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HomeMy WebLinkAbout2021-12-14; City Council; ; City of Carlsbad Fiscal Year 2020-21 Annual Financial Audit ResultsCA Review CKM Meeting Date: Dec. 14, 2021 To: Mayor and City Council From: Scott Chadwick, City Manager Staff Contact: Ryan Green, Assistant Finance Director ryan.green@carlsbadca.gov, 760-602-2414 Subject: City of Carlsbad Fiscal Year 2020-21 Annual Financial Audit Results Districts: All Recommended Action Receive a report on the city’s fiscal year 2020-21 annual financial audit results. Executive Summary The City of Carlsbad is required by the State of California to be audited by a certified public accountant or public accountant, licensed by, and in good standing with, the California Board of Accountancy. The city’s annual financial audit resulted in an unmodified opinion and there were not any material weaknesses in internal controls, nor any material instances of noncompliance identified. Discussion The Finance Department is responsible for the stewardship of the city’s assets and liabilities, helping to ensure information is provided in an effective and timely manner so that the best financial decisions can be made. An important component of this stewardship is the completion of the city’s annual financial audit by a certified public accountant firm. Results of the Fiscal Year 2020-21 Audit In May 2017, city staff selected and issued a five-year contract to the CPA firm Davis Farr LLP to perform the city’s annual financial audit. The role of the external auditor is to express an opinion on the city’s financial statements on whether they are materially misstated or not. The external auditors follow Government Auditing Standards that have been created by the American Institute of Certified Public Accountants. The fiscal year 2020-21 audit began in May 2021 with the external auditors conducting interim fieldwork, and the audit concluded on Nov. 30, 2021, when the auditors issued their opinion on the city’s financial statements. The city received an “unmodified” opinion, which means that it is the auditor’s judgment that the city’s financial statements and footnotes are fairly stated, without any material exceptions, and in compliance with the generally accepted accounting principles known as GAAP. Dec. 14, 2021 Item #2 Page 1 of 209 The auditor did not identify any material weaknesses in internal controls nor any material instances of noncompliance. The Independent Auditor’s Report is part of the city’s Annual Comprehensive Financial Report (Exhibit 1, Page 23.) This annual report also includes further discussion and analysis of the city’s finances and basic financial statements. Transparency The city publishes monthly financial status reports on the city’s website which highlight the city’s General Fund, Water Fund, Wastewater Fund and Golf Course Fund revenues and expenditures for the fiscal year. City staff also provided the public and City Council with quarterly economic and financial updates throughout the fiscal year as well as a fiscal year end synopsis of the General Fund. A brief description of these updates, with links to the reports themselves, is provided below. Monthly status reports These monthly reports provide the unaudited detail of city’s General Fund, Water Fund, Wastewater Fund and Golf Course Fund revenues and expenditures for the fiscal year. Economic and Financial Update: First Quarter of Fiscal Year 2020-21 This report, presented Oct. 20, 2020, detailed the economic outlook and provided an update on the city’s finances for the period of July 1 through Sept. 30, 2020. Economic and Financial Update: Second Quarter of Fiscal Year 2020-21 Jan. 26, 2021, report covered the period of July 1 through Dec. 31, 2020 Economic and Financial Update: Third Quarter of Fiscal Year 2020-21 April 27, 2021, report for July 1, 2020, through March 31, 2021 General Fund Surplus Policy: Approval of Fiscal Year 2020-21 Budget Carryforward Requests and Appropriation of Funds to Fiscal Year 2021-22 In addition to requesting carryforward funding for fiscal year 2021-22, this Sept. 28, 2021, report provided an unaudited synopsis of the results of fiscal year 2021-22 for the city’s General Fund. Economic and Financial Update: First Quarter of Fiscal Year 2021-22 This Nov. 2, 2021, report detailed positive economic trends in the recovery from the most severe period of the pandemic as well as the residual economic impact of the Delta surge and other recent economic events. In line with regional trends, Carlsbad saw increases in revenues in almost all categories when compared to the same quarter in the previous fiscal year, and expenditures are in line with the prior year’s rate of spending. Dec. 14, 2021 Item #2 Page 2 of 209 Fiscal Analysis This is an informational item with no fiscal impact. Next Steps None. Environmental Evaluation 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. Public Notification This item was noticed 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. City of Carlsbad’s fiscal year 2020-21 Annual Comprehensive Financial Report Dec. 14, 2021 Item #2 Page 3 of 209 JUNE 30, 2021 FISCAL YEAR ENDED Annual Comprehensive Financial Report Exhibit 1 Dec. 14, 2021 Item #2 Page 4 of 209 Fiscal Year Ended June 30, 2021 Annual Comprehensive Financial ReportDec. 14, 2021 Item #2 Page 5 of 209 Annual Comprehensive Financial Report Fiscal Year Ended June 30, 2021 Prepared by the Finance Department 1635 Faraday Ave. Carlsbad, CA 92008 www.carlsbadca.gov Dec. 14, 2021 Item #2 Page 6 of 209 i CITY OF CARLSBAD Annual Comprehensive Financial Report Year Ended June 30, 2021 Table of Contents Page Introductory Section: Letter of Transmittal 1 Certificate of Achievement for Excellence in Financial Reporting, Government Finance Officers Association 19 Location Map 20 List of City Officials 21 Organization Chart 22 Financial Section: Independent Auditor’s Report 23 Management’s Discussion and Analysis 26 Basic Financial Statements Government-wide Financial Statements: Statement of Net Position 46 Statement of Activities 48 Fund Financial Statements: Balance Sheet – Governmental Funds 50 Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Position 53 Statement of Revenues, Expenditures and Changes in Fund Balances – Governmental Funds 54 Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Activities 57 Statement of Revenues, Expenditures and Changes in Fund Balance – Budget and Actual – General Fund 58 Statement of Net Position – Proprietary Funds 60 Statement of Revenues, Expenses and Changes in Net Position – Proprietary Funds 64 Statement of Cash Flows – Proprietary Funds 66 Statement of Fiduciary Net Position – Fiduciary Funds 70 Statement of Changes in Fiduciary Net Position – Fiduciary Funds 71 Notes to the Financial Statements 72 Required Supplementary Information 119 120 125 126 Schedule of Changes in Net Pension Liability and Related Ratios During Measurement Period Schedule of Pension Plan Contributions Schedule of Changes in Net OPEB Liability and Related Ratios During Measurement Period Schedule of OPEB Plan Contributions 129 Dec. 14, 2021 Item #2 Page 7 of 209 ii Table of Contents (continued) Page Combining and Individual Fund Financial Statements and Schedules 131 Combining Balance Sheet – Nonmajor Governmental Funds 132 Combining Statement of Revenues, Expenditures and Changes in Fund Balances – Nonmajor Governmental Funds 136 Combining Schedule of Revenues and Expenditures – Budget and Actual (Budgetary Basis) – Special Revenue Funds 140 Combining Schedule of Revenue and Expenditures – Budget and Actual (Budgetary Basis) – Capital Project Funds 143 Combining Statement of Net Position – Internal Service Funds 144 Combining Statement of Revenues, Expenses and Changes in Net Position – Internal Service Funds 146 Combining Statement of Cash Flows – Internal Service Funds 148 Combining Statement of Fiduciary Net Position 152 Combining Statement of Changes in Fiduciary Net Position 153 Statistical Section: Table of Contents 155 Financial Trends Net Position by Component – Last Ten Fiscal Years 156 Changes in Net Position – Last Ten Fiscal Years 158 Fund Balances of Governmental Funds – Last Ten Fiscal Years 162 Changes in Fund Balances of Governmental Funds – Last Ten Fiscal Years 164 Revenue Capacity General Governmental Tax Revenues by Source – Last Ten Fiscal Years 166 Water and Wastewater Rates – Last Ten Fiscal Years 167 Assessed Value of Taxable Property – Last Ten Fiscal Years 169 Direct and Overlapping Property Tax Rates – Last Ten Fiscal Years 170 Principal Property Taxpayers – Current Year and Nine Years Ago 172 Property Tax Levies and Collections – Last Ten Fiscal Years 173 Debt Capacity Ratios of Outstanding Debt by Type – Last Ten Fiscal Years 175 Schedule of Direct and Overlapping Bonded Debt – Current Fiscal Year 176 Direct and Overlapping Debt – Last Ten Fiscal Years 178 Legal Debt Margin Information – Last Ten Fiscal Years 180 Pledged-Revenue Coverage – Last Ten Fiscal Years 182 Demographic and Economic Information Demographic and Economic Statistics – Last Ten Fiscal Years 184 Principal Employers – Current Year and Nine Years Ago 187 Operating Information Authorized Full and ¾ Time City Government Employees by Program Area – Last Ten Fiscal Years 188 Operating Indicators by Function/Program – Last Ten Fiscal Years 190 Capital Asset Statistics – Last Ten Fiscal Years 192 Dec. 14, 2021 Item #2 Page 8 of 209 Dec. 14, 2021 Item #2 Page 9 of 209 Introductory Section Introductory SectionDec. 14, 2021 Item #2 Page 10 of 209 Introductory Section Introductory SectionDec. 14, 2021 Item #2 Page 11 of 209 Administrative Services Branch Finance Department 1635 Faraday Avenue  Carlsbad, CA 92008  760-602-2430 t www.carlsbadca.gov 760-602-8553 f 1 November 30, 2021 Honorable Mayor, City Council, and Residents of the City of Carlsbad City of Carlsbad Carlsbad, CA 92008 LETTER OF TRANSMITTAL FISCAL YEAR 2020-21 ANNUAL COMPREHENSIVE FINANCIAL REPORT Honorable Mayor, City Council, and Residents: I am pleased to present the fiscal year 2020-21 Annual Comprehensive Financial Report for the City of Carlsbad (“city”). The information found in this report is provided by management to the City Council and the public to assist those interested in understanding the fiscal condition of the city as of June 30, 2021. Management assumes full responsibility for the completeness and reliability of the information contained in this report, based upon a comprehensive framework of internal controls that has been established for this purpose. Because the cost of internal controls should not outweigh its benefits, the city’s comprehensive framework of internal controls has been designed to provide reasonable, rather than absolute, assurance that the financial statements will be free from material misstatement. State law and the Carlsbad Municipal Code require that an annual financial report is prepared. This report fulfills that obligation. It has been prepared in conformity with generally accepted accounting principles (GAAP) and with the financial reporting requirements prescribed by the Governmental Accounting Standards Board (GASB). The independent auditing firm, Davis Farr LLP, has issued an unmodified (“clean”) opinion on the city’s financial statements for the fiscal year that ended June 30, 2021. The independent auditor’s report is located at the front of the financial section of this Annual Comprehensive Financial Report. Management’s Discussion and Analysis (MD&A) immediately follows the independent auditor’s report and provides a narrative introduction, overview and analysis of the basic financial statements. The MD&A complements this letter of transmittal and should be read in conjunction with it. As a recipient of federal and state financial assistance, the city is required to have a “Single Audit” performed by an independent audit firm. The Single Audit is designed to meet the special needs of federal grantor agencies. The standards governing Single Audit engagements require that the independent auditor report not only on the fair presentation of the financial statements, but also on the audited government’s internal controls and compliance with legal requirements, with special emphasis on internal controls and legal requirements involving the administration of federal awards. These reports will be completed in January 2022 and made publicly available on the city’s website in the city’s separately issued Compliance Reports and Other Financial Information. Dec. 14, 2021 Item #2 Page 12 of 209 2 Profile of the City of Carlsbad Carlsbad incorporated in 1952 as a General Law City, although its “village” area dates back more than 100 years. In June 2008, the voters of Carlsbad overwhelmingly approved the city to change to a Charter City. Carlsbad is located on the southern California coast, about 35 miles north of the City of San Diego. The city is governed by a five-member City Council under the Council Manager form of government. The City Council is elected by district, on a staggered basis, for a term of four years. The city currently has four districts; however, the mayor is elected at large. The City Clerk and City Treasurer are also elected to four-year terms. The City Council appoints the City Manager and City Attorney. The city covers approximately 39 square miles and has a population of approximately 115,000, with an expected built out population of 120,000 residents. Commercial activities in the city include: a major regional shopping center, a specialty outlet center, a commercial center with upscale retail shops, 43 hotels offering 5,059 rooms, 325 short- term vacation rentals and 668 timeshares for tourist lodging, over 23 auto dealers, high technology, multimedia and biomedical businesses, electronics, golf apparel and equipment manufacturers, several business and light industry parks, and numerous land developers building single and multi-family housing in a variety of community settings. This report includes financial statements for the City of Carlsbad, the Housing Authority of the City of Carlsbad, the Carlsbad Public Financing Authority, and the Carlsbad Municipal Water District. Through these entities, Carlsbad provides a full range of services to its citizens and customers including: • Development services • Fire and paramedic services • Housing programs • Library and arts programs • Park lands • Police protection services • Recreation programming for all ages • Solid waste services • Street construction and maintenance • Water delivery system • Wastewater system In addition to the full range of services normally associated with a municipality, Carlsbad offers programs to help residents and businesses. The city’s Housing Authority administers federal housing assistance to more than 500 low-income households in Carlsbad, and older residents can take advantage of Carlsbad’s senior citizen programs. Dec. 14, 2021 Item #2 Page 13 of 209 3 Budget Process The City Council sets the overall policy direction for Carlsbad and helps staff prioritize programs, projects and services to support that direction. Public input plays a critical role in setting both the long-range policy direction of the city and decisions about day-to-day spending. Public input specific to the budget process involved four main opportunities: City Council goal-setting, presentation of goal work plans, presentation of the preliminary budget and the budget adoption public hearing. The City Council gathered in February and March 2021 for three public workshops to develop goals for the fiscal year 2021-22 budget. Taking into account work that was already put in motion through public input into the fiscal year 2020-21 budget, the City Council asked staff to focus on four main areas: • Engage the community through a citizens committee to create a new plan to manage growth in Carlsbad in a way that maintains an excellent quality of life • Reduce the homeless unsheltered population, among those who want help, by 50% within five years, with quarterly reports until the city decreases the unsheltered homeless population or five years • Bring the Fire Department into conformance with Standards of Cover evaluation • Conduct a facilitated City Council Workshop to work on team building and City Council communication and an ethics ordinance to support the delivery of superior public service In addition to these four goals, the City Council asked that three principles be integrated into day-to-day activities. These include early and meaningful public engagement, technology infrastructure, and diversity, equity and inclusion. Budgetary control for the city is maintained through its accounting systems. Expenditures may not exceed budgeted figures at the fund level. Monthly reports summarizing the results of operations for the city’s more significant funds are provided to the City Council and the public on the city’s website. Dec. 14, 2021 Item #2 Page 14 of 209 4 Community Vision These nine core values make up the Carlsbad Community Vision. They were developed in collaboration with the community and drive both the day to day work of the city and its long-term planning. Small town feel, beach community character and connectedness – Enhance Carlsbad’s defining attributes—its small town feel and beach community character. Build on the city’s culture of civic engagement, volunteerism and philanthropy. Open space and the natural environment – Prioritize protection and enhancement of open space and the natural environment. Support and protect Carlsbad’s unique open space and agricultural heritage. Access to recreation and active, healthy lifestyles – Promote active lifestyles and community health by furthering access to trails, parks, beaches and other recreation opportunities. The local economy, business diversity and tourism – Strengthen the city’s strong and diverse economy and its position as an employment hub in north San Diego County. Promote business diversity, increased specialty retail and dining opportunities, and Carlsbad’s tourism. Walking, biking, public transportation and connectivity – Increase travel options through enhanced walking, bicycling and public transportation systems. Enhance mobility through increased connectivity and intelligent transportation management. Sustainability – Build on the city’s sustainability initiatives to emerge as a leader in green development and sustainability. Pursue public/private partnerships, particularly on sustainable water, energy, recycling and foods. History, the arts and cultural resources – Emphasize the arts by promoting a multitude of events and productions year-round and cutting-edge venues to host world class performances and celebrate Carlsbad’s cultural heritage in dedicated facilities and programs. High quality education and community services – Support quality, comprehensive education and lifelong learning opportunities, provide housing and community services for a changing population, and maintain a high standard for citywide public safety. Neighborhood revitalization, community design and livability – Revitalize neighborhoods and enhance citywide community design and livability. Promote a greater mix of uses citywide, more activities along the coastline and link density to public transportation. Revitalize the downtown Village as a community focal point and a unique and memorable center for visitors and rejuvenate the historic Barrio neighborhood. Dec. 14, 2021 Item #2 Page 15 of 209 5 Economic and Fiscal Issues Facing the City Over one year ago, the unprecedented impacts of the Coronavirus Disease 2019 (“COVID-19”) began challenging the City of Carlsbad, the state of California, the nation, and the entire world. The World Health Organization declared COVID-19 a global pandemic on March 11, 2020. The city subsequently declared a local emergency on March 17, 2020, and a countywide stay-at-home order began on March 19, 2020. The governor introduced a tiered reopening system, called the “Blueprint for a Safer Economy” on August 28, 2020, imposing criteria on tightening and loosening COVID-19 allowable activities. On June 15, 2021, the governor ordered the full reopening of California’s economy because vaccine supply was sufficient and hospitalization rates were stable and low. However, during the entire fiscal year the world, nation, state and city grappled with the ongoing economic effects of COVID-19. The economic impacts of COVID-19 to the federal, state, and regional economies have been unparalleled, impacting all businesses. Those impacts have been disproportionate depending on industry, size of business, and even ownership structure. In Carlsbad, the most profound effects have been concentrated in the restaurant, travel, entertainment and leisure & hospitality sectors. Prior to the pandemic, Carlsbad boasted a low estimated unemployment rate of 2.9%. At the height of the pandemic, unemployment spiked to 13.8%. Unemployment improved to a low estimate of 5.7% in November 2020, before rising to 6.6% in December 2020 amid the surge of cases and corresponding health orders. Since then, estimated unemployment has dropped again and was at 6.6% in June 2021. To spawn economic recovery, several federal, state and local programs were approved, providing substantial resources for businesses. This includes the American Rescue Plan, the Paycheck Protection Program, for which Carlsbad companies were recipients at a higher rate than any other North County city in the first round; the State of California Small Business Relief Program, and the City of Carlsbad’s Economic Recovery and Revitalization Initiative. Due to many of these programs, traditional debt-financing has been less appealing for businesses. National interest rates held lower than pre-pandemic levels, with one-year rates at 0.07%, ten-year rates at 1.45%, and 30-year rates at 2.06% in June 2021. Maintaining good fiscal health remains a top priority of the city. Meeting this objective preserves the city’s ability to continue providing important programs and services to the community. Past economic challenges and prudent financial planning have provided opportunities for developing solutions to address lost revenues while preserving vital services. Revenues, along with the local economy, have begun to recover as COVID-19 restrictions were lifted, but the recovery will be partially offset by the loss of federal and state aid that was provided during the pandemic. Some sectors like leisure & hospitality have bounced back very strong during the 2021 summer, but others, like business travel, are projected to recover slowly, which could have a lasting impact on the city’s third largest revenue source, transient occupancy tax. Expenditures and revenues will be closely monitored, disciplined spending and long-term financial planning remain critical to ensuring the future sustainability of important city programs and services. Dec. 14, 2021 Item #2 Page 16 of 209 6 Long -Term Financial Planning Strategic planning begins with determining the city's fiscal capacity based upon long-term financial forecasts of recurring available revenues and future financial obligations. Prior to the adoption of the annual budget, the finance department prepares a Ten-Year Financial Forecast (“Forecast”) that evaluates known internal and external issues impacting the city's financial condition. The Forecast is intended to help the city achieve the following: 1. The city can attain and maintain financial sustainability 2. The city has sufficient long-term information to guide financial decisions 3. The city has sufficient resources to provide programs and services for the stakeholders 4. Identify potential risks to on-going operations in the long-term financial planning process and communicate these risks on an annual basis 5. Establish mechanisms to identify early warning indicators 6. Identify changes in expenditure or revenue structures needed to deliver services or to meet the goals adopted by the City Council It is important to stress that the Forecast is not a budget. It does not make expenditure decisions, but rather highlights the need to prioritize the allocation of the city’s limited resources, to ensure the continuation of core city services. The purpose of the plan is to provide the City Council, key stakeholders, and the public an overview of the city’s fiscal health based on various financial and service level assumptions over the next ten years; and allow for the discussion of necessary steps to be initiated during the development and implementation of future budgets. The Forecast is intended to look beyond the annual budget cycle and serve as a planning tool to bring a long-term perspective to the budget process. The Forecast also takes into consideration Council Policies that need to be met on an annual basis including General Fund reserve guidelines, pension funding guidelines, etc. Should ongoing projected expenditures exceed ongoing projected revenues in any given year, the City Manager will need to identify steps to mitigate the shortfalls prior to presenting a balanced budget to the City Council for consideration during the annual budget development process. It should be noted that the Forecast is a snapshot in time and will change as additional information is made available and incorporated into the fiscal projections. COVID-19 and the economic uncertainty associated with the pandemic period has increased the volatility of projecting future revenues. The city prepares a long-term financial model for both capital and operating needs. It is imperative that the city plan for the impacts of development, constructing and operating new public facilities, and planning resources needed to build them. The city prepares a ten-year operating forecast for the General Fund, a fifteen-year Capital Improvement Program, and a five-year Strategic Digital Transformation Investment Program. As part of the Capital Improvement Program and new Strategic Digital Transformation Investment Program, the city annually calculates the amounts needed to pay for the various projects and calculates the anticipated operating budget impacts. In this way, the city can anticipate the effects of development from both a capital and an operating perspective. One important initiative the city has undertaken to ensure its financial health is the development of an Infrastructure Replacement Fund. With this fund, the city sets aside a portion of General Fund revenues on an annual basis for major maintenance and replacement of its infrastructure. Much of the city’s infrastructure is relatively new; thus, the city is just now experiencing the impact of maintenance requirements. By setting aside funds annually, the residents of Carlsbad can be assured that the proper maintenance and replacement, as needed, will be performed on streets, parks, and many facilities for which the city is responsible. Employee retirement costs continue to require ongoing prudent fiscal management. City Council issued a pension funding policy to codify its commitment to ensure that resources will be available to fulfill the city’s contractual retirement promises to its employees, and to minimize the chance that the funding of these benefits will interfere with providing essential services to the community. The policy outlines a funding discipline to ensure that adequate resources will be accumulated in a systematic and disciplined manner to Dec. 14, 2021 Item #2 Page 17 of 209 7 fund the long-term cost of benefits to the plan participants and annuitants. Overall funding levels of the city’s plans are reviewed annually, and the City Council recently approved two additional discretionary contributions of $10 million and $6.4 million to boost the city’s funding level to 80%, the city’s minimum targeted level. While this enhances the city’s funding position, risks remain in the system. Required employer contributions will continue to increase over the next few years and actual contribution increases could exceed expectations if future investment return rates or other factors are unfavorable. Revenue and expenditure growth projections The city’s Forecast considers the annual growth of all currently known elements of city revenues and expenditures. Projecting revenues is particularly difficult when considering the short-term impacts of COVID-19 on the economy, leaving the timing of an economic rebound and future growth volatility uncertain. When forecasting expenditures, some of the major factors considered are rising healthcare and workers’ compensation costs, underperforming pension programs, and general inflation in both personnel and operating expenditures. Currently, the city projects expenditure growth will outpace revenue growth in the near future. In order to support the increase in ongoing costs, the city will need to consider alternative options, such as ways to increase economic activity that will drive sustainable increases in the city’s current revenue base, an expansion of the city’s revenue base or a reduction of the city’s current service offerings and associated costs. American Rescue Plan Act The federal American Rescue Plan Act of 2021 was passed on March 11, 2021 and allocated $12.6 million in COVID-19 recovery funds to the city, half in fiscal year 2020-21 and half in fiscal year 2021-22. The American Rescue Plan Act provides an infusion of resources to help turn the tide on the pandemic, to address its economic fallout and to lay the foundation for a strong recovery. In accordance with the American Rescue Plan Act, funds are allowed to be used through Dec. 31, 2024 and may be used to: • Support urgent COVID-19 response efforts, • Replace lost public sector lost revenue, • Support immediate economic stabilization, and • Address systemic public health and economic challenges. The funds are restricted from being used to offset tax cuts or for pension liabilities. The city plans to use the funds as a replacement of revenue to partially offset the negative economic impacts from the pandemic. To substantiate the use of these funds for revenue replacement, the American Rescue Plan Act requires the city to demonstrate the extent of revenue reduction. Additional guidelines are still expected and pending from the United States Department of the Treasury. Following the current guidance, the city’s revenue loss from the COVID-19 pandemic is estimated to have resulted in a total projected revenue loss of more than the $12.6 million available. FINANCIAL MANAGEMENT POLICIES Revenue Policies The development and maintenance of balanced and reliable revenue streams is the primary revenue objective of the city. Efforts are directed to optimize existing revenue sources while periodically reviewing potential new revenue sources. The need to promote a healthy business climate is recognized as one method to maximize existing revenue sources. Revenue estimates are prepared on an annual basis during the preparation of the budget, and major revenue categories are continuously projected on a ten-year basis. Revenues are estimated conservatively using accepted standards and estimates provided by the state and other governmental agencies. Alternative revenue sources are periodically evaluated to determine their applicability to meet identified city needs. Sources of revenue are evaluated and modified as necessary and allowable to assure a diversified and growing revenue base that improves the city’s ability to handle fluctuations in individual sources. Revenues from “one-time” or limited duration revenue sources are not used for ongoing operating expenses. Fees and charges for services are evaluated and, if necessary, adjusted annually to ensure that they generate sufficient revenues to meet service delivery costs. The city establishes user charges at a level Dec. 14, 2021 Item #2 Page 18 of 209 8 generally related to the full cost (operating, direct, indirect, and capital costs) of providing the service, unless City Council determines that a subsidy from the General Fund is in the public interest. The city also considers market rates and charges levied by other municipalities of similar size for like services when establishing rates, fees, and charges. Enterprise and Internal Service Funds are to be self-supporting. Expenditure and Budget Policies Major expenditure categories are projected on a ten-year basis. The city operates on a current funding basis. Expenditures are budgeted and controlled so as not to exceed current revenues plus the planned use of any accumulated fund balances. Ongoing annual operating expenditures shall not exceed annual operating revenues, unless directed by the City Council. The City Manager shall prepare and submit to the City Council annually a proposed operating, strategic digital transformation investment program and capital investment program budget each year, and the budgets are adopted by June 30 of each year. Financial status reports are prepared monthly and posted on the city’s website. Because the budget is based on estimates, from time to time, it is necessary to make adjustments to finetune the line-items within it. Various levels of administrative control are utilized to maintain the budget’s integrity. Program managers are accountable for the line-item level of control of their individual program budgets. Department heads are accountable for the fund level of control for funds within their departments. Finance oversees the general level of accountability related to budgetary integrity through systematic checks and balances and various internal controls. The city’s General Fund Surplus Policy-City Council Policy No. 87 outlines the use of surplus funds resulting from unrestricted General Fund actual revenues exceeding total actual expenditures, encumbrances, and commitments for a given fiscal year. It is the intent of the city to use all surplus funds generated to meet reserve policies, and the reduction or avoidance of long-term liabilities. The city will not use year-end surplus funds to fund ongoing operations unless otherwise approved by the City Council. The city will use surplus funds to replenish any General Fund reserve deficiencies, up to the minimum level as set forth in the General Fund Reserve Policy-City Council Policy No. 74 and then any pension liability deficiencies, as defined in City Council Policy No. 86, Pension Funding Policy. The City Manager is then authorized to approve the carryforward of any unencumbered and unspent and unencumbered budget for a particular item less than $100,000 into the following fiscal year. These items are limited to one-time expenditures and cannot be for ongoing services, programs or personnel. Any remaining surplus funds in excess of reserve and pension liability deficiencies and items equal to or greater than $100,000 will be brought forward for City Council approval. The city adheres to long-range financial planning best practices by forecasting revenues and expenditures over a long-term period, using assumptions about economic conditions, future spending scenarios, and other salient variables. Financial planning allows the city to execute overall strategies to support the process of aligning financial capacity with long-term service objectives. Financial forecasts are updated at least once a year, or more often, if unexpected changes in economic conditions or other unforeseen circumstances exist. Any significant changes are reported to the City Manager and the City Council. Otherwise, these financial forecasts will be used as a tool during the development of the annual budget process and to set utility rates as needed. In March 2021, the City Council adopted a Long Term General Fund Capital Funding Policy-City Council Policy No. 91 which is designed to ensure the needs of the city are met; provide a funding source for long-term, large value capital purchases; and demonstrate continued prudent fiscal management. Additionally, the policy set guidelines for establishing a plan to replenish capital fund balances to include both how such replenishment is to be funded and the period over which the replenishment is to occur. The city commits to targeting a transfer to the city’s long-term capital funds of 6% of budgeted General Fund revenues that will be proposed during the annual budget process or on an as needed basis. Dec. 14, 2021 Item #2 Page 19 of 209 9 Reserve Policies The city formally mandates the levels at which reserves shall be maintained for the General Fund and informally sets minimum target levels for the Enterprise and Internal Service Funds. The General Fund Reserve Policy-City Council Policy No. 74 was most recently updated and approved by the City Council in June 2019. The purpose of the policy is to establish a target minimum level of designated reserves in the General Fund to: • Reduce the risk of financial impacts resulting from a natural disaster or other catastrophic events; • Respond to the challenges of a changing economic environment, including prolonged downturns in the local, state or national economy; and • Demonstrate continued prudent fiscal management and creditworthiness. The city commits to maintaining General Fund reserves (the term reserve refers to any unassigned fund balance) at a target of 40% of General Fund annual operating expenditures. The total reserve level will be calculated using the prior years adopted General Fund budgeted expenditures. At the discretion of the City Council, reserve levels in excess of the 40% target requirement, may be used for one-time opportunity cost purposes. Reserve funds will not be spent for any function other than the specific direction in the annual budget or by a separate City Council action. As a general budget principle concerning the use of reserves, the City Council decides whether or not to appropriate funds from reserves. Reserve funds will not be spent for any function other than the specific purpose of the reserve account from which they are drawn without specific direction in the annual budget or by a separate City Council action. The Wastewater and Water Operating Fund Reserves target a reserve funding level of 40%. The reserve amount is calculated by dividing unassigned fund balance by total budgeted operating expenses plus replacement transfers plus budgeted debt service payments. The annual budget process and setting utility user rates and charges will be used to achieve and maintain the target reserve level. The city’s Workers’ Compensation Fund will maintain a minimum reserve equal to the estimated outstanding claims as calculated by a third-party administrator. Additional reserve amounts may be set aside as deemed appropriate based on a third-party actuarial study completed at two-year intervals. During the annual budget process, the target confidence level will be compared with the projected fund balance, and, if the projected fund balance is greater than or lesser than the target, a plan to adjust the fund balance will be considered, using either or both increasing revenues through interdepartmental charges and one- time cash contributions from those funds contributing to the shortfall. The Risk Management Fund (General Liability) will maintain a minimum reserve equal to the estimated outstanding claims as calculated by a third-party administrator. Additional reserve amounts may be set aside as deemed appropriate based on a third-party actuarial study completed at two-year intervals. During the annual budget process, the reserve level will be compared with the projected fund balance, and, if the projected fund balance is greater than or lesser than the target, a plan to adjust the fund balance will be considered, using either or both increasing revenues through interdepartmental charges and one-time cash contributions from those funds contributing to the shortfall. The Information Technology Asset Replacement Fund shall maintain a minimum reserve level defined as the amount of accumulated depreciation of capitalized assets based on the original cost of each capitalized asset, and up to a maximum reserve level defined as the accumulated depreciation based on the estimated replacement cost of each capitalized asset. The Vehicle Asset Replacement Fund shall maintain a minimum reserve level defined as the amount of accumulated depreciation of capitalized Fleet assets based on the original cost of each capitalized asset, and up to a maximum reserve level defined as the accumulated depreciation based on the estimated replacement cost of each capitalized asset. Dec. 14, 2021 Item #2 Page 20 of 209 10 Investment Policy The city has established a formal Investment Policy. It is the policy of the City of Carlsbad to invest public funds not required for immediate day-to-day operations in safe, liquid and medium-term investments that shall yield an acceptable return while conforming to all California statutes. It is intended that the policy cover the investment activities of all contingency reserves and inactive cash under the direct authority of the city. Investments of the city and its component units will be made on a pooled basis; however, investments of bond proceeds will be held separately if required. Pension Funding Policy The city’s Pension Funding Policy-City Council Policy No. 86 embodies funding and accounting principles to ensure that resources will be available to fulfill the city’s contractual promises to its employees. The policy objectives include using actuarially determined contributions, or ADC, provided by CalPERS, funding the full amount of the ADC each year, maintaining no less than a combined minimum of 80% funded ratio, and demonstrating accountability and transparency by communicating all information necessary for assessing the city’s progress toward meeting its pension funding objectives. In the event the city is unable to meet the minimum combined pension funded ratio of 80% with current resources (i.e., without borrowing or using reserves), the Finance Director will identify a reasonable period to return to a minimum 80% funded ratio status. Strategic Digital Transformation Investment Program The Strategic Digital Transformation Investment Program, or SDTIP, is a comprehensive approach to planning for and funding digital transformation efforts throughout the city. It is informed by the City Council approved Connected Carlsbad: An Inclusive City Innovation Roadmap, the Internal Digital Information Network Action Plan, the Information Technology Strategy, and complimented by a five-year projected roadmap of digital transformation investments. The SDTIP is the strategic plan for technology and digital transformation combined with project descriptions, costs, funding sources and timelines. The purpose of this program, new for fiscal year 2021-22, is to provide for an annual investment strategy, not a commitment for spending, and outlines a five-year expenditure plan for future digital transformation and technology projects and the corresponding revenues necessary to pay for them. This investment program is organized into the five primary goal areas approved by the City Council: • Pursue Communitywide Digital Transformation focuses on the foundational elements, including connectivity, up-to-date hardware and software, and a robust security strategy while providing an aspirational vision for the future. • Build Capacity for Data-Driven Government focuses on the policies, procedures and staffing necessary for the city to fully capture the value of emerging models of data analytics. • Foster a Vibrant Civic Engagement Culture builds upon the first two goals with a human- centered perspective that an engaged city that uses data and technology in a way that respects people and their privacy will support a vibrant culture where residents, organizations and businesses are invested in their community and its future. • Enhance Accessibility and Transparency recognizes that open government and approaching problem-solving from an accessibility perspective leads to better outcomes for all. • Promote Safety and Sustainability Through Connectivity leads to understanding the interconnected nature of our communities that can achieve environmental, mobility and sustainability goals when approached in a cross-departmental and community informed manner. Projects will receive an appropriation that authorizes spending in the amount specified for the adopted fiscal year only. Estimated budget information is shown for a five-year period to provide the most comprehensive information about known future projects. Spending authority in future years is not granted until adoption of the annual proposed SDTIP budget associated with each year. Dec. 14, 2021 Item #2 Page 21 of 209 11 The Information Technology (IT) Department is organized into five divisions: Enterprise Applications, Infrastructure and Operations, Geographic Information Systems, Public Safety Technology and Administration. These five divisions work together to provide services in three core areas that are crucial to digital transformation efforts: Investing in Digital Tran s formation As the city continues to grow and develop, the use of technology has also grown exponentially over the last two decades. The SDTIP outlines the financial resources needed to ensure that the technology infrastructure is in place to enable the city to provide services to the community. Prudent financial planning will ensure that ongoing funding for investment in technology is available. SDTIP Project Evaluation Making decisions on technology implementations is a challenging and complex task. The challenging nature of these decisions is exacerbated by the expanding reach of technology and the increasingly interdisciplinary nature of emerging technologies. A major component of the SDTIP is the establishment of a cross-departmental approach to technology leadership to evaluate, prioritize, budget for and adopt digital transformation efforts. A new administrative order has been developed that provides a collaborative forum for key staff to validate and prioritize technology implementations. This approach also provides a structured venue to explore how particular configurations of a technology implementation may positively or negatively affect others within the organization. The process to evaluate digital transformation initiatives is ongoing and meetings may be held on a monthly, bimonthly or quarterly basis depending on the need. A number of factors are considered when putting together projects for the five-year program. All digital transformation and technology projects shall be consistent categories on the right. Proposed projects are evaluated and prioritized by a set of criteria that include: • Alignment with City Council goals and IT strategic plans, architecture, security and technology standards, including legislative and regulatory mandates, and other goals Strategic Digital Transformation Investment Program Public health and safety City Mission, Vision and Organizational Values Community values City Council goals Governing and policy documents Funding availability Environmental review Technology standards and strategic plans Applications Enterprise applications Geographic Information Systems Public Safety technology Business systems Infrastructure Networking Datacenter systems Client systems Security Administration Contracts and agreements Accounts payable Asset replacement Dec. 14, 2021 Item #2 Page 22 of 209 12 • Coordination of IT investments across the enterprise to avoid duplication, maximizing the return on investment and increasing efficiency • Effective articulation of the business case including valid operational benefits of the project • Accuracy and reasonableness of cost and benefit estimates • Consideration of potential project risks and identification of appropriate means to manage those risks • Adherence to standard project management practices • Capacity of staffing resources to implement the project As the SDTIP is implemented throughout the year, staff will continually re-evaluate projects’ scopes, costs and schedules to responsibly and cost-effectively manage city resources. SDTIP Fiscal Year 2021 -22 Appropriations In fiscal year 2021-22, there are approximately 33 continuing and new projects planned over the next five years at an estimated total cost of $26.9 million. Included in the $26.9 million is approximately $15.4 million in estimated new costs over the course of the same timeframe to provide additional funding for the continuation of existing projects as well as funding for new projects. Within the $15.4 million is approximately $4.9 million of estimated new appropriations for fiscal year 2021-22 for these same projects. Pursue Communitywide Digital Transformation $13.1 million This goal includes updating connectivity, providing up-to-date hardware and software, and a robust security strategy. Build Capacity for Data-driven Decision Making $0.8 million This goal’s projects include the policies, procedures and staffing necessary for the city to fully capture the value of emerging models of data analytics. It also includes building a comprehensive approach to citywide Build Capacity for Data-driven Decision Making 3% Enhance Accessibility and Transparency 6% Foster a Vibrant Civic Engagement Culture 6% Promote Security and Sustainability through Connectivity 36% Pursue Communitywide Digital Transformation 49% Estimated Total Projects Costs by Goal FY 2021-22 to FY 2025-26 $26.94 million Dec. 14, 2021 Item #2 Page 23 of 209 13 data management to enable data-rich key performance metrics and effective operation of city departments. A data policy and resources will be created to align departments with standards of data cataloging for compliance ease of data sharing Foster a Vibrant Civic Engagement Culture $1.6 million The city’s civic engagement culture builds upon the first two goals with a human-centered perspective that an engaged city that uses data and technology in a way that respects people and their privacy. Projects in this category will support a vibrant culture where residents, organizations and businesses are invested in their community and its future. Enhance Accessibility and Transparency $1.7 million This goal recognizes that open government and approaching problem-solving from an accessibility perspective leads to better outcomes for all. Projects in this category include Civic Engagement with Open Data, Online Permitting/Electronic Reviews, Records Management System and a Virtual Permitting Counter. Promote Security and Sustainability through Connectivity $9.7 million Projects in this goal include the annual replacement of hardware and technology infrastructure, a Facility Security Master Plan, the replacement of the Police Computer Aided Dispatch System and a Unified Communication System to replace the city’s aging phone system. SDTIP Future Appropriations The City of Carlsbad’s SDTIP for fiscal year 2021-22 to fiscal year 2025-26 outlines 33 projects at an estimated total cost of $26.94 million. Of the $26.94 million, $15.41 million is for new or increased funding for projects over the next five years. The information provided for future years reflects the most comprehensive snapshot of known or anticipated future projects as well as associated estimated costs. Build Capacity for Data- driven Decision Making5% Enhance Accessibility and Transparency7% Foster a Vibrant Civic Engagement Culture 3% Promote Security and Sustainability through Connectivity 47% Pursue Communitywide Digital Transformation 38% Estimated Future Projects Costs by Goal FY 2021-22 to FY 2025-26 $15.41 million Dec. 14, 2021 Item #2 Page 24 of 209 14 Capital Improvement Program The City of Carlsbad Capital Improvement Program, or CIP, reflects the city’s ongoing commitment to maintaining the highest standards of quality facilities for the community today and in the future. It is a planning document, not a commitment for spending. The 15-year program outlines the expenditure plan for future capital projects and the corresponding revenues to pay for those expenditures. Projects that are shown in the CIP are generally defined as any construction, rehabilitation or replacement of major infrastructure such as streets, libraries, parks, fire stations and administrative facilities, water, sewer and drainage facilities, and other facilities that are located on or in the ground. In most cases, the total construction cost of each of these assets is recorded and tracked as part of the city’s inventory of capital infrastructure assets and other city-owned property. Once the City Council adopts the proposed annual CIP budget, projects receive an appropriation that authorizes spending in the amount specified for the adopted fiscal year only. Estimated budget information is shown for a 15-year period to provide the most comprehensive information about known future projects. Spending authority in future years is not granted until adoption of the annual proposed CIP budget associated with each year. Carlsbad’s philosophy is to take a proactive, long-range planning approach to building high quality facilities and infrastructure that support the needs and priorities of the community. The CIP is organized by the following project classifications: I nvesting in Quality of Life As the city continues to grow and develop, there is a corresponding increase in the demand for development-related services and new facilities. To ensure that the necessary infrastructure and facilities are built on a schedule that meets or exceeds this demand, the citizens of Carlsbad adopted a Growth Management Plan in 1986. The plan was established to manage development within the city by linking residential, commercial, and industrial development directly to standards for availability of public services and facilities. Planning Study Plan Assessment Maintenance & Operations Technical master plans Repair Refurbishment/ Rehabilitation Modifications Improvements Maintenance Program Monitoring Replacement Upgrade Capital Projects Regulatory & Policy- Driven: Legal requirements, compliance with Growth Management Plan, Climate Action Plan, defined projects to implement policies, plans and goals adopted by City Council Community Enhancements: new facilities, expansions, parks & trails, traffic signals, coastal improvements Project Accounting CFD #1 Admin Open Space Acquisition Loans Repayment/Transfer Dec. 14, 2021 Item #2 Page 25 of 209 15 The Growth Management Plan states that unless a standard level of facilities is available to meet new demands resulting from the city’s growth, development cannot proceed. Recently, certain actions, such as imposing a moratorium, have been determined to be impermissible by the California Housing and Community Development Department, per Senate Bill 330, Housing Crisis Act of 2019, which became effective on Jan. 1, 2020. The detailed level of planning required by Growth Management has allowed the city’s CIP to anticipate the funding needed for capital improvements in the next 15 years. Facilities such as community centers, parks and fire stations have been constructed and opened to the public under this program. The CIP has been designed to specifically address areas where new or expanded facilities will be needed to maintain compliance with the adopted performance standards. With the adoption of the fiscal year 2021- 22 CIP, compliance with the Growth Management Plan is continued. Prudent financial planning has ensured ongoing funding to modernize, repair, and replace existing infrastructure projects through numerous asset management programs, which ensure adequate inspection, maintenance, and replacement of buildings and parks, water, sewer and drainage systems, bridges, and roadways systems. CIP Project Evaluation Development of the CIP is a team effort involving all operational departments, the City Manager’s Office, the City Council, and the community. Community feedback on infrastructure needs is considered and incorporated as appropriate. The CIP is fully vetted at multiple levels of the city organization by appropriate staff using an inclusive and transparent process, and reviewed on a quarterly basis. As the CIP is implemented throughout the year, staff continually re-evaluate projects’ scopes, costs and schedules to responsibly and cost-effectively manage infrastructure assets at the required levels of service throughout their lifecycle. Recommendations for project funding consider current project status, project scheduling and sequencing requirements, project constraints, and current staff capacity. Project charters are updated to include project description, location, summary of need, justification including any legislative or policy citations, cost estimates, and project scores. In anticipation of revenue decreases in some capital funding sources, staff recommended funding adjustments in fiscal year 2021-22 that focused on matching existing resources with realistic and achievable project schedules. New project requests were minimized and the city remains committed to continue work on projects that are already underway. Capital Improvement Program Public health and safety City mission, vision and organizational values Community values Environmental review Governing and policy documents Funding availability City Council goals Dec. 14, 2021 Item #2 Page 26 of 209 16 CIP F iscal Year 20 2 1 -2 2 A ppropriations In the fiscal year 2021-22 CIP, there are approximately 254 continuing and new projects planned over the next 15 years. The fiscal year 2021-22 CIP outlines $56.2 million in new appropriations to provide additional funding for the continuation of existing projects as well as funding for 21 new projects. Projected revenues during the same fiscal year are estimated at $65.8 million. Civic Buildings and Facility Maintenance $8.2 million This category includes a variety of facilities such as fire stations, libraries and the new City Hall. Costs include repair, maintenance and replacement of civic buildings. Parks $2.6 million Projects include improvements and enhancements to existing parks, such as playground resurfacing, picnic areas and other needs identified by the community and in recently updated parks master plans. Drainage $7.2 million The city’s drainage infrastructure plays an important role in handling storm water runoff flows, as well as maintaining the water quality of the city’s creeks, lagoons and ocean. As the city continues to age, it is increasingly necessary to balance repairing and replacing the existing lines with enhancing the current infrastructure to accommodate future needs. Dec. 14, 2021 Item #2 Page 27 of 209 17 Wastewater $11.5 million The city’s sewer, or wastewater, projects include numerous pipeline construction and rehabilitation projects, as well as improvements to the Encina Wastewater Treatment facility. Most new lines are built and paid for with impact fees collected with new development. Water and Recycled Water $3.1 million Future water and recycled water projects include construction of new pipe lines, replacement of existing waterlines and reservoir improvements. The Carlsbad Municipal Water District has been producing and delivering recycled water for over 30 years. Transportation $23.6 million People of all ages and abilities want to go places safely and conveniently in Carlsbad, whether they drive, walk, bike, or ride a bus or train. Carlsbad continues to invest in modernizing roads, leveraging technology to improve traffic systems, and making timely repairs and rehabilitation of the roadways, bridges, sidewalks and other assets in public rights-of-way throughout the city. CIP F uture Projects The CIP for fiscal year 2021-22 to fiscal year 2035-36 outlines approximately 254 projects at a cost of $669 million in new or additional funding. Long-range planning and responsible asset management play key roles in the development of future capital projects. Using data from various infrastructure master plans, ongoing asset condition assessments, technical modelling, field inspections as well as community feedback, the information provided for future years reflects the most comprehensive snapshot of known or anticipated future projects as well as associated estimated costs. Dec. 14, 2021 Item #2 Page 28 of 209 18 Unfunded Projects There are six projects identified in the Capital Improvement Program for which there is no identifiable funding source and, in some cases, where only partial funding has been identified. The city will investigate obtaining possible external funding, such as federal and state grants, loans, or other financing sources. Once funding is identified for these projects, the project costs will have to be reviewed and updated to reflect actual cost estimates. The unfunded projects do not receive annual inflationary increases. Two projects are partially funded by the Traffic Impact Fee Program. The program was planned to generate enough revenue to pay for 20% of the total costs of these projects, leaving the remaining 80% unfunded. A wards and Acknowledg ements The Government Finance Officers Association (GFOA) of the United States and Canada awarded a Certificate of Achievement for Excellence in Financial Reporting to the city for its Annual Comprehensive Financial Report for the fiscal year ended June 30, 2020. This was the 23rd consecutive year that the city has achieved this prestigious award. To be awarded a Certificate of Achievement, a government unit must publish an easily readable and efficiently organized Annual Comprehensive Financial Report. This report must satisfy both GAAP and applicable legal requirements. A Certificate of Achievement is valid for a period of one year only. The city strives to annually produce an Annual Comprehensive Financial Report which will continue to meet the Certificate of Achievement Program’s requirements. This report will be also submitted to GFOA to determine eligibility for another certificate. This report has been a comprehensive effort by many people from many different areas of responsibility. It could not have been accomplished without their help and the dedicated efforts of all of the finance staff, especially Roxanne Muhlmeister, Assistant Finance Director and Kim Riboni, Senior Accountant. I also appreciate the staff of Davis Farr LLP for the professional way in which the audit of this financial report was conducted. It has been a pleasure to work with them. Additionally, I would like to thank the City Council, the City Manager and the city’s Executive Management Team for their leadership and unfailing support in maintaining the highest standards of professionalism in the management of the city’s finances. Respectfully submitted, Ryan Green Finance Director Business Park Recreational Facility (partial funded)6,600,000$ Cannon Lake Park (6.7 acres)2,243,000 Carlsbad Blvd. Mountain View to Northerly City Limits (partially funded) 6,905,600 Carlsbad Blvd. and Palomar Airport Road (partially funded)14,109,600 Carlsbad Blvd. Realignment (segments 3-5)26,100,000 College Boulevard Extension 30,000,000 Total Unfunded Projects 85,958,200$ Dec. 14, 2021 Item #2 Page 29 of 209 Government Finance Officers Association Certificate of Achievement for Excellence in Financial Reporting Presented to City of Carlsbad California For its Comprehensive Annual Financial Report For the Fiscal Year Ended June 30, 2020 Executive Director/CEO 19Dec. 14, 2021 Item #2 Page 30 of 209 20 Dec. 14, 2021 Item #2 Page 31 of 209 21 As of 6/30/2021 Elected Officials Matt Hall, Mayor Keith Blackburn, Mayor Pro Tem – District 2 Vacant, Council Member – District 1 Priya Bhat-Patel, Council Member – District 3 Teresa Acosta, Council Member – District 4 Barbara Engleson, City Clerk Craig Lindholm, City Treasurer Leadership Team Scott Chadwick, City Manager Celia Brewer, City Attorney Geoff Patnoe, Assistant City Manager Gary Barberio, Deputy City Manager, Community Services Laura Rocha, Deputy City Manager, Administrative Services Paz Gomez, Deputy City Manager, Public Works Michael Calderwood, Fire Chief Mickey Williams, Police Chief Babaq Taj, Engineering Manager David Graham, Chief Innovation Officer Faviola Medina, City Clerk Services Manager James Wood, Environmental Management Director Jason Haber, Intergovernmental Affairs Director Jeff Murphy, Community Development Director John Maashoff, Public Works Manager Judy von Kalinowski, Human Resources Director Kristina Ray, Communication & Engagement Director Kyle Lancaster, Parks & Recreation Director Mandy Mills, Housing & Homeless Services Director Maria Callander, Information Technology Director Morgen Fry, Executive Assistant to the City Manager Ryan Green, Finance Director Sheila Cobian, Director of Legislative and Constituent Services Suzanne Smithson, Library & Cultural Arts Director Tom Frank, Transportation Director Vicki Quiram, Utilities Director Boards and Commissions Chairs Eric Larson, Agricultural Conversion Mitigation Fee Ad Hoc Citizens’ Advisory Committee Emma Jadhav, Arts Commission Fred Briggs, Beach Preservation Commission Timothy Stripe, Carlsbad Golf Lodging Business Improvement District Timothy Stripe, Carlsbad Tourism Business Improvement District Board Rebecca Tam, Community Development Block Grant Citizen Advisory Committee Chad Majer, Historic Preservation Commission John Nguyen-Cleary, Housing Commission Michael Fabiano, Independent Redistricting Commission Gina Payne McBride, Library Board of Trustees Michael Luna, Parks & Recreation Commission Roy Meenes, Planning Commission John Rodenhausen, Senior Commission Monica Gocan, Traffic & Mobility Commission Dec. 14, 2021 Item #2 Page 32 of 209 22 Dec. 14, 2021 Item #2 Page 33 of 209 Financial Section Financial SectionDec. 14, 2021 Item #2 Page 34 of 209 Financial SectionFinancial SectionDec. 14, 2021 Item #2 Page 35 of 209 Independent Auditor’s Report City Council City of Carlsbad Carlsbad, California Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Carlsbad, California, as of and for the year ended June 30, 2021, and the related notes to the financial statements, which collectively comprise the City’s basic financial statements as listed in the table of contents. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards,issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion.An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. 23 Dec. 14, 2021 Item #2 Page 36 of 209 City Council City of Carlsbad, California Page Two Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Carlsbad, California, as of June 30, 2021, and the respective changes in financial position and, where applicable, cash flows thereof and the statement of revenues, expenditures and changes in fund balance –budget and actual of the general fund for the year then ended in accordance with accounting principles generally accepted in the United States of America. Emphasis of Matter As described further in note 21 to the financial statements, during the year ended June 30, 2021, the City implemented Governmental Accounting Standards Board (GASB) Statement No.84. Our opinion is not modified with respect to this matter. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the Management’s Discussion and Analysis, the Schedule of Changes in Net Pension Liability and Related Ratios During Measurement Period, Schedule of Pension Plan Contributions, Schedule of Changes in Net OPEB Liability and Related Ratios During Measurement Period and Schedule of OPEB Plan Contributions be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City of Carlsbad’s basic financial statements. The combining and individual nonmajor fund financial statements, the introductory section and the statistical section are presented for purposes of additional analysis and are not a required part of the basic financial statements. The combining and individual nonmajor fund financial statements and the budget to actual schedules are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the 24 Dec. 14, 2021 Item #2 Page 37 of 209 City Council City of Carlsbad, California Page Three United States of America. In our opinion, the combining and individual nonmajor fund financial statements and budget to actual schedules are fairly stated, in all material respects, in relation to the basic financial statements as a whole. The introductory section and the statistical section have not been subjected to the auditing procedures applied in the audit of the basic financial statements, and accordingly, we do not express an opinion or provide any assurance on them. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated November 30, 2021 on our consideration of the City of Carlsbad's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is solely to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering City of Carlsbad’s internal control over financial reporting and compliance. Irvine, California November 30, 2021 25Dec. 14, 2021 Item #2 Page 38 of 209 26 Management’s Discussion and Analysis Management of the City of Carlsbad (“city”) provides readers this overview and analysis of the financial activities of the city for the fiscal year ended June 30, 2021. The intent is to assist the reader of these financial statements in better understanding the impact of financial decisions made by the city. This analysis will focus on the significant changes to explain the city’s overall financial condition. The information presented here should be considered in conjunction with the additional information furnished in the letter of transmittal. Overview of the Financial Statements The financial statements section of the annual report consists of four parts – management’s discussion and analysis (this section), the basic financial statements, required supplementary information, and an optional section that presents combining statements for nonmajor governmental funds and internal service funds. The basic financial statements include two kinds of statements that present different views of the city. •The first two statements are Government-wide Financial Statements that provide both long-term and short-term information about the city’s overall financial status. •The remaining statements are Fund Financial Statements that focus on individual parts of the city government, reporting the city’s operations in more detail than the Government-wide Statements. o The Governmental Funds Financial Statements detail how general government services, such as public safety, were financed in the short-term, as well as what remains for future spending. o Proprietary Funds Statements offer short- and long-term financial information about the activities the city operates like businesses, such as providing water and wastewater services. o Fiduciary Funds Statements provide information about the financial relationships – such as assessment and business improvement districts – in which the city acts solely as a trustee or agent for the benefit of others to whom the resources belong. The financial statements also include notes that explain some of the information in the financial statements and provide greater detail. The statements are accompanied by required supplementary information that further explain and support the information in the financial statements. In addition to these required elements is the combining fund statements section that provides financial information about the nonmajor governmental funds, internal service funds, and fiduciary funds, which are added together and presented in single columns in the basic financial statements. The remainder of this overview section of management’s discussion and analysis (MD&A) explains the structure and content of each of the statements. Government-wide Financial Statements The Government-wide Financial Statements report information about the city as a whole, using accounting methods similar to those used by private-sector companies. The Statement of Net Position includes all of the city’s assets and liabilities. All of the current year’s revenues and expenses are accounted for in the Statement of Activities, regardless of when cash is received or paid. The two Government-wide Financial Statements report the city’s net position and how it has changed. Net position – the difference between the city’s assets and liabilities – is one way to measure the city’s financial health, or position. Over time, increases or decreases in the city’s net position are an indicator of whether the city’s financial health is improving or deteriorating, respectively. Additional non-financial factors should be considered, such as changes in the city’s property tax base and the condition of the city’s infrastructure, to assess the overall health of the city. Dec. 14, 2021 Item #2 Page 39 of 209 27 The Government-wide Financial Statements of the city are divided into two categories: • Governmental activities – Most of the city’s basic services, such as police, fire, public works, community services, and internal services are included here. Taxes, revenues from other governments and agencies, income from property and investments, grants and contributions, and charges for services finance most of these activities. • Business-type activities – The city charges fees to customers to cover the cost of certain services it provides. The city’s water, wastewater, solid waste and municipal golf course operations are the primary business-type activities. Fund Financial Statements The Fund Financial Statements provide more detailed information about the city’s most significant funds – not the city as a whole. Funds are accounting devices used by the city to keep track of specific sources of funding and spending for particular purposes. Some funds are required by state law and bond covenants, while the city establishes other funds to control and manage money for particular purposes (such as the developer impact fee funds) or to show that it is properly using certain taxes and grants (such as the Section 8 Rental Assistance Fund). The city has three kinds of funds: • Governmental funds – Most of the city’s basic services are included in governmental funds. These funds are used to account for (1) cash and other financial assets that can readily be converted to cash flow in and out, and (2) balances left at year-end that are available for future spending. Consequently, the Governmental Funds Statement provides a detailed short-term view that helps the reader determine the amount of financial resources that can be spent in the near future to finance the city’s programs. The statements are presented on a modified accrual basis of accounting. A reconciliation between the long-term and short-term focus of the Government-wide Financial Statements is provided immediately following each statement. There are currently three governmental fund types being used by the city: the General Fund, special revenue funds, and capital project funds. • Proprietary funds – Services for which the city charges customers a fee are generally reported in proprietary funds. Proprietary funds, like Government-wide Financial Statements, provide both long- and short-term financial information, and are presented on an accrual basis of accounting. There are two types of propriety funds, enterprise funds and internal service funds: o Enterprise funds are used to report activities that provide business-type services, generally to external customers – such as water, wastewater, solid waste, and golf services. In both the Government-wide Financial Statements and the Fund Financial Statements, these funds are shown under business-type activities. o Internal service funds are used to report activities that provide services and supplies for the city’s other programs and activities – such as fleet, workers’ compensation, risk/liability, and information technology. • Fiduciary funds – These funds are used to account for situations where the city’s role is purely custodial, such as the receipt, temporary investment, and remittance of fiduciary resources to individuals, private organizations, or other governments. All of the city’s fiduciary activities are reported in a separate Statement of Fiduciary Net Position. These activities are excluded from the city’s Government-wide Financial Statements because the city cannot use these assets to finance its operations. Dec. 14, 2021 Item #2 Page 40 of 209 28 Financial Analysis of the City as a Whole Net Position The city’s combined net position as of June 30, 2021, as shown below, was $1.86 billion. The city’s net position increased by $28.5 million as compared to the prior fiscal year. This increase was heavily impacted by revenues exceeding expenses for the year which resulted in a $14.7 million increase in citywide cash balances. Other factors leading to the higher net position included an increase in receivable balances, capital assets, a reduction in outstanding debt, the impacts of the city recording the annual pension activities (an increase in deferred outflows and smaller increases in the net pension liability and deferred inflows), and decreases in other liabilities (lower accrued liabilities and estimated claims payable). These increases were partially offset by an increase in deposits payable and various other minor changes. The increase in capital assets is discussed in more detail in the capital asset section of this MD&A. As noted earlier, over time, net position may serve as a useful indicator of the city’s financial position. For the city, assets currently exceed liabilities by $1.86 billion at the close of the fiscal year. A large portion of the city’s net position, 62%, reflects its net investment in capital assets (i.e. land, buildings, machinery, equipment, and infrastructure), less any related debt used to acquire those assets that is still outstanding. The city uses these capital assets to provide services to residents; consequently, these assets are not available for future spending. Although the city’s investment in its capital assets is reported net of related debt, the resources needed to repay this debt must be provided from other sources since the capital assets themselves would not be used to pay for these liabilities. The net investment in capital assets for the city increased slightly during fiscal year 2020-21 due primarily to additional developer donated assets (streets, sidewalks, streetlights, water and wastewater lines) netted with a decrease in outstanding debt (primarily Recycled Water). Of the city’s total net position, 17% represents resources that are subject to external restrictions on usage. The remaining balance of unrestricted net position ($399.6 million) may be used to meet the city’s ongoing obligations to residents and creditors. Total Percentage Change 2020 2021 2020 2021 2020 2021 2020-21 Current and other assets $702.3 $675.5 $167.5 $218.5 $869.8 $894.0 2.8% Net OPEB asset 0.0 0.0 0.8 0.0 0.8 0.0 -100.0% Capital assets 791.3 789.3 366.5 375.2 1,157.8 1,164.5 0.6% Total assets 1,493.6 1,464.8 534.8 593.7 2,028.4 2,058.5 1.5% Deferred outflows 33.5 46.1 2.2 3.5 35.7 49.6 38.9% Other liabilities 33.8 44.6 25.3 18.1 59.1 62.7 6.1% Net OPEB liability 3.7 2.8 0.2 0.4 3.9 3.2 -17.9% Net pension liability 139.2 154.4 11.0 12.0 150.2 166.4 10.8% Long-term debt outstanding 0.0 0.0 13.6 13.7 13.6 13.7 0.7% Total liabilities 176.7 201.8 50.1 44.2 226.8 246.0 8.5% Deferred inflows 4.4 1.0 0.4 0.1 4.8 1.1 -77.1% Net position Net investment in capital assets 791.1 789.3 351.2 361.5 1,142.3 1,150.8 0.7% Restricted 268.5 269.1 41.2 41.5 309.7 310.6 0.3% Unrestricted 286.4 249.7 94.1 149.9 380.5 399.6 5.0% Total net position, as restated $1,346.0 $1,308.1 $486.5 $552.9 $1,832.5 $1,861.0 1.6% Total CITY OF CARLSBAD'S NET POSITION (in millions of dollars) Governmental Activities Business-Type Activities Dec. 14, 2021 Item #2 Page 41 of 209 29 The remaining net position is unrestricted, meaning it can be used for future spending and largely coincided with the increase in city cash. Notably, the unrestricted net position of governmental activities decreased and the business-type activities balance increased from the previous fiscal year. This was largely due to a $47 million transfer from the General Fund to the Golf Course Fund. The General Fund had previously advanced funds to the Golf Course Fund for the construction of the course and partially subsidized the operations of the course in prior fiscal years. However, it was determined that repayment of the advance balance is not projected in the near or foreseeable future. Changes in Net Position The condensed summary of activities below shows that net position increased by $28.5 million during the year. This increase occurs when revenues earned and special items are greater than expenses incurred. Percentage Change 2020 2021 2020 2021 2020 2021 2020-21 Revenues Program revenues Charges for services $19.2 $20.0 $70.4 $75.2 $89.6 $95.2 6.2% Operating grants and contributions 18.5 26.5 0.4 3.5 18.9 30.0 58.7% Capital grants and contributions 16.8 9.6 6.3 7.6 23.1 17.2 -25.5% General revenues Property taxes 73.9 78.2 4.2 4.5 78.1 82.7 5.9% Sales and use taxes 36.5 42.6 - - 36.5 42.6 16.7% Other taxes 31.4 28.8 - - 31.4 28.8 -8.3% Income from property and investments 20.2 5.1 5.0 0.6 25.2 5.7 -77.4% Other 0.6 0.5 - - 0.6 0.5 -16.7% Total revenues 217.1 211.3 86.3 91.4 303.4 302.7 -0.2% Expenses General government 24.3 20.0 - - 24.3 20.0 -17.7% Public safety 75.2 80.3 - - 75.2 80.3 6.8% Community services 60.8 57.7 - - 60.8 57.7 -5.1% Public works 41.4 35.5 - - 41.4 35.5 -14.3% Carlsbad Municipal Water District - - 51.2 56.3 51.2 56.3 10.0% Golf course - - 10.3 10.3 10.3 10.3 0.0% Wastewater - - 16.9 9.0 16.9 9.0 -46.7% Solid waste - - 4.4 5.1 4.4 5.1 15.9% Total expenses 201.7 193.5 82.8 80.7 284.5 274.2 -3.6% Excess (deficiency) before transfers 15.4 17.8 3.5 10.7 18.9 28.5 50.8% Special items - Golf Course debt - (8.4) - 8.4 - - 0.0% Transfers (0.3) (47.3) 0.3 47.3 - - 0.0% Increase (decrease) in net position 15.1 (37.9) 3.8 66.4 18.9 28.5 50.8% Beginning position, as restated 1,330.9 1,346.0 482.7 486.5 1,813.6 1,832.5 1.0% Ending net position $1,346.0 $1,308.1 $486.5 $552.9 $1,832.5 $1,861.0 1.6% Activities Activities Total Governmental Business-Type Dec. 14, 2021 Item #2 Page 42 of 209 30 There were several reasons for the increase in net position: • Intergovernmental revenues received from COVID-19 related programs such as the CARES Act, American Rescue Plan Act, and Operation Collaboration • Fiscal discipline implemented by the city due to the budget uncertainty resulting from COVID-19 restrictions • “Savings” in the General Fund totaling $17.9 million is being carried forward into fiscal year 2021-22 by various major service areas within the city to enhance and provide for future services and programs (indicating that spending levels in fiscal year 2020-21 were less than budgeted expenditures) • Revenues and transfers received in the city’s capital project funds for future projects • Donations of infrastructure assets from developers Approximately 71% of the revenues of the city’s governmental funds are generated through taxes collected (i.e. property tax, sales tax, transient occupancy tax, etc.), and approximately 82% of the city’s business-type revenue is generated through charges for services. The chart below graphically depicts the city’s revenue sources. The city’s revenues, particularly transient occupancy tax, sales tax and recreation related revenues, were projected to be significantly impacted by COVID-19 related restrictions. Most of the city’s hotels, including the larger hotels, were closed for a significant portion of the year, and many parks and recreation programs were cancelled and closed during the majority of the fiscal year due to the COVID-19 emergency. One measure of the magnitude that the pandemic had on the city’s transient occupancy tax revenues is the average occupancy rate. In fiscal year 2020-21, the city’s hotels had an average occupancy rate of 58% compared to 70% in fiscal year 2018-19. As a result, transient occupancy tax revenues finished at levels comparable with fiscal year 2012-13. Similarly, recreation fee revenues were 47% lower than pre-pandemic periods, also in line with fiscal year 2012-13 revenues. Conversely, sales tax revenues were boosted by the federal stimulus packages and increased consumer savings, as well as the expiration of a deferment program that allowed small businesses to delay their sales tax payments. These factors led to the city’s highest sales tax revenues during any fiscal year. The city’s largest revenue source, property taxes, increased due to assessed values increasing by 4.8% in total for all components: residential, commercial and industrial properties. This was the sixth year in a row that the city had growth in all three assessed value components. The city also experienced increases in aircraft taxes due to an increase in the number of aircraft domiciled at Palomar Airport and an increase in payments for previous years’ taxes due to extensions that were allowed during the COVID-19 pandemic that expired in the current year. The city experienced an increase in business license revenue, despite a decrease in the number of businesses licensed in the city at June 30, 2021, due largely to increased economic activity. Development remained relatively strong for the year, although it expectedly slowed when compared to the prior fiscal year. The city saw infill residential development Sources of Revenue for Fiscal Year 2020-21 $302.7 Million Charges for Services Property Tax Sales Tax Federal and State Aid Contributions from Property Owners Transient Occupancy Tax Other Taxes and Revenues 32% 28% 14% 8% 7% 5% 6% Dec. 14, 2021 Item #2 Page 43 of 209 31 (especially in the Village area of the city) as well as some of the last remaining master planned community development. There was very little commercial and industrial development during the year, similar to the prior fiscal year. Income from property and investments were heavily impacted by three factors: unrealized losses created by adjusting the city’s investments to their fair market value at June 30, 2021, a decrease in the average yield on the treasurer’s portfolio for the year (down 72 basis points from last fiscal year to 1.35%), and a 0.8% increase in the average cash balance. These factors combined to create a decrease in income from property and investments when compared to the prior fiscal year. The primary contributors to the city’s charges for services are water and wastewater customers. An increase in total water revenues was driven primarily by higher demand and rate increases implemented in January 2020 and 2021. Wastewater charges increased due to rate increases and development throughout the city. During the COVID-19 shutdown, a decrease in commercial customer water usage partially offset the wastewater revenue increase because commercial and industrial wastewater rates in Carlsbad are based on water usage. Together, these factors led to an increase in charges for services for the year for both water and wastewater. Additionally, the city’s municipal golf course experienced an increase in charges for services due to higher demand for allowable recreation activities during the shutdown. The total cost of all programs and services was $274.2 million in fiscal year 2020-21 which was moderately lower (3.6%) than prior fiscal year costs of $284.5 million. The majority of the decrease in program costs came from salary and benefit cost savings related to facility closures during the pandemic, and the city’s efforts to defer costs while city revenues were largely uncertain. Departments were asked to eliminate travel, postpone trainings, delay new programs, defer the hiring of new staff members, and to be additionally prudent in their spending of city funds. Increases were seen in public safety as the city focused efforts on emergency related projects such as Operation Collaboration, a north county collaboration to vaccinate residents. The city’s water district also saw increases as the cost of water and amount of water purchased increased. • General Government (7%) This segment of the city is divided into three major groups: Policy & Leadership, Administrative Services and non- departmental charges. The Policy and Leadership group encompasses all elected officials, the City Manager and City Attorney offices, the Communications & Engagement team, and the Legislative & Constituent Services team. The Administrative Services group includes Finance, Human Resources (including Workers’ Compensation and Risk Management), Information Technology, and Innovation & Economic Development. Non-departmental also includes any special projects directed by the City Council. Functional Expenses for Fiscal Year 2020-21 $274.2 Million General Government Public Safety Community Services Public Works Water Golf Course Wastewater Solid Waste 7% 29% 21% 13% 21% 4% 3% 2% Dec. 14, 2021 Item #2 Page 44 of 209 32 • Public Safety (29%) Public Safety remains a top City Council priority. This major service area includes the Police Department, whose mission is to protect and serve the community with integrity, professionalism and valor. The Fire Department is the other component of this major service area with a mission to enhance the quality of life by delivering exceptional services in safeguarding lives, property, and the environment. • Community Services (21%) Community Services consists of Library & Cultural Arts, Parks & Recreation, Community Development and Housing & Homeless Services. These city service areas ensure the city’s planning and building policies are carried out, foster lifelong learning, support strong neighborhoods, administer affordable housing and homeless response programs, attend to the community’s health and wellness and promote transparency in government. Library & Cultural Arts provides educational, informational and cultural arts services for all community residents, which contribute to quality of life by supporting lifelong learning, the pursuit of knowledge, and creating the availability of community gathering places. Parks & Recreation offers comprehensive opportunities for meeting the recreational and social needs and interests of the community by providing programs for all segments of the population. Community Development’s primary roles include the day-to-day administration of the local, state, and federal land use regulations, promoting economic and business development, protecting life and property, enhancing public health, and preserving the environment. Community Development encompasses Land Use Planning, Building, Code Enforcement, and Land Development Engineering. • Public Works (13%) Public Works is responsible for building and maintaining all city infrastructure assets. This service area includes Public Works Administration, Facilities & Fleet, Environmental Management, Transportation, Construction Management & Inspection and Utilities. Construction Management & Inspection manages construction of major projects, inspection and oversight of private development grading, stormwater and improvements inspection and oversight of all activity in the public right-of-way. Environmental Management oversees the climate action plan program, the habitat management plan program, the sustainable materials management program, solid waste, and provides coordination of the municipal component of the National Pollutant Discharge Elimination System Municipal Storm Water Permit. Fleet & Facilities supports the maintenance of city vehicles and facilities. The Transportation Department cares for road infrastructure and projects, keeps people and traffic moving, maintains streets and storm drains, maintains street lighting, and provides incident response for city and private property. • Water (21%) The Carlsbad Municipal Water District (CMWD), a subsidiary of the city, provides potable and recycled water service to approximately 28,900 customers within a 32.3 square mile service area. CMWD purchases 100% of its potable water, which includes a local supply of desalinated seawater, as treated water from the Metropolitan Water District and the San Diego County Water Authority. CMWD also provides recycled water for irrigation purposes which is produced at the Carlsbad Water Recycling Facility, as well as purchased from the Vallecitos Water District. Dec. 14, 2021 Item #2 Page 45 of 209 33 • Golf Course (4%) The city opened a municipal golf course in the summer of 2007, further enhancing the tourist attractions the city offers. The municipal golf course, The Crossings at Carlsbad, is an 18-hole golf course set in the rolling hills and canyons of Carlsbad. With ocean views, a high-quality golf experience, a first-class restaurant and clubhouse, and connections to hiking trails, The Crossings at Carlsbad is a destination for golfers and non-golfers alike. • Wastewater (3%) The city operates and maintains a sanitary wastewater collection system that provides wastewater services to approximately two thirds of the city’s population, covering approximately 74% of the geographic area of the city. Wastewater is treated by the Encina Wastewater Treatment Plant, a facility jointly owned by the cities of Carlsbad, Vista and Encinitas; the Leucadia Wastewater District; the Vallecitos Water District; and the Buena Sanitation District. • Solid Waste (2%) The Solid Waste Division administers and monitors the solid waste contract and the Palomar Transfer Station agreement and is responsible for ensuring the waste reduction and recycling components of the Source Reduction and Recycling Element and Household Hazardous Waste Element comply with state mandated diversion and disposal requirements. Also included in this section is the Storm Water Protection Program, whose goal is to provide leadership and stewardship of the city’s resources protecting the city’s beaches, creeks and lagoons. The following sections provide information about the operations of the governmental and business-type activities. Governmental Activities The decrease in net position for governmental activities was $36.7 million. This decrease was primarily driven by the $47 million transfer from the governmental activities to the business-type activities. The transfer was required a result of the collectability of the General Fund’s prior advances to the Golf Course Fund. Total revenues from governmental activities of $211.3 million ($56.1 million in program revenues and $155.2 million in general revenues) offset by $193.5 million in total costs of governmental activities partially offset the decrease resulting from the transfers. The following table presents the total cost of each of the city’s major programs, as well as each program’s revenue (fees generated by the activities, contributions, and intergovernmental funding). The net cost (the difference between adjoining bars in the graph) shows the financial burden that was placed on the city’s taxpayers by each of these programs (costs covered by general revenues). Dec. 14, 2021 Item #2 Page 46 of 209 34 Revenues are generated through several sources to cover the cost of the city’s programs. Total revenues of $211.3 million include fees and charges paid by those who directly benefit from the programs ($20.0 million), grants and contributions from other governments and organizations which subsidize certain programs ($36.1 million), and taxes and other revenues (such as income from property and investments) received by the city to pay for the “public benefit” portion. Community Services revenues are derived from development activities throughout the city, housing assistance programs, parks and recreation fees, and library fees. A large portion of Community Services revenues are comprised of housing assistance programs (Section 8 Rental Assistance, affordable housing loan repayments, and developers paying into the Affordable Housing Trust Fund) as well as charges for development related services. As expected, development activity reflected a moderate decrease from the prior fiscal year, offsetting only a portion of the program expenses. The majority of Public Works revenues are used to acquire and build capital assets (versus covering operating expenses). In addition, the donation of capital assets from developers is reflected in the program revenues for Public Works. Capital assets are generally constructed or purchased once sufficient funds have accumulated to pay for the entire asset cost. Several years ago, the city entered a new stage of its lifecycle, from a developing or growing stage, to a mature and maintenance focused stage. As the city continues to mature and approach buildout, there will be fewer master planned projects. In past years, these projects constructed new facilities, roads, parks, and other city-owned infrastructure. The city is shifting its focus towards maintenance of existing facilities and will use funding sources such as the Infrastructure Replacement Fund to maintain and replace these assets. There are still some master planned communities that were recently completed or are near completion, such as Poinsettia 61. The developers of these communities have dedicated or will dedicate infrastructure to the city, a requirement for development. $9.4 $7.7 $20.4 $18.7 $20.0 $80.3 $57.7 $35.5 $0 $10 $20 $30 $40 $50 $60 $70 $80 $90 General Government Public Safety Community Services Public Works Program Revenues $56.2 Program Expenses $193.5 Governmental Activities Program Revenues and Expenses Fiscal Year 2020-21(in millions) Dec. 14, 2021 Item #2 Page 47 of 209 35 Business-type Activities Program revenues for the city’s business-type activities totaled $86.3 million for the year, while program expenses equaled $80.7 million. Water program revenues are generated primarily from the sale of water, but also from developer donated assets and grants. Program expenses were slightly higher than revenues; however, the water program also collected $4.5 million in general revenues to end the fiscal year with a positive change in net position. The revenues were impacted by an increase in water demand and rates (1% beginning in January 2020 and 2021) offset by a decrease in capital grants. Water program expenses were higher than the prior year due to increased water purchase cost and more water purchases needed to meet the demand. Wastewater program revenues finished significantly higher at $20.7 million than program expenses of $9.0 million due to the recognition of $4.8 million in capital restricted fees, $1.2 million in large developer donated assets of sewer lines at El Camino Real and Telaga Road, and operating revenues exceeding operating expenses. The city’s golf course enterprise was in its 14th full year of operation and finished the fiscal year with a net loss of $2.2 million. The demand for golf, an outdoor activity largely excluded from COVID-19 related restrictions, experienced historical highs across the nation, in the region and at the city’s municipal course. The course witnessed over 82,000 rounds played which more than offset lost revenues from food & beverage sales. Golf course revenues were sufficient to fund normal golf course operating expenses (i.e. excluding depreciation expense). Solid waste revenues are primarily generated from fees charged to waste removal services customers to support the city’s integrated waste management plan which include recycling efforts and proper waste disposal programs. Expenses were planned to surpass revenues as many waste management programs have increased in level of effort and cost, such as solid waste, recycling, and organics management services, household hazardous waste collection and disposal, and environmental outreach and education. Despite the current year loss, the fund has sufficient reserves. $53.6 $20.7 $8.1 $3.9 $56.3 $9.0 $10.3 $5.1 $0 $10 $20 $30 $40 $50 $60 Water Wastewater Golf Course Solid Waste Program Revenues $86.3 Program Expenses $80.7 Business-Type Activities Program Revenues and Expenses Fiscal Year 2020-21(in millions) Dec. 14, 2021 Item #2 Page 48 of 209 36 Capital construction expenses are spread over the life of an asset as annual depreciation charges (program expenses) and are not reflected as an expense in the year acquired. A more detailed discussion of each of the enterprises can be found in the Proprietary Funds Section. Financial Analysis of the City’s Funds As noted earlier, the city uses fund accounting to ensure compliance with finance related legal requirements. In the current Annual Comprehensive Financial Report, the city implemented GASB Statement No. 84, Fiduciary Activities, and GASB Statement No. 98, The Annual Comprehensive Financial Report. Governmental Funds The focus of the city’s governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. This information is useful in assessing the city’s financing requirements. In particular, unassigned fund balances may serve as a useful measure of a government’s net resources available for spending at the end of the fiscal year. There are five fund balance classifications: nonspendable, restricted, committed, assigned, and unassigned. These fund balance classifications comprise a hierarchy based primarily on the extent to which a government is bound to observe constraints imposed upon the use of the resources reported in governmental funds. Detail of the fund balances by classification is shown in Note 10 of the financial statements. At the end of the current fiscal year, the city’s governmental funds reported combined ending fund balances of $594.9 million, down $26.4 million from the year before. Approximately 1% ($3.4 million) constitutes nonspendable fund balances, mostly comprised of advances and loans to other funds. Restricted fund balances can only be spent for a specific purpose stipulated by law and make up about 45% ($269.1 million). Assigned fund balances are intended to be used by the city for specific purposes, but do not meet the criteria to be classified as restricted or committed. These make up over 37% ($222.3 million) of the city’s fund balance. Almost 17% ($99.0 million) of the fund balance is unassigned, which is available for spending at the City Council’s discretion. Of the unassigned fund balance, the City Council has $9.6 million set aside for economic uncertainty purposes. However, accounting standards require that the $9.6 million set aside be shown as part of the city’s unassigned fund balance. Governmental Fund Balances for Fiscal Year 2020-21 $594.9 Million Nonspendable Restricted Purposes Committed Assigned Unassigned 0.6% 45.2% 0.2% 37.4% 16.6% Dec. 14, 2021 Item #2 Page 49 of 209 37 The General Fund is the main operating fund of the city, and at the end of the fiscal year had a total fund balance of $159.8 million, a decrease of $31.1 million. As previously mentioned, the City Council authorized the transfer of $47.0 million in nonspendable fund balance to the golf course fund which is the primary cause of the decrease. The unassigned fund balance portion of the General Fund was $99.3 million, a decrease of $10.7 million from last fiscal year. During the fiscal year the city used a portion of the General Fund’s unassigned balance: $1.5 million of the economic set aside was used to cover COVID-19 related costs; $10 million of the unassigned balance was used to paydown the city’s unfunded pension liability; $3.5 million of the unassigned balance was transferred to the city’s long-term capital project funds for future projects; and $4.2 million of the unassigned balance was used to fund the one-time costs associated with the City Council’s goals. Partially offsetting these decreases includes revenues that exceeded total expenditures, and changes in open purchase orders at fiscal year end, among other factors. The city’s General Fund Reserve Policy, outlined in City Council Policy No. 74, commits the city to maintaining General Fund reserves at a target of 40% of General Fund annual operating expenditures. The total reserve level is to be calculated using the prior fiscal year’s adopted General Fund budgeted expenditures and is outlined below: GENERAL FUND RESERVE BALANCE (in millions of dollars) Actual Target Unassigned General Fund balance $ 99.3 $ 65.4 Economic uncertainty set aside (9.6) - Unassigned fund balance, excluding economic uncertainty 89.7 65.4 Fiscal year 2020-21 adopted General Fund budgeted expenditures $ 163.6 $ 163.6 General Fund reserve percentage 61% 40% General Fund reserve percentage, excluding economic uncertainty 55% 40% General Fund revenues increased by 4.7% compared to the prior year. The increase was largely driven by increases in all major taxes: property, sales, and transient occupancy. In total, taxes collected were $8.1 million higher, the majority of which was seen in the fourth quarter of the fiscal year. The city also saw a large increase in intergovernmental revenues, a result of $6.3 million received in American Rescue Plan Act funding as well as CARES Act funding from the federal government. The city applied the entire American Rescue Plan Act funding received towards general governmental services as the city’s revenue losses associated with the COVID-19 pandemic exceeded the city’s total allotment. These increases were largely offset by a significant decline in income from property and investments. The city’s investment portfolio saw large decreases as the interest rates in bond markets declined significantly. Due to the uncertainties in revenue the city experienced as a result of the pandemic, costs were closely monitored, and expenditures were deferred throughout much of the fiscal year. The city realized savings in general government and community services as some city facilities were shut down due to COVID-19 restrictions, and innovation projects slowed when compared to the prior year. Public safety expenditure increases were realized in emergency operations, field operations and investigative services. A major factor in the increase was the additional $10 million CalPERS discretionary payment made during the fiscal year, that will have lasting effects and lower the city’s future retirement costs A summary of the General Fund’s revenues, expenditures and changes in fund balance is shown on the following page. Dec. 14, 2021 Item #2 Page 50 of 209 38 The Community Facilities District No. 1 Fund continues to collect assessments for the future construction of city infrastructure and facilities. The General Capital Construction Fund used a portion of its existing fund balance towards improvements at City Hall, Fire Station No. 2, the Calavera Park Gateway, and various other projects. The expenditures were partially offset by a transfer from the General Fund for future projects. The fund balance in the Infrastructure Replacement Fund increased as the city continued the annual transfer of funds from the General Fund for the future replacement of existing infrastructure and facilities. Projects for the year included the Police and Fire Headquarters refurbishment and various other projects. The Park Development Fund continued to collect assessments for the future construction and refurbishment of city facilities. During the year, the city continued to set aside money for the construction of various projects within these and other governmental funds. Historically, the city has not issued debt to fund the construction of capital projects and sets aside funds on an annual basis until sufficient funds have been collected for the construction of specific projects. In addition, projects will not be constructed until anticipated annual operating costs can be absorbed into the city’s budget without creating a deficit. Total Increase Percentage (Decrease)Change 2020 2021 Revenues Taxes $141.3 $149.4 $8.1 5.7% Intergovernmental 3.4 10.1 6.7 197.1% Licenses and permits 2.7 2.4 (0.3) -11.1% Charges for services 7.5 7.5 0.0 0.0% Fines and forfeitures 0.5 0.4 (0.1) -20.0% Income from property and investments 12.0 5.6 (6.4) -53.3% Miscellaneous 1.7 1.6 (0.1) -5.9% Total revenues 169.1 177.0 7.9 4.7% Expenditures General government 25.2 22.0 (3.2) -12.7% Interdepartmental charges (5.1) (5.1)0.0 0.0% Public safety 70.5 78.3 7.8 11.1% Community services 43.2 40.5 (2.7) -6.3% Public works 18.6 18.5 (0.1) -0.5% Total expenditures 152.4 154.2 1.8 1.2% Excess (deficiency) before transfers 16.7 22.8 Transfers in 0.0 0.0 Transfers out (11.5) (57.0) Increase (decrease) in fund balance 5.2 (34.2) Beginning fund balance, as restated 185.6 194.0 Ending fund balance $190.8 $159.8 2020-21 Total STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE GENERAL FUND (in millions of dollars) Dec. 14, 2021 Item #2 Page 51 of 209 39 Proprietary Funds The purpose of the city’s proprietary fund sections is to provide short-term and long-term financial information about the city’s business-type activities. The analysis focuses on the determination of operating income, changes in net position (cost recovery), financial position, and cash flows. The Carlsbad Municipal Water District (CMWD) funds experienced an operating loss of approximately $4.5 million for the year. Operating revenues were approximately $51.5 million and operating expenses were approximately $55.9 million. Water purchases was one of the larger factors in the operating loss and caused by cost increases of water purchased from the Metropolitan Water District and the San Diego County Water Authority (suppliers of the CMWD’s potable water). The loss was offset by an increase in volume of water sales, which was primarily attributable to lower than expected rainfall in the current year and a 2% increase in CMWD’s water rates effective January 2021, and a $1.8M settlement agreement received from the water authorities. Nonoperating income included property and investments of $0.5 million and property taxes of $4.5 million. Income before transfers, capital contributions and special items for the year was $0.2 million. The Wastewater Fund had an annual operating gain of $6.0 million for the fiscal year. Total revenues from operations were up from the prior year and budget, due primarily to higher commercial water consumption, the rate determining factor for commercial customers. Revenues were also increased from fees collected from sewer benefit areas that was repurposed for use on capital projects. Lower operating expenses were primarily the result of decreased wastewater plant costs and decreased depreciation expense on recently added capital assets. Nonoperating revenues did not result in any change to the $6.0 million operating income before transfers and capital contributions. In the fourteenth year of operation, the Golf Course Fund had an operating loss of $2.2 million. Excluding depreciation of the enterprise's assets ($3.6 million), the Golf Course Fund’s income was $1.4 million. Revenues exceeded expectations in the current year due to phased reopening of businesses closed from COVID-19 restrictions driving increased participation in outdoor activities. This increase in revenue driven by higher rounds played was combined with an increase in green fees during the year. While revenue increased, golf related costs are generally fixed in nature and did not increase at the same rate. Solid Waste Operations and Storm Water Programs are combined on the city’s financial reports and showed a net operating loss of $1.1 million for the year. Revenues were slightly lower than the previous fiscal year, and expenses increased due to planned outside professional service costs: for solid waste, recycling, and organics management services; household hazardous waste collection and disposal; and environmental outreach and education. Nonoperating revenues did not result in any change to the $1.1 million operating income before transfers and capital contributions. The unrestricted net position for the Water, Golf Course, Wastewater and Solid Waste Operations at the end of the year amounted to $148.3 million, or approximately 27% of the total enterprise funds net position. This unrestricted balance increased mostly from removal of the Golf Course Fund advance. Each fund’s unrestricted net position may be used for rate stabilization for the respective fund’s services, fluctuations in operating expenses, and unforeseen repairs and maintenance. Approximately $41.5 million, or 8%, of the net position of all the proprietary funds are restricted for future capital construction of new and replacement water and wastewater infrastructure assets. Since funding for the replacement of infrastructure assets is not restricted, it is reflected in the Statement of Net Position as unrestricted. The city does, however, account for and monitor these amounts in separate funds to ensure that water and wastewater assets can be replaced when needed. General Fund Budgetary Highlights for Fiscal Year 2020-21 Management monitors revenues during the year and updates estimated revenue figures when new information is received. General Fund revenue estimates were revised minimally during the year, as compared to the originally budgeted estimates. Some of the factors that led to the $1.6 million increase in revenue estimates included: Dec. 14, 2021 Item #2 Page 52 of 209 40 • An increase in sales tax revenue resulting from a 1st quarter sales tax audit • The revenue adjustment to offset fiscal year 2020-21 mutual aid overtime for Operation Collaboration COVID-19 vaccination program expenses • Grant funds received from the Coastal Conservancy for the South Carlsbad Boulevard Climate Adaptation Project • Adult literacy and family literacy grant funds received during the year • Reimbursement for mutual aid overtime • Developer deposits received during the year • Revenue received from neighboring cities to fund the Innovate78 contract agreement with San Diego Regional Economic Development Corporation • Reimbursement from SANDAG for the Carlsbad Connector program The increase from the total original expenditure and transfers budget to the final budget amounted to $90.8 million primarily due to: • Transfers of $47 million to the Golf Course Fund and $3.5 million to the Infrastructure Replacement Fund • Outstanding purchase orders at June 30, 2020 totaling $10.5 million carried forward into fiscal year 2020-21 • The remaining balance of innovation funds at June 30, 2020 totaling $10.8 million carried forward into fiscal year 2020-21 and transferred to the Technology Investment Capital Fund • The appropriation of additional funds related to COVID-19 related expenditures • The appropriation for increased parks sanitizing and cleaning costs related to COVID-19 • The carryforward of other unspent funds at June 30, 2020 planned to be used for: o External legal services o A Unified Communication System o Schulman Auditorium AV system maintenance o Redistricting contractor services o Mylar back file conversion project o Additional Climate Action Plan costs o Preventative health screenings for chronic conditions per National Fire Protection Association Guidelines o Cannon Park playground refurbishment o Public arts o COVID-19 related cleaning services and • Mutual aid overtime costs • Additional costs related to the modification of overtime calculations for Fire employees • The appropriation of grant money received • Developer funded studies The difference of $25.7 million between the final budgeted expenditures plus transfers and the actual expenditures plus transfers for the year, on a budgetary basis, can be generally summarized as follows: • Higher than expected intergovernmental revenues, sales tax and transient occupancy tax • Interdepartmental charges were $0.2 million above estimates, which are offset against expenditures for reporting purposes in the financial statements. • Savings by various major service areas within the city making up the remaining difference. Current year savings were generated from: o The closure of purchase orders that had no activity during the past 12 months o Departments cutting back on expenditures due to the COVID-19 pandemic o Unfilled staff vacancies o Overall awareness of fiscal responsibility throughout the city o Deferral of projects o Accumulated savings set aside for future technology and innovation enhancements For purposes of budgetary presentation, actual revenues have been adjusted to exclude unrealized gains and losses in investments pursuant to GASB; actual expenditures have been adjusted to include remaining encumbrances. Dec. 14, 2021 Item #2 Page 53 of 209 41 Capital Asset and Debt Administration Capital Assets At the end of fiscal year 2020-21, the city had recorded investments of over $1.1 billion in a broad range of capital assets, including park facilities, land, buildings, roads, bridges, drainage facilities, water and wastewater lines, Police and Fire vehicles, and other maintenance equipment. This number includes infrastructure assets of the general government which are required per GASB. Some of this year’s major capital asset additions included: • Installation of digital information network • Installation of adaptive signal coordination systems • Improvements to Village Art building • Replacement of Hidden Canyon playground mat • Installation of one traffic signal • Replacement of data switches • Improvements to Dove library parking lot accessibility, lighting and sidewalk • Replacement of city records management system with Laserfiche software • Upgrade to financial systems software to Finance Enterprise • Acquisition of a parcel of land known as Windsor Pointe • Replacement of City Hall monitors • Replacement of recycled water pipelines • Whiting-Turner donated assets (wastewater lines, drainage and improvements on existing streets) • Presidio Cornerstone donated assets (water and wastewater lines) • Carlsbad Buena Vista donated assets (water and wastewater lines, sidewalks, improvements on existing streets and street lighting) • Seascape development donated assets (water lines, wastewater lines, drainage, sidewalks, street lighting and improvements on existing streets) • Ocean Street 8 Owner donated assets (water lines, drainage, sidewalks and improvements on existing streets) • Pivotal 650 California Street donated assets (water and wastewater lines, and improvements on existing streets) • Tabata Family Trust donated assets (water lines, wastewater lines, drainage, sidewalks, street lighting and improvements on existing streets) • Pino Vitti donated assets (water lines, wastewater lines, sidewalks, street lighting and improvements on existing streets) • Magnolia A3 donated assets (water lines, wastewater lines, drainage, sidewalks, landscaping and improvements on existing streets) • NWB Carlsbad donated assets (water lines and improvements to existing streets) • 11 defibrillators • 46 vehicles • One wet dry hydro-excavator • One trailer mounted jetting unit Total Percentage Change Change 2020 2021 2020 2021 2020 2021 2020-21 2020-21 Land $155.9 $160.6 $9.3 $9.3 $165.2 $169.9 $4.7 2.8% Construction in progress 16.2 18.1 24.8 21.4 41.0 39.5 (1.5) -3.7% Buildings and other structures 138.3 138.3 41.1 41.2 179.4 179.5 0.1 0.0% Improvements other than buildings 93.8 98.9 53.2 53.5 147.0 152.4 5.4 3.7% Machinery and equipment 51.7 52.2 13.9 14.0 65.6 66.2 0.6 0.9% Infrastructure 734.3 738.3 379.6 402.5 1,113.9 1,140.8 26.9 2.4% Wastewater treatment facility - - 60.3 62.4 60.3 62.4 2.1 3.5% Intangibles 5.0 6.5 - - 5.0 6.5 1.5 29.7% 1,195.2 1,212.9 582.2 604.3 1,777.4 1,817.2 39.8 2.2% Accumulated depreciation (403.9) (423.6) (215.7) (229.0) (619.6) (652.6) (33.0) 5.3% Total $791.3 $789.3 $366.5 $375.3 $1,157.8 $1,164.6 $6.8 0.6% Activities Activities Total CITY OF CARLSBAD'S CAPITAL ASSETS (in millions of dollars) Governmental Business-Type Dec. 14, 2021 Item #2 Page 54 of 209 42 • One motorcycle • One CCTV transporter • One stump cutter • One woodchipper • One vacuum excavator • One utility four-wheeler In addition to carrying forward appropriations of $246.4 million for previously budgeted projects, the city’s fiscal year 2021-22 capital improvement budget appropriated an additional $56.2 million for capital projects. These additional appropriations were principally for the following projects: Avenida Encinas widening south of Palomar Airport Road; Carlsbad Boulevard waterline replacement at Terramar; Carlsbad Water Recycling Encina capital projects; citywide drainage improvement program; Desalinated Water Flow Facility No. 5 projects; El Camino Real widening from Poinsettia Lane to Camino Vida Roble; Encina capital projects; fleet fuel island upgrade; Kelly Drive and Park Drive complete street improvements; Leo Carrillo Ranch roof repairs; Park Drive street and drainage improvements; pavement management program; SCADA improvements; sewer lift station repairs and upgrades; Terramar area coastal improvements; Veterans Memorial Park; water system rehabilitation and replacement; and the transfer of Fire Station No. 4 funds to the General Fund. These projects will be financed by development fees, infrastructure and replacement transfers from the General Fund, special district fees and taxes, water and wastewater replacement reserves and other sources, including grants and contributions from other agencies. More detailed information about the city’s capital assets is presented in Note 6 of the financial statements and in the city’s Capital Improvement Program (CIP) document, which can be found on the city’s website or obtained from the Administrative Services Department. Long-term Debt CITY OF CARLSBAD'S OUTSTANDING DEBT (in millions of dollars) Governmental Business-Type Percentage Activities Activities Total Change 2020 2021 2020 2021 2020 2021 2020-21 Loans $0.0 $0.0 $15.3 $13.7 $15.3 $13.7 -10.5% Capital leases 0.2 0.0 0.0 0.0 0.2 0.0 -100.0% Total $0.2 $0.0 $15.3 $13.7 $15.5 $13.7 -11.6% At fiscal year-end, the city had $13.7 million in loans and capital leases, a decrease of $1.8 million from last year, as shown in the table above. Regular payments were made on all the city’s outstanding loans and capital leases. More detail about the city’s long-term liabilities is presented in Note 7 of the financial statements. Economic Factors and Next Year’s Budgets and Rates for Fiscal Year 2021-22 • The State of California adopted its Fiscal Year 2021-22 Annual Budget and is projecting reserves reach $21 billion and an ending fund balance of $7 billion. The budget reflects significantly higher revenues than were estimated at the time of the fiscal year 2021-22 Budget Act due to the impacts of COVID-19. Further, the budget package uses $8.9 billion in American Rescue Plan Act fiscal relief funds to offset General Fund revenue losses that have occurred, relative to the pre‑pandemic trajectory, due to the COVID-19 public health emergency. This lowers General Fund costs by that amount. The spending plan dedicates the vast majority to one-time or temporary program augmentations. Some major General Fund spending choices in the 2021-22 Budget Act affecting the city are listed below. o Pay down deferrals of required minimum annual funding to schools and community colleges o Golden State Stimulus payments o Funding for housing and homelessness programs, including flexible aid to local governments to address homelessness in their communities o Second round of grants to small businesses and nonprofit cultural institutions Dec. 14, 2021 Item #2 Page 55 of 209 43 o Wildfire and forest resilience package o Statewide broadband infrastructure o A variety of resources and environment programs o Litter abatement and beautification projects on state highways and local roads o Increasing eligibility and participation in the CalWORKS and food assistance programs • Property tax, the largest source of General Fund revenues, is expected to grow by 1.8% in fiscal year 2021-22. While the residential real estate market in Carlsbad has seen significant increases in values, commercial property assessed values are expected to remain flat. The median price of a single-family residence in Carlsbad, based on resale data from Zillow, was up by 13.7% year over year in March 2021. • Sales Tax revenues generally move in step with economic conditions. Overall, the City of Carlsbad’s economy has been neutral during the pandemic – the economic conditions of some segments have suffered, and others have grown. The city has also been benefitting from sales tax revenues on internet sales generated as a result of the Wayfair or AB147 law that went into effect in October 2019. Until fiscal year 2019-20, sales tax revenues had improved markedly, peaking in fiscal year 2018-19 at $40.8 million. Easing of the COVID-19 related restrictions is expected to lead to an 11% increase over fiscal year 2020-21 levels to a total of $44.0 million in sales tax revenues for fiscal year 2021-22. This is 8% higher than the sales tax peak of $40.8 million in fiscal year 2018-19 and is expected due to high levels of consumer savings coupled with pent-up demand for particular segments • Transient Occupancy Tax (TOT, or hotel tax) is forecasted to increase by 47% in fiscal year 2021-22 when compared to estimated fiscal year 2020-21 revenues. The increase, while significant, is still lower than peak levels seen in fiscal year 2018-19. The recovery of TOT is expected to be partial as the city’s hotels are largely driven by the tourists in the summer and group business travel in the winter. With the economy fully reopened in June, the summer season is expected to be robust. However, with the trend of remote work and decreased business travel that is largely related to the impacts of COVID-19, the city’s business-related travel is anticipated to recover slowly. The city saw the opening of the Home2Suites and the Springhill Suites hotels during fiscal year 2021-22, but the impact of new openings has been overshadowed by the COVID-19 disease containment and suppression measures. • The city approved 23.5 new full-time positions and 6.2 part-time positions in the General Fund, primarily in the following main areas: o New positions to support the new Housing & Homeless Services Department o Nine paramedic firefighters o New positions for the Police Department’s Homeless Outreach Team o A senior program manager for the Diversity, Equity & Inclusion Program o Several part-time to full-time position conversions o Several new part-time positions and the reinstatement of part-time aquatic positions to pre-COVID-19 levels • As part of CalPERS’ strategy to ensure the plan’s sustainability, CalPERS deliberately raised participating agencies’ contributions over several years to improve the plan’s long-term funded status. In support of CalPERS strategies for plan sustainability, and as part of the city’s strategic, long-term approach to financial management, the city actively manages its unfunded pension liability. The City Council approved an additional discretionary contribution of $10 million to decrease future costs of the city’s unfunded actuarial liability. This active management helps ensure resources are available to fulfill the city’s contractual promises to its employees and minimizes the chance that funding these pension benefits will interfere with the city’s ability to provide essential public services • Through Memorandums of Understanding (MOUs): o The Carlsbad City Employees’ Association (CCEA) employees will receive a 2.5% salary increase on Jan. 1, 2022. o The Carlsbad Firefighters Association (CFA) will receive a 4.0% salary increase on Jan. 1, 2022. o The City Council has not determined what the following groups will receive on Jan. 1, 2022:  Fire Management and General Management employees  Carlsbad Police Management Association (CPMA) employees (currently negotiating)  Carlsbad Police Officers Association (CPOA) employees (currently negotiating) These factors were considered when preparing the city’s General Fund budget for fiscal year 2021-22. Budgeted expenditures increased by 12.8% to $184.6 million. The total personnel budget for fiscal year 2021-22 is $116.3 million, which is 10.7% more than the previous year’s personnel budget of $105.0 million. The total maintenance and operations budget for fiscal year 2021-22 is $60.3 million, which is 17.8% more than the previous year’s budget of $51.2 million. The Dec. 14, 2021 Item #2 Page 56 of 209 44 total capital outlay budget for fiscal year 2021-22 is $0.9 million, $0.5 million more than the previous year. The fiscal year 2021-22 budget reflects the plan to reinstate city services back to pre-pandemic levels and operationalize the City Council’s goals. The increase includes $5.9 million in one-time costs associated with the goals and the addition of 23.5 new full-time and 6.2 part-time employees which are mostly associated with the goals. Transfers out of the General Fund are budgeted at $7.1 million, a $0.1 million increase from the prior fiscal year. The General Fund transferred $5.4 million to the General Capital Construction Fund for major new construction of city infrastructure and facilities; the similar transfer to the Infrastructure Replacement Fund for maintenance or replacement of city infrastructure and facilities was not needed because of the offset for the cancellation of $5.1 million in funds for the Fire Station 4 Expansion project. Adding to the adopted budget of $184.6 million for the General Fund, funds will be carried over to fiscal year 2021-22: approximately $2.0 million in unspent fiscal year 2020-21 budgeted expenditures, $9.8 million in unspent innovation fund budgeted expenditures, $6.4 million for a CalPERS additional discretionary payment, and $12.2 million in open encumbrances as of June 30, 2021. During the current fiscal year, the unassigned fund balance in the General Fund decreased by $10.9 million to $99.3 million. However, due to fiscal discipline, expenditures were below the budget by $25.7 million. Based on fiscal year 2021-22 projections, the unassigned General Fund balance is expected to be reduced by approximately $5.8 million. Projected revenues are currently sufficient to build the approved projects listed in the fiscal year 2020-21 CIP. The city’s business-type activities reflect the following: Water revenues are expected to increase from 2% rate increase starting January 2022 assuming the same quantity of water sold. Wastewater revenues are projected to increase slightly due to customer demand and a shift of demand from residential to commercial customers. The effective increase in purchase costs for CMWD is projected to be approximately 3.9%. The cost of water purchased from the San Diego County Water Authority is projected to increase due to decreased countywide demand and increases in Metropolitan Water District’s water rates, inter alia. Cost increases are being partially mitigated through planned draws on San Diego County Water Authority’s rate stabilization fund. Healthy reserves have allowed CMWD to keep local rates low during fiscal year 2021-22. A recent cost of service study will set rate increases based on increased purchase rates, capital repair costs and increases to cost of materials starting in 2022. Wastewater rates increased 3% for calendar year 2021 with planned increases based on a recent cost study expected to go into effect in 2022. The increases are needed to offset increasing costs of capital repair based on an updated sewer master plan and higher costs of materials, increasing costs of odor control chemicals, and increased costs from the operator of the wastewater treatment facility. Solid Waste revenues are projected to increase moderately and the fund expects to run a deficit due to increasing waste management requirements imposed by the state. Sufficient reserves are able to sustain the increase costs without significant price increases in the short term. The Golf Course Fund projected a slight increase in revenues from an increase in rates in July 2021 offset by an expected decrease from reopening of other competing businesses and activities. As a result, the operation expected to continue to see improvements in their cash flows going forward. Contacting the City’s Financial Management This financial report is designed to provide the residents, taxpayers, customers, investors, and creditors with a general overview of the city’s finances and to demonstrate the city’s accountability for the money it receives. If you have any questions about this report or need additional information, contact the Administrative Services Department, 1635 Faraday Avenue, Carlsbad, CA 92008, 760-602-2430, or find additional information at www.carlsbadca.gov. Dec. 14, 2021 Item #2 Page 57 of 209 45Dec. 14, 2021 Item #2 Page 58 of 209 June 30, 2021 Governmental Business-Type ASSETS Activities Activities Total Cash and investments 624,616,452 $ 196,386,006 $ 821,002,458 $ Deposits 200,432 - 200,432 Receivables: Interest 5,247,445 685,482 5,932,927 Taxes 13,527,673 29,974 13,557,647 Other 1,046,864 554,328 1,601,192 Accounts, net of allowances 1,923,145 11,647,966 13,571,111 Due from other governments 1,343,695 5,552,542 6,896,237 Internal balances (2,627,139) 2,627,139 - Inventories 344,776 813,227 1,158,003 Prepaid items 2,777,822 151,713 2,929,535 Loan and reimbursement receivables, net of allowances 24,833,116 - 24,833,116 Land held for resale 2,285,722 - 2,285,722 Capital assets: Land 160,619,596 9,330,718 169,950,314 Construction in progress 18,154,248 21,380,351 39,534,599 Buildings and other structures 138,281,470 41,175,467 179,456,937 Improvements other than buildings 98,889,725 53,509,748 152,399,473 Machinery and equipment 52,220,679 13,963,957 66,184,636 Infrastructure 738,257,324 402,470,807 1,140,728,131 Wastewater treatment facility - 62,425,149 62,425,149 Intangible assets 6,483,648 - 6,483,648 Less accumulated depreciation (423,571,946) (229,028,524) (652,600,470) Total capital assets 789,334,744 375,227,673 1,164,562,417 Total assets 1,464,854,747 593,676,050 2,058,530,797 DEFERRED OUTFLOWS OF RESOURCES Deferred outflows of resources - OPEB related items 2,916,391 538,649 3,455,040 Deferred outflows of resources - pension related items 43,201,359 2,971,345 46,172,704 Total deferred outflows of resources 46,117,750 3,509,994 49,627,744 The notes to the financial statements are an integral part of this statement. Primary Government Statement of Net Position 46Dec. 14, 2021 Item #2 Page 59 of 209 June 30, 2021 Governmental Business-Type LIABILITIES Activities Activities Total Accrued liabilities 18,279,836 $ 4,042,877 $ 22,322,713 $ Accrued interest payable - 44,276 44,276 Due to other governments 49,132 12,961,396 13,010,528 Estimated claims payable 14,146,021 - 14,146,021 Deposits payable 11,195,474 939,873 12,135,347 Unearned revenue 915,942 38,327 954,269 Noncurrent liabilities: Due within one year - 1,658,821 1,658,821 Due in more than one year: Loans payable and capital leases - 12,091,078 12,091,078 Net OPEB liability 2,799,783 354,191 3,153,974 Net pension liability 154,426,420 12,047,042 166,473,462 Total liabilities 201,812,608 44,177,881 245,990,489 DEFERRED INFLOWS OF RESOURCES Deferred inflows of resources - OPEB related items 182,976 65,955 248,931 Deferred inflows of resources - pension related items 842,684 48,824 891,508 Total deferred inflows of resources 1,025,660 114,779 1,140,439 NET POSITION Net investment in capital assets 789,334,744 361,477,774 1,150,812,518 Restricted for: Capital assets 212,635,840 41,461,775 254,097,615 Lighting and landscaping districts 9,225,568 - 9,225,568 Affordable housing 40,988,135 - 40,988,135 Other purposes 6,250,598 - 6,250,598 Unrestricted 249,699,344 149,953,835 399,653,179 Total net position 1,308,134,229 $ 552,893,384 $ 1,861,027,613 $ The notes to the financial statements are an integral part of this statement. Primary Government Statement of Net Position (continued) 47Dec. 14, 2021 Item #2 Page 60 of 209 Statement of Activities For the Year Ended June 30, 2021 Operating Capital Charges for Grants and Grants and Functions/Programs Expenses Services Contributions Contributions Primary government: Governmental activities: General government 20,002,696 $ 1,259,648 $ 8,033,583 $ 930 $ Public safety 80,294,584 5,020,236 2,650,581 - Community services 57,654,582 8,079,724 10,859,966 1,488,437 Public works 35,480,588 5,662,440 4,914,549 8,076,137 Interest and fiscal charges on long-term debt 436 - - - Total governmental activities 193,432,886 20,022,048 26,458,679 9,565,504 Business-type activities: Carlsbad Municipal Water District 56,318,872 49,667,581 1,792,425 2,107,290 Golf course 10,280,089 8,107,466 - - Wastewater 9,062,816 14,026,739 1,157,360 5,493,915 Solid waste 5,086,004 3,387,077 534,632 - Total business-type activities 80,747,781 75,188,863 3,484,417 7,601,205 Total primary government 274,180,667 $ 95,210,911 $ 29,943,096 $ 17,166,709 $ General revenues: Property taxes Sales and use taxes Transient occupancy taxes Franchise taxes Business license taxes Real property transfer taxes Income from property and investments Other general revenues Special items-Golf Course debt Transfers Total general revenues, special items, and transfers Change in net position Net position at beginning of year, as restated Net position at end of year The notes to the financial statements are an integral part of this statement. Program Revenues 48Dec. 14, 2021 Item #2 Page 61 of 209 Governmental Business-type Activities Activities Total (10,708,535) $ -$ (10,708,535) $ (72,623,767) - (72,623,767) (37,226,455) - (37,226,455) (16,827,462) - (16,827,462) (436) - (436) (137,386,655) - (137,386,655) - (2,751,576) (2,751,576) - (2,172,623) (2,172,623) - 11,615,198 11,615,198 - (1,164,295) (1,164,295) - 5,526,704 5,526,704 (137,386,655) 5,526,704 (131,859,951) 78,239,492 4,490,519 82,730,011 42,579,211 - 42,579,211 15,583,688 - 15,583,688 5,773,811 - 5,773,811 5,704,576 - 5,704,576 1,786,173 - 1,786,173 5,035,615 639,262 5,674,877 516,472 - 516,472 (8,427,362) 8,427,362 - (47,272,546) 47,272,546 - 99,519,130 60,829,689 160,348,819 (37,867,525) 66,356,393 28,488,868 1,346,001,754 486,536,991 1,832,538,745 1,308,134,229 $ 552,893,384 $ 1,861,027,613 $ Primary Government Changes in Net Position Net Revenue (Expense) and 49Dec. 14, 2021 Item #2 Page 62 of 209 Balance Sheet Governmental Funds June 30, 2021 Community General General Facilities Capital Infrastructure ASSETS Fund District No. 1 Construction Replacement Cash and investments 160,339,923 $ 94,992,909 $ 43,092,669 $ 124,415,160 $ Receivables: Interest 730,248 329,881 - 433,878 Taxes 13,526,783 890 - - Other 851,243 15,283 - - Accounts, net of allowances 468,173 - - - Due from other funds 300,012 - - - Due from other governments 287,001 - - - Inventories 10,564 - - - Prepaid items 649,970 - - - Land held for resale - - - - Loans receivable, net of allowances 1,531,162 - - - Deposits 200,432 - - - Advances to other funds 1,253,825 1,525,948 - - Total assets 180,149,336 $ 96,864,911 $ 43,092,669 $ 124,849,038 $ LIABILITIES Accrued liabilities 7,710,563 $ 141,930 $ 1,250,560 $ 484,569 $ Due to other funds 993,748 - - - Deposits payable 10,724,357 13,000 - - Due to other governments 2,967 - - - Advances from other funds - - - - Unearned revenue 737,627 - - - Total liabilities 20,169,262 154,930 1,250,560 484,569 DEFERRED INFLOWS OF RESOURCES Unavailable revenue 159,458 - - - Total deferred inflows of resources 159,458 - - - FUND BALANCES Nonspendable 3,445,521 - - - Restricted - 96,709,981 - - Committed 1,000,000 - - - Assigned 56,114,979 - 41,842,109 124,364,469 Unassigned 99,260,116 - - - Total fund balances 159,820,616 96,709,981 41,842,109 124,364,469 Total liabilities, deferred inflows of resources, and fund balances 180,149,336 $ 96,864,911 $ 43,092,669 $ 124,849,038 $ The notes to the financial statements are an integral part of this statement. 50Dec. 14, 2021 Item #2 Page 63 of 209 Other Total Park Governmental Governmental Development Funds Funds 14,098,254 $ 135,771,804 $ 572,710,719 $ 49,166 3,543,590 5,086,763 - - 13,527,673 - 180,338 1,046,864 - 1,449,866 1,918,039 - - 300,012 - 1,056,694 1,343,695 - 2,145 12,709 - 856 650,826 - 2,285,722 2,285,722 - 23,301,954 24,833,116 - - 200,432 - 5,744,116 8,523,889 14,147,420 $ 173,337,085 $ 632,440,459 $ -$ 1,311,704 $ 10,899,326 $ - 300,012 1,293,760 - 456,149 11,193,506 - 46,165 49,132 5,650,000 2,873,889 8,523,889 - 178,315 915,942 5,650,000 5,166,234 32,875,555 - 4,505,452 4,664,910 - 4,505,452 4,664,910 - 856 3,446,377 8,497,420 163,892,740 269,100,141 - - 1,000,000 - - 222,321,557 - (228,197) 99,031,919 8,497,420 163,665,399 594,899,994 14,147,420 $ 173,337,085 $ 632,440,459 $ 51Dec. 14, 2021 Item #2 Page 64 of 209 - 52Dec. 14, 2021 Item #2 Page 65 of 209 Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Position June 30, 2021 Total fund balances - governmental funds 594,899,994 $ Amounts reported for governmental activities in the statement of net position are different because: Capital assets used in governmental activities are not financial resources and, therefore, are not reported in the funds. Governmental funds 769,696,375 Internal service funds 19,638,369 Total capital assets 789,334,744 Deferred outflows are not an available resource and therefore, are not reported in the funds. Governmental funds 44,277,540 Internal service funds 1,840,210 Total deferred outflows 46,117,750 Internal service funds are used by management to charge the costs of fleet management, self insured benefits, information technologies, records management, risk management and workers' compensation to individual funds. The assets and liabilities of the internal service funds are included in governmental activities in the statement of net position. Total internal service fund net position 47,424,399 Adjustment to reflect the consolidation of internal service fund activities related to enterprise funds (1,633,391) Internal service fund net position included as part of total capital assets (19,638,369) Internal service fund net position included as part of deferred outflows (1,840,210) Internal service fund net position included as part of long-term liabilities 7,016,857 Internal service fund net position included as part of deferred inflows 39,408 Net internal service fund net position 31,368,694 Interest receivable on advances to other funds is not a current financial resource and therefore is not recognized as revenue in the funds until received.34,458 Development fees receivable are not a current financial resource and therefore are not recognized as revenue in the funds until received.1,429,966 A portion of deferred grant revenues are not available to pay for current period expenditures and therefore are not recognized in the funds.125,000 Interest receivable on housing loans is not a current financial resource and therefore is not recognized as revenue in the funds until received.3,075,486 Long-term liabilities, including net pension liability, are not due and payable in the current period and therefore, are not reported in the funds. Governmental funds (150,209,346) Internal service funds (7,016,857) Total long-term liabilities (157,226,203) Deferred inflows represent an acquisition of net position that applies to a future period so it will not be recognized until that time. Governmental funds (986,252) Internal service funds (39,408) Total deferred inflows (1,025,660) Net position of governmental activities 1,308,134,229 $ The notes to the financial statements are an integral part of this statement. 53Dec. 14, 2021 Item #2 Page 66 of 209 Statement of Revenues, Expenditures and Changes in Fund Balances Governmental Funds For the Year Ended June 30, 2021 Community General General Facilities District Capital Fund No. 1 Construction Revenues: Taxes 149,397,305 $ 1,424,880 $ -$ Intergovernmental 10,115,918 - - Licenses and permits 2,398,980 - - Charges for services 7,503,388 - - Fines and forfeitures 423,380 - - Income from property and investments 5,641,716 349,229 - Contributions from property owners - 512,370 - Donations - - - Miscellaneous 1,604,683 - 154,470 Total revenues 177,085,370 2,286,479 154,470 Expenditures: Current: General government 22,099,329 105,795 - Less: interdepartmental charges (5,146,267) - - Public safety 78,328,413 - - Community services 40,500,659 - - Public works 18,463,529 - - Capital outlay - 476,385 5,086,289 Debt service: Principal retirement 7,970 - - Interest and fiscal charges 218 - - Total expenditures 154,253,851 582,180 5,086,289 Excess (deficiency) of revenues over (under) expenditures 22,831,519 1,704,299 (4,931,819) Other financing sources (uses): Transfers in 10,000 - 4,500,000 Transfers out (57,012,546) - - Total other financing sources (uses)(57,002,546) - 4,500,000 Net change in fund balances (34,171,027) 1,704,299 (431,819) Fund balances at beginning of year, as restated 193,991,643 95,005,682 42,273,928 Fund balances at end of year 159,820,616 $ 96,709,981 $ 41,842,109 $ The notes to the financial statements are an integral part of this statement. 54Dec. 14, 2021 Item #2 Page 67 of 209 Other Total Infrastructure Park Governmental Governmental Replacement Development Funds Funds -$ -$ 4,640,131 $ 155,462,316 $ - - 13,537,077 23,652,995 - - - 2,398,980 - - 4,111,694 11,615,082 - - 5,751 429,131 204,670 41,052 781,012 7,017,679 - 1,240,730 4,096,601 5,849,701 - - 321,213 321,213 - - 27,191 1,786,344 204,670 1,281,782 27,520,670 208,533,441 - - 244,777 22,449,901 - - - (5,146,267) - - 402,874 78,731,287 - - 12,766,757 53,267,416 - - 1,527,264 19,990,793 3,333,332 1,118 12,493,070 21,390,194 - - - 7,970 - - 16,961 17,179 3,333,332 1,118 27,451,703 190,708,473 (3,128,662) 1,280,664 68,967 17,824,968 4,500,000 - 750,000 9,760,000 - - (60,000) (57,072,546) 4,500,000 - 690,000 (47,312,546) 1,371,338 1,280,664 758,967 (29,487,578) 122,993,131 7,216,756 162,906,432 624,387,572 124,364,469 $ 8,497,420 $ 163,665,399 $ 594,899,994 $ 55Dec. 14, 2021 Item #2 Page 68 of 209 56Dec. 14, 2021 Item #2 Page 69 of 209 Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Activities For the Year Ended June 30, 2021 Net change in fund balances - total governmental funds (29,487,578) $ Amounts reported for governmental activities in the statement of activities are different because: Governmental funds report capital outlays as expenditures. However, in the statement of activities, the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense. Purchase of capital assets 17,604,642 Gain on the disposal of capital assets (99,428) Depreciation expense (22,688,260) Governmental funds do not reflect the donation of capital assets as revenues.1,543,454 Unpaid interest income on advances to other funds is not a current financial resource and therefore is not recognized as revenue in the funds until received.16,756 Received interest income on advances to other funds is not a current financial resource and therefore is recognized as revenue in the funds.(2,681,952) Writ-offs of previously recognized interest income on golf course advance is not recognized as an expenditure in the governmental funds.(8,427,362) Unpaid development fees are not a current financial resource and therefore are not recognized as revenue in the funds until received.1,429,966 Revenues that are recorded in the funds that are not recorded in the statement of activities due to measurement differences.64,506 Unpaid interest revenue on advances for housing loans is not a current financial and therefore is not recognized as revenue in the funds until received.3,075,486 The issuance of long-term debt (e.g., leases) provides current financial resources to governmental funds, the repayment of the principal of long-term debt consumes the current financial resources of governmental funds.7,970 The net revenue of activities of internal service funds is reported with governmental activities.514,975 Adjustments made to the net pension and net OPEB liabilities do not use current financial resources and therefore, are not recognized in the funds.1,257,034 Adjustment to reflect the consolidation of internal service fund activities related to enterprise funds.2,266 Change in net position of governmental activities (37,867,525) $ The notes to the financial statements are an integral part of this statement. 57Dec. 14, 2021 Item #2 Page 70 of 209 General Fund Variance With Actual Amounts Final Budget - Original Final (Budgetary Basis)Over/(Under) Revenues: Taxes 140,716,000 $ 140,780,200 $ 149,397,305 $ 8,617,105 $ Intergovernmental 924,000 1,757,249 10,115,918 8,358,669 Licenses and permits 1,814,000 1,814,000 2,398,980 584,980 Charges for services 7,415,000 7,827,822 7,503,388 (324,434) Fines and forfeitures 515,000 515,000 423,380 (91,620) Income from property and investments 7,482,000 7,492,000 7,998,952 506,952 Miscellaneous 956,000 1,224,238 1,604,683 380,445 Total revenues 159,822,000 161,410,509 179,442,606 18,032,097 Expenditures: Current: General government 23,434,636 43,407,013 25,419,627 (17,987,386) Less: interdepartmental charges (4,955,962) (4,955,962) (5,146,267) (190,305) Public safety 71,766,577 81,238,585 80,132,785 (1,105,800) Community services 42,648,122 49,127,083 44,264,702 (4,862,381) Public works 18,762,702 23,170,537 21,654,706 (1,515,831) Total expenditures 151,656,075 191,987,256 166,325,553 (25,661,703) Excess (deficiency) of revenues over (under) expenditures 8,165,925 (30,576,747) 13,117,053 43,693,800 Other financing sources (uses): Transfers in 10,000 10,000 10,000 - Transfers out (7,009,000) (57,512,546) (57,012,546) 500,000 Total other financing sources (uses)(6,999,000) (57,502,546) (57,002,546) 500,000 Net change in fund balances 1,166,925 (88,079,292) (43,885,493) 44,193,799 $ Fund balance at beginning of year, as restated 193,991,643 193,991,643 193,991,643 Fund balance at end of year 195,158,568 $ 105,912,351 $ 150,106,150 $ The notes to the financial statements are an integral part of this statement. Budgeted Amounts For the Year Ended June 30, 2021 Statement of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual - 58Dec. 14, 2021 Item #2 Page 71 of 209 Statement of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual - General Fund (continued) For the Year Ended June 30, 2021 Actual Amounts (Budgetary Basis) Revenues Actual amounts (budgetary basis) “available for appropriation” from the budgetary comparison schedule (previous page).179,442,606 $ The recording of unrealized gains and losses on the city's investments are shown for financial reporting purposes (pursuant to GASB 31), but are not shown for budgetary purposes.(2,357,236) 177,085,370 $ Expenditures Actual amounts (budgetary basis) “total charges to appropriations” from the budgetary comparison schedule (previous page).166,325,553 $ Differences - budget to GAAP: Encumbrances are shown in the year encumbered for budgetary purposes, but in the year paid for financial reporting purposes.(12,071,702) 154,253,851 $ The notes to the financial statements are an integral part of this statement. BUDGET-TO-GAAP RECONCILIATION 59Dec. 14, 2021 Item #2 Page 72 of 209 Statement of Net Position Proprietary Funds June 30, 2021 Carlsbad Municipal Golf ASSETS Water District Course Wastewater Current assets: Cash and investments 134,471,029 $ 2,791,263 $ 45,350,047 $ Receivables: Interest 472,560 6,896 158,024 Taxes 29,974 - - Other - 25,149 - Accounts, net of allowances 8,348,664 2,207 2,321,298 Due from other funds 1,048,262 - - Due from other governments 2,607,382 - 2,945,160 Inventories 657,997 140,712 14,518 Prepaid items 89,002 62,540 171 Total current assets 147,724,870 3,028,767 50,789,218 Capital assets: Land 1,914,871 4,786,745 2,629,102 Construction in progress 2,266,081 6,631 19,107,639 Buildings and other structures 21,005,016 20,170,451 - Improvements other than buildings 2,322,172 44,052,752 7,134,824 Machinery and equipment 10,989,380 1,906,589 1,067,988 Infrastructure 262,320,164 - 140,150,643 Wastewater treatment facility - - 62,425,149 Intangible assets - - - Less accumulated depreciation (95,902,091) (43,858,439) (89,267,994) Total capital assets (net of accumulated depreciation)204,915,593 27,064,729 143,247,351 Total noncurrent assets 204,915,593 27,064,729 143,247,351 Total assets 352,640,463 30,093,496 194,036,569 DEFERRED OUTFLOWS OF RESOURCES Deferred outflows of resources - OPEB related items 384,066 - 90,912 Deferred outflows of resources - pension related items 1,771,129 - 780,681 Total deferred outflows of resources 2,155,195 - 871,593 The notes to the financial statements are an integral part of this statement. Business-Type Activities - 60Dec. 14, 2021 Item #2 Page 73 of 209 Governmental Activities - Nonmajor Internal Solid Service Waste Totals Funds 13,773,667 $ 196,386,006 $ 51,905,733 $ 48,002 685,482 160,682 - 29,974 - 529,179 554,328 - 975,797 11,647,966 5,106 - 1,048,262 - - 5,552,542 - - 813,227 332,067 - 151,713 2,126,996 15,326,645 216,869,500 54,530,584 - 9,330,718 - - 21,380,351 820,801 - 41,175,467 - - 53,509,748 - - 13,963,957 34,714,847 - 402,470,807 - - 62,425,149 - - - 3,155,837 - (229,028,524) (19,053,116) - 375,227,673 19,638,369 - 375,227,673 19,638,369 15,326,645 592,097,173 74,168,953 63,671 538,649 159,908 419,535 2,971,345 1,680,302 483,206 3,509,994 1,840,210 (continued) Enterprise Funds 61Dec. 14, 2021 Item #2 Page 74 of 209 Statement of Net Position Proprietary Funds (continued) June 30, 2021 Carlsbad Municipal Golf LIABILITIES Water District Course Wastewater Current liabilities: Accrued liabilities 1,451,268 427,050 662,949 Accrued interest payable 44,276 - - Due to other funds - - 46,534 Due to other governments 8,246,700 - 4,703,753 Estimated claims payable - - - Current portion of loans payable 1,658,821 - - Total current liabilities 11,401,065 427,050 5,413,236 Noncurrent liabilities: Deposits payable 102,690 481,006 356,177 Unearned revenue - - 10,000 Net OPEB liability 207,532 - 72,541 Net pension liability 7,180,879 - 3,165,198 Loans payable 12,091,078 - - Total noncurrent liabilities 19,582,179 481,006 3,603,916 Total liabilities 30,983,244 908,056 9,017,152 DEFERRED INFLOWS OF RESOURCES Deferred inflows of resources - OPEB related items 56,302 - 5,320 Deferred inflows of resources - pension related items 29,102 - 12,828 Total deferred inflows of resources 85,404 - 18,148 NET POSITION Net investment in capital assets 191,165,694 27,064,729 143,247,351 Restricted for: Capital assets 36,704,578 - 4,757,197 Unrestricted 95,856,738 2,120,711 37,868,314 Total net position (deficit)323,727,010 $ 29,185,440 $ 185,872,862 $ Adjustment to reflect the consolidation of internal service fund activities related to enterprise funds. Net position of business-type activities The notes to the financial statements are an integral part of this statement. Business-Type Activities - 62Dec. 14, 2021 Item #2 Page 75 of 209 Governmental Enterprise Funds Activities - Nonmajor Internal Solid Service Waste Totals Funds 1,501,610 4,042,877 7,380,510 - 44,276 - 7,980 54,514 - 10,943 12,961,396 - - - 14,146,021 - 1,658,821 - 1,520,533 18,761,884 21,526,531 - 939,873 1,968 28,327 38,327 - 74,118 354,191 204,229 1,700,965 12,047,042 6,812,628 - 12,091,078 - 1,803,410 25,470,511 7,018,825 3,323,943 44,232,395 28,545,356 4,333 65,955 11,799 6,894 48,824 27,609 11,227 114,779 39,408 - 361,477,774 19,638,369 - 41,461,775 - 12,474,681 148,320,444 27,786,030 12,474,681 $ 551,259,993 47,424,399 $ 1,633,391 552,893,384 $ 63Dec. 14, 2021 Item #2 Page 76 of 209 Statement of Revenues, Expenses and Changes in Net Position Proprietary Funds For the Year Ended June 30, 2021 Carlsbad Municipal Golf Water District Course Wastewater Operating revenues: Water sales 49,313,865 $ -$ -$ Wastewater service charges - - 14,026,739 Golf course operations - 8,105,675 - Other charges for services 353,716 - - Miscellaneous 1,792,425 1,791 1,157,360 Total operating revenues 51,460,006 8,107,466 15,184,099 Operating expenses: Encina plant operations 1,218,079 - 4,060,896 Purchased water 27,362,142 - - Golf course operations - 6,696,313 - Depreciation 5,914,562 3,577,013 4,355,958 Fuel and supplies - - - Claims and premiums expense - - - Small equipment purchases - - - General and administrative 21,499,580 6,763 713,862 Total operating expenses 55,994,363 10,280,089 9,130,716 Operating income (loss)(4,534,357) (2,172,623) 6,053,383 Nonoperating revenues (expenses): Income from property and investments 496,313 95,044 30,908 Interest expense and fees (292,567) - - Gain (loss) on sale of property (90) - - Property taxes 4,490,519 - - Total nonoperating revenues (expenses)4,694,175 95,044 30,908 Income (loss) before transfers, capital contributions and special items 159,818 (2,077,579) 6,084,291 Transfers in - 47,031,506 - Transfers out - - - Capital contributions: Capital restricted fees and grants 863,016 - 4,251,735 Developer constructed assets 1,244,274 - 1,242,180 Other - - - Special items-Golf Course debt - 8,427,362 - Change in net position 2,267,108 53,381,289 11,578,206 Total net position (deficit) at beginning of year 321,459,902 (24,195,849) 174,294,656 Total net position (deficit) at end of year 323,727,010 $ 29,185,440 $ 185,872,862 $ Adjustment to reflect the consolidation of internal service fund activities related to enterprise funds. Changes in net position of business-type activities The notes to the financial statements are an integral part of this statement. Business-Type Activities - 64Dec. 14, 2021 Item #2 Page 77 of 209 Governmental Activities - Nonmajor Internal Solid Waste Totals Service Funds -$ 49,313,865 $ -$ - 14,026,739 - - 8,105,675 - 3,387,077 3,740,793 22,785,718 534,632 3,486,208 518,465 3,921,709 78,673,280 23,304,183 - 5,278,975 - - 27,362,142 - - 6,696,313 - - 13,847,533 2,712,987 - - 1,488,319 - - 5,461,168 - - 687,076 5,047,690 27,267,895 14,862,263 5,047,690 80,452,858 25,211,813 (1,125,981) (1,779,578) (1,907,630) 16,997 639,262 63,198 - (292,567) (3,360) - (90) 42,739 - 4,490,519 - 16,997 4,837,124 102,577 (1,108,984) 3,057,546 (1,805,053) 281,040 47,312,546 40,000 (40,000) (40,000) - - 5,114,751 - - 2,486,454 - - - 2,280,028 - 8,427,362 - (867,944) 66,358,659 514,975 13,342,625 46,909,424 12,474,681 $ 47,424,399 $ (2,266) 66,356,393 $ Enterprise Funds 65Dec. 14, 2021 Item #2 Page 78 of 209 Statement of Cash Flows Proprietary Funds For the Year Ended June 30, 2021 Carlsbad Municipal Golf Water District Course Wastewater Cash flows from operating activities: Receipts from customers and users 49,690,413 $ 8,094,756 $ 13,893,397 $ Receipts from interfund charges - - - Payments to suppliers (40,235,138) (6,594,784) (1,994,462) Payments to employees (7,414,680) - (2,312,409) Internal activity - payments to other funds (3,413,519) - (1,395,257) Claims and premiums paid - - - Other receipts 1,792,425 1,791 1,157,360 Other disbursements (5,956) - (4,189,543) Net cash provided (used) by operating activities 413,545 1,501,763 5,159,086 Cash flows from noncapital financing activities: Transfers from other funds - - - Net cash provided (used) by capital and related financing activities - - - Cash flows from capital and related financing activities: Capital restricted fees 803,826 - 4,251,735 Purchase of capital assets (6,820,548) (365,381) (13,128,426) Gross proceeds from the sale of capital assets - - - Principal paid on capital debt (1,620,408) - - Interest and other fees paid (256,076) - - Proceeds from state and local grants 59,190 - - Property taxes received 4,499,984 - - Net cash (used in) capital and related financing activities (3,334,032) (365,381) (8,876,691) Cash flows from investing activities: Interest on investments 604,701 91,258 81,033 Net increase (decrease) in cash and cash equivalents (2,315,786) 1,227,640 (3,636,572) Cash and cash equivalents at beginning of year 136,786,815 1,563,623 48,986,619 Cash and cash equivalents at end of year 134,471,029 $ 2,791,263 $ 45,350,047 $ The notes to the financial statements are an integral part of this statement. Business-Type Activities - 66Dec. 14, 2021 Item #2 Page 79 of 209 Governmental Activities - Nonmajor Internal Solid Waste Totals Service Funds 3,386,859 $ 75,065,425 $ -$ - - 23,863,664 (2,197,160) (51,021,544) (9,832,818) (1,942,214) (11,669,303) (7,737,413) (722,531) (5,531,307) (201,624) - - (5,552,574) 534,632 3,486,208 - - (4,195,499) - (940,414) 6,133,980 539,235 241,040 241,040 40,000 241,040 241,040 40,000 - 5,055,561 - - (20,314,355) (2,584,322) - - 397,276 - (1,620,408) (147,952) - (256,076) (3,360) - 59,190 - - 4,499,984 - - (12,576,104) (2,338,358) 30,002 806,994 101,380 (669,372) (5,394,090) (1,657,743) 14,443,039 201,780,096 53,563,476 13,773,667 $ 196,386,006 $ 51,905,733 $ (continued) Enterprise Funds 67Dec. 14, 2021 Item #2 Page 80 of 209 Statement of Cash Flows Proprietary Funds (continued) For the Year Ended June 30, 2021 Carlsbad Municipal Golf Water District Course Wastewater Reconciliation of operating income (loss) to net cash provided by operating activities: Operating income (loss)(4,534,357) $ (2,172,623) $ 6,053,383 $ Adjustments to reconcile operating income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization 5,914,562 3,577,013 4,355,958 Changes in assets and liabilities: (Increase) decrease in receivables 22,832 (10,919) (133,342) (Increase) decrease in due from other fund (1,048,262) - - (Increase) decrease in due from other governments 202,498 - - (Increase) decrease in inventories (114,152) 7,649 (717) (Increase) decrease in prepaid items (80,590) 6,653 (171) (Increase) decrease in OPEB asset 844,526 - - (Increase) decrease in deferred outflows - OPEB related items (11,337) - (347,150) (Increase) decrease in deferred outflows - pension related items (739,411) - (3,962) (Decrease) increase in accrued liabilities (2,056,695) (82,043) 90,298 (Decrease) increase in due to other funds - - 46,534 (Decrease) increase in due to other governments 1,282,601 - (832,464) (Decrease) increase in estimated claims payable - - - (Decrease) increase in deposits payable (5,956) 176,033 (4,189,543) (Decrease) increase in unearned revenue - - - (Decrease) increase in OPEB liability 207,532 - (45,208) (Decrease) increase in net pension liability 653,694 - 284,619 (Decrease) increase in deferred inflows - OPEB related items 5,824 - (121,184) (Decrease) increase in deferred inflows - pension related items (129,764) - 2,035 Net cash provided by operating activities 413,545 $ 1,501,763 $ 5,159,086 $ Noncash capital financing activities: Capital assets contributed by other sources 1,244,274 $ -$ 1,242,180 $ The notes to the financial statements are an integral part of this statement. Business-Type Activities - 68Dec. 14, 2021 Item #2 Page 81 of 209 Governmental Activities - Nonmajor Internal Solid Waste Totals Service Funds (1,125,981) $ (1,779,578) $ (1,907,630) $ - 13,847,533 2,712,987 56,464 (64,965) 57,299 - (1,048,262) - - 202,498 - - (107,220) 184,413 - (74,108) (440,974) - 844,526 - (4,048) (362,535) (12,094) (161,350) (904,723) (671,493) 239,587 (1,808,853) 564,315 7,980 54,514 - - 450,137 - - - (183,637) - (4,019,466) - (56,682) (56,682) - (6,624) 155,700 4,056 152,953 1,091,266 612,602 2,081 (113,279) 6,215 (44,795) (172,524) (386,824) (940,415) $ 6,133,979 $ 539,235 $ -$ 2,486,454 $ 2,280,028 $ Enterprise Funds 69Dec. 14, 2021 Item #2 Page 82 of 209 Statement of Fiduciary Net Position Fiduciary Funds June 30, 2021 Private Purpose Custodial ASSETS Trust Fund Funds Current assets: Cash and investments 1,426,697 $ 6,711,318 $ Receivables: Assessments - 19,975 Interest 4,975 41,802 Taxes - 64,139 Total current assets 1,431,672 6,837,234 Noncurrent assets: Loans receivable 4,391,761 - Restricted assets: Cash and investments - 4,458,829 Total noncurrent assets 4,391,761 4,458,829 Total assets 5,823,433 11,296,063 LIABILITIES Current liabilities: Accrued liabilities 404 88,936 Accrued interest payable 50,350 - Bonds payable - due within one year 900,000 - Total current liabilities 950,754 88,936 Noncurrent liabilities: Bonds payable - due in more than one year 1,950,000 - Total liabilities 2,900,754 88,936 NET POSITION Restricted for: Individuals, organizations and other governments - 11,207,127 Redevelopment obligation retirement purposes 2,922,679 - Total net position 2,922,679 $ 11,207,127 $ The notes to the financial statements are an integral part of this statement. 70Dec. 14, 2021 Item #2 Page 83 of 209 Statement of Changes in Fiduciary Net Position Fiduciary Funds For the Year Ended June 30, 2021 Private Purpose Custodial ADDITIONS Trust Fund Funds District assessment collections -$ 5,659,874 $ Property taxes 3,013,484 1,355,775 Income (loss) from property and investments (67,626) 57,000 Interest on housing loans 836,498 - Total additions 3,782,356 7,072,649 DEDUCTIONS Distributions to beneficiaries - 796,085 General and administrative 78,985 67,290 Bond principal - 3,175,000 Bond Interest expense and fees 160,918 1,781,108 Total deductions 239,903 5,819,483 Change in net position 3,542,453 1,253,166 Net position (deficit) at beginning of year, as restated (619,774) 9,953,961 Net position (deficit) at end of year 2,922,679 $ 11,207,127 $ The notes to the financial statements are an integral part of this statement. 71Dec. 14, 2021 Item #2 Page 84 of 209 Notes to the Financial Statements 72 Note 1. Summary of Significant Accounting Policies The City of Carlsbad, California (“city”), was incorporated on July 16, 1952. The city was a general law city until 2008, when the citizens in Carlsbad voted and approved the city to become a charter city. The city operates under a Council-Manager form of government and provides the following services: general government, public safety, community services and public works. The accounting policies of the city and its component units conform to accounting principles generally accepted in the United States of America as applicable to governmental units. The following is a summary of the more significant policies: Description and scope of the reporting entity As required by accounting principles generally accepted in the United States of America, these financial statements present the financial position of the city and its component units, entities for which the city is considered to be financially accountable. The city is considered to be financially accountable for an organization if the city appoints a voting majority of that organization’s governing body and the city is able to impose its will on that organization or there is a potential for that organization to provide specific financial benefits to or impose specific financial burdens on the city. The city is also considered to be financially accountable for an organization if that organization is fiscally dependent upon the city (i.e., it is unable to adopt its budget, levy taxes, set rates or charges, or issue bonded debt without approval from the city). In certain cases, other organizations are included as component units if the nature and significance of their relationship with the city are such that their exclusion would cause the city’s financial statements to be misleading or incomplete. Based upon the above criteria, the component units of the city are the Housing Authority of the City of Carlsbad, the City of Carlsbad Public Improvement Corporation, the Carlsbad Public Financing Authority and the Carlsbad Municipal Water District. The city does not issue separate financial statements for these component units. Since the City Council serves as the governing board for these component units and there is either a financial benefit/burden relationship between the component unit and city or the management of the city has the operational responsibility for the component unit, all of the city’s component units are considered to be blended component units. Blended component units, although legally separate entities, are in substance part of the city’s operations, and so data from these units is reported with the interfund data of the primary government. Government-wide and Fund Financial Statements The Government-wide Financial Statements (i.e., the Statement of Net Position and the Statement of Activities) report information on all of the nonfiduciary activities of the city and its blended component units. For the most part, the effect of interfund activity has been removed from these statements. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which rely to a significant extent on user fees and charges for support. The Statement of Activities demonstrates the degree to which the direct expenses of a given function or segment are offset by program revenues. Direct expenses are those that are clearly identifiable to a specific function or segment. Program revenues include: 1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or segment; and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other items not properly classified as program revenues are reported as general revenues. Dec. 14, 2021 Item #2 Page 85 of 209 Notes to the Financial Statements 73 Note 1. Summary of Significant Accounting Policies (continued) Separate financial statements are provided for governmental funds, proprietary funds, and fiduciary funds, even though the latter are excluded from the Government-wide Financial Statements. Major individual governmental funds and major individual enterprise funds are reported in separate columns in the Fund Financial Statements. Measurement focus, basis of accounting, and financial statement presentation The Government-wide Financial Statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the Proprietary Fund and Private Purpose Trust Fund Financial Statements. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. In applying the susceptible to accrual concept to intergovernmental revenues, the legal and contractual requirements of the individual programs are used as guidance. Property taxes are recognized as revenues in the year for which they are levied. Governmental Fund Financial Statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the government considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred, as under accrual accounting, as long as the expenditure reflects a near-term cash outflow. Principal and interest on long-term debt are recorded as fund liabilities when due. Revenues that are accrued generally include real property taxes, sales tax, transient occupancy taxes (TOT), franchise taxes, highway users tax, interest, and some state and federal grants. Real property taxes are levied on October 15 against property owners of record on January 1 of that year. The taxes are due in two installments, on November 1 and February 1, and become delinquent after December 10 and April 10, respectively. Tax liens attach annually as of 12:01 a.m. on the first day of January in the fiscal year for which the taxes are levied. Under the provisions of NCGA (National Council on Government Accounting) Interpretation 3, property tax revenue is recognized in the fiscal year for which the taxes have been levied, provided it is collected within 60 days of the end of the fiscal year. Custodial funds, which are a type of fiduciary fund, account for assets held by the city for other governments or individuals. These funds report using an economic resources measurement focus and include all inflows, outflows and balances reflecting the fund’s net position. The city reports the following major governmental funds: •The General Fund is the city’s primary operating fund. It accounts for all financial resources of the general government, except those required to be accounted for in another fund. •The Community Facilities District (CFD) No. 1 capital project fund is used to account for the receipt of taxes and fees charged to developers that are restricted for civic facilities, parks, and road segments. •The General Capital Construction (GCC) capital project fund is used to account for transfers from the General Fund and expenditures for various capital projects not financed through another capital project fund. •The Infrastructure Replacement (IRF) capital project fund is used to account for transfers from the General Fund and expenditures for the replacement of major infrastructure throughout the city. Dec. 14, 2021 Item #2 Page 86 of 209 Notes to the Financial Statements 74 Note 1. Summary of Significant Accounting Policies (continued) •The Park Development Fund capital project funds are used to account for receipts of fees charged to developers for park acquisition and development. The city reports the following major enterprise funds: •The Carlsbad Municipal Water District (CMWD) enterprise funds are used to account for the operation, maintenance, and capital facility financing of the city’s potable and recycled water systems. •The Golf Course enterprise fund is used to account for revenues and expenses for the construction, maintenance and operating activities of the city’s municipal golf course. The city has elected to promote the golf course fund from a nonmajor enterprise fund to a major fund. •The Wastewater enterprise funds are used to account for the operation, maintenance, and capital facility financing of the city’s wastewater system. The city reports the following nonmajor enterprise fund: •The Solid Waste enterprise funds are used to account for the revenues and expenses of the city’s solid waste source-reduction, recycling and storm water programs. Additionally, the city reports the following fund types: •Internal Service funds account for fleet maintenance and replacement, self-insured benefits, information technology, risk management and workers’ compensation services provided to other departments or agencies of the city. •The Custodial funds account for assets held by the city for other governments or individuals. These funds include debt service transactions on assessment district bonds for which the city is not obligated and thecity’s two Business Improvement Districts: the Carlsbad Tourism Business Improvement District and the Carlsbad Golf Lodging Business Improvement District. •The Trust fund accounts for the activities of the Redevelopment Obligation Retirement Fund, which accumulates resources for obligations previously incurred by the former City of Carlsbad Redevelopment Agency (RDA). As a general rule, the effect of interfund activity has been eliminated from the Government-wide Financial Statements. An exception to this general rule is the charges between the Carlsbad Municipal Water District and various other functions of the city. Elimination of these charges would distort the direct costs and program revenues reported for the various functions concerned. Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund’s principal ongoing operations. The principal operating revenues of the city’s proprietary funds are charges to customers for sales and services. The city also recognizes new account charges, late fees and contributions from other agencies as operating revenues. Operating expenses for enterprise and internal service funds include the cost of sales and services, general and administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses. Dec. 14, 2021 Item #2 Page 87 of 209 75 Notes to the Financial Statements Note 1. Summary of Significant Accounting Policies (continued) When both restricted and unrestricted resources are available for use, it is the city’s policy to use restricted resources first, then unrestricted resources as they are needed. When expenditures are incurred for purposes for which both restricted and unrestricted (committed, assigned, or unassigned) fund balances are available, restricted revenue will be applied first. When expenditures are incurred for purposes for which committed, assigned, or unassigned fund balances are available, the policy is to apply committed fund balance first, then assigned fund balance and finally unassigned fund balance. Change in accounting principles The city implemented Government Accounting Standards Board (GASB) Statement No. 84, Fiduciary Activities during fiscal year 2020-21. This change in accounting principle resulted in a prior period adjustment, increasing the net position of custodial funds being reported in the Statement of Changes in Fiduciary Net Position. Prior to the implementation of this statement the custodial funds were not required to report a net position. This change also required a prior period adjustment as an increase to net position in the Statement of Activities for Governmental Activities and the Statement of Revenues, Expenditures and Changes in Fund Balances, Governmental Funds. This increase was a result of moving the accumulated interest income earned on developer deposits from the Fiduciary Funds to the General Fund, as all developer construction deposits are now held and accounted for in the General Fund, as required by GASB 84. See footnote 21, Prior Period Adjustment for more detailed information. The requirements of GASB 84 will enhance consistency and comparability by (1) establishing specific criteria for identifying activities that should be reported as fiduciary activities and (2) clarifying whether and how business-type activities should report their fiduciary activities. Greater consistency and comparability enhance the value provided by the information reported in financial statements for assessing government accountability and stewardship. The city also implemented GASB Statement No. 98, The Annual Comprehensive Financial Report during fiscal year 2020-21 which establishes the term annual comprehensive financial report and its acronym ACFR. Cash and investments Cash includes amounts in demand and time deposits. Investments are reported in the accompanying balance sheet at fair value, except for certain investment contracts that are reported at cost because they are not transferable and they have terms that are not affected by changes in market interest rates. Changes in fair value that occur during a fiscal year are recognized as income from property and investments reported for that fiscal year. Income from property and investments includes interest earnings; changes in fair value; any gains or losses realized upon the liquidation, maturity, or sale of investments; property rentals and the sale of city owned property. The city pools cash and investments of all funds, except for assets held by fiscal agents. Each fund’s share in this pool is displayed in the accompanying financial statements as cash and investments. Investment income earned by the pooled investments is allocated to the various funds on a monthly basis, based on each fund’s average cash and investments balance. Restricted cash and investments represent amounts that are restricted under the terms of debt agreements. Inventories Inventories consist of materials and supplies that are valued at cost and are recorded as expenses or expenditures on a first-in, first-out basis when consumed. Dec. 14, 2021 Item #2 Page 88 of 209 Notes to the Financial Statements 76 Note 1. Summary of Significant Accounting Policies (continued) Compensated absences Compensated absences are comprised of vacation payable for all city employees and banked overtime (comp time). Vacation pay and comp time are payable to employees at the time used or upon termination of employment. For governmental funds, the cost of accumulated vacation and comp time expected to be paid in the next 12 months is recorded as a liability in the Self-Insured Benefits internal service fund. Since the city caps the amount of vacation and comp time employees are allowed to have on the books at any point in time, for compensated absences recorded at June 30, 2021, all balances are expected to be paid within the following 12 months. For proprietary funds, the cost of vacation and comp time is recorded as a liability when earned. Risk management The city accounts for its general liability and workers’ compensation activities in internal service funds. The funds are responsible for collecting premiums from other city funds and departments and paying claims, settlements and insurance premiums. Interfund premiums are based on the insured fund’s claims experience. Incurred but not reported claims are accrued at year-end, if material. Unbilled services Unbilled water, wastewater and solid waste revenues of the enterprise funds are recognized as earned when the services are used. Capital assets Capital assets, which include land (including right-of-way), buildings, equipment and infrastructure assets (e.g., roads, bridges, traffic signals, water and wastewater systems, and similar items), are reported in the applicable governmental or business-type activities columns in the Government-wide Financial Statements. Capital assets are defined by the city as machinery and equipment and capital construction with an initial, individual cost of more than $10,000 and an estimated useful life in excess of one year; and intangible assets such as computer software with an initial cost of more than $100,000, and an estimated useful life in excess of one year. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated capital assets are recorded at acquisition value at the date of donation. The cost of normal maintenance and repairs that do not add to the value of an asset or materially extend an asset’s useful life are not capitalized. Construction in progress costs are transferred to their respective capital asset category upon completion. Depreciation is charged to operations using the straight-line method based on the estimated useful life of an asset. The estimated useful lives of depreciable assets are as follows: Years Buildings and other structures 10 – 50 Improvements other than buildings 10 – 50 Infrastructure 10 – 100Intangible assets 5 – 10 Machinery and equipment 3 – 20 Wastewater treatment facility (including equipment) 5 – 75 The city has capitalized all general infrastructure assets acquired or constructed. In addition, the land upon which the streets and roads are constructed (right-of-way) has also been valued and capitalized. Dec. 14, 2021 Item #2 Page 89 of 209 Notes to the Financial Statements 77 Note 1. Summary of Significant Accounting Policies (continued) Unearned revenue The unearned revenue reported in the city’s financial statements represents money received during the current or previous fiscal years that has not been earned by the city as of the end of the fiscal year. These monies will be recognized as revenues in subsequent fiscal years, once the revenue has been earned. Deferred outflows In addition to assets, the statement of financial position reports a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net position that applies to a future period(s) and so will not be recognized as an outflow of resources (expense/expenditure) until then. The city has pension-related and other postemployment benefits related items in this category. Deferred inflows In addition to liabilities, the statement of financial position reports a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net position that applies to a future period(s) and so will not be recognized as an inflow of resources (revenue) until that time. The city has two types of items that qualify for reporting in this category. The first item, unavailable revenue, is reported only in the governmental funds balance sheet. The governmental funds report unavailable revenues from two sources: interest on advances, loans and grants. This amount is deferred and recognized as an inflow of resources in the period that the amount becomes available. The second item, deferred inflows of resources, is reported in the proprietary funds balance sheet and the Statement of Net Position. The city has pension related and other postemployment benefits related items in this category. Interfund transactions Activity between funds that is representative of lending/borrowing arrangements outstanding at the end of the fiscal year is referred to as either “due to/from other funds” (short-term interfund loans), “advances to/from other funds” (long-term interfund loans) or “due from Successor Agency” (long-term trust fund loan). Any residual balances outstanding between the governmental activities and business-type activities are reported in the Government-wide Financial Statements as “internal balances.” The portion of fund balance associated with amounts that have been disbursed to other funds in the form of long- term interfund advances have been classified as nonspendable unless the funds associated with repayment of the advance are otherwise restricted for a specific purpose. Dec. 14, 2021 Item #2 Page 90 of 209 Notes to the Financial Statements 78 Note 1. Summary of Significant Accounting Policies (continued) Receivables and payables All trade, service and tax receivables are shown net of an allowance for uncollectibles. The utility billing receivable allowance is equal to 2% of outstanding billings at June 30, 2021, the ambulance billing receivable allowance is equal to 40% of outstanding billings at June 30, 2021, and the trade and false alarm receivable allowance is equal to 18% of the total of all outstanding receivable balance at June 30, 2021. The only exceptions to these rules are receivables that were subsequently paid or were known to be collectible at year-end, which were not reserved for at June 30, 2021, and any receivables due from other public agencies. Loan and reimbursement receivable The accompanying financial statements reflect the recording of certain loans receivable that represent loans made to various organizations and individuals. In certain cases, the amount of collection is dependent upon future residual receipts to be generated by the property or contingent upon the ability of the owner to sell the property at an amount sufficient to pay all liens against the property, including the obligation to the city. All loan and reimbursement receivables are shown net of an allowance for uncollectibles. Encumbrances Encumbrance accounting, under which purchase orders, contracts and other commitments for the expenditure of monies are recorded in order to reserve that portion of the applicable appropriation, is employed as an extension of formal budgetary control in the governmental funds. Unexpended and unencumbered appropriations lapse at fiscal year-end unless City Council takes action in the form of a resolution to continue the appropriation into the following fiscal year. Net position Net position represents the differences between assets and deferred outflows, and liabilities and deferred inflows. Net investment in capital assets, consist of capital assets, net of accumulated depreciation, reduced by the outstanding balances of any borrowings, used for the acquisition, construction or improvement of those assets. Net investment in capital assets excludes unspent debt proceeds. Net position is reported as restricted when there are limitations imposed on its use either through the enabling legislation adopted by the city or through external restrictions imposed by creditors, grantors, or laws or regulations of other governments. It is the city’s policy to consider restricted net position to have been depleted before unrestricted net position is applied. Cash flows Statements of cash flows are presented for proprietary fund types. Cash and cash equivalents include all unrestricted and restricted highly liquid investments with original purchase maturities of three months or less. Pooled cash and investments in the city’s Treasury represent monies in a cash management pool and such accounts are similar in nature to demand deposits. Dec. 14, 2021 Item #2 Page 91 of 209 Notes to the Financial Statements 79 Note 1. Summary of Significant Accounting Policies (continued) Long-term obligations In the Government-wide Financial Statements, and proprietary fund types in the Fund Financial Statements, long- term debt and other long-term obligations are reported as liabilities in the applicable governmental activities, business-type activities, or proprietary fund type Statement of Net Position. Pensions For purposes of measuring the net pension liability, deferred outflows and inflows of resources related to pensions, and pension expense, information about the fiduciary net position of the city’s California Public Employees’ Retirement System (CalPERS) plans (Plans) and additions to/deductions from the fiduciary net position have been determined on the same basis as they are reported by CalPERS. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value. For this report, the following timeframes are used: Valuation Date (VD) June 30, 2019 Measurement Date (MD) June 30, 2020 Measurement Period (MP) July 1, 2019 to June 30, 2020 Other Postemployment Benefits (OPEB) For purposes of measuring the net OPEB asset/liability, deferred outflows of resources and deferred inflows of resources related to OPEB, and OPEB expense, information about the fiduciary net position of the city’s plan (OPEB Plan), the assets of which are held by the California Employers’ Retiree Benefit Trust (CERBT), and additions to and deductions from the OPEB Plan’s fiduciary net position have been determined by an independent actuary. For this purpose, benefit payments are recognized when currently due and payable in accordance with the benefit terms. Investments are reported at fair value. Generally accepted accounting principles require that the reported results must pertain to liability and fiduciary net position information within certain defined timeframes. For this report, the following timeframes are used: Valuation Date (VD) June 30, 2019 Measurement Date (MD) June 30, 2020 Measurement Period (MP) July 1, 2019 to June 30, 2020 Compensated absences, OPEB obligation and net pension liability The obligations for compensated absences, the OPEB obligation and net pension liability are primarily liquidated from the General Fund. There is no fixed payment schedule for these liabilities. Dec. 14, 2021 Item #2 Page 92 of 209 Notes to the Financial Statements 80 Note 1. Summary of Significant Accounting Policies (continued) Fair value measurements Certain assets and liabilities are required to be reported at fair value. The fair value framework provides a hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of fair value hierarchy are described as follows: Level 1 – Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets. Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, and fair value is determined through the use of models or other valuation methodologies including: •Quoted prices for similar assets or liabilities in active markets; •Quoted prices for identical or similar assets or liabilities in markets that are inactive; •Inputs other than quoted prices that are observable for the asset or liability; and •Inputs that are derived principally from or corroborated by observable market data by correlation or other means. Level 3 – Inputs to the valuation methodology are unobservable and significant to the fair value measurement. These unobservable inputs reflect the city’s own assumptions about the inputs market participants would use in pricing the asset or liability (including assumptions about risk). These unobservable inputs are developed based on the best information available in the circumstances and may include the city’s own data. Note 2. Budgetary Data The city follows these procedures in establishing its budgetary data: •During May or June, the City Manager submits a proposed operating, strategic digital transformation investment program and capital improvement program budgets for the fiscal year commencing the following July 1 to the City Council. The budget includes estimated revenues and proposed expenditures on a departmental and/or project basis. •In June, a public hearing is conducted at a City Council meeting to obtain citizens’ comments. •Prior to July 1, the budget is enacted legally through passage of an appropriation resolution. The City Manager is authorized to make transfers of appropriated amounts from one department to another within a fund. The legal level of budgetary control is at the fund level. Revisions that alter the total appropriations of any fund must be approved by the City Council with the exception of budget adjustments that involve offsetting revenues and expenditures, increases in General Liability and Workers’ Compensation Fund claims expenses, and increases in Encina Wastewater Authority expenses. The City Manager is authorized to increase or decrease an appropriation for a specific purpose where the appropriation is offset by unbudgeted revenue, which is designated for said specific purpose. Monthly financial reports are provided to the City Council during the year, and any changes to the adopted budget are approved by the City Council as necessary. During the year, several supplementary appropriations were necessary. Dec. 14, 2021 Item #2 Page 93 of 209 Notes to the Financial Statements 81 Note 2. Budgetary Data (continued) Budgets for governmental type funds are adopted on the modified accrual basis except that encumbrances are treated as budgeted expenditures in the year purchases are committed. Expenditures may not exceed budgeted appropriations at the fund level. All appropriations lapse at fiscal year-end unless the City Council takes action in the form of a resolution to continue the appropriation into the following fiscal year or, if the appropriation is less than $100,000, the City Manager may approve to continue the appropriation into the following fiscal year. For purposes of budgetary presentation, actual revenues have been adjusted to exclude unrealized gains and losses pursuant to GASB. Actual expenditures have been adjusted to include encumbrances outstanding. Annual budgets are adopted for the General Fund, special revenue funds except for the Tyler Court Apartments Fund, and a portion of the Parking-in-Lieu Capital Project Fund (Grants and Other Capital Project Funds). Accordingly, the revenues and expenditures for the Tyler Court Apartments Fund have been excluded from the budget basis financial statements. Annual operating budgets are not adopted for the capital projects funds except for the Parking-in-Lieu Fund; therefore, budget basis financial statements have not been prepared because a comparison of such budgetary amounts to annual revenues and expenditures is not meaningful. Note 3. Deposit and Investment Risk Cash resources of the individual funds are combined to form a pool of cash and investments. The city maintains a formal Investment Policy Statement, which is reviewed by the Investment Review Committee and adopted annually by the City Council. All investments held in the Treasurer’s Pool are consistent with the city’s Investment Policy Statement objectives of safety of principal, adequacy of liquidity, and achievement of an average market rate of return. The risk disclosures on the next page apply to the city’s internal investment pool. Portfolio investments are exposed to five types of risk: custodial (investments and cash deposits), concentration, default, event, and market or interest rate risk. The city and its agencies invest a portion of the funds in an external investment pool known as the Local Agency Investment Fund (LAIF). Management and oversight are the responsibility of the California State Treasurer. As of June 30, 2021, the LAIF performance report shows a fair value factor of 1.00008297. The city’s position in the LAIF pool is calculated as a percentage of the fair value of the city’s shares to the fair value of the pooled shares. The city and its agencies invest a portion of the funds in an external investment pool known as the California Asset Management Program (CAMP). CAMP is a California Joint Powers Authority directed by a Board of Trustees, which is made up of local government finance directors and treasurers. Investments held outside the Treasurer’s Pool consist mainly of required reserve funds for various bond issues. They are held by trustees and are not available for the city’s general expenditures. Dec. 14, 2021 Item #2 Page 94 of 209 Notes to the Financial Statements 82 Note 3. Deposit and Investment Risk (continued) As of June 30, 2021, the city had the following investments in its portfolio: Fair % of Modified Treasurer's Pool investments Value Total Duration U.S. agencies: United States Treasury Bills & Notes 71,633,795 $ C 8.7% 1.637 Federal Home Loan Mortgage Corporation 61,337,368 7.4% 2.862 Federal National Mortgage Association 49,288,221 6.0% 2.987 Federal Home Loan Bank 88,589,949 10.7% 3.399 Federal Farm Credit Bank 87,301,449 10.6% 2.890 Federal Agricultural Corporation 17,636,515 2.1% 3.379 Supranational 32,863,776 4.0% 2.607 Tennessee Valley Authority 1,074,240 0.1% 3.058 Subtotal U.S. agencies 409,725,313 49.6%3.075 Agency backed passthrough securities Federal Home Loan Mortgage Corporation 14,373,742 1.7% 1.826 Federal National Mortgage Association 1,899,556 0.2% 0.793 Subtotal agency backed passthrough securities 16,273,298 1.9% 1.706 Corporate notes: Medium-term corporate notes 202,236,011 24.5% 2.021 Subtotal corporate notes 202,236,011 24.5%2.021 Municipal bonds: Municipal bonds 26,040,598 3.2% 3.575 Subtotal municipal bonds 26,040,598 3.2%3.575 CAMP 1,006,349 0.1%- LAIF 140,235,814 17.0%- Certificates of deposit 21,538,503 2.6%- Cash accounts 9,476,180 1.1%- Total Treasurer’s Pool 826,532,066 100.0% 2.114 Investments held outside the Treasurer’s Pool Money market funds 4,677,782 83.2%- Guaranteed investment contracts 942,770 16.8%- Subtotal debt service funds/bond proceeds 5,620,552 100.0% 0.000 Other deposits 1,437,414 Petty cash funds 9,270 Total cash and investments 833,599,302 $ Statement of Net Position, Primary Government Cash and investments 821,002,458 $ Statement of Net Position, Fiduciary Funds Cash and investments 8,138,015 Restricted cash and investments 4,458,829 Total cash and investments 833,599,302 $ Dec. 14, 2021 Item #2 Page 95 of 209 Notes to the Financial Statements 83 Note 3. Deposit and Investment Risk (continued) Fair Value Measurement The city categorizes its fair value investments within the fair value hierarchy established by generally accepted accounting principles. The city has the following recurring fair value measurements as of June 30, 2021: Custodial credit risk (investments) The city uses a third-party bank for its custody and safekeeping service for its investment securities. Custodial credit risk is the risk that the city will not be able to recover the value of its investments in the event of the custodian’s failure. All city investments held in custody and safekeeping are held in the name of the city and are segregated from securities owned by the bank. This is the lowest level of custodial credit risk exposure. Investments are settled on Delivery vs. Payment (DVP) in accordance with the third-party custodial agreement. Custodial credit risk (deposits) The city maintains cash accounts at one major banking institution. At the conclusion of each business day and if advantageous to the city, balances in these accounts are “swept” into overnight pooled investments, which are pooled into funds collateralized with U.S. government securities (guaranteed) or U.S. agency securities (government- sponsored). The California Code authorizes both of these types of investments. Amounts up to $250,000 are Federal Deposit Insurance Corporation (FDIC) insured. All funds in non-interest-bearing transaction accounts are fully insured under the Dodd-Frank Wall Street Reform and Consumer Protection Act. Concentration credit risk Concentration credit risk is the heightened risk of potential loss when investments are concentrated in one issuer. The California state code and the city’s Investment Policy Statement require that total investments in medium-term corporate notes of all issuers not exceed 30% of the portfolio. Level 1 Level 2 Level 3 Total U.S. treasury bills & notes 71,633,795 $ -$ -$ 71,633,795 $ U.S. agencies & supranational - 338,091,518 - 338,091,518 Agency backed passthrough securities - 16,273,298 - 16,273,298 Medium-term corporate notes - 202,236,011 - 202,236,011 Municipal bonds - 26,040,598 26,040,598 Certificates of deposit - 21,538,503 - 21,538,503 Subtotal investments reported at fair value 71,633,795 $ 604,179,928 $ -$ 675,813,723 Cash and investments not reported at fair value Cash accounts 9,476,180 CAMP 1,006,349 LAIF 140,235,814 Money market funds 4,677,782 Guaranteed investment contracts 942,770 Other deposits 1,437,414 Petty cash funds 9,270 Total cash and investments 833,599,302 $ Fair Value Hierarchy Dec. 14, 2021 Item #2 Page 96 of 209 Notes to the Financial Statements 84 Note 3. Deposit and Investment Risk (continued) For concentration of investments, the city’s Investment Policy Statement requires that no more than 5% of investments in corporate notes or passthrough securities be in any one issuer. There is no similar requirement in either the state code or the city’s Investment Policy Statement for U.S. agencies. As of June 30, 2021, the portfolio was in compliance with this requirement. Default credit risk Default credit risk is the risk that the issuer of the security does not pay either the interest or principal when due. Debts of most U.S. agencies are not backed by the full faith and credit of the federal government. These agencies are U.S. government sponsored. In August 2011, Standard and Poor’s Investor’s Service downgraded U.S. long-term debt one step to AA+. Competing agencies, Moody’s Investors Service, and Fitch Ratings, maintained their AAA rating on U.S. debt. Although the default credit risk of these investments has increased, the city believes the risk of default remains low. California state code limits investments in medium-term corporate notes to the top three credit ratings (AAA, AA, and A). However, it is the city’s policy to limit investments to the top two credit ratings (AAA and AA). As of June 30, 2021, approximately 18% of the investments in medium-term corporate notes did not have one of these two credit ratings. These investments were initially made when the credit ratings were AA or higher. California state code and the city’s Investment Policy Statement allow the city Treasurer to determine the course of action to correct exceptions to the Investment Policy Statement. It is the intent of the city treasurer to hold these investments in the portfolio until maturity unless events indicate they should be sold. The default credit risk for corporate notes with a credit rating of single A is considered by the city Treasurer to be within acceptable limits for purposes of holding to maturity. A credit rating of single A is within state code purchase requirements. The Local Agency Investment Funds (LAIF) is an external investment pool managed by the California State Treasurer. The California Asset Management Program (CAMP) is an external investment pool managed by PFM Asset Management LLC. These investments are short-term and follow the investment requirements of the State. LAIF is not rated; however, the city Treasurer considers the default credit risk to be minimal. CAMP is rated AAA by Standard and Poor’s Investor Services. Money market funds held by bond trustees are rated AAA. Investment contracts held by bond trustees are not rated by rating agencies. Dec. 14, 2021 Item #2 Page 97 of 209 Notes to the Financial Statements 85 Note 3. Deposit and Investment Risk (continued) The table below is the minimum rating (where applicable) of the California state code, the city’s investment policy, or debt agreements, and the actual rating at June 30, 2021 for each investment type by S&P Investor’s Service: Note for this schedule: Certificates of Deposit are FDIC insured. As of June 30, 2021, five investments in medium term notes had a credit rating of a single A (A) which is below the double A (AA) rating required by the Investment Policy. These investments were initially made in accordance with the city's Investment Policy. California state code and the city's Investment Policy allow the City Treasurer to determine the course of action to correct exceptions to the policy. It is the intent of the City Treasurer to hold these assets in the portfolio until maturity unless events indicate a sale should be made. These investments are paying interest at the required times and their principal is considered secure. Minimum Exempt Legal from Not Investment Type Total Rating Disclosure AAA AA A Rated Treasury securities 71,633,795$ N/A 71,633,795$ -$ -$ -$ -$ Federal agency securities 338,091,518 N/A - - 338,091,518 - - Agency backed passthrough securities 16,273,298 AA - 16,273,298 - - - Medium term notes 202,236,011 AA - 27,808,172 138,239,224 36,188,615 - Municipal bonds 26,040,598 AA - 3,487,088 22,553,510 - California Asset Management Program (CAMP)1,006,349 N/A - 1,004,415 - - - Local Agency Investment Fund (LAIF)140,235,814 N/A - - - - 140,235,814 Certificates of deposit 21,538,503 N/A - - - - 21,538,503 Cash accounts 9,476,180 N/A - - - - 9,476,180 Other deposits 1,437,414 N/A - - - - 1,437,414 Petty cash funds 9,270 N/A - - - - 9,270 Investments with fiscal agent Money market funds 4,677,782 AA-m - 4,677,782 - - - Guaranteed investment contracts 942,770 N/A - - - - 942,770 833,599,302$ 71,633,795$ 53,250,755$ 498,884,252$ 36,188,615$ 173,639,951$ Rating as of Year End Dec. 14, 2021 Item #2 Page 98 of 209 Notes to the Financial Statements 86 Note 3. Deposit and Investment Risk (continued) Interest rate risk Interest rate risk is the risk that investments will lose market value because of increases in market interest rates. A rise in market interest rates will cause the market value of investments made earlier at lower interest rates to lose value. The reverse will cause a gain in market value. As of June 30, 2021, the portfolio had a 1.02% gain in market value based on cost. The city’s Investment Policy Statement has adopted two means of limiting its exposure to market value losses caused by rising market interest rates: (1) limiting total portfolio investments to a maximum modified duration of 2.2; and (2) requiring liquid investments (LAIF and bank accounts) and investments maturing within one year to be equal to an amount that is not less than two-thirds of the current fiscal year’s operating budget. The city met those requirements as follows: 1. As of June 30, 2021, the modified duration of the portfolio was 2.114. Modified duration is a prospective measure of the sensitivity of a fixed-income security’s value to changes in market rates of interest. Modified duration identifies the potential gain/loss in value before it actually occurs. For example, a modified duration of 1.5 indicates that when and if a 1.0% change in market interest rates occurs, a 1.5% change in the security’s value will result. Investments with modified durations of one to three are considered to be relatively conservative. 2. As of June 30, 2021, maturities within one year exceeded the required minimum of $292,643,525 (two- thirds of current year operating budget for the city per the Fiscal Year 2020-21 operating budget adopted by the City Council). 3. As of June 30, 2021, the weighted average maturity of the LAIF underlying debt securities was 191 days. As of June 30, 2021, LAIF had a 0.4806% loss in market value. 4. As of June 30, 2021, the city’s investment portfolio included $1,500,000 of callable step-up notes at par. Dec. 14, 2021 Item #2 Page 99 of 209 Notes to the Financial Statements 87 Note 4. Due To and From Other Funds The following table shows amounts due from funds within the city to other funds within the city at June 30, 2021. Note 5. Advances To and From Other Funds The following table shows amounts advanced from governmental funds within the city to other funds within the city at June 30, 2021: Advances to and from other funds are primarily long-term advances used to fund capital projects in advance of related revenues. 1 The advance between the General Fund and the Habitat & Agricultural Management Fund is estimated to be repaid from future Habitat Mitigation Fees. Interest on the advance will compound annually at the average interest rate earned by the Treasurer’s Pool during the fiscal year. 2 The advance between the CFD No. 1 Fund and the Traffic Impact Projects Fund is estimated to be repaid over a 10-15 year period as Traffic Impact Fees are collected. 3 The advance between the Public Facilities Fees Fund and the Park Development Funds is estimated to be repaid at build-out. 4 The advance between the Affordable Housing Fund and the Section 8 Rental Assistance Fund is a short-term advance and will be repaid as rental payments due on port-in rental participants is collected by the city from the participating housing agencies. Due to Due from Other Funds Other Funds General Fund 993,748 $ 1 300,012 $ Other Governmental Funds: Community Development Block Grant 300,012 2 - Enterprise Funds: Carlsbad Municipal Water District - 1,048,262 Wastewater 46,534 1 - Nonmajor Solid Waste 7,980 1 - Totals 1,348,274 $ 1,348,274 $ Advances From Advances To Amount General Fund Other Governmental Funds: Habitat Mitigation 1,253,825$ 1 Other Governmental Funds:Other Governmental Funds: CFD No. 1 Traffic Impact Projects 1,525,948 2 Public Facilities Construction Park Development 5,650,000 3 Affordable Housing Section 8 Rental Assistance 94,116 4 8,523,889$ Dec. 14, 2021 Item #2 Page 100 of 209 Notes to the Financial Statements 88 Note 6. Capital Assets Capital asset activity was as follows for the year ended June 30, 2021: Balance at Balance at June 30, 2020 Increases Decreases June 30, 2021 Governmental activities: Capital assets, not being depreciated: Land (including right-of-way)155,896,231$ 4,723,365$ -$ 160,619,596$ Construction in progress 16,236,469 19,187,308 (17,269,529) 18,154,248 Total capital assets, not being depreciated 172,132,700 23,910,673 (17,269,529) 178,773,844 Capital assets, being depreciated: Buildings 138,281,470 - - 138,281,470 Improvements, other than buildings 93,825,851 5,063,874 - 98,889,725 Machinery and equipment 51,645,979 5,996,727 (5,422,027) 52,220,679 Infrastructure 734,252,385 4,004,939 - 738,257,324 Intangible assets 5,017,448 2,203,989 (737,789) 6,483,648 Total capital assets, being depreciated 1,023,023,133 17,269,529 (6,159,816) 1,034,132,846 Less accumulated depreciation for: Buildings (45,782,463) (2,859,311) - (48,641,774) Improvements, other than buildings (35,960,421) (3,685,622) - (39,646,043) Machinery and equipment (31,479,443) (3,753,574) 5,284,255 (29,948,762) Infrastructure (286,933,074) (15,074,482) - (302,007,556) Intangible assets (3,721,147) (28,258) 421,594 (3,327,811) Total accumulated depreciation (403,876,548) (25,401,247) 5,705,849 (423,571,946) Total capital assets being depreciated, net 619,146,585 (8,131,718) (453,967) 610,560,900 Governmental activities capital assets, net 791,279,285$ 15,778,955$ (17,723,496)$ 789,334,744$ Dec. 14, 2021 Item #2 Page 101 of 209 Notes to the Financial Statements 89 Note 6. Capital Assets (continued) Balance at Balance at June 30, 2020 Increases Decreases June 30, 2021 Business-type activities: Capital assets, not being depreciated: Land (including right-of-way)9,330,718$ -$ -$ 9,330,718$ Construction in progress 24,786,724 21,094,581 (24,500,954) 21,380,351 Total capital assets, not being depreciated 34,117,442 21,094,581 (24,500,954) 30,711,069 Capital assets, being depreciated: Buildings 41,103,821 71,646 - 41,175,467 Improvements, other than buildings 53,224,688 285,437 (377) 53,509,748 Machinery and equipment 13,890,645 73,312 - 13,963,957 Infrastructure 379,576,446 22,894,361 - 402,470,807 Wastewater treatment facility 60,308,682 2,677,411 (560,944) 62,425,149 Total capital assets, being depreciated 548,104,282 26,002,167 (561,321) 573,545,128 Less accumulated depreciation for: Buildings (12,238,699) (914,234) - (13,152,933) Improvements, other than buildings (41,006,047) (3,088,790) 287 (44,094,550) Machinery and equipment (3,133,498) (2,066,255) - (5,199,753) Infrastructure (120,598,237) (6,784,611) - (127,382,848) Wastewater treatment facility (38,765,741) (993,643) 560,944 (39,198,440) Total accumulated depreciation (215,742,222) (13,847,533) 561,231 (229,028,524) Total capital assets being depreciated, net 332,362,060 12,154,634 (90) 344,516,604 Business-type activities capital assets, net 366,479,502$ 33,249,215$ (24,501,044)$ 375,227,673$ Dec. 14, 2021 Item #2 Page 102 of 209 Notes to the Financial Statements 90 Note 6. Capital Assets (continued) Depreciation expense was charged to functions/programs of the primary government as follows: Note 7. Long-term Debt The following is a summary of changes in the principal balance of long-term debt for the year ended June 30, 2021: Governmental activities: General government 912,571$ Public safety 1,448,515 Community services 4,915,154 Public works 15,412,020 Capital assets held by the internal service funds (charged to various functions based on their usage of the assets)2,712,987 Total depreciation expense - governmental activities 25,401,247$ Business-type activities: Carlsbad Municipal Water District 5,914,562$ Wastewater 4,355,958 Golf course 3,577,013 Total depreciation expense - business-type activities 13,847,533$ Principal Principal Balance at Balance at Due Within July 1, 2020 Increases Decreases June 30, 2021 One Year Governmental activities: Obligations under capital lease 155,922 $ -$ 155,922 $ -$ -$ Total governmental activities 155,922 $ -$ 155,922 $ -$ -$ Principal Principal Balance at Balance at Due Within July 1, 2020 Increases Decreases June 30, 2021 One Year Business-type activities: Loans payable 15,326,593 $ 43,714 $ 1,620,408 $ 13,749,899 $ 1,658,821 $ Total business type activities 15,326,593 $ 43,714 $ 1,620,408 $ 13,749,899 $ 1,658,821 $ Dec. 14, 2021 Item #2 Page 103 of 209 Notes to the Financial Statements 91 Note 7. Long-term Debt (continued) No long-term governmental debt exists at June 30, 2021. Business-type long-term debt at June 30, 2021 is comprised of the following issues: Balance at Business-type long-term debt June 30, 2021 2005 Carlsbad Municipal Water District loan agreement with the State Water Resources Control Board totaling $9,694,504. Principal is due in varying amounts ranging from $586,023 to $631,082 on June 1 of each year through 2025, interest payable on June 1 each year at 2.5% per annum. Payable from recycled water user fees.2,433,468$ 2006 Carlsbad Municipal Water District loan agreement with the State Water Resources Control Board totaling $19,382,546. Principal is due in varying amounts ranging from $1,072,798 to $1,201,977 on April 1 of each year through 2027, interest payable on April 1 of each year at 2.3% per annum. Payable from recycled water user fees. 6,818,453 2014 Carlsbad Municipal Water District loan agreement, as revised, with the State Water Resources Control Board authorized to $22,150,000. Principal and interest will not be due until Dec. 2023. Interest is payable on Dec. 31 of each year at 1.0% per annum. Principal due under the current amortization schedule ranges from $129,308 to $172,563. Payable from recycled water user fees.4,497,978 Subtotal business-type long-term debt 13,749,899 Less current portion (1,658,821) Total long-term portion of business-type debt 12,091,078 $ Dec. 14, 2021 Item #2 Page 104 of 209 Notes to the Financial Statements 92 Note 7. Long-term Debt (continued) The aggregate maturities of long-term debt are as follows: The aggregate maturities for the business-type activities reflect a recent $43,714 increase in the state water loan. The city is currently drawing down loan proceeds from an authorized $22.1 million for the expansion of the recycled water facility. The loan amount will continue to adjust as future draws are made. Note 8. Rate Covenants and Pledged Revenue Rate covenants The CMWD loan agreements with the State Water Resources Control Board requires that CMWD set its charges for services and rates for fees each year at rates sufficient to produce net revenues (after paying the operating and maintenance expenses of CMWD, excluding depreciation) of at least one times debt service for that year. All of the water revenues of CMWD are pledged to meet these rate covenants and to secure related debt. All rate covenants requirements were met for the fiscal year ended June 30, 2021. Pledged revenue The city has a number of debt issuances outstanding that are collateralized by the pledging of certain revenues. The purpose for which the proceeds of the related debt issuances were utilized are disclosed in the debt descriptions of the accompanying notes. For the current year, debt service payments as a percentage of the pledged gross revenue (net of certain expenses where so required by the debt agreement) are indicated in the table below. These percentages also approximate the relationship of debt service to pledged revenues for the remainder of the term of the commitment: Year ended June 30: Principal Interest 2022 1,658,821 $ 217,661 $ 2023 1,698,146 178,336 2024 1,867,713 183,057 2025 1,910,220 140,550 2026 1,306,860 97,050 2027-2031 1,881,566 219,496 2032-2036 714,255 157,186 2037-2041 750,689 120,751 2042-2046 788,982 82,459 2047-2051 829,228 42,213 2052-2053 343,419 5,159 13,749,899 $ 1,443,918 $ Business-type Activities Description of Pledged Annual Amount of Pledged Annual Debt Service Pledged Revenue as a Revenue Revenue (net of expenses)Payments Percentage of Debt Water revenues 6,367,037$ 1,876,482$ 339% Dec. 14, 2021 Item #2 Page 105 of 209 Notes to the Financial Statements 93 Note 9. Debt without Government Commitment In the opinion of city officials, the bonds listed below are not payable from any revenues or assets of the city, and neither the full faith and credit nor the taxing power of the city, the State of California, nor any political subdivision thereof, is obligated to the payment of the principal or interest on the bond. Accordingly, no liability has been recorded in the accompanying financial statements. Limited obligation improvement bonds As of June 30, 2021, the city has two series of assessment district bonds outstanding in the amount of $27,685,000. These bonds were issued under the provisions of the Improvement Bond Act of 1915 and were used to finance public infrastructure improvement projects. The city collects assessments to pay the bond debt. These monies are accounted for in the assessment districts’ custodial funds. Special tax bonds As of June 30, 2021, the city has two series Community Facilities District (CFD) bonds outstanding in the amount of $18,050,000. These bonds were issued under the provisions of the Mello-Roos Community Facilities Act of 1982 and were used to finance public infrastructure improvement projects. The city collects special taxes to pay the bond debt. These monies are accounted for in the CFDs’ custodial funds. Mortgage revenue bonds Multi-Family Housing Revenue Bonds are issued to provide construction and permanent financing to developers of multi-family residential rental projects located in the city which will be partially occupied by persons of low or moderate income. The total amount of mortgage revenue bonds outstanding as of June 30, 2021 is $16,250,000. The bonds, together with interest thereon, are limited obligations of the city payable solely from bond proceeds, revenues and other amounts derived solely from home mortgage and developer loans secured by first deeds of trust, irrevocable letters of credit, and irrevocable surety bonds. Dec. 14, 2021 Item #2 Page 106 of 209 Notes to the Financial Statements 94 Note 10. Fund Balances The following is a summary of the components of fund balances as of June 30, 2021: Community General Facilities Capital Fund Balances General District No. 1 Construction Nonspendable: Inventory 10,564 $ -$ -$ Prepaid items 649,970 - - Loans receivable 1,531,162 - - Advances to other funds 1,253,825 - - Totals 3,445,521 - - Restricted for: Affordable housing - - - Lighting and landscaping districts - - - Capital projects - 96,709,981 - General government - - - Public safety - - - Community services - - - Totals - 96,709,981 - Committed to: Community activity grants 1,000,000 - - Totals 1,000,000 - - Assigned to: General government 13,388,622 - - Public safety 2,269,806 - - Community services 5,084,504 - - Public works 3,273,135 - - Deposits 10,724,357 - - CalPERS Contribution 6,400,000 - - City Council Goals 7,194,499 - - Capital projects 7,780,056 - 41,842,109 Totals 56,114,979 - 41,842,109 Unassigned: Unassigned 89,624,207 - - Economic uncertainty 9,635,909 - - Totals 99,260,116 - - Total fund balances 159,820,616 $ 96,709,981 $ 41,842,109 $ Governmental Funds Dec. 14, 2021 Item #2 Page 107 of 209 95 Other Infrastructure Park Governmental Replacement Development Funds Total -$ -$ -$ 10,564 $ - - 856 650,826 - - - 1,531,162 - - - 1,253,825 - - 856 3,446,377 - - 40,988,135 40,988,135 - - 9,225,568 9,225,568 - 8,497,420 107,428,439 212,635,840 - -941,429 941,429 - -488,501 488,501 - - 4,820,668 4,820,668 - 8,497,420 163,892,740 269,100,141 - - - 1,000,000 - - - 1,000,000 - - - 13,388,622 - - - 2,269,806 - - - 5,084,504 - - - 3,273,135 - - - 10,724,357 - - - 6,400,000 - - - 7,194,499 124,364,469 - - 173,986,634 124,364,469 - - 222,321,557 - - (228,197) 89,396,010 - - - 9,635,909 - - (228,197) 99,031,919 124,364,469 $ 8,497,420 $ 163,665,399 $ 594,899,994 $ Dec. 14, 2021 Item #2 Page 108 of 209 Notes to the Financial Statements 96 Note 10. Fund Balances (continued) Fund balances are reported in the fund statements in the following classifications: Nonspendable Fund Balance Nonspendable Fund Balance includes amounts that cannot be spent because they are either not spendable in form (such as inventory) or legally or contractually required to be maintained intact (such as endowments). Spendable Fund Balance Restricted Fund Balance – this includes amounts that can be spent only for specific purposes stipulated by constitution, external resource providers, or through enabling legislation. If the City Council action limiting the use of funds is included in the same action (legislation) that created (enables) the funding source, then it is restricted. Committed Fund Balance – this includes amounts that can be used only for the specific purposes determined by a formal action of the City Council. It includes legislation (council action) that can only be overturned by new legislation requiring the same type of voting consensus that created the original action. Therefore, if the City Council action limiting the use of the funds is separate from the action (legislation) that created (enables) the funding source, then it is committed, not restricted. The city considers a resolution to constitute the formal action of the City Council that is necessary to commit fund balance. Assigned Fund Balance – this includes amounts that are designated or expressed by the City Council, but does not require a formal action like a resolution or ordinance. The City Council has delegated the authority for the City Manager to carry forward certain unspent budget amounts for specific purposes if the amount is equal to or less than $100,000 to the next fiscal year. The City Council has authorized, through a resolution, that all outstanding encumbrances at the end of the fiscal year and certain unspent budgeted amounts above $100,000 to be carried forward into the next fiscal year. The assigned fund balance also includes an additional discretionary contribution to CalPERS and a transfer to the city’s long-term capital funds approved by the City Council through a resolution, and deposits that are required to be returned to developers. These amounts are shown as assigned fund balance at the end of the fiscal year: • General Government – Unspent funds for innovation projects; leadership team training; Faraday Center offices ClickShare installation; conference registration; and Program management Certificate training. • Public Safety – Homeless outreach team vehicles; reserve aerial ladder truck; fire station computers; fire station iPad replacements; Fire Department wellness pilot program; Fire Department utility terrain vehicle; firefighting foam mandate costs; self-contained breathing apparatus storage cylinder mandate costs; Fire Department office furniture; fire records online payment form; Fire Department digital dashboard equipment; temporary pet shelter program; miscellaneous programming; barriers for the Village Faire; radio encryption installation; Police Department Nakoa wellness program. Encumbrances rolled forward include fire apparatus replacement and encryption software upgrades for radios, among other items. • Community Services – unspent developer deposits; unspent planning grant funds; unspent Library & Cultural Arts grant funds; environmental analysis for the Housing Element; Mills Act creation; digital matrix processor; eBulletin Board software upgrade; laptop purchases; arts education consultant; arts maintenance contract; office renovation and security; Leo Carrillo market lighting; property boundary surveys; and master plan costs. Encumbrances rolled forward include citywide parks restroom custodial maintenance services agreement; Interfaith community services; rental assistance; building plan check consultant; planning consultant for developing design review standards; landscape plan check and inspection agreement; and other professional services and items. Dec. 14, 2021 Item #2 Page 109 of 209 Notes to the Financial Statements 97 Note 10. Fund Balances (continued) • Public Works – fall safety system. Encumbrances rolled forward include electrical maintenance services agreement; mechanical/HVAC agreement; vehicle replacements; citywide street sweeping services; citywide facility custodial maintenance services; Urban Corps of San Diego citywide litter removal and storm drain inspection and cleaning services; solid waste, recycling, and organics management services among other items. • City Council Goals – Fire Department Standards of Cover workplan execution, including two ambulances and additional paramedic firefighters; homeless workplan implementation, including the hotel/motel voucher program; and a citizens committee. • Deposits to be reimbursed • CalPERS ADC – CalPERS Additional Discretionary Contribution • COVID-19 – Unspent COVID-19 Economic Revitalization Funds. Encumbrances rolled forward include small business loan services, and website content development and social media management services. • Capital projects – City Council assigned general fund surplus budget from fiscal year 2020-21 to fund the city’s long-term capital project fund. Unassigned Fund Balance – this includes the remaining spendable amounts which are not included in one of the other classifications. The General Fund is the only fund that reports a positive unassigned fund balance amount. It is the city’s policy that restricted resources will be applied first, followed by (in order of application) committed, assigned, and unassigned resources, in the absence of a formal policy adopted by the City Council. Note 11. General Fund Balance Policy Pursuant to Council Policy 74, the city is committed to maintaining General Fund reserves at a target of 40% of General Fund annual operating expenditures. The total reserve level is calculated using the prior fiscal years adopted General Fund budgeted expenditures. This reserve is for unforeseen emergencies or catastrophic impacts upon the city. Reserves are evaluated annually in conjunction with the development of the city’s annual operating budget process. Staff report to the City Council annually on the status of the reserve levels relative to this policy. Note 12. Accumulated Fund Deficits/Negative Net Position The following funds reported deficits in fund balances or net position as of June 30, 2021: The deficit in the Habitat and Agricultural Management Fund is the result of the General Fund advancing money for the purchase of mitigation credits in a prior fiscal year. The advance is returned to the General Fund in periodic payments from developer impact fees collected in the Habitat and Agricultural Management Fund. Deficit BalanceSpecial Revenue Funds: Habitat and Agricultural Management (228,197)$ Dec. 14, 2021 Item #2 Page 110 of 209 Notes to the Financial Statements 98 Note 13. Interfund Transfers Interfund transfers for the year ended June 30, 2021, consisted of the following: Transfers are used to: (1) move revenues and expenditures to the appropriate funds; (2) use unrestricted revenues collected in the General Fund to finance various programs accounted for in other funds in accordance with Council authorizations; and (3) move excess cash collected for future capital replacement in accordance with Council authorization. The transfer from the General Fund to the Golf Course Fund totaling $47,031,506 was due to the recognition that the repayment of advances from the General Fund to the Golf Course Fund loans from initial golf course construction and subsequent operating costs is not scheduled to happen in the near and foreseeable future. Note 14. Risk Management The city is exposed to various risks of loss related to its operations, including losses associated with errors and omissions and injuries to employees and members of the public. The city uses a Risk Management Self-Insurance Fund and a Workers’ Compensation Fund (all internal service funds) to account for and finance its uninsured risks of loss. All other funds of the city make payments to these funds based on annual estimates of the amounts needed to pay prior and current year claims and to establish a reserve for catastrophic losses. Transfers Out Amount General Fund Gas Tax Fund 10,000$ Capital Project Funds: General Capital Construction General Fund 4,500,000 Infrastructure Replacement General Fund 4,500,000 Enterprise Funds: Storm Water Protection General Fund 281,040 Golf Course General Fund 47,031,506 Internal Service Funds: Fleet Maintenance and Replacement Storm Water Protection 40,000 Special Revenue Funds: Financing Districts General Fund 700,000 Section 8 Rental Assistance Affordable Housing 50,000 57,112,546$ Transfers In Dec. 14, 2021 Item #2 Page 111 of 209 Notes to the Financial Statements 99 Note 14. Risk Management (continued) Beginning July 1, 2019, the city joined the California Insurance Pool Authority (CIPA) for excess general liability coverage. This coverage was purchased directly through the pool’s manager, Kiser & Company. Under this program, the city’s coverage is a maximum of $43,000,000 per occurrence with a self-insured retention of $1,000,000. CIPA has been in existence since 1978. At June 30, 2021, the unrestricted fund equity for the Risk Management Self- Insurance Fund was $948,337. Funds used by the Risk Management Fund to liquidate the claims liability predominantly come from the General Fund (81.36%), the Water Fund (6.64%), the Solid Waste Fund (3.72%) and the Wastewater Fund (2.97%). The city is self-insured for workers’ compensation claims for claims up to $1,250,000 and insured by Safety National thereafter and up to statutory limits. At June 30, 2021, the unrestricted fund equity for the Workers’ Compensation Self-Insurance Fund was $2,915,297. Funds used by the Workers’ Compensation Fund to liquidate the claims liability predominantly come from the General Fund (95.68%), the Water Fund (1.59%) and the Wastewater fund (0.71%). The estimated claims payable reported at June 30, 2021 is based on the requirements of GASB, which requires that a liability for claims be reported if information prior to the issuance of the financial statements indicates that it is probable that a liability has been incurred at the date of the financial statements and the amount of the loss can be reasonably estimated. Settled cases did not exceed insurance coverage during the past fiscal year. Changes in the estimated claims payable amounts in fiscal years 2019-20 and 2020-21 for the two internal service funds are as follows: Expense and Beginning Changes in Claim Ending Balance Estimates Payments Balance Risk Management Fund: 2019-20 2,897,988 1,284,264 718,182 3,464,070 2020-21 3,464,070 1,297,338 1,140,040 3,621,368 Workers’ Compensation Fund: 2019-20 10,197,793 2,993,863 2,335,294 10,856,362 2020-21 10,856,362 2,637,645 2,969,354 10,524,653 Claims Dec. 14, 2021 Item #2 Page 112 of 209 Notes to the Financial Statements 100 Note 15. Joint Ventures Encina Water Pollution Control Facilities The Encina Water Pollution Control Facilities (the facilities) are wastewater facilities owned jointly by the cities of Carlsbad, Vista and Encinitas and the Leucadia Wastewater District, the Buena Vista Sanitation District and the Vallecitos Water District. The Encina Wastewater Authority (EWA) is a joint powers authority established to operate and administer the facilities. It is responsible for the management, maintenance and operations of the joint system. Each member agency has a specified percentage of ownership in the various components of the Encina Water Pollution Control Facilities that varies from component to component. Accordingly, each member agency reports its undivided interest in the facilities as a part of that member agency’s capital assets. As of June 30, 2021, the undivided interest of each member agency in the various components of the Encina Water Pollution Control Facilities aggregated as follows: City of Vista 25% City of Carlsbad 24% Vallecitos Water District 23% Leucadia Wastewater District 17% Buena Sanitation District 7% City of Encinitas 4% EWA does not recognize net income or loss. Net operating expenditures in excess of users’ assessments are treated as accounts receivable on EWA’s books and charged to users’ accounts in the following year. Conversely, users’ assessments in excess of net operating expenditures are treated as a liability and credited against users’ accounts, also in the following year. Under this basis, net operating loss (before member billings) for EWA totaled $47,551 in fiscal year 2019-20. The financial statements of EWA can be obtained at www.encinajpa.com. Encina Financing Joint Powers Authority The Encina Financing Joint Powers Authority (the Authority) was created on February 1, 1989 between the City of Carlsbad (Carlsbad), the City of Vista (Vista), the Buena Vista Sanitation District (Buena) and the Leucadia County Water District (Leucadia). The primary purpose of the Authority is to issue revenue bonds in order to finance the expansion of the facility. The Authority is governed by a Board of Directors, which consists of one director appointed by each member. The financial statements of the Authority can be obtained at the city’s Administrative Services Department. The city’s share in the accounts of the Authority is recorded in the Wastewater Enterprise Fund. The expansion of the facility is shown as a capital asset of the Wastewater Enterprise Fund. Dec. 14, 2021 Item #2 Page 113 of 209 Notes to the Financial Statements 101 Note 16. Pension Plan Plan description, benefits provided and employees covered All qualified permanent and probationary employees are eligible to participate in the city’s Safety (sworn police and fire) and Miscellaneous (all other) Plans (the Plans), agent multiple-employer defined benefit pension plans administered by CalPERS, which acts as a common investment and administrative agent for its participating member employers. A full description of the Plans regarding number of employees covered, benefit provisions, assumptions (for funding, but not accounting purposes), and membership information are listed in the Plan’s June 30, 2020 Annual Actuarial Valuation Reports (funding valuations). Details of the benefits provided can be obtained in Appendix B of the Actuarial Valuation Report. This report and CalPERS’ audited financial statements are publicly available reports that can be obtained at CalPERS’ website. Benefits provided CalPERS provides service retirement and disability benefits, annual cost of living adjustments, and death benefits to plan members, who must be public employees and beneficiaries. Benefits are based on years of credited service, equal to one year of full-time employment. The Plans’ provisions and benefits in effect at June 30, 2021, are summarized as follows: On or after Prior to November 28, 2011 to On or after Hire date November 28, 2011 December 31, 2012 January 1, 2013 Benefit formula 3% @ 60 2% @ 60 2% @ 62 Benefit vesting schedule 5 years of service 5 years of service 5 years of service Benefit payments monthly for life monthly for life monthly for life Retirement age 50 - 60 50 - 63 52 - 67 Monthly benefits as a % of eligible compensation 2.0% to 3.0% 1.092% to 2.418% 1.0% to 2.5% Required employee contribution rates 8.00%7.00%7.50% Required employer contribution rates 15.119%12.601%8.411% $5,486,476 Miscellaneous Required employer payment of unfunded liability: On or after Prior to October 4, 2010 to On or after Hire date October 4, 2010 December 31, 2012 January 1, 2013 Benefit formula 3% @ 50 2% @ 50 2.7% @ 57 Benefit vesting schedule 5 years of service 5 years of service 5 years of service Benefit payments monthly for life monthly for life monthly for life Retirement age 50 50 - 55 50 - 57 Monthly benefits, as a % of eligible compensation 3%2.0% to 2.7% 2.0% to 2.7% Required employee contribution rates 9.00%9.00%13.50% Required employer contribution rates 23.412%20.592%13.905% Required employer payment of unfunded liability:$4,008,843 Safety Dec. 14, 2021 Item #2 Page 114 of 209 Notes to the Financial Statements 102 Note 16. Pension Plan (continued) Employees covered As of June 30, 2019, the following employees were covered by the benefit terms for each Plan: Contribution description Section 20814(c) of the California Public Employees’ Retirement Law (PERL) requires that the employer contribution rates for all public employers be determined on an annual basis by the actuary and shall be effective on the July 1 following notice of a change in the rate. The total plan contributions are determined through the CalPERS’ annual actuarial valuation process. The actuarially determined rate is the estimated amount necessary to finance the costs of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability. The employer is required to contribute the difference between the actuarially determined rate and the contribution rate of employees. For the measurement period ending June 30, 2019 (the measurement date), the average active employee contribution rate ranged from 7.0% to 8.0% of annual pay for miscellaneous employees and 9.0% to 13.5% of annual pay for safety employees, and the average employer’s contribution rate is 12.787% of annual payroll for miscellaneous employees and 21.401% of annual payroll for safety employees. Employer contribution rates may change if plan contracts are amended. Payments made by the employer to satisfy contribution requirements that are identified by the pension plan terms as plan member contribution requirements are classified as plan member contributions. Actuarial methods and assumptions used to determine total pension liability The June 30, 2019 valuation was rolled forward to determine the June 30, 2020 total pension liability, based on the following actuarial methods and assumptions: Actuarial cost method Entry Age Normal in accordance with the requirements of GASB 68 Actuarial assumptions Discount rate 7.15% Inflation 2.50% Salary increases Varies by entry age and service Mortality rate table* Derived using CalPERS' membership data for all funds Post-retirement benefit increase Contract COLA up to 2.5% until Purchasing Power Protection Allowance Floor on purchasing power applies; 2.50% thereafter * The mortality table used was developed based on CalPERS-specific data. The probabilities of mortality are based on the 2017 CalPERS Experience Study for the period from 1997 to 2015. Pre-retirement and post-retirement mortality rates include 15 years of projected mortality improvement using 90% of Scale MP-2016 published by the Society of Actuaries. For more details on this table, please refer to the CalPERS Experience Study and Review of Actuarial Assumptions report from December 2017 that can be found on the CalPERS website. Miscellaneous Safety Inactive employees or beneficiaries currently receiving benefits 588 258 Inactive employees or beneficiaries currently not yet receiving benefits 497 101 Active employees 525 199 Total 1,610 558 Dec. 14, 2021 Item #2 Page 115 of 209 Notes to the Financial Statements 103 Note 16. Pension Plan (continued) Discount rate The discount rate used to measure the total pension liability was 7.15%. The projection of cash flows used to determine the discount rate assumed that contributions from plan members will be made at the current member contribution rates and that contributions from employers will be made at statutorily required rates, actuarially determined. Based on those assumptions, the Plans’ fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return on plan investments was applied to all periods of projected benefit payments to determine the total pension liability. Long-term expected rate of return The long-term expected rate of return on pension plan investments was determined using a building-block method in which expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. In determining the long-term expected rate of return, CalPERS took into account both short-term and long-term market return expectations as well as the expected pension fund cash flows. Using historical returns of all the funds’ asset classes, expected compound (geometric) returns were calculated over the short-term (first 10 years) and the long-term (11+ years) using a building-block approach. Using the expected nominal returns for both short-term and long-term, the present value of benefits was calculated for each fund. The expected rate of return was set by calculating the rounded single equivalent expected return that arrived at the same present value of benefits for cash flows as the one calculated using both short-term and long-term returns. The expected rate of return was then set equal to the single equivalent rate calculated above and adjusted to account for assumed administrative expenses. The expected real rates of return by asset class are as follows: Current Target Real Return Real Return Asset Class¹Allocation Years 1 - 10²Years 11+3 Public equity 50.0%4.80%5.98% Global fixed income 28.0 1.00 2.62 Inflation sensitive assets 0.0 0.77 1.81 Private equity 8.0 6.30 7.23 Real estate 13.0 3.75 4.93 Liquidity 1.0 0.00 (0.92) ¹ In the System's Consolidated Annual Financial Report, fixed income is included in global debt securities; liquidity is included in short-term investment; inflation assets are included in both global equity securities and global debt securities. 2 An expected inflation of 2.0% used for this period. 3 An expected inflation of 2.92% used for this period. Dec. 14, 2021 Item #2 Page 116 of 209 Notes to the Financial Statements 104 Note 16. Pension Plan (continued) Pension plan fiduciary net position CalPERS issues a publicly available financial report that includes financial statements and required supplementary information. That report may be obtained on the California Public Employees’ Retirement System website at www.calpers.ca.gov under forms and publications. Changes in net pension liability The following tables show the changes in net pension liability recognized over the measurement period. Miscellaneous Safety Plan Plan Total Net pension liability 87,678,609$ 78,794,853$ 166,473,462$ Deferred outflows of resources - pension related items 26,795,767 19,376,937 46,172,704 Deferred inflows of resources - pension related items (536,120) (355,388) (891,508) Pension expense 7,160,510 12,658,758 19,819,268 Total Pension Plan Fiduciary Net Pension Liability Net Position Liability/(Asset) (a)(b)(c) = (a) - (b) Balance at 6/30/2019 401,846,361$ 322,051,935$ 79,794,426$ Changes recognized for the measurement period: • Service cost 7,748,623 - 7,748,623 • Interest on the total pension liability 28,392,127 - 28,392,127 • Differences between expected and actual experience 1,167,225 - 1,167,225 • Changes of assumptions - - - • Plan to plan resource movement - - - • Contributions from the employer - 10,637,969 (10,637,969) • Contributions from employees - 3,338,003 (3,338,003) • Net investment income - 15,901,834 (15,901,834) • Benefit payments1 (19,590,424) (19,590,424) - • Administrative expense - (454,014) 454,014 • Other miscellaneous income/(expense)- - - Net changes during fiscal year 2019-20 17,717,551 9,833,368 7,884,183 Balance at 6/30/2020 419,563,912$ 331,885,303$ 87,678,609$ 1 Includes refunds of employee contributions Increase (Decrease)Miscellaneous Plan Dec. 14, 2021 Item #2 Page 117 of 209 Notes to the Financial Statements 105 Note 16. Pension Plan (continued) Sensitivity of the net pension liability to changes in the discount rate The following presents the net pension liability of the Plan as of the measurement date, calculated using the discount rate of 7.15%, as well as what the net pension liability would be if it were calculated using a discount rate that is 1 percentage-point lower (6.15%) or 1 percentage-point higher (8.15%) than the current rate: Recognition of gains and losses Under GASB 68, gains and losses related to changes in total pension liability and fiduciary net position are recognized in pension expense systematically over time. Total Pension Plan Fiduciary Net Pension Liability Net Position Liability/(Asset) (a)(b)(c) = (a) - (b) Balance at 6/30/2019 314,256,438$ 243,910,793$ 70,345,645$ Changes recognized for the measurement period: • Service cost 6,578,451 - 6,578,451 • Interest on the total pension liability 22,410,699 - 22,410,699 • Differences between expected and actual experience 4,071,899 - 4,071,899 • Changes of assumptions - - - • Plan to plan resource movement - - - • Contributions from the employer - 10,321,371 (10,321,371) • Contributions from employees - 2,581,027 (2,581,027) • Net investment income - 12,053,297 (12,053,297) • Benefit payments1 (16,362,437) (16,362,437) - • Administrative expense - (343,854) 343,854 • Other miscellaneous income/(expense)- - - Net changes during fiscal year 2019-20 16,698,612 8,249,404 8,449,208 Balance at 6/30/2020 330,955,050$ 252,160,197$ 78,794,853$ 1 Includes refunds of employee contributions Increase (Decrease) Safety Plan Discount Rate - 1%Current Discount Discount Rate + 1% (6.15%)Rate (7.15%)(8.15%) Plan's Net Pension Liability - Miscellaneous 141,847,666$ 87,678,609$ 42,773,187$ Plan's Net Pension Liability - Safety 124,400,833$ 78,794,853$ 41,465,389$ Dec. 14, 2021 Item #2 Page 118 of 209 Notes to the Financial Statements 106 Note 16. Pension Plan (continued) The first amortized amounts are recognized in pension expense for the year the gain or loss occurs. The remaining amounts are categorized as deferred inflows and deferred outflows of resources related to pensions and are to be recognized in future pension expense. The amortization period differs depending on the source of the gain or loss: Difference between projected and actual earnings on pension plan investments 5-year straight-line amortization All other amounts Straight-line amortization over the expected average remaining service lifetime (EARSL) of all members that are provided with benefits (active, inactive, and retired) as of the beginning of the measurement period The expected average remaining service lifetime (EARSL) is calculated by dividing the total future service years by the total number of plan participants (active, inactive, and retired). The EARSL for the Miscellaneous Plan for the June 30, 2020 measurement date is 3.2 years, which was obtained by dividing the total service years of 5,119 (the sum of remaining service lifetimes of the active employees) by 1,606 (the total number of participants: active, inactive, and retired). Note that inactive employees and retirees have remaining service lifetimes equal to zero. Also note that total future service is based on the members’ probability of decrementing due to an event other than receiving a cash refund. The EARSL for the Safety Plan for the June 30, 2020 measurement date is 4.7 years, which was obtained by dividing the total service years of 2,624 (the sum of remaining service lifetimes of the active employees) by 558 (the total number of participants: active, inactive, and retired). Note that inactive employees and retirees have remaining service lifetimes equal to zero. Also note that total future service is based on the members’ probability of decrementing due to an event other than receiving a cash refund. Pension expense and deferred outflows and deferred inflows of resources related to Pensions For the measurement period ending June 30, 2020 (the measurement date), the city recognized a pension expense of $19,819,268 for the Plans. As of the June 30, 2020 measurement date, the city reports other amounts for the Miscellaneous Plan as deferred outflows and deferred inflows of resources related to pensions as follows: Deferred Outflows Deferred Inflows of Resources of Resources Pension contributions subsequent to measurement date 16,501,759$ -$ Difference between expected and actual experience 1,632,200 (188,998) Changes of assumptions - (166,390) Net difference between projected and actual earnings on pension plan investments 3,491,543 - Total 21,625,502$ (355,388)$ Dec. 14, 2021 Item #2 Page 119 of 209 Notes to the Financial Statements 107 Note 16. Pension Plan (continued) As of the June 30, 2020 measurement date, the city reports other amounts for the Safety Plan as deferred outflows and deferred inflows of resources related to pension as follows: For the Miscellaneous Plan, $16,501,759 reported as deferred outflows of resources related to employer contributions subsequent to the measurement date, and for the Safety Plan, $14,253,194 reported as deferred outflows of resources related to employer contributions subsequent to the measurement date, will be recognized as a reduction of the net pension liability in the fiscal year ended June 30, 2022. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to the Miscellaneous Plan pensions will be recognized as pension expense as follows: Other amounts reported as deferred outflows of resources and deferred inflows of resources related to the Safety Plan pensions will be recognized as pension expense as follows: Deferred Outflows Deferred Inflows of Resources of Resources Pension contributions subsequent to measurement date 14,253,194$ -$ Difference between expected and actual experience 5,461,988 (92,009) Changes of assumptions 2,173,295 (444,111) Net difference between projected and actual earnings on pension plan investments 2,658,725 - Total 24,547,202$ (536,120)$ Deferred Measurement Period Outflows/(Inflows) of Ended June 30:Resources 2021 (20,906)$ 2022 1,573,196 2023 1,840,289 2024 1,375,776 2025 - Thereafter - Deferred Measurement Period Outflows/(Inflows) of Ended June 30:Resources 2021 3,198,758$ 2022 2,398,823 2023 2,512,576 2024 1,647,731 2025 - Thereafter - Dec. 14, 2021 Item #2 Page 120 of 209 Notes to the Financial Statements 108 Note 17. Other Postemployment Benefits (OPEB) The city offers other postemployment benefits in the form of health benefits to two employee groups: City of Carlsbad employees and former CMWD employees. The majority of city and former CMWD employees are under the city defined benefit agent multiple-employer plan. Benefit descriptions by employee group Former Carlsbad Municipal Water District (CMWD) employees The benefit plan is for active and retired employees who were employed with CMWD at the time CMWD was acquired by the city. Per Resolution No. 614, all former employees of CMWD (including dependents) are eligible for postretirement health care benefits if they voluntarily retire after the age of 50, with no less than five years of service and whose age, combined with years of service, equals 70 or more. The city pays for 100% of the health insurance premiums which is coordinated with Medicare and other benefits provided by federal and state law, when available, to the extent it reduces the cost of insurance premiums. This plan is administered by CalPERS. City of Carlsbad employees City employees are offered health insurance coverage under the Public Employees’ Medical and Hospital Care Act (PEMHCA), which is administered by CalPERS. Under PEMHCA, the city is required to pay a small portion of the monthly medical premiums of retired employees (considered a subsidy), if the retired employees continue their medical coverage under PEMHCA. Surviving spouses and domestic partners of eligible retirees are eligible for the city subsidy. Surviving spouses and domestic partners of deceased active members are eligible for the city subsidy only if the employee had attained age 50 with five years of service. The city pays a monthly subsidy per eligible employee/retiree regardless of coverage elected: Calendar Year 2019 $136.00 Calendar Year 2020 139.00 Calendar Year 2021 143.00 Thereafter, the subsidy is adjusted annually to reflect changes in the medical component of the Consumer Price Index. California Public Employer’s Retiree Benefit Trust Program The city is participating in the California Employer’s Retiree Benefit Trust Program (CERBT) through irrevocable trust agreements for both plans. CERBT is administered by CalPERS. The city’s OPEB fiduciary net position is included in the CERBT Schedule of Changes in Fiduciary Net Position by Employer report. That report may be obtained on the California Public Employees’ Retirement System website at www.calpers.ca.gov under forms and publications. Dec. 14, 2021 Item #2 Page 121 of 209 Notes to the Financial Statements 109 Note 17. Other Postemployment Benefits (continued) Employees covered As of the June 30, 2020, the measurement date, the following employees were covered by the benefit terms for each benefit tier: Contributions The obligation of CMWD to contribute to the CMWD plan is established and may not be amended by the CMWD Board. The obligation of the city to contribute to the city plan is established, and as long as the city is a member of PEMCHA, may not be amended by the City Council. The City Council does have the authority to change health insurance coverage outside of PEMHCA, which could change the funding obligation for city employees. Employees are not required to contribute to the plan. The city and CMWD’s contributions are based on the actuarially determined contribution (ADC), an amount actuarially determined in accordance with the parameters of GASB. The ADC represents a level of funding that, if paid on an ongoing basis, is projected to cover the normal cost each year and to amortize any unfunded actuarial liabilities (or funding excess) over a period not to exceed 30 years on a “closed” basis. The city’s and CMWD’s contributions are as follows: Inactive employees or beneficiaries currently receiving benefits 257 Inactive employees or beneficiaries currently not yet receiving benefits 293 Active employees 779 Total 1,329 Fiscal Year 2020-21 Cash Contributions 626,418 $ Fiscal Year 2020-21 Estimated Implied Subsidy Payments 448,323 Administrative expenses paid outside of trust 5,816 Fiscal Year 2020-21 Trust Contributions 100,000 Total Contributions 1,180,557 $ Dec. 14, 2021 Item #2 Page 122 of 209 Notes to the Financial Statements 110 Note 17. Other Postemployment Benefits (continued) Net OPEB liability The city’s net OPEB liability was measured as of June 30, 2020 and the total OPEB liability used to calculate the net OPEB liability was determined by an actuarial valuation dated June 30, 2019, based on the actuarial methods and assumptions shown below: Actuarial Cost Method: Entry Age Normal Actuarial Assumptions: Discount Rate 7.00% Inflation 2.75% Salary Increases 3.00% Investment Rate of Return 7.00% with a 45% to 50% confidence based on Bartel Associates modeling for CERBT Strategy 1. Mortality Rate1 Derived using CalPERS’ Membership Data for all funds. Pre-Retirement Turnover2 Derived using CalPERS’ Membership Data for all funds. Healthcare Trend Rate3 Based in part on premium experience. Notes: 1. Based on CalPERS 1997-2015 Experience Study. The Experience Study Reports may be accessed on the CalPERS website www.calpers.ca.gov under Forms and Publications. 2. Based on CalPERS 1997-2015 Experience Study for Miscellaneous Employees. The Experience Study Reports may be accessed on the CalPERS website www.calpers.ca.gov under Forms and Publications. 3. Short-term healthcare trends were developed in consultation with Axene Health Partner’s healthcare actuaries. Long-term healthcare trend developed using Society of Actuaries’ Getzen Model of Long-Run Medical Cost Trends. Dec. 14, 2021 Item #2 Page 123 of 209 Notes to the Financial Statements 111 Note 17. Other Postemployment Benefits (continued) The target allocation and best estimates of arithmetic real rates of return for each major asset class are summarized in the following table: CERBT Strategy 1 Asset Class Target Allocation Long-Term Expected Real Rate of Return Global Equity 59% 4.82% Fixed Income 25% 1.47% TIPS 5% 1.29% Commodities 3% 0.84% REITs 8% 3.76% Total 100% Notes: 1. The long-term expected rate of return is 7.00%. 2. Assumed long-term rate of inflation is 2.75%. Discount rate The discount rate used to measure the total OPEB liability was 7.00%. The projection of cash flows used to determine the discount rate assumed that city contributions will be made at rates equal to the actuarially determined contribution rates. Based on those assumptions, the OPEB Plans’ fiduciary net position was projected to be available to make all projected OPEB payments for current active and inactive employees and beneficiaries. Therefore, the long-term expected rate of return on OPEB Plans investments was applied to all periods of projected benefit payments to determine the total OPEB liability. Dec. 14, 2021 Item #2 Page 124 of 209 Notes to the Financial Statements 112 Note 17. Other Postemployment Benefits (continued) The changes in the net OPEB (asset)/liability are shown below: Sensitivity of the net OPEB (asset)/liability to changes in the discount rate The following presents the net OPEB (asset)/liability of CMWD and city if it were calculated using a discount rate that is one percentage point lower or one percentage point higher than the current rate, for measurement period ended June 30, 2020: Sensitivity of the net OPEB (asset)/liability to changes in the health care cost trend rates The following presents the net OPEB (asset)/liability of the CMWD and city if it were calculated using health care cost trend rates that are one percentage point lower or one percentage point higher than the current rate, for measurement period ended June 30, 2020: Total OPEB Plan Fiduciary Net OPEB Liability Net Position Liability (a)(b)(c) = (a) - (b) Balance at 6/30/2020 (Measurement date of 6/30/2019)18,437,935$ 15,341,653$ 3,096,282$ Changes Recognized for the Measurement Period: • Service cost 657,941 - 657,941 • Interest on the total OPEB liability 1,301,721 - 1,301,721 • Actuarial assumption changes (281,685) - (281,685) • Contributions from the employer - 1,085,866 (1,085,866) • Net investment income - 541,912 (541,912) • Benefit payments, including refunds of employee contributions (999,866) (999,866) - • Administrative expense - (7,493) 7,493 Net Changes 678,111 620,419 57,692 Balance at 6/30/2021 (Measurement date of 6/30/2020)19,116,046$ 15,962,072$ 3,153,974$ Increase (Decrease) Discount Rate - 1%Current Discount Discount Rate + 1% (6.00%)Rate (7.00%)(8.00%) Plan's Net OPEB Liability 5,538,181$ 3,153,974$ 1,180,212$ Health Care Cost Trend Rate - 1% Current Health Care Cost Trend Rate Health Care Cost Trend Rate + 1% (6.50%/5.50% decreasing to 3.00%) (7.50%/6.50% decreasing to 4.00%) (8.50%/7.50% decreasing to 5.00%) Plan's Net OPEB Liability 813,092$ 3,153,974$ 6,036,313$ Dec. 14, 2021 Item #2 Page 125 of 209 Notes to the Financial Statements 113 Note 17. Other Postemployment Benefits (continued) Recognition of deferred outflows and deferred inflows of resources Gains and losses related to changes in total OPEB liability and fiduciary net position are recognized in OPEB expense systematically over time. Amounts are first recognized in OPEB expense for the year the gain or loss occurs. The remaining amounts are categorized as deferred outflows and deferred inflows of resources related to OPEB and are to be recognized in future OPEB expense. The initial recognition period is five years. OPEB expense and deferred outflows/inflows of resources related to OPEB For the fiscal year ended June 30, 2021, the city recognized OPEB expense of $1,065,607. As of the fiscal year ended June 30, 2021, the city reported deferred outflows of resources related to OPEB from the following sources: The $1,180,557 reported as deferred outflows of resources related to contributions subsequent to the June 30, 2020 measurement date will be recognized as a reduction of the net OPEB liability during the fiscal year ending June 30, 2021. Other amounts reported as deferred outflows and inflows of resources related to OPEB will be recognized as expense as follows: Deferred Outflows Deferred Inflows of Resources of Resources OPEB contributions subsequent to measurement date 1,180,557$ -$ Difference between expected and actual experience 950,091 - Changes of assumptions 968,709 (248,931) Net difference between projected and actual earnings on OPEB plan investments 355,683 - Total 3,455,040$ (248,931)$ Deferred Fiscal Year Outflows/(Inflows) Ended:of Resources 2022 260,980$ 2023 348,968 2024 375,384 2025 351,683 2026 245,333 Thereafter 443,204 Dec. 14, 2021 Item #2 Page 126 of 209 Notes to the Financial Statements 114 Note 18. Commitments and Contingencies Operating leases The city has two parking lot leases with North County Transit District. On June 15, 1976, the city entered into a month-to-month lease for the parking lot located to the east of the railroad tracks between Carlsbad Village Drive and Oak Avenue. The current lease amount is approximately $1,513 per month and payable monthly. On September 1, 1988, the city entered into a month-to-month lease for the parking lot located on Washington Street to the west of the railroad tracks between Carlsbad Village Drive and Oak Avenue. The current lease amount is approximately $2,627 per month and payable annually. Both parking lot leases may be increased annually by the Consumer Price Index – Average U.S. Cities. Water purchase agreements On August 5, 2003, CMWD entered into a 22-year agreement with the Vallecitos Water District, to purchase three million gallons per day (3,360 acre feet) of recycled water for uses throughout CMWD’s boundaries. Per the agreement, there is an annual reconciliation that trues up the monthly payments to the actual cost for the water purchased each fiscal year. The recycled water cost is adjusted every July 1st and shall not exceed 75% of the wholesale cost of potable water from SDCWA. The agreement also stipulates that CMWD will pay for its share of the actual operating costs (up to a maximum cost of 75% of the wholesale cost of potable water from the San Diego County Water Authority) of the Mahr Reservoir, which produces the water. The estimated operating costs paid by CMWD for the period ended June 30, 2021 is $2,193,339. Golf course advances The Golf Course Fund previously showed an advance from other funds balance in the amount of $47,031,506 representing loans received from the city’s General Fund that were used to fund the initial course construction and some operating costs. For financial statement purposes, these loans were reclassified to “Transfers In” recognizing that the repayment of these loans is not scheduled to happen in the near and foreseeable future. The city has not forgiven the loans and the advances are now being disclosed as a contingent liability of the Golf Course Fund. The balance of these loans is $55,458,868 in total, $47,031,506 of principal and $8,427,362 of interest. The city discontinued accruing interest on the advances in fiscal year 2013-14. Should sufficient resources in the golf course become available to make repayments in the future, those repayments of this contingent liability will take place, and will be recorded as transfers out from the Golf Course Fund at that time. Dec. 14, 2021 Item #2 Page 127 of 209 Notes to the Financial Statements 115 Note 18. Commitments and Contingencies (continued) Encumbrances As of June 30, 2021, city commitments for outstanding encumbrances (purchase orders and contracts for goods and services not yet delivered) by major governmental fund and nonmajor funds in the aggregate are as follows: Note 19. Successor Agency Trust for Assets of Former Redevelopment Agency On December 29, 2011, the California Supreme Court upheld Assembly Bill 1X 26 (“the bill”) which provides for the dissolution of all redevelopment agencies in the State of California. This action impacted the reporting entity of the city that previously had reported a redevelopment agency within the reporting entity of the city as a blended component unit. The bill provides that upon dissolution of a redevelopment agency, either the city or another unit of local government will agree to serve as the “successor agency” to hold the assets until they are distributed to other units of state and local government. On January 10, 2012, the City Council elected to become the Successor Agency for the former redevelopment agency in accordance with the bill as part of City Council Resolution No. 2012-013 and Housing and Redevelopment Commission Resolution No. 519. Outstanding Encumbrances Governmental Activities General Fund 12,124,490 $ Community Facilities District No. 1 1,042,627 General Capital Construction 11,194,844 Infrastructure Replacement 4,902,195 Public Facilities Construction 368,223 Non-major Governmental Funds in the Aggregate 7,066,546 Subtotal Governmental Activities 36,698,925 Business Like Activities-Enterprise Funds Carlsbad Municipal Water District 4,595,553 Golf Course 10,685 Wastewater 2,998,332 Non-Major Solid Waste 943,544 Subtotal Enterprise Funds 8,548,114 Internal Service Funds 4,099,193 Total 49,346,232 $ Dec. 14, 2021 Item #2 Page 128 of 209 Notes to the Financial Statements 116 Note 19. Successor Agency Trust for Assets of Former Redevelopment Agency (continued) After enactment of the law, which occurred on June 28, 2011, redevelopment agencies in the State of California cannot enter into new projects, obligations or commitments. Subject to the control of a newly established oversight board, remaining assets can only be used to pay enforceable obligations in existence at the date of the dissolution (including the completion of any unfinished projects that were subject to legally enforceable contractual commitments). In future years, successor agencies will only be allowed revenue in the amount that is necessary to pay the estimated annual installment payments on enforceable obligations of the former redevelopment agency until all enforceable obligations of the prior redevelopment agency have been paid in full and all assets have been liquidated. On March 7, 2014, the city received notice from the California Department of Finance that the loans previously made by the city to the former redevelopment agency are enforceable obligations and that they were made for legitimate redevelopment purposes. This approval allows the city to list repayment of these loans on future Redevelopment Obligation Payment Schedules (ROPS). In accordance with the timeline set forth in the bill (as modified by the California Supreme Court on December 29, 2011) all redevelopment agencies in the State of California were dissolved and ceased to operate as legal entities as of February 1, 2012. Long-term debt The following is a summary of changes in the principal balance of long-term debt for the year ended June 30, 2021: Principal Principal Balance at Balance at Due Within June 30, 2020 Increases Decreases June 30, 2021 One Year Bonds 3,705,000$ -$ 855,000$ 2,850,000$ 900,000$ Due to the City of Carlsbad 2,681,689 - 2,681,689 - - Total 6,386,689$ -$ 3,536,689$ 2,850,000$ 900,000$ Dec. 14, 2021 Item #2 Page 129 of 209 Notes to the Financial Statements 117 Note 19. Successor Agency Trust for Assets of Former Redevelopment Agency (continued) The 1993 Carlsbad Housing and Redevelopment Commission Tax Allocation Bonds were issued totaling $15,495,000. Principal is due in amounts ranging from $900,000 to $1,000,000 on September 1 of each year through 2024. Interest is payable on March 1 and September 1 at rate of 5.30% per annum. The city posted a surety bond in lieu of a cash reserve in the amount of $1,055,953. Bonds are payable from redevelopment property tax increment revenues. The aggregate maturities of long-term debt are as follows: Pledged revenue The Successor Agency has a debt issuance outstanding that is collateralized by the pledging of certain revenues. The amount and term of the remainder of this commitment is indicated in the debt service to maturity table presented above. The purpose for which the proceeds of the related debt issuance was utilized is disclosed in the debt description on the previous page. For the current year, debt service payments as a percentage of pledged gross revenue (net of certain expenses where so required by the debt agreement) are indicated in the table below. This percentage also approximates the relationship of debt service to pledged revenues for the remainder of the term of the commitment: Note 20. Special Items – Golf Course Debt The Golf Course Fund previously showed an advance from other funds representing loans received from the city’s General Fund that were used to fund the initial course construction and some operating costs. The repayment of these loans is not scheduled to happen in the near and foreseeable future. The city has not forgiven the loans and the advances are now being disclosed as a contingent liability of the Golf Course Fund. The balance of these loans is $55,458,868 in total, $47,031,506 of principal and $8,427,362 of interest. For financial statement purposes, the principal balance was reclassified to “Transfers In” and the interest balance as a special item for the year ended June 30, 2021. Should sufficient resources in the golf course become available to make repayments in the future, those repayments of this contingent liability will take place, and will be recorded as transfers out from the Golf Course Fund at that time. Year ended June 30: Principal Interest 2022 900,000 127,200 2023 950,000 78,175 2024 1,000,000 26,500 2,850,000 $ 231,875 $ Debt Service as a Description of Annual Amount of Annual Debt Service Percentage of PledgedPledged Revenue Pledged Revenue Payments Revenue Tax increment 3,782,356$ 1,028,708$ 27% Dec. 14, 2021 Item #2 Page 130 of 209 Notes to the Financial Statements 118 Note 21. Prior Period Adjustment The city implemented Governmental Accounting Standards Board (GASB) Statement No. 84 related to Fiduciary Activities during fiscal year 2020-21. The requirements of this statement will enhance consistency and comparability by establishing specific criteria for identifying activities that should be reported as fiduciary activities. Greater consistency and comparability enhance the value provided by the information reported in financial statements for assessing government accountability and stewardship. This statement converts the former agency funds, which previously only reported assets and liabilities, to custodial funds with an economic resources measurement focus and additions and deductions being reported. This statement also required that all monies held as developer construction deposits in the agency fund now be held and accounted for in the city’s General Fund. Accordingly, the net position was restated as of July 1, 2020 as follows: Statement of Activities Governmental Activities Net position at July 1, 2020 $ 1,342,872,773 GASB 84 implementation 3,128,981 Net position at July 1, 2020, as restated $ 1,346,001,754 Statement of Changes in Fiduciary Net Position Custodial Funds Net position at July 1, 2020 $ - GASB 84 implementation 9,953,961 Net position at July 1, 2020, as restated $ 9,953,961 Statement of Revenues, Expenditures and Changes in Fund Balances Governmental Funds General Fund Net position at July 1, 2020 $ 190,862,662 GASB 84 implementation 3,128,981 Net position at July 1, 2020, as restated $ 193,991,643 Dec. 14, 2021 Item #2 Page 131 of 209 Required Supplementary Information 119Dec. 14, 2021 Item #2 Page 132 of 209 Required Supplementary Information Schedule of Changes in Net Pension Liability and Related Ratios During Measurement Period Total Pension Liability Measurement Total Pension Service Changes of Period1 Liability - Beginning Cost Interest Benefit Terms Miscellaneous Plan 2013–14 292,931,044 $ 6,908,307 $ 21,793,340 $ -$ 2014–15 310,018,027 6,674,982 23,142,961 - 2015–16 322,606,958 6,836,445 24,192,948 - 2016–17 336,686,595 7,836,970 25,085,808 - 2017–18 372,190,930 7,642,062 25,874,546 - 2018–19 383,133,348 7,393,365 27,175,110 - 2019–20 401,846,361 7,748,623 28,392,127 - Safety Plan 2013–14 227,568,288 $ 5,425,425 $ 16,876,220 $ -$ 2014–15 239,340,454 5,048,529 17,775,039 - 2015–16 247,020,357 5,209,900 18,557,781 - 2016–17 257,649,541 5,825,080 19,305,098 - 2017–18 285,701,762 5,985,155 20,248,091 - 2018–19 299,532,094 6,317,755 21,269,278 - 2019–20 314,256,438 6,578,451 22,410,699 - ¹ Historical information is required only for measurement periods for which GASB 68 is applicable. 120Dec. 14, 2021 Item #2 Page 133 of 209 Difference Benefit Payments, Between Expected Including Refunds Net Change in and Actual Changes of of Employee Total Pension Total Pension Experience Assumptions Contributions Liability Liability - Ending (a) -$ -$ (11,614,664) $ 17,086,983 $ 310,018,027 $ 1,300,520 (5,737,798) (12,791,734) 12,588,931 322,606,958 (2,605,228) - (14,344,528) 14,079,637 336,686,595 (3,079,012) 20,988,178 (15,327,609) 35,504,335 372,190,930 (3,023,977) (2,662,243) (16,887,970) 10,942,418 383,133,348 2,338,341 - (18,193,803) 18,713,013 401,846,361 1,167,225 - (19,590,424) 17,717,551 419,563,912 -$ -$ (10,529,479) $ 11,772,166 $ 239,340,454 $ 638,786 (4,517,683) (11,264,768) 7,679,903 247,020,357 (941,378) - (12,197,119) 10,629,184 257,649,541 (705,417) 16,661,943 (13,034,483) 28,052,221 285,701,762 2,726,755 (1,332,336) (13,797,333) 13,830,332 299,532,094 2,425,561 - (15,288,250) 14,724,344 314,256,438 4,071,899 - (16,362,437) 16,698,612 330,955,050 121Dec. 14, 2021 Item #2 Page 134 of 209 Required Supplementary Information Schedule of Changes in Net Pension Liability and Related Ratios During Measurement Period (continued) Plan Fiduciary Net Position Plan Fiduciary Net Measurement Net Position Contributions Contributions Investment Period1 Beginning2 Employer Employee Income3 Miscellaneous Plan 2013–14 204,354,694 $ 8,004,157 $ 3,039,951 $ 35,526,156 $ 2014–15 239,310,294 8,434,882 2,703,715 5,362,753 2015–16 242,447,633 9,562,926 2,833,466 1,330,196 2016–17 241,681,934 14,677,334 2,820,046 26,893,994 2017–18 270,386,079 22,114,923 3,005,761 22,720,698 2018–19 300,121,419 17,745,975 3,040,423 19,551,424 2019–20 322,051,935 10,637,969 3,338,003 15,901,834 Safety Plan 2013–14 161,108,415 $ 6,141,746 $ 1,853,365 $ 27,905,516 $ 2014–15 186,479,563 6,491,856 1,726,785 4,107,305 2015–16 187,329,833 6,836,098 1,933,363 990,545 2016–17 184,778,552 12,379,181 1,922,500 20,385,351 2017–18 206,161,081 8,675,370 2,169,504 17,250,148 2018–19 219,522,878 23,119,896 2,380,740 14,331,677 2019–20 243,910,793 10,321,371 2,581,027 12,053,297 ¹ 2 3 4 During Fiscal Year 2017-18, as a result of Governmental Accounting Standards Board Statement (GASB) No. 75, Accounting and Financial Reporting for Postemployment Benefit Plans Other than Pension (GASB 75), CalPERS reported its proportionate share of activity related to postemployment benefits for participation in the State of California's agent OPEB plan. Accordingly, CalPERS recorded a one-time expense as a result of the adoption of GASB 75. Additionally, CalPERS employees participate in various State of California agent pension plans and during Fiscal Year 2017-18, CalPERS recorded a correction to previously reported financial statements to properly reflect its proportionate share of activity related to pensions in accordance with GASB Statement No. 68, Accounting and Financial Reporting for Pensions (GASB 68). Historical information is required only for measurement periods for which GASB 68 is applicable. Net of administrative expenses. Includes any beginning of year adjustment. 122Dec. 14, 2021 Item #2 Page 135 of 209 Benefit Payments,Plan Net Pension Including Refunds Other Changes Net Change Plan Fiduciary Liability/(Asset) of Employee In Fiduciary in Fiduciary Net Position Ending Contributions Net Position4 Net Position Ending (b)(a) - (b) (11,614,664) $ -$ 34,955,600 $ 239,310,294 $ 70,707,733 $ (12,791,734) (572,277) 3,137,339 242,447,633 80,159,325 (14,344,528) (147,759) (765,699) 241,681,934 95,004,661 (15,327,609) (359,620) 28,704,145 270,386,079 101,804,851 (16,887,970) (1,218,072) 29,735,340 300,121,419 83,011,929 (18,193,803) (213,503) 21,930,516 322,051,935 79,794,426 (19,590,424) (454,014) 9,833,368 331,885,303 87,678,609 (10,529,479) $ -$ 25,371,148 $ 186,479,563 $ 52,860,891 $ (11,264,768) (210,908) 850,270 187,329,833 59,690,524 (12,197,119) (114,168) (2,551,281) 184,778,552 72,870,989 (13,034,483) (270,020) 21,382,529 206,161,081 79,540,681 (13,797,333) (935,892) 13,361,797 219,522,878 80,009,216 (15,288,250) (156,148) 24,387,915 243,910,793 70,345,645 (16,362,437) (343,854) 8,249,404 252,160,197 78,794,853 123Dec. 14, 2021 Item #2 Page 136 of 209 Required Supplementary Information Schedule of Changes in Net Pension Liability and Related Ratios During Measurement Period (continued) Plan Fiduciary Plan Net Pension Net Position Liability/(Asset) as a Percentage as a Percentage Measurement of the Total Covered of Covered - Period1 Liability Payroll Payroll Miscellaneous Plan 2013–14 77.19%32,960,515 $ 214.52% 2014–15 75.15% 33,609,704 238.50% 2015–16 71.78% 35,141,036 270.35% 2016–17 72.65% 35,845,774 284.01% 2017–18 78.33% 36,214,870 229.22% 2018–19 80.14% 39,130,545 203.92% 2019–20 79.10% 42,138,677 208.07% Safety Plan 2013–14 77.91%18,013,144 $ 293.46% 2014–15 75.84% 18,378,393 324.79% 2015–16 71.72% 18,514,525 393.59% 2016–17 72.16% 18,965,085 419.41% 2017–18 73.29% 20,768,094 385.25% 2018–19 77.62% 22,328,023 315.06% 2019–20 76.19% 24,695,745 319.06% ¹ Historical information is required only for measurement periods for which GASB 68 is applicable. Notes to Schedule: Benefit Changes: Changes of Assumptions: The figures above do include any liability impact that may have resulted from plan changes which have occurred after June 30, 2019 valuation date. This applies for voluntary benefit changes as well as any offers of two years additional service credit (a.k.a. Golden Handshakes). In 2019 and 2020,there were no changes.In 2018,demographic assumptions and inflation rate were changed in accordance to the CalPERS Experience Study and Review of Actuarial Assumptions December 2017.There were no changes in the discount rate.In 2017,the accounting discount rate reduced from 7.65%to 7.15%.In 2016,there were no changes.In 2015,amounts reported reflect an adjustment of the discount rate from 7.5% (net of administrative expense)to 7.65% (without a reduction for pension plan administration expense). In 2014, amounts reported were based on the 7.5% discount rate. 124Dec. 14, 2021 Item #2 Page 137 of 209 Required Supplementary Information Schedule of Pension Plan Contributions¹ Contributions in Relation to Contributions Actuarially the Actuarially Contribution as a Percentage Fiscal Year Determined Determined Deficiency Covered of Covered Ending Contribution Contribution (Excess)Payroll Payroll Miscellaneous Plan 06/30/2014 8,004,157 $ (8,004,157) $ -$ 32,960,515 $ 24.28% 06/30/2015 8,434,882 (8,434,882) - 33,609,704 25.10% 06/30/2016 9,562,926 (9,562,926) - 35,141,036 27.21% 06/30/2017 10,338,549 (14,677,334) (4,338,785) 35,845,774 40.95% 06/30/2018 10,456,115 (22,114,923) (11,658,808) 36,214,870 61.07% 06/30/2019 11,966,625 (17,745,975) (5,779,350) 39,130,545 45.35% 06/30/2020 10,633,467 (10,633,467) - 42,138,677 25.23% 06/30/2021 11,098,619 (16,501,759) (5,403,140) 43,884,424 37.60% Safety Plan 06/30/2014 6,141,746 $ (6,141,746) $ -$ 18,013,144 $ 34.10% 06/30/2015 6,491,856 (6,491,856) - 18,378,393 35.32% 06/30/2016 6,836,098 (6,836,098) - 18,514,525 36.92% 06/30/2017 7,695,135 (12,379,181) (4,684,046) 18,965,085 65.27% 06/30/2018 8,658,116 (8,658,116) - 20,768,094 41.69% 06/30/2019 8,899,136 (23,119,790) (14,220,654) 22,328,023 103.55% 06/30/2020 10,323,721 (10,323,721) - 24,695,745 41.80% 06/30/2021 9,656,334 (14,253,194) (4,596,860) 26,392,461 54.00% ¹ Historical information is required only for measurement periods for which GASB 68 is applicable. Notes to Schedule: The actuarial methods and assumptions used to set the actuarially determined contributions for Fiscal Year 2020-21 were derived from the June 30, 2018 funding valuation reports. Actuarial Cost Method Entry Age Normal Amortization Method/Period For details, see June 30, 2018 Funding Valuation Report Asset Valuation Method Market Value of Assets. For details, see June 30, 2018 Funding Valuation Report Inflation 2.50% Salary Increases Varies by entry age and service Payroll Growth 2.75% Investment Rate of Return 7.00% net of pension plan investment and administrative expenses; includes inflation Retirement Age The probabilities of retirement are based on the 2017 CalPERS Experience Study for the period from 1997 to 2015 Mortality The probabilities of mortality are based on the 2017 CalPERS Experience Study for the period from 1997 to 2015. Pre-retirement and post-retirement mortality rates include 20 years of projected mortality improvement using Scale BB published by the Society of Actuaries. 125Dec. 14, 2021 Item #2 Page 138 of 209 Required Supplementary Information Schedule of Changes in Net OPEB Liability and Related Ratios During Measurement Period Total OPEB Liability Measurement Total OPEB Service Changes of Period¹Liability - Beginning Cost Interest Benefit Terms 2016–17 15,143,574 $ 505,348 $ 1,064,137 $ -$ 2017–18 15,819,160 520,509 1,113,646 - 2018–19 16,592,421 536,124 1,167,930 - 2019–20 18,437,935 657,941 1,301,716 - Plan Fiduciary Net Position Plan Fiduciary NetMeasurementNet Position Contributions Contributions InvestmentPeriod¹Beginning Employer Employee Income² 2016–17 12,192,178 $ 747,772 $ -$ 1,281,487 $ 2017–18 13,327,538 860,894 - 1,064,150 2018–19 14,366,953 978,302 - 887,132 2019–20 15,341,653 1,085,866 - 541,912 ¹ Historical information is required only for measurement periods for which GASB 75 is applicable.2 Net of administrative expenses. 126Dec. 14, 2021 Item #2 Page 139 of 209 Difference Benefit Payments, Between Expected Including Refunds Net Change in and Actual Changes of of Employee Total OPEB Total OPEB Experience Assumptions Contributions Liability Liability - Ending (a) -$ -$ (893,899) $ 675,586 $ 15,819,160 $ - - (860,894) 773,261 16,592,421 (203,116) 1,232,232 (887,656) 1,845,514 18,437,935 - (281,685) (999,866) 678,106 19,116,041 Benefit Payments,Plan Net OPEB Including Refunds Other Changes Net Change Plan Fiduciary Liability/(Asset)of Employee In Fiduciary in Fiduciary Net Position EndingContributionsNet Position Net Position Ending (b)(a) - (b) (893,899) $ -$ 1,135,360 $ 13,327,538 $ 2,491,622 $ (860,894) (24,735) 1,039,415 14,366,953 2,225,468 (887,656) (3,078) 974,700 15,341,653 3,096,282 (999,866) (7,493) 620,419 15,962,072 3,153,969 127Dec. 14, 2021 Item #2 Page 140 of 209 Required Supplementary Information Schedule of Changes in Net OPEB Liability and Related Ratios During Measurement Period (Continued) Related Ratios Plan Fiduciary Plan Net OPEBNet Position Liability/(Asset) as a Percentage Covered - as a Percentage Measurement of the Total Employee of Covered -Period¹Liability Payroll Employee Payroll 2016–17 84.25%54,810,859 $ 4.55% 2017–18 86.59%56,982,964 3.91% 2018–19 83.21%61,458,568 5.04% 2019–20 83.50%66,834,422 4.72% ¹ Historical information is required only for measurement periods for which GASB 75 is applicable. 128Dec. 14, 2021 Item #2 Page 141 of 209 Required Supplementary Information Schedule of OPEB Pension Plan Contributions¹ Contributions in Relation to Contributions Actuarially the Actuarially Contribution Covered -as a Percentage Fiscal Year Determined Determined Deficiency Employee of Covered- Ending2 Contribution Contribution (Excess)Payroll Employee Payroll 06/30/2018 770,693 $ (860,894) $ (90,201) $ 56,982,964 $ 1.51% 06/30/2019 788,383 (978,302) (189,919) 61,458,568 1.59% 06/30/2020 941,129 (1,085,864) (144,735) 66,834,422 1.62% 06/30/2021 962,244 (1,180,557) (218,313) 70,276,885 1.68% ¹ Historical information is required only for measurement periods for which GASB 75 is applicable. 2 One plan, rather than two, was reported beginning in fiscal year ending 06/30/2021. Notes to Schedule: The actuarial methods and assumptions used to set the actuarially determined contributions for Fiscal Year 2020-21 were derived from the June 30, 2019 funding valuation reports. Actuarial Cost Method Entry Age Normal, Level % of pay Amortization Method/Period Level dollar over 28-year fixed period Inflation 2.75% Salary Increases Varies by Entry Age and Service based on the CalPERS Experience Study for the period from 1997 to 2015. Payroll Growth 3.00% Investment Rate of Return 7.0% net of pension plan investment and administrative expenses, including inflation Retirement Age The probabilities of retirement are based on the CalPERS Experience Study for the period from 1997 to 2015. Mortality The probabilities of mortality are based on the CalPERS Experience Study for the period from 1997 to 2015. Mortality Improvement Post-retirement mortality projected fully generational with Scale MP-2019. 129Dec. 14, 2021 Item #2 Page 142 of 209 This p a g e is intentionally left blank. 130Dec. 14, 2021 Item #2 Page 143 of 209 Combining and Individual Fund Statements and Schedules 131Dec. 14, 2021 Item #2 Page 144 of 209 Combining Balance Sheet Nonmajor Governmental Funds June 30, 2021 Community Affordable Development Financing Housing Block Grant Donations Districts Cash and investments 16,689,733 $ -$ 2,895,693 $ 9,464,509 $ Receivables: Interest 3,133,685 - 10,107 31,140 Other - - - 16,214 Accounts, net of allowances - - - - Due from other governments - 468,306 - - Inventories - -2,145 - Prepaid items - -- - Land held for resale 324,223 1,961,499 - - Loan receivables, net of allowances 23,301,954 - - - Advances to other funds 94,116 - - - Total assets 43,543,711 $ 2,429,805 $ 2,907,945 $ 9,511,863 $ LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES Liabilities: Accrued liabilities 45,546 $ 201,669 $ 15,401 $ 286,295 $ Due to other funds - 300,012 - - Due to other governments - -- - Deposits payable - -- - Advances from other funds - -- - Unearned revenue - -- - Total liabilities 45,546 501,681 15,401 286,295 Deferred inflows of resources: Unavailable revenue 3,075,486 - - - Fund balances: Nonspendable: Prepaid items - - - - Restricted: Affordable housing 40,422,679 - - - Lighting and landscaping districts - - - 9,225,568 Capital projects - - - - General government - - - - Public safety - - - - Community services - 1,928,124 2,892,544 - Unassigned - - - - Total fund balances 40,422,679 1,928,124 2,892,544 9,225,568 Total liabilities, deferred inflows of resources and fund balances 43,543,711 $ 2,429,805 $ 2,907,945 $ 9,511,863 $ ASSETS Special Revenue Funds 132Dec. 14, 2021 Item #2 Page 145 of 209 Other Police Habitat and Special Grants and Section 8 Tyler Agricultural Revenue Asset Rental Court Management Funds Forfeiture Assistance Apartments Totals 1,022,064 $ 870,233 $ 517,329 $ 423,753 $ 375,620 $ 32,258,934 $ 3,564 3,035 2,109 830 3 3,184,473 - 73,840 - - 666 90,720 - - - - - - - - - 143,404 - 611,710 - - - - - 2,145 - - - - 856 856 - - - - - 2,285,722 - - - - - 23,301,954 - - - - - 94,116 1,025,628 $ 947,108 $ 519,438 $ 567,987 $ 377,145 $ 61,830,630 $ -$ 5,679 $ 25,578 $ 18,302 $ 17,312 $ 615,782 $ - - - - - 300,012 - - - 46,165 - 46,165 - - - 735 29,234 29,969 1,253,825 - - 94,116 - 1,347,941 - - 5,359 172,956 - 178,315 1,253,825 5,679 30,937 332,274 46,546 2,518,184 - - - - - 3,075,486 - - - - 856 856 - - - 235,713 329,743 40,988,135 - - - - - 9,225,568 - - - - - - - 941,429 - - - 941,429 - - 488,501 - - 488,501 - - - - - 4,820,668 (228,197) - - - - (228,197) (228,197) 941,429 488,501 235,713 330,599 56,236,960 1,025,628 $ 947,108 $ 519,438 $ 567,987 $ 377,145 $ 61,830,630 $ (continued) Special Revenue Funds 133Dec. 14, 2021 Item #2 Page 146 of 209 Combining Balance Sheet Nonmajor Governmental Funds (continued) June 30, 2021 Grants Planned Assessment Bridge and and Other Local and Other Thoroughfare Gas Capital Drainage Districts Districts Tax Project Funds Facilities Cash and investments 3,464,775 $ 12,648,466 $ 17,584,878 $ 1,779,759 $ 4,672,546 $ Receivables: Interest 8,685 44,110 61,330 7,120 16,298 Other - - - - 490 Accounts, net of allowances - 1,429,966 - - - Due from other governments - - 386,685 57,044 - Inventories - - - - - Prepaid items - - - - - Land held for resale - - - - - Loan receivables, net of allowances - - - - - Advances to other funds - - - - - Total assets 3,473,460 $ 14,122,542 $ 18,032,893 $ 1,843,923 $ 4,689,334 $ LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES Liabilities: Accrued liabilities -$ -$ 189,842 $ -$ 979 $ Due to other funds - - - - - Due to other governments - - - - - Deposits payable 426,180 - - - - Advances from other funds - - - - - Unearned revenue - - - - - Total liabilities 426,180 - 189,842 - 979 Deferred inflows of resources: Unavailable revenue - 1,429,966 - - - Fund balances: Nonspendable: Prepaid items - - - - - Restricted: Affordable, low and moderate income housing - - - - - Lighting and landscaping districts - - - - - Capital projects 3,047,280 12,692,576 17,843,051 1,843,923 4,688,355 General government - - - - - Public safety - - - - - Community services - - - - - Unassigned - - - - - Total fund balances 3,047,280 12,692,576 17,843,051 1,843,923 4,688,355 Total liabilities, deferred inflows of resources and fund balances 3,473,460 $ 14,122,542 $ 18,032,893 $ 1,843,923 $ 4,689,334 $ ASSETS Capital Project Funds 134Dec. 14, 2021 Item #2 Page 147 of 209 Public Traffic Total Other Facilities Sales Tax/Impact Governmental Construction TransNet Projects Totals Funds 30,905,041 $ 8,856,520 $ 23,600,885 $ 103,512,870 $ 135,771,804 $ 107,842 29,978 83,754 359,117 3,543,590 - 89,128 - 89,618 180,338 19,900 - - 1,449,866 1,449,866 - 1,255 - 444,984 1,056,694 - - - - 2,145 - - - - 856 - - - - 2,285,722 - - - - 23,301,954 5,650,000 - - 5,650,000 5,744,116 36,682,783 $ 8,976,881 $ 23,684,639 $ 111,506,455 $ 173,337,085 $ 13,885 $ 262,779 $ 228,437 $ 695,922 $ 1,311,704 $ - - - - 300,012 - - - - 46,165 - - - 426,180 456,149 - - 1,525,948 1,525,948 2,873,889 - - - - 178,315 13,885 262,779 1,754,385 2,648,050 5,166,234 - - - 1,429,966 4,505,452 - - - - 856 - - - - 40,988,135 - - - - 9,225,568 36,668,898 8,714,102 21,930,254 107,428,439 107,428,439 - - - - 941,429 - - - - 488,501 - - - - 4,820,668 - - - - (228,197) 36,668,898 8,714,102 21,930,254 107,428,439 163,665,399 36,682,783 $ 8,976,881 $ 23,684,639 $ 111,506,455 $ 173,337,085 $ 135Dec. 14, 2021 Item #2 Page 148 of 209 Combining Statement of Revenues, Expenditures and Changes in Fund Balances Nonmajor Governmental Funds For the Year Ended June 30, 2021 Community Affordable Development Financing Housing Block Grant Donations Districts Revenues: Taxes -$ -$ -$ -$ Intergovernmental - 1,440,502 - - Charges for services 22,634 - - 2,457,690 Fines and forfeitures - - - - Income from property and investments 245,888 166,213 6,460 19,240 Contributions from property owners 273,120 - - - Donations - - 321,213 - Miscellaneous - - 2,674 14,171 Total revenues 541,642 1,606,715 330,347 2,491,101 Expenditures: Current: General government - - - - Public safety - - - - Community services 424,624 636,782 201,259 2,005,001 Public works - - - 927,264 Capital outlay 4,200,000 300,000 - - Debt service: Interest and fiscal charges - - - - Total expenditures 4,624,624 936,782 201,259 2,932,265 Excess (deficiency) of revenues over (under) expenditures (4,082,982) 669,933 129,088 (441,164) Other financing sources (uses): Transfers in - - - 700,000 Transfers out (50,000) - - - Total other financing sources (uses)(50,000) - - 700,000 Net change in fund balances (4,132,982) 669,933 129,088 258,836 Fund balance (deficit) at beginning of year 44,555,661 1,258,191 2,763,456 8,966,732 Fund balance (deficit) at end of year 40,422,679 $ 1,928,124 $ 2,892,544 $ 9,225,568 $ Special Revenue Funds 136Dec. 14, 2021 Item #2 Page 149 of 209 Other Police Habitat and Special Grants and Section 8 Tyler Agricultural Revenue Asset Rental Court Management Funds Forfeiture Assistance Apartments Totals -$ -$ -$ -$ -$ -$ - - 464,537 9,070,879 - 10,975,918 - - - - 604,338 3,084,662 - - 5,751 - - 5,751 1,551 343 1,066 2,888 2,128 445,777 16,962 302,404 - - - 592,486 - - - - - 321,213 4,696 - - 5,650 - 27,191 23,209 302,747 471,354 9,079,417 606,466 15,452,998 - 196,533 - - - 196,533 - - 402,874 - - 402,874 - - - 9,024,884 474,207 12,766,757 - - - - - 927,264 - 139,468 27,873 - - 4,667,341 16,961 - - - - 16,961 16,961 336,001 430,747 9,024,884 474,207 18,977,730 6,248 (33,254) 40,607 54,533 132,259 (3,524,732) - - - 50,000 - 750,000 - - - - - (50,000) - - - 50,000 - 700,000 6,248 (33,254) 40,607 104,533 132,259 (2,824,732) (234,445) 974,683 447,894 131,180 198,340 59,061,692 (228,197) $ 941,429 $ 488,501 $ 235,713 $ 330,599 $ 56,236,960 $ (continued) Special Revenue Funds 137Dec. 14, 2021 Item #2 Page 150 of 209 Combining Statement of Revenues, Expenditures and Changes in Fund Balances Nonmajor Governmental Funds (continued) For the Year Ended June 30, 2021 Grants Assessment Bridge and and Other and Other Thoroughfare Gas Capital Districts Districts Tax Project Funds Revenues: Taxes -$ -$ 4,640,131 $ -$ Intergovernmental - - - 253,900 Charges for services - - - - Fines and forfeitures - - - - Income from property and investments 4,720 22,969 47,949 6,421 Contributions from property owners - - 194,729 44,960 Donations - - - - Miscellaneous - - - - Total revenues 4,720 22,969 4,882,809 305,281 Expenditures: Current: General government - - - 48,244 Public safety - - - - Community services - - - - Public works - - 600,000 - Capital outlay 8,867 - 2,472,180 260,821 Debt service: Interest and fiscal charges - - - - Total expenditures 8,867 - 3,072,180 309,065 Excess (deficiency) of revenues over (under) expenditures (4,147) 22,969 1,810,629 (3,784) Other financing sources (uses): Transfers in - - - - Transfers out - - (10,000) - Total other financing sources (uses)- - (10,000) - Net change in fund balances (4,147) 22,969 1,800,629 (3,784) Fund balances at beginning of year 3,051,427 12,669,607 16,042,422 1,847,707 Fund balances at end of year 3,047,280 $ 12,692,576 $ 17,843,051 $ 1,843,923 $ Capital Project Funds 138Dec. 14, 2021 Item #2 Page 151 of 209 Planned Local Public Traffic Total Other Drainage Facilities Sales Tax/Impact Governmental Facilities Construction TransNet Projects Totals Funds -$ -$ -$ -$ 4,640,131 $ 4,640,131 $ - - 2,307,259 - 2,561,159 13,537,077 - - 1,027,032 - 1,027,032 4,111,694 - - - - - 5,751 (776) 194,323 12,946 46,683 335,235 781,012 669,774 1,557,155 - 1,037,497 3,504,115 4,096,601 - - - - - 321,213 - - - - - 27,191 668,998 1,751,478 3,347,237 1,084,180 12,067,672 27,520,670 - - - - 48,244 244,777 - - - - - 402,874 - - - - - 12,766,757 - - - - 600,000 1,527,264 1,569,895 164,848 2,152,292 1,196,826 7,825,729 12,493,070 - - - - - - 16,961 1,569,895 164,848 2,152,292 1,196,826 8,473,973 27,451,703 (900,897) 1,586,630 1,194,945 (112,646) 3,593,699 68,967 - - - - - 750,000 - - - - (10,000) (60,000) - - - - (10,000) 690,000 (900,897) 1,586,630 1,194,945 (112,646) 3,583,699 758,967 5,589,252 35,082,268 7,519,157 22,042,900 103,844,740 162,906,432 4,688,355 $ 36,668,898 $ 8,714,102 $ 21,930,254 $ 107,428,439 $ 163,665,399 $ 139Dec. 14, 2021 Item #2 Page 152 of 209 Combining Schedule of Revenues and Expenditures Budget and Actual (Budgetary Basis) Special Revenue Funds For the Year Ended June 30, 2021 Actual Amounts Variance (Budgetary Over Budget Basis)(Under) Affordable Housing Total revenues 1,204,279 $ 845,714 $ (358,565) $ Total expenditures 5,632,518 4,674,624 (957,894) Net change in fund balance (4,428,239) (3,828,910) 599,329 Community Development Block Grant Total revenues 1,551,030 1,606,715 55,685 Total expenditures 3,050,296 2,021,741 (1,028,555) Net change in fund balance (1,499,266) (415,026) 1,084,240 Donations Total revenues 336,541 361,895 25,354 Total expenditures 810,903 232,610 (578,293) Net change in fund balance (474,362) 129,285 603,647 Financing Districts Total revenues 3,259,066 3,286,271 27,205 Total expenditures 3,944,676 3,024,034 (920,642) Net change in fund balance (685,610) 262,237 947,847 Habitat and Agricultural Management Total revenues 30,230 35,581 5,351 Total expenditures 83,779 16,961 (66,818) Net change in fund balance (53,549) 18,620 72,169 Other Special Revenue Funds Total revenues 296,000 314,104 18,104 Total expenditures 452,470 451,446 (1,024) Net change in fund balance (156,470) $ (137,342) $ 19,128 $ (continued) 140Dec. 14, 2021 Item #2 Page 153 of 209 Combining Schedule of Revenues and Expenditures Budget and Actual (Budgetary Basis) Special Revenue Funds (continued) For the Year Ended June 30, 2021 Actual Amounts Variance (Budgetary Over Budget Basis)(Under) Police Grants and Asset Forfeiture Total revenues 425,257 $ 478,314 $ 53,057 $ Total expenditures 852,482 447,627 (404,855) Net change in fund balance (427,225) 30,687 457,912 Section 8 Rental Assistance Total revenues 8,950,124 9,130,221 180,097 Total expenditures 9,225,163 9,032,784 (192,379) Net change in fund balance (275,039) 97,437 372,476 Totals Total revenues 16,052,527 16,058,815 6,288 Total expenditures 24,052,287 19,901,827 (4,150,460) Net change in fund balance (7,999,760) $ (3,843,012) $ 4,156,748 $ 141Dec. 14, 2021 Item #2 Page 154 of 209 142Dec. 14, 2021 Item #2 Page 155 of 209 Combining Schedule of Revenues and Expenditures Budget and Actual (Budgetary Basis) Capital Project Funds For the Year Ended June 30, 2021 Actual Amounts Variance (Budgetary Over Budget Basis)(Under) Parking-in-Lieu (Grants and Other Capital Project Funds) Total revenues 17,064 $ 47,438 $ 30,374 $ Total expenditures 50,000 48,244 (1,756) Net change in fund balance (32,936) $ (806)$ 32,130 $ 143Dec. 14, 2021 Item #2 Page 156 of 209 Combining Statement of Net Position Internal Service Funds June 30, 2021 Fleet Self-Insured ASSETS Management Benefits Current assets: Cash and investments 20,105,624 $ 5,615,815 $ Receivables: Interest 70,109 - Accounts, net of allowances 5,106 - Inventories 332,067 - Prepaid items 4,461 - Total current assets 20,517,367 5,615,815 Noncurrent assets: Capital assets: Machinery and equipment 29,618,343 - Construction in progress - - Intangible assets - - Less accumulated depreciation (15,607,609) - Total capital assets (net of accumulated depreciation)14,010,734 - Total assets 34,528,101 5,615,815 DEFERRED OUTFLOWS OF RESOURCES Deferred outflows of resources - OPEB related items 36,415 - Deferred outflows of resources - pension related items 317,895 - Total deferred outflows of resources 354,310 - LIABILITIES Current liabilities: Accrued liabilities 348,743 5,615,815 Estimated claims payable - - Total current liabilities 348,743 5,615,815 Noncurrent liabilities: Deposits payable 968 - Net OPEB liability 46,698 - Net pension liability 1,288,875 - Total noncurrent liabilities 1,336,541 - 1,685,284 5,615,815 DEFERRED INFLOWS OF RESOURCES Deferred inflows of resources - OPEB related items 2,597 - Deferred inflows of resources - pension related items 5,223 - Total deferred inflows of resources 7,820 - NET POSITION Net investment in capital assets 14,010,734 - Unrestricted 19,178,573 - 33,189,307 $ -$ Total liabilities Total net position 144Dec. 14, 2021 Item #2 Page 157 of 209 Information Risk Workers’ Technology Management Compensation Total 7,436,689 $ 4,967,238 $ 13,780,367 $ 51,905,733 $ 25,918 17,322 47,333 160,682 - - - 5,106 - - - 332,067 2,122,535 - - 2,126,996 9,585,142 4,984,560 13,827,700 54,530,584 5,096,504 - - 34,714,847 820,801 - - 820,801 3,155,837 - - 3,155,837 (3,445,507) - - (19,053,116) 5,627,635 - - 19,638,369 15,212,777 4,984,560 13,827,700 74,168,953 113,454 7,038 3,001 159,908 1,219,678 88,665 54,064 1,680,302 1,333,132 95,703 57,065 1,840,210 1,264,526 138,462 12,964 7,380,510 - 3,621,368 10,524,653 14,146,021 1,264,526 3,759,830 10,537,617 21,526,531 - 1,000 - 1,968 144,673 9,004 3,854 204,229 4,945,074 359,482 219,197 6,812,628 5,089,747 369,486 223,051 7,018,825 6,354,273 4,129,316 10,760,668 28,545,356 8,477 513 212 11,799 20,041 1,457 888 27,609 28,518 1,970 1,100 39,408 5,627,635 - - 19,638,369 4,535,483 948,977 3,122,997 27,786,030 10,163,118 $ 948,977 $ 3,122,997 $ 47,424,399 $ 145Dec. 14, 2021 Item #2 Page 158 of 209 Combining Statement of Revenues, Expenses and Changes in Net Position Internal Service Funds For the Year Ended June 30, 2021 Fleet Self-Insured Information Management Benefits Technology Operating revenues: Other charges for services 6,066,234 $ -$ 12,530,344 $ Miscellaneous 33,250 - 48,270 Total operating revenues 6,099,484 - 12,578,614 Operating expenses: Depreciation 2,271,706 - 441,281 Fuel and supplies 1,488,319 - - Claims and premiums expense - - - Small equipment purchases 50,151 - 636,925 General and administrative 1,735,362 - 12,504,070 Total operating expenses 5,545,538 - 13,582,276 Operating income (loss)553,946 - (1,003,662) Nonoperating revenues (expenses): Income from property and investments 50,099 - (28,270) Interest expense - - (3,360) Gain (loss) on sale of property 374,856 - (332,117) Total nonoperating revenues (expenses)424,955 - (363,747) Income (loss) before transfers and capital contributions 978,901 - (1,367,409) Transfers in 40,000 - - Transfers out - (1,834,163) - Capital contributions 1,085,280 - 1,194,748 Change in net position 2,104,181 (1,834,163) (172,661) Total net position at beginning of year 31,085,126 1,834,163 10,335,779 Total net position at end of year 33,189,307 $ -$ 10,163,118 $ 146Dec. 14, 2021 Item #2 Page 159 of 209 Risk Workers’ Management Compensation Totals 2,308,836 $ 1,880,304 $ 22,785,718 $ 59,053 377,892 518,465 2,367,889 2,258,196 23,304,183 - - 2,712,987 - - 1,488,319 2,194,785 3,266,383 5,461,168 - - 687,076 480,350 142,481 14,862,263 2,675,135 3,408,864 25,211,813 (307,246) (1,150,668) (1,907,630) 1,928 39,441 63,198 - - (3,360) - - 42,739 1,928 39,441 102,577 (305,318) (1,111,227) (1,805,053) - 1,834,163 1,874,163 - - (1,834,163) - - 2,280,028 (305,318) 722,936 514,975 1,254,295 2,400,061 46,909,424 948,977 $ 3,122,997 $ 47,424,399 $ 147Dec. 14, 2021 Item #2 Page 160 of 209 Combining Statement of Cash Flows Internal Service Funds For the Year Ended June 30, 2021 Fleet Self-Insured Management Benefits Cash flows from operating activities: Receipts from customers and users 6,107,407 $ 594,421 $ Payments to suppliers (1,782,816) - Payments to employees (1,209,723) - Internal activity - payments to other funds (154,668) - Claims and premiums paid - - Net cash provided by (used in) operating activities 2,960,200 594,421 Cash flows from noncapital financing activities: Operating subsidies and transfers (to) from other funds 40,000 (1,834,163) Cash flows from capital and related financing activities: Purchase of capital assets (1,761,111) - Gross proceeds from the sale of capital assets 397,276 - Principal paid on capital debt - - Interest expense - - Net cash provided by (used in) capital and related financing activities (1,363,835) - Cash flows from investing activities: Interest on investments 58,257 - Net increase (decrease) in cash and cash equivalents 1,694,622 (1,239,742) Cash and cash equivalents at beginning of year 18,411,002 6,855,557 Cash and cash equivalents at end of year 20,105,624 $ 5,615,815 $ 148Dec. 14, 2021 Item #2 Page 161 of 209 Information Risk Workers’ Technology Management Compensation Total 12,578,609 $ 2,367,890 $ 2,215,337 $ 23,863,664 $ (7,898,594) (151,408) - (9,832,818) (6,056,893) (309,869) (160,928) (7,737,413) (34,656) (11,100) (1,200) (201,624) - (2,046,712) (3,505,862) (5,552,574) (1,411,534) (151,199) (1,452,653) 539,235 - - 1,834,163 40,000 (823,211) - - (2,584,322) - - - 397,276 (147,952) - - (147,952) (3,360) - - (3,360) (974,523) - - (2,338,358) (12,628) 6,253 49,498 101,380 (2,398,685) (144,946) 431,008 (1,657,743) 9,835,374 5,112,184 13,349,359 53,563,476 7,436,689 $ 4,967,238 $ 13,780,367 $ 51,905,733 $ (continued) 149Dec. 14, 2021 Item #2 Page 162 of 209 Combining Statement of Cash Flows Internal Service Funds (continued) For the Year Ended June 30, 2021 Fleet Self-Insured Management Benefits Reconciliation of operating income (loss) to net cash provided by (used in) operating activities: Operating income (loss)553,946 $ -$ Adjustments to reconcile operating income to net cash provided by operating activities: Depreciation and amortization 2,271,706 - Change in assets and liabilities: (Increase) decrease in receivables 7,926 - (Increase) in inventories 184,413 - (Increase) in prepaid items (4,461) - (Increase) in deferred outflows - OPEB related items (2,567) - (Increase) in deferred outflows - pension related items (132,841) - Increase (decrease) in accrued liabilities 2,844 594,421 Increase (decrease) in estimated claims payable - - Increase (decrease) in net OPEB liability 860 - Increase (decrease) in net pension liability 115,898 - Increase (decrease) in deferred inflows - OPEB related items 1,318 - Increase (decrease) in deferred inflows - pension related items (38,842) - Net cash provided by (used in) operating activities 2,960,200 $ 594,421 $ Noncash capital financing activities: Capital assets contributed by other funds 1,085,280 $ -$ 150Dec. 14, 2021 Item #2 Page 163 of 209 Information Risk Workers’ Technology Management Compensation Total (1,003,662) $ (307,246) $ (1,150,668) $ (1,907,630) $ 441,281 - - 2,712,987 - - 49,373 57,299 - - - 184,413 (436,513) - - (440,974) (8,804) (517) (206) (12,094) (482,641) (31,663) (24,348) (671,493) (40,634) 6,316 1,368 564,315 - 148,073 (331,710) (183,637) 2,954 173 69 4,056 444,668 32,325 19,711 612,602 4,524 267 106 6,215 (332,707) 1,073 (16,348) (386,824) (1,411,534) $ (151,199) $ (1,452,653) $ 539,235 $ 1,194,748 $ -$ -$ 2,280,028 $ 151Dec. 14, 2021 Item #2 Page 164 of 209 Combining Statement of Fiduciary Net Position Custodial Funds June 30, 2021 Assessment Business Improvement ASSETS Districts Districts Total Current assets: Cash and investments 4,516,804 $ 2,194,514 $ 6,711,318 $ Receivables: Assessments 12,240 7,735 19,975 Interest 34,148 7,654 41,802 Taxes 64,139 - 64,139 Total current assets 4,627,331 2,209,903 6,837,234 Restricted assets: Cash and investments 4,458,829 - 4,458,829 Total assets 9,086,160 2,209,903 11,296,063 LIABILITIES Accrued liabilities 26,746 62,190 88,936 Total liabilities 26,746 62,190 88,936 NET POSITION Restricted for: Individuals, organizations and other governments 9,059,414 $ 2,147,713 $ 11,207,127 $ 152Dec. 14, 2021 Item #2 Page 165 of 209 Combining Statement of Changes in Fiduciary Net Position Custodial Funds For the Year Ended June 30, 2021 Assessment Business Improvement ADDITIONS Districts Districts Total District assessment collections 3,453,276 $ 2,206,598 $ 5,659,874 $ Income from property and investments 42,077 14,923 57,000 Property Taxes 1,355,775 - 1,355,775 Total additions 4,851,128 2,221,521 7,072,649 DEDUCTIONS Distributions to beneficiaries - 796,085 796,085 General and administrative - 67,290 67,290 Bond principal 3,175,000 - 3,175,000 Bond Interest expense and fees 1,781,108 - 1,781,108 Total deductions 4,956,108 863,375 5,819,483 Change in net position (104,980) 1,358,146 1,253,166 Net position (deficit) at beginning of year, as restated 9,164,394 789,567 9,953,961 Net position (deficit) at end of year 9,059,414 $ 2,147,713 $ 11,207,127 $ 153Dec. 14, 2021 Item #2 Page 166 of 209 This p a g e is intentionally left blank. 154Dec. 14, 2021 Item #2 Page 167 of 209 Statistical SectionStatistical SectionDec. 14, 2021 Item #2 Page 168 of 209 Statistical SectionStatistical SectionDec. 14, 2021 Item #2 Page 169 of 209 155 Statistical Section This section of the City of Carlsbad’s Annual Comprehensive Financial Report presents detailed information as a context for understanding what the information in the financial statements, note disclosures, and required supplementary information says about the city’s overall financial health. Table of Contents Page Financial Trends 156 These schedules contain trend information to help the reader understand how the city’s financial performance and well-being have changed over time. Revenue Capacity 166 These schedules contain information to help the reader assess the city’s water and wastewater revenue sources as well as the city’s most significant local revenue source, property taxes. Debt Capacity 175 These schedules present information to help the reader assess the affordability of the city’s current levels of outstanding debt, and the city’s ability to issue additional debt in the future. Demographic and Economic Information 184 These schedules offer demographic and economic indicators to help the reader understand the environment within which the city’s financial activities take place. Operating Information 188 These schedules contain service and infrastructure data to help the reader understand how the information in the city’s financial report relates to the services the city provides and the activities it performs. Sources: Unless otherwise noted, the information in these schedules is derived from the Annual Comprehensive Financial Reports for the relevant year. Dec. 14, 2021 Item #2 Page 170 of 209 Net Position by Component Last Ten Fiscal Years (dollars in thousands) 2011-12 2012-13 2013-14 2014-15 Governmental activities Net investment in capital assets 780,727$ 782,500$ 784,210$ 783,298$ Restricted for: Capital assets 192,713 182,685 175,468 178,228 Lighting and landscaping districts 2,246 2,958 4,703 5,263 Affordable housing 38,434 37,390 39,317 39,544 Habitat and agricultural mitigation management 4,799 2,665 1,713 1,708 Other purposes 4,022 3,685 3,774 3,059 Unrestricted 308,470 319,317 328,602 223,522 Total governmental activities net position 1,331,411$ 1,331,200$ 1,337,787$ 1,234,622$ 1 Business-type activities Net investment in capital assets 311,392$ 307,000$ 305,681$ 307,122$ Restricted for: Capital assets 45,522 45,990 46,632 47,315 Unrestricted 47,530 55,758 66,083 69,922 Total business-type activities net position 404,444$ 408,748$ 418,396$ 424,359$ 1 Total government Net investment in capital assets 1,092,119$ 1,089,500$ 1,089,891$ 1,090,420$ Restricted for: Capital assets 238,235 228,675 222,100 225,543 Lighting and landscaping districts 2,246 2,958 4,703 5,263 Affordable housing 38,434 37,390 39,317 39,544 Habitat and agricultural mitigation management 4,799 2,665 1,713 1,708 Other purposes 4,022 3,685 3,774 3,059 Unrestricted 356,000 375,075 394,685 293,444 Total net position 1,735,855$ 1,739,948$ 1,756,183$ 1,658,981$ Source: City of Carlsbad Annual Comprehensive Financial Reports 1 Net position for the prior year was restated in FY 2014-15, to reflect the application of GASB 68, Accounting & Financial Reporting for Pensions 2 Habitat and agricultural mitigation management was combined with other purposes in FY 2019-20 due to immateriality. 3 In FY 2020-21 a transfer of $47 million was made from the General Fund to the Golf Course Fund. The recorded advance from the General Fund to the Golf Course Fund was removed as it was determined that repayment of the advance is not projected in the near or foreseeable future. 156Dec. 14, 2021 Item #2 Page 171 of 209 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 788,035$ 788,078$ 793,090$ 786,965$ 791,124$ 789,335$ 176,279 183,245 182,811 194,434 206,067 212,636 5,921 6,527 7,307 8,025 8,967 9,225 40,390 40,528 41,500 43,588 44,885 40,988 1,758 1,805 1,640 1,524 -2 - 2,948 2,818 2,800 4,329 5,444 6,251 245,078 249,816 262,023 289,000 286,386 249,699 3 1,260,409$ 1,272,817$ 1,291,171$ 1,327,865$ 1,342,873$ 1,308,134$ 317,927$ 344,836$ 349,548$ 346,628$ 351,153$ 361,477$ 45,950 40,098 39,522 38,540 41,244 41,462 73,285 85,153 88,576 97,509 94,140 149,954 3 437,162$ 470,087$ 477,646$ 482,677$ 486,537$ 552,893$ 1,105,962$ 1,132,914$ 1,142,638$ 1,133,593$ 1,142,277$ 1,150,812$ 222,229 223,343 222,333 232,974 247,311 254,098 5,921 6,527 7,307 8,025 8,967 9,225 40,390 40,528 41,500 43,588 44,885 40,988 1,758 1,805 1,640 1,524 -2 - 2,948 2,818 2,800 4,329 5,444 6,251 318,363 334,969 350,599 386,509 380,526 399,653 1,697,571$ 1,742,904$ 1,768,817$ 1,810,542$ 1,829,410$ 1,861,027$ 157Dec. 14, 2021 Item #2 Page 172 of 209 Changes in Net Position Last Ten Fiscal Years (dollars in thousands) 2011-12 2012-13 2013-14 2014-15 Expenses Governmental activities General government 16,675$ 23,574$ 3 20,187$ 16,108$ Public safety 45,576 48,468 48,942 48,856 Community services 43,087 47,900 4 45,341 48,630 Public works 28,441 36,806 30,314 36,273 Interest and fiscal charges on long-term debt 298 4 1 - Total governmental activities 134,077 156,752 144,785 149,867 Business-type activities Carlsbad Municipal Water District 35,985 41,626 43,547 40,897 Golf course 11,190 10,668 11,032 10,538 Wastewater 11,330 13,556 12,488 12,629 Solid waste 2,922 2,918 2,856 2,973 Total business-type activities 61,427 68,768 69,923 67,037 Total government 195,504$ 225,520$ 214,708$ 216,904$ Program Revenues Governmental activities Charges for services: General government 315$ 1,469$ 289$ 1,382$ Public safety 4,379 4,025 3,950 4,220 Community services 6,314 6,987 8,732 10,534 Public works 3,717 5,073 3,720 4,014 Operating grants and contributions 11,813 13,199 11,919 12,242 Capital grants and contributions 15,429 17,741 16,129 19,105 Total governmental activities 41,967 48,494 44,739 51,497 Business-type activities Charges for services: Carlsbad Municipal Water District 35,776 44,240 5 46,750 47,461 Golf course 6,127 6,278 6,635 6,709 Wastewater 10,989 12,402 12,896 12,875 Solid waste 2,961 3,060 3,320 3,245 Operating grants and contributions 1,201 38 90 59 Capital grants and contributions 4,560 2,855 3,198 5,879 Total business-type activities 61,614 68,873 72,889 76,228 Total government 103,581$ 117,367$ 117,628$ 127,725$ Net (Expense)/Revenue: Governmental activities (92,110)$ (108,258)$ (100,046)$ (98,370)$ Business-type activities 187 105 2,966 9,191 Total government net expense (91,923)$ (108,153)$ (97,080)$ (89,179)$ 158Dec. 14, 2021 Item #2 Page 173 of 209 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 16,147$ 18,374$ 25,192$ 10 22,234$ 24,267$ 20,003$ 50,463 55,994 62,630 10 67,968 75,249 80,295 51,191 54,212 51,897 57,978 60,771 57,654 37,464 34,317 36,875 36,897 41,419 35,481 1 3 2 4 2 - 155,266 162,900 176,596 185,081 201,708 193,433 39,458 45,219 51,658 51,638 51,198 56,319 10,545 10,211 10,560 11,035 10,252 10,280 12,613 12,626 13,495 15,238 16,931 9,063 2,997 3,272 3,089 3,840 4,382 5,086 65,613 71,328 78,802 81,751 82,763 80,748 220,879$ 234,228$ 255,398$ 266,832$ 284,471$ 274,181$ 296$ 327$ 816$ 1,679$ 1,030$ 1,260$ 3,980 4,647 4,805 4,784 4,711 5,020 10,711 12,154 11,588 10,755 9,324 8,080 4,152 3,952 3,768 4,574 4,142 5,662 11,912 12,630 13,054 17,307 18,437 26,459 12,042 7 22,789 22,993 13,842 16,802 9,565 43,093 56,499 57,024 52,941 54,446 56,046 39,854 8 44,817 50,095 46,431 46,332 49,668 6,988 7,119 7,973 7,979 6,637 8,108 12,963 13,467 13,885 14,099 13,849 14,027 3,206 3,302 3,427 3,440 3,563 3,387 5,646 2,471 1,611 1,260 399 3,484 2,011 13,322 5,484 4,864 6,327 7,601 70,668 84,498 82,475 78,073 77,107 86,275 113,761$ 140,997$ 139,499$ 131,014$ 131,553$ 142,321$ (112,173)$ (106,401)$ (119,572)$ (132,140)$ (147,262)$ (137,387)$ 5,055 13,170 3,673 (3,678) (5,656) 5,527 (107,118)$ (93,231)$ (115,899)$ (135,818)$ (152,918)$ (131,860)$ (continued) 159Dec. 14, 2021 Item #2 Page 174 of 209 Changes in Net Position (continued) Last Ten Fiscal Years (dollars in thousands) 2011-12 2012-13 2013-14 2014-15 General Revenues and Other Changes in Net Position Governmental activities Taxes: Property taxes 51,538$ 52,861$ 52,608$ 55,992$ Sales and use taxes 28,094 28,403 30,520 32,146 Transient occupancy taxes 12,872 14,702 17,472 19,713 Franchise taxes 4,852 5,118 4,907 5,427 Business license taxes 2,695 3,834 4,177 4,548 Real property transfer taxes 925 1,058 1,080 1,406 Vehicle license fees 53 1 55 - - Income from property and investments 6,088 1,792 6,917 4,564 Other general revenues 419 426 429 609 Extraordinary gain/(loss)20,477 2 - (10,289) 6 - Special items-Golf Course debt - - - - Transfers (1,810) (656) (1,188) (1,264) Total governmental activities 126,203 107,593 106,633 123,141 Business type activities Property taxes 2,721 2,904 2,897 3,133 Income from property and investments 2,054 555 2,498 1,870 Other general revenues 106 85 99 623 Transfers 1,810 655 1,188 1,264 Special items-Golf Course debt - - - - Total business-type activities 6,691 4,199 6,682 6,890 Total government 132,894$ 111,792$ 113,315$ 130,031$ Change in Net Position Governmental activities 34,093$ (665)$ 6,587$ 24,771$ Business-type activities 6,878 4,304 9,648 16,081 Total government 40,971$ 3,639$ 16,235$ 40,852$ Source: City of Carlsbad Annual Comprehensive Financial Reports 1 The State of California ceased sending the city vehicle license fee revenues in FY 2011-12. 2 The extraordinary gain in FY 2011-12 resulted from the transfers of the assets and liabilities of the former Redevelopment Agency to Successor Agency trust funds. 3 The large increase in FY 2012-13 includes a repayment to SANDAG of $1.4 million in excess Transnet Funds on inactive/closed projects and a transfer of $4.5 million in surplus construction funds from the Poinsettia Lane Assessment District to be used in the refunding of Reassessment District No. 2012-1. 4 The large increase in FY 2012-13 includes a $3.8 million transfer of an affordable housing loan receivable to the Successor Housing Agency trust fund as required by the California Department of Finance. 5 The increase in FY 2012-13 was the result of a combination of a 5% increase in the number of water units sold coupled with an average 8% increase in water rates charged to customers and a reimbursement from a lawsuit involving a landslide. 6 The extraordinary loss in FY 2013-14 resulted from the restatement of accrued interest on prior year advances made by the city to the Successor Housing Agency per California state mandate. 7 The decrease in FY 2015-16 was a result of one-time funds received from the federal government in the previous fiscal year for the 2014 Poinsettia Fire, as well as the receipt of retroactive mandated cost reimbursements. 8 The decrease in FY 2015-16 was a result of a decrease in water sales during the fiscal year from drought conservation measures. 9 The increase in FY 2015-16 is a result of higher cash balances that generate interest, an increase in investment earnings, and interest received from the California Department of Finance earned on unpaid mandated costs. 10 The increase in FY 2017-18 is mainly due to changes in the city's pension discount rate. 11 The decrease is FY 2020-21 in income from property and investments was caused by unrealized losses created by adjusting the city's investments to fair market value at June 30, 2021 and a decrease in the average yield on the treasurer's portfolio for the year. 12 In FY 2020-21 a transfer of $47 million was made from the General Fund to the Golf Course Fund. The recorded advance from the General Fund to the Golf Course Fund was removed as it was determined that repayment of the advance is not projected in the near or foreseeable future. 160Dec. 14, 2021 Item #2 Page 175 of 209 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 58,945$ 63,988$ 66,524$ 69,952$ 73,885$ 78,239$ 34,843 33,999 33,674 38,510 36,491 42,579 20,943 22,267 24,233 26,320 18,898 15,584 5,632 5,475 5,812 6,100 5,864 5,774 4,895 4,328 5,026 5,322 5,414 5,705 1,546 1,393 1,463 1,715 1,247 1,786 - -- - - - 11,910 9 1,975 2,551 20,695 20,239 5,036 11 486 451 519 439 559 516 - -- - - - - -- - - (8,427) 12 (1,240)(15,067)(136) (219) (303) (47,273)12 137,960 118,809 139,666 168,834 162,294 99,519 3,306 3,569 3,743 4,002 4,226 4,491 3,163 749 986 7,784 4,963 639 11 39 370 3 113 - - 1,240 15,067 136 219 303 47,273 12 - -- - - 8,427 12 7,748 19,755 4,868 12,118 9,492 60,830 145,708$ 138,564$ 144,534$ 180,952$ 171,786$ 160,349$ 25,787$ 12,408$ 20,094$ 36,694$ 15,032$ (37,868)$ 12,803 32,925 8,541 8,440 3,836 66,357 38,590$ 45,333$ 28,635$ 45,134$ 18,868$ 28,489$ 161Dec. 14, 2021 Item #2 Page 176 of 209 Fund Balances of Governmental Funds Last Ten Fiscal Years (dollars in thousands) 2011-12 2012-13 2013-14 2014-15 2015-16 General Fund Nonspendable 54,228$ 57,719$ 56,707$ 56,381$ 55,324$ Committed 1,000 1,000 1,000 1,000 1,000 Assigned 22,955 26,200 27,838 40,865 42,692 Unassigned 61,384 69,578 75,615 80,274 94,404 Total General Fund 139,567$ 154,497$ 161,160$ 178,520$ 193,420$ All Other Governmental Funds Nonspendable Special revenue funds 440$435$430$3$4$ Capital project funds - - - - - Restricted Special revenue funds 64,401 61,938 66,833 66,300 51,013 2 Capital project funds 177,372 167,009 1 157,712 1 161,499 176,280 2 Assigned Capital project funds 123,465 121,861 131,627 136,237 131,939 Unassigned Special revenue funds - - - - - Debt service funds - - - - - Total all other governmental funds 365,678$ 351,243$ 356,602$ 364,039$ 359,236$ Source: City of Carlsbad Annual Comprehensive Financial Reports 1 The large decreases in the restricted fund balance in the capital projects fund is a result of increased expendituresduring FY 2012-13 and 2013-14 for the construction of Alga Norte Community Park. 2 Beginning in FY 2015-16, the Gas Tax fund balance was reclassified from a Special Revenue fund to a Capital Project fund. 3 In FY 2019-20, the General Fund advanced money to the Habitat Mitigation Fund, a Special Revenue fund, to be repaid to the General Fund once funds are available. 4 In FY 2020-21 a transfer of $47 million was made from the General Fund to the Golf Course Fund. The recorded advance from the General Fund to the Golf Course Fund was removed as it was determined that repayment of the advance is not projected in the near or foreseeable future. 162Dec. 14, 2021 Item #2 Page 177 of 209 2016-17 2017-18 2018-19 2019-20 2020-21 53,751$ 51,628$ 49,608$ 49,008$ 3,446$ 4 1,000 1,000 1,000 1,000 1,000 38,439 43,855 33,367 30,733 56,115 78,191 82,570 101,701 110,122 99,260 171,381$ 179,053$ 185,676$ 190,863$ 159,821$ 1$ 1$ 1$1$ 1$ - -- - 51,677 53,246 57,465 59,295 56,465 183,245 182,812 194,434 206,067 212,635 146,994 151,306 162,139 165,267 166,206 - -- (234) 3 (228) - -- - 381,917$ 387,365$ 414,039$ 430,396$ 435,079$ 163Dec. 14, 2021 Item #2 Page 178 of 209 Changes in Fund Balances of Governmental Funds Last Ten Fiscal Years (dollars in thousands) 2011-12 2012-13 2013-14 2014-15 Revenues: Taxes 105,595$ 109,447$ 114,996$ 123,411$ 3 Intergovernmental 9,603 11,513 10,602 10,359 Licenses and permits 1,852 2,016 2,184 2,369 Charges for services 10,092 10,261 11,278 13,181 Fines and forfeitures 892 861 876 837 Income from property and investments 6,253 2,362 7,604 6,442 Contributions from property owners 9,927 12,029 9,042 10,688 Donations 206 411 210 440 Miscellaneous 697 1,969 1,219 2,550 Total revenues 145,117 150,869 158,011 170,277 Expenditures: Current: General government 16,992 23,072 21,471 17,903 Less: Interdepartmental charges (3,750) (3,858) (3,566) (3,807) Public safety 44,915 46,162 47,333 48,915 Community services 40,402 40,899 41,505 44,501 Public works 11,773 11,299 15,442 16,350 Capital outlay 17,367 28,602 18,702 20,050 Debt service: Principal retirement 851 316 159 - Interest and fiscal charges 308 6 5 5 Total expenditures 128,858 146,498 141,051 143,917 Excess (deficiency) of revenues over (under) expenditures 16,259 4,371 16,960 26,360 Other financing sources (uses): Transfers in 19,887 8,087 11,477 14,857 Transfers out (23,097) (14,792) (16,415) (16,420) Extraordinary gain (loss)12,847 2 - - - Total other financing sources (uses)9,637 (6,705) (4,938) (1,563) Net change in fund balances 25,896$ (2,334)$ 12,022$ 24,797$ Debt service as percentage of noncapital expenditures1 0.99%0.24%0.13%0.00% Source: City of Carlsbad Annual Comprehensive Financial Reports 1 Noncapital expenditures are total expenditures less capital outlay (to the extent capitalized for the Government-wide Statement of Net Position) and expenditures for capitalized assets included within the functional expenditure categories. 2 With the dissolution of Redevelopment Agencies state-wide, the former Redevelopment Agency debt service funds were transferred to trust funds in FY 2011-12. 3 Increase in taxes in FY 2014-15 due to growth in property and TOT taxes. 4 Includes a transfer out to the Golf Course Fund in the amount of $14.8 million for the defeasance of the golf course construction bonds during FY 2016-17. 5 Increase in investment income for FY 2018-19 is due to an increase in the average yield on the investment portfolio for the year as well as an increase due to the fair value adjustment done on investments at fiscal year end (per GASB 31). 6 Increase in public safety expenditures in FY 2018-19 is due to a voluntary $14.2 million additional payment to CalPERS to reduce the city's unfunded pension liability in the safety plan. 7 Decrease in tax revenue for sales and transient occupancy taxes for FY 2020-21 is due to the effects of the COVID-19 pandemic and resulting stay at home orders on sales and transient occupancy taxes. 164Dec. 14, 2021 Item #2 Page 179 of 209 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 129,617$ 134,165$ 141,118$ 154,673$ 147,535$ 7 155,462$ 11,290 11,963 11,608 14,647 15,505 23,653 2,467 3,034 2,999 2,668 2,739 2,399 12,913 14,309 14,145 13,221 11,525 11,615 854 740 679 581 760 429 9,970 3,845 4,622 23,275 5 24,989 7,018 8,009 13,330 12,898 10,301 6,623 5,850 417 349 332 1,385 426 321 1,503 1,467 1,991 3,316 2,641 1,786 177,040 183,202 190,392 224,067 212,743 208,533 17,221 27,925 26,625 24,033 25,762 22,450 (3,471) (3,345) (3,160) (4,581) (5,052) (5,146) 52,015 57,329 58,568 77,550 6 70,997 78,731 46,298 48,930 49,039 52,951 56,931 53,267 17,465 17,349 17,220 18,380 19,995 19,991 34,669 17,603 26,885 20,703 22,171 21,390 - - 10 10 11 8 6 5 7 5 12 17 164,203 165,796 175,194 189,051 190,827 190,708 12,837 17,406 15,198 35,016 21,916 17,825 9,970 20,849 11,513 11,881 11,183 9,760 (12,710) (37,613) 4 (13,590) (13,600) (11,486) (57,053) - -- - - - (2,740) (16,764) (2,077) (1,719) (303) (47,313) 10,097$ 642$ 13,121$ 33,297$ 21,613$ (29,488)$ 0.00%0.00%0.01%0.01%0.01%0.01% 165Dec. 14, 2021 Item #2 Page 180 of 209 General Governmental Tax Revenues by Source Last Ten Fiscal Years (dollars in thousands) Fiscal Year Property Tax * Sales and Use Taxes Transient Occupancy Taxes Franchise Taxes Business License Taxes Real Property Transfer Taxes Gas Tax Total Tax Revenue 2011-12 51,538$ 28,733$ 12,872$ 4,852$ 3,669$ 925$ 3,006$ 105,595$ 2012-13 52,888 29,301 14,702 5,118 3,834 1,058 2,546 109,447 2013-14 52,607 31,464 17,472 4,907 4,178 1,080 3,288 114,996 2014-15 55,992 1 33,202 19,713 2 5,427 4,548 1,406 3,123 123,411 2015-16 58,946 35,232 20,943 5,632 4,895 1,545 2,424 129,617 2016-17 63,988 1 34,543 22,267 3 5,475 4,328 1,393 2,171 134,165 2017-18 66,523 34,972 24,234 4 5,812 5,026 5 1,463 3,088 6 141,118 2018-19 69,952 40,795 7 26,320 6,100 5,322 1,715 4,469 154,673 2019-20 73,889 37,585 8 18,898 8 5,864 5,414 1,247 4,638 147,535 2020-21 78,247 43,726 15,584 8 5,774 5,705 1,786 4,640 155,462 Percentage change from FY 2011-12 to FY 2020-21: 45%66%35%24% 59%96% 85%50% 1 Reflects improvement in the housing market and new construction. 2 The increase in TOT in FY 2014-15 is due to the openings of several new hotels and higher occupancy and room rates throughout the city. 3 The increase in TOT in FY 2016-17 is due to higher room rates throughout most of the city's hotels and an increase in available rooms. 4 The increase in TOT in FY 2017-18 is due to higher room rates throughout most of the city's hotels and an opening of a new hotel. 5 The increase in Business License Taxes in FY 2017-18 is due to a significant number of delinquent payments being collected. 6 The increase in Gas Taxes in FY 2017-18 is due to new ongoing allocations received from the state's Road Maintenance and Rehabilitation Account. 7 The increase in Sales and Use Taxes in FY 2018-19 is due to overall growth and the ending of the state's sales and use tax "triple flip" in FY 2017-18. 8 The decreases in tax revenue for sales tax for FY 2019-20 and transient occupancy taxes for FY 2019-20 and FY 2020-21 is due to the effects of the COVID-19 pandemic and resulting stay at home orders on sales and transient occupancy taxes. * Property Tax category also includes Vehicle License Fees (VLF) in lieu, property tax increment and CFD No. 1 special taxes. Source: City of Carlsbad Annual Comprehensive Financial Reports $0 $10,000 $20,000 $30,000 $40,000 $50,000 $60,000 $70,000 $80,000 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 Total General Governmental Tax Revenues - Last Ten Fiscal Years (in thousands) Property Tax Sales and Use Taxes TOT Other 166Dec. 14, 2021 Item #2 Page 181 of 209 Water and Wastewater Rates Last Ten Fiscal Years Wastewater Fiscal Year Monthly Delivery Charge Base Price Per Unit1 Monthly Base Rate 2011-12 $19.80 $2.97 $24.53 2012-13 21.38 3.20 25.02 2013-14 20.07 3.19 25.52 2014-15 21.08 3.35 26.03 2015-16 22.19 3.53 27.81 2016-17 24.11 3.84 27.81 2017-18 24.72 3.94 27.81 2018-19 24.72 3.94 27.81 2019-20 25.02 4.04 28.66 2020-21 25.52 4.13 29.52 Source: City of Carlsbad Water 1 One unit of water equals 748 gallons. The base price shown is for tier 1, which applies to the first 12 units of usage per month at a single family residence. Note: Rates shown are for a 5/8" meter, which is the standard household meter size. 167Dec. 14, 2021 Item #2 Page 182 of 209 This p a g e is intentionally left blank. 168Dec. 14, 2021 Item #2 Page 183 of 209 Assessed Value of Taxable Property Last Ten Fiscal Years (dollars in millions) Fiscal Year Residential Property Commercial Property Industrial Property Exemptions and Other Taxable Property1 Net Assessed Valuation Change From Prior Year Estimated Property Tax Revenue2 Total Direct Tax Rate3 2011-12 17,306 3,133 1,983 560 22,982 -0.13 44 0.1927 2012-13 17,222 3,237 1,884 614 22,957 -0.11 44 0.1927 2013-14 17,774 3,298 1,871 580 23,523 2.47 45 0.1927 2014-15 19,450 3,603 1,847 589 25,489 8.36 49 0.1927 2015-16 20,431 3,973 1,909 612 26,925 5.63 52 0.1927 2016-17 21,472 4,238 2,092 622 28,424 5.57 55 0.1927 2017-18 22,707 4,355 2,378 555 29,995 5.53 58 0.1927 2018-19 24,077 4,528 2,541 490 31,636 5.47 61 0.1927 2019-20 25,379 4,964 2,673 640 33,656 6.39 65 0.1927 2020-21 26,507 5,224 2,809 677 35,217 4.64 68 0.1927 1 Other property includes farm, rural, institutional, recreational, state secured property, unsecured property, personal property and fixtures. 2 Estimated property tax revenues do not include special assessments, redevelopment tax increment or community facilities district revenues. 3 The total direct tax rate is the city's proportionate share of Proposition 13 property taxes collected within the tax rate area. Source: County of San Diego, California Auditor and Controller's Office Notes: Information about estimated actual value of property is not available; the assessed value is based on the most recent sales value and includes secured property only. $0 $5,000 $10,000 $15,000 $20,000 $25,000 $30,000 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 Taxable Assessed Property Value Last Ten Fiscal Years (in millions) Residential Property Commercial Property Industrial Property 169Dec. 14, 2021 Item #2 Page 184 of 209 Direct and Overlapping Property Tax Rates Last Ten Fiscal Years (rate per $100 of assessed value) Fiscal Year City of Carlsbad Total Direct Rate2 Carlsbad Unified School District San Diego County Educational Revenue Augmentation Fund Mira Costa Community College Tri City Hospital District All Other Rates Total Prop 13 Rate3 Voter Approved Debt4 Total Tax Rate5 2011-12 0.1927% 0.3412% 0.1576% 0.1497% 0.0937% 0.0198% 0.0453% 1.0000% 0.0748% 1.0748% 2012-13 0.1927 0.3412 0.1576 0.1497 0.0937 0.0198 0.0453 1.0000 0.0768 1.0768 2013-14 0.1927 0.3412 0.1576 0.1497 0.0937 0.0198 0.0453 1.0000 0.0743 1.0743 2014-15 0.1927 0.3412 0.1576 0.1497 0.0937 0.0198 0.0453 1.0000 0.0710 1.0710 2015-16 0.1927 0.3412 0.1576 0.1497 0.0937 0.0198 0.0453 1.0000 0.0681 1.0681 2016-17 0.1927 0.3412 0.1576 0.1497 0.0937 0.0198 0.0453 1.0000 0.0563 1.0563 2017-18 0.1927 0.3412 0.1576 0.1497 0.0937 0.0198 0.0453 1.0000 0.0791 1.0791 2018-19 0.1927 0.3412 0.1576 0.1497 0.0937 0.0198 0.0453 1.0000 0.0758 1.0758 2019-20 0.1927 0.3412 0.1576 0.1497 0.0937 0.0198 0.0453 1.0000 0.1015 1.1015 2020-21 0.1927 0.3412 0.1576 0.1497 0.0937 0.0198 0.0453 1.0000 0.0999 1.0999 Allocation of 1% Ad Valorem Property Taxes Overlapping Rates for Tax Rate Area 090001 Source: County of San Diego, California Auditor and Controller's Office 1 The tax rate history above is for Tax Rate Area 09000, which has the highest total assessed value of the all the tax rate areas in the city. Tax Rate Area 09000 was chosen as the most representative for the city. 2 The city has no general obligation bonds; therefore the Basic Tax Rate is the same as the Total Direct Tax Rate. 3 In 1978, California voters passed Proposition 13 which limited property taxes to a total maximum rate of 1.00% based on the assessed value of each property being taxed. This 1.00% is shared by all taxing agencies within a tax rate area. Each year, the assessed value of property may be increased by an "inflation factor" (limited to a maximum increase of 2%). With few exceptions, propertyis only reassessed at the time that it is sold to a new owner. At that point, the purchase price of the property becomes the new assessed value. 4 The majority of voter approved debt is related to various school district and hospital bonds. 5 The Total Tax Rate is the 1.00% Proposition 13 rate plus the Voter Approved Debt rate. 170Dec. 14, 2021 Item #2 Page 185 of 209 Direct and Overlapping Property Tax Rates (continued) Last Ten Fiscal Years (rate per $100 of assessed value) Total Tax Rates1 County Tax Rate Areas2 Carlsbad Unified Schools Oceanside Unified Schools San Marcos Unified Schools Vista Unified Schools Encinitas Union Schools Mira Costa Comm. College Palomar Comm. College Palomar Health District MWD / SDCWA3 Total Voter Approved Rates4 1.0561% 1 0.0000% 0.0000% 0.0000% 0.0000% 0.0423% 0.0137% 0.0000% 0.0000% 0.0000%0.0560% 1.0596 37 - - - - 0.0423 0.0137 - - 0.0035 0.0596 1.0669 3 - - - - 0.0423 - 0.0211 - 0.0035 0.0669 1.0731 2 - - 0.0559 - - 0.0137 - - 0.0035 0.0731 1.0804 24 - - 0.0559 - - - 0.0211 - 0.0035 0.0804 1.0964 3 0.0827 - - - - 0.0137 - - - 0.0964 1.0999 54 0.0827 - - - - 0.0137 - - 0.0035 0.0999 1.1132 1 - 0.0960 - - - 0.0137 - - 0.0035 0.1132 1.1048 5 - -- 0.0803 - - 0.0211 - 0.0035 0.1048 1.1073 3 0.0827 - - - - - 0.0211 - 0.0035 0.1073 1.1091 1 - - 0.0559 - - 0.0137 - 0.0360 0.0035 0.1091 1.1164 11 - - 0.0559 - - - 0.0211 0.0360 0.0035 0.1164 1.1359 1 0.0827 - - - - 0.0137 - 0.0360 0.0035 0.1359 Fiscal Year 2020-21 Voter Approved Debt Tax Rates for all Rate Areas Source: County of San Diego, California Auditor and Controller's Office 1 The Total Tax Rate is the 1.00% Proposition 13 rate plus the Voter Approved Debt rate. 2 Tax rate areas are determined by the County of San Diego. There are currently thirteen tax rates distributed among the 146 tax rate areas of the city. The table above shows the number of tax rate areas affected by each of the rates. 3 MWD is the Metropolitan Water District and SDCWA is the San Diego County Water Authority. 4 The majority of voter approved debt is related to various school district and hospital bonds. 171Dec. 14, 2021 Item #2 Page 186 of 209 Principal Property Taxpayers Current Year and Nine Years Ago Taxpayer Taxable Assessed Value Rank Percentage of Total City Net Assessed Value Taxable Assessed Value Rank Percentage of Total City Net Assessed Value Poseidon Water Desalination Plant 424,822,973$ 1 1.21%-$ 0.00% La Costa Glen Retirement Community 276,265,671 2 0.78 230,236,508 1 1.00 Legoland California, LLC 252,623,430 3 0.72 128,722,242 3 0.00 La Costa Resort & Spa 240,911,267 4 0.68 116,833,774 5 0.51 The Forum Shopping Center 206,583,259 5 0.59 84,882,929 8 0.37 Levine Investments Limited Partnership 182,685,818 6 0.52 The Shoppes at Carlsbad 178,546,161 7 0.51 102,117,463 7 0.44 Park Hyatt Aviara Resort 160,542,900 8 0.46 149,845,296 2 0.65 Grand Pacific Carlsbad LP 160,427,282 9 0.46 La Costa Town Center, LLC 154,861,764 10 0.44 Carlsbad Premium Outlets 114,617,062 6 0.50 Pacific View Apartments 121,249,952 4 0.53 P P C Cascade LLC 82,935,307 9 0.36 HG Fenton Company 79,102,340 10 0.34 Total 2,238,270,525$ 6.36% 1,210,542,873$ 5.27% Net assessed valuation 35,217,379,111$ 22,982,171,525$ Source: County of San Diego, California Assessor's Office 2021 2012 172Dec. 14, 2021 Item #2 Page 187 of 209 Property Tax Levies and Collections Last Ten Fiscal Years Fiscal Year Total Tax Levy for Fiscal Year1 Amount2 Percentage of Levy Collections in Subsequent Years Amount Percentage of Levy 2011-12 $53,682,809 $52,778,359 98.32%$748,269 $53,526,628 99.71% 2012-13 54,469,819 53,677,921 98.55 575,090 54,253,011 99.60 2013-14 55,883,499 55,042,944 98.50 526,607 55,569,551 99.44 2014-15 60,266,230 59,509,285 98.74 550,190 60,059,475 99.66 2015-16 63,363,527 62,595,504 98.79 489,759 63,085,263 99.56 2016-17 67,116,590 66,233,111 98.68 561,730 66,794,841 99.52 2017-18 70,221,876 69,383,391 98.81 534,234 69,917,625 99.57 2018-19 74,560,530 73,518,065 98.60 554,726 74,072,791 99.35 2019-20 78,446,259 77,076,471 98.25 780,401 77,856,872 99.25 2020-21 82,787,902 81,504,185 98.45 N/A 81,504,185 98.45 1 Includes real property transfer taxes, homeowner exemptions and Proposition 172 public safety sales taxes. 2 Total collections include secured, unsecured, homeowners' exception and supplementary amounts distributed by the county. Collections within the Fiscal Year of the Levy Total Collections to Date Source: County of San Diego, California Auditor and Controller's Office $0 $20 $40 $60 $80 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 Property Tax Levies & Collections Last Ten Fiscal Years (in millions) Total Tax Levy for Fiscal Year1 Total Collections to Date 173Dec. 14, 2021 Item #2 Page 188 of 209 This p a g e is intentionally left blank. 174Dec. 14, 2021 Item #2 Page 189 of 209 Ratios of Outstanding Debt by Type Last Ten Fiscal Years (dollars in thousands except per capita) Fiscal Year Capital Leases Loans Payable Bonds/ Special Debt1 Installment Purchase Agreements Loan Payable2 Capital Leases Total Percentage of Personal Income Per Capita 2011-12 -$ 475$ 17,345$ 3 2,585$ 22,830$ 14$ 43,249$ 1.00%401.67$ 2012-13 -159 17,237 1,697 21,335 -40,428 0.92 373.48 2013-14 --16,645 905 19,837 -37,387 0.77 339.36 2014-15 --16,260 -18,429 -34,689 0.71 313.49 2015-16 970 -16,058 -17,670 -34,698 0.60 307.25 2016-17 784 --4 -15,901 -16,685 0.28 146.71 2017-18 588 ---14,944 -15,532 0.24 135.51 2018-19 378 ---16,827 -17,205 0.25 149.30 2019-20 156 ---15,327 -15,483 0.25 135.27 2020-21 ----13,750 -13,750 0.18 119.05 Notes: Details regarding the city's outstanding debt can be found in the notes to the financial statements. Sources: MuniServices, LLC, California Department of Finance and US Census Data Governmental Activities Business-Type Activities 1 Bond/Special Debt is net of amortized premiums. 2 The State Water Resources Control Board issued low interest loans for the Carlsbad Water Recycling Facility in 2005, 2006 and 2014. Varying amounts of principal and interest are due annually. Payments are funded from recycled water user fees. 3 During FY 2006-07, Carlsbad Municipal Golf Course Revenue Bonds were issued for $18.5 million. 4 The Carlsbad Municipal Golf Course Revenue Bonds were defeased during FY 2016-17. $402 $373 $339 $313 $307 $147 $136 $149 $135 $119 $0 $200 $400 $600 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 Outstanding Debt per Capita Last Ten Fiscal Years (in dollars) 175Dec. 14, 2021 Item #2 Page 190 of 209 Schedule of Direct and Overlapping Bonded Debt Current Fiscal Year Fiscal Year 2020-21 Assessed Valuation:$36,740,028,230 Redevelopment Incremental Valuation:1,522,649,119 Adjusted Assessed Valuation:$35,217,379,111 Total Debt City’s Share of Overlapping Tax and Assessment Debt:06/30/21 Debt 6/30/21 Metropolitan Water District 26,830,000$ 1.13%303,179$ Mira Costa Community College District 306,265,000 27.76 85,003,851 Palomar Community College District 650,751,375 2.69 17,524,735 Carlsbad Unified School District 317,807,031 98.19 312,061,080 Carlsbad Unified School District Community Facilities District No 1 1,215,000 100.00 1,215,000 Oceanside Unified School District 253,121,176 0.00 10,125 Vista Unified School District 124,109,882 0.77 950,682 Encinitas Union School District 45,278,945 30.26 13,703,220 San Marcos Unified School District 279,770,706 17.80 49,793,590 San Marcos Unified School District CFD No. 4 14,220,000 32.78 4,661,174 San Marcos Unified School District CFD No. 5 12,675,000 100.00 12,675,000 San Dieguito Union High School District 431,325,000 8.88 38,288,720 San Dieguito Union HS District CFD No. 94-2 24,270,000 98.34 23,867,846 San Dieguito Union HS District CFD No. 95-2 5,790,000 8.92 516,294 Palomar Health District 415,526,602 1.66 6,901,897 Olivenhain Municipal Water District, Assess. Dist. No. 96-1 6,315,000 22.06 1,392,773 City of Carlsbad CFD No. 3, I.A. No. 1 & No. 2 18,050,000 100.00 18,050,000 City of Carlsbad 1915 Act Bonds 27,685,000 100.00 27,685,000 Total Overlapping Tax and Assessment Debt 2,961,005,717$ 614,604,166$ Source: MuniServices, LLC and County of San Diego, California Auditor and Controller's Office 1 Percentage of overlapping agency's assessed valuation located within boundaries of the city. Percent Applicable1 176Dec. 14, 2021 Item #2 Page 191 of 209 Schedule of Direct and Overlapping Bonded Debt (continued) Current Fiscal Year Total Debt City’s Share of Overlapping General Fund Obligation Debt:06/30/21 Debt 6/30/21 San Diego County General Fund Obligations 211,585,000$ 6.30%13,334,087$ San Diego County Pension Obligation Bonds 400,125,000 6.30 25,215,878 San Diego County Superintendent of Schools General Fund Obligations 8,585,000 6.30 541,027 Palomar Community College District General Fund Obligations 1,560,000 2.69 42,011 Carlsbad Unified School District General Fund Obligations 38,190,000 98.19 37,499,525 San Marcos Unified School District General Fund Obligations 72,899,158 17.80 12,974,592 Vista Unified School District Certificates of Participation 995,000 0.77 7,622 San Dieguito Union High School District General Fund Obligations 12,730,000 8.88 1,130,042 Total Overlapping General Fund Obligation Debt 746,669,158$ 90,744,784$ Overlapping Tax Increment Debt (Successor Agency):2,850,000 100.00 2,850,000 2 Total Overlapping Debt:3,710,524,875$ 708,198,950$ City of Carlsbad Direct Debt: City of Carlsbad Governmental Activities Obligations -$ 100.00 -$ Total City of Carlsbad Direct Debt -$ -$ Combined Total Debt 3,710,524,875$ 708,198,950$ 3 Source: MuniServices, LLC and County of San Diego, California Auditor and Controller's Office 1 Percentage of overlapping agency's assessed valuation located within boundaries of the city. 2 Created by the dissolution of the Redevelopment Agency in FY 2011-12. 3 Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue and tax allocation bonds. Ratios to FY 2020-21 Assessed Valuation: Total Overlapping Tax and Assessment Debt 1.67% Ratios to FY 2020-21 Adjusted Assessed Valuation: Governmental Activities Direct Debt 0.00% Combined Total Debt 1.92% Percent Applicable1 177Dec. 14, 2021 Item #2 Page 192 of 209 Direct and Overlapping Debt Last Ten Fiscal Years (rate per $1,000 of assessed value) 2011-12 2012-13 2013-14 Overlapping Tax and Assessment Debt: Metropolitan Water District 0.110$ 0.080$ 0.062$ Mira Costa Community College District - - - Palomar Community College District 0.448 0.375 0.361 Carlsbad Unified School District 8.527 8.312 7.921 Carlsbad Unified School District CFD No. 1 0.149 0.103 0.052 Oceanside Unified School District 0.001 0.001 - Vista Unified School District 0.038 0.031 0.028 Encinitas Union School District 0.338 0.454 0.426 San Marcos Unified School District 3.103 1.711 2.248 San Marcos Unified School District Facility Improvement District 0.176 0.076 0.057 San Marcos Unified School District CFD No. 4 0.236 0.230 0.292 San Marcos Unified School District CFD No. 5 0.950 0.918 0.864 San Dieguito Union High School District -0.621 0.607 San Dieguito Union HS District CFD No. 94-1 0.004 0.004 0.004 San Dieguito Union HS District CFD No. 94-2 1.106 1.082 1.032 San Dieguito Union HS District CFD No. 95-2 0.022 0.022 0.023 San Dieguito Union HS District combined CFD - - - Palomar Health District 0.434 0.353 0.336 Olivenhain Municipal Water District, Assess. Dist. No. 96-1 0.142 0.138 0.139 City of Carlsbad CFD No. 3, I.A. No. 1 & No. 2 1.063 1.045 1.000 City of Carlsbad 1915 Act Bonds 2.569 2.107 2.018 Total Overlapping Tax and Assessment Debt 19.416$ 17.663$ 17.470$ Overlapping General Fund Obligation Debt: San Diego County General Fund Obligations 1.155$ 1.070$ 0.983$ San Diego County Pension Obligation Bonds 2.300 2.017 1.865 San Diego City Superintendent of Schools General Fund Obligations 0.055 0.047 0.042 Mira Costa Community College District Certificates of Participation 0.032 0.028 0.023 Palomar Community College District General Fund Obligations 0.008 0.006 0.006 Carlsbad Unified School District General Fund Obligations 2.028 1.967 2.086 San Marcos Unified School District General Fund Obligations 0.837 0.458 0.441 Vista Unified School District Certificates of Participation - 0.001 0.001 San Dieguito Union High School District General Fund Obligations 0.059 0.051 0.049 Other Unified School District Certificates of Participation 0.002 - - Total Overlapping General Fund Obligation Debt 6.476$ 5.645$ 5.496$ Overlapping Tax Increment Debt (Successor Agency):-$ 0.376$ 0.341$ Total Overlapping Debt:25.892 23.684 23.307 City of Carlsbad Direct Debt: City of Carlsbad Governmental Activities Obligations 0.021 0.007 - Total City of Carlsbad Direct Debt 0.021$ 0.007$ -$ Combined Total Debt 25.913$ 23.691$ 23.307$ Source: MuniServices, LLC and County of San Diego, California Auditor and Controller's Office 178Dec. 14, 2021 Item #2 Page 193 of 209 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 0.049$ 0.039$ 0.030$ 0.023$ 0.017$ 0.013$ 0.009$ - -- 0.918 0.750 0.590 2.414 0.562 0.520 0.619 0.571 0.530 0.493 0.498 7.073 6.370 5.816 5.298 7.474 6.944 8.861 - -- 0.051 0.045 0.039 0.035 - -- - - - - 0.025 0.022 0.024 0.018 0.028 0.027 0.027 0.385 0.515 0.551 0.506 0.461 0.421 0.389 2.087 1.922 1.797 1.706 1.571 1.521 1.414 0.035 0.027 0.020 0.014 0.009 0.004 - 0.254 0.232 0.199 0.181 0.164 0.146 0.132 0.690 0.626 0.566 0.509 0.456 0.404 0.360 0.967 0.906 1.031 1.032 0.956 0.925 1.087 0.003 0.003 0.003 0.003 - - - 0.928 0.855 0.983 0.908 0.800 0.736 0.678 0.021 0.019 0.017 0.016 0.018 0.017 0.015 - -- - - - - 0.308 0.285 0.258 0.244 0.228 0.212 0.196 0.031 0.102 0.091 0.079 0.069 0.058 0.040 0.903 0.836 0.750 0.684 0.623 0.561 0.513 1.727 1.564 1.379 1.240 1.024 0.892 0.786 16.048$ 14.843$ 14.134$ 14.001$ 15.223$ 14.003$ 17.454$ 0.857$ 0.709$ 0.648$ 0.572$ 0.510$ 0.436$ 0.379$ 1.664 1.497 1.347 1.168 1.016 0.860 0.716 0.036 0.031 0.025 0.023 0.020 0.018 0.015 0.018 0.014 0.119 0.005 0.001 - - 0.005 0.004 0.003 0.002 0.002 0.001 0.001 1.846 1.692 1.598 1.447 1.313 1.176 1.065 0.407 0.376 0.378 0.459 0.421 0.401 0.368 0.001 0.001 0.001 - - - - 0.047 0.044 0.041 0.039 0.036 0.034 0.032 - -- - - - - 4.881$ 4.368$ 4.160$ 3.715$ 3.319$ 2.926$ 2.576$ 0.290$ 0.250$ 0.212$ 0.177$ 0.143$ 0.110$ 0.090$ 21.219 19.461 18.506 17.893 18.685 17.039 20.120 -0.036 0.028 0.020 0.012 0.005 - -$ 0.036$ 0.028$ 0.020$ 0.012$ 0.005$ -$ 21.219$ 19.497$ 18.534$ 17.913$ 18.697$ 17.044$ 20.120$ 179Dec. 14, 2021 Item #2 Page 194 of 209 Legal Debt Margin Information Last Ten Fiscal Years (dollars in thousands) 2011-12 2012-13 2013-14 2014-15 Net assessed valuation 22,982,172$ 22,956,650$ 23,522,746$ 25,489,468$ Debt limit (25% x 15%)861,831 860,874 882,103 955,855 Less amount of debt applicable to limit: Bonded debt 17,345 17,005 16,645 16,260 Loan payable 475 159 - - Obligations under capital leases 14 - - - Total net debt applicable to limit 17,834 17,164 16,645 16,260 Legal debt margin 843,997$ 843,710$ 865,458$ 939,595$ Total net debt applicable to the limit as a percentage of debt limit 2.07%1.99%1.89%1.70% Source: City of Carlsbad Annual Comprehensive Financial Reports 1 The golf course bonds were defeased during FY 2016-17. Note: Under state finance law, the city's outstanding general obligation debt should not exceed 15% (as adjusted by 25% per the law) of total assessed property value. By law, the general obligation debt subject to the limitation may be offset by amounts set aside for repaying general obligation bonds. 2.07%1.99%1.89%1.70%1.67% 0.07%0.05%0.03%0.01%0.00% 0.00% 1.00% 2.00% 3.00% 4.00% 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 Percent of Debt Applicable to the Legal Debt Limit Last Ten Fiscal Years 180Dec. 14, 2021 Item #2 Page 195 of 209 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 26,924,891$ 28,423,782$ 29,994,964$ 31,635,528$ 33,655,907$ 35,217,379$ 1,009,683 1,065,892 1,124,811 1,186,332 1,262,097 1,320,652 15,855 - 1 ---- - - ---- 970 785 588 378 156 - 16,825 785 588 378 156 - 992,858$ 1,065,107$ 1,124,223$ 1,185,954$ 1,261,941$ 1,320,652$ 1.67%0.07%0.05%0.03%0.01%0.00% 181Dec. 14, 2021 Item #2 Page 196 of 209 Pledged-Revenue Coverage Last Ten Fiscal Years 2011-12 2012-13 2013-14 2014-15 Wastewater Revenue Bonds Gross revenues 1, 5 12,391,225$ 12,599,601$ 13,699,286$ 13,723,835$ Less expenses 2, 5 6,645,436 7,094,310 6,989,194 7,249,798 Net available revenue 5,745,789$ 5,505,291$ 6,710,092$ 6,474,037$ Debt service Principal 5 780,000$ 820,000$ 860,000$ 905,000$ Interest 5 152,468 111,469 68,419 23,191 Total debt service 932,468$ 931,469$ 928,419$ 928,191$ Coverage 6.16 5.91 7.23 6.97 Recycled Water Loans Gross revenues 3 7,002,009$ 8,160,109$ 9,392,061$ 9,210,258$ Less expenses 4 4,133,530 4,019,176 3,640,786 3,826,699 Net available revenue 2,868,479$ 4,140,933$ 5,751,275$ 5,383,559$ Debt service Principal 1,312,398$ 1,343,498$ 1,375,337$ 1,407,932$ Interest 564,084 532,983 501,144 468,550 Total debt service 1,876,482$ 1,876,481$ 1,876,481$ 1,876,482$ Coverage 1.53 2.21 3.06 2.87 Golf Course Revenue Bonds Gross revenues 1, 6 7,863,951$ 6,777,292$ 7,747,116$ 8,428,375$ Less expenses 2, 6 6,177,438 5,954,896 6,125,159 6,302,019 Net available revenue 1,686,513$ 822,396$ 1,621,957$ 2,126,356$ Debt service Principal 6 325,000$ 340,000$ 360,000$ 385,000$ Interest 6 785,750 771,600 755,850 739,088 Total debt service 1,110,750$ 1,111,600$ 1,115,850$ 1,124,088$ Coverage 1.52 0.74 1.45 1.89 Source: City of Carlsbad Annual Comprehensive Financial Reports 1 Includes operating and non-operating revenues and transfers in from the General Fund. 2 Includes operating and non-operating expenses, excluding interest expense and depreciation. 5 Debt service on the wastewater revenue bonds was completed during FY 2015-16. 6 The golf course bonds were defeased during FY 2016-17. 3 Includes water (potable and recycled) operating and non-operating revenues and fees. In FY 2020-21 the State Water Resources Board confirmed the pledged revenue includes potable, which was excluded in prior years. 4 Includes water (potable and recycled) operating and non-operating expenses, excluding interest expense and depreciation. In FY 2020-21 the State Water Resources Board confirmed the pledged revenue includes potable, which was excluded in prior years. 182Dec. 14, 2021 Item #2 Page 197 of 209 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 13,723,835$ -$ -$ -$ -$ -$ 7,249,798 ----- 6,474,037$ -$ -$ -$ -$ -$ 905,000$ -$ -$ -$ -$ -$ ------ 905,000$ -$ -$ -$ -$ -$ 7.15 n/a n/a n/a n/a n/a 8,216,362$ 8,371,467$ 9,869,958$ 8,198,882$ 7,557,893$ 56,446,838$ 3,4 4,679,706 4,863,054 5,559,509 6,472,817 5,926,215 50,079,801 3,4 3,536,656$ 3,508,413$ 4,310,449$ 1,726,065$ 1,631,678$ 6,367,037$ 1,441,301$ 1,475,461$ 1,510,433$ 1,546,234$ 1,582,886$ 1,620,408$ 435,182 401,021 366,049 330,248 293,596 256,074 1,876,483$ 1,876,482$ 1,876,482$ 1,876,482$ 1,876,482$ 1,876,482$ 1.88 1.87 2.30 0.92 0.87 3.39 8,196,853$ -$ -$ -$ -$ -$ 6,273,320 ----- 1,923,533$ -$ -$ -$ -$ -$ 405,000$ -$ -$ -$ -$ -$ 721,313 ----- 1,126,313$ -$ -$ -$ -$ -$ 1.71 n/a n/a n/a n/a n/a 183Dec. 14, 2021 Item #2 Page 198 of 209 Demographic and Economic Statistics Last Ten Fiscal Years Year Total Population % of S.D. County Population % Change from Previous Year % High School Graduate % Bachelor's Degree or Higher Median Age 2011-12 107,674 3.43% 1.05% 95.3% 50.6%40.3 2012-13 108,246 3.44 0.53 88.5 35.4 39.3 2013-14 110,169 3.45 1.78 95.6 51.3 40.3 2014-15 110,653 3.43 0.44 96.0 51.9 41.1 2015-16 112,930 3.43 2.06 95.6 54.8 42.1 2016-17 113,725 3.43 0.70 95.8 54.2 41.9 2017-18 114,622 3.43 0.79 95.7 55.0 42.3 2018-19 115,241 3.44 0.54 95.7 58.1 42.6 2019-20 114,463 3.42 -0.68 95.0 59.5 44.4 2020-21 115,501 3.48 0.91 95.2 59.5 42.9 Sources: MuniServices, LLC Population projections are from the California Department of Finance 2 Unemployment increase in FY 2019-20 is due to the COVID-19 pandemic. Educational Attainment 1 Personal income is the estimated total aggregate income for the total population. Unemployment rate estimates are from the California Employment Development Department, Bureau of Labor Statistics. Household and demographic characteristics estimates are from the United States Census Data Sets Tables. 184Dec. 14, 2021 Item #2 Page 199 of 209 Average Household Size Personal Income (millions) 1 Per Capita Personal Income City Unemployment Rate 2.58 4,304$ 39,975$ 6.30% 2.63 4,403 40,672 5.90 2.53 4,862 44,134 6.30 2.30 4,907 44,345 4.30 2.68 5,741 50,838 5.20 2.58 6,060 53,285 4.20 2.60 6,496 56,675 3.00 2.60 6,889 59,780 2.60 2.60 6,101 53,300 13.50 2 2.38 7,751 67,111 8.11 185Dec. 14, 2021 Item #2 Page 200 of 209 186Dec. 14, 2021 Item #2 Page 201 of 209 Principal Employers Current Fiscal Year and Nine Years Ago Employer Industry Employees Rank % of Total City Employment Employees Rank % of Total City Employment ViaSat, Inc.Information Technology 2,481 1 3.23%2,193 3 4.01% Legoland California Hospitality/Tourism 2,300 2 2.99%1,158 6 2.12% Thermo Fisher Scientific Life Sciences 1,982 3 2.58%4,142 1 7.57% Omni La Costa Resort & Spa Hospitality/Tourism 1,300 4 1.69%886 8 1.62% Carlsbad Unified School District Education 1,092 5 1.42%885 9 1.62% TaylorMade Golf Company Action Sports 960 6 1.25%2,498 2 4.57% City of Carlsbad Government 748 7 0.97% Nortek Security & Control Information Technology 637 8 0.83% HM Electronics, Inc.Information Technology 571 9 0.74% Gemological Institute of America Research/Education 555 10 0.72%1,344 5 2.46% Callaway Golf Company Action Sports 1,637 4 2.99% Genoptix, Inc.Life Sciences 1,098 7 2.01% Alphatec Spine, Inc.Medical Manufacturing 765 10 1.40% Subtotal Employees 12,626 16.44%16,606 30.36% Total Employees Citywide (estimate)76,800 54,700 Source: City of Carlsbad Business License Data Fiscal Year 2020-21 Fiscal Year 2011-12 187Dec. 14, 2021 Item #2 Page 202 of 209 Authorized Full-Time and 3/4-Time City Government Employees by Program Area Last Ten Fiscal Years Program Area 2011-12 2012-13 2013-14 2014-15 Policy and Leadership Group City Attorney 7.00 7.00 7.00 7.00 City Clerk Services 6.25 6.00 5.00 5.00 City Council 1.00 1.00 1.00 1.00 City Manager 7.00 7.00 7.00 7.00 City Treasurer 0.75 0.75 0.75 0.75 Communications & Engagement 2.75 2.75 2.75 4.75 1 Administrative Services Administration - - - - Finance 30.50 30.50 31.50 31.50 Human Resources 9.00 9.00 9.00 11.00 Information Technology 22.50 22.50 22.50 22.50 Innovation & Economic Development - - - - Public Safety Police 162.00 161.00 161.00 162.00 Fire 87.75 87.75 88.00 89.00 Community Services Community Services Administration - - - - Community Development 50.00 47.00 44.00 44.00 Housing & Homeless Services 13.00 10.00 10.00 12.00 Library & Cultural Arts 51.25 51.25 51.25 50.25 1 Parks & Recreation 70.95 68.40 67.60 61.60 1 Public Works Construction Management & Inspection - - - - Environmental Management - - - - Fleet & Facilities - - - - General Services 39.60 39.55 40.60 39.90 Public Works Administration - - - - Transportation 54.40 54.40 53.40 55.90 Utilities 68.55 67.65 65.40 64.60 Limited Term Personnel (Full-Time)- 1.00 2.00 - Total Full Time Authorized Employees 684.25 674.50 669.75 669.75 Net Increase/(decrease) over prior year (14.75) (9.75) (4.75) - Source: City of Carlsbad Operating Budget Notes: Table Includes both full-time and 3/4 time employees A full-time employee is scheduled to work 2,080 hours per year (including vacation and sick-leave). A 3/4 time employee is scheduled to work 1,560 hours per year (including vacation and sick-leave). 1 During FY 2014-15, the Policy and Leadership and Community Services divisions were reorganized. 2 During FY 2015-16, FY 2016-17, FY 2019-20 and FY 2020-21, the Public Works division restructured divisions. 3 During FY 2018-19, Police IT was consolidated with city IT, resulting in the transfer of 5.0 FTEs. 4 During FY 2018-19, Housing & Neighborhood Services was combined with Community Development. 5 During FY 2020-21, Housing & Homeless Services was established. 6 During FY 2020-21, employees were moved from City Manager and Community Development to create a new office of Innovation & Economic Development and Community Services Administration. 188Dec. 14, 2021 Item #2 Page 203 of 209 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 7.00 6.00 7.00 7.00 8.00 8.00 5.00 5.00 6.00 6.00 7.00 7.00 1.00 1.00 1.00 2.00 2.00 2.00 7.00 8.00 8.00 9.00 12.00 7.00 6 0.75 0.75 0.75 0.75 1.00 1.00 5.00 5.00 5.00 7.00 7.00 7.00 - -- - -3.00 32.50 33.00 32.00 32.00 33.00 28.00 11.00 11.00 11.00 11.00 14.00 17.00 19.50 20.00 27.00 32.00 3 35.00 37.00 - -- - -4.00 6 168.00 168.00 168.00 170.00 3 183.00 186.00 89.00 90.00 90.00 92.00 97.75 111.00 - -- - 3.00 3.00 6 44.00 44.00 44.00 59.00 4 67.00 53.00 5, 6 13.00 13.00 13.00 - 4 -14.00 5 50.50 50.50 50.50 50.50 52.50 52.50 58.15 57.15 57.00 55.00 55.00 55.00 - -- - -15.20 2 8.50 2 9.50 2 9.70 9.60 11.05 11.95 - -- - -35.10 2 28.10 2 51.30 2 52.00 53.00 47.85 2 - 8.05 2 9.85 2 12.30 7.40 7.60 7.85 57.35 2 33.00 2 32.00 35.00 44.15 2 43.70 60.85 2 60.20 2 59.00 61.75 62.10 63.95 3.75 6.75 7.75 4.75 0.75 - 678.00 683.00 693.00 704.75 750.75 773.25 8.25 5.00 10.00 11.75 46.00 22.50 189Dec. 14, 2021 Item #2 Page 204 of 209 Operating Indicators by Function/Program Last Ten Fiscal Years 2011-12 2012-13 2013-14 2014-15 General Government Number of applications processed (full and part-time)1,998 10,904 1 9,527 8,551 Number of external new hires (full and part-time)16 151 1 284 299 Number of internal promotions / transfers (full-time only)6 6 47 41 Business licenses processed 9,303 9,422 10,327 10,735 Number of outgoing payments processed 39,075 38,441 39,310 40,663 Public Safety Police Calls for service 93,248 90,122 87,976 91,314 Average priority one response (minutes)5.9 5.8 5.8 6.5 Cases 7,963 8,314 8,296 8,349 Fire Emergency responses 9,106 10,755 9,925 9,830 Response time: arrivals on scene within goal standard 72%71%63%63% Community Development Affordable housing units completed - 59 - - Financial assistance to affordable housing projects 780,000$ 7,408,000$ -$ 2,646,000$ Building permits issued 1,400 1,500 1,400 1,600 Building inspections conducted 19,000 24,000 19,000 21,000 Final inspections (residential dwelling units)271 440 190 200 Final inspections (commercial square feet)n/a n/a 45,000 60,000 Code Enforcement Actions (activities)3,827 4,943 4,794 5,389 Community Services Library - total material circulation 1,358,839 1,348,333 1,369,369 1,293,282 Library - patron visits 858,422 821,045 791,533 804,003 Cultural Arts - number of events 50 50 62 80 Arts - attendance of events 75,000 80,000 75,000 87,000 Recreation - youth sports participants 1,200 1,200 2,292 2 1,000 Recreation - adult sports participants 5,450 5,200 5,600 6,150 Recreation - enrichment class enrollees 12,650 12,200 10,350 19,030 3 Recreation - special events participants 10,000 13,000 13,600 17,841 3 Recreation - aquatics classes conducted 557 575 1,018 2 1,224 Trees trimmed 1,863 1,936 1,920 2,018 Public Works Streets Centerline road miles resurfaced with overlay or slurry seal 25.2 24.3 14.8 18.1 Carlsbad Municipal Water District Average consumption (millions of gallons per day)14.4 15.4 15.9 14.6 Annual water deliveries (acre feet)16,104 17,248 17,801 16,368 Water connections 28,379 28,947 29,045 29,190 Wastewater Sewage pumped (millions of gallons per day)6.92 6.65 6.53 5.90 Annual flow (millions of gallons)2,524 2,426 2,384 2,152 Wastewater connections 22,631 22,955 23,282 23,431 Source: City of Carlsbad 1 Beginning in FY 2012-13, part-time applicants were added to the number of applicants and new hires. 2 Increases in the number of participants is the result of the opening of the Alga Norte Community Park in FY 2013-14. 3 Increases in the number of enrichment class and special events participants are the results of overall higher attendance and including recategorized classes previously not classified or included as enrichment classes or special events in prior years. 4 The decrease in patron visits is due to the temporary closures of library facilities for remodeling during FY 2015-16. 5 The decrease is due to the time involved with the implementation of a new licensing system during FY 2016-17. 6 Restated in FY 2019-20. Various large commercial, industrial and residential projects were permitted. 7 Reporting of information is not available for FY 20167-17 due to the implementation of a new permitting system. 8 Beginning in FY 2016-17, 2,500 acre feet of contracted desalinated water is included in the water purchase totals. 10 Data is for the calendar year. 11 FY 2019-20 had decreases in some public facing programs and services due to the impacts of the COVID-19 pandemic. 190Dec. 14, 2021 Item #2 Page 205 of 209 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 8,037 9,544 9,455 8,495 8,012 5,469 260 292 311 345 248 181 31 58 44 66 66 34 11,449 8,142 (5)11,267 9,546 10,180 10,164 41,398 41,304 41,869 43,520 44,128 41,164 92,061 84,858 90,760 99,562 112,323 110,448 6.1 5.9 5.8 5.7 5.5 5.2 9,253 8,884 8,643 8,705 8,774 8,222 11,455 12,183 6 12,520 6 12,833 6 13,331 6 12,345 64%78%6 76%6 76%6 75%6 75% - - - - 157 10 119 -$ 1,280,000$ -$ -$ -$ 8,300,000$ 3,000 4,500 4,392 4,884 6 4,464 4,645 23,000 27,000 22,671 21,527 6 21,209 17,044 200 600 289 215 6 268 309 60,000 95,000 155,292 2,350,975 6 365,644 403,397 10,994 n/a 7 9,538 8,154 6 7,360 6,443 1,103,090 1,243,228 1,169,247 1,185,390 975,024 11 536,078 11 609,679 4 720,205 685,188 668,973 483,233 11 20,214 11 88 79 82 96 51 11 135 11 85,000 79,067 65,817 61,531 37,913 11 9,724 11 1,000 968 1,003 1,260 993 11 - 5,600 4,500 4,800 4,800 2,400 11 - 19,632 17,402 12,996 17,900 9,641 11 3,270 11 19,474 12,150 11,645 9,600 3,705 11 300 11 684 733 778 830 770 11 715 11 1,965 1,971 1,954 4,340 4,678 4,500 20.0 23.8 25.8 8.3 14.9 - 12.1 13.1 14.3 13.0 12.7 13.5 13,578 14,616 8 16,032 14,563 14,249 14,731 29,190 29,782 30,054 30,131 30,265 30,439 6.17 5.82 6.32 6.03 6.31 6.27 2,252 2,125 2,306 2,200 2,305 2,288 23,431 23,747 23,863 23,959 24,040 24,103 191Dec. 14, 2021 Item #2 Page 206 of 209 Capital Asset Statistics Last Ten Fiscal Years 2011-12 2012-13 2013-14 2014-15 Community Services Number of parks and community fields 31 31 33 33 Acres of developed parks and community fields 183 183 281 319 Acres of open space and community fields 790 755 728 728 Miles of open space trails 47 47 47 47 Number of pools 1 1 3 3 Number of community centers 4 4 4 4 Number of libraries 3 3 3 3 Number of Materials in Library Collections 645,414 625,893 581,865 574,775 Public Safety Fire Protection Number of stations 6 6 6 6 Number of fire trucks 12 12 13 12 Number of ambulances 5 6 8 7 Number of other fire vehicles 15 15 16 15 Police Protection Number of patrol and other vehicles 90 88 114 114 Number of motorcycles 11 13 13 14 Public Works Carlsbad Municipal Water District Miles of pipelines 527 534 534 534 Wastewater Miles of sewers 288 288 288 288 Streets Miles of streets 340 343 346 347 Number of street lights 7,142 7,179 7,236 7,262 Number of traffic signals 172 174 174 177 Source: City of Carlsbad 1 During FY 2018-19, the number of vehicles was updated to include both active and reserve vehicles.2 In FY 2019-20, a change in the reporting methodology was implemented to include all first responder vehicles. 3 In FY 2019-20, only active lines were counted. Prior years included abandoned and future lines. 192Dec. 14, 2021 Item #2 Page 207 of 209 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 33 33 33 33 33 33 319 319 319 319 319 322 728 728 728 787 802 817 47 47 47 52 52 67 3 3 3 3 3 3 4 4 5 5 5 5 3 3 3 3 3 3 563,581 491,956 477,149 473,154 477,042 497,407 6 6 6 6 1 6 6 12 12 13 14 1 13 2 13 6 5 5 5 1 6 2 6 18 20 20 25 1 25 2 27 106 106 96 119 1 119 119 15 12 13 13 1 15 15 559 559 559 559 535 3 535 288 288 288 288 272 265 348 350 350 350 350 350 7,265 7,334 7,337 7,388 7,520 7,527 177 177 178 179 181 181 193Dec. 14, 2021 Item #2 Page 208 of 209 This p a g e is intentionally left blank. 194Dec. 14, 2021 Item #2 Page 209 of 209