HomeMy WebLinkAbout2026-02-24; City Council; 10; Economic and Financial Update for the Second Quarter of Fiscal Year 2025-26 and Midyear Budget ReviewCA Review CKM
Meeting Date: Feb. 24, 2026
To: Mayor/President and City Council/Board Members
From: Geoff Patnoe, City Manager/Executive 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
2025-26 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
2025-26 and provide direction as appropriate; and
2)Receive a report on the results of the fiscal year 2025-26 mid-year budget review; and
3)Adopt a City Council resolution authorizing the City Manager or designee to appropriate
$490,000 from the General Fund, $18,677 from the Fleet Maintenance Fund, $29,159 from
the Fleet Replacement Fund, $206,000 from the Stormwater Enterprise Fund, and $22,000
from the Wastewater Operating Fund to the Fiscal Year 2025-26 Operating Budget for
various operational needs; and
4)Adopt a Carlsbad Municipal Water District Board of Directors resolution authorizing the
Executive Manager or designee to appropriate $121,615 from the Potable Water Operating
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.
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The City Manager is also presenting the City Council with requests for additional appropriations
at this mid-point of the fiscal year, including:
•Increasing quarterly payments for the Public Provider Ground Emergency Medical
Transportation Intergovernmental Transfer program (Fire Department, $200,000)
•Implementation of additional all-way stops, signing and striping improvements at El
Camino Real and Tamarack Avenue, additional traffic analyses, and software
(Transportation Department, $50,000)
•Quarterly maintenance and vegetation and sediment removal for four concrete
channels in the city (Transportation Department, $150,000)
Explanation & Analysis
Economic update
Carlsbad’s economy remained stable during the fourth quarter of 2025, though several
indicators point to a gradual moderation in activity as the year concluded. The city’s five key
industry clusters – life sciences, technology, clean technology, sports and active lifestyle, and
hospitality and tourism – continue to provide diversification and long-term strength. However,
hiring activity, commercial absorption and housing momentum softened modestly, consistent
with broader national cooling trends.
Gross regional product
Carlsbad continues to maintain one of the largest gross regional products in San Diego County
at more than $18.7 billion, second only to the City of San Diego. While annual output remains
strong, growth across sectors has become more uneven. While hospitality, tourism and health-
related industries continue to grow, manufacturing and certain research and development
segments remain more sensitive to federal funding shifts and global trade conditions. This
divergence could reflect a broader national recalibration or signal a contraction.
Labor market conditions
The unemployment rate in Carlsbad remains consistent with near full employment, though
hiring momentum slowed through the end of the year. National labor data shows a continued
cooling in job openings, and private sector data earlier in the fall reflected softer hiring
sentiment.
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Job postings in Carlsbad totaled 5,283 in the fourth quarter, down from the prior quarter,
indicating more cautious employer activity. Nationally, job openings declined through late
2025, reinforcing a broader narrative of a shifting labor market. While layoffs in Carlsbad
remain relatively low among national trends in tech, the labor market is no longer as tight as in
prior years. This moderation may ease wage pressures over time but could also slow
employment growth in key sectors.
Hospitality and tourism
Hotel performance moderated seasonally in the fourth quarter following stronger summer
months. While full annual performance remained solid, late-year occupancy softened,
consistent with typical seasonal patterns. Hotel room rates remained comparatively strong,
reflecting Carlsbad’s positioning as a premium coastal destination.
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Visit Carlsbad’s analysis of 2025 shows that group business continues to buoy performance, as
leisure travel has shown greater variability amid economic uncertainty. The destination
marketing organization concluded that without strong group bookings, Carlsbad would have
seen a decline in hospitality metrics for the year.
Commercial real estate trends
During the fourth quarter, Carlsbad’s commercial real estate market continued to moderate but
remained comparatively strong relative to the broader San Diego region. Industrial vacancy
increased to 10.4%, up 0.8 percentage points from the prior quarter. While this is an increase
over the notably tight market of 2022 and 2023, this is more in alignment with historical
averages. The increase does suggest that tenant demand continues to slow, with fewer large
lease expansions and a longer timeline for space absorption.
Office vacancy held steady at 14.7%, performing slightly better than the regional average. While
stabilization is a positive sign following several quarters of increases, overall leasing activity
remains measured as businesses reassess space needs in a higher-cost operating environment.
Retail vacancy rose modestly to 5.1%, up 0.4 percentage points, yet remains below the regional
average, indicating continued relative strength in the city’s retail corridors.
Despite incremental increases in vacancy, rental rates rose across all product types. Retail rents
reached $44.61 per square foot per year, office rents increased to $39.33, and industrial rents
rose to $22.62. The combination of rising rents and slowing absorption reflects landlords
maintaining pricing discipline even as leasing velocity moderates.
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While higher rents reinforce Carlsbad’s premium market position, they also present challenges
for small and locally owned businesses. Elevated occupancy costs, combined with higher
borrowing rates and operating expenses, may limit expansion plans or deter new business
formation.
Carlsbad continues to compare favorably to the broader San Diego region, though absorption
trends warrant continued monitoring heading into 2026.
Housing market and cost of living
Housing values stabilized during the fourth quarter. Zillow’s home value index for Carlsbad
measured $1.326 million to end the year, up 4.6% from the previous year, but down 0.3% from
the October peak.
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After several years of sustained appreciation, home values appear to be leveling off. Mortgage
rates remained elevated through the end of the year, with December Treasury yields at
approximately 3.48% (1-year), 4.18% (10-year), and 4.84% (30-year). Higher borrowing costs
continue to constrain affordability and limit transaction volume.
While stabilization may help moderate future price volatility, housing affordability remains a
structural constraint for workforce attraction and retention. In addition, earlier-than-expected
housing cooling seen in the third quarter has carried into the fourth quarter, which could
foreshadow a slower housing cycle in 2026.
Federal policy and macroeconomic considerations
Federal policy shifts, global trade conditions and national monetary policy continue to affect
Carlsbad businesses in ways well outside of our local control. Fluctuating tariffs and geopolitical
tensions have contributed to input cost volatility and supply chain uncertainty. Carlsbad
businesses have noted that setting prices for future products is difficult because of the
uncertainty of costs. This has affected industries like food production, sports and active
lifestyle, and consumer brands, in addition to cleantech and life sciences. Moreover, staff have
heard from businesses of all sizes that there are likely to be price shocks in 2026.
Elevated borrowing costs continue to constrain access to capital, affecting business expansion,
startup formation and commercial real estate investment. Life sciences and technology
companies remain sensitive to federal research funding levels and regulatory timelines, which
directly influence hiring and long-term planning. Venture capital, which has historically been a
strong funding source for San Diego region startups in technology and life sciences, is
increasingly concentrated in artificial intelligence–focused companies, a segment where
Carlsbad has comparatively limited representation. This shift has redirected investment
attention toward other markets and subsectors.
National labor market cooling and moderating consumer spending are also impacting
hospitality, tourism and retail sectors. While Carlsbad’s industry base remains diversified and
resilient, businesses are taking a more measured approach to hiring and investment as policy
and economic conditions evolve.
Conclusion
Carlsbad closed 2025 in a position of relative economic stability, though signs of moderation
became more pronounced during the fourth quarter. Hiring activity slowed, commercial
vacancy ticked upward in select segments and housing values leveled off after sustained
appreciation. At the same time, rental rates remain firm, small business optimism is high and
key industry clusters continue to provide structural resilience.
The complete economic scan for the second quarter of fiscal year 2025-26 is provided as
Exhibit 3. Economic indicators are tracked on a dashboard available at
carlsbadca.gov/economy.
Financial update
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 revenues from the transient occupancy tax on overnight
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lodging ended the year very similarly to the prior year. Similar trends were experienced in fiscal
year 2024-25, namely with sales tax and diminishing consumer demand, given the sustained
inflationary increases across the region.
Bolstered by property tax revenues, the General Fund’s total revenues remain strong, though
sales tax revenues continue to be sensitive to changes in consumer demand. It will be critical to
monitor the city’s revenues and expenditures as the city continues through fiscal year 2025-26
and take necessary proactive steps to continue mitigating economic uncertainties.
The December 2025 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 are not specifically designated for another fund, and primarily covers the costs of essential
services such as police, firefighting, 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. Fiscal year 2024-
25 experienced much smaller growth in property and transient occupancy taxes, with both
realizing 4% increases while sales taxes realized a 3% reduction.
Because revenue growth continues to level off, the current fiscal year’s adopted budget took a
conservative approach at estimating these revenue sources. Total revenues are down $83,000
or 0.1% over the prior year, which is mainly attributed to a drop in sales taxes that was offset by
an insurance reimbursement received by the city. The table below shows the differences in
revenue when comparing the first half of fiscal year 2025-26 with the same period in the prior
fiscal year.
Fiscal year 2025-26 year-to-date revenues as of December 2025
compared to fiscal year 2024-25 as of December 2024
Revenue category Change ($) Change (%)
Investments, property
income $1,554,060 35%
Interdepartmental charges $169,053 6%
Other revenue sources $1,248,242 538%
Intergovernmental -$557,783 -40%
Fines and forfeitures $69,424 37%
Other taxes $278,698 5%
Property tax $1,341,196 4%
Transient occupancy tax -$165,908 -1%
Licenses and permits -$263,211 -14%
Charges for services $151,567 2%
Sales tax -$3,908,717 -13%
Total revenues -$83,379 -0.1%
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Major revenue sources
• Property tax
The majority of property tax revenue is collected in December and April each year.
Increases of $1.3 million for the first half of the fiscal year are due to a 4.3% increase in
assessed property values when compared to last year. Although increases in residential
assessed values were recorded for fiscal year 2025-26 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.
• Sales tax
For the first half of the fiscal year, sales tax revenues are $1.3 million, or 13%, lower
than the same period in the previous fiscal year. Sales tax revenues to date for the
current fiscal year represent the city’s sales tax revenues for the second and third
calendar quarter of calendar year 2025 as well as the first advance for the fourth
calendar quarter of 2025.
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 years 2023-24
and 2024-25 revealed a leveling from sales growth and slowdown in consumer activity.
This leveling off is continuing into the current fiscal year as revenue trends remain
slightly lower than a year ago overall. Consumers are more likely to wait for greater
improvement of household economic conditions before extending themselves again,
inspiring the next sales tax growth cycle.
The largest economic segments in the city are automobile dealers, general consumer
goods and restaurants. Together, they generate approximately 70% of the city’s sales
tax revenues. For sales occurring in the third calendar quarter of 2025, the most recent
data available, Carlsbad’s cash basis sales were down 11.2% when compared to the third
calendar quarter of 2024. The city’s largest sector, auto dealers, showed a 1.9% decline,
which is attributable to a taxpayer error that was correct in the previous period. With
this in mind, and on an economically adjusted basis, the city’s sales tax receipts were
actually down approximately 1% over the previous year, a decline caused mainly by a
decline in consumer demand, likely in response to the sustained inflationary period
combined with future uncertainty related to the current federal administration.
• Transient occupancy tax
Year-to-date transient occupancy tax figures represent taxes collected on overnight
stays at lodging businesses through the month of November 2025. The revenue received
in the first half represents a slight decrease of $166,000, or 0.08% when compared to
the same year-to-date period last year.
Occupancy rates over the last 12 months have been 71.6% on average, which is slightly
higher compared to the prior year, when the average was 71.5%. Average daily room
rates in October, November and December of 2025 were the same as the previous year
on average.
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Expenditures and encumbrances
General Fund
The city’s total General Fund expenditures and encumbrances – those funds either spent or
committed for specific expenses – through the month of December 2025 are $135.7 million,
compared to $131.1 million at the same time last year. The remaining budget available through
the fiscal year ending June 30, 2026, is $127.9 million, or 48.5% of the total approved.
Excluding transfers out, contingencies and non-departmental charges, the percentage available
on Dec. 31, 2025, is 48.1%, 1.8% more than the 46.3% available in the prior year on Dec. 31,
2024.
Pension funding
The cost of CalPERS, the state pension system for government employees and pension funding,
has been and will continue to be a challenge for participating agencies like the City of Carlsbad.
CalPERS administers the city’s defined benefit pension plan, and costs have been increasing in
past years as CalPERS addresses a structural shortfall in the plan’s assets to cover unfunded
actuarial liabilities, the shortfall when a pension plan's assets are less than the value of the
promised benefits it owes to current and future retirees.
The city actively manages its unfunded pension costs in support of CalPERS’ strategies for plan
sustainability and as part of the city’s strategic, long-term approach to financial management.
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 valuation report (as of June 30, 2024) indicated the city had a combined pension
funded status of 75.7%, improved from the prior year’s status of 73.7%. This increase was
predominantly driven by CalPERS’ fiscal year 2023-24 investment return of 9.3%, above its
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 (a Section 115 trust) in 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 in September 2023 and a subsequent $7.5 million contribution in
October 2024. The City Council approved an additional $7.5 million contribution in September
2025 to be made into the trust in October 2025.
As of Dec. 31, 2025, the city’s pension trust had a balance of $29,284,500, including the initial
$10 million contribution and subsequent contributions of $15 million. Since the trust was
established, the investments have earned $4.3 million. 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 2025 is 78.8%.
Staff will continue to monitor the activities in the trust and report the city’s pension-funded
status to the City Council quarterly.
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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.
Mid-year budget update
The city initiated a mid-year budget review of the Fiscal Year 2025-26 Operating Budget in
November 2025. 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 2025-26.
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 lower than originally estimated, given the level of economic uncertainty,
staff do not recommend changes to the original estimates. Some departments identified
modest savings anticipated at the end of the fiscal year. 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 for various operational needs. These
requests are presented below for the City Council’s consideration.
Additional appropriation for ambulance services due to service changes from the City of
Oceanside - $150,000
Oceanside’s Fire Chief notified the City of Carlsbad in December 2025 that the City of
Oceanside would open Fire Station 9 in the northeastern portion of Oceanside later
that month and would suspend the paramedic ambulance at Oceanside Fire Station
2 due to an unforeseen budget issue. Personnel assigned to the Fire Station 2
ambulance have been reassigned to partially staff the new station. As a result, and
at the direction of the City Manager, part-time Fire Department resources have been
assigned as an immediate, cost-effective measure to address the resulting service
gap caused by Oceanside’s actions. Staff request a $150,000 appropriation to
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.
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support this effort from January through March 2026. Transport cost recovery
associated with the additional ambulance is expected to offset the personnel
expenses required for its deployment. Staff will continue to keep the City Council
informed regarding Oceanside’s actions and staffing allocations, particularly those
related to Oceanside Fire Station 2.
Additional appropriation for final quarterly payment to medical transportation
reimbursement program - $200,000
The city participates in the state’s Public Provider Ground Emergency Medical
Transportation Intergovernmental Transfer program, which helps reimburse public
agencies for the cost of providing ambulance transport services to Medi-Cal patients
when those costs are not fully covered. State law requires participating cities to pay
the local share of the program costs through quarterly payments to the state, which
are then matched with federal funds. Those combined funds are returned to the city
as additional reimbursement for each eligible ambulance transport. In July 2023, the
City Council approved participation in the program and set aside annual funding to
cover these required quarterly payments. Since then, the required local payments
have increased due to program changes, including higher reimbursement rates and
adjustments from prior years, with another increase expected in 2026. As a result,
the funding approved in 2023 is no longer enough. In the current fiscal year, the
department used its full annual allocation after only three of the four required
payments and needs an estimated additional $200,000 to cover the remaining cost.
Because the program reimburses the city after the payments are made, this
additional funding will be matched with federal funds and returned to the city as
ambulance transport revenue. The Fire Department plans to request additional
ongoing funding in the fiscal year 2026–27 budget to address this issue going
forward.
Police surveillance trailer - $90,000
This request seeks funding for a surveillance trailer to enhance public safety by
providing a visible, mobile crime-prevention tool that can be rapidly deployed to
high-need areas, special events and emerging crime hotspots. The trailer will
support proactive policing, deter criminal activity and assist with real-time
monitoring and post-incident investigations.
Traffic engineering operational needs - $50,000
The Transportation Department is requesting $50,000 in one-time additional
appropriations to fulfill the following immediate needs:
o $22,000 is requested for additional all-way stop sign implementations over
the remainder of the fiscal year. Requests for new all-way stop signs at
intersections citywide have increased. The department’s existing budget has
been exhausted and this amount should help cover planned work for the
remainder of the fiscal year.
o $11,000 for signing and striping improvements at El Camino Real and
Tamarack Avenue. This work was originally planned as part of an ongoing
Capital Improvement Program project but has subsequently been pulled out
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due to changing circumstances. The department would like to respond to
resident requests by completing work at this intersection during the current
fiscal year.
o $3,000 for AutoTurn license. AutoTurn is software used for fire truck turning
analyses. This software will allow traffic engineers to more accurately
account for project impacts on fire trucks’ turning abilities. Ongoing budget
for this software will be requested as part of the Information Technology
Department’s budget for fiscal year 2026-27.
o $14,000 for additional traffic analyses. Currently, the department has a
$20,000 budget for traffic analyses and received $90,000 in funding carried
forward from the last fiscal year to the current one for a total budget of
$110,000. Requests for these analyses have risen significantly and spending
so far this year has nearly surpassed existing budget. This request should
cover the anticipated remaining four to five analyses this fiscal year.
Additional ongoing budget will be requested for fiscal year 2026-27.
Non-General Fund requests for City Council/Carlsbad Municipal Water District Board approval
Fleet Maintenance Facility Repairs and mobile service support needs - $18,677
The Fleet & Facilities Department is requesting $18,677 in one-time additional
appropriations to fulfill the following immediate needs:
o $5,000 is requested for repairs to tire mounting and balancing equipment
and adding lift assistance devices at the Fleet Maintenance Facility. The
facility’s existing tire mounting and balancing equipment needs unexpected
repairs to pneumatic control valves and cylinders. Upgrading these machines’
capacity so that they can lift heavier wheels and tires is preferable to having
staff perform that heavy lifting.
o $8,000 for a new snap-on diagnostic scanner. The department’s existing
snap-on scanner is eight years old and is no longer supported by the
manufacturer. Staff have been unable to communicate with or diagnose
newer vehicles with this scanner due to this lack of product support. This
new scanner will make it easier for Fleet to diagnose vehicles more quickly,
reducing vehicle downtime.
o $5,677 for tools, emergency lighting and strobe kit to equip a service van for
additional support for road call responses. The department identified a
vehicle exchange that would benefit both Fleet and Facilities custodial staff.
Fleet's light-duty response vehicle, a Ford Maverick, was exchanged for an
all-electric Ford Transit used by the Facilities custodial team. To prepare the
E-Transit for service within the city’s fleet, staff are requesting funding for
safety lighting and essential tools so they can respond to additional road
calls. This will further reduce vehicle downtime.
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Additional appropriations for purchases and outfitting of five vehicles - $29,159
The Fleet & Facilities Department is requesting $29,159 in one-time additional
appropriations to complete purchases and outfitting of the following vehicles:
o $14,400 to complete the purchase of four Ford Mavericks. In fiscal year
2024-25, four vehicles were approved to be replaced with Ford Mavericks at
a budgeted replacement cost of $27,500 each. Ford order restrictions limited
our ability to order these vehicles in the fiscal year 2024-25 and price
increases to the 2025 model year priced out the ability to support the
replacement of these vehicles with the original appropriated funding. Fleet
staff expected government concession incentives would be increased later
that fiscal year, which would have provided a price reduction suitable to
meet our $27,500 budgeted replacement cost. Unfortunately, Ford's
concessions did not increase, and the fiscal year 2025-26 budget was
submitted to Finance before an adjustment to the budget could be
requested. This request will increase the budgeted replacement cost of each
of these vehicles from $27,500 to $31,100, which is aligned with vehicle
replacements of other Ford Maverick vehicles approved in the fiscal year
2025-26 budget. This appropriation is supported with existing funds in the
Fleet Vehicle Replacement Fund generated by auctioning off used vehicles in
previous fiscal years.
o $14,759 to complete outfitting of a pickup truck. In fiscal year 2024-25, a
vehicle was approved for replacement with a budget of $48,723 that would
include the purchase of a Ford F150 and the addition of a liftgate and
directional arrow board for the street maintenance team's roadside
functions. A request from the Transportation Department to upgrade the
directional arrow board to a more functional message board was received in
September 2025 as estimates for outfitting the new vehicle were being
made. The cost of the message board upgrade exceeds the replacement
budget of this vehicle by $14,759. This appropriation is also supported with
existing funds in the Fleet Vehicle Replacement Fund from previous years’
auctions.
Purchase of a new pole camera for the Stormwater Enterprise Fund - $26,000
The Transportation Department is requesting $26,000 to replace the pole camera used
for inspection of the city’s storm drain infrastructure. The existing camera is 17 years old
and no longer functional because replacement parts are no longer available. A
replacement is needed to continue inspections of storm drain infrastructure. The new
camera is expected to last 10-20 years.
Purchase of a new automatic jib crane for the Stormwater Enterprise Fund - $30,000
The Transportation Department is requesting $30,000 to replace the automatic jib crane
used for grate removal and installation. The current crane has been non-operational for
several months, requiring staff to do these tasks manually. This presents operational
risks and requires additional staff. The new crane has an expected useful life of 20 years
and will restore the ability of staff to handle these tasks more quickly and easily.
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Vegetation and sediment removal from concrete channels - $150,000
The Transportation Department is requesting $150,000 be appropriated in the
Stormwater Enterprise Fund to remove sediment and vegetation from the following
concrete channels:
o The Tamarack Channel
o The box culvert under the Kelly Drive and Park Drive intersection
o The channel adjacent to the Jockey Club development in La Costa
o The drainage channel adjacent to Rancho Santa Fe Road
o The Gabbiano Lane Discharge
This work is needed due to increased flooding risk, but no current budget exists to
perform it. Ongoing funding for this work will be requested as part of the fiscal year
2026-27 budget process along with funding to complete work for other channels.
Additional appropriations for outfitting of three vehicles - $143,615 (CMWD)
The Utilities Department is requesting additional appropriations for the outfitting of
three vehicles as outlined below. These were all previously approved as part of a
carryforward request that was unable to be completed during fiscal year 2024-25:
o $50,365 in the Potable Water Operations fund for outfitting of a 1.5-ton
service truck
o $28,000 in the Potable Water Operations fund and $22,000 in the
Wastewater Operations fund for outfitting of a 1-ton service truck
o $43,250 in the Potable Water Operations fund for outfitting of a half-ton
service truck
Fiscal Analysis
• The request to appropriate $150,000 for additional ambulance funding is expected to be
offset by additional ambulance transport cost recovery revenue.
• The request to appropriate $200,000 for the medical transfer reimbursement program
will be eventually offset by additional revenue, but since that reimbursement may not
occur during this fiscal year there may be a temporary impact to the existing General
Fund reserve balance.
• The request to appropriate $90,000 for the Police surveillance trailer will not result in
any citywide fiscal impact in the current year other than using the existing General Fund
reserve balance. If approved, the surveillance trailer will be included in the city’s Fleet
Vehicle Replacement Fund with annual collections.
• The request to appropriate $50,000 for traffic engineering operational needs will not
result in any citywide fiscal impact in the current year other than using the existing
General Fund reserve balance. The ongoing licensing cost for the AutoTurn software will
be requested as part of the Information Technology Department’s fiscal year 2026-27
budget.
• The $18,677 request for Fleet Maintenance needs is supported by existing funds and will
not result in any ongoing fiscal impact beyond the one-time expenditure.
• The $29,159 request for the Fleet Vehicle Replacement Fund is supported by existing
funds from excess auction revenues on the sale of disposed assets and will not result in
any ongoing fiscal impact beyond the one-time expenditure.
Feb. 24, 2026 Item #10 Page 14 of 46
Docusign Envelope ID: 24CD97F5-9437-46E2-9751-98A1054BCB7B
• The request to appropriate $206,000 from the Stormwater Enterprise Fund will have an
impact on this fund alone. In recent years, this fund has been operating in a deficit
because the program’s revenue alone is inadequate to fund ongoing operations. It
partially operates by using its fund balance, requiring additional General Fund transfers
to fund the remaining activities. In fiscal year 2025-26, the city’s General Fund
transferred $2 million in the annual adopted budget and $6 million in the annual budget
carryforward process.
• The request to appropriate $121,615 to the Utilities Department’s Potable Water
Operating Fund budget will impact this fund alone. Outfitting for these vehicles was
previously approved and budgeted for but not completed. Future replacement costs for
these vehicles and their associated outfitting costs are included in the Fleet
Replacement Fund.
• The request to appropriate $22,000 to the Utilities Department’s Wastewater Operating
Fund budget will impact this fund alone. Outfitting for this vehicle was previously
approved and budgeted for but not completed. Future replacement costs for the vehicle
and its associated outfitting costs are included in the Fleet Replacement Fund.
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 2026 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 2025-26 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 Maintenance Fund, Fleet
Replacement Fund, Stormwater Enterprise Fund, and Wastewater Operating Fund.
With the CMWD Board of Directors’ approval, funds for the various vehicle outfitting needs will
be appropriated to the Potable Water Operating Fund.
Environmental Evaluation
The proposed actions are not a “project” as defined by California Environmental Quality Act, or
CEQA, Section 21065 and CEQA Guidelines Section 15378(b)(5) and do not require environment
review under CEQA Guidelines Section 15060(c)(3) and 15061(b)(3), because the proposed
actions to receive an economic and financial update and to appropriate funds are
organizational or administrative government activities that do not involve any commitment to
any specific project which may result in a potentially significant physical impact on the
environment. Any subsequent action or direction stemming from the proposed actions may
require preparation of an environmental document in accordance with CEQA or the CEQA
Guidelines.
Feb. 24, 2026 Item #10 Page 15 of 46
Docusign Envelope ID: 24CD97F5-9437-46E2-9751-98A1054BCB7B
Exhibits
1. City Council resolution
2. Carlsbad Municipal Water District Board of Directors resolution
3. Carlsbad Economic Scan - FY 2025-26 - Second Quarter
4. December 2025 Financial Status Report
Feb. 24, 2026 Item #10 Page 16 of 46
Docusign Envelope ID: 24CD97F5-9437-46E2-9751-98A1054BCB7B
Exhibit 1
RESOLUTION NO. 2026-048 .
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CARLSBAD,
CALIFORNIA, AUTHORIZING THE CITY MANAGER OR DESIGNEE TO
APPROPRIATE $490,000 FROM THE GENERAL FUND, $18,677 FROM THE
FLEET MAINTENANCE FUND, $29,159 FROM THE FLEET REPLACEMENT
FUND, $206,000 FROM THE STORMWATER ENTERPRISE FUND, AND
$22,000 FROM THE WASTEWATER OPERATING FUND TO THE FISCAL YEAR
2025-26 OPERATING BUDGET FOR VARIOUS OPERATIONAL NEEDS
WHEREAS, the City Council of the City of Carlsbad, California, has determined that various
operational needs in the Fire, Police and Transportation departments exceed the current fiscal year
2025-26 operating budget; and
WHEREAS, the General Fund requires additional operating budget appropriations of $490,000
to account for these needs as outlined in Attachment A; and
WHEREAS, critical operational needs in Fleet Maintenance necessitate making equipment and
tool purchases; and
WHEREAS, the Fleet Maintenance Fund requires additional appropriations of $18,677 to
complete these purchases as outlined in Attachment A; and
WHEREAS, certain vehicle replacements and outfitting requirements have exceeded existing
budget amounts; and
WHEREAS, the Fleet Replacement Fund requires additional appropriations of $29,159 to
complete these purchases as outlined in Attachment A; and
WHEREAS, critical equipment needs and concrete channel maintenance work in the
Stormwater Enterprise fund have exceeded current budget levels; and
WHEREAS, the Stormwater Enterprise Fund requires additional appropriations of $206,000 to
account for these needs as outlined in Attachment A; and
WHEREAS, vehicle outfitting needs that were previously approved but have not yet been
completed have increased the required amount to ready a service vehicle for service; and
WHEREAS, the Wastewater Operating Fund requires additional appropriations of $22,000 to
meet this need as outlined in Attachment A.
Feb. 24, 2026 Item #10 Page 17 of 46
Docusign Envelope ID: 24CD97F5-9437-46E2-9751-98A1054BCB7B
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 proposed action is not a “project” as defined by California Environmental
Quality Act, or CEQA, Section 21065 and CEQA Guidelines Section 15378(b)(5) and does
not require environment review under CEQA Guidelines Section 15060(c)(3) and
15061(b)(3), because the proposed action to appropriate funds is an organizational or
administrative government activity that does not involve any commitment to any
specific project which may result in a potentially significant physical impact on the
environment. Any subsequent action or direction stemming from the proposed action
may require preparation of an environmental document in accordance with CEQA or the
CEQA Guidelines.
3.That the City Manager, or designee, is authorized to appropriate $490,000 to the
General Fund’s 2025-26 operating budget for various operational needs as shown in
Attachment A.
4.That the City Manager, or designee, is authorized to appropriate $18,677 to the Fleet
Maintenance Fund’s 2025-26 operating budget for Fleet Maintenance Facility repairs
and mobile service support needs as shown in Attachment A.
5.That the City Manager, or designee, is authorized to appropriate $29,159 to the Fleet
Replacement Fund’s 2025-26 operating budget for the purchase and outfitting of five
vehicles as shown in Attachment A.
6.That the City Manager, or designee, is authorized to appropriate $206,000 to the
Stormwater Enterprise Fund’s 2025-26 operating budget for equipment purchases and
concrete channel maintenance needs as shown in Attachment A.
7.That the City Manager, or designee, is authorized to appropriate $22,000 to the
Wastewater Operating Fund’s 2025-26 operating budget vehicle outfitting as shown in
Attachment A.
Feb. 24, 2026 Item #10 Page 18 of 46
Docusign Envelope ID: 24CD97F5-9437-46E2-9751-98A1054BCB7B
PASSED, APPROVED AND ADOPTED at a Joint Special Meeting of the City Council of the City
of Carlsbad, and Board of Directors of the Carlsbad Municipal Water District on the 24th day of
February, 2026, by the following vote, to wit:
AYES: Blackburn, Bhat-Patel, Acosta, Burkholder, Shin.
NAYS: None.
ABSTAIN: None.
ABSENT: None.
_____________________________________
KEITH BLACKBURN, Mayor
______________________________________
SHERRY FREISINGER, City Clerk
(SEAL)
Feb. 24, 2026 Item #10 Page 19 of 46
Docusign Envelope ID: 24CD97F5-9437-46E2-9751-98A1054BCB7B
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Attachment A
Feb. 24, 2026 Item #10 Page 20 of 46
Docusign Envelope ID: 24CD97F5-9437-46E2-9751-98A1054BCB7B
Exhibit 2
RESOLUTION NO. 1798 .
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
$121,615 FROM THE POTABLE WATER OPERATING FUND FOR VARIOUS
OPERATIONAL NEEDS
WHEREAS, the outfitting required to equip three service trucks was not completed in fiscal year
2024-25 when budget was available; and
WHEREAS, this outfitting is necessary to put these service trucks in service; and
WHEREAS, the Potable Water Operating Fund requires additional appropriations of $428,179
to meet these needs; and
NOW, THEREFORE, BE IT RESOLVED by the Board of Directors of the Carlsbad Municipal Water
District of the City of Carlsbad, California, as follows:
1.That the above recitations are true and correct.
2. That the proposed action is not a “project” as defined by California Environmental
Quality Act, or CEQA, Section 21065 and CEQA Guidelines Section 15378(b)(5) and does
not require environment review under CEQA Guidelines Section 15060(c)(3) and
15061(b)(3), because the proposed action to appropriate funds is an organizational or
administrative government activity that does not involve any commitment to any
specific project which may result in a potentially significant physical impact on the
environment. Any subsequent action or direction stemming from the proposed action
may require preparation of an environmental document in accordance with CEQA or the
CEQA Guidelines.
3.That the Executive Manager, or designee, is authorized to appropriate $121,615 to the
Potable Water Operating Fund to complete vehicle outfitting for three vehicles as shown
in Attachment A.
Feb. 24, 2026 Item #10 Page 21 of 46
Docusign Envelope ID: 24CD97F5-9437-46E2-9751-98A1054BCB7B
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 24th
day of February, 2026, by the following vote, to wit:
AYES: Blackburn, Bhat-Patel, Acosta, Burkholder, Shin.
NAYS: None.
ABSTAIN: None.
ABSENT: None.
_____________________________________
KEITH BLACKBURN, President
______________________________________
SHERRY FREISINGER, Secretary
(SEAL)
Feb. 24, 2026 Item #10 Page 22 of 46
Docusign Envelope ID: 24CD97F5-9437-46E2-9751-98A1054BCB7B
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Attachment A
Feb. 24, 2026 Item #10 Page 23 of 46
Docusign Envelope ID: 24CD97F5-9437-46E2-9751-98A1054BCB7B
1
Second Quarter, Fiscal Year 2025-26
The following scan provides an overview of key economic indicators for October, November, and December
2025 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)
$18.7B
In 2025, Carlsbad had the second largest gross regional product
in San Diego County at more than $18.7B, only trailing the City
of San Diego. From 2024 to 2025, Carlsbad’s GRP grew by $700
million (adjusted). 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, December 2025 Report)
Unemployment in Carlsbad remained consistent with near full employment during the fourth quarter, though labor market
conditions continued to moderate. The unemployment rate hovered under 5% through year-end, reflecting slower hiring
activity compared to earlier in the year. National data also shows a cooling labor market, with declining job openings
and softer private-sector hiring. While layoffs remain relatively low, employers are taking a more measured approach to
expansion heading into 2026.
0
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Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Carlsbad Unemployment Rate 2022 -2025
2022 2023 2024 2025
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Dec-24 Jan-25 Feb-25 Mar-25 Apr-25 May-25 Jun-25 Jul-25 Aug-25 Sep-25 Oct-25 Nov-25 Dec-25
Unemployment Rate Comparison Last 12-Months
Carlsbad San Diego County California North County Avg w/o Carlsbad
Economic Development Department
Gross Regional Product
Released Feb 24, 2026
*October data is unavailable due to the federal government shutdown
Exhibit 3
Feb. 24, 2026 Item #10 Page 24 of 46
Docusign Envelope ID: 24CD97F5-9437-46E2-9751-98A1054BCB7B
2
Job Postings (Source: Lightcast, October - December 2025)
5,283
Job postings totaled 5,283 during the fourth quarter, down from the previous quarter, reflecting more cautious hiring activity
among Carlsbad employers. National job openings continued
to decline through year-end, signaling ongoing cooling in labor
demand. While layoffs remain relatively low and hiring persists
in sectors such as health care and transportation, employers are taking a more measured approach to expansion. Shorter posting
durations compared to prior years suggest a more balanced
labor market and improved candidate availability.
In-Demand Skills (Source: Lightcast, December 2025)
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. 24, 2026 Item #10 Page 25 of 46
Docusign Envelope ID: 24CD97F5-9437-46E2-9751-98A1054BCB7B
3
CAPITAL
Interest Rates (Source: U.S. Department of the Treasury, December 2025)
The Federal Reserve maintained a cautious stance through the fourth quarter following its September rate cut. While the
benchmark rate remains in the 4.00–4.25% range, borrowing costs continue to constrain business expansion and housing
affordability. By December, Treasury yields were approximately 3.48% for the 1-year, 4.18% for the 10-year, and 4.84% for
the 30-year. Mortgage rates remain elevated compared to recent years, contributing to slower housing activity and more
measured capital investment decisions heading into 2026.
December 2024
One-year interest rate 4.16%
10-year interest rate 4.58%
30-year interest rate 4.78%
December 2025
One-year interest rate 3.48%
10-year interest rate 4.18%
30-year interest rate 4.84%
COMMERCIAL REAL ESTATE
Market Vacancy Rates and Rent per Square Foot (Source: CoStar, December 2025)
The commercial real estate market in Carlsbad remained stable
but continued to normalize during the fourth quarter of 2025.
Industrial vacancy increased to 10.4% (up 0.8 percentage points
from the prior quarter), office vacancy held steady at 14.7%, and
retail vacancy rose modestly to 5.1% (up 0.4 points). While vacancy
has increased in select segments, Carlsbad continues to perform
comparably or slightly better than the broader San Diego region,
though slower absorption reflects more cautious tenant expansion.
Rental rates increased across all product types. Average asking
rents per square foot, per year reached $44.61 for retail, $39.33
for office, and $22.62 for industrial space. Rising rents alongside
incremental vacancy gains suggest a market adjusting to slower
demand rather than experiencing distress, though higher rental
costs remain a challenge for small and growing businesses.
10.4%
Industrial vacancy rate
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
14.00%
16.00%
Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2023 2024 2025
Carlsbad Commercial Vacancy Rates
Carlsbad Retail Carlsbad Office Carlsbad Industrial
$0.00
$10.00
$20.00
$30.00
$40.00
$50.00
$60.00
Retail Office Industrial Retail Office Industrial
Carlsbad North County w/o Carlsbad
Market Rent Per SF
2024 Q4 2025 Q1 2025 Q2 2025 Q3 2025 Q4
Feb. 24, 2026 Item #10 Page 26 of 46
Docusign Envelope ID: 24CD97F5-9437-46E2-9751-98A1054BCB7B
4
TOURISM
Hotel occupancy in Carlsbad softened into the fourth quarter following summer peaks. October (73.9%) was a strong period,
driven by group travel but November saw occupancy decline to 64.0%, but that is still 3.6% higher than November 2024.
December (63.9%) saw a 5.45% increase over December 2024. While Carlsbad continues to perform well as a destination market,
occupancy is becoming more sensitive to shifts in traveler sentiment and broader economic uncertainty.
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 2025 Report)
Carlsbad’s average daily room rate (ADR) moderated during the fourth quarter compared to 2024 levels. October ADR measured
$213.40, followed by $195.42 in November and $184.67 in December, reflecting typical seasonal softening after peak summer
rates. December ADR declined approximately 3.5% year-over-year, indicating some rate compression compared to the prior year.
While occupancy improved year-over-year in the final two months, hotel operators appear to have adjusted pricing to sustain
demand heading into year-end.
Hotel Average Daily Room Rate (Source: Smith Travel Research, December 2025 Report)
0.00
50.00
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2023 2024 2025
Hotel Average Daily Rate Trend
0.0
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2023 2024 2025
Hotel Occupancy Trend
0.010.0
20.030.0
40.050.0
60.0
70.080.0
90.0
Hotel Occupancy Last 12 Months
San Diego County, CA City of Oceanside, CA
City of Newport Beach, CA City of Carlsbad
0.00
50.00100.00150.00
200.00
250.00300.00350.00
400.00
450.00
Average Daily Rate Last 12 Months
City of Carlsbad San Diego County, CA
City of Oceanside, CA City of Newport Beach, CA
Hotels in Carlsbad
Feb. 24, 2026 Item #10 Page 27 of 46
Docusign Envelope ID: 24CD97F5-9437-46E2-9751-98A1054BCB7B
5
INCOME + HOUSING
Median Household Income (Source: 2023 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 2023 was $139,326, (adjusted for inflation), which was $5,200 higher than the previous year, and $36,000 more
than the county median household income. Carlsbad has generally outpaced the region in terms of household income
growth.
Median Home Price (Source: Zillow.com Home Value Index - December 2025)
Home values in Carlsbad remained elevated during the fourth quarter but showed signs of leveling off late in the year. The
median home value reached approximately $1.333 million in October, before easing slightly to $1.326 million in December,
representing a 4.6% increase year-over-year. This modest pullback from the fall peak suggests price stabilization following several years of strong appreciation. Home values in Carlsbad crept higher through most of 2025, which bucked the trend
of the rest of North County. Higher mortgage rates and affordability constraints continue to influence buyer activity,
contributing to a more balanced housing market heading into 2026.
2019 2020 2021 2022 2023_
City of Carlsbad
Median Household Income $123,409 $112,933 $124,669 $146,596 $139,326_
County of San Diego
Median Household Income $70,588 $74,855 $79,324 $98,928 $102,285_
City of Carlsbad
Per Capita Income $63,079 $57,607 $65,430 $66,944 $70,896_
County of San Diego
Per Capita Income $40,389 $39,737 $44,377 $46,957 $49,891_
$-
$200,000.00
$400,000.00
$600,000.00
$800,000.00
$1,000,000.00
$1,200,000.00
$1,400,000.00
$1,600,000.00
Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Median Home Price Comparison, Last 12 Months
Carlsbad Escondidio Oceanside San Marcos Vista
Feb. 24, 2026 Item #10 Page 28 of 46
Docusign Envelope ID: 24CD97F5-9437-46E2-9751-98A1054BCB7B
6
BUSINESS ACTIVITY
Building Permits (Source: City of Carlsbad, December 2025)
Building activity strengthened during the fourth quarter of
2025. Residential permits totaled 923, an increase of 18.8%
year-over-year compared to 777 permits in Q4 2024.
Commercial permits reached 125, up significantly from
77 in the same quarter last year, representing a 62% year-
over-year increase. The rebound in commercial permitting
suggests renewed development activity and improved
investor confidence heading into 2026.
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2021 2022 2023 2024 2025
Building Permits Issued
Q1 Q2 Q3 Q4
Business Licenses (Source: City of Carlsbad, December 2025)
A total of 2,160 business licenses were issued in the fourth quarter
of 2025, including 845 non-residential, 538 residential, and 777
outside-the-city licenses. This represents a modest 1.7% decrease
year-over-year compared to Q4 2024.
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 6,585 businesses
in Carlsbad, a net increase of 53 total businesses over the
previous year.
0
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Business Licenses Issued by Quarter
Non-Residential Residential Outside City Total Carlsbad Businesses by City Council District
Feb. 24, 2026 Item #10 Page 29 of 46
Docusign Envelope ID: 24CD97F5-9437-46E2-9751-98A1054BCB7B
7
BUSINESS ACTIVITY Continued
Largest Employers (Source: City of Carlsbad, December 2025)
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 2025)
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-residential businesses in the city according to business license filings.
District 1
• Wholeness Collective Therapy Group
• Carlsbad Village Yoga Co-Op• Bayshire Carlsbad
• Hospice of The North Coast
• Sprouts Farmers Market
District 2
• Life Technologies Corporation
• Legoland California• Viasat Inc
• lonis Pharmaceuticals
• Genmark Diagnostics Inc
District 3
• Park Hyatt Aviara
• Costco
• Hilton Garden Inn
• Vons• Raken
District 4
• Omni La Costa
• La Costa Glen Carlsbad CCRC
• Glenbrook HC
• The Henry• The Vintage Glass
Carlsbad Village Senior Living
Red Light Method Carlsbad
Hellman’s Haus
Holiday Ornaments
Surf Art Spot
The Regulation Place Occupational
Therapy
Natalie Blue Therapy
EVGO Services LLC
Nova Upper Cervical Chiropractic Jardin
Vitality Sports Medicine and Rehab
Johnson Chiropractic
Momentum Psychological Services APC
Living Spectrum Psychology
Polaris Electro-Optics Inc
Holder General Engineering
Cross and Co Studios LLC
Pastaphony
Stone Depot Building and Construction
Inspira Health LLC
The Curl Loft Corp
Tatum Shane Hair
Jurassic Productions LLC
Tecovas Soul Tide Psychotherapy PC
District 1
District 4
District 3
District 2
Business License Activity by District
District 1 District 2 District 3 District 4
New 28 17 15 13
Renewing 396 531 198 167
Total 424 548 213 180
Feb. 24, 2026 Item #10 Page 30 of 46
Docusign Envelope ID: 24CD97F5-9437-46E2-9751-98A1054BCB7B
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. 24, 2026 Item #10 Page 31 of 46
Docusign Envelope ID: 24CD97F5-9437-46E2-9751-98A1054BCB7B
9
INDUSTRY IMPACT
Largest Industries (Source: Lightcast, December 2025)
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. 24, 2026 Item #10 Page 32 of 46
Docusign Envelope ID: 24CD97F5-9437-46E2-9751-98A1054BCB7B
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
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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 24, 2026
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.
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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. 24, 2026 Item #10 Page 33 of 46
Docusign Envelope ID: 24CD97F5-9437-46E2-9751-98A1054BCB7B
Exhibit 4
This report summarizes the City of Carlsbad’s General Fund revenues and expenditures through December 31,
2025. It compares revenues and expenditures for the first half of fiscal year 2025-26 and fiscal year 2024-25.
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 ($35.7 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 4.3% for fiscal
year 2025-26. This is the 13th 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, 5.3%, industrial, 3.4%, properties in the city and
commercial, 4.5%. This is the 11th 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 2025-26 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 4% when compared to the prior fiscal
year. The primary reasons for the increase are:
•Current taxes are up by $1.6 million or 5% mainly due to increased assessed property values. The first
installment of taxes for the fiscal year was received by the city in December.
•Supplemental taxes are down $7,000 or 1%, these taxes are driven by the change in assessed value due
to changes in property ownership.
•Aircraft taxes are down $490,000 or 16% due to a decrease in aircraft assessed values.
Sales Taxes ($26.6 million) – For the first half of the fiscal year, sales tax revenues
are $1.3 million, or 13%, lower than the same period in the previous fiscal year.
Sales tax revenues to date for the current fiscal year represent the city’s sales tax
revenues for the second and third calendar quarter of calendar year 2025 as well
as the first advance for the fourth calendar quarter of 2025.
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 and 2024-25 revealed a leveling from 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, 2025
4%
-13%
Feb. 24, 2026 Item #10 Page 34 of 46
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The largest economic segments in the city are automobile dealers, general consumer goods, and restaurants.
Together, they generate approximately 70% of the city’s sales tax revenues. For sales occurring in the third
calendar quarter of 2025 (the most recent data available), Carlsbad’s cash basis sales were down 11.2%, when
compared to the third calendar quarter of 2024. The city’s largest sector, auto dealers, showed a 1.9% decline,
which is attributable to a taxpayer error that was corrected in the previous period. With this in mind, and on an
economically adjusted basis, the city’s sales tax receipts were actually down approximately 1% 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 ($19.6 million) – The city’s third highest General Fund
revenue source on an annual basis is Transient Occupancy Tax (TOT or hotel tax),
estimated at $35.8 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 2025. TOT collected for the first half of the fiscal year reflects
a slight decrease of $166,000 or 0.8%, when compared to the previous year.
Currently, there are approximately 5,000 hotel rooms in the city and 400 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 71.5%. Average daily room rates in October, November and December
of 2025 were the same as the previous year on average.
Business License Tax ($3.2 million) – All entities doing business in the City of
Carlsbad are required to have a valid business license. Business license revenue is
estimated at $6.8 million for the current fiscal year. Business license revenues are
up by $225,000, or 8%, from the previous fiscal year. The increase is due to an
increase in new license activity combined with an increase in penalty revenue
from overdue business license renewals.
A total of 4,601 business licenses have been issued fiscal year to date, including 1,840 non-residential, 1,111
residential (home-based) and 1,650 outside the city licenses. This represents a small 2% decrease when
compared to the prior fiscal year during the same period.
Interdepartmental Charges ($2.8 million) – Interdepartmental charges are up by
$169,000 or 6% 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 increase this year is the result of the
budgeted increase in reimbursed work and 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 ($5.9 million) – For the first half of the
fiscal year, income from investments and property is up $1.5 million compared
to the previous fiscal year. This increase is due to several factors including an
18% rise in the average yield from 3.0% as of December 2024 to 3.6% as of
December 2025 as well as interest earned of $1.5 million 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
6%
35%
8%
-0.8%
Feb. 24, 2026 Item #10 Page 35 of 46
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contribution of $10 million was authorized by the City Council followed by a second annual contribution of $7.5
million in October 2024 and a third contribution of $7.5 million authorized in September 2025.
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. This range
remained in place until September 2025 when rates continued to be cut all the way down to 3.5%-3.75%. Recent
indicators suggest that the labor market, while not seeing accelerated layoffs, is still experiencing slow hiring
and inflation has been slowly easing.
Recreation Fees ($1.7 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 very slightly by $16,000 compared to last year at
this time. The decrease in revenue is due to a decrease in instructional class
revenue when compared to the same six month period last year. There is also a
decrease in revenue from the Monroe Street Pool which has been closed for a reconstruction project since April
2025. The pool is currently under construction with plans to reopen later in calendar year 2026. This decrease
in revenue at the Monroe location is offset by an increase in recreation swim revenue at the city’s second pool
location at Alga Norte.
Development Related Revenues ($2.4 million) – Development related revenues,
which include building permits, planning fees, building department fees, and
engineering fees, reflect a 0.2% decrease, or $5,400, 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 second quarter of fiscal year 2025-26 included permits associated with the new residential
construction of 19 second dwelling units across the city and one condominium (Marja Acres and various
homeowner improvements. Commercial and industrial building permit activity included a medical office shell
building on Hidden Valley Road (50,000 sq. ft.).
One source of development related revenue is building permits, which are $841,000 for the current fiscal year
compared to $1 million from the prior fiscal year, a decrease of $159,000. This decrease is attributable to permit
fees received in the prior fiscal year for the Tower 24 Ponto Beach townhome project (86 units).
Franchise Tax ($1.8 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 $7.2 million for the current fiscal year. Year-to-date
franchise taxes are $27,000 higher, or 1%, when compared to the same period
last year.
Cable television franchise revenues (Spectrum and AT&T) are down $75,000 representing a decrease in the
number of subscription service subscribers (premium video, equipment rental, on-demand, and programming
services) as more customers continue to move to streaming services. The decrease in cable television franchise
-1%
-0.2%
1%
Feb. 24, 2026 Item #10 Page 36 of 46
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revenues is offset by an increase of $102,000 in trash collection franchise revenue, which resulted from the city’s
most recent contract with Republic Services, the city’s waste services provider.
SDG&E pays franchise taxes for the use of public land over which they transport gas and electric services. In
addition, SDG&E pays an “in-lieu” franchise tax based on the value of gas and electricity transported through
SDG&E lines but purchased from another source. The “in-lieu” tax was put in place to capture the franchise taxes
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 2026.
Ambulance Fees ($3.4 million) – The city bills any individual who is transported
in one of the city’s ambulances. Through December 2025, receipts from
ambulance fees are down $276,000, or 8%, compared to last fiscal year. The
decrease in revenue for the first half of the fiscal year is mainly due to decreases
in transports. Billable transports totaled 3,292 in the first half of fiscal year 2025-
26 versus 3,860 at the same time in the prior fiscal year.
Other Revenue Sources ($1.5 million) – Other revenue sources have increased
by $1.2 million 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
increase to date when compared to the prior fiscal year is related to an
insurance reimbursement of $1.2 million that was received by the city in the
current fiscal year.
Other Licenses and Permits ($742,000) – 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
decrease of $64,100 over the prior year is primarily a result of decreased
coastal development and fire protection permits received.
Fines and Forfeitures ($257,150) – Fines and forfeitures represent
fees collected for code violations, parking citations, overdue fines, and
returned checks. The city recognizes revenues when the citizen pays the fine or
forfeiture, as opposed to when the fine is imposed. The increase to date of
$69,000 is mainly due to an increase in parking citations when compared to
the previous fiscal year. This increase is mainly due to the enforcement of
the state’s new daylighting law which makes it illegal to park a vehicle
within 20 feet of any marked or unmarked crosswalks.
Intergovernmental Revenues ($845,000) – 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. This year’s decrease to date of $558,000 when compared
to the previous year includes reimbursements of $780,000 received in the
prior year from FEMA related to the city’s COVID reimbursement claims
and an overall decrease of $36,000 in state reimbursements for mandated
costs. These decreases were offset by the receipt of state vehicle license
fees of $176,000 (these were received earlier in the fiscal year than usual).
-8%
-8%
538%
-40%
37%
Feb. 24, 2026 Item #10 Page 37 of 46
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Transfer Taxes ($553,000) – 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 slightly
increased by $26,000 over the same period last year due to decrease in property
transfers.
Other Charges or Fees ($824,000) – 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 fire mutual aid response, mall
police services, emergency response services, reports, etc. These fees are up by
$250,000 or 43% mainly due to an increase in fire mutual aid response
reimbursements when compared to the prior fiscal year.
A detailed schedule of General Fund revenues is provided below:
5%
43%
Feb. 24, 2026 Item #10 Page 38 of 46
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REVENUE
REVENUE EXPECTED ACTUAL ACTUAL CHANGE FROM
BUDGETED THROUGH FY 2025 FY 2026 YTD 2025 TO PERCENT
FOR FY 2025-26 12/31/25 AS OF 12/31/24 AS OF 12/31/25 YTD 2026 CHANGE
TAXES
PROPERTY TAX $100,105,610 $35,521,961 $34,383,742 $35,724,938 $1,341,196 4%
SALES TAX 57,847,173 31,621,395 30,539,472 26,630,755 (3,908,717) -13%
TRANSIENT OCCUPANCY TAX 35,822,721 19,901,838 19,727,955 19,562,047 (165,908) -1%
FRANCHISE TAX 7,188,534 1,827,158 1,737,775 1,765,146 27,371 2%
BUSINESS LICENSE TAX 6,750,302 3,220,349 2,972,407 3,197,373 224,966 8%
TRANSFER TAX 1,724,744 573,917 526,378 552,739 26,361 5%
TOTAL TAXES 209,439,084 92,666,618 89,887,729 87,432,998 (2,454,731) -3%
INTERGOVERNMENTAL
VEHICLE LICENSE FEES 145,000 0 0 175,864 175,864 100%
HOMEOWNERS EXEMPTIONS 300,000 45,405 48,281 47,522 (759) -2%
OTHER REIMBURSEMENT 782,027 592,535 1,354,400 621,512 (732,888) -54%
TOTAL INTERGOVERNMENTAL 1,227,027 637,940 1,402,681 844,898 (557,783) -40%
LICENSES AND PERMITS
BUILDING PERMITS 2,218,000 1,110,016 1,040,425 841,314 (199,111) -19%
OTHER LICENSES & PERMITS 1,215,697 717,262 806,147 742,047 (64,100) -8%
TOTAL LICENSES & PERMITS 3,433,697 1,827,278 1,846,572 1,583,361 (263,211) -14%
CHARGES FOR SERVICES
PLANNING FEES 912,000 560,003 487,474 430,629 (56,845) -12%
BUILDING DEPARTMENT FEES 855,000 458,310 403,645 609,085 205,440 51%
ENGINEERING FEES 818,000 388,486 489,722 534,831 45,109 9%
AMBULANCE FEES 6,800,000 3,546,385 3,660,860 3,385,016 (275,844) -8%
RECREATION FEES 3,330,000 1,790,144 1,772,756 1,756,728 (16,028) -1%
OTHER CHARGES OR FEES 1,889,400 503,929 574,206 823,941 249,735 43%
TOTAL CHARGES FOR SERVICES 14,604,400 7,247,257 7,388,663 7,540,230 151,567 2%
FINES AND FORFEITURES 388,200 184,507 187,728 257,152 69,424 37%
INCOME FROM INVESTMENTS & PROPERTY 8,677,570 3,713,454 4,381,065 5,935,125 1,554,060 35%
INTERDEPARTMENTAL CHARGES 5,316,999 2,566,162 2,636,342 2,805,395 169,053 6%
OTHER REVENUE SOURCES 301,700 125,852 231,918 1,480,160 1,248,242 538%
TRANSFERS IN 0 0 0 0 0 0%
TOTAL GENERAL FUND $243,388,677 $108,969,067 107,962,698 $107,879,319 ($83,379) -0.1%
(1)
(1) Calculated General Fund revenues are 1% below estimates as of December 31, 2025.
GENERAL FUNDREVENUE COMPARISON
Feb. 24, 2026 Item #10 Page 39 of 46
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Expenditures
Total General Fund expenditures and encumbrances – those funds either spent or committed for specific
expenses – through the month of December 2025 (the first half of the fiscal year) are $135.7 million, compared
to $131.1 million at the same time last year. The remaining budget available through the fiscal year ending June
30, 2026, is $127.9 million, or 48.5%. If funds were spent in the same proportion as the previous year, the General
Fund would have 48.2% or $122.2 million available. Excluding transfers out, contingencies, and non-
departmental charges, the percentage available on December 31, 2025, is 48.1%, 1.8% more than the 46.3%
available on December 31, 2024.
The fiscal year 2025-26 budget was developed with a focus that invests in the community’s highest priorities,
sets aside money for future infrastructure needs and grows the city’s cash reserves – all while supporting the
continued delivery of top-quality services the Carlsbad community expects. As in recent prior year budgets, 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.
While the broader economy continues to present challenges, Carlsbad is well-positioned to adapt. The adopted
budget for fiscal year 2025-26 is a focused, responsible and responsive budget – one that addresses both internal
and community priorities and sustains high-quality services without accelerating any projected financial deficit
over the next five years.
The adopted General Fund budget for fiscal year 2025-26 increased by 1.7% or $3.9 million when compared to
last fiscal year due to:
•Increased personnel costs (increase of $10.9 million or 8%):
o $6.1 million in salaries and wages due to negotiated salary increases was well as the addition of 4.6 full-
time equivalent positions. The new positions included one accountant in the Finance Department, one
analyst in the Human Resources Department with the remaining increases in part-time positions across
various departments.
o $3.3 million in retirement benefits costs.
o $1.1 million in health insurance costs.
o $0.4 million increase in other personnel costs (Medicare, unemployment and disability benefits).
•Increased maintenance and operations costs (increase of $4.7 million or 7%):
o 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 is still ranging between 2.5%
and 3.8% thus far in fiscal year 2024-25. While it is expected that inflation will continue to slowly
decrease, much uncertainty remains around the Federal Reserve’s actions to adjust target interest rates.
Moreover, the uncertainty around tariff implementation continues to severely impact consumer
confidence. Much of the fiscal year 2025-26 maintenance and operating budget increase is attributable
to inflationary increases, Climate Action Plan initiatives, and fire mitigation efforts.
•Decrease in transfers to other city funds (decrease of $13.8 million or 37%):
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 $14.6 million, split between these three capital project funds (42% to
the Infrastructure Replacement Fund, 42% General Capital Construction Fund and 16% to the
Technology Investment Capital Fund).
•Increase in capital outlay ($2.7 million budgeted compared with $500,000 in the prior year):
o The increase is primarily due to the Fire Department’s request to purchase a second front-line aerial
ladder truck.
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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, 2024) indicated the city had a combined pension funded
status of 75.7%, increased from the prior year’s status of 73.7%. This increase was predominantly driven by
CalPERS’ fiscal year 2023-24 investment return of 9.3%, above 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 in September 2023, a subsequent $7.5
million contribution in October 2024 and an additional $7.5 million contribution in September 2025. This brings
the total contributions to date to $25 million.
As of December 31, 2025, the city’s Section 115 Trust had a balance of $29,284,500. 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
2025 is 78.8%.
A detailed schedule of General Fund expenditure is provided on the next page.
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ADOPTED WORKING
BUDGET BUDGET AMOUNT AVAILABLE %
DEPARTMENT DESCRIPTION FY 2025-26 FY 2025-26 (a)COMMITTED (b)BALANCE AVAILABLE (c)
POLICY AND LEADERSHIP GROUP
CITY ATTORNEY $2,366,301 $2,394,804 $1,252,628 $1,142,176 47.7%
CITY CLERK 1,493,122 1,550,684 703,914 846,770 54.6%
CITY COUNCIL 641,472 642,752 294,980 347,772 54.1%
CITY MANAGER 2,070,890 2,159,075 1,110,328 1,048,747 48.6%CITY TREASURER 320,948 320,948 138,687 182,261 56.8%
COMMUNICATIONS & ENGAGEMENT 2,119,816 2,191,371 1,004,623 1,186,748 54.2%
TOTAL POLICY AND LEADERSHIP GROUP 9,012,549 9,259,634 4,505,160 4,754,474 51.3%
ADMINISTRATIVE SERVICES
ADMINISTRATION 889,826 908,301 453,514 454,787 50.1%
FINANCE 6,181,006 6,390,577 3,217,524 3,173,053 49.7%
HUMAN RESOURCES 5,600,534 6,025,910 2,701,621 3,324,289 55.2%
ECONOMIC DEVELOPMENT 963,571 1,129,716 577,283 552,433 48.9%
TOTAL ADMINISTRATIVE SERVICES 13,634,937 14,454,504 6,949,942 7,504,562 51.9%
PUBLIC SAFETY
POLICE 64,138,292 65,630,702 34,375,118 31,255,584 47.6%
FIRE 47,290,269 49,229,396 25,935,007 23,294,389 47.3%
TOTAL PUBLIC SAFETY 111,428,561 114,860,098 60,310,125 54,549,973 47.5%
COMMUNITY SERVICES
COMMUNITY SERVICES ADMINISTRATION 647,219 697,615 391,326 306,289 43.9%
COMMUNITY DEVELOPMENT 11,975,702 13,616,976 6,928,130 6,688,846 49.1%
HOUSING & HOMELESS SERVICES 3,317,186 3,575,378 2,002,796 1,572,582 44.0%
LIBRARY & CULTURAL ARTS 15,662,271 16,222,207 8,110,012 8,112,195 50.0%
PARKS & RECREATION 24,241,322 25,049,655 13,367,280 11,682,375 46.6%
TOTAL COMMUNITY SERVICES 55,843,700 59,161,831 30,799,544 28,362,287 47.9%
PUBLIC WORKS
PUBLIC WORKS ADMINISTRATION 1,488,222 1,489,688 737,637 752,051 50.5%
CONSTRUCTION MANAGEMENT & INSPECTIONS 3,250,987 3,313,176 1,688,849 1,624,327 49.0%
ENVIRONMENTAL SUSTAINABILITY 1,704,367 2,143,167 1,293,448 849,719 39.6%
FACILITIES 7,584,723 8,512,344 4,593,676 3,918,668 46.0%
TRANSPORTATION 12,173,662 12,716,755 6,464,541 6,252,214 49.2%
TOTAL PUBLIC WORKS 26,201,961 28,175,130 14,778,151 13,396,979 47.5%
NON-DEPARTMENTAL & CONTINGENCY
(d)OTHER NON-DEPARTMENTAL 2,079,000 2,283,649 523,823 1,759,826 77.1%
VILLAGE TRENCHING 0 5,220,000 0 5,220,000 100.0%
OPERATING TRANSFERS OUT 23,699,119 29,699,119 17,849,562 11,849,557 39.9%
CONTINGENCY 500,000 495,613 0 495,613 100.0%
TOTAL NON-DEPT & CONTINGENCY 26,278,119 37,698,381 18,373,385 19,324,996 51.3%
TOTAL GENERAL FUND $242,399,827 $263,609,578 $135,716,307 $127,893,271 48.5%
(a) Working budget includes the adopted budget, open encumbrances from the end of the prior fiscal year,
approved carry forwards of the prior fiscal year and all other mid-year council approvals.
(b) Actual expenditures on a budgetary basis include encumbrances and exclude non-budgeted items.
(c) Amount available would be 48.2% if funds were spent in the same proportion as the previous year.
(d) Other non-departmental includes property tax administration fees, assessment district administration, citywide litigation expenses,
and other items not attributed to a specific department.
AS OF 12/31/25
EXPENDITURE STATUS BY DEPARTMENTGENERAL FUND
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Council Contingency
The City Council has allocated $500,000 in the General Fund budget for unanticipated emergencies or
unforeseen program needs. Below is a summary of the activity in the City Council’s contingency account to date
for fiscal year 2025-26:
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 summary listing of all donations, that have been
accepted by the city manager to date during fiscal year 2025-26:
CONTINGENCY ACCOUNT
USE OF FUNDS
EXPLANATION AMOUNT
ADOPTED BUDGET $500,000
USES:
Community Sprit Grant: Carlsbad High School Lancer Day Parade (Council Policy 51)(4,387)
TOTAL USES (4,387)
AVAILABLE BALANCE $495,613
Note 1 - City Council Policy 51 gives authorization to the City Manager, or designee, to approve
Winning Teams and Community Spirit Grants up to $5,000 per grant.
Department Intention Qtr. 1 Oct.Nov.Dec.Qtr. 2 Total
Parks & Recreation Leo Carrillo Ranch Cash Donations $1,630 $476 $400 $258 $1,134 $2,764
Parks & Recreation Opportunity Grant Donations 2,177 890 680 342 1,912 4,089
Parks & Recreation Senior Center Cash Donations 2 100 2 9 111 113
Parks & Recreation Senior Meals Cash Donations 4,412 1,298 1,400 1,499 4,197 8,609
Parks & Recreation Senior Transportation Cash Donations 812 263 219 227 709 1,521
Parks & Recreation Teen Program Cash Donations 699 10 0 1 11 710
Subtotal - Parks & Recreation $9,732 $3,037 $2,701 $2,336 $8,074 $17,806
Library & Cultural Arts Books $500 $0 $0 $0 $0 $500
Library & Cultural Arts Support Library Programs and Services 37 0 50 5,412 5,462 5,499
Subtotal - Library & Cultural Arts $537 $0 $50 $5,412 $5,462 $5,999
Fire Pickleball paddles and pickleballs $250 $0 $0 $0 $0 $250
Fire Food gifts for station crews 0 300 1,000 1,090 2,390 2,390
Subtotal - Fire $250 $300 $1,000 $1,090 $2,390 $2,640
Total Donations $10,519 $3,337 $3,751 $8,838 $15,926 $26,445
Donations Fiscal Year 2025-26
Feb. 24, 2026 Item #10 Page 43 of 46
Docusign Envelope ID: 24CD97F5-9437-46E2-9751-98A1054BCB7B
Quarterly Financial Report _______________________________________________________________ 11
Water Enterprise
Revenues
• Increase in water operating revenues due to increase in user rates effective July 2025, offset by
a 4.7% decrease in water volume sales.
• Interest earnings increased due to a 19.3% increase in the yield of the Treasurer’s portfolio
offset by a 25.3% decrease in the monthly average cash balance.
• The increase in property taxes is primarily due to the annual increase in assesed property
values.
• The increase in fines is mostly from door hanger fees.
• The decrease in other revenues is from lower reimbursed work from other departments.
• The increase in miscellaneous service charges driven by private development requests.
Expenses
• The increase in staffing expenses due to negotiated salary adjustments and annual required
contribution to the city’s unfunded pension liability balance with CalPERS.
• Higher interdepartmental expenses resulted from the annual update of the citywide cost
allocation.
• Purchased water expenses have increased from the prior year due to a 11.57% rate increase in
the variable cost of water purchased from the San Diego County Water Authority (SDCWA),
offset by a 9.09% decrease in the amount of water purchased.
• Outside services increased due to the timing of the annual water system fee payment, paid in
December this year compared to the following quarter in the prior year.
• Miscellaneous expense increased due to higher electricity costs.
8.2%
5.9%
Feb. 24, 2026 Item #10 Page 44 of 46
Docusign Envelope ID: 24CD97F5-9437-46E2-9751-98A1054BCB7B
Quarterly Financial Report _______________________________________________________________ 12
Wastewater Enterprise
Revenues
•Charges for current services are higher than in the prior year due primarily to a 14% rate increase
that went into effect in July 2025.
•Interest earnings increased due to a 19.3% increase in the yield of the Treasurer’s portfolio offset
by a 45.9% decrease in the monthly average cash balance.
•The decrease in other revenues is from lower reimbursed work from other departments.
Expenses
•The decrease in staffing expenses is due vacancies, offset by negotiated salary adjustments in
addition to annual required contribution to the city’s unfunded pension liability balance with
CalPERS.
•Higher interdepartmental expenses resulted from the annual update of the citywide cost
allocation.
•Encina operating costs increased from higher staffing and costs for energy and insurance with
costs for chemicals decreasing overall.
•Outside and miscellaneous services incresed from parts and rental costs.
•Capital outlay for installation of truck compressor system.
8.1%
5.4%
Feb. 24, 2026 Item #10 Page 45 of 46
Docusign Envelope ID: 24CD97F5-9437-46E2-9751-98A1054BCB7B
Quarterly Financial Report _______________________________________________________________ 13
Golf Course Enterprise
Revenues
•Primary operating revenues at the golf course have remained relatively consistent year over
year, and the increase in rates is offset by a slight decrease in weekday rounds.
•Food and beverage increased from banquet and the player’s lounge.
•Pro shop and practice center revenues have all increased in addition to an increase in interest
revenues.
Expenses
•Course and grounds slightly increased driven mostly by landscaping and other outside services.
•Cost of sales increase correlated to sales in pro shop and focus on lower margins in food and
beverage.
•General & Administrative expenses increased due to higher personnel costs and increased other
operating expenses compared to the prior year.
•Depreciation has increased from new assets placed in service for improvements and equipment.
•Miscellaneous expenses from reallocation of water monitoring charges.
•Capital outlay remains steady, reflecting ongoing equipment replacements and repair
expenditures.
CHANGE FROM
BUDGET YTD YTD YTD 2024-25 TO PERCENT
FY 2025-26 12/31/2024 12/31/2025 YTD 2025-26 CHANGE
REVENUES:
GOLF COURSE 5,531,000 2,993,408 3,021,345 27,937 0.9%
FOOD & BEVERAGE 4,423,000 2,561,295 3,007,336 446,041 17.4%
PRO SHOP 386,000 189,694 215,986 26,292 13.9%
PRACTICE CENTER 494,000 266,968 305,713 38,745 14.5%
OTHER REVENUES 442,700 198,119 240,783 42,664 21.5%
TOTAL OPERATING REVENUE 11,276,700 6,209,484 6,791,163 581,679 9.4%
EXPENSES:
GENERAL & ADMINISTRATIVE 6,399,000 2,985,241 3,322,649 337,408 11.3%
COURSE & GROUNDS 1,378,000 703,271 743,014 39,743 5.7%
FOOD & BEVERAGE 378,000 203,349 231,910 28,561 14.0%
PRO SHOP 73,000 22,290 55,428 33,138 148.7%
COST OF SALES 1,173,000 612,656 709,185 96,529 15.8%
DEPRECIATION/REPLACEMENT 1,397,000 500,000 698,502 198,502 39.7%
MISCELLANEOUS EXPENSES 400,000 86,004 97,673 11,669 13.6%
CAPITAL OUTLAY 1,205,000 202,149 353,631 151,482 74.9%
TOTAL OPERATING EXPENSES 12,403,000 5,314,960 6,211,992 897,032 16.9%
OPERATING INCOME/LOSS (1,126,300)894,524 579,171 (315,352) -35.3%
GOLF COURSE FUND
December 31, 2025
9.4%
16.9%
Feb. 24, 2026 Item #10 Page 46 of 46
Docusign Envelope ID: 24CD97F5-9437-46E2-9751-98A1054BCB7B
Matt Sanford, Economic Development Director
Zach Korach, Finance Director
February 24, 2026
Economic and Financial
Update: Q2 FY 2025-26
TODAY’S PRESENTATION
•Today’s report will cover Fiscal Year 2025-26, Second Quarter
o October through December 2025
•Economic update
•Financial update
•Mid-year budget review
ITEM 10: ECONOMIC AND FINANCIAL UPDATE
2
CARLSBAD ECONOMY
•Carlsbad’s Gross Regional Product was an estimated
$18.6 billion in 2024
•Carlsbad’s remains the second largest economy in
San Diego County
ITEM 10: ECONOMIC AND FINANCIAL UPDATE
3
ECONOMIC TRENDS
•External factors continue to affect the economy
o Stable economy with signs of moderation
o Labor market cooling but near full employment
o Commercial real estate normalizing
o Housing stabilizing amid high borrowing costs
o External uncertainty influencing business
decisions
ITEM 10: ECONOMIC AND FINANCIAL UPDATE
4
ITEM 10: ECONOMIC AND FINANCIAL UPDATE
5
INFLATION
Consumer Price Index for All Urban
Consumers for San Diego-Carlsbad MSA
Consumer Price Index for All Urban
Consumers for Western Region
ITEM 10: ECONOMIC AND FINANCIAL UPDATE
6
CARLSBAD JOBS
•October through December saw 5,283 unique
job postings
•Jobs were posted by 977 different Carlsbad
employers
•Median Posting Duration was 20 days
ITEM 10: ECONOMIC AND FINANCIAL UPDATE
7
ITEM 10: ECONOMIC AND FINANCIAL UPDATE
8
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Median Home Price Comparison, Last 12 Months
Carlsbad Escondidio Oceanside San Marcos Vista
DEVELOPMENT & BUSINESS ACTIVITY
•There are an estimated 6,585 current businesses in Carlsbad
•License activity remained consistently strong
9
ITEM 10: ECONOMIC AND FINANCIAL UPDATE
ITEM 10: ECONOMIC AND FINANCIAL UPDATE
10
14.7%
10.4%
5.1%
ITEM 10: ECONOMIC AND FINANCIAL UPDATE
11
TOURISM
KEY TAKEAWAYS
•Macro-economic policies continue to create a
chaotic operating environment for businesses
•Tourism propped up by group travel
•The labor market is softening
•Costs continue to be the top concern for businesses
ITEM 10: ECONOMIC AND FINANCIAL UPDATE
12
GENERAL FUND REVENUES
fiscal year to date through second quarter
13
$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 2024-25 Actual
FY 2025-26 Expected
FY 2025-26 Actual
GENERAL FUND REVENUES
Revenue category
Actual
FY 2024-25
Actual
FY 2025-26
$
difference
%
difference
Property tax $34.4 $35.7 $1.3 4%
Sales tax 30.5 26.6 -3.9 -13%
Transient occupancy tax 19.7 19.6 -0.1 -1%
Other taxes 5.2 5.5 0.3 6%
Income from inv. and property 4.4 5.9 1.5 35%
Development related revenue 2.4 2.4 0 0%
Other revenues 11.3 12.1 0.8 7%
Total $107.9 $107.8 -$0.1 -0.1%
fiscal year to date through second quarter (in millions)
14
GENERAL FUND BUDGET
ITEM 10: ECONOMIC AND FINANCIAL UPDATE
•Adopted budget of $242.4 million
•Working budget of $263.6 million
•Available budget remaining of $127.9 million, or 48%
•Includes actual expenditures through December 2025
•Includes open purchase order commitments
15
GENERAL FUND EXPENDITURES & ENCUMBRANCES
fiscal year to date through second quarter
16
GENERAL FUND EXPENDITURES
fiscal year to date through second quarter (in millions)
Category
FY 2025-26
Budget
As of Qtr. 2
FY 2025-26
% of Budget
Spent to Date
OPEN POs
at 12/31/25
Personnel $145.6 $74.1 51%$0.0
Maintenance & operations 77.7 30.7 39%11.2
Transfers out 29.7 17.8 60%0.0
Capital outlay 4.9 0.4 9%1.5
Village Trenching 5.2 0.0 0%0.0
Contingency 0.5 0.0 0%0.0
Total $263.6 $123.0 47%$12.7
17
WATER AND WASTEWATER
ITEM 10: ECONOMIC AND FINANCIAL UPDATE
Compared to prior year through Quarter 2:
•Water revenues are up 6% and expenses
are up 8%
•Wastewater revenues are up 8% and expenses are up 5%
18
GOLF COURSE
ITEM 10: ECONOMIC AND FINANCIAL UPDATE
Compared to prior year through Quarter 2:
•Golf Course revenues are up 9% and
expenses are up 17%
19
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 10: ECONOMIC AND FINANCIAL UPDATE
20
GENERAL FUND REQUESTS
•$150,000 – Ambulance services
•$200,000 – Medical transportation reimbursement
program
•$90,000 – Police surveillance trailer
•$50,000 – Traffic engineering operational needs
ITEM 10: ECONOMIC AND FINANCIAL UPDATE
21
NON-GENERAL FUND REQUESTS
•$18,677 – Fleet facility repairs and mobile service
support needs
•$29,159 – vehicle purchases and outfitting
•$26,000 – Pole camera for storm drain inspections
•$30,000 – Automatic jib crane for grate removal
•$150,000 – Vegetation and sediment removal from
concrete channels
•$143,615 – vehicle purchases and outfitting (CMWD)
ITEM 10: ECONOMIC AND FINANCIAL UPDATE
22
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 10: ECONOMIC AND FINANCIAL UPDATE
23
NEXT STEPS
•Monitor revenues and expenditures
•Publish economic and financial status reports:
carlsbadca.gov/doingbusiness
carlsbadca.gov/departments/finance/financial-reports
•Present third quarter report to City Council in May 2026
ITEM 10: ECONOMIC AND FINANCIAL UPDATE
24