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2021-01-26; City Council; ; Economic and Financial Update for the Second Quarter of Fiscal Year 2020-21
Meeting Date: Jan. 26, 2021 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 Second Quarter of Fiscal Year 2020-21 Districts: All Recommended Action Receive a report on the economic and financial update for the second 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. Jan. 26, 2021 Item #6 Page 1 of 24 CA Review: CKM Prior to the COVID-19 pandemic, 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 2019, Carlsbad’s 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 a peak of 13.8% in April. Government stimulus from federal, state, and county programs began to reverse the downward trend in the economy though surging case rates and fluctuation health orders and restrictions have caused continued uncertainty. The most recent unemployment data from the California Employment Development shows state unemployment at 7.9%, San Diego County’s at 6.6% and Carlsbad’s at 5.4% in November. To ensure the city remains responsive to the changing situation and is prepared to meet new challenges head-on, staff have leveraged greater in-house economic data capabilities and analytics developed over the past six months to publish a quarterly economic scan (Exhibit 2). Staff also maintains a new economic development story map that is dynamically updated with important economic development data for those wanting to do business, find employment, or gain a better understanding of Carlsbad’s economy. 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 are 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 stay- at-home orders continue, the city is also 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 second 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 and third calendar quarters of 2020 and the first advance of the city’s fourth calendar quarter sales tax revenues. • Transient occupancy taxes - For the half of the new fiscal year two of the city’s largest hotels have remained fully or partially closed and occupancy rates have been heavily Jan. 26, 2021 Item #6 Page 2 of 24 impacted by the pandemic. The closing of the LEGOLAND California Resort has also reduced tourism activity. • Other General Fund revenues - A majority of General Fund revenues have been negatively impacted by the pandemic. The city’s General Fund expenditures and encumbrances through December 2020 total 49% of the working budget or $94.3 million. The city is closely monitoring departmental spending, focusing on reducing variable costs where possible and taking measures to limit current year expenditures. City staff will continue to adjust the current year budget with the evolving public health and economic situation. During this difficult time, the city has not charged customers any late fees on their utility bills – water, wastewater, and solid waste – to continue to provide customers with reliable water service. Additionally, water service disconnections for non-payment have been suspended since March 2020 because of the COVID-19 pandemic and the governor’s subsequent executive order (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 its 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 half of the fiscal year. Fiscal Analysis This is an informational item with no fiscal impact. Next Steps Staff will provide an update after the end of the third quarter in fiscal year 2020-21. Environmental Evaluation (CEQA) This informational report 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. Dec. 2020 Financial Status Report 2. Jan. 2021 Economic Scan Jan. 26, 2021 Item #6 Page 3 of 24 This report summarizes the City of Carlsbad’s General Fund revenues and expenditures through Dec. 31, 2020. It compares revenues and expenditures for the first half 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 from 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 changed routine shopping habits. Businesses deemed nonessential have had to close or suspend operations. Hotels, resorts and other hospitality businesses have been particularly hard hit. For the City of Carlsbad, staff is forecasting a significant decline in transient occupancy tax revenues and a decline sales tax revenue. Revenue from the city’s largest revenue 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 seeing a significant drop in recreation and lease/rental revenues. General Fund Revenues Property Taxes ($27.0 million) The majority of property tax revenue is collected in Dec. and April each year. According to the County of San Diego Assessor’s Office, assessed values in Carlsbad have increased by 4.76% 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 reasons property taxes for the first half of the fiscal year have increased by 11% as compared to the prior fiscal year are: Current taxes are up by $2,143,000 or 10% primarily due to higher assessed values. Aircraft taxes are up by $279,000 or 21% due to timing differences and an increase in the number of aircraft being housed at the airport. Payments for previous year’s taxes are up by $210,000 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 began receiving those taxes in the current fiscal year. Dec. 31, 2020 11% EXHIBIT 1 Jan. 26, 2021 Item #6 Page 4 of 24 Monthly Financial Report ______________________________________________________ 2 Supplemental property taxes are $14,000 lower when compared with the prior year due to a slight decrease in property resales. Unitary taxes are up by $20,000 or 9% percent. Sales Taxes ($19.5 million) For the first six months of the fiscal year, sales tax revenues are $252,000 (or 1%) lower than the same period in the previous fiscal year. Sales tax revenues for the year represent the first advance of the city’s fourth calendar quarter sales tax revenues, the city’s third calendar quarter sales tax revenues, a large portion of the city’s second calendar quarter of 2020 sales tax revenues, a portion of the clean‐up for the first quarter of calendar year 2020, and some clean‐up revenue from calendar year 2019. 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 seeing payments for those deferrals, helping to offset the expected decrease in revenues due to COVID‐19 in the current fiscal year. A similar program was offered again in Dec. 2020 for payments and returns due from Dec. 2020 through April 2021. For sales occurring in the third calendar quarter of 2020 (the most recent data available), key gains were seen in automobile dealers, restaurants, clothing stores, warehouse clubs, and luggage and leather goods stores. During the same period, key declines were seen in grocery stores, home health care services, other miscellaneous store retailers, durable goods and merchant wholesalers, and electronic and appliance stores. The largest economic segments in the city are automobile dealers, restaurants, warehouse clubs, clothing stores and grocery stores. Together, they generate 66% of the city’s sales tax revenues. Transient Occupancy Tax ($6.6 million) The city’s third highest General Fund revenue source on an annual basis is Transient Occupancy Tax (TOT or hotel tax), estimated at $18.5 million for the current fiscal year. A tax of 10% of the rent amount is collected on all occupancies less than 30 days (transient) in duration and remitted to the city one month in arrears. TOT collected for the first six months of the new fiscal year reflects a decrease of $8.3 million, 56% less than the previous year. Due to the COVID‐19 pandemic, many hotels have remained closed or partially closed during some or all of the first six months of the fiscal year including three of the largest hotels – the Omni La Costa, the Park Hyatt Aviara and the LEGOLAND hotels. Additionally, the LEGOLAND park remains closed and group events have been canceled, which have had a large impact on leisure and business travel. Year‐to‐date TOT figures represent taxes collected on hotel receipts through the month of Nov. Currently, there are 4,812 hotel rooms (an increase in the current year due to the opening of Home2Suites by Hilton), 668 timeshares and 276 registered short‐term vacation rentals. Of the total hotel rooms, 4,562 were available in Dec. 2020. The average occupancy of hotel rooms over the most recent 12 months has been 49%, which is 25% less than last year’s average at this time. Business License Tax ($2.7 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 up $283,000, or 12%, higher than the previous fiscal year. The year over year increase was caused by an increase in the revenue used to calculate some business license taxes, partially offset by the fact that some businesses have closed due to COVID‐19. There are currently 9,409 licensed businesses operating within the city, 517 less than the prior year. The majority, 6,327, of taxed businesses are located in Carlsbad, with 2,401 of these businesses being home‐based businesses. 56% 1% 12% Jan. 26, 2021 Item #6 Page 5 of 24 Monthly Financial Report ______________________________________________________ 3 Interdepartmental Charges ($2.5 million) Interdepartmental charges are $148,000, or 6%, higher than last year. These charges are generated through engineering services charged to capital projects (up $99,000 due to additional staff time charged to capital projects); reimbursed work for other funds (down $4,000 for less repair work performed and charged to the Carlsbad Municipal Water District); and miscellaneous interdepartmental expenses charged to funds outside the General Fund for services performed by departments within the General Fund (up $54,000), the result of increased personnel and, maintenance and operations costs. Income from Investments and Property ($2.4 million) For the first half of the new fiscal year, income from investments and property is down $1.5 million compared to the previous fiscal year. Interest income is down $429,000 for the year due to a 31.9% decrease in the average yield on the portfolio for the year (a decrease in the yield from 2.089% last fiscal year to 1.4550% in the current fiscal year) offset partially by a 2.1% increase in the average cash balance. In March 2020, the Federal Reserve effectively cut its benchmark rate by a full percentage point to zero. In December 2020, the Federal Reserve maintained its target for the federal funds rate at a range of 0% to 0.25%. This is a decrease from the prior year from a range of one to 1.25%. The city is seeing many 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 $1.1 million 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 ($1.9 million) 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 $1,427,000 in COVID‐19 CARES Act assistance, a $250,000 homeless program grant, $80,000 of senior nutrition grants, $52,000 in homeowners’ exemption, $33,000 for mandated costs from the State of California and some smaller intergovernmental revenues. Franchise Taxes ($1.5 million) Franchise taxes are generated from public utility sources, such as San Diego Gas & Electric (SDG&E), trash collection franchises, and cable franchises conducting business within city limits. Franchise tax revenue is estimated at $5.5 million for the current fiscal year. Year‐to‐date franchise taxes are $6,000, or 0.4%, lower than the same period last year. Cable television franchise revenues (Spectrum and AT&T) are down by $9,000 due to a decrease in the number of paid subscription services (premium video, equipment rental, on‐demand, and programming services). 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 $8,000 decrease in revenue from the prior year. These decreases were partially offset by an increase in trash collection revenue of $11,000. Approximately 47% of the total franchise tax revenue anticipated for the year will be collected from SDG&E during the month of April 2021. 0.4% 39% 6% 592% Jan. 26, 2021 Item #6 Page 6 of 24 Monthly Financial Report ______________________________________________________ 4 Development Related Revenues ($1.5 million) Development related revenues, which include building permits, planning fees, building department fees, and engineering fees reflect a significant, but expected decrease for the first five months 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 Dec. included grading for six condominium units at Grand West; the conversion of portables to new classrooms and playground improvements at Hope Elementary School; and the grading of two parcels for new single‐family dwellings. One source of development related revenue is building permits, which are on par with last fiscal year’s revenues levels. Building permit revenue is derived from the combination of a large increase in the valuation of new construction and an increase in the number of new residential permits, offset by a decrease in commercial/ industrial permitting to date. The year‐to‐date valuation of new construction in the current fiscal year is $121.8 million, while it was $110.3 million in the previous fiscal year, a 10% increase. In Dec., Carlsbad issued building permits for 70 residential units, an increase from the 7 residential units permitted in during the month of Nov. 2020. In the southwest quadrant, building permits were issued for 7 residential dwelling units: 6 permits were issued as part of Phase 14 at Poinsettia 61 Treviso and one permit was issued for a second‐dwelling unit. In the southeast quadrant, building permits were issued for one second‐dwelling unit. In the northwest quadrant, building permits were issued for 62 residential units: one permit was issued for a detached home, six permits were issued for second dwelling units, 5 permits were issued for condominiums as part of Madison Five and 24 permits were issued for apartments as part of Windsor Point. For the current fiscal year, 148 residential permits have been issued, as compared to 101 residential permits issued during the same period last year. During the month of Dec., one permit was issued for 42,749 square feet of commercial space for Oakmont at Carlsbad and no industrial permits were issued. Fiscal year‐to‐date, there has been 206,297 square feet of commercial/industrial permits issued compared to 220,078 square feet of commercial/industrial permits issued during the same period last year. Ambulance Fees ($1.4 million) The city bills any individual who is transported in one of the city’s ambulances. Through Dec. 2020, receipts from ambulance fees are down $10,000, or 1%, compared to last fiscal year. The decrease in revenue is caused by a decrease in the number of transports during the first half of fiscal year 2020‐21 (2,794) versus fiscal year 2019‐20 (2,841). Other Revenue Sources ($963,000) Other revenue sources have increased by $191,000 when compared to the prior year and include revenues received by the city to offset the costs of special studies or projects for developers; reimbursements for damage done to city streets, rights‐of‐way, and other city‐owned property; donations; 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 reimbursed expenses related to Innovate 78 ($190,000) and a settlement payment from Verizon ($78,000). The increase was partially offset by an increase in miscellaneous accounts receivable write‐offs, and reductions in loss recovery revenues, and miscellaneous revenues through the first six months of the new fiscal year. 21% 1% 25% Jan. 26, 2021 Item #6 Page 7 of 24 Monthly Financial Report ______________________________________________________ 5 Recreation Fees ($776,000) 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 $1.0 million compared to last year at this time. This decrease was due to cancellations across all programs due to the COVID‐19 pandemic. Transfer Taxes ($618,000) When real property is sold, the County Assessor’s Office charges a transfer tax. The transfer tax rate in San Diego County is $0.0011 multiplied by the selling price of the property. The city receives 50% of the transfer tax charged for sales within the City of Carlsbad. Year‐to‐date revenues represent four payments received by the city thus far in the fiscal year and have increased significantly compared to the prior year receipts for the same period. Due to the pent‐up demand of sales hindered by COVID‐19, extremely low interest rates and a nationwide shift to a more remote workforce, the housing market is extremely strong in Southern California, impacting revenues to date. Other Licenses and Permits ($528,000) 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 and can vary significantly throughout the year. The decrease to date was derived from lower right‐of‐way permits, coastal development permits, lagoon permits and fire protection system permits through Dec. as compared to last year at this time. Fines and Forfeitures ($213,000) Fines and forfeitures represent fees collected for code violations, parking citations, overdue fines, and returned checks. The city recognizes revenues when payment of the fine or forfeiture is received, as opposed to when the fine is imposed. The decrease to date is due to a large decrease in parking citations and overdue fines (the libraries have been closed for in‐person activity due to the COVID‐19 pandemic), offset partially by increases in code violation and short‐term vacation rental code violation revenue. Other Charges or Fees ($165,000) 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 from the prior year of $137,000 was caused by a decrease in mutual aid reimbursements, audio visual fees at the libraries (these fees were eliminated in 2019), copies, 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. A detailed schedule of General Fund revenues is provided on the following page. 57% 30% 53% 45% 27% Jan. 26, 2021 Item #6 Page 8 of 24 Monthly Financial Report ______________________________________________________ 6 REVENUE REVENUE EXPECTED ACTUAL ACTUAL CHANGE FROM ESTIMATE THROUGH FY 2020 FY 2021 YTD 2020 TO PERCENT AS OF 12/31/20 12/31/20 AS OF 12/31/19 AS OF 12/31/20 YTD 2021 CHANGE TAXES PROPERTY TAX $74,218,000 $25,006,958 $24,357,174 $26,995,194 $2,638,020 11% SALES TAX 36,393,200 19,135,761 19,762,217 19,510,183 (252,034)‐1% TRANSIENT OCCUPANCY TAX 18,463,000 14,571,998 14,915,580 6,604,990 (8,310,590)‐56% FRANCHISE TAX 5,512,000 1,423,571 1,514,382 1,508,583 (5,799) 0% BUSINESS LICENSE TAX 4,990,000 2,238,553 2,428,894 2,711,501 282,607 12% TRANSFER TAX 1,204,000 389,248 403,220 618,296 215,076 53% TOTAL TAXES 140,780,200 62,766,089 63,381,467 57,948,747 (5,432,720)‐9% INTERGOVERNMENTAL VEHICLE LICENSE FEES 50,000 0 0 0 0 0% HOMEOWNERS EXEMPTIONS 350,000 52,429 53,750 52,285 (1,465)‐3% OTHER 555,668 42,500 222,540 1,859,333 1,636,793 736% TOTAL INTERGOVERNMENTAL 955,668 94,929 276,290 1,911,618 1,635,328 592% LICENSES AND PERMITS BUILDING PERMITS 795,000 400,012 727,515 726,437 (1,078) 0% OTHER LICENSES & PERMITS 1,019,000 592,129 751,728 527,512 (224,216)‐30% TOTAL LICENSES & PERMITS 1,814,000 992,141 1,479,243 1,253,949 (225,294) ‐15% CHARGES FOR SERVICES PLANNING FEES 367,000 246,391 239,262 124,218 (115,044)‐48% BUILDING DEPARTMENT FEES 850,000 488,579 549,587 390,537 (159,050)‐29% ENGINEERING FEES 565,000 303,687 333,412 223,215 (110,197)‐33% AMBULANCE FEES 2,830,000 1,493,024 1,452,011 1,441,697 (10,314)‐1% RECREATION FEES 2,195,000 1,903,594 1,815,306 776,312 (1,038,994)‐57% OTHER CHARGES OR FEES 608,000 258,289 301,209 164,657 (136,552)‐45% TOTAL CHARGES FOR SERVICES 7,415,000 4,693,563 4,690,787 3,120,636 (1,570,151) ‐33% FINES AND FORFEITURES 515,000 288,414 292,790 212,627 (80,163) ‐27% INCOME FROM INVESTMENTS & PROPERTY 7,482,000 2,491,331 3,988,675 2,446,352 (1,542,323) ‐39% INTERDEPARTMENTAL CHARGES 4,955,962 2,354,327 2,399,750 2,548,201 148,451 6% OTHER REVENUE SOURCES 1,108,000 513,712 771,766 962,707 190,941 25% TRANSFERS IN 10,000 10,000 10,000 10,000 0 0% TOTAL GENERAL FUND $165,035,830 $74,204,506 $77,290,768 $70,414,837 ($6,875,931) ‐9% (1) (1) Calculated General Fund revenues are 5 percent below estimates as of Dec. 31, 2020. GENERAL FUND REVENUE COMPARISON Jan. 26, 2021 Item #6 Page 9 of 24 Monthly Financial Report ______________________________________________________ 7 Expenditures Total General Fund expenditures and encumbrances through the month of Dec. 2020 are $94.3 million, compared to $106.8 million at the same time last year. This leaves $96.6 million, or 50.6%, 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 40.6% 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 Dec. 31, 2020 is 47.7%, moderately more than the 43.5% available at Dec. 31, 2019. 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): 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 A detailed schedule of General Fund expenditures is provided on the following page. Jan. 26, 2021 Item #6 Page 10 of 24 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 ATTORNEY $1,987,318 $1,987,318 $985,301 $1,002,017 50.4% CITY CLERK SERVICES 1,263,159 1,463,103 694,553 768,550 52.5% CITY COUNCIL 586,317 612,717 222,129 390,588 63.7% CITY MANAGER 2,153,294 2,278,723 1,091,855 1,186,868 52.1%CITY TREASURER 244,090 244,090 116,579 127,511 52.2% COMMUNITY OUTREACH AND ENGAGEMENT 1,692,761 2,081,603 963,049 1,118,554 53.7% TOTAL POLICY AND LEADERSHIP GROUP 7,926,939 8,667,554 4,073,466 4,594,088 53.0% ADMINISTRATIVE SERVICES FINANCE 5,989,716 6,814,074 3,488,579 3,325,495 48.8% HUMAN RESOURCES 5,010,104 5,349,666 2,700,672 2,648,994 49.5% INNOVATION AND ECONOMIC DEVELOPMENT 1,131,877 1,499,868 838,620 661,248 44.1% TOTAL ADMINISTRATIVE SERVICES 12,131,697 13,663,608 7,027,871 6,635,737 48.6% PUBLIC SAFETY POLICE 44,593,457 46,589,732 24,693,676 21,896,056 47.0% FIRE 27,173,120 27,908,566 15,356,554 12,552,012 45.0% TOTAL PUBLIC SAFETY 71,766,577 74,498,298 40,050,230 34,448,068 46.2% COMMUNITY SERVICES COMMUNITY SERVICES ADMINISTRATION 581,849 641,849 325,194 316,655 49.3% COMMUNITY DEVELOPMENT 10,781,168 12,348,755 6,437,533 5,911,222 47.9% LIBRARY AND CULTURAL ARTS 13,291,868 14,027,630 6,329,673 7,697,957 54.9% PARKS AND RECREATION 17,993,237 19,116,548 10,194,180 8,922,368 46.7% TOTAL COMMUNITY SERVICES 42,648,122 46,134,782 23,286,580 22,848,20249.5% PUBLIC WORKS PUBLIC WORKS ADMINISTRATION 1,786,198 1,986,625 1,124,003 862,622 43.4% CONSTRUCTION MANAGEMENT & INSPECTIONS 2,893,903 3,019,590 1,474,599 1,544,991 51.2% ENVIRONMENTAL MANAGEMENT 808,946 1,221,456 709,171 512,285 41.9% FACILITIES 5,862,683 7,648,492 4,443,837 3,204,655 41.9% TRANSPORTATION 7,410,972 8,160,301 4,122,876 4,037,425 49.5% TOTAL PUBLIC WORKS 18,762,702 22,036,464 11,874,486 10,161,978 46.1% NON‐DEPARTMENTAL & CONTINGENCY (d) OTHER NON‐DEPARTMENTAL 1,876,000 17,402,522 2,773,525 14,628,997 84.1% OPERATING TRANSFERS OUT 7,009,000 7,009,000 5,200,000 1,809,000 25.8% CONTINGENCY 1,500,000 1,450,000 0 1,450,000 100.0% TOTAL NON‐DEPT & CONTINGENCY 10,385,000 25,861,522 7,973,525 17,887,997 69.2% TOTAL GENERAL FUND $163,621,037 $190,862,228 $94,286,158 $96,576,07050.6% (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 40.6% 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 12/31/20 EXPENDITURE STATUS BY DEPARTMENT GENERAL FUND Jan. 26, 2021 Item #6 Page 11 of 24 Monthly Financial Report ______________________________________________________ 9 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 Dec. 31, 2020, nothing has been authorized out of the council contingency account; however, $50,000 was transferred to Community Development for an affordable housing gap analysis/ study as a result of resolution 2020‐081, dated May 5, 2020 that was not previously appropriated. Donations Carlsbad Municipal Code 2.08.100 authorizes the city to accept donations in an amount or of value of up to $5,000. These donations shall be used in accordance with the donor’s intent or added to the city’s contingency account. Below is a listing of all donations, excluding minor food donations such as donuts and cookies, that have been accepted during fiscal year 2020‐21: Department Intention Qtr. 1 Oct. Nov. Dec. Qtr. 2 Total Parks & Recreation Congregate Meals/Guest Donation $3,145 $1,834 $1,038 $1,187 $4,059 $7,204 Parks & Recreation Home Meals Donation 4,478 1,290 1,542 1,761 4,593 9,071 Parks & Recreation Leo Carrillo Ranch Contribution Revenue Fund 877 774 84 140 998 1,875 Parks & Recreation Opportunity Grant Donations 2,646 592 250 693 1,5354,181 Parks & Recreation Parks Maintenance Contribution Revenue Fund 1,900 1,550 0 1,200 2,750 4,650 Parks & Recreation Senior Center Contribution Revenue Fund 0 0 3,000 0 3,000 3,000 Subtotal ‐ Parks & Recreation $13,046 $6,040 $5,914 $4,981 $16,935 $29,981 Library & Cultural Arts Annual Friends Direct Donation $88,200 $0 $0 $0 $0 $88,200 Library & Cultural Arts Book selections in honor of retiring L&CA Director Heather Pizzuto Dove Children's Sr. Librarian Barbara Chung & Community Relations Manager Jessica Padilla Bowen 1,000 0 0 1,000 1,000 2,000 Library & Cultural Arts Book purchases: historical non‐fiction, fiction mysteries 0 0 200 300 500 500 Library & Cultural Arts Gallery, TGIF and Arts Education support, per Donation Instructions 38,400 0 0 0 0 38,400 Library & Cultural Arts Genealogy‐related material 0 100 0 0 100 100 Library & Cultural Arts Library learning center's literacy program 0 0 0 1,000 1,000 1,000 Library & Cultural Arts Support for "A Very Jazzy Holiday with Jazzy Ash"0 0 0 6,800 6,800 6,800 Library & Cultural Arts No preference 120 100 1,000 1,000 2,100 2,220 Subtotal ‐ Library & Cultural Arts $127,720 $200 $1,200 $10,100 $11,500 $139,220 Fire Personal protective equipment $0 $0 $200 $0 $200 $200 Fire Food for crews 700 0 3,230 1,423 4,653 5,353 Subtotal ‐ Fire $700 $0 $3,430 $1,423 $4,853 $5,553 Total Donations $141,466 $6,240 $10,544 $16,504 $33,288 $174,754 Donations Jan. 26, 2021 Item #6 Page 12 of 24 Monthly Financial Report ______________________________________________________ 10 Water Enterprise Revenues A 1% increase in both water volume sales and water rates (beginning in January 2020) have led to higher water delivery revenues. Interest earnings have decreased year‐over‐year due to a 31.9% decrease in the yield of the Treasurer’s portfolio coupled with a slight decrease in the average cash balance. An increase in property taxes was primarily due to timing differences. Also, there have been higher current year property taxes received at this time as well as increased collections of previous year’s property taxes. Property owners were given an extension to pay their property taxes due last fiscal year because of the COVID‐19 pandemic. The decrease in fines, forfeitures and penalties was driven by lower late fee revenue. Under the Governor’s COVID‐19 executive order, the Carlsbad Municipal Water District has not been shutting water off for nonpayment. Also, the Carlsbad Municipal Water District has been waiving all late fees. The increase in other revenues was driven by cell site lease rent increases, an adjustment to the AT&T cell site payment, and a reallocation of ground lease revenue. Expenses The increase in staffing expenses was driven by planned salary increases and retirement costs, as well as vacation payout expenses; a decrease in the allocation of workers compensation partially offset the increase. Higher interdepartmental expenses have resulted from increased personnel, and maintenance and operations costs for shared services. Purchased water expenses have increased from the prior year due to a 2.5% rate increase in the variable cost of water purchased from the San Diego County Water Authority (SDCWA) compounded with a 3.4% increase in the amount of water purchased. A planned purchase for an industrial vacuum truck increased capital outlays as compared to prior year. CHANGE FROM BUDGET YTD (*) YTD (*) YTD 2019‐20 TO PERCENT FY 2020‐21 12/31/2019 12/31/2020 YTD 2020‐21 CHANGE REVENUES: WATER DELIVERY 40,113,000$ 21,833,450$ 22,242,062$ 408,612$ 1.9% INTEREST 550,000 314,945 220,323 (94,622)‐30.0% MISC. SERVICE CHARGES 322,000 165,371 161,931 (3,440)‐2.1% PROPERTY TAXES 3,827,600 1,621,621 1,795,692 174,071 10.7% FINES, FORFEITURES & PENALTIES 303,000 160,251 2,421 (157,830)‐98.5% OTHER REVENUES 469,000 221,632 227,873 6,241 2.8% TOTAL OPERATING REVENUE 45,584,600 24,317,270 24,650,302 333,032 1.4% EXPENSES: STAFFING 3,653,470 1,931,987 1,953,799 21,812 1.1% INTERDEPARTMENTAL SERVICES 2,744,695 1,311,089 1,359,375 48,286 3.7% PURCHASED WATER 25,400,000 12,209,420 12,898,462 689,042 5.6% MWD/CWA FIXED CHARGES 6,860,000 3,137,855 3,350,332 212,477 6.8% OUTSIDE SERVICES/MAINTENANCE 2,962,302 378,194 398,335 20,141 5.3% DEPRECIATION/REPLACEMENT 4,200,000 1,955,000 2,100,000 145,000 7.4% MISCELLANEOUS EXPENSES 961,476 399,064 368,840 (30,224)‐7.6% CAPITAL OUTLAY 430,712 9,538 413,198 403,660 4232.1% TOTAL OPERATING EXPENSES 47,212,655 21,332,148 23,186,885 1,854,737 8.7% OPERATING INCOME/(LOSS) (1,628,055)$ 2,985,122$ 1,463,417$ (1,521,705)$ ‐51.0% (*) Adjusted to reflect timing differences for water purchases and depreciation. DEC. 31, 2020 WATER OPERATIONS FUND 1% 9% Jan. 26, 2021 Item #6 Page 13 of 24 Monthly Financial Report ______________________________________________________ 11 Wastewater Enterprise Revenues Charges for current services were lower than in the prior year due primarily to lower commercial customer water usage related to COVID‐19 restrictions. Commercial/industrial wastewater rates in Carlsbad are based on water usage. The decrease was partially offset by a 3% rate increase that began in Jan. 2020, and an increase in development throughout the city. Interest earnings decreased due to the combination of a 31.9% decrease in the yield of the Treasurer’s portfolio and an 16.6% decrease in the average cash balance. The increase in other revenues is primarily due to a one‐time reimbursement from the City of Oceanside for wastewater bypass services rendered during a storm event. Expenses The decrease in staffing expenses was due primarily to an additional biweekly pay period in Dec. 2019. Encina plant services to date are a combination of actual expenses and an estimate of the annual Encina expense prorated monthly. The increase in outside services was due to sewer rehabilitation costs for three sewer mains in need of service. The increase in miscellaneous expenses was primarily due to chemicals and higher parts costs for pump repairs. The increase was partially offset by decreases in conferenece travel, printing/postage expenses resulting from the switch to a web‐based electronic invoice payment system and lower heat and light utility expenses as compared to prior year. The decrease in capital outlay expenses was due to a nonrecurring vehicle purchases in the prior fiscal year. CHANGE FROM BUDGET YTD* YTD* YTD 2019‐20 TO PERCENT FY 2020‐21 12/31/2019 12/31/2020 YTD 2020‐21 CHANGE REVENUES: CHARGES FOR CURRENT SERVICES 14,039,000 7,263,763 6,962,128 (301,635)‐4.2% INTEREST 75,000 106,939 66,211 (40,728)‐38.1% OTHER REVENUES 203,000 92,492 216,747 124,255 134.3% TOTAL OPERATING REVENUE 14,317,000 7,463,194 7,245,086 (218,108) ‐2.9% EXPENSES: STAFFING 2,462,740 1,205,287 1,154,306 (50,981)‐4.2% INTERDEPARTMENTAL SERVICES 1,427,715 653,360 696,885 43,525 6.7% ENCINA PLANT SERVICES 4,300,000 1,775,879 2,150,000 374,121 21.1% OUTSIDE SERVICES/MAINTENANCE 1,429,361 185,036 229,334 44,298 23.9% DEPRECIATION/REPLACEMENT 5,000,000 1,825,000 2,500,000 675,000 37.0% MISCELLANEOUS EXPENSES 794,090 275,428 293,223 17,795 6.5% CAPITAL OUTLAY 104,000 43,516 0 (43,516)‐100.0% TOTAL OPERATING EXPENSES 15,517,906 5,963,506 7,023,748 1,060,242 17.8% OPERATING INCOME/LOSS (1,200,906) 1,499,688 221,338 (1,278,350) ‐85.2% (*) Adjusted to reflect timing differences for Encina quarterly invoices and depreciation. DEC. 31, 2020 WASTEWATER OPERATIONS FUND 3% 18% Jan. 26, 2021 Item #6 Page 14 of 24 1 Second Quarter, Fiscal Year 2020-2021 January 20, 2021 The following scan provides an overview of key economic indicators for the October, November, and 2 Job Postings (Source: EMSI, October - December 2020) 9,542 There were 9,542 unique job pos���in Carlsbad between October and December, an increase of 703 pos���from the 3 According to a November survey of Carlsbad businesses, 4 INCOME + HOUSING Median Household Income (Source: 2018 ACS 5-Year Estimates, the latest year available) 5 TOURISM Tourism saw a boost over the summer and fall when the region was in the state’s “Red Tier”, showing signs of a slow recovery. However, Carlsbad along with the Southern California tourism industry as a whole, took a downward turn in the fall and winter. The state’s Regional Stay at Home Order, which went into e�ect in early December, has had a ����ant impact on hotels and 6 INDUSTRIES Largest Industries (Source: EMSI) 7 INDUSTRY CLUSTERS Life Sciences (Source: 2019 Biennial Business Report and 2020 Carlsbad Industry Cluster Update) 8 INNOVATION Patents (Source: 2020 Carlsbad Industry Cluster Patent Update) 9 BUSINESS ACTIVITY Business Licenses (Source: City of Carlsbad) Compared to 2019, the number of Carlsbad business 10 REAL ESTATE Market Vacancy Rates and Rent per Square Foot (Source: CoStar, January 2020) Economic and Financial Update Second Quarter –Fiscal Year 2020-21 Laura Rocha, Deputy City Manager, Administrative Services Matt Sanford, Economic Development Manager Ryan Green, Finance Director Jan. 26, 2021 Economic Update •Timeframe analyzed –Second quarter FY2020-2021 (October – December) –Calendar year 2020 •National Context •State Context •Local Data National trends •GDP had a steep decline in the first and second quarter of 2020 •There was significant recovery in the third quarter •Personal income and consumer spending has also fluctuated wildly •Forecasting is still difficult given surging case rate, corresponding health orders, and vaccine roll out U.S. Gross Domestic Product •GDP 35 25 15 5 -5 -15 -25 -35 Real GDP: Percent change from preceding quarter ~ m m ITT ~ m w ITT ~ m w ITT ~ m m ITT 2016 2017 2018 2019 2020 U.S. Bureau of Economic Analysis Seasonally adjusted at annua l rates U.S. GDP Projections •GDP Real GDP projections, United States 96 growth over previous quarter, annualised rate, Q4 2019 -Q4 2022 • FORECAST 30 20 10 ~-=:.::,-_., __________ _ • • =====!= ---------•.______, JUN 2020 single-hit -·• •-----•-DEC 2020 forecast ~• 0 ~ ________ _,__,_ _______ ! -=--I ~ NOV 2019 forecast • -10 -20 -30 -40 • 04 2020 02 03 04 2021 02 03 04 2022 02 03 04 © Compare countries on data.oecd.org 1)0ECD GDP by State Real GDP: Percent Change at Annual Rate, 2020:Q2-2020:Q3 ,o ~-HI ,.~ 31.3 t) U.S. Bureau of conomic Analvsis WY 19.4 co 30.1 ND 22.4 SD 32.1 NE 33.2 KS 34.3 ,,,,. MA 33.1 Quintile growth rates • 39.5% to 52.2% • 35.5% to 39.5% • 33.1%to35.5% D 30.5% to 33.1% D 19.2%to30.5% U.S. growth rate = 33.4% Changes to Personal Income2 1 ..1-J 0 C: QJ u ~ <l> a.. -1 -2 -3 Month-to-Month Change in Personal Income Jul. Aug. Sep. Oct. Nov. U.S. Bureau of Economic Analysis Personal Income by State Per sonal Income: Percent Change at Annua l Rate, 2020:Q2-2020:Q3 ,o ~-<>lb HI -17.4 {) U.S. Bureau of Econ o mic Analysis WY -17.1 NM -14.9 ND -20.6 SD -17.6 NE -15.3 KS -15.1 OK MN -16.7 IA -20.0 AR MA-15.3 Quintile growth rates • -0.6% to -8.6% • -8.6% to -12.5% D -12.5% to -15.7% D -1s.1% to -19.9% D -1 9.9% to -29.9% U.S. growth rate= -10.0% Economic Uncertainty •Regional Stay at Home Order heavily impacted businesses •Reopening has been in flux, remains reduced •Restaurants, personal services,hotels and fitness are most impacted •Some COVID-19 related sectors, like life sciences and some tech and businesses are experiencing expansion •Employment trends vary by sector Financial Relief •Reauthorized federal stimulus providing much needed relief –$284 billion for PPP –$20 billion for EIDL –$300 per week in additional unemployment benefits –Further potential for additional federal relief programs •State grant program also contributing significant relief –$500 million in small business grants –Additional $504 million for small business grants is contained in Governor’s FY21-22 budget proposal Tracking Carlsbad's Economy •Developed increased economic analysis capacity in order to: –Publish quarterly economic data (Exhibit 2) –Increase city’s awareness of economic trends –Improve agility in how city responds to economic conditions Carlsbad Economy •Carlsbad’s GRP was $15.3 billion in 2019 (latest year available) •GRP increased $800 million from the previous year •Certain industry clusters, like life sciences continue to do well $15.3 Billion Carlsbad Unemployment •California unemployment rate 8.8% -a 0.9% monthly increase •County unemployment rate 8.0% -a 1.4% monthly increase •Carlsbad unemployment rate 6.6 % -a 1.2% monthly increase 0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0 16.0 18.0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Unemployment Rate 2020 Carlsbad San Diego County California 0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0 16.0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Carlsbad Unemployment Rate, 2019 vs 2020 2019 2020 Carlsbad Jobs •February 2020 unemployment was at 2.9% •April spike to 13.8%, down to 5.4% in November. •October through December saw 9,542 unique job postings •Increase of 703 from previous quarter •Continued upswing in hiring in –Manufacturing –Administrative Services –Professional, Scientific & Technical Carlsbad Tourism •Regional Stay at Home Order impact on hotels has been severe •Hotels unable to accept guests on non-essential travel •December occupancy down 49% year over year 0.0 20.0 40.0 60.0 80.0 100.0 Jan Fen Mar Apr May Jun Jul Aug Sep Oct Nov Dec 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 Fen Mar Apr May Jun Jul Aug Sep Oct Nov Dec Hotel Occupancy 2020 City of Carlsbad+San Diego County, CA City of Oceanside, CA+City of Newport Beach, CA+ Carlsbad Tourism •Average daily rates in December, down $48 •For the year average daily rates down 29.3% •Resort properties particularly hard hit 0.00 50.00 100.00 150.00 200.00 250.00 300.00 350.00 Jan Fen Mar Apr May Jun Jul Aug Sep Oct Nov Dec Avg. Daily Rate 2019 City of Carlsbad+San Diego County, CA City of Oceanside, CA+City of Newport Beach, CA+ 0.00 50.00 100.00 150.00 200.00 250.00 300.00 350.00 Jan Fen Mar Apr May Jun Jul Aug Sep Oct Nov Dec Average Daily Rate 2020 City of Carlsbad+San Diego County, CA City of Oceanside, CA+City of Newport Beach, CA+ Commercial Real Estate •Vacancy rates for industrial properties are down to 10.2% •Retail vacancy has leveled off after climbing from 5% to 8% •Retail rents have dipped 3.5%, lowest in past five years 0.00% 5.00% 10.00% 15.00% 20.00% 2020 Q1 2020 Q2 2020 Q3 2020 Q4 2021 Q1 QTD Vacancy Rates Retail Office Industrial $- $10.00 $20.00 $30.00 $40.00 $50.00 2020 Q1 2020 Q2 2020 Q3 2020 Q4 2021 Q1 QTD Market Rent Per SF Retail Office Industrial Residential Real Estate •Carlsbad home values have risen more than 9.5% over the past year •Zillow’s forecast predicts there will be an additional rise of 4.6% next year •The continued rise in home values is generally attributed to constrained supply, low interest rates, and a strong demand in the region $800,000 $820,000 $840,000 $860,000 $880,000 $900,000 $920,000 $940,000 $960,000 $980,000 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Median Home Price 2019 2020 Key Takeaways •Economic recovery will be based on several factors including: –Case rates –Health Orders –Availability of vaccine –Continued relief programs •The more stability in operating conditions, the faster the recovery will be Industry Insights •Carlsbad’s “Innovation Economy” employers continue to grow –More resilient to economic downturn –Provide higher than average wages –Employees are generally able to work remotely •Tourism (including hospitality and related industries) will continue to be hard hit when health orders restrict leisure travel. –Impacts city revenue that is received in sales tax and TOT Financial Update •General Fund revenues •General Fund expenditures •Water and Wastewater funds •Golf Course Fund General Fund Revenues Through Dec. 31 22 $0 $5,000,000 $10,000,000 $15,000,000 $20,000,000 $25,000,000 $30,000,000 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 vs. Expectations 23 Revenue category Expected FY 2020-21 Actual FY 2020-21 $ difference % difference Property tax $25,006,958 $26,995,194 $1,988,236 8% Sales tax 19,135,761 19,510,183 374,422 2% Transient occupancy tax 14,571,998 6,604,990 (7,967,008)-55% Other taxes 4,051,373 4,838,380 787,007 19% Income from inv. and property 2,491,331 2,446,352 (44,979)-2% Development related revenue 1,438,669 1,464,407 25,738 2% Other revenues 7,508,417 8,555,331 1,046,914 14% Total $74,204,506 $70,414,837 ($3,789,669)-5% General Fund Revenues Through Dec. 31 24 Revenue category FY 2019-20 FY 2020-21 $ change % change Property tax $24,357,174 $26,995,194 $2,638,020 11% Sales tax 19,762,217 19,510,183 (252,034)-1% Transient occupancy tax 14,915,580 6,604,990 (8,310,590)-56% Other taxes 4,346,496 4,838,380 491,884 11% Income from inv. and property 3,988,675 2,446,352 (1,542,323)-39% Development related revenue 1,849,776 1,464,407 (385,369)-21% Other revenues 8,070,850 8,555,331 484,481 6% Total $77,290,768 $70,414,837 ($6,875,931)-9% Property Tax 25 •Majority of property taxes are collected in Dec. 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 is partially due to timing differences and has been driven by increases in: –Unsecured taxes –Aircraft taxes –Delinquent taxes •We expect property taxes for the fiscal year to slightly exceed the originally projected amount Sales Tax 26 •To date, the city has received: –Cleanup payments from Q4 of 2019 and Q1 of 2020 –A large portion of Q2 2020 payments –Three payments from Q3 of 2020 –First advance of Q4 2020 projected revenue •Small decrease for the first half of FY 2020-21 was driven by: –COVID-19 related economic impacts –Offset by Collection of Q2 deferrals and increased county pool revenues •Avenu is now projecting that revenues will slightly exceed forecast for the year Transient Occupancy Tax (TOT) 27 •Revenues to date represent: –Hotel stays through Nov. –Average occupancy during the last 12 months has been 49% compared to 74% for the same period in the previous year •The majority of TOT collected to date is from tourists versus group events •TOT revenues are now projected to fall short of original expectations Other Taxes 28 •Business license taxes are moderately up when compared to the same period in the prior year –Increase in gross receipts for some businesses where gross receipts is the factor to determine the tax –Offset partially by some businesses that have closed •Franchise taxes: –Majority comes in April from SDG&E –Essentially the same as last year at this time •Transfer taxes are up significantly due to the housing resale market and timing differences Income from Inv. and Property 29 •Down 39% for the year due to: –Drop in yield on the portfolio of 31.9% –Drop in property sales and rentals: •Sale of Fire Station #3 last fiscal year •Decrease in property rentals (parks, facilities, etc.) of $117,000 –Small increase in average cash balance of 2.1% Development Related Revenues 30 •In total, development related revenues are down by 21% –Budget for these revenues were projected to be down by 24% for the fiscal year •Residential permits issued for the year are 148 compared to 101 last year •Commercial/industrial square feet of permits issued are 206,297 square feet as compared to 220,078 square feet last year •Planning, building and engineering fees are all down for the year, creating the negative variance Other General Fund Revenues 31 •Other intergovernmental revenues are up due to COVID- 19 CARES Act assistance and a homeless program grant •Recreation revenues are down $1 million compared to the prior year due to reductions across all programs •Ambulance fees are slightly down due to a small decrease in the number of billable transports •Other General Fund revenues are down by $102,000 General Fund Expenditures Through Dec. 32 $0M $20M $40M $60M $80M $100M $120M Personnel Maintenance & operations Capital outlay Transfers out Innovation & COVID-19 City Council Contingency Expended FY 2019-20 Budget FY 2020-21 Expended & committed Expenditure type (in millions) Expended FY 2019-20 Budget FY 2020-21 Expended & committed $.% Personnel $99.8 $105.1 $53.6 51% Maintenance & operations 51.0 61.0 31.8 52% Capital outlay 1.8 1.6 0.8 48% Transfers out 11.5 7.0 5.2 74% Innovation & COVID-19 4.5 14.8 2.9 20% City Council contingency 0.0 1.5 0.0 0% Total $168.5 $190.9 $94.3 49% General Fund Expenditures Through Dec. 33 General Fund Expenditures 34 •Adopted budget of $163.4 million plus carryforwards and encumbrances totals $190.9 million for FY 2020-21 •Through Dec. expenditures and encumbrances total $94.8 million compared to $106.8 million at the same time last year –Personnel includes $8 million upfront CalPERS payment –M&O expenditures are $19.6 million and encumbrances total $12.2 million –Closely monitoring departmental spending and are performing another scrub of open encumbrances Water and Wastewater Funds 35 •Water –When compared to the same prior in the year, revenues are up 1.4% and expenses are up 8.7% –Net operating income significantly above of the full year forecast due to increased water delivery revenue and lower outside services •Wastewater –Revenues are down 2.9% and expenses are up 17.8% when compared to the same prior in the year –Net operating income is ahead of plan due to and lower outside services and a higher than expected reimbursement Golf Course Fund 36 Category FY 2019-20 FY 2020-21 $ change % change Golf revenue $1,997,480 $3,159,828 $1,162,348 58% Food & beverage revenue 1,665,089 883,809 (781,280)-47% Total revenue 3,662,569 4,043,637 381,068 10% Expenses, excluding depreciation 3,744,044 3,327,740 (416,304)-11% Net cash activity (81,474)715,897 797,372 979% Category Budgeted FY 2020-21 Actual FY 2020-21 $ change % change Golf revenue $2,296,034 $3,159,828 $863,795 38% Food & beverage revenue 854,152 883,809 29,657 3% Total revenue 3,150,185 4,043,637 893,452 28% Expenses, excluding depreciation 3,213,237 3,327,740 114,503 4% Net cash activity (63,051)715,897 778,949 1,235% Next Steps 37 •No budget adjustments proposed at this point •Continue to monitor revenues and expenses •Continue to issue monthly financial status report •Bring third quarter update to City Council in April 2021 Questions & Discussion 38 Economic and Financial Update First Quarter –Fiscal Year 2020-21