HomeMy WebLinkAbout2020-10-20; City Council; ; Economic and financial update for the first quarter of fiscal year 2020-21CA Review CKM
Meeting Date: Oct. 20, 2020
To: Mayor and City Council
From: Scott Chadwick, City Manager
Staff Contact: Laura Rocha, Deputy City Manager, Administrative Services
laura.rocha@carlsbadca.gov, 760-602-2415
Subject: Economic and financial update for the first quarter of fiscal year 2020-21
Recommended Action
Receive a report on the economic and financial update for the first quarter of fiscal year 2020-
21 and provide direction as appropriate.
Executive Summary
At the April 7, 2020, City Council meeting, the City Council voted unanimously to direct staff to
return to the City Council with financial expenditure reports relating to the city’s response to
the COVID-19 pandemic. The city manager further committed to provide quarterly updates to
the City Council on the economic outlook and an update on the city’s finances during the
adoption of the fiscal year 2020-21 operating and capital project budgets on June 23, 2020. For
these updates, staff will provide a presentation on the:
•National, state, regional and Carlsbad specific economic data
•City’s most recent financial data
•General progress and execution of the fiscal year 2020-21 annual budget
Discussion
The Carlsbad economy is diverse, has strong industry clusters and is a leader in innovation. The
city’s gross regional product is $15.3 billion, second only to the largest city in the county, San
Diego. Key industries driving this output are professional, scientific and technical services,
computer and electronic product manufacturing and other manufacturing. The city also has a
strong tourism industry that generates the second highest amount of transient occupancy tax in
the region.
The COVID-19 pandemic has led to public health orders requiring people to stay at home aside
for essential trips or jobs and forced many businesses across the state to suspend or reduce
operations. These restrictions have had disruptive effects on the economy, across the nation
the state and in Carlsbad. Consumers have postponed travel and making major purchases as
well as routine shopping. Businesses deemed non-essential have had to close or suspend
operations. Hotels and resorts and other hospitality businesses have been particularly hard hit.
Prior to the pandemic of the COVID-19 disease, the economic outlook for the United States,
California, the County of San Diego and the City of Carlsbad was positive. The local gross
regional product continued to expand along with most of the rest of the nation. From 2018 to
Oct. 20, 2020 Item #6 Page 1 of 22
2019, Carlsbad gross regional product grew by $800 million. The National Bureau of Economic
Research determined that a peak in monthly economic activity occurred in the U.S. economy in
February 2020, marking the end of the longest recorded U.S. expansion, which began in June
2009. The pandemic brought on a global economic crisis and the impact on the U.S. economy
was swift. Compared to the other recessions that the U.S. experienced since 1980, the
economic drop due to COVID-19 was extreme.
As businesses were shuttered due to public health orders, unemployment numbers rose with
an estimated 20.5 million people in the U.S. out of work due to the pandemic according to a
September 2020 Hamilton Project report. In Carlsbad, unemployment rose to 13.8% in April.
Government stimulus from federal, state, and county programs has begun to reverse the
downward trend in the economy though uncertainty remains. The most recent unemployment
data from the California Employment Development shows state unemployment at 11%, San
Diego County at 9% and Carlsbad at 7.9% in September.
The economic impact of COVID-19 and the speed with which the impact occurred reaffirmed
the need to build greater in-house economic data capabilities. To understand the national,
state, and local economy, there are many sources of data and staff is developing greater in-
house economic data analytics and reporting capability. In conjunction with these quarterly
financial updates, staff is piloting a quarterly economic scan (Exhibit 2). Staff has also launched
a new economic development story map that will be dynamically updated with important
economic development data for those wanting to do business or find employment in Carlsbad.
In conjunction with the existing Life in Action campaign, the city continues to develop tools to
understand the economy, attract businesses, cultivate talent and support data-driven economic
development decision-making.
The economic impact of COVID-19 has a direct impact on city revenues and budget. For the City
of Carlsbad, staff is forecasting declines in revenues in two of the city’s three primary revenue
streams: sales tax and transient occupancy tax. Revenue from the third major source, the city’s
share of property taxes, is not expected to be substantially impacted by COVID-19. As the
shelter-in-place orders continue, the city is now seeing a significant drop in recreation lease and
rental revenues.
The timing of the city’s three major revenue sources varies, but can be generally summarized as
follows:
•Property taxes - The majority of property tax revenue is collected in December and April
each year. Through the first quarter, the majority of revenue received has been for
aircraft, supplemental and delinquent taxes.
•Sales taxes - To date, the majority of sales tax revenues represent funds collected for
the second calendar quarter of 2020 and the first advance of the city’s third calendar
quarter sales tax revenues.
•Transient occupancy taxes - For the first quarter of the new fiscal year two of the city’s
largest hotels have remained closed and occupancy rates have been heavily impacted by
the pandemic. The closing of the LEGOLAND park has also impacted tourism activity.
Oct. 20, 2020 Item #6 Page 2 of 22
•Other General Fund revenues - A majority of General Fund revenues have been
negatively impacted by the pandemic. On a positive note, development-related
revenues have remained in line with budgeted estimates.
During this difficult time, the city has not charged customers any late fees on their utility bills –
water, wastewater, and solid waste – in order to be able to continue to provide customers with
reliable water service. Additionally, water service disconnections for non-payment have been
suspended since March 2020 due to the COVID-19 pandemic and the governor’s subsequent
Executive Order N-42-20. As a result, the city has seen an increase in overdue utility billing
balances.
The city’s municipal golf course, The Crossings at Carlsbad, has endured many fluctuations in
business operations including a full shutdown of operations, elimination of banquets, and many
other limitations on food and beverage services. However, golf rounds and greens fees have
exceeded last year’s and budgeted estimates for the first quarter of the fiscal year.
Fiscal Analysis
None.
Next Steps
Staff will provide an update after the end of the second quarter in fiscal year 2020-21.
Environmental Evaluation (CEQA)
This action does not constitute a “project” within the meaning of the California Environmental
Quality Act under California Public Resources Code Section 21065 in that it has no potential to
cause either a direct physical change in the environment or a reasonably foreseeable indirect
physical change in the environment and therefore does not require environmental review.
Public Notification
Public notice of this item was posted in keeping with the Ralph M. Brown Act and it was
available for public viewing and review at least 72 hours before the scheduled meeting date.
Exhibits
1.September 2020 Financial Status Report
2.October 2020 Economic Scan
Oct. 20, 2020 Item #6 Page 3 of 22
This report summarizes the City of Carlsbad’s General Fund revenues and expenditures through
Sept. 30, 2020. It compares revenues and expenditures for the first quarter of fiscal year 2020‐21
and fiscal year 2019‐20. In addition, the financial status of the Water and Wastewater Enterprises
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.
COVID‐19 Pandemic
The pandemic of the COVID‐19 disease has led to public health orders requiring people to stay at home aside for
essential trips or jobs and forced many businesses across the state to suspend or reduce operations. These
restrictions have had disruptive effects on the economy, across the nation the state and in Carlsbad. Consumers
have postponed making major purchases as well as routine shopping. Businesses deemed non‐essential have
had to close or suspend operations. Hotels and resorts and other hospitality businesses have been particularly
hard hit. For the City of Carlsbad, staff is forecasting declines in revenues in two of the city’s three primary
revenue streams: sales tax and transient occupancy tax. Revenue from the third major source, the city’s share
of property taxes, is not expected to be substantially impacted by COVID‐19. As the shelter‐in‐place orders
continue, the city is now seeing a significant drop in recreation and lease/rental revenues.
General Fund Revenues
Property Taxes ($3.5 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 4.76 percent for fiscal year
2020‐21. This is the eighth 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. This reflects continued strength in the
housing market and new construction. The increase in this year’s assessed values was due to a large increase in
the assessed values of commercial and industrial properties in the city; the city saw smaller increases in
residential property values for the year. This is the sixth 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).
The primary reason that property taxes for the first three months of the new fiscal year have increased by 54
percent as compared to the prior fiscal year are:
Current taxes are up by $410,000 or 37.9 percent primarily due to higher unsecured property taxes
received at this time.
Aircraft taxes are up by $601,000 or 58.2 percent due to timing differences and an increase in the
number of aircraft being housed at the airport.
Sept. 30, 2020
54%
EXHIBIT 1
Oct. 20, 2020 Item #6 Page 4 of 22
Monthly Financial Report ______________________________________________________ 2
Payments for previous year’s taxes are up by $171,000 due to collections of previous year’s property
taxes. Property owners were given an extension to pay their property taxes due last fiscal year due to
the COVID‐19 pandemic, and the city is beginning to receive those taxes in the current fiscal year.
Supplemental taxes are up by $35,000 due to a strong property resale market.
Sales Taxes ($9.6 million) For the first quarter of the new fiscal year, sales tax
revenues are $106,000 (or one percent) higher than the same period in the
previous fiscal year. Sales tax revenues for the year represent the city’s first
advance for the third calendar quarter of 2020, the second calendar quarter of
2020 sales tax revenues, a portion of the city’s first calendar quarter of 2020 sales
tax revenues, and a portion of the city’s 2019 fourth calendar quarter sales tax
revenues. Small businesses in the State of California were given additional time to remit their first and second
calendar quarter 2020 sales tax payments. The city is now beginning to see payments for those deferrals,
creating the increase in the current fiscal year.
For sales occurring in the second calendar quarter of 2020 (the most recent data available), key gains were seen
in automobile dealers, building material and supply dealers, miscellaneous durable goods merchant wholesalers,
electronic and appliance stores, and electronic shopping. During the same period, key declines were seen in
warehouse clubs, amusement parks, clothing stores, restaurants and other eateries, and traveler
accommodations. The largest economic segments in the city continue to be automobile dealers, restaurants,
general merchandise stores, gas stations, and grocery stores. Together, they generate 66 percent of the city’s
sales tax revenues.
Transient Occupancy Tax ($3.1 million) The city’s third highest General Fund
revenue source on an annual basis is Transient Occupancy Tax (TOT or hotel tax),
estimated at $18.5 million for the current fiscal year. A tax of 10 percent of the
rent amount is collected on all occupancies less than 30 days (transient) in
duration. TOT collected for the first quarter of the new fiscal year reflects a
decrease of $6.2 million, 66 percent less than the previous year. Due to the
COVID‐19 pandemic, many hotels have remained closed during the first three months of the fiscal year including
two of the largest hotels – the Omni La Costa and the Park Hyatt Aviara. In addition, LEGOLAND remains closed,
which has had a large impact on leisure travel. Year‐to‐date TOT figures represent taxes collected on hotel
receipts through the month of Aug. 2020.
Currently, there are 4,764 hotel rooms, 668 timeshares and 265 registered short‐term vacation rentals. The
average occupancy of hotel rooms over the most recent 12 months has been 51 percent, which is 18 percent
less than last year’s average at this time.
Business License Tax ($1.4 million) All entities doing business in the City of
Carlsbad are required to have a valid business license. Business license revenue
is estimated at $5 million for the current fiscal year. Business license revenues
are down $21,000, or 1.5 percent, lower than the previous fiscal year. This slight
drop can be attributed to a decrease in revenue used to calculate some business
license taxes as well the fact that some business have closed due to COVID‐19.
There are currently 9,619 licensed businesses operating within the city, 252 less than the prior year. The majority
of taxed businesses (6,436 businesses) are located in Carlsbad, with 2,427 of these businesses being home‐based
businesses.
66%
1%
1%
Oct. 20, 2020 Item #6 Page 5 of 22
Monthly Financial Report ______________________________________________________ 3
Interdepartmental Charges ($1.2 million) Interdepartmental charges are $55,000
or five percent higher than last year. These charges are generated through
engineering services charged to capital projects (up $28,000 due to additional
staff time charged to capital projects); reimbursed work from other funds (flat);
and miscellaneous interdepartmental expenses charged to funds outside the
General Fund for services performed by departments within the General Fund (up
$27,000), the result of increased personnel and, maintenance and operations costs.
Income from Investments and Property ($1.1 million) For the first quarter of
the new fiscal year, income from investments and property is down $1 million
compared to the previous fiscal year.
Interest income is down $148,000 for the year due to a 22.4 percent decrease
in the average yield on the portfolio for the year (a decrease in the yield from
two percent last fiscal year to 1.549 percent in the current fiscal year) offset
partially by a 1.6 percent increase in the average daily cash balance. In March 2020, the Federal Reserve
effectively cut its benchmark rate by a full percentage point to zero. The benchmark U.S. interest rate is now in
a range of zero to 0.25 percent, down from a range of one to 1.25 percent. The city is seeing some of their higher
rate bonds and notes being called, causing the city to have to invest in lower yield securities. This will continue
to drive the yield on the portfolio lower in the upcoming months.
Income from property sales and rentals is down by $880,000 for the year, primarily due the sale of the former
Fire Station #3 to a private party last fiscal year as well as the impact of COVID‐19 on park, facility and pool
rentals.
Other Intergovernmental Revenues ($990,000) Other intergovernmental
revenues include miscellaneous receipts received from the state or federal
governments, as well as local school districts. Included in the funding received this
year is $707,000 in COVID‐19 CARES Act assistance and a $250,000 homeless
program grant as well as some smaller intergovernmental revenues.
Franchise Taxes ($739,000) Franchise taxes are generated from public utility
sources, such as San Diego Gas & Electric (SDG&E), trash collection franchises, and
cable franchises conducting business within city limits. Franchise tax revenue is
estimated at $5.5 million for the current fiscal year. Year‐to‐date franchise taxes
are $3,000 lower than the same period last year.
Cable television franchise revenues (Spectrum and AT&T) are down by $6,000 due to a decrease in the number
of paid subscription services (premium video, equipment rental, on‐demand, and programming services). An
increase in trash collection revenue of $13,000 is due to a small increase in trash rates combined with additional
trash customers. Additionally, the reclassification of fiber optic antenna system lease payment fees from
franchise fees (last fiscal year) to income from investments and property (current fiscal year) resulted in a
$10,000 decrease in revenue from the prior year.
Approximately 47 percent of the total franchise tax revenue anticipated for the year will be collected from
SDG&E during the month of April 2021.
0.4%
47%
5%
1010%
Oct. 20, 2020 Item #6 Page 6 of 22
Monthly Financial Report ______________________________________________________ 4
Ambulance Fees ($721,000) The city bills any individual who is transported in one
of the city’s ambulances. Through Sept. 2020, receipts from ambulance fees are
down $17,000, or two percent, compared to last fiscal year. The decrease in
revenue is caused by a small decrease in the number of billable transports to date.
The number of billable transported patients for the first three months of fiscal
year 2020‐21 (1,401) versus fiscal year 2019‐20 (1,431).
Development Related Revenues ($708,000) Development related revenues,
which include building permits, planning fees, building department fees, and
engineering fees reflect a significant, but expected decrease for the first quarter
of the new fiscal year.
Development related fees are paid by developers to cover 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. Some of the activity in Sept. included the Carlsbad
Ocean Estates and parking lot upgrades at the new Space Craft building.
One source of development related revenue is building permits, which are up six percent compared to last fiscal
year. The increase in building permit revenue is derived from the combination of a large increase in the valuation
of new construction, a small increase in the number of new residential permits, and a moderate increase in
commercial/industrial permitting to date. The year‐to‐date valuation of new construction in the current fiscal
year is $63.4 million, while it was $50.3 million in the previous fiscal year, a 26 percent increase. In Sept., Carlsbad
issued building permits for eight residential units, a decrease from the 27 residential units permitted in during
the month of Aug. 2020. In the northwest quadrant, building permits were issued for five residential dwelling
units: four second‐dwelling units and one single‐family detached home. In the northeast quadrant, building
permits were issued for two second‐dwelling units. In the southeast quadrant, a building permit was issued for
one second‐dwelling unit. For the current fiscal year, 47 residential permits have been issued, as compared to
45 residential permits issued during the same period last year.
During the month of Sept., one permit was issued for commercial and industrial space: 392 square feet of
commercial space for the pool house at Treviso Poinsettia 61. Year‐to‐date, there has been 153,092 square feet
of commercial/industrial permits issued compared to 74,736 square feet of commercial/industrial permits
issued during the same period last year.
Recreation Fees ($550,000) 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 $784,000 compared to last year at this time. This decrease is due to
cancellations across all programs due to the COVID‐19 pandemic, which started
on March 4, 2020.
Other Revenue Sources ($518,000) Other revenue sources have increased by
$66,000 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; reimbursement
from the Gas Tax Fund for traffic signal maintenance; and miscellaneous
reimbursed expenses and refunds of prior year fees. The increase to date was
primarily driven by additional miscellaneous revenues related to the climate action plan and Innovate 78, an
increase in miscellaneous reimbursed expenses, and fewer prior period fee refunds. The increases were partially
offset by fewer contributions from property owners, a reduction in loss recovery revenues, and an increase in
miscellaneous accounts receivable write‐offs through the first three months of the new fiscal year.
59%
19%
15%
2%
Oct. 20, 2020 Item #6 Page 7 of 22
Monthly Financial Report ______________________________________________________ 5
Transfer Taxes ($312,000) – When real property is sold, the County Assessor’s
Office charges a transfer tax. The transfer tax rate in San Diego County is $1.10 per
thousand multiplied by the selling price of the property. The city receives 50
percent of the transfer tax charged for sales within the City of Carlsbad. Year‐to‐
date revenues have increased significantly, however, these revenues only represent
two payments received by the city thus far in the fiscal year, and we anticipate these
revenues to stabilize throughout the remainder of the year. Due to extremely low interest rates, the housing
market is extremely strong, impacting revenues to date.
Other Licenses and Permits ($220,000) 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. These revenues can vary
throughout the year. The decrease to date was derived from low lagoon permits,
conditional use permits, and right‐of‐way permits through Sept. as compared to
last year at this time.
Other Charges or Fees ($97,000) 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; audio/visual rental fees; and general services, such as mutual aid
response, mall police services, emergency response services, reports, etc. The
decrease was caused by a decrease in mutual aid reimbursements, audio visual
fees at the libraries (these fees were eliminated in 2019), and a reduction in false
alarm billings. The decreases were partially offset by the timing of the city’s administrative fee for its work on
assessment districts and community facility districts.
Fines and Forfeitures ($76,000) Fines and forfeitures represent fees collected for
code violations, parking citations, overdue fines, and returned checks. The city
recognizes revenues when the citizen pays the fine or forfeiture, as opposed to
when the fine is imposed. The decrease to date is due to a large decrease in
overdue fines (the libraries have been closed for in‐person activity due to the
COVID‐19 pandemic), a decrease in parking citation revenues, and a decrease in
short term vacation rental code and moving violation revenue.
Expenditures
Total General Fund expenditures and encumbrances through the month of Sept. 2020 are $58.2 million,
compared to $66.2 million at the same time last year. This leaves $127.5 million, or 68.7 percent, available
through the fiscal year ending June 30, 2021. If funds were spent in the same proportion as the previous year,
the General Fund would have 63.1 percent available. Several transfers out of the General Fund were done earlier
last year than this year contributing to the available balance variance.
Excluding the transfers out, contingencies, and non‐departmental charges, the percentage available at Sept. 30,
2020 is 68.7 percent, slightly more than the 63.3 percent available at Sept. 30, 2019. With the current COVID‐19
pandemic in full swing, city departments are conscience of how they are spending funds, creating the savings to
date.
The adopted General Fund budget for fiscal year 2020‐21 decreased by $3.5 million due to the following factors:
Increased personnel costs (increase of $3.7 million):
53%
32%
285%
2%
Oct. 20, 2020 Item #6 Page 8 of 22
Monthly Financial Report ______________________________________________________ 6
o $4.9 million in additional salary costs associated with previously negotiated and anticipated wage
increases
o $1.2 million decrease in other personnel costs (Medicare, unemployment and disability benefits)
Decreased maintenance and operations costs (decrease of $2.8 million):
o Small increase in internal service charges
o Decreases in:
Travel
Training
Conferences
Decreased transfers out of the General Fund:
o Decrease of $4.1 million in the annual transfer to the Infrastructure Replacement Fund
o Decrease of $600,000 in the annual transfer to the General Capital Construction Fund
o Increase of $500,000 for a transfer to the Golf Course Fund
o Decrease of $250,000 in the annual transfers to the city’s Lighting and Landscaping District #1 Funds
Council Contingency
The City Council has allocated $1.5 million out of the General Fund budget for unanticipated emergencies or
unforeseen program needs. As of Sept. 30, 2020, nothing has been authorized out of the council contingency
account.
Detailed schedules of General Fund revenues and expenditures are provided on the following pages.
Oct. 20, 2020 Item #6 Page 9 of 22
Monthly Financial Report ______________________________________________________ 7
REVENUE
REVENUE EXPECTED ACTUAL ACTUAL CHANGE FROM
ESTIMATE THROUGH FY 2020 FY 2021 YTD 2020 TO PERCENT
AS OF 09/30/20 09/30/20 AS OF 09/30/19 AS OF 09/30/20 YTD 2021 CHANGE
TAXES
PROPERTY TAX $74,218,000 $2,305,377 $2,245,474 $3,462,785 $1,217,311 54%
SALES TAX 36,393,200 9,213,543 9,515,171 9,620,963 105,792 1%
TRANSIENT OCCUPANCY TAX 18,463,000 9,073,866 9,287,812 3,135,162 (6,152,650)‐66%
FRANCHISE TAX 5,512,000 697,137 741,608 738,744 (2,864) 0%
BUSINESS LICENSE TAX 4,990,000 1,329,643 1,442,700 1,421,365 (21,335)‐1%
TRANSFER TAX 1,204,000 78,264 81,073 311,818 230,745 285%
TOTAL TAXES 140,780,200 22,697,830 23,313,838 18,690,837 (4,623,001)‐20%
INTERGOVERNMENTAL
VEHICLE LICENSE FEES 50,000 0 0 0 0 0%
HOMEOWNERS EXEMPTIONS 350,000 0 0 0 0 0%
OTHER 524,000 16,068 89,219 990,186 900,967 1010%
TOTAL INTERGOVERNMENTAL 924,000 16,068 89,219 990,186 900,967 1010%
LICENSES AND PERMITS
BUILDING PERMITS 795,000 190,294 346,094 367,475 21,381 6%
OTHER LICENSES & PERMITS 1,019,000 252,860 321,015 219,589 (101,426)‐32%
TOTAL LICENSES & PERMITS 1,814,000 443,154 667,109 587,064 (80,045) ‐12%
CHARGES FOR SERVICES
PLANNING FEES 367,000 136,346 132,401 31,428 (100,973)‐76%
BUILDING DEPARTMENT FEES 850,000 216,559 243,600 186,394 (57,206)‐23%
ENGINEERING FEES 565,000 143,093 157,099 123,202 (33,897)‐22%
AMBULANCE FEES 2,830,000 758,183 737,356 720,755 (16,601)‐2%
RECREATION FEES 2,195,000 1,399,083 1,334,194 550,001 (784,193)‐59%
OTHER CHARGES OR FEES 608,000 84,674 98,744 96,678 (2,066)‐2%
TOTAL CHARGES FOR SERVICES 7,415,000 2,737,937 2,703,394 1,708,458 (994,936) ‐37%
FINES AND FORFEITURES 515,000 159,063 161,476 76,057 (85,419) ‐53%
INCOME FROM INVESTMENTS & PROPERTY 7,482,000 1,357,788 2,173,849 1,145,611 (1,028,238) ‐47%
INTERDEPARTMENTAL CHARGES 4,955,962 1,157,025 1,179,348 1,233,863 54,515 5%
OTHER REVENUE SOURCES 1,115,376 302,983 452,171 518,309 66,138 15%
TRANSFERS IN 10,000 10,000 10,000 10,000 0 0%
TOTAL GENERAL FUND $165,011,538 $28,881,848 $30,750,404 $24,960,385 ($5,790,019) ‐19%
(1)
(1) Calculated General Fund revenues are 14 percent below estimates as of September 30, 2020.
GENERAL FUND
REVENUE COMPARISON
Oct. 20, 2020 Item #6 Page 10 of 22
Monthly Financial Report ______________________________________________________ 8
ADOPTED WORKING
BUDGET BUDGET AMOUNT AVAILABLE %
DEPT DESCRIPTION FY 2020‐21 FY 2020‐21 (a) COMMITTED (b) BALANCE AVAILABLE (c)
POLICY AND LEADERSHIP GROUP
CITY COUNCIL $586,317 $586,317 $113,367 $472,950 80.7%
CITY ATTORNEY 1,987,318 1,987,318 525,550 1,461,768 73.6%
CITY MANAGER 2,153,294 2,276,873 676,748 1,600,125 70.3%
CITY TREASURER 244,090 244,090 63,944 180,146 73.8%
COMMUNITY OUTREACH AND ENGAGEMENT 1,692,761 1,970,278 623,304 1,346,974 68.4%
TOTAL POLICY AND LEADERSHIP GROUP 6,663,780 7,064,876 2,002,913 5,061,963 71.6%
ADMINISTRATIVE SERVICES
FINANCE 5,989,716 6,814,074 2,220,305 4,593,769 67.4%
HUMAN RESOURCES 5,010,104 5,458,006 1,297,112 4,160,894 76.2%
INNOVATION AND ECONOMIC DEVELOPMENT 1,131,877 1,464,868 576,791 888,077 60.6%
TOTAL ADMINISTRATIVE SERVICES 12,131,697 13,736,948 4,094,208 9,642,740 70.2%
PUBLIC SAFETY
POLICE 44,593,457 46,119,382 13,670,545 32,448,837 70.4%
FIRE 27,173,120 27,657,248 8,731,968 18,925,280 68.4%
TOTAL PUBLIC SAFETY 71,766,577 73,776,630 22,402,513 51,374,117 69.6%
COMMUNITY SERVICES
COMMUNITY SERVICES ADMINISTRATION 581,849 641,849 174,841 467,008 72.8%
CITY CLERK SERVICES 1,263,159 1,320,103 321,701 998,402 75.6%
COMMUNITY DEVELOPMENT 10,781,168 12,421,561 4,220,173 8,201,388 66.0%
LIBRARY AND CULTURAL ARTS 13,291,868 13,619,201 3,273,272 10,345,929 76.0%
PARKS AND RECREATION 17,993,237 19,006,748 6,871,965 12,134,783 63.8%
TOTAL COMMUNITY SERVICES 43,911,281 47,009,462 14,861,952 32,147,510 68.4%
PUBLIC WORKS
PUBLIC WORKS ADMINISTRATION 1,786,198 1,986,625 739,280 1,247,345 62.8%
CONSTRUCTION MANAGEMENT & INSPECTIONS 2,893,903 3,019,590 853,141 2,166,449 71.7%
ENVIRONMENTAL MANAGEMENT 808,946 1,184,764 533,713 651,051 55.0%
FACILITIES 5,862,683 7,635,492 3,008,562 4,626,930 60.6%
TRANSPORTATION 7,410,972 7,866,703 2,549,315 5,317,388 67.6%
TOTAL PUBLIC WORKS 18,762,702 21,693,174 7,684,011 14,009,163 64.6%
NON‐DEPARTMENTAL & CONTINGENCY
(d) OTHER NON‐DEPARTMENTAL 1,876,000 16,007,538 1,962,015 14,045,523 87.7%
OPERATING TRANSFERS OUT 7,009,000 4,918,886 5,200,000 (281,114)‐5.7%
CONTINGENCY 1,500,000 1,500,000 0 1,500,000 100.0%
TOTAL NON‐DEPT & CONTINGENCY 10,385,000 22,426,424 7,162,015 15,264,409 68.1%
TOTAL GENERAL FUND $163,621,037 $185,707,514 $58,207,612 $127,499,902 68.7%
(a) Working budget includes the adopted budget, open encumbrances from the end of the prior fiscal year, and any carry forwards.
(b) Actual expenditures on a budgetary basis include encumbrances and exclude non‐budgeted items.
(c) Amount available would be 63.1% if funds were spent in the same proportion as the previous year.
(d) Other non‐departmental includes technology innovation, property tax administration fees, assessment district
administration, citywide litigation expenses, and other items not attributed to a specific department.
AS OF 09/30/20
EXPENDITURE STATUS BY DEPARTMENT
GENERAL FUND
Oct. 20, 2020 Item #6 Page 11 of 22
Monthly Financial Report ______________________________________________________ 9
Water Enterprise
Revenues
A one percent increase in both water volume sales and water rates (beginning in January
2020) have led to higher water delivery revenues.
Interest earnings decreased due to a combination of a 22.4 percent decrease in the yield of
the Treasurer’s portfolio and a 3.8 percent decrease in the average cash balance.
The increase in property taxes is primarily due to higher current year property taxes received
at this time as well as an increase in collections of previous year’s property taxes. Property
owners were given an extension to pay their property taxes due last fiscal year caused by the
COVID‐19 pandemic. The city is beginning to receive those taxes in the current fiscal year.
The decrease in fines, forfeitures and penalties is driven by lower late charges revenue. The city, under the
Governor’s COVID‐19 executive order, is waiving all late fees and not shutting water off for non‐payment.
The increase in other revenues is from cell site lease rent increases, an adjustment to the AT&T cell site
payment, and reallocation of ground lease revenue.
Expenses
The increase in staffing expenses is due primarily to planned salary increases and retirement
costs, vacation payout expenses, partially offset by a decrease in the allocation of workers
compensation.
Higher interdepartmental expenses are the result of increased personnel and, maintenance and
operations costs.
Purchased water expenses have increased from the prior year due to a 2.5 percent rate increase
in the variable cost of water purchased from the San Diego County Water Authority (SDCWA)
compounded with a 2.7 percent increase in the amount of water purchased.
The decrease in miscellaneous expenses is primarily due to lower office equipment and parts purchases.
1.4%
4.6%
CHANGE FROM
BUDGET YTD (*) YTD (*) YTD 2019‐20 TO PERCENT
FY 2020‐21 9/30/2019 9/30/2020 YTD 2020‐21 CHANGE
REVENUES:
WATER DELIVERY 40,113,000$ 11,363,012$ 11,591,676$ 228,664$ 2.0%
INTEREST 550,000 157,967 117,329 (40,638)‐25.7%
MISC. SERVICE CHARGES 322,000 89,056 84,097 (4,959)‐5.6%
PROPERTY TAXES 3,827,600 85,396 129,410 44,014 51.5%
FINES, FORFEITURES & PENALTIES 303,000 76,983 771 (76,212)‐99.0%
OTHER REVENUES 469,000 116,903 126,653 9,750 8.3%
TOTAL OPERATING REVENUE 45,584,600 11,889,317 12,049,936 160,619 1.4%
EXPENSES:
STAFFING 3,623,470 1,034,405 1,054,735 20,330 2.0%
INTERDEPARTMENTAL SERVICES 2,744,695 657,948 678,868 20,920 3.2%
PURCHASED WATER 25,400,000 6,862,148 7,211,177 349,029 5.1%
MWD/CWA FIXED CHARGES 6,860,000 1,568,928 1,675,166 106,238 6.8%
OUTSIDE SERVICES/MAINTENANCE 2,887,302 181,965 189,252 7,287 4.0%
DEPRECIATION/REPLACEMENT 4,200,000 977,500 1,050,000 72,500 7.4%
MISCELLANEOUS EXPENSES 944,376 201,511 153,623 (47,888)‐23.8%
CAPITAL OUTLAY 430,712 0 0 0 0.0%
TOTAL OPERATING EXPENSES 47,090,555 11,484,405 12,012,821 528,416 4.6%
OPERATING INCOME/(LOSS)(1,505,955)$ 404,912$ 37,115$ (367,797)$ ‐90.8%
(*) Adjusted to reflect timing differences for water purchases and depreciation.
SEPT. 30, 2020
WATER OPERATIONS FUND
Oct. 20, 2020 Item #6 Page 12 of 22
Monthly Financial Report ______________________________________________________ 10
Wastewater Enterprise
Revenues
Charges for current services are down due to lower commercial customer sales from reduced
water usage resulting from COVID‐19. Commercial wastewater rates in Carlsbad are based on
water usage. The decrease is partially offset by a three percent rate increase in rates that began
in January 2020, and an increase in development throughout the city.
Interest earnings decreased due to the combination of a 22.4 percent decrease in the yield of
the Treasurer’s portfolio and a 21.2 percent decrease in the average cash balance.
The increase in other revenues is primarily due to a reimbursement from the City of Oceanside
for a wastewater bypass during recent storm events.
Expenses
The decrease in staffing expenses is the result of lower health insurance expenses created by a
switch in the healthcare provider for retirees, combined with a decrease in overtime and
standby pay.
Encina plant services to date are a combination of actual expenses and an estimate of the annual
Encina expense prorated monthly.
Outside services and maintenance is flat however, this is due to the net effect of a decrease in
the timing of sewer lift maintenance invoices offset by fees from a switch to a web‐based
electronic invoice payment system, which is reduction in printing/postage costs.
The increase in miscellaneous expenses is primarily due to higher parts for pump repairs and chemicals
partially offset by a decrease in printing/postage from the switch to a web‐based electronic invoice payment
system and fewer office furniture purchases, as compared the prior fiscal year.
The decrease in capital outlay expenses is due to nonrecurring vehicle purchases in the prior fiscal year.
3.3%
17.3%
CHANGE FROM
BUDGET YTD* YTD* YTD 2019‐20 TO PERCENT
FY 2019‐20 9/30/2019 9/30/2020 YTD 2020‐21 CHANGE
REVENUES:
CHARGES FOR CURRENT SERVICES 14,039,000 3,731,270 3,482,621 (248,649)‐6.7%
INTEREST 75,000 59,424 36,543 (22,881)‐38.5%
OTHER REVENUES 203,000 52,252 196,527 144,275 276.1%
TOTAL OPERATING REVENUE 14,317,000 3,842,946 3,715,691 (127,255) ‐3.3%
EXPENSES:
STAFFING 2,462,740 651,832 637,291 (14,541)‐2.2%
INTERDEPARTMENTAL SERVICES 1,427,715 326,626 349,335 22,709 7.0%
ENCINA PLANT SERVICES 4,300,000 887,939 1,075,000 187,061 21.1%
OUTSIDE SERVICES/MAINTENANCE 1,429,361 81,851 82,149 298 0.4%
DEPRECIATION/REPLACEMENT 5,000,000 912,500 1,250,000 337,500 37.0%
MISCELLANEOUS EXPENSES 756,090 103,986 111,114 7,128 6.9%
CAPITAL OUTLAY 20,000 23,591 0 (23,591)‐100.0%
TOTAL OPERATING EXPENSES 15,395,906 2,988,325 3,504,889 516,564 17.3%
OPERATING INCOME/LOSS (1,078,906) 854,621 210,802 (643,819) ‐75.3%
(*) Adjusted to reflect timing differences for Encina quarterly invoices and depreciation.
SEPT. 30, 2020
WASTEWATER OPERATIONS FUND
Oct. 20, 2020 Item #6 Page 13 of 22
0.0
5.0
10.0
15.0
20.0
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Carlsbad Unemployment 2020
Carlsbad San Diego County California
0.0
5.0
10.0
15.0
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2019 vs 2020 Unemployment
2019 2020
First Quarter, Fiscal Year 2020-2021 October 15, 2020
The following scan provides a snapshot for calendar year 2020 and the first quarter of fiscal year 2020-
2021. It includes information and indicators about the City of Carlsbad’s economy. This economic scan is
updated quarterly. For dynamically updated information regarding the Carlsbad economy and economic
development go to https://carlsbadca.gov/doingbusiness.
Carlsbad GRP (Source: EMSI, 2019)
Carlsbad has a gross regional product of $15.3B, the
second largest in San Diego County behind San Diego.
This represents an $800M increase over 2018. Key
industries driving this output are professional, scientific
and technical services, computer and electronic product
manufacturing and other manufacturing. These industries
are generally more resilient to recessions. Another major
industry, accommodation and food services, has been
severely impacted by the COVID-19 pandemic.
Unemployment Rates (Source: California Employment Development Department, August Report)
Prior to the pandemic, Carlsbad boasted a low unemployment rate of 2.9%. At the height of the
pandemic, unemployment spiked to 13.8%. Over the past quarter unemployment has improved to 7.9%
in September.
GENERAL
JOBS
$15.3B
EXHIBIT 2
Oct. 20, 2020 Item #6 Page 14 of 22
Exhibit 2
Job Postings (EMSI, October 2020)
There were 8,839 unique job postings between July
and September in Carlsbad, an increase of 1,436
postings from the previous quarter, indicating an
upswing in hiring. Many of these jobs are in
manufacturing, administrative services, or
professional, scientific and technical services.
Education (Source: U.S. Bureau of Labor Statistics)
Carlsbad has a concentration of highly educated residents and is near premier academic institutions and
technical colleges. The city has 2x the national, and state averages for post graduate degrees and nearly
1.75x higher than the national average for residents with bachelor’s degrees.
Nearby public and
private universities
offer top notch
programs
and the Carlsbad
business community
works closely with
them to align various
education tracks with
workforce needs.
Talent + Workforce
8,800+
Unique job postings
Oct. 20, 2020 Item #6 Page 15 of 22
Exhibit 2
(Source: Individual Institution Reports of Degrees Conferred)
Interest Rates (Source: U.S. Department of The Treasury)
National interest rates are hovering near zero, with the Federal Reserve Bank indicating stability for the
next three years. This means access to capital is less expensive which is critical for businesses that want
to adapt and grow. With such a low cost of capital, businesses experiencing depressed revenues may be
able to access financing necessary to continue operations until they can fully recover.
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Avg
2019 1 Yr 2.55 2.54 2.4 2.39 2.21 1.92 2 1.76 1.75 1.53 1.6 1.59 2.02
10 Yr 2.63 2.73 2.41 2.51 2.14 2 2.02 1.5 1.68 1.69 1.78 1.92 2.08
30 Yr 2.99 3.09 2.81 2.93 2.58 2.52 2.53 1.96 2.12 2.17 2.21 2.39
2.53
2020 1 Yr 1.45 0.97 0.17 0.16 0.17 0.16 0.11 0.12 0.12 0.38
10 Yr 1.51 1.13 0.7 0.64 0.65 0.66 0.55 0.72 0.67 0.80
30 Yr 1.99 1.65 1.35 1.28 1.41 1.41 1.2 1.49 1.42
1.47
YOY G 1 Yr -0.43 -0.62 -0.93 -0.93 -0.92 -0.92 -0.95 -0.93 -0.93 -0.84
RATE 10 Yr -0.43 -0.59 -0.71 -0.75 -0.70 -0.67 -0.73 -0.52 -0.60 -0.63
30 Yr -0.33 -0.47 -0.52 -0.56 -0.45 -0.44 -0.53 -0.24 -0.33 -0.43
Carlsbad Business COVID-19 Capital Needs (Source: July 2020 Survey of Carlsbad Businesses)
According to a survey of Carlsbad businesses,
37% of respondents stated access to capital
was one of their biggest concerns. Lack of
customers was a big concern for 33% of
respondents. From both an operating capital
standpoint and having the revenue to
continue operating this remains a concern for
businesses as businesses have begun to
reopen in many cases with operational
restrictions.
When asked what financial relief would be
necessary through the end of the year, 72% of
businesses predicted they would need further
relief funds. Of those, 76% estimated they
would need more than $25,000.
Federal assistance through the Paycheck Protection Program (PPP) has been a significant source of
financial relief for businesses. According to a July 7, 2020 Coast News analysis, businesses in Carlsbad
CAPITAL
Oct. 20, 2020 Item #6 Page 16 of 22
Exhibit 2
INCOME & HOUSING
Median Household Income (Source: 2018 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 was $32,317 higher than the regional median income.
2016 2017 2018
City of Carlsbad Median
household income
(dollars)
$113,217 $102,722 $107,172
County of San Diego
Median household
income (dollars)
$70,824 $70,588 $74,855
City of Carlsbad Per
capita income (dollars)
$49,349
$52,560
$55,518
County of San Diego Per
capita income (dollars)
$32,482 $34,350 $36,156
Median Home Prices (Source: Zillow Home Value Index)
Despite the pandemic, home values continue to rise, with median home prices now at nearly $930,000.
This value is seasonally adjusted and only includes the middle price tier of homes. Carlsbad home values
have gone up over 5.3% over the past year and Zillow predicts they will rise 4.6% next year. The
continued rise in home values can be attributed to constrained supply and a strong demand in the
region.
$820,000
$840,000
$860,000
$880,000
$900,000
$920,000
$940,000
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Median Home Price in Carlsbad
2019 2020
$928,174
$889,000
Oct. 20, 2020 Item #6 Page 17 of 22
Exhibit 2
With 41 hotels in the City of Carlsbad, tourism is a major
industry in terms of employment and economic impact.
Below are several indicators reflecting the health of the
city’s tourism economy.
Tourism has slowly recovered since the beginning of the
pandemic, but the absence of group sales continues to
impact the hotel industry. All Carlsbad hotels have
reopened, although some at reduced occupancy.
Hotel Occupancy (Source: Smith Travel Reports)
The tourism economy was hit hard by the pandemic. Carlsbad hotels experienced a 60% year-over-year
drop in business in April when many hotels were closed. Hotel occupancy was down more than 35% in
Summer 2020 compared to Summer 2019.
Hotel Average Daily Rate (Source: Smith Travel Reports)
Carlsbad’s July 2020 hotel average daily rate (the peak rate of the year) was down by $103 compared to
July 2019. Combined with decreased occupancy, the tourism industry in Carlsbad continues to be hard
hit.
0.0
20.0
40.0
60.0
80.0
100.0
jan feb mar apr may jun jul aug
Hotel Occupancy 2019
City of Carlsbad+San Diego County, CA
City of Oceanside, CA+City of Newport Beach, CA+
0.0
20.0
40.0
60.0
80.0
100.0
jan feb mar apr may jun jul aug
Hotel Occupancy 2020
City of Carlsbad+San Diego County, CA
City of Oceanside, CA+City of Newport Beach, CA+
TOURISM
0.00
100.00
200.00
300.00
400.00
jan feb mar apr may jun jul aug
Average Daily Rate 2019
City of Carlsbad+San Diego County, CA
City of Oceanside, CA+City of Newport Beach, CA+
0.00
100.00
200.00
300.00
400.00
jan feb mar apr may jun jul aug
Average Daily Rate 2020
City of Carlsbad+San Diego County, CA
City of Oceanside, CA+City of Newport Beach, CA+Oct. 20, 2020 Item #6 Page 18 of 22
Exhibit 2
INDUSTRY CLUSTERS
Life Sciences (Source: 2019 Biennial Business Report and 2020 Carlsbad Industry Cluster Update)
Life Sciences includes the research, design, and production of medical devices. It also covers
biotechnology & pharmaceuticals which includes research and development related to biological
technologies as well as the manufacturing of medicinal and diagnostic substances. As of 2019, Carlsbad’s
life sciences industry consisted of nearly 128 companies employing more than 6,531 people. Companies
like GenMark Diagnostics, COPAN, Thermo Fischer Scientific, IntelliGuard, and Active Motif have been
on the front lines addressing COVID-19. The high concentration of life sciences companies in Carlsbad
represents a strength in the economy that has been resilient and thriving through the pandemic.
Technology (Source: 2019 Biennial Business Report and 2020 Carlsbad Industry Cluster Update)
The technology cluster includes communications, computer and electronics, and software industries.
Common areas of business are cybersecurity, software and video game design, satellite communication,
electronic device development, radio and wireless communication, and robotics As of 2019 Carlsbad’s
tech industry consisted of nearly 302 companies employing more than 9,157 people. Companies like
Viasat, Walmart Global Tech, Rockstar Games and Airspace Technologies are benefitting from a highly
educated and connected workforce to build products and services that change the way we live as well as
keeping us increasingly connected during a time of social distancing and remote work.
Clean Tech (Source: 2019 Biennial Business Report and 2020 Carlsbad Industry Cluster Update)
This cluster includes firms that are engaged in advanced technologies including renewable energy,
energy efficiency, and energy storage. As of 2019, the clean tech industry consisted of nearly 32
companies employing more than 1,129 people. This cluster in Carlsbad is 70% more concentrated than
the national average. Companies like Calsense, OPTEC and Poseidon Water are leading the way on new
technologies that improve sustainability and promote environmental stewardship.
Sports Innovation & Design (Source: 2019 Biennial Business Report and 2020 Carlsbad Industry Cluster Update)
This cluster includes firms that are engaged in the design and production of recreational equipment,
from golf clubs to surfboards, as well as the apparel and accessories as part of the growing athletic
apparel and “athleisure” industry. As of 2019 Carlsbad’s sports innovation & design industry consisted of
nearly 77 companies employing more than 2,381 people. Companies like TaylorMade Golf, Callaway
Golf and Canyon Bicycles are blending tech and creativity with cutting edge sports science to create
some of the world’s most advanced athletic equipment and apparel.
Largest Industries by number of Jobs (Source: EMSI) Industry Job Growth (Source: EMSI)
Oct. 20, 2020 Item #6 Page 19 of 22
Exhibit 2
INNOVATION
Patents (Source: 2020 Carlsbad Industry Cluster Patent Update)
The four key industry clusters mentioned above drive innovation activity in Carlsbad. The figure below
shows that while the life sciences cluster has been a long-term driver of the city’s innovation economy,
information & communications technology patents have seen dramatic growth over the past ten years
and was responsible for virtually the same number of new patents as life sciences in 2019. It is also
worth noting that clean technology, which is the industry cluster with the lowest number of patents, has
grown by more than 800% since 2009. All told, these four industry clusters accounted for 96% of all
patents awarded to Carlsbad firms in 2019.
Growth in Patents Held by Carlsbad Businesses
Patents per Capita
Carlsbad has a notably higher proportion
of patents per 1,000 workers—over 60%
more than the next-closest competitor
city. This figure shows that Carlsbad has a
greater concentration of patent activity
than even the technology hubs of San
Jose, Seattle, San Francisco, and Boston.
In 2019, Carlsbad had 1.6 patents for
every 1 patent per 1,000 workers in San
Jose. That ratio was 2.5 and 2.8 for Seattle
and San Francisco.
2019 Patents per 1,000 Workers in the Labor Force
Oct. 20, 2020 Item #6 Page 20 of 22
Exhibit 2
Licenses (Source: City of Carlsbad)
Business license activity has continued to be
strong.
Compared to the first three quarters of 2019, the
number of Carlsbad business licenses has
increased slightly in non-residential businesses
(103) and residential businesses (82). Businesses
outside the city with a Carlsbad business license
decreased slightly (-79).
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 between
5,500 and 6,000 businesses in Carlsbad.
Permits (Source: City of Carlsbad)
The number of building permit applications in 2020 is down significantly compared to the same three
quarters of 2019. Most of this decrease is in residential permits. September marked the first month
that 2020 permits applications surpassed 2019 in both residential and commercial permits. If this
trend continues, it could mark a rebound for building and construction industries.
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
Business Licenses
2019 (Jan-Sept)2020 (Jan-Sept)
BUSINESS ACTIVITY
0
50
100
150
200
250
300
350
400
jan feb mar apr may jun jul aug sept
Building Permits
2019 Commercial 2019 Residential 2020 Commercial 2020 Residential
Oct. 20, 2020 Item #6 Page 21 of 22
Exhibit 2
Market Vacancy Rates and Rent per SF (Source: CoStar, October 2020)
So far, commercial vacancy rates have remained
relatively stable through the pandemic. Retail vacancies
have climbed slightly from 5% to 8% since January.
Current COVID-19 relief programs, such as commercial
eviction moratoriums and financial aid may be impacting
overall vacancy rates. Market rent per square foot has
also been relatively steady in all three commercial
categories through the pandemic.
REAL ESTATE
FIRST QUARTER CONCLUSION
There is no doubt the COVID-19 pandemic has taken a measurable toll on Carlsbad businesses, especially small businesses.
However, with many sectors reopening over the first quarter, and with a number of relief programs in effect, indicators
suggest that Carlsbad’s economy is stabilizing, with some signals of recovery.
Resilient industries, like tech and life sciences will help maintain a positive outlook for Carlsbad, however hospitality and
tourism are still struggling. As long as the County of San Diego does not backslide into the state’s “Widespread” tier,
stability and gradual improvement should be expected in the second quarter, when retail typically experiences a boost.
$-
$10.00
$20.00
$30.00
$40.00
$50.00
2020 Q1 2020 Q2 2020 Q3 2020 Q4 QTD
Market Rent Per SF
Carlsbad
Retail Office Industrial
0.00%
5.00%
10.00%
15.00%
20.00%
2020 Q1 2020 Q2 2020 Q3 2020 Q4 QTD
Vacancy Rates
Carlsbad
Retail Office Industrial
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
14.00%
2020 Q1 2020 Q2 2020 Q3 2020 Q4 QTD
Vacancy Rates
San Diego County
Retail Office Industrial
$-
$10.00
$20.00
$30.00
$40.00
$50.00
2020 Q1 2020 Q2 2020 Q3 2020 Q4 QTD
Market Rent Per SF
San Diego County
Retail Office Industrial
Oct. 20, 2020 Item #6 Page 22 of 22
All Receive -Agenda ltern # _f:p
For the Information of the:
CITY COUNCIL
, Date / D/;r--g,A ...-CC..::::::
CM /ACM ~CM (3) ..::5'-:
Oct. 20, 2020
To:
From:
Via:
Council Memorandum
{city of
Carlsbad
Re:
Honorable Mayor Hall and Members of the City Council
Laura Rocha, Deputy City Manager, Administrative Services
Geoff Patnoe, Assistant City Manager {g,
Additional Materials Related to Staff Report Item No. 6 -Economic and Financial
Update for the First Quarter of Fiscal Year 2020-2021
This memorandum provides an updated Exhibit 2 Economic Scan for Item No. 6 on the
Oct. 20, 2020, City Council Meeting Agenda.
On Oct. 19, 2020, the city received tourism data for the month of September which has been
added to the Economic Scan in the hotel occupancy and average daily rate charts.
Additional information and formatting changes have been made, including the following:
• A new industries section, in addition to the industry clusters section. This information
provides a brief summary of the largest industries and job growth, in addition to
improving the chart readability.
• Additional information has been added to the capital section regarding federal and local
financial assistance distributed to Carlsbad companies.
• The tourism charts and the building permit chart have been revised to capitalize the first
letter of the months.
The revisions to the Economic Scan provide the most current data available and enhance the
readability of the document.
Attachment: A. October 20, 2020 First Quarter, Fiscal Year 2020-2021 Economic Scan
cc: Scott Chadwick, City Manager
Celia Brewer, City Attorney
Kevin Branca, Finance Director
Administrative Services
Office of Innovation & Economic Development
1635 Faraday I Carlsbad, CA 92008 I 760-473-2259
ATTACHMENT A
Exhibit 2
Economic Scan {city of
Carlsbad
OFF ICE OF INNOVATION + ECONOMIC DEVELOPMENT
First Quarter, Fiscal Year 2020-2021 Oct ober 19, 2020
The following scan provides a snapshot for calendar year 2020 and the first quarter of fiscal year 2020-
2021. It includes information and indicators about the City of Carlsbad's economy. This economic scan is
updated quarterly. For dynamically updated information regarding the Carlsbad economy and economic
development go to https://carlsbadca.gov/doingbusiness .
... . ' .
GENERAL . .
Carlsbad GRP (Source: EMS/, 2019}
$15.3B
JOBS
Carlsbad has a gross regional product of $15.38, the
second largest in San Diego County behind San Diego.
This represents an $BOOM increase over 2018. Key
industries driving this output are professional, scientific
and technical services, computer and electronic product
manufacturing and other manufacturing. These industries
are generally more resilient to recessions. Another major
industry, accommodation and food services, has been
severely impacted by the COVID-19 pandemic.
L -----
Unemployment Rates (Source: California Employment Development Department, August Report)
Prior to the pandemic, Carlsbad boasted a low unemployment rate of 2.9%. At the height of the
pandemic, unemployment spiked to 13.8%. Over the past quarter unemployment has improved to 7.9%
in September.
20.0
15.0
10.0
5.0
0.0
Carlsbad Unemployment 2020
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
-Ca rl sbad -San Diego County California
15.0
10.0
5.0
0.0
2q19 vs 2020 Unemployment
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
-2019 -2020
Job Postings {EMS/, October 2020}
There were 8,839 unique job postings between July
and September in Carlsbad, an increase of 1,436
postings from the previous quarter, indicating an
upswing in hiring. Many of these jobs are in
manufacturing, administrative services, or
professional, scientific and technical services.
0 8,800+
Unique job postings
Talent+ Workforce
Education {Source: U.S. Bureau of Labor Statistics)
Carlsbad has a concentration of highly educated residents and is near premier academic institutions and
technical colleges. The city has 2x the national, and state averages for post graduate degrees and nearly
1.75x higher than the national average for residents with bachelor's degrees.
Educational Attainment Comparison
Percent of Population Over 25 Years Old
40.0%
35.0%
3(1.0%
25.0%
20.0%
:1.5.0%
10.0%
5.0,%
0.0%
less than high High school $ome college, AsSDciate's
schc-ol graduate no degree degree
Bac helor's
degree
National ■ California S.an Diego County ■ Carlsbad
Graduate or
professional
deg:ree
Nearby public and
private universities
offer top notch
programs
UC San San Dlago
and the Carlsbad
business community
works closely with
them to align various
education tracks with
workforce needs.
" ,,
i I SK
D
rviira Costa
College
3,554
'.!.S
Cal State
San M.:ircos
3,573
Diego
10,266
20
National
University , .. ,, T
Proximity in Nilles from Carlsbad
Sate University
9,671
University of
San Diego
2,780 ~
35
CAPITAL
Interest Rates (Source: U.S. Department of The Treasury)
National interest rates are hovering near zero, with the Federal Reserve Bank indicating stability for the
next three years. This means access to capital is less expensive which is critical for businesses that want
to adapt and grow. With such a low cost of capital, businesses experiencing depressed revenues may be
able to access financing necessary to continue operations until they can fully recover.
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Avg
2019 1 Yr 2.55 2.54 2.4 2.39 2.21 1.92 2 1.76 1.75 1.53 1.6 1.59 2.02
10 Yr 2.63 2.73 2.41 2.51 2.14 2 2.02 1.5 1.68 1.69 1.78 1.92 2.08
30 Yr 2.99 3.09 2.81 2.93 2.58 2.52 2.53 1.96 2.12 2.17 2.21 2.39 2.53
2020 1 Yr 1.45 0.97 0.17 0.16 0.17 0.16 0.11 0.12 0.12 0.38
10 Yr 1.51 1.13 0.7 0.64 0.65 0.66 0.55 0.72 0.67 0.80
30 Yr 1.99 1.65 1.35 1.28 1.41 1.41 1.2 1.49 1.42 1.47
YOYG 1 Yr -0.43 -0.62 -0.93 -0.93 -0.92 -0.92 -0.95 -0.93 -0.93 -0.84
RATE 10 Yr -0.43 -0.59 -0.71 -0.75 -0.70 -0.67 -0.73 -0.52 -0.60 -0.63
30 Yr -0.33 -0.47 -0.52 -0.56 -0.45 -0.44 -0.53 -0.24 -0.33 -0.43
Carlsbad Business COVID-19 Capital Needs (Source: July 2020 Survey of Carlsbad Businesses)
Carlsbad Leads North County pack in PPP loan recipients According to a survey of Carlsbad businesses,
37% of respondents stated access to capital
was one of their biggest concerns. Lack of
customers was a big concern for 33% of
respondents. From both an operating capital
standpoint and having the revenue to
continue operating this remains a concern for
businesses as businesses have begun to
reopen in many cases with operational
restrictions.
■ $5-10 million ■ $2-5 million ■ $1-2 million $350,000-1 million $1S0,000-350,000 $0-150,000
When asked what financial relief would be
necessary through the end of the year, 72% of
businesses predicted they would need further
relief funds. Of those, 76% estimated they
would need more than $25,000.
Number of Redpienls
0 500
CARLSBAD
ENCINITAS
ESCONDIDO
OCEANSIDE
SAN MARCOS
SOLANA BEACH
DELMAR
RANCHO SANTA FE I
1000 1500 2000 2500
Federal assistance through the Paycheck Protection Program (PPP) has been a significant source of
financial relief for businesses. According to a July 7, 2020 Coast News analysis, businesses in Carlsbad
received the largest number of PPP loans in North County.
Carlsbad businesses also received over $1.1 million dollars though the County of San Diego stimulus
program. There are 202 business that have received county stimulus to date.
3000 3500
. INCOME & HOUSING .-
Median Household Income (Source: 2018 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 was $32,317 higher than the regional median income.
City of Carlsbad Median
household income
(dollars)
County of San Diego
Median household
income (dollars)
City of Carlsbad Per
capita income (dollars)
County of San Diego Per
capita income (dollars)
2016
$113,217
$70,824
$49,349
$32,482
Median Home Prices {Source: Zillow Home Value Index)
2017 2018
$102,722 $107,172
$70,588 $74,855
$52,560 $55,518
$34,350 $36,156
Despite the pandemic, home values continue to rise, with median home prices now at nearly $930,000.
This value is seasonally adjusted and only includes the middle price tier of homes. Carlsbad home values
have gone up over 5.3% over the past year and Zillow predicts they will rise 4.6% next year. The
continued rise in home values can be attributed to constrained supply and a strong demand in the
region.
$940,000
$920,000
$900,000
$880,000
$860,000
$840,000
$820,000
Median Home Price in Carlsbad
$928,174
$889,000 ----------------
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
-2019 -2020
I
TOURISM
100.0
80.0
60.0
40.0
20.0
0.0
HOTEL
With 41 hotels in the City of Carlsbad, tourism is a major
industry in terms of employment and economic impact.
Below are several indicators reflecting the health of the
city's tourism economy. .
Tourism has slowly recovered since the beginnij g of the
pandemic, but the absence of group sales continues to
impact the hotel industry. All Carlsbad hotels have
reopened, although some at reduced occupancy.
Hotel Occupancy (Source: Smith Travel Reports, October 2020}
The tourism economy was hit hard by the pandemic. Carlsbad hotels experienced a 60% year-over-year
drop in business in April when many hotels were closed. Hotel occupancy was down more than 35% in
Summer 2020 compared to Summer 2019.
Hotel Occupancy 2019
Jan Feb Mar Apr May Jun Jul Aug Sep
100.0
80.0
60.0
40.0
20.0
0.0
Hotel Occupancy 2020
Jan Feb Mar Apr May Jun · Jul Aug Sep
-City of Carlsbad+ -San Diego County, CA -City of Carlsbad+ -San Diego County, CA
400.00
300.00
200.00
100.00
0.00
City of Oceanside, CA+ City of Newport Beach, CA+ City of Oceanside, CA+ City of Newport Beach, CA+
Hotel Average Daily Rate (Source: Smith Travel Reports)
Carlsbad's July 2020 hotel average daily rate (the peak rate of t he year) was down by $103 compared to
July 2019. Combined with decreased occupancy, the tourism industry in Carlsbad continues to be hard
hit.
Avg. Daily Rate 2019
___,,,.,. ---------"
Jan Feb Mar Apr May Jun Jul Aug Sep
400.00
300.00
200.00
100.00
0.00
Average Daily Rat e 2020
Jan Feb Mar Ap r May Jun Jul Aug Sep
-City of Carlsbad+ -San Diego County, CA -City of Carlsbad+ -san Diego County, CA
City of Oceanside, CA+ City of Newport Beach, CA+ City of Oceanside, CA+ City of Newport Beach, CA+
INDUSTRIES
Largest Industries (Source: EMS/)
The Carlsbad economy significantly exceeds the national average in manufacturing, accommodation and
food services, and professional, scientific and technical services jobs. These sectors also represent the
most significant job growth in the economy. Transportation and warehousing, healthcare and social
assistance, and construction have also seen strong job growth.
• lncJu5try Jobs
Manufacttiring
t\ccommoct~Tion ;md Food 5e-1vic..e-s
Re:t;iilTr;i.dr.
Health C.;re .and .Social A:s.i:t:mce,
AUmi11ht1alivL' amt Suµport ;:.mi W;;1~tc M.-magcmerit and
Remi?dl.}r10n 5rrvic,e,s
G11v,;:rnm.=-nt
Oth.=:r SF-rvic?c; (r)(c-,=.pt Public fu1mmic;tr,itinn)
V,Jhole-s;ile Trnde
Con~truc:tion
Arts, [n f tt8lnn-i,em, Jnd Rl:'.'Cf:'!,c1rt on
r.-1.Jn;ig:=n-..:-ni of Con1r,.1nii:"<: ~nrl Ent<":"rprl::e:y --i
T,..;n!.r,iortation :tnd \·Varehausing
RL'.:11 fo,l3l<.! :.:mcl Rl!.11131 and lc.3:iing -~-
l::.tlLJtdtiUmll ~l:"I viu.'.~
lnform;1ticm
\Jrilirics iir
I
Agrh:ultw e. Forestry. ~ishing and Hunting I
0 2,000
National Average
-
4,000 6,000
• Industry Jul,~ ljrowth
A11!11ini-.,11,1tl~· ... ;1r1<I i;o11p11fl ,,1111 V 1•.1~ ~vl,iri~1i_;t"ll1,•nl :11ht
H_.,1,1t--di,,1ic,11 ~f'IVir'.:''l
1-)0Vf':!llfrl('llJ
Agricult1..l"€. Fc.restrv. rishir,g and Hur.tir'.g
0 200 60J
8.000 10.000 12,000 14,000
800 l.20iJ
INDUSTRY CLUSTERS
Life Sciences (Source: 2019 Biennial Business Report and 2020 Carlsbad Industry Cluster Update)
Life Sciences includes the research, design, and production of medical devices. It also covers
biotechnology & pharmaceuticals which includes research and development related to biological
technologies as well as the manufacturing of medicinal and diagnostic substances. As of 2019, Carlsbad's
life sciences industry consisted of nearly 128 companies employing more than 6,531 people. Companies
like GenMark Diagnostics, COPAN, Thermo Fischer Scientific, lntelliGuard, and Active Motif have been
on the front lines addressing COVID-19. The high concentration of life sciences companies in Carlsbad
represents a strength in the economy that has been resilient and thriving through the pandemic.
Tech no logy (Source: 2019 Biennial Business Report and 2020 Carlsbad Industry Cluster Update)
The technology cluster includes communications, computer and electronics, and software industries.
Common areas of business are cybersecurity, software and video game design, satellite communication,
electronic device development, radio and wireless communication, and robotics As of 2019 Carlsbad's
tech industry consisted of nearly 302 companies employing more than 9,157 people. Companies like
Viasat, Walmart Global Tech, Rockstar Games and Airspace Technologies are benefitting from a highly
educated and connected workforce to build products and services that change the way we live as well as
keeping us increasingly connected during a time of social distancing and remote work.
Clean Tech (Source: 2019 Biennial Business Report and 2020 Carlsbad Industry Cluster Update)
This cluster includes firms that are engaged in advanced technologies including renewable energy,
energy efficiency, and energy storage. As of 2019, the clean tech industry consisted of nearly 32
companies employing more than 1,129 people. This cluster in Carlsbad is 70% more concentrated than
the national average. Companies like Calsense, OPTEC and Poseidon Water are leading the way on new
technologies that improve sustainability and promote environmental stewardship.
Sports Innovation & Design (Source: 2019 Biennial Business Report and 2020 Carlsbad Industry Cluster Update)
This cluster includes firms that are engaged in. the design and production of recreational equipment,
from golf clubs to surfboards, as well as the apparel and accessories as part of the growing athletic
apparel and "athleisure" industry. As of 2019 Carlsbad's sports innovation & design industry consisted of
nearly 77 companies employing more than 2,381 people. Companies like TaylorMade Golf, Callaway
Golf and Canyon Bicycles are blending tech and creativity with cutting edge sports science to create
some ofthe world's most advanced athletic equipment and apparel.
. . .
INNOVATION
-. .
Patents (Source: 2020 Carlsbad Industry Cluster Patent Update)
The four key industry clusters mentioned above drive innovation activity in Carlsbad. The figure below
shows that while the life sciences cluster has been a long-term driver of the city's innovation economy,
information & communications technology patents have seen dramatic growth over the past ten years
and was responsible for virtually the same number of new patents as life sciences in 2019. It is also
worth noting that clean technology, which is the industry cluster with the lowest number of patents, has
grown by more than 800% since 2009. All told, these four industry clusters accounted for 96% of all
patents awarded to Carlsbad firms in 2019.
Growth in Patents Held by Carlsbad Businesses
350
300
1:: 250
:::,
0 u 'c 20D
"-' ... /"J
::: 150 r, ::;
C ~ 100
so
0
209%
20[)9 2.010 2011 · 2012 2013 2014 2{)15 2016 2017 2018 2.019
-c ean Technobgy
--Life Sc~nces
Carlsbad has a notably higher proportion
of patents per 1,000 workers-over 60%
more than the next-closest competitor
city. This figure shows that Carlsbad has a
greater concentration of patent activity
than even the technology hubs of San
Jose, Seattle, San Francisco, and Boston.
In 2019, Carlsbad had 1.6 patents for
every 1 patent per 1,000 workers in San
Jose. That ratio was 2.5 and 2.8 for Seattle
and San Francisco.
-information and Communi:ationsTecllnology
Sports innovataon and De.sign
PortGnd -
Denver -
Baitlmore -
Pitt.s.burgl1 ---
Austin ---■
Bek:ton ----
Sal Francisco
Patents per Capita
Se0ttle --------
Sa1Jose -----------•
Carlsbad -------------------0.0 2.0 4.0 6.0 1-.0 10.0 12.0 14.0 16.0 18.C•
. 2019 Patents per 1,000 Workers in the Labor Force
F· ■ ---• • ---• • ·•T
: BUSINESS ACTIVITY
l_ --"
Licenses {Source: City of Carlsbad}
Business license activity has continued to be
strong. Compared to the first three quarters of
2019, the number of Carlsbad business licenses has
increased slightly in non-residential businesses
(103) and residential businesses (82). Businesses
outside the city with a Carlsbad business license
decreased slightly (-79).
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 est imated that there are between
5,500 and 6,000 businesses in Carlsbad.
Perm its (Source: City of Carlsbad)
9000
8000
7000
6000
5000.
4000
3000
2000
1000
0
Business Lice nses
■ 2019 (Jan-Sep) ■ 2020 (Jan-Sep)
The number of building permit applications in 2020 is down significantly compared to the same three
quarters of 2019. Most of this decrease is in residential permits. September marked the first month
that 2020 permits applications surpassed 2019 in both residential and commercial permits. If this
trend continues, it could mark a rebound for building and construction industries.
400
350
300
250
200
150
100
50
0
Bu ilding Permit s
Jan Feb Mar Apr May Jun
-2019 Commercial -2019 Residential 2020 Commercial
Jul Aug Sept
2020 Residential
REAL ESTATE
Market Vacancy Rates and Rent per SF (Source: Costar, October 2020}
20.00%
15.00%
10.00%
5.00%
0.00%
$50.00
$40.00
$30.00
$20.00
$10.00
$-
I I
Vacancy Rates
Carlsbad
2020 Ql 2020 Q2 2020 Q3 2020 Q4 QTD
-Retail -Office , Industrial
Market Rent Per SF
Carlsbad
2020 Ql 2020 Q2 2020 Q3 2020 Q4 QTD
-Reta il -Office Industrial
FIRST QUARTER CONCLUSION
So far, commercial vacancy rates have remained
relatively stable through the pandemic. Retail vacancies
have climbed slightly from 5% to 8% since January.
Current COVID-19 relief programs, such as commercial
eviction moratoriums and financial aid may be impacting
overall vacancy rates. Market rent per square foot has
also been relatively steady in all three commercial
categories through the pandemic.
14.00%
12.00%
10.00%
8.00%
6.00%
4.00%
2.00%
0.00%
$50.00
$40.00
$30.00
$20.00
$10.00
$-
2020 Ql
Vacancy Rates
San Diego County
2020 Q2 2020 Q3 2020 Q4 QTD
-Retai l -Office Industrial
2020 Ql
Market Rent Per SF
San Diego County
2020 Q2 2029 Q3 2020 Q4 QTD
-Retail -Office • -Industrial
There is no doubt the COVID-19 pandemic has taken a measurable toll on Carlsbad businesses, especially small businesses.
However, with many sectors reopening over the first quarter, and with a number of relief programs in effect, indicators
suggest that Carlsbad's economy is stabilizing, with some signals of recovery.
Resilient industries, like tech and life sciences will help maintain a positive outlook for Carlsbad, however hospitality and
tourism are still struggling. As long as the County of San Diego does not backslide into the state's "Widespread" tier,
stability and gradual improvement should be expected in the second quarter, when retail typically experiences a boost.
Economic and Financial Update
First Quarter –Fiscal Year 2020-21
Laura Rocha, Deputy City Manager, Administrative Services
David Graham, Chief Innovation Officer
Kevin Branca, Finance Director
Oct. 20, 2020
Economic Update
•Timeframe
–Calendar year to date
–COVID-19 start to now
–First quarter
•National
•State
•Local
National Economy
•June 2009 –February 2020 longest recorded period of
U.S. economic expansion
•Followed by two consecutive quarters of decline
•Steepest decline in a quarter 9.1%
•Most significant quarterly GDP drop previously was 3%
•More drastic and more swift than other recessions
FIGURE C.
Percent Change in GDP Relative to Business Cycle Peak. by Business Cycle
"" "'
2 .,
a. 0 .9/ V >-V -2 ~ ~ .,
C:
~ :, -4 .,,
E
0 ~ --6 .,
"' -8 C: "' ~ V -C: -10 .,
~ .,
a. -1 2
3 6 9 12 15 18 21 24 27 30 33 36 39 42
Months since business cycle peak
SOvrcct U.S. ~ 01 Ec::onorriC ~ (SEA) H)80-2020: NBER n.O.; 31.itl'IOtS' ealW3tiOnS.
Not~ Toe llgl.re Sh<>w$ the cioa,te,ty l)Qr'Cen1 ¢l'la,lQa in ,ea1 GrO$$ C>orne$1ie PfOdoCI (GOP) t'Onl 1"9 PEIOk ~ a 0U$ll'l(l$$ Cye:.19 ur'llll GOP rEICt,IIT'l$ t<> lh9te,,.•el
01 thO P'MM buSiOQs$¢yd01)9('1k. GOP ii$ In bllons ol d'la,'\Qd 2012 OOl!lw'$.
-1980 recession
-1981-82 recession
-1990-91 recession
-2001 recession
-2007-09 recession
-2020 recession
fll€ HAMILTON
1'11.0Jt('I
BROOKI NGS
Retail Sales
•Retail spending has swung wildly
•Retail sales fell by 8.7% from Feb. to Mar. 2020
•Largest recorded month-to-month decrease
•Some increased demand in non-store retail, grocery
stores and pharmacies
•Declines in clothing, furniture, appliances, food and
beverage, sporting and hobby stores, and gas stations
Retail Sales
•May reopening and federal assistance spurred recovery
•April to May record making 17.7% spike in retail sales
•Strong growth into August with sales at 2.6% above 2019
•Uncertainty about another round of federal aid
•Concerns about second wave business closures
•Long-term unemployment may temper rebound
FIGURE E.
Pe rce nt Change in Retai l Sales Re lative to Business Cycl e Peak by Bus iness Cyc le
"" 2
"' .,
C.
0
.!!! -2
V >-V -4
~ ~ ., -6
.!: ~ -8 :,
.0 -10 E
0 ~ --12 .,
-I 4 01 C "' .s:: -16
V -C -18 .,
~ -20 ~ -22
0 6 12 18 24 30 36
Months since business cycle peak
~ U.S. COn$II.I$ 8...-~ 1~2020: "8ER n d.; authOrS' c:ak:uatiOnS,
42 48 54 60
Note· The flgl.a'e ShOw:$ the l)er'OEll'lt ~in tM:I'~ re.,, re1e;1 and IOOd .sdes .-on'I the PQOk:01 <'I bu6itlesS ¢yCl9 until S.'119$ retl.l'n 10 tl'le ie,.-er ol lhe Pf'~
bu$lnQ6s cycto poak. Oata atQ dGflalGd IJSl"9 the Consu~ Pnco lnl;tOl( fOI' Al UJban C<:nsurnQrs (1~-$4-100). O.a .n ~od b'$Q0S01'181,. hOl(lay <'W'w:t
tn1drng-day dffl"""'°"
-1980 recession
-1981-82 recession
-1990-91 recession
-2001 recession
-2007-09 recession
-2020 recession
f llll
HAM ILTON
l'"k.OJfl'T
BROOKINGS
Manufacturing
•Sector employees 13 million workers
•Industrial production has been impacted
•Steep drop in production in March
•Partial rebound but not recovery
•Impact varies based upon industry subsector
–Construction related production less severe
–Auto production increased by 107% in June
–Some manufacturers have pivoted to COVID-19
related products
FIGURE F.
Percent Change in Industrial Production Relative to Business Cycle Peak by Business Cycle
-"' 2
[ 0
.!! -2 ~ u
~ -4 ~
I!' -6 ~ :,
.0 -8
E 0 ---10 ..
"' C -12
"' ,:; -1 4 u -C -16 .. u -~ -18
1 5 9 13 17 21 25 29 33 37 41 45 49 53 57 61 65 69 73 77
Months since business cycle peak
Souoe: Bol!rd of Gover~ of h Fcdcrd Re!ICNC Sys1t,n 198().~ t.SEFI n.d.; ~• etkwiions.
ND1t!: The '9JrC shot/f's h p&0Cr'!I ~ h h lrdu!lb'l:11 Pl'ocluc:ticn ~ ~ tern fie~ of a tius.'IC!SS cydtt 11111 h prod.ction tt!tl.lrnS lo 11-e le-I'd al the
~~ qoc:le pa.,k. h Fl ll'le8Sl.-M tc:il rupu; lor al bcitics loeMt!d "1 the oilodSWes "1 the~. OWVlg. #'Id doctric #'ldp utlhes
nlustres ~ lo NA.CS dM!libtions.
-t 980 recession
-t981 -82reces~on
-t990-91 reces~on
-2001 recession
-2007-09reces~on
-2020 recession
n 1r
HAMILTON l'IU►Jl'n
BROOKINGS
National Employment
•COVID-19 wiped out 113 consecutive months of job
growth
•Unemployment went from 3.8% to 13%
•Total nonfarm employment fell by 20.5 million jobs
•Federal assistance has caused a sharp uptick
•September unemployment at 7.9%
•Have not returned to pre COVID-19 levels
FIGURED.
Pe rce nt Change in E1npl oy1nenl Relative to Bu siness Cyc le Pe ak by Bu siness Cycle
"" 2 al
Q. 0 .,
e-·2
~ -4
C '§
.0
E
-6
·8 .g ., -10 r -12 .s:
V c ·14 .,
~ -16
1 5 9 13 17 21 25 29 33 37 41 45 49 53 57 61 65 69 73 77
Months since business cycle peak
Souo:o llu'oou OI l.alxlf SIO!lstl::l (OI.S. Cu-F'q>.jOllon &,wy ICl'SD 1080-2020. NOCR n d . '"'"°"' cel::IA)IJOnl
NolO-ThQ ~ .,_, lhO monlh~ PQrconl <11."'0Q '1101'11 nonl;wm P<l)'rc,a tom lhO poak"' 8 t,.$nQ5S Cyt~ ._,~ IOIJll nomarm poy,<>1 ... ums 10 lhO-Ol lhO
~ buol-eyde-.
-1980 recession
-1981-82 recession
-1990-91 recession
-2001 recession
-2007-09 recession
-2020 recession
'I H>' HAM U:l'ON
l'llOlt'l'T
BHOOK INCS
Employment
EDD August unemployment data
•California unemployment rate 10.8% -a .6% improvement
•County unemployment rate 9% -a .9% improvement
•Carlsbad unemployment rate 7.9% -a .9% improvement
Regional Impact of COVID-19
October SANDAG COVID-19 impacts report
•2020 forecast and estimate data
•June estimate was a 7.8% contraction for 2020
•Sept. estimate is a 4.7% contraction for 2020
•$12.4 billion loss in GRP for the year
Fi1gure 1: San Diego 1Ciil~IP Forecast s -Pre-CO1VID, lune ,and September 2020
320
300
0 N 280
0 N -260 0
~ ~ O CU 240
:= 0 220 CD "0
i::
CL 200
et:
G
+2%
--.. .,.. --
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
--June 2020 --September 2020 -Pre-COVlD
Regional Impact of COVID-19
October SANDAG COVID-19 impacts report
•$4.8 billion in lost wages in first six months
•176,000 workers unemployed due to COVID-19
•Highest percent change in unemployment in lowest
income category
•Unemployment in $60,000+ income level category has
nearly rebounded
•80% job loss in Tourism, Retail, and Education
Figure 2: Percent Change in Employment by Income Category in the San Diego Region
5%
0%
-5%
-10%
-15%
-20%
-25%
-35%
-40%
--0.8%
-8.5%
-23.3%
3/18 3125 4/1 4/8 4/15 4/22 4/29 5/6 5/13 5/20 5/27 6/3 6/10 6/17 6/24 7/1 7/8 7/1 5 7/22 7/29
-Below 527,000 -527,000 to $60,000 -Over $60,000
Source: Estunates based on data from Opportunity Insights Economic Tracker based on research from Raj Chetty,
John N. Friedman, Nathaniel Hendren, Michael Stepner, and the Opportunily Insights Team tracktherecovery.org/
Regional Impact of COVID-19
October SANDAG COVID-19 impacts report
•August 2019 to August 2020 estimated job losses
–Tourism 77,700 a 37% decrease
–Retail 36,100 a 15% decrease
–Education 27,500 a 21% decrease
•80% of estimated job losses are in these three areas
Figure 3: Estimated Job Loss in the San Diego Region by Employment Sector August 2019 to
August 2020
10,000 7; I?, ~O'c, /y, -1/el/ I> Co ?;.q II/I} Govt. 01.t"· ete,;, ee,1, ·'1y Oi,,<9t,• 'SIJ} t'eu, ~Ce l.t/ . -~ '1/s~ '1/s,0_ 'Of} of/ 'll 1 800
0 ""fr? .io/o +1% -'
-10,000 -4,700 -1,600 -800
-11,500 -9,300 -8,800
-20,000
-30,000 -27,500
-40,000 -36, 100
-50,000
-60,000 80%of new 20%ofnew
unemployed workers unemployed workers
-70,000
-80,000 -77,700
-90,000
Source: SANDAG estimates using August 2019 and August 2020 Employment Development Department Industry employment
Release date September 18, 2020; and Applied Geographic Solutions, Inc., Thousand Oaks, California, Weekly Release
September 14, 2020. Note: Does not inciude uniformed service military employment.
Most Impacted Sectors
Tourism Retail Education
Pre-COVID Pre-COVID Pre-COVID
• • • • •
• • •
COVI0-19 Impact COVID-19 Impact COVI0-19 Impact
(first six months) (first six months) (first six months)
• • •
• • •
• • . .. • ...
Job Losses Job Losses Job Losses
• • • • • • • • • • • •
Economic Uncertainty
•Stimulus powered an economic bump
•CARES Act provided response but not recovery
•Reopening remains reduced
•Brick and mortar retail affected
•COVID-19 related businesses are experiencing expansion
•Employment recovery is sector and wage level specific
•Seasonal change may have an impact
Carlsbad Economy
•Building economic data capacity
•Piloting local economic scan
•Improve awareness
•Build capacity while reducing cost
•Improve agility
•Carlsbad GRP is $15.8 billion
•GRP increased $800 million from 2018-2019
•Certain industry clusters, like life sciences, are doing well
$15.3B
Carlsbad Economy
•Vacancy rates for retail, office, and industrial have not
spiked
•Retail vacancy climbed slightly from 5% to 8%
20.0o%
15.0o%
10.0o%
5.0o%
O.Oo%
2020Q1
Vacancy Rates
Carlsbad
20200.2 2020 Q3 2020 Q4 QiD
-Retail -office -1adus1Jrial
14.00%
12.00%
10.00%
8.00%
6.00%
4.00%
2.00%
0.00%
2020Q1
Vacancy Rates
San Diego County
2020Q2 2020 Q.3 2020 Q.4 QllD
-Retail -office -industrial
Carlsbad Employment
•February unemployment was at 2.9%
•April spike to 13.8% and now at 7.9% in Sept.
•July to Sept. 8,839 unique job postings
•Increase of 1,436 from previous quarter
•Upswing in hiring many in
–Manufacturing
–Administrative Services
–Professional, Scientific & Technical
0 ~a~ 8,800+ Uni · -que Job po~ting~
Carlsbad Tourism
•Tourism, Hospitality, Food & Beverage hit hard
•60% year-over-year drop in business in April
•Occupancy down more than 35% in 2020 over 2019
Hotel Occupancy 2019
o_o
Jan Feb Mar Apr May Jun Jul Aug sep
-city of Carlsbad+ -san Diego County, CA
-city of oceanside, CA+ -city of Newport Beach, CA+
Hot e l Occupancy 2020
100.0
80 .. 0
60.0
40.0
20.0
0.0
Jan Feb Mar Apr M ;ry Jun Ju Aug
-City of Cartsbad+ -san Diego county, CA
-City of oceanside, CA+ -Oily of Newport Beach, CA+
Carlsbad Tourism
•Average daily rates down $103
•For the year average daily rates down 28.3%
•Higher than the county and peer cities in Southern CA
Avg. Daily Rate 2019
~ ----------0.00
Jan Feb Mar Apr May un Jul Aug :Sep
-City of ca rlsbad+ -~.in Diego county, CA
-City of oceanside, CAi--oily of Newport Beach, CA+
400.00
:1,00.00
200.00
100.00
0.00
Average Daily Rate 2020
=
Jan Feb Mar Apr May Jun J(j Aug
-City of Carlsbad+ -san Diego county, CA
-city of oceanside, CA+ -City of NeWJ)Ort Beach, CA+
Summary
•Carlsbad employment has faired better due to diverse
industries
•Expansion in life sciences and certain technology sectors
•County tier status is important to ongoing recovery
•Federal aid uncertainty may slow or reverse recovery
•Rapid response by the city to support business helps
General Fund Revenues
28
$0
$2,000,000
$4,000,000
$6,000,000
$8,000,000
$10,000,000
$12,000,000
Property tax Sales tax Transient
occupancy tax
Other taxes Income from
inv. and
property
Development
related
revenue
Other revenues
FY 2019-20
FY 2020-21 Expected
FY 2020-21 Actual
General Fund Revenues Through Sept. 30
29
Revenue category FY 2019-20 FY 2020-21 $ change % change
Property tax $2,245,474 $3,462,785 $1,217,311 54%
Sales tax 9,515,171 9,620,963 105,792 1%
Transient occupancy tax 9,287,812 3,135,162 (6,152,650)-66%
Other taxes 2,265,381 2,471,927 206,546 9%
Income from inv. and property 2,173,849 1,145,611 (1,028,238)-47%
Development related revenue 879,194 708,499 (170,695)-19%
Other revenues 4,383,523 4,415,438 31,915 1%
Total $30,750,404 $24,960,385 ($5,790,019)-19%
General Fund Revenues vs. Expectations
30
Revenue category
Expected
FY 2020-21
Actual
FY 2020-21 $ difference % difference
Property tax $2,305,377 $3,462,785 $1,157,408 50%
Sales tax 9,213,543 9,620,963 407,420 4%
Transient occupancy tax 9,073,866 3,135,162 (5,938,704)-65%
Other taxes 2,105,043 2,471,927 366,884 17%
Income from inv. and property 1,357,788 1,145,611 (212,177)-16%
Development related revenue 686,292 708,499 22,207 3%
Other revenues 4,139,939 4,415,438 275,501 7%
Total $28,881,848 $24,960,385 ($2,921,463)-14%
Property Tax
31
•Majority of property taxes are collected in December and April of every year.
•According to the Assessor’s Office, assessed values in Carlsbad have increased by 4.76%
•To date, the increase in property tax revenue has been driven by increases in:
–Aircraft taxes
–Unsecured taxes
–Delinquent taxes
–Supplemental taxes
Sales Tax
32
•To date, the city has received:
–Cleanup payments from Q4 of 2019 and Q1 of 2020
–Two of three payments from Q2 of 2020
–First advance of Q3 projected revenue
•Small increase for the quarter was driven by:
–Collection of Q2 deferrals
–Increase in revenues from the county pool
•Avenu is currently projecting that revenues will slightly
exceed forecast for the year
Transient Occupancy Tax (TOT)
33
•Revenues to date represent:
–June, July and August hotel stays
–Average occupancy during the last 12 months has been 51% compared to 75% for the same period in the previous year
•TOT has been effected by the closure of the LEGOLAND park
•The majority of TOT collected to date is from tourists versus group events
•As groups begin booking rooms again, occupancy at the larger hotels will rise, and TOT revenues will begin to grow
Other Taxes
34
•Business license tax –are down slightly when compared to the same quarter in the prior year
–Drop in revenues for businesses calculated on gross receipts
–Some businesses have closed
•Franchise taxes:
–Majority comes in April from SDG&E
–Essentially the same as last year at this time
•Transfer taxes –up significantly due to the housing resale market and timing differences
Income from Inv. and Property
35
•Down 47% for the year:
–Small increase in average cash balance of 1.6%
–Drop in yield on the portfolio of 22.4%
–Drop in property sales and rentals:
•Sale of Fire Station #3 last fiscal year
•Decrease in property rentals (parks, facilities,
etc.) of $117,000
Development Related Revenues
36
•In total, development related revenues are down by 19%
–Budget for these revenues were projected to be down by 24% for
the fiscal year
–Residential permits issued for the year are 47 compared to 45 last
year
–Commercial/industrial square feet of permits issued are 153,092
square feet as compared to 74,736 square feet last year
–Planning, building and engineering fees are all down for the year,
creating the negative variance
Other General Fund Revenues
37
•Other intergovernmental revenues are up due to COVID-
19 Cares Act assistance and a homeless program grant
•Ambulance fees are down due to a small decrease in the
number of billable transports
•Recreation revenues are down $784,000 due to
reductions across all programs
•Other General Fund revenues are down by $68,000
Water and Wastewater Funds
38
•Water
–Revenues are up 1.4% year over year
–Net operating income is short of forecast by $108,000
–State requirements: No water shut offs
–City choice: no late fees
•Wastewater
–Revenues are down 3.3% year over year
–Net operating income is short of forecast by $95,000
–The primary driver is lower commercial water consumption
Golf Course Fund
39
Category FY 2019-20 FY 2020-21 $ change % change
Golf revenue $1,272,798 $1,708,784 $435,986 34%
Food & beverage revenue 936,616 489,545 (447,071)-48%
Total revenue 2,209,414 2,198,329 (11,085)-1%
Expenses, excluding depreciation 2,294,063 1,655,905 (638,158)-28%
Net cash activity (84,649)542,425 627,074 741%
Category
Budgeted
FY 2020-21
Actual
FY 2020-21 $ change % change
Golf revenue $1,159,415 $1,708,784 $549,369 47%
Food & beverage revenue 313,756 489,545 175,789 56%
Total revenue 1,473,171 2,198,329 725,158 49%
Expenses, excluding depreciation 1,493,257 1,655,905 162,648 11%
Net cash activity (20,086)542,425 562,511 2,801%
Next Steps
40
•No budget adjustments proposed at this point
•Continue to monitor revenues and expenses
•Continue to issue monthly financial status report
•Bring another update to City Council in early 2021
Questions & Discussion
41
Economic and Financial Update
First Quarter –Fiscal Year 2020-21