in
Attachment A.
3. That the City Manager, or designee, is authorized to appropriate $1,260,294 to the Fleet
Replacement Fund's 2024-25 operating budget for mid-year vehicle purchases as shown
in Attachment A.
4. That the City Manager, or designee, is authorized to appropriate $466,860 to the
Housing Trust Fund's 2024-25 operating budget for affordable housing acquisition and
an increase in legal fees as shown in Attachment A.
5. That the City Manager, or designee, is authorized to appropriate $150,000 to the
Stormwater Enterprise Fund's 2024-25 operating budget for its Storm Drain
Maintenance program as shown in Attachment A.
6. That the City Manager, or designee, is authorized to appropriate $55,000 to the Public
Facilities Fee Fund's 2024-25 capital budget for additional design & permitting costs for
Pickleball Courts Capital Improvement Project No. 4612 as shown in Attachment A.
7. That the City Manager, or designee, is authorized to appropriate $24,038 to the
Wastewater Operating Fund for miscellaneous interdepartmental chargebacks as
shown in Attachment A.
PASSED, APPROVED AND ADOPTED at a Regular Meeting of the City Council of the City of
Carlsbad on the 25th day of February 2025, by the following vote, to wit:
AYES:
NAYS:
ABSTAIN :
ABSENT:
Blackburn, Bhat-Patel, Acosta, Burkholder, Shin.
None.
None.
None.
KEITH BLACKB ~
DE
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Attachment A
Feb. 25, 2025 Item #7 Page 17 of 43
RESOLUTION NO. 1763
A RESOLUTION OF THE BOARD OF DIRECTORS OF THE CARLSBAD
MUNICIPAL WATER DISTRICT OF THE CITY OF CARLSBAD, CALIFORNIA,
AUTHORIZING THE EXECUTIVE MANAGER OR DESIGNEE TO APPROPRIATE
$428,179 FROM THE POTABLE WATER OPERATING FUND, $504,165 FROM
THE RECYCLED WATER OPERATING FUND AND $504,165 FROM THE
RECYCLED WATER REPLACEMENT FUND FOR VARIOUS OPERATIONAL
NEEDS
WHEREAS, revised water rates set by the San Diego County Water Authority have increased
variable water charges paid by the District's Potable Water Operating Fund and revisions to the city's
cost allocation plan have increased the miscellaneous interdepartmental chargeback to the Potable
Water Operating Fund ; and
WHEREAS, the Potable Water Operating Fund requires additional appropriations of $428,179
in order to meet these needs; and
WHEREAS, revisions to the city's cost allocation plan as well as ongoing construction costs for
the Vallecitos Water District have increased budget needs for the Recycled Water Operating Fund; and
WHEREAS, the Recycled Water Operating Fund requires additional appropriations of $504,165
in order to meet these requirements; and
WHEREAS, The Recycled Water Operating Fund balance is insufficient to support this additional
appropriation; and
WHEREAS, the Recycled Water Replacement Fund requires an additional appropriation of
$504,165 to transfer out fund balance to the Recycled Water Operating Fund to support the increased
budget needs.
1. That the above recitations are true and correct.
2. That the Executive Manager, or designee, is authorized to appropriate $428,179 to the
Potable Water Operating Fund for variable water charges and miscellaneous
interdepartmental chargebacks as shown in Attachment A.
3. That the Executive Manager, or designee, is authorized to appropriate $504,165 to the
Recycled Water Operating Fund's 2024-25 operating budget for increased water
purchases as shown in Attachment A.
4. That the Executive Manager, or designee, is authorized to appropriate $504,165 to the
Recycled Water Replacement Fund's 2024-25 capital budget for transfers out to the
Recycled Water Operating Fund as shown in Attachment A.
PASSED, APPROVED AND ADOPTED at a Joint Special Meeting of the Board of Directors of the
Carlsbad Municipal Water District, and the City Council of the City of Carlsbad on the 12th day of
February 2025, by the following vote, to wit:
AYES:
NAYS:
ABSTAIN :
ABSENT:
Blackburn, Bhat-Patel, Acosta, Burkholder, Acosta.
None.
None.
None.
KEITH BLACKBURN, President
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Attachment A
Feb. 25, 2025 Item #7 Page 20 of 43
1
Second Quarter, Fiscal Year 2024-25
The following scan provides an overview of key economic indicators for October, November, and December
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/economy.
GROSS REGIONAL PRODUCT
Carlsbad GRP (Source: Lightcast, 2025)
$16.8B
In 2024, Carlsbad had the second largest gross regional product
in San Diego County at more than $16.8B, only trailing the City of
San Diego. From 2023 to 2024, Carlsbad’s GRP contracted by $50
million representing a modest decline of .3%. Some industries saw growth, like hospitality and tourism, real estate, and health
care, while others saw declines, like manufacturing, professional,
scientific and technical services (commonly known as research
and development), and office administrative services.
JOBS
Unemployment Rate (Source: California Employment Development Department, Dec. 2024 Report)
Carlsbad’s unemployment rate has remained relatively steady, peaking at 4.8% in August before coming back down through the
remainder of 2024. Unemployment in December was 4%. Job opportunities continue to outnumber available workers, keeping
overall unemployment in Carlsbad and the San Diego region down. The unemployment rate in December was 5.2% at the state
level and 4.3% 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
1
2
3
4
5
6
7
Jan-24 Feb-24 Mar-24 Apr-24 May-24 Jun-24 Jul-24 Aug-24 Sep-24 Oct-24 Nov-24 Dec-24
Unemployment Rate Comparison
Last 12-Months
Carlsbad San Diego County California North County Avg w/o Carlsbad
Innovation + Economic Development Department
Gross Regional Product
Released Feb 25, 2025
Exhibit 3
Feb. 25, 2025 Item #7 Page 21 of 43
2
Job Postings (Source: Lightcast, October - December 2024)
5,441
There were 5,441 unique job postings in Carlsbad between October and December, roughly 400 fewer than the previous quarter, but
up about 400 positions from the same quarter last year. Over the
quarter, 1,100 different Carlsbad employers posted open positions.
The median advertised salary for these postings was $56,200, a
jump of about $4,000 over the previous quarter. Of jobs posted, 71% 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, December 2024)
Job Postings This Quarter
Marketing, Project Management, and Audit skills are currently among the most in-demand skills for Carlsbad employers,
showing rapid projected growth. However, a noticeable gap remains in the availability of these skills, as seen by the lower
frequency in job postings compared to professional profiles.
Feb. 25, 2025 Item #7 Page 22 of 43
3
CAPITAL
Interest Rates (Source: U.S. Department of the Treasury, December 2024)
The Federal Reserve lowered interest rates cutting the benchmark interest rate three times in 2024, totaling a 1% decrease,
as economic output began to show signs of slowing and inflation remained in check. Despite rate cuts, interest rates
increased to end the year, which was attributable to market demand. In December, one-year rates were 4.16%. Ten-year
rates were 4.58%. 30-year rates were 4.78%. As of November, inflation figures for the San Diego area were 2.6% (3.2% less
food and energy) over the past year. Nationally, inflation in December was 2.7% (3.2% less food and energy).
December 2023
One-year interest rate 4.79%
10-year interest rate 3.88%
30-year interest rate 4.03%
December 2024
One-year interest rate 4.16%
10-year interest rate 4.58%
30-year interest rate 4.78%
COMMERCIAL REAL ESTATE
Market Vacancy Rates and Rent per Square Foot (Source: CoStar, December 2024)
Commercial vacancy rates continued to fluctuate across all three
categories this quarter. The industrial vacancy rate in December
rose to 7.6%. The office vacancy rate in December dropped to
14.3%. Retail vacancy in December dropped to 4.8%.
Rental rates were relatively steady across all categories. Average
market rents per square foot, per year for office rates in
December were $40.09. Industrial rates in December were
$22.38. Retail rates in December were $48.03.
The Carlsbad office market continues to see elevated vacancy.
With uncertain workforce dynamics and tight capital markets,
commercial developers are still largely holding off on new
developments. This trend is predicted to continue for the coming
12 - 18 months.
7.6%
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
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
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Feb. 25, 2025 Item #7 Page 23 of 43
4
TOURISM
Occupancy averaged 64.7% in the first quarter, which is consistent with the same quarter for 2023 (64.5%).
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, December 2024 Report)
Carlsbad’s average daily room rate (ADR) for the quarter was a strong $201.33 an increase over 2023 levels ($195.79). 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, December 2024 Report)
0.00
50.00
100.00
150.00
200.00
250.00
300.00
350.00
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2020 2021 2022 2023 2024
Hotel Average Daily Rate Trend
0
10
20
30
40
50
60
70
80
90
100
Ja
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Ja
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2020 2021 2022 2023 2024
Hotel Occupancy Trend
010203040506070
8090
Hotel Occupancy Last 12 Months
San Diego County, CA City of Oceanside, CA
City of Newport Beach, CA City of Carlsbad
050100150200250300350400450
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
Feb. 25, 2025 Item #7 Page 24 of 43
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 - December 2024)
Carlsbad home prices have dipped slightly over the past six months. Consumer demand and low inventory have kept
mortgage rates elevated, despite interest rate cuts from the Federal Reserve. 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 $1.48 million, an increase of 2% 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
Feb. 25, 2025 Item #7 Page 25 of 43
6
BUSINESS ACTIVITY
Building Permits (Source: City of Carlsbad, December 2024)
Between October and December, residential permits issued (777) continued a general decreasing trend for residential
building permits (879 - Q1).
Commercial permits issued (77) also decreased compared
to the previous quarter (101).
0
200
400
600
800
1000
1200
1400
1600
CommercialResidentialCommercialResidential CommercialResidentialCommercialResidential
2021 2022 2023 2024
Building Permits Issued
Q1 Q2 Q3 Q4
Business Licenses (Source: City of Carlsbad, December 2024)
There were a total of 2,197 business licenses issued last quarter,
including 903 non-residential, 551 residential, and 743 outside-the-
city licenses. This is an overall decrease of 22 total businesses over the
same quarter of 2023. The total number of Carlsbad business licenses
is 10,068.
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 6,532 businesses
in Carlsbad, a decrease of 135 total businesses over the previous year.
0
500
1000
1500
2000
2500
3000
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
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
District 1 District 2 District 3 District 4
New 27 20 10 13
Renewing 432 571 179 177
Total 459 591 189 190
Feb. 25, 2025 Item #7 Page 26 of 43
7
BUSINESS ACTIVITY Continued
Largest Employers (Source: City of Carlsbad, December 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, December 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
Electric Bike Center Carlsbad Reformation Skin and Wellness LLC
Trimming Petals
Calor Studios LLC - Ste A
Calor Studios LLC - Ste B
Seaside Drafting and Design LLC Gazelle Fashion and Style LLC
Deals and Beyond Collectibles
Peaceful Pigeon Co
The Origin Hip Hop Performing Arts
Academy LLC Golden Lotus Spa Inc
From the Trophy Room
Clementine Art Studio
Carlsbad Homewood Suites by Hilton
Eleven-11 Bath Company LLC
IHS Environmental Enterprises Inc
Caminito
Craig Meisner LMFT
Foundation Escrow
5 Point Detail Inc
Golden Dreams Mattress
Kenji Watanabe LMFT
Miller CPA Group PC
Soapy Joes Paseo Del Norte Inc Created Beautiful Aesthetics
Sharkeys Cuts for Kids Fou Water - 3409 Kroeker Kids LLC
District 1
District 4
District 3
District 2
Feb. 25, 2025 Item #7 Page 27 of 43
8
INDUSTRY CLUSTERS
Life Sciences (Source: City of Carlsbad and Lightcast - 2025)
The Life Sciences industry cluster employs 6,415 workers across 115 firms and experienced a 17% increase in employment
between 2019 and 2024. The cluster is 5.18 times more concentrated in Carlsbad than the national average and annual wages
per worker average $170,820.
San Diego County and California have historically experienced parallel employment growth in the Life Sciences cluster.
Between 2010 and 2020, employment in Carlsbad surged by 75%, with a particularly strong 40% growth from 2016 to 2018.
While growth slowed between 2018 and 2020, the sector rebounded significantly, growing 17% between 2019 and 2024.
Technology (Source: City of Carlsbad and Lightcast - 2025)
The Information and Communications Technologies (ICT) cluster employs 8,470 workers across 327 firms in Carlsbad and is
2.18 times more concentrated in Carlsbad than the national average. Annual wages per worker average $181,562, and the
ICT industry cluster experienced a 5% increase in the number of jobs between 2019 and 2024.
Between 2010 and 2020, San Diego County and California experienced steady parallel growth in ICT, while Carlsbad saw an initial decline from 2012 to 2015. However, since 2015, employment in Carlsbad’s ICT sector has trended upward. From 2019 to 2024,
employment in Carlsbad grew by 5%, compared to San Diego County which did not have any growth across the industry.
Cleantech (Source: City of Carlsbad and Lightcast - 2025)
Between 2019 and 2024, the number of workers employed at Cleantech firms increased by 15%. Across the industry cluster,
36 Cleantech firms in Carlsbad employed more than 3,780 people. The average annual wage per worker is $200,304, and
the Cleantech industry cluster in Carlsbad is 4.38 times more concentrated than the national average.
Carlsbad’s Cleantech industry initially declined between 2010 and 2012 before experiencing steady growth through 2020.
While employment growth peaked in California and San Diego County in 2013, Carlsbad has continued its upward trend.
Between 2019 and 2024, employment in Carlsbad’s Cleantech sector grew 15%, significantly outpacing the 3% growth in
San Diego County.
Sports Innovation & Design (Source: City of Carlsbad and Lightcast - 2025)
The Sports Innovation & Design industry cluster employs 1,754 workers across 113 firms and experienced a 28% increase in
employment between 2019 and 2024. The cluster is 17.37 times more concentrated in Carlsbad than the national average
and annual wages per worker average $134,176.
Previously, Carlsbad’s employment in the Sports Innovation & Design cluster had been on a steady decline since 2013.
San Diego County and California also saw declines starting in 2015, with sharp drops between 2019 and 2020 due to the
COVID-19 pandemic. However, Carlsbad experienced a strong recovery, with employment increasing 28% between 2019
and 2024, significantly outpacing San Diego County’s 9% growth.
Hospitality & Tourism (Source: City of Carlsbad and Lightcast - 2025)
Carlsbad’s Hospitality & Tourism cluster is about 1.42 times more concentrated in Carlsbad than the national average and
employs 14,170 people across 674 businesses. Hospitality & Tourism experienced a sharp 15% decrease in employment
between 2019 and 2024, 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 $44,930 on average.
Carlsbad, San Diego County, and California saw severe employment declines in the Hospitality & Tourism sector between
2019 and 2020 as businesses such as theater companies, amusement parks, and arcades shut down due to the COVID-19
pandemic. While the sector has struggled to recover, Carlsbad experienced a 15% decline from 2019 to 2024, exceeding the
1% decline in San Diego County. Feb. 25, 2025 Item #7 Page 28 of 43
9
INDUSTRY IMPACT
Largest Industries (Source: Lightcast, December 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
Feb. 25, 2025 Item #7 Page 29 of 43
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
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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 February 25, 2025
The quarterly economic scan is developed by the City of Carlsbad Economic Development Department.
For more information, visit carlsbadca.gov/economy, 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
Feb. 25, 2025 Item #7 Page 30 of 43
Exhibit 4
This report summarizes the City of Carlsbad’s General Fund revenues and expenditures through December 31,
2024. It compares revenues and expenditures for the first half 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 ($34.4 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 half of the fiscal year have increased by 5% as compared to the prior fiscal year.
The primary reasons for the increase are:
Current taxes are up by $1,741,000 or 6.1% mainly due to increased assessed property values. The first
installment of taxes was received by the city in December.
Supplemental taxes are down $259,000 or 35%, these taxes are driven by change in assessed value due
to change in property ownership.
Aircraft taxes are also up $182,000 or 6% due to an increase in aircraft assessed values.
Sales Taxes ($30.5 million) – For the first half of the fiscal year, sales tax revenues
are $160,000, or 0.5%, higher 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 and third calendar quarter of calendar year 2024 as well
as the first advance for the fourth 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.
December 31, 2024
5%
0.5%
Feb. 25, 2025 Item #7 Page 31 of 43
Quarterly Financial Report _______________________________________________________________ 2
The largest economic segments in the city are automobile dealers, general consumer goods, and restaurants.
Together, they generate approximately 63% of the city’s sales tax revenues. For sales occurring in the third
calendar quarter of 2024 (the most recent data available), Carlsbad’s cash basis sales were up 2.9%, when
compared to the third quarter of 2023. The city’s largest sector, auto dealers, showed higher new car sales,
which is attributable to the correction of a taxpayer error. With this in mind, and on an economically adjusted
basis, the city’s sales tax receipts were actually down approximately 6% over the previous year and driven mainly
by a decline in consumer demand, likely in response to the sustained inflationary period combined with future
uncertainty with the new administration.
Transient Occupancy Tax ($19.7 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 November 2024. TOT collected for the first half of the fiscal year
reflects an increase of $612,000 or 3%, 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 of 70.3%. Average daily room rates in October, November and December of 2024
were 3% 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 ($3.0 million) – All entities doing business in the City of
Carlsbad are required to have a valid business license. Business license revenue is
estimated at $6.6 million for the current fiscal year. Business license revenues are
down by $128,000, or 0.4%, from the previous fiscal year. The decrease is due to
a 2% decrease in license renewal revenue combined with a reduction in penalty
revenue from overdue business license renewals.
There are currently 9,925 active business licenses, 435 more than the prior year. The majority of taxed
businesses (6,714 businesses) are located in Carlsbad, with 2,533 of these businesses home-based.
Interdepartmental Charges ($2.6 million) – Interdepartmental charges are down
by $437,000 or 14% 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 ($4.4 million) – For the first half of the
fiscal year, income from investments and property is up $757,000 compared to
the previous fiscal year. This increase is due to several factors including a 24%
rise in yield from 2.49% as of December 2023 to 3.03% as of December 2024
along with a 0.9% increase in the average cash balance held in the General Fund
as well as interest earned of $471,000 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 preparing for potential
future decreases in CalPERS’ discount rate. An initial contribution of $10 million was authorized by the City
Council followed by a second annual contribution of $7.5 million in October 2024.
-14%
21%
-4.1%
3%
Feb. 25, 2025 Item #7 Page 32 of 43
Quarterly Financial Report _______________________________________________________________ 3
Inflation which had been on a historic rise for much of 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.
The Federal Reserve began cutting interest rates in late 2024, first lowering the range to 4.75%-5.0% in
September, followed by further reductions to 4.5%-4.75% in November and 4.25%-4.5% in December. Recent
indicators suggest that economic activity has continued to expand at a solid pace, with the unemployment rate
moving up but remaining low. Inflation has made further downward progress but remains somewhat elevated.
While many experts predict additional rate cuts in the months ahead, the Federal Reserve has indicated it will
proceed with caution.
Recreation Fees ($1.8 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 down by $160,000 compared to last year at this time.
The decrease in revenue is due to the temporary deferral of class payments,
which will be recognized when the classes occur.
Development Related Revenues ($2.4 million) – Development related revenues,
which include building permits, planning fees, building department fees, and
engineering fees, reflect a 16% increase, or $332,000, for the first half 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 half of fiscal year 2024-25 included permits associated with the new residential
construction of 26 second dwelling units across the city, 65 condominiums (Coral Springs at Marja Acres), 97
apartments (FPC Residential at Ponto and Romeria Pointe), 3 single family homes and various homeowner
improvements. Commercial building permit activity included Grand Pacific Autograph Hotel (28,170 sq. ft.)
Toyota of Carlsbad (26,665 sq. ft.) and additional footage for Palomar Airport Road car wash (3,111 sq. ft.).
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 $1.04 million for the current fiscal
year compared to $1.01 million from the prior fiscal year, a 3% increase.
Franchise Tax ($1.7 million) – 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 $800 lower, or 0.1%, when compared to the same
period last year.
Cable television franchise revenues (Spectrum and AT&T) are down $70,400 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. This was offset by an increase of $69,600
in trash collection revenue mostly from contracted rate adjustments 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
-8%
16%
-0.1%
Feb. 25, 2025 Item #7 Page 33 of 43
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 ($3.7 million) – The city bills any individual who is transported
in one of the city’s ambulances. Through December 2024, receipts from
ambulance fees are up $336,000, or 10%, compared to last fiscal year. The
increase in revenue for the half of the fiscal year is mainly due to changes to the
ambulance fee schedule that the City Council approved in June 2024 based on
an updated cost of service study (increases effective Sept 1, 2024). Billable
transports totaled 3,829 in the first half of fiscal year 2024-25 versus 3,992 at
the same time in the prior fiscal year.
Other Revenue Sources ($232,000) – Other revenue sources have decreased by
$109,000 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 ($806,000) – 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
$278,000 over the prior year is primarily a result of increased right of way
($90,000), coastal development and grading permits ($74,000) and fire
inspection services ($47,000) when compared to the same period last year.
Fines and Forfeitures ($188,000) – 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 decrease to date of $3,000 is
mostly due to a slight decrease in parking citations when compared to the
previous fiscal year.
Intergovernmental Revenues ($1,403,000) – 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. The increase of $413,000 received this year includes FEMA
COVID-19 reimbursement of $780,000 which was offset by a decrease of
$538,000 in state reimbursements received for two planning related state grant
awards in the prior year. These state grants were completed in the prior year
and no additional receipts this fiscal year will be received.
10%
53%
-32%
42%
-2%
Feb. 25, 2025 Item #7 Page 34 of 43
Quarterly Financial Report _______________________________________________________________ 5
Transfer Taxes ($526,000) – 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 by $8,000 over the same period last year due to an increase in
property transfers.
Other Charges or Fees ($574,000) – 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 down by
$223,000, or 28% mainly due to a decrease in mutual aid response
reimbursements when compared to the prior fiscal year.
A detailed schedule of General Fund revenues is provided below:
2%
-28%
Feb. 25, 2025 Item #7 Page 35 of 43
Quarterly Financial Report _______________________________________________________________ 6
Feb. 25, 2025 Item #7 Page 36 of 43
Quarterly Financial Report _______________________________________________________________ 7
Expenditures
Total General Fund expenditures and encumbrances – those funds either spent or committed for specific
expenses – through the month of December 2024 (the first half of the fiscal year) are $131.1 million, compared
to $129.5 million at the same time last year. The remaining budget available through the fiscal year ending June
30, 2025, is $122.2 million, or 48%. If funds were spent in the same proportion as the previous year, the General
Fund would have 46% or $112.0 million available. Excluding transfers out, contingencies, and non-departmental
charges, the percentage available on December 31, 2024, is 46.3%, 0.6% more than the 45.7% available on
December 31, 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 expected to increase at a faster rate than anticipated ongoing revenue. The city’s five-year financial
forecast currently 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
Feb. 25, 2025 Item #7 Page 37 of 43
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 December 31,
2024, the city’s Section 115 Trust had a balance of $18,798,900. Considering the assets held by CalPERS as well
as the assets held in the city’s trust, the combined pension funded status as of December 2024 is 75.8%.
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.
Feb. 25, 2025 Item #7 Page 38 of 43
Quarterly Financial Report _______________________________________________________________ 9
Feb. 25, 2025 Item #7 Page 39 of 43
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:
Feb. 25, 2025 Item #7 Page 40 of 43
Quarterly Financial Report _______________________________________________________________ 11
Water Enterprise
Revenues
Increase in water operating revenues due to increase in user rates effective January 2024,
combined with a 5.3% increase in water volume sales.
Interest earnings increased due to a 24% 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 is from rate increase of late and door hanger fees.
The increase in other revenues is from higher revenue due to a loss recovery and reimbursed
work from other departments.
The decrease in miscellaneous service charges driven by private development requests.
Expenses
The increase in staffing expenses due to negotiated salary adjustments in addition to annual
required contribution to the city’s unfunded pension liability balance with CalPERS.
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 8.3% increase in the amount of water purchased.
Outside services increase from pump and asphalt repairs in current year.
Miscellanous expense increased from various parts and equipment purchases.
Captial outlay decrease due to higher costs in piror year for excavator purchase.
6.7%
9.1%
Feb. 25, 2025 Item #7 Page 41 of 43
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 24% 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 and reimbursed
labor charges in prior year.
Expenses
The increase in staffing expenses is due to negotiated salary adjustments in addition to annual
required contribution to the city’s unfunded pension liability balance with CalPERS.
Encina operating costs increased from higher staffing and costs for chemicals, energy and
insurance.
Depreciation increased from replacement of infrastructe has reached end of useful life.
24.3%
25%
Feb. 25, 2025 Item #7 Page 42 of 43
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.
Pro shop revenues decreased which was offset by increases in food and beverage, practice
center and other revenues from interest earnings.
Expenses
Course and grounds increase driven mostly by higher water use and rate.
Cost of sales decrease correlated to sales in pro shop and focus on lower margins in food and
beverage.
Depreciation has increased from new assets placed in service for improvements and equipment.
Miscellaneous expenses slightly decreased from prior year invoices for utility cost savings.
Capital outlay higher in prior year from replacement of mower, utility carts and patio furniture.
1.8%
-4.4%
Feb. 25, 2025 Item #7 Page 43 of 43
Matt Sanford, Economic Development Director
Zach Korach, Finance Director
February 25, 2025
Economic and Financial
Update: Q2 FY 2024-25
TODAY’S PRESENTATION
•Today’s report will cover Fiscal Year 2024-25, Second Quarter
o October through December 2024
•Economic update
•Financial update
•Mid-year budget review
ITEM 7: ECONOMIC AND FINANCIAL UPDATE
2
CARLSBAD ECONOMY
•Carlsbad’s Gross Regional Product was an estimated
$16.8 billion in 2024
•Carlsbad’s economy contracted by approximately
$50 million from 2023 to 2024 (0.3%)
•This is the first time a contraction has been noted
since the city began tracking GRP data (2019)
ITEM 7: ECONOMIC AND FINANCIAL UPDATE
3
ECONOMIC TRENDS
•External factors continue to affect the economy
o NIH spending cuts
o Tariffs
o Potential rebound of inflation and cost of capital
o Disinvestment in clean technologies
o International tourist sentiment
ITEM 7: ECONOMIC AND FINANCIAL UPDATE
4
ITEM 7: ECONOMIC AND FINANCIAL UPDATE
5
INFLATION
Consumer Price Index for All Urban Consumers for San Diego-Carlsbad MSA
ITEM 7: ECONOMIC AND FINANCIAL UPDATE
7
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
Jan-24 Feb-24 Mar-24 Apr-24 May-24 Jun-24 Jul-24 Aug-24 Sep-24 Oct-24 Nov-24 Dec-24
Unemployment Rate Comparison
Last 12-Months
Carlsbad San Diego County California North County Avg w/o Carlsbad
CARLSBAD JOBS
•October through December saw 5,441 unique
job postings
•Jobs were posted by 1,100 different Carlsbad
employers
•Average salary for posted jobs was $56,200
•Entry Level jobs account for about 67% of
available jobs
ITEM 7: ECONOMIC AND FINANCIAL UPDATE
8
ITEM 7: ECONOMIC AND FINANCIAL UPDATE
9
$1.48m
$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
DEVELOPMENT & BUSINESS ACTIVITY
•There are an estimated 6,532 current businesses in Carlsbad
•License activity remained consistently strong
10
0
500
1000
1500
2000
2500
3000
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2022 2023 2024
Business Licenses Issued by Quarter
Non-Residential Residential Outside City Total
ITEM 7: ECONOMIC AND FINANCIAL UPDATE
11
14.3%
7.6%
4.8%
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
2022 2023 2024
Carlsbad Commercial Vacancy Rates
Carlsbad Retail Carlsbad Office Carlsbad Industrial
ITEM 7: ECONOMIC AND FINANCIAL UPDATE
12
TOURISM
0
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60
80
100
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2022 2023 2024
Hotel Occupancy Trend
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2022 2023 2024
Hotel Average Daily Rate Trend
KEY TAKEAWAYS
•External factors are creating a chaotic operating
environment for businesses
•Rising costs could create additional challenges
•Finding and retaining workers remains a challenge
•Carlsbad’s diverse economy is resilient
•The city continues to be a sought-after destination
for businesses and workers
ITEM 7: ECONOMIC AND FINANCIAL UPDATE
13
GENERAL FUND REVENUES
fiscal year to date through second quarter
14
$0
$5,000,000
$10,000,000
$15,000,000
$20,000,000
$25,000,000
$30,000,000
$35,000,000
$40,000,000
Property tax Sales tax Transient
occupancy tax
Other taxes Income from inv.
and prop.
Development
related revenue
Other revenues
FY 2023-24 Actual
FY 2024-25 Expected
FY 2024-25 Actual
GENERAL FUND REVENUES
Revenue category
Actual
FY 2023-24
Actual
FY 2024-25
$
difference
%
difference
Property tax $32.7 $34.4 $1.7 5%
Sales tax 30.4 30.5 0.1 0%
Transient occupancy tax 19.1 19.7 0.6 3%
Other taxes 5.4 5.2 -0.2 -4%
Income from inv. and property 3.6 4.4 0.8 21%
Development related revenue 2.1 2.4 0.3 14%
Other revenues 11.2 11.3 0.1 1%
Total $104.4 $107.9 $3.5 3%
fiscal year to date through second quarter (in millions)
15
GENERAL FUND BUDGET
ITEM 7: ECONOMIC AND FINANCIAL UPDATE
•Adopted budget of $238.5 million
•Working budget of $253.4 million
•Available budget remaining of $122.2 million, or 48%
•Includes actual expenditures through Dec. 2024
•Includes open purchase order commitments
16
GENERAL FUND EXPENDITURES & ENCUMBRANCES
fiscal year to date through second quarter
17
$-
$20,000,000.00
$40,000,000.00
$60,000,000.00
$80,000,000.00
$100,000,000.00
$120,000,000.00
$140,000,000.00
Personnel Maintenance & operations Transfers out Other
FY 2024-25 Budget
Q2 FY 2023-24 Actual
Q2 FY 2024-25 Actual
GENERAL FUND EXPENDITURES
fiscal year to date through second quarter (in millions)
Category
FY 2024-25
Appropriation
As of Qtr. 2
FY 2024-25
% of Budget
Spent to Date
OPEN POs
at 12/31/24
Personnel $134.7 $68.3 51%$0.0
Maintenance & operations 73.0 30.4 42%11.2
Transfers out 37.6 18.8 50%0.0
Capital outlay 2.4 0.7 29%1.7
Village Trenching 5.2 0.0 0%0.0
Contingency 0.5 0.0 0%0.0
Total $253.4 $118.2 47%$12.9
18
WATER AND WASTEWATER
ITEM 7: ECONOMIC AND FINANCIAL UPDATE
Compared to prior year through Quarter 2:
•Water revenues are up 9% and expenses
are up 7%
•Wastewater revenues are up 24% and expenses are up 25%
19
GOLF COURSE
ITEM 7: ECONOMIC AND FINANCIAL UPDATE
Compared to prior year through Quarter 2:
•Net income $350,000 higher than last year
•Golf Course revenues are up 2% and
expenses are down 4%
20
MIDYEAR BUDGET REVIEW
•Departments conduct a comprehensive budget review
•Various operational needs and one-time requests were
identified
•Departments first seek to absorb the impacts through
realized budget savings
•All requests submitted to Finance and require approval
by City Manager before being brought to the City Council
ITEM 7: ECONOMIC AND FINANCIAL UPDATE
12
GENERAL FUND REQUESTS
•$850,000 – fire mitigation
•$100,000 – interest earned and paid on developer
deposits held by the city
•$95,000 – electric vehicle for Fire Marshal
•$84,000 – Police Dept operational needs
•$45,000 – Park Impact Fee study
•$40,000 – Library Sunday hours
ITEM 7: ECONOMIC AND FINANCIAL UPDATE
12
NON-GENERAL FUND REQUESTS
•$1,260,294 – fleet replacement
•$500,000 – Recycled water purchases from Vallecitos Water District
•$391,860 – affordable housing property acquisition
•$350,000 – demand-based water charges increase
•$150,000 – storm drain maintenance operational costs
•$106,382 – interdepartmental charge from General Fund to utility
funds
•$75,000 – Housing Trust Fund legal fees
•$55,000 – CIP design increase for Pickleball Courts
ITEM 7: ECONOMIC AND FINANCIAL UPDATE
12
RECOMMENDED ACTION
•To receive the economic and financial update and
midyear budget review and consider adopting the
necessary resolutions approving the requests for
additional appropriations
ITEM 7: ECONOMIC AND FINANCIAL UPDATE
12
NEXT STEPS
•Monitor revenues and expenditures
•Publish economic and financial status reports:
carlsbadca.gov/doingbusiness
carlsbadca.gov/departments/finance/financial-reports
•Present fiscal year 2024-25 third quarter results to City Council in May 2025
ITEM 7: ECONOMIC AND FINANCIAL UPDATE
21