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Home My WebLink About2009-04-21; City Council; 19779; Prsentation of economic overviewCITY OF CARLSBAD - AGENDA BILL AB# 19,779 MTG. 4/21/09 DEPT. FIN PRESENTATION OF ECONOMIC OVERVIEW DEPT. HEAD -^< CITY ATTY. tf&^~ CITYMGR. MX/ RECOMMENDED ACTION: Accept presentation regarding an overview of the economy and the impact on the City of Carlsbad's revenues. ITEM EXPLANATION: The United States is experiencing an economic slow down especially with respect to the housing and financial markets. It is important for the City of Carlsbad to be aware of the economic slow down and the potential impacts on the City of Carlsbad's finances. This presentation will help provide an overview of the national, state and local economies with specific information regarding the City of Carlsbad's economy as well as the impact of the slowing economy on Carlsbad and its neighboring cities. This information will help the City be aware and proactive as we move through this economic uncertainty. FISCAL IMPACT: None. ENVIRONMENTAL IMPACT: The proposed presentation does not constitute a "project" within the meaning of the California Environmental Quality Act and, therefore, do not require environmental review. EXHIBITS: None. DEPARTMENT CONTACT: Lisa Irvine and Cynthia Haas 760-602-2430 lisa.irvine@carlsbadca.gov or cvnthia.haas@carlsbadca.gov FOR CITY CLERKS USE ONLY. COUNCIL ACTION:APPROVED DENIED CONTINUED WITHDRAWN AMENDED XDn D D CONTINUED TO DATE SPECIFIC CONTINUED TO DATE UNKNOWN RETURNED TO STAFF OTHER -SEE MINUTES COUNCIL RECEIVED THE REPORT. D D D D 11 City of Carlsbad Economic Overview and Financial Status April 2009 22 Economy (Cynthia Haas) General Fund Revenues Through Mar. 2009 (Kevin Branca) Ten-Year Financial Forecast (Lisa Irvine) A G E N D A 33 Economic Conditions 4 Desperate Times Call for Desperate Measures Unemployment 5 0 2 4 6 8 10 12 14 16 18 MarchAprilMayJuneJulyAugustS eptemberOctoberNovemberDecemberJanuaryFebruaryMarchS an Diego California U.S U-3 Reported Rate U.S U-6 Rate 15.6 % 9.3 8.5 U-6 Rate is the unemployment/underemployment rate and includes currently unemployed + discouraged workers & those whose hours have been cut back to part-time California U-3 UCLA/UCSB Unemployment forecast to hit between 12-15% by 2010 11.2% Employment Changes San Diego –Last 6 months Construction (-11.2%) Manufacturing (–5.4%) Trade/Transportation/Utilities (-4.8%) Leisure/Hospitality (-3.8%) Professional/Business Services (-3.1%) Information (-2%) Financial (-<1%) Education/Health Services (-<1%) Government (+1%) 6 2008 Consumer Prices San Diego Overall increase of 3.2% from 2007 Shelter up 2.9% Fuels/Utilities up 10.1% Food & Beverage up 5% Recreation up 4.2% Apparel fell 1.6% 7 March 2009 Consumer Prices posted their 1st year over year decline in 54 years (.4%) pointing to widespread weakness in the economy and possible deflationary cycle. Carlsbad Market Area Foreclosures 2007- Current -Auctioned 8 •Carlsbad –63 •Oceanside -321 •Vista –129 •San Marcos –139 •Encinitas -23 9 Carlsbad/SD County Housing Median SF Home Price in SD County for February 2009 was $319,000 ** ($574,000 in May 2006). Median SF Home Price for homes in Carlsbad between March 2008 -2009 Zip Code 2008 2009 Change 92008 $580,000 $572,500 -1.3% 92009 $820,000 $683,000 -16.7% 92010 $445,000 $424,250 -4.7% 92011 $821,250 $652,000 -20.6% ** Majority of sales involved properties foreclosed in past 12 months 10 2008 Carlsbad New Residential Dwelling Units Permitted 0 500 1,000 1,500 2,000 2,500 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 YTD Permits Permits Issued Trend YTD 23 Permits Issued 23 Residential Permits Issued in 1st Quarter. March & January = 2 Permits Data Based on Calendar Year 11 2008 Carlsbad Commercial & Industrial Permitted Square Footage 0 200,000 400,000 600,000 800,000 1,000,000 1,200,000 1,400,000 1,600,000 200020012002200320042005200620072008YTD 2009Square Footage No Commercial/Industrial Permits in 1st Qtr 2009. Data Based on Calendar YTD What is ahead? Forecasts for when the economy will begin to recover differ widely among economists. Many see a bottom forming in late 2009 or sometime in 2010. Once a bottom is established it could be a very long slow recovery. Past spending patterns unlikely to return to their previous levels. 12 1313 General Fund Revenues Through March 2009 14 Source: Fiscal Year 2008-09 Revised Revenue Estimates 14 Four Largest Revenue Sources 82% of General Fund Property taxes (43.4%) Sales taxes (22.6%) Transient occupancy taxes (11.6%) Franchise taxes (3.9%) 15 General Fund Revenues First Nine Months of the Fiscal Year ACTUAL FY 2008 BUDGET FY 2009 ACTUAL FY 2009 CHANGE FROM EXPECTED Taxes $63,326,589 $63,365,061 $63,585,880 220,819 Intergovernmental 2,104,320 911,909 1,227,437 315,528 Licenses/Permits 1,125,948 599,482 795,376 195,894 Charges for Services 5,642,932 4,398,380 4,739,947 341,567 Fines/Forfeitures 979,146 952,553 1,000,982 48,429 Income from Invest.3,043,825 2,606,709 2,772,855 166,146 Interdepartmental 1,688,066 2,521,180 2,695,065 173,885 Other 457,125 452,143 599,300 147,157 $78,367,951 $75,807,417 $77,416,842 $1,609,425 16 Property Taxes Property taxes are up $2.6 million or 9% through March 31, 2009 Although assessed values have increased by 7.6% over the prior fiscal year, current property taxes are up by only 6.9% Major factors in increase from prior fiscal year: Current taxes (up $1.7 million) Aircraft taxes (up $861,000) Delinquent taxes (up $439,000) Supplemental taxes (down $452,000) 17 Sales Taxes Top 25 Contributors Through the 4th Quarter 2008 ARCO AM/PM Marts Aviara Four Seasons Bob Baker Chrysler Jeep Bob Baker Volkswagen Cal Worthington Dodge Chevron Service Stations Coach Stores Costco Wholesale Hoehn Mercedes-Benz Hoehn Used Cars Invitrogen JC Penney Company Ken Grody Ford Ken Grody GMC/Pontiac La Costa Resort and Spa Legoland California Lexus Macy’s Department Store Pacific Sales Kitchen & Bath Petrochem Manufacturing Sears Roebuck & Company Toyota Carlsbad Toyota Motor Credit Vons Grocery Company Weseloh Chevrolet 1818 Sales Taxes YTD Revenues -$17.8 Million (down 10%) Revised Projected FY 2008-09 Revenues -$26.3 Million (down 6%) 1919 Transient Occupancy Taxes Through March 2009, TOT is down 3% compared to last year Decrease was partially offset by an increase in hotel rooms: Sheraton Carlsbad Resort, Hampton Inn and Homewood Suites Outlook for the remainder of the fiscal year does not look promising (projected decrease of 5.5% for the fiscal year) 2020 Development-Related Revenues Includes: Building permits Planning fees Building plan check fees Engineering plan check fees 2121 Development-Related Revenues 0 1,000,000 2,000,000 3,000,000 4,000,000 5,000,000 6,000,000 7,000,000 Annual Revenues19941996199820002002200420062008Fiscal Year Development-Related Revenues Building Permits Planning Fees Building Plan Check Fees Engineering Plan Check Fees 2009 Revised Budget Projections 2222 Other Factors Effects of increase in sales tax rate on sales tax revenues Annual SDG&E franchise payment is going to be 31% higher than expected (April receipt) Drop in the yield on the Treasurer’s portfolio Lack of home resales on real property transfer taxes and supplemental taxes 2323 Ten -Year Financial Forecast 2424 The US Economy GDP growth: -6.3% Q4, -0.5% Q3, 2.8% Q2 and 0.9% Q1 Fed Funds: 0 -0.25% 10 year Treasury Note: 2.95% Price per barrel of oil is now approximately $50 down from the high of $150 over the summer 2525 California’s Economy State budget outlook for FY 2008-09 continues to deteriorate State sales tax has increased from 5% to 6.5% which may exacerbate economic slowdown State Ballot Measures including income tax increase to voters on May 19, 2009 2626 City of Carlsbad FY 2008-09 Council actions in January 2009: Reduced General Fund revenue projections by $4.6 million Reduced General Fund expenditures by $5.3 million Reduced Non-General Fund departments by $884,000 Ten Year Financial Forecast Assumes 3 year economic recession with slow recovery beginning in FY 2012 Opening of new facilities are proposed to be delayed/deferred to help balance forecast Approximately $4.5 million of operating cuts for FY 2010 are assumed 27 28 Operating Forecast General Fund ($4) ($2) $0 $2 $4 $6 $8 $10 FY2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018Millions $Fiscal Year 10 Year Financial Forecast FY 08 FY 09 Next Steps Balanced budget for FY 2009-10 Continue Selective Hiring Freeze Innovations/Efficiencies No Plan to Use Reserves for Operating Expenditures Continue to monitor economy and actions taken by Federal and State governments 29 3030 Good News Standard and Poor’s recently upgraded the City of Carlsbad’s credit rating to AAA which is the highest possible. According to S&P, the upgrade is attributed to strong financial management resulting in healthy general fund surpluses and reserves as well as a formal reserve policy. 3131 3232 City of Carlsbad Economic Overview and Financial Status April 2009