HomeMy WebLinkAbout2022-05-17; City Council; ; Economic and Financial Update for the Third Quarter of Fiscal Year 2021-22CA Review CKM
Meeting Date: May 17, 2022
To: Mayor and City Council
From: Scott Chadwick, City Manager
Staff Contact: Laura Rocha, Deputy City Manager, Administrative Services
laura.rocha@carlsbadca.gov, 760-602-2415
Subject: Economic and Financial Update for the Third Quarter of Fiscal Year 2021-
22
Districts: All
Recommended Action
Receive a report on the economic and financial update for the third quarter of fiscal year 2021-
22
Executive Summary
The City Manager committed to provide quarterly updates to the City Council on the economic
outlook and an update on the city’s finances during the COVID-19 emergency. In these updates,
staff provides a presentation on the:
•National, state, regional and Carlsbad-specific economic data
•The city’s most recent financial data
•General progress and execution of the annual budget
This report details current economic trends that may impact Carlsbad industries and
businesses. 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.
Discussion
Economic update
The Carlsbad economy is diverse, has strong industry clusters and is a leader in innovation.
According to the most recent biennial business survey of Carlsbad businesses, released in
January 2022, five key industry clusters are driving growth:
•Life sciences
•Information, communications and technologies
•Cleantech
•Sports innovation and design
•Hospitality and tourism
The gross regional product for Carlsbad is $14.6 billion, indicating that Carlsbad is the largest
economy in the county behind the City of San Diego. Companies that call Carlsbad home are at
May 17, 2022 Item #6 Page 1 of 25
the forefront in areas of technology and innovation, and the city’s hospitality and tourism
industry generates the second highest amount of transient occupancy tax among the county’s
18 cities.
The COVID-19 pandemic took a toll on the city’s economy, with unemployment spiking in April
2020 to 13.8%. Many businesses were forced to reduce or suspend operations temporarily at
various times throughout the pandemic and corresponding public health orders.
However, because of the diversity of industries, strategic engagement by the City of Carlsbad to
attract and grow innovation businesses, and rapid allocation of financial resources to respond
to the pandemic, the economic impact on Carlsbad was less than surrounding cities, with many
businesses recovering rapidly and resuming growth.
In January, the Omicron variant caused a brief uptick in unemployment. Unemployment
continued its downward trend in February and March. The unemployment rate in March was
4.2% at the state level, 3.4% at the county level, and 3.1% in Carlsbad. This is 0.2% above pre-
pandemic lows.
This quarter, the COVID-19 pandemic did impact supply chains and manufacturing capacity
abroad. Some manufacturing operations – as well as entire cities – have been locked down to
combat an Omicron variant surge in China, causing supply shortages on a wide range of
products from construction material to technology products. There also continues to be a
significant semiconductor shortage, with the global backlog on semiconductor orders extending
beyond eight months, and up to two years for certain types of chips.
Domestically, most pandemic-related regulations have been suspended, allowing the economy
to continue its resurgence. Employers now cite talent, supply chain issues and rising costs as
the biggest challenges to doing business.
To ensure the city remains responsive to the changing situation and is prepared to meet new
challenges head-on, staff have leveraged greater in-house economic data capabilities and
analytics developed over the past year to publish a quarterly economic scan. The Economic
Scan for Fiscal Year 2021-2022 Q3 is presented as Exhibit 1. Staff also publish relevant data on
the city’s economic development site, carlsbadca.gov/doingbusiness. The city will continue to
develop tools to understand the economy, attract businesses, cultivate talent, and support
data-driven economic development decision-making.
Financial update
During the prior fiscal year, the City of Carlsbad saw significantly lower revenues from its
transient occupancy tax, the tax assessed on each hotel and motel room rented in Carlsbad.
This tax is the city’s third-largest revenue source. With the reopening of the economy in June
2021 after a prolonged COVID-19 pandemic related tier system, all local hotels are now open.
This is in stark contrast to the prior fiscal year, where many hotels were partially or fully closed.
Revenue from sales tax, the second-largest revenue source, appears to have been bolstered by
Carlsbad’s strong economy, economic stimulus payments, the paycheck protection program
and other economic measures such as the federal CARES Act and American Rescue Plan Act,
which were intended to offset the impacts of COVID-19.
May 17, 2022 Item #6 Page 2 of 25
Revenue from the city’s largest revenue source, the city’s share of property taxes, was not
substantially changed by COVID-19. However, many of the city’s other revenue sources, such as
recreational service revenues, were significantly impacted by the pandemic, which reduced
their contributions to the city’s budget.
During this very uncertain time, the city adopted its fiscal year 2021-22 budget based on
conservative revenue projections. The ongoing economic disruption caused by COVID-19 was
one of staff’s primary considerations when projecting city revenues, and the demands of the
pandemic, along with the City Council’s approved goals, were the main factors when budgeting
for expenditures.
Revenues
The vast majority of health order restrictions on businesses have now been lifted since the
fiscal year 2021-22 budget was adopted on June 8, 2021, and the results have been positive
across most of the city’s revenue streams. The table below shows the differences in revenue
when comparing the second quarter of fiscal year 2021-22 with the same period in the prior
fiscal year.
Increased Decreased Transient occupancy tax Intergovernmental revenue
$13,685,500 161% -$1,517,000 -58% Sales tax Investments, property income
$8,770,600 29% -$435,700 -10% Property tax Other revenue sources
$1,605,500 3% -$365,500 -28% Other taxes Fines and forfeitures
$1,109,000 15% -$40,000 -14% Licenses, permits, service charges
$2,322,000 34% Interdepartmental charges $92,000 2%
As noted above, the city’s three major revenue sources are property tax, sales tax and transient
occupancy tax.
• The majority of property tax revenue is collected in December and April each year.
Assessed values have increased 3.14% for fiscal year 2021-22.
• The majority of sales tax revenues represent funds collected for the second, third and
fourth calendar quarters of 2021. For sales occurring in the fourth calendar quarter of
2021, the most recent data available, key gains were seen in automobile dealerships,
jewelry and luggage stores, clothing stores, general merchandise stores and department
stores.
May 17, 2022 Item #6 Page 3 of 25
• The city has collected significantly more transient occupancy taxes to date this fiscal
year than in the same period in the prior year because many of the city’s hotels were
fully or partially closed during that part of the previous fiscal year, and because
occupancy rates overall were greatly reduced by the pandemic. The average occupancy
of hotel rooms over the most recent 12 months has been 63%, an increase from 43% at
this time last year.
Expenditures and encumbrances
Total General Fund expenditures and encumbrances for the current fiscal year through the
month of March 2022 are $163.1 million, compared to $126.3 million at the same time last
year. The significant increase is largely due to an increase in transfers, particularly:
• $10.7 million transferred to the new Technology Investment Program in support of the
Strategic Digital Transformation Investment Program
• $7.8 million transferred to the General Capital Construction Fund using funds from the
fiscal year 2020-21 General Fund surplus
• a $5.5 million additional discretionary payment made to CalPERS, the state pension
system, to reduce the city’s unfunded pension liability.
This leaves $59.4 million, or 26.7% of the budget, available to be spent on city programs
through the fiscal year ending June 30, 2022. If funds were spent in the same proportion as the
previous year, the General Fund would have $66.1 million, or 34.4% of the budget, available.
Excluding the transfers out, contingencies and non-departmental charges, the percentage of
available budget on March 31, 2022, is 28.4%, slightly less than the 28.5% available on
March 31, 2021.
Enterprise funds
The city’s water and wastewater enterprise funds continue to operate in line with budgeted
expectations. The city’s municipal golf course, The Crossings at Carlsbad, continues to exceed
budgeted estimates due to higher than expected demand for golf and food and beverage
services.
Fiscal Analysis
This is an informational item with no fiscal impact.
Next Steps
Staff will continue to provide quarterly economic and financial updates through the COVID-19
emergency.
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.
May 17, 2022 Item #6 Page 4 of 25
Exhibits
1. Economic Scan Fiscal Year 2021-2022, third quarter
2. March 2022 Financial Status Report
May 17, 2022 Item #6 Page 5 of 25
1
Third Quarter, Fiscal Year 2021-2022
The following scan provides an overview of key economic indicators for January, February, and March 2022
for the City of Carlsbad. This economic scan is updated quarterly to provide information that is relevant to
the health of Carlsbad’s economy. For regularly updated information regarding the Carlsbad economy and
economic development visit carlsbadca.gov/doingbusiness.
GROSS REGIONAL PRODUCT
Carlsbad GRP (Source: EMSI, 2021)
$14.6B
As of 2021, Carlsbad had the second largest gross regional product
in San Diego County at nearly $14.6B, only trailing the City of San Diego. In 2019, Carlsbad’s economy grew by $800 million
to nearly $13.6 billion. In 2020, as a result of the pandemic, the
city’s GRP remained flat. In 2021, Carlsbad’s economy grew by
approximately $1 billion, to nearly $14.6 billion. This growth was
seen across all industry categories, and was led by manufacturing, wholesale trade, and professional, scientific, & technical services.
JOBS
Unemployment Rate (Source: California Employment Development Department, March 2022 Report)
Unemployment has continued to steadily improve since an initial spike to 13.8% at the onset of the COVID-19 pandemic. The
March unemployment rate of 3.1% in Carlsbad only lags pre-pandemic unemployment levels by .2 percentage points. The
unemployment rate for the County of San Diego was 3.4% in March and the State of California was 4.2%. Currently, many
employers are citing difficulty in finding and retaining workers. In March, nationally, there were 1.9 open jobs for every
unemployed worker. This is one underlying cause to increased wage pressures and difficulty retaining employees.
0
1
2
3
4
5
6
7
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Carlsbad Unemployment Rate 2021 vs 2022
2021 2022
0
1
2
3
4
5
6
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Unemployment Rate Comparrison 2022
Carlsbad San Diego County
North County Avg w/o Carlsbad California
Innovation + Economic Development Department
Exhibit 1
May 17, 2022 Item #6 Page 6 of 25
2
Job Postings (Source: EMSI, January - March 2022)
15,628
There were 15,628 unique job postings in Carlsbad between January and March, a slight increase from the previous quarter.
This continues a trend of increased postings quarter over quarter
for the past eight quarters. The median advertised salary for these
postings was $44,200, which is on average $2,600 more than jobs
posted in the previous quarter. Of jobs posted, 45% did not indicate any experience was required and 68% indicated an education
requirement of High School/GED or less. Continued feedback
from hospitality and restaurant businesses indicate hiring in those
industries remains a challenge.
TALENT + WORKFORCE
Education (Source: 2019 ACS 5-Year Estimates, the latest year available)
Carlsbad has established itself as having
the right workforce to fuel innovation
in tech and life sciences fields. Carlsbad
businesses can access talent from San
Diego County, Orange County, and even
southwest Riverside County. Nearly
60% of working-age residents hold a
bachelor’s degree, with more than 25%
attaining an advanced degree. Outside of
some communities in central San Diego,
Carlsbad has the heaviest concentration
of households with degrees in
science, technology, engineering, and
mathematics (STEM degrees). This local
talent mix is among the leading reasons
that firms choose Carlsbad.
Nearby public and private universities
offer top-notch programs. Within a 30-
mile radius, more than a half-dozen
universities and colleges confer more
than 35,000 degrees annually. The
Carlsbad business community works
closely with higher education partners
to align various education tracks
with local workforce needs.
Talent Pipeline Degrees Conferred by University,
Displayed as Distance from Carlsbad
San Diego State University9,671
May 17, 2022 Item #6 Page 7 of 25
3
CAPITAL
Interest Rates (Source: U.S. Department of the Treasury, March 2022)
National interest rates, which dropped significantly during the pandemic have now eclipsed pre-pandemic rates (measured
as February 2020) for all categories. One-year rates are currently at 1.63%. Ten-year rates are currently at 2.32%. 30-year
rates are at 2.44%. With current inflation concerns, the Federal Reserve has begun to raise interest rates. They have also
indicated they plan for further rate-hikes of up to .5% over the next several quarters.
March 2021
One-year interest rate 0.06%
10-year interest rate 1.73%
30-year interest rate 2.38%
March 2022
One-year interest rate 1.63%
10-year interest rate 2.32%
30-year interest rate 2.44%
COMMERCIAL REAL ESTATE
Market Vacancy Rates and Rent per Square Foot (Source: CoStar, March 2022)
Commercial vacancy rates improved in all segments this
quarter. The industrial vacancy rate is now at 2.9%, compared
to 10.8% pre-pandemic. The office vacancy rate is currently 13%, compared to 15.25% pre-pandemic. Retail, which was
disproportionately impacted by the pandemic continues to see
elevated vacancy rates, although they have improved slightly
since last quarter. Retail vacancy is now at 8.3%, compared to
5.27% pre-pandemic.
Average market rents per square foot, per year have also risen
across all categories this quarter. Retail rates are now $43.55.
Office rates are now $36.95. Industrial rates are now at $19.24.
2.9%
Industrial vacancy rate
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
14.00%
16.00%
2021 Q1 2021 Q2 2021 Q3 2021 Q4 2022 Q1
Carlsbad Commercial Vacancy Rates
Carlsbad Retail Carlsbad Office Carlsbad Industrial
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
14.00%
16.00%
Retail Office Industrial Retail Office Industrial
Carlsbad North County w/o Carlsbad
Vacancy Rate Comparison
2021 Q1 2021 Q2 2021 Q3 2021 Q4 2022 Q1
May 17, 2022 Item #6 Page 8 of 25
4
TOURISM
Hospitality and tourism businesses have been hard-hit over the past two years with fluctuating health order restrictions and
consumer confidence impacting travel. Hotel occupancy in January was significantly lower than January 2019 levels. However,
occupancy rose sharply over the quarter, with March occupancy (75.5%) nearly matching March 2019 occupancy levels (76.5%).
With the Omicron surge behind us, tourism leaders are optimistic that individual and family travel could continue to rise. Baseline
comparison is 2019, as it represents normal conditions.
42 With 42 hotels in Carlsbad, tourism is a major industry in terms of
employment and economic impact. Below are several indicators
reflecting the health of the city’s tourism economy.
Hotel Occupancy (Source: Smith Travel Reports, March 2022 Report)
Carlsbad’s average daily room rate (ADR) remains higher than pre-pandemic levels. Despite beginning the quarter with lower
occupancy numbers, ADR quickly rose as occupancy rates recovered. ADR was $209.40 in March, compared to $174.54 in March
2019. Baseline comparison is 2019, as it represents normal conditions.
Hotel Average Daily Room Rate (Source: Smith Travel Reports, March 2022 Report)
0.0
20.0
40.0
60.0
80.0
100.0
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Hotel Occupancy 2019
City of Carlsbad San Diego County, CA
City of Oceanside, CA City of Newport Beach, CA
0.00
50.00
100.00
150.00
200.00
250.00
300.00
350.00
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Average Daily Rate 2019
City of Carlsbad San Diego County, CA
City of Oceanside, CA City of Newport Beach, CA
50
100
150
200
250
300
350
400
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Avgerage Daily Rate 2022
City of Carlsbad San Diego County, CA
City of Oceanside, CA City of Newport Beach, CA
0
20
40
60
80
100
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Hotel Occupancy 2022
City of Carlsbad San Diego County, CA
City of Oceanside, CA City of Newport Beach, CA
May 17, 2022 Item #6 Page 9 of 25
5
INCOME + HOUSING
Median Household Income (Source: 2019 ACS 5-Year Estimates, the latest year available)
Median household income in Carlsbad continues to exceed county income levels. The median income for a household in
Carlsbad in 2019 was $123,409, which was $44,085 higher than the county median income. The delta between Carlsbad
median income and the County median income grew by $11,768 between 2018 and 2019, meaning Carlsbad is outpacing
the region in terms of household income growth.
Median Home Price (Source: Zillow Home Value Index - March 2022)
Home values in Carlsbad, along with San Diego County, continue to rise significantly, with median home prices in the city
at $1.44 million in March, a gain of 3.7% over the previous quarter. This value is seasonally adjusted and only includes the
middle price tier of homes. Carlsbad home values have risen 28.5% over the past year. The continued rise in home values
can be partially attributed to constrained supply and strong demand in the region.
$0
$200,000
$400,000
$600,000
$800,000
$1,000,000
$1,200,000
$1,400,000
$1,600,000
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Carlsbad Median Home Price
2020 2021 2022
$600,000
$700,000
$800,000
$900,000
$1,000,000
$1,100,000
$1,200,000
$1,300,000
$1,400,000
$1,500,000
Jan Feb Mar
Median Home Price Comparison
Carlsbad North County Avg
May 17, 2022 Item #6 Page 10 of 25
6
BUSINESS ACTIVITY
Business Licenses (Source: City of Carlsbad, March 2022)
There were a total of 2,810 business licenses issued last quarter, including 1,156 non-residential, 757 residential, and 897 outside-
the-city licenses. This represents the strongest quarter for business licenses issued since the pandemic.
The number of licenses issued does not reflect the number of businesses in Carlsbad as a business may carry multiple
licenses, short-term vacation rentals are required to get a license, and businesses outside of Carlsbad that do business
in the city or with the city are required to get a license. It is estimated that there are approximately 6,327 businesses
in Carlsbad.
Upon evaluation of the number of business licenses that were discontinued - those that were once active but not renewed -
Carlsbad actually lost fewer businesses during the pandemic than the 24 months prior to the pandemic.
Building Permits (Source: City of Carlsbad, March 2022)
Between January and March, permit activity remained the same for commercial building permits and increased for
residential building permits. The number of residential permits issued (1,139) was an increase of 148 over the last quarter. Commercial permits issued (117), was consistent with last quarter. The number of residential building permits issued has
been generally increasing over the past two years.
While permit activity is improving YOY, residential builders continue to cite labor shortages and increased building costs as
challenges to new housing starts.
0
200
400
600
800
1000
1200
Commercial Residential Commercial Residential Commercial Residential
2020 2021 2022
Building Permits Issued
Q1 Q2 Q3 Q4
0
500
1000
1500
2000
2500
3000
Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022
Business Licenses Issued by Quarter
Non-Residential Residential Outside City Total
May 17, 2022 Item #6 Page 11 of 25
7
INDUSTRY CLUSTERS
Life Sciences (Source: 2022 Business Report and Industry Cluster Update)
The Life Sciences industry cluster employs 6,657 workers across 134 firms and experienced a 2.6% increase in employment
between 2018 and 2020. The cluster is 5.51 times more concentrated in Carlsbad than the national average and annual
wages per worker average $123,702.
San Diego County and California have experienced parallel employment growth in the Life Sciences cluster between
2010 and 2020. In the same ten-year period, employment in Carlsbad grew by 75%. Between 2016 and 2018, Carlsbad
experienced over 40% growth. Over the past two years (2018-2020), however, employment growth tapered off compared
to years prior.
Technology (Source: 2022 Business Report and Industry Cluster Update)
The Information and Communications Technologies (ICT) cluster employs 9,008 workers across 343 firms in Carlsbad and is
2.75 times more concentrated in Carlsbad than the national average. Annual wages per worker average $136,254, and the
ICT industry cluster experienced a 3.3% increase in the number of jobs between 2018 and 2020.
San Diego County and California experienced steady parallel growth in the ICT cluster between 2010 and 2020. In the same ten-year period, Carlsbad experienced an initial decline in employment between 2012 and 2015; between 2015 and 2020,
employment in the ICT cluster has steadily trended upwards.
Clean Technology (Source: 2022 Business Report and Industry Cluster Update)
Between 2018 and 2020, the number of workers employed at Cleantech firms increased by 22.2%. By 2019, the 48
Cleantech firms in Carlsbad employed more than 872 people. The average annual wage per worker is $109,779, and the
Cleantech industry cluster in Carlsbad is 4.66 times more concentrated than the national average.
Between 2010 and 2012, Carlsbad experienced an initial employment drop for the Cleantech industry followed by steady
growth between 2012 and 2020. Employment growth in California peaked in 2013 and has been on a steady decline since.
Growth in San Diego County also peaked in 2013, dropping by over 25% between 2013 and 2017. Since 2017, employment
in the Cleantech cluster for San Diego County has been on a steady increase.
Sports Innovation & Design (Source: 2022 Business Report and Industry Cluster Update)
The Sports Innovation & Design industry cluster employs 1,804 workers across 116 firms and experienced a 16.3% decrease
in employment between 2018 and 2020. The cluster is 5.06 times more concentrated in Carlsbad than the national average
and annual wages per worker average $75,652.
Employment in the Sports Innovation & Design cluster has steadily declined since 2013 in Carlsbad. Both San Diego County
and California have declined steadily since 2015 and experienced sharp declines between 2019 and 2020, likely due to the
COVID-19 pandemic.
Hospitality & Tourism (Source: 2022 Business Report and Industry Cluster Update)
Carlsbad’s Hospitality & Tourism cluster is about 1.35 times more concentrated in Carlsbad than the national average and
employs 9,179 people across 467 businesses. Hospitality & Tourism experienced a sharp 34% decrease in employment
between 2018 and 2020, driven by the effects of the COVID-19 pandemic between 2019 and 2020. Average annual wages
per worker remain low relative to other key industry clusters, with workers earning $31,315 on average.
Carlsbad, San Diego County, and California experienced sharp declines between 2019 and 2020, during which sub-clusters
like Theater Companies and Dinner Theaters, Amusement and Theme Parks, and Amusement Arcades were shut down to
mitigate the effects of the COVID-19 pandemic.May 17, 2022 Item #6 Page 12 of 25
8
INDUSTRY IMPACT
Largest Industries (Source: EMSI, March 2022)
Carlsbad’s economy significantly exceeds the national average in manufacturing, accommodation and food services,
and professional, scientific and technical services jobs. These sectors, which would include tech, life sciences, and other
innovation industries are generally more resilient to recessions, also represent significant job growth in the economy.
GRP by Industry
Industry size by employment
May 17, 2022 Item #6 Page 13 of 25
9
INNOVATION
Patents (Source: 2020 Carlsbad Industry Cluster Patent Update)
Four of the key industry clusters mentioned above drive innovation activity in Carlsbad. The figure below shows that while
the life sciences cluster has been a long-term driver of the city’s innovation economy, information & communications
technology patents have seen dramatic growth over the past ten years and have been responsible for virtually the same
number of new patents as life sciences in 2019. It is also worth noting that clean technology, which is the industry cluster
with the lowest number of patents, has grown by more than 800% since 2009. All told, these four industry clusters
accounted for 96% of all patents awarded to Carlsbad firms in 2019.
Patents per Capita
2019 Patents per 1,000 Workers in the Labor Force
Carlsbad has a notably higher proportion
of patents per 1,000 workers—over 60%
more than the next-closest competitor
city. This figure shows that Carlsbad has
a greater concentration of patent activity than even the technology hubs of San
Jose, Seattle, San Francisco, and Boston. In
2019, Carlsbad had 1.6 patents for every
1 patent per 1,000 workers in San Jose.
That ratio was 2.5 and 2.8 for Seattle and San Francisco.
Released May 17, 2022
The quarterly economic scan is developed by the City of Carlsbad Innovation & Economic Development Department.
For more information, visit carlsbadca.gov/doingbusiness, or contact the team at business@carlsbadca.gov.
May 17, 2022 Item #6 Page 14 of 25
This report summarizes the City of Carlsbad’s General Fund revenues and expenditures through March 31,
2022. It compares revenues and expenditures for the first nine months of fiscal year 2021-22 and fiscal year
2020-21. In addition, the financial status of the Water and Wastewater Enterprises are included. This report
is for internal use only. The figures presented here are unaudited and have not been prepared in accordance
with Generally Accepted Accounting Principles.
General Fund Revenues
Property Taxes ($48.6 million) – The majority of property tax revenue is collected
in December and April each year. According to the County of San Diego Assessor’s
Office, assessed values in Carlsbad have increased by 3.14% for fiscal year 2021-
22. This is the ninth year in a row that Carlsbad’s assessed values have increased
from year to year, and in line with assessed value increases with other cities in
San Diego County for the year. This reflects continued strength in the regional
housing market. The increase in this year’s assessed values is due to a large increase in the assessed values of
residential properties in the city; the city saw smaller increases in commercial and industrial property values for
the year. This is the seventh year in a row since the Great Recession ended that the city saw increases in assessed
values in all three property components (residential, commercial and industrial).
The property taxes for the first nine months of the fiscal year have increased by 3% as compared to the prior
fiscal year. The primary reasons for the increase are:
•Current taxes are up by $1.4 million or 3.8% mainly due to increased assessed values.
•Supplemental and surplus property taxes are $485,000 higher when compared with the prior year.
These increases are offset slightly by the following decrease:
•Aircraft taxes are down by $303,000 or 18% due to a decrease in aircraft being housed at the airport.
Sales Taxes ($38.8 million) – For the first nine months of the fiscal year, sales tax
revenues are $8.8 million higher than the same period in the previous fiscal year.
Sales tax revenues for the year represent a portion of the city’s first quarter 2022,
the second, third, and fourth calendar quarter of 2021 sales tax revenues, a
portion of the city’s first calendar quarter of 2021 sales tax revenues, and a
portion of the city’s 2020 fourth calendar quarter sales tax revenues.
In the prior fiscal year, the city saw the impacts the COVID-19 pandemic including the shelter-in-place orders,
which essentially shut down all non-essential businesses, and where small businesses in the State of California
were allowed to defer sales tax payments.
For sales occurring in the fourth calendar quarter of 2021 (the most recent data available), key gains were seen
in automobile dealers, jewelry and luggage stores, clothing stores, general merchandise stores, and department
stores. During the same period, key declines were seen in amusement parks, restaurants, motor vehicle
manufacturing, equipment and supplies merchant wholesalers, and petroleum and coal products
March 31, 2022
3%
29%
Exhibit 2
May 17, 2022 Item #6 Page 15 of 25
Monthly Financial Report _________________________________________________________________ 2
manufacturing. The largest economic segments in the city are automobile dealers, general merchandise stores,
and restaurants. Together, they generate 80% of the city’s sales tax revenues.
Transient Occupancy Tax ($22.2 million) – The city’s third highest General Fund
revenue source on an annual basis is Transient Occupancy Tax (TOT or hotel tax),
estimated at $18.4 million for the current fiscal year. A tax of 10% of the rent
amount is collected on all occupancies less than 30 days (transient) in duration.
Year-to-date TOT figures represent taxes collected on hotel receipts through the
month of March 2022. TOT collected for the first nine months of the fiscal year
reflects an increase of $13.7 million, or 161%, more than the previous year. With the reopening of the economy
in June 2021 after a prolonged COVID-19 pandemic related tier system, all local hotels are now open. This is in
stark contrast to the prior fiscal year where many hotels were partially or fully closed, including three of
Carlsbad’s largest hotels – the Omni La Costa, the Park Hyatt Aviara, and the LEGOLAND Hotels.
Currently, there are 4,778 hotel rooms in service (of 5,018 total rooms built in the city), 668 timeshares and 349
registered short-term vacation rentals. The average occupancy of hotel rooms over the most recent 12 months
has been 63% which is up from 43% at this time last year.
Business License Tax ($4.9 million) – All entities doing business in the City of
Carlsbad are required to have a valid business license. Business license revenue is
estimated at $5.8 million for the current fiscal year. Business license revenues are
up $814,000 or 20% higher, than the previous fiscal year. The increase is due to
significant payments received for overdue business license renewals and
penalties, as well as a small increase in new business licenses.
There are currently 9,519 licensed businesses operating within the city, 5 more than the prior year. The majority
of taxed businesses (6,349 businesses) are located in Carlsbad, with 2,416 of these businesses home-based.
Interdepartmental Charges ($3.9 million) – Interdepartmental charges are up
by $92,000 when compared with the same period last year. These charges are
generated through engineering services charged to capital projects (down
$73,000 due to less staff charging to capital projects); reimbursed work from
other funds (down $7,000 charged to date); and miscellaneous
interdepartmental expenses charged to funds outside the General Fund for
services performed by departments within the General Fund (up 6%, or $173,000).
Income from Investments and Property ($3.9 million) – For the first nine
months of the fiscal year, income from investments and property is down
$436,000 compared to the previous fiscal year.
Interest income is down $1.1 million for the year due to the combination of a
17.8% decrease in the average yield on the portfolio for the year (a decrease in
the yield from 1.391% last fiscal year to 1.143% in the current fiscal year) and interest income of $750,000
received last fiscal year on the advance between the city and the city’s former Redevelopment Agency. There
was no interest income received on this advance during the current fiscal year as this loan was fully paid down
in fiscal year 2020-21. The current year decrease in interest income is offset partially by the interest income
earned on the 8% increase in the monthly average cash balance.
The Federal Reserve has maintained an effective benchmark rate between 0 and 0.25% since March 2020. The
city has since seen many of its higher rate bonds and notes being called, causing the city to have to invest in
lower yield securities. This has and will continue to drive the yield on the portfolio lower. In March 2022, the
2%
20%
161%
10%
May 17, 2022 Item #6 Page 16 of 25
Monthly Financial Report _________________________________________________________________ 3
Federal Reserve announced that it would raise the benchmark rate by 0.25%, shifting the target range to 0.25%
to 0.50%.
Income from property sales and rentals is up by $698,000 for the year, or 48% as compared to the prior fiscal
year, primarily due to significant increases in facilities and pool lane rentals as the prior year was severely
impacted by the COVID-19 pandemic and increased cell site lease revenues.
Recreation Fees ($1.8 million) – Recreation fees are generated through
instructional classes, camps, youth and adult sports, special events, parent
participation preschool, senior programs, and various aquatic programs.
Recreation revenues are up by $766,000 compared to last year at this time. This
large increase is due to the reopening of programs as compared to the prior
fiscal year when there were cancellations across all programs due to COVID-19
restrictions.
Development Related Revenues ($2.9 million) – Development related revenues,
which include building permits, planning fees, building department fees, and
engineering fees, reflect a 30% increase for the first nine months of the fiscal
year.
Development related fees are paid by developers to cover a portion of the cost
of reviewing and monitoring development activities, such as plan checks and inspections. Engineering plan check
fees are one of the first fees paid during the initial stages of development. Activity during March 2022 included
permits associated with residential second dwelling units, various minor home improvement permits, a car wash
and commercial additions at two car dealerships.
Another source of development related revenue is building permits, which are up 1% compared to last fiscal
year. The year-to-date valuation of new construction in the current fiscal year is $132.4 million. This represents
a $30.6 million, or 18.7%, decrease over the previous fiscal year.
In March Carlsbad issued building permits for nine residential second dwelling units (seven in the northwest
quadrant and two in the southeast quadrant). For the current fiscal year, 71 residential permits have been
issued, as compared to 251 residential permits issued during the same period last year. During the month of
March, three permits were issued for a total of 94,000 square feet of commercial and/or industrial space. This
included 5,000 square feet for a car wash and 89,000 square feet for two car dealership expansions. For the
current fiscal year, 108,000 square feet of commercial and/or industrial permits have been issued, as compared
to 216,800 square feet for permits issued during the same period last year.
While development activity fiscal year to date is lower than last fiscal year at this same period, revenues are
slightly higher due to a change in the fee structure for building permits that was approved with a fee study in
2021. Permit fees that were previously calculated based on project valuation are now calculated using square
footage. Other development related service fees were also included in the fee study and some fees were
increased as a result of the study. These fee changes became effective in September 2021.
Franchise Tax ($2.3 million) – Franchise taxes are generated from public utility
sources, such as San Diego Gas & Electric (SDG&E), trash collection franchises, and
cable franchises conducting business within city limits. Franchise tax revenue is
estimated at $5.7 million for the current fiscal year. Year-to-date franchise taxes
are $46,000 lower than the same period last year.
Cable television franchise revenues (Spectrum and AT&T) are down by $42,500
due to a decrease in the number of paid subscription services (premium video, equipment rental, on-demand,
76%
30%
2%
May 17, 2022 Item #6 Page 17 of 25
Monthly Financial Report _________________________________________________________________ 4
and programming services). An increase in trash collection revenue of $29,000 is due to an increase in trash rates
combined with additional trash customers.
Approximately 47% of the total franchise tax revenue anticipated for the year will be collected from SDG&E in
April 2022.
Ambulance Fees ($2.3 million) – The city bills any individual who is transported in
one of the city’s ambulances. Through March 2022, receipts from ambulance fees
are up $399,000, or 21%, compared to last fiscal year. The increase in revenue for
the first nine months of the fiscal year is mainly due to an increase in the number
of billable transports, 4,421 in the first nine months of fiscal year 2021-22 versus
3,961 in the prior fiscal year.
Other Revenue Sources ($947,000) – Other revenue sources have decreased by
$365,000 and include revenues received by the city to offset the costs of special
studies or projects for developers; reimbursements for damage done to city
streets, rights-of-way, and other city-owned property; donations; reimbursement
from the Gas Tax Fund for traffic signal maintenance; and miscellaneous
reimbursed expenses and refunds of prior year fees. The decrease to date is
primarily driven by lower receipts this fiscal year as the City of Oceanside took over as the lead agency on the
joint city Innovate 78 joint city contract.
Other Licenses and Permits ($816,000) – Other licenses and permits consist of
fire protection services, right-of-way, lagoon, grading, hazardous uses, and other
miscellaneous permit revenues. These permits usually increase/decrease along
with increases/decreases in development activity. Other licenses and permit
revenues can vary throughout the year. To date, the increase of $62,000 is
primarily a result of increased activity in coastal development permits, Habitat
Management Plan permits and hazardous uses permits, offset by a decrease in right-of-way permits and lagoon
permits.
Fines and Forfeitures ($253,000) – Fines and forfeitures represent fees collected
for code violations, parking citations, overdue fines, and returned checks. The
city recognizes revenues when the citizen pays the fine or forfeiture, as opposed
to when the fine is imposed. The decrease to date of $40,000 is mostly due to
increases in parking citation revenues and overdue fines, offset by a decrease in
code violation revenue.
Intergovernmental Revenues ($1.1 million) – Intergovernmental revenues
include homeowners property tax exemption revenue and miscellaneous
receipts received from the state or federal governments, as well as local school
districts. Various miscellaneous receipts comprise the $1.1 million received this
year. Some larger receipts include senior nutrition program revenues, $201,000
reimbursement from the school district for their share of the school resource
officers, $78,000 received from the state for mandated cost reimbursements, $54,000 received from the state
for the library’s adult learning program, $88,000 for a state coastal grant and $80,000 for a federal grant provided
to the Police Department. In the prior year, the city received Coronavirus Aid, Relief and Economic Security Act
or CARES Act funding as well as a homeless grant which did not recur in the current fiscal year.
8%
21%
28%
14%
58%
May 17, 2022 Item #6 Page 18 of 25
Monthly Financial Report _________________________________________________________________ 5
Transfer Taxes ($1.5 million) – When real property is sold, the County Assessor’s
Office charges a transfer tax. The transfer tax rate in San Diego County is $0.0011
multiplied by the selling price of the property. The city receives 50% of the
transfer tax charged for sales within the City of Carlsbad. Revenues have increased
due to an increase in property transfers.
Other Charges or Fees ($1.3 million) – Other charges or fees are generated
through the sale of city documents, such as staff reports, blueprints and copies;
general fees collected for false alarms, easements and agreements, weed
abatement and kiosk signs; audio/visual rental fees; and general services, such as
mutual aid response, mall police services, emergency response services, reports,
etc. These fees are up by $433,000 or 52% mainly due to the addition of an annual
fire inspection fee which has generated $317,000 fiscal year to date.
A detailed schedule of General Fund revenues is provided on the following page.
52%
30%
May 17, 2022 Item #6 Page 19 of 25
Monthly Financial Report _________________________________________________________________ 6
REVENUE
REVENUE EXPECTED ACTUAL ACTUAL CHANGE FROM
BUDGETED THROUGH FY 2021 FY 2022 YTD 2021 TO PERCENT
FOR FY 2021-22 03/31/22 AS OF 03/31/21 AS OF 03/31/22 YTD 2022 CHANGE
TAXES
PROPERTY TAX $76,590,000 $46,827,531 $46,969,704 $48,575,209 $1,605,505 3%
SALES TAX 44,015,000 32,496,133 30,064,901 38,835,524 8,770,623 29%
TRANSIENT OCCUPANCY TAX 18,441,000 10,083,500 8,521,128 22,206,584 13,685,456 161%
FRANCHISE TAX 5,666,000 2,278,363 2,327,411 2,281,602 (45,809)-2%
BUSINESS LICENSE TAX 5,817,000 4,199,855 4,123,326 4,937,517 814,191 20%
TRANSFER TAX 1,285,000 815,605 1,133,707 1,474,559 340,852 30%
TOTAL TAXES 151,814,000 96,700,988 93,140,177 118,310,995 25,170,818 27%
INTERGOVERNMENTAL
VEHICLE LICENSE FEES 50,000 50,000 83,951 133,433 49,482 59%
HOMEOWNERS EXEMPTIONS 350,000 174,999 173,248 169,133 (4,115)-2%
OTHER REIMBURSEMENT 7,737,091 1,917,201 2,371,900 809,413 (1,562,487)-66%
TOTAL INTERGOVERNMENTAL 8,137,091 2,142,200 2,629,099 1,111,979 (1,517,120)-58%
LICENSES AND PERMITS
BUILDING PERMITS 521,000 391,895 1,031,246 1,102,455 71,209 7%
OTHER LICENSES & PERMITS 944,000 679,188 753,932 815,914 61,982 8%
TOTAL LICENSES & PERMITS 1,465,000 1,071,083 1,785,178 1,918,369 133,191 7%
CHARGES FOR SERVICES
PLANNING FEES 274,000 190,665 254,604 476,136 221,532 87%
BUILDING DEPARTMENT FEES 617,000 471,532 620,155 604,745 (15,410)-2%
ENGINEERING FEES 441,000 312,826 338,652 723,953 385,301 114%
AMBULANCE FEES 2,584,000 1,775,572 1,911,247 2,309,838 398,591 21%
RECREATION FEES 1,760,000 1,109,138 1,011,116 1,777,654 766,538 76%
OTHER CHARGES OR FEES 550,000 312,758 833,542 1,266,192 432,650 52%
TOTAL CHARGES FOR SERVICES 6,226,000 4,172,491 4,969,316 7,158,518 2,189,202 44%
FINES AND FORFEITURES 406,000 281,357 293,400 253,389 (40,011)-14%
INCOME FROM INVESTMENTS & PROPERTY 4,879,925 2,753,303 4,361,539 3,925,857 (435,682)-10%
INTERDEPARTMENTAL CHARGES 5,181,349 3,845,363 3,823,986 3,916,308 92,322 2%
OTHER REVENUE SOURCES 964,429 686,595 1,312,651 947,163 (365,488)-28%
TRANSFERS IN 10,000 10,000 10,000 10,000 0 0%
TOTAL GENERAL FUND $179,083,794 $111,663,379 $112,325,346 $137,552,578 $25,227,232 22%
(1)
(1) Calculated General Fund revenues are 23% above estimates as of March 31, 2022.
GENERAL FUND
REVENUE COMPARISON
May 17, 2022 Item #6 Page 20 of 25
Monthly Financial Report _________________________________________________________________ 7
Expenditures
Total General Fund expenditures and encumbrances through the month of March 2022 are $163.2 million,
compared to $126.3 million at the same time last year. The significant increase is largely due to an increase in
transfers, particularly the $10.7 million related to the new Technology Investment Program in support of the
Strategic Digital Transformation Investment Program, a $7.8 million transfer to the General Capital Construction
Fund from prior fiscal year 2020-21 General Fund surplus, and a $5.5 million additional discretionary payment
to CalPERS. The remaining budget available through the fiscal year ending June 30, 2022 is $59.4 million, or
26.7%. If funds were spent in the same proportion as the previous year, the General Fund would have 34.4% or
$66.1 million available.
Excluding the transfers out, contingencies, and non-departmental charges, the percentage available on March
31, 2022, is 28.4%, slightly less than the 28.5% available on March 31, 2021.
The adopted General Fund budget for fiscal year 2021-22 increased by 12.8% or $20.9 million due to:
• Increased personnel costs (increase of $11.3 million):
o $6.1 million in additional salary costs associated with 23.5 new full-time positions, 20 of which are
directly related to City Council goals, 6.2 new part-time positions and previously negotiated and
anticipated wage increases
o $2.3 million in health insurance and retirement benefits costs
o $2.9 million increase in other personnel costs (Medicare, unemployment and disability benefits)
• Increased maintenance and operations costs (increase of $9.6 million):
o Implementation of the City Council’s goals
o Reinstatement of services after many programs were stalled or halted due to COVID-19 restrictions
o Increased legal services costs
• Decreased City Council contingency from $1.5 million to $500,000
A detailed schedule of General Fund expenditures is provided on the following page.
May 17, 2022 Item #6 Page 21 of 25
Monthly Financial Report _________________________________________________________________ 8
ADOPTED WORKING
BUDGET BUDGET AMOUNT AVAILABLE %
DEPARTMENT DESCRIPTION FY 2021-22 FY 2021-22 (a)COMMITTED (b)BALANCE AVAILABLE (c)
POLICY AND LEADERSHIP GROUP
CITY ATTORNEY $2,037,136 $2,169,185 $1,555,810 $613,375 28.3%
CITY CLERK SERVICES 1,300,469 1,436,264 931,995 504,269 35.1%
CITY COUNCIL 649,975 667,690 400,314 267,376 40.0%
CITY MANAGER 2,112,097 2,370,197 1,624,588 745,609 31.5%
CITY TREASURER 250,752 258,589 181,719 76,870 29.7%
COMMUNICATIONS & ENGAGEMENT 1,771,173 2,479,665 1,999,920 479,745 19.3%
TOTAL POLICY AND LEADERSHIP GROUP 8,121,602 9,381,590 6,694,346 2,687,244 28.6%
ADMINISTRATIVE SERVICES
ADMINISTRATION 568,883 714,415 520,475 193,940 27.1%
FINANCE 5,632,387 6,335,681 4,519,377 1,816,304 28.7%
HUMAN RESOURCES 4,959,011 5,461,482 3,828,528 1,632,954 29.9%
INNOVATION & ECONOMIC DEVELOPMENT 1,264,626 1,480,933 994,556 486,377 32.8%
TOTAL ADMINISTRATIVE SERVICES 12,424,907 13,992,511 9,862,936 4,129,575 29.5%
PUBLIC SAFETY
POLICE 48,756,017 52,851,249 38,589,144 14,262,105 27.0%
FIRE 33,521,412 35,274,422 25,998,441 9,275,981 26.3%
TOTAL PUBLIC SAFETY 82,277,429 88,125,671 64,587,585 23,538,086 26.7%
COMMUNITY SERVICES
COMMUNITY SERVICES ADMINISTRATION 656,221 862,511 643,488 219,023 25.4%
COMMUNITY DEVELOPMENT 10,502,061 12,592,920 9,752,586 2,840,334 22.6%
HOUSING & HOMELESS SERVICES 5,901,431 6,087,311 1,992,693 4,094,618 67.3%
LIBRARY & CULTURAL ARTS 13,780,555 14,581,524 9,584,483 4,997,041 34.3%
PARKS & RECREATION 19,159,380 20,965,518 16,168,041 4,797,477 22.9%
TOTAL COMMUNITY SERVICES 49,999,648 55,089,784 38,141,291 16,948,493 30.8%
PUBLIC WORKS
PUBLIC WORKS ADMINISTRATION 1,941,613 2,171,541 1,457,360 714,181 32.9%
CONSTRUCTION MANAGEMENT & INSPECTIONS 2,990,665 3,285,409 2,488,298 797,111 24.3%
ENVIRONMENTAL MANAGEMENT 1,282,225 1,719,435 1,252,249 467,186 27.2%
FACILITIES 6,555,934 8,744,326 6,188,956 2,555,370 29.2%
TRANSPORTATION 8,405,466 9,113,411 6,526,831 2,586,580 28.4%
TOTAL PUBLIC WORKS 21,175,903 25,034,122 17,913,694 7,120,428 28.4%
NON-DEPARTMENTAL & CONTINGENCY
(d)OTHER NON-DEPARTMENTAL 2,922,000 3,845,896 1,031,290 2,814,606 73.2%
OPERATING TRANSFERS OUT 7,148,000 26,777,804 24,937,804 1,840,000 6.9%
CONTINGENCY 500,000 354,910 0 354,910 100.0%
TOTAL NON-DEPT & CONTINGENCY 10,570,000 30,978,610 25,969,094 5,009,516 16.2%
TOTAL GENERAL FUND $184,569,489 $222,602,288 $163,168,946 $59,433,342 26.7%
(a) Working budget includes the adopted budget, open encumbrances from the end of the prior fiscal year, and any approved carry forwards.
(b) Actual expenditures on a budgetary basis include encumbrances and exclude non-budgeted items.
(c) Amount available would be 34.4% if funds were spent in the same proportion as the previous year.
(d) Other non-departmental includes property tax administration fees, assessment district administration, citywide litigation expenses,
and other items not attributed to a specific department.
AS OF 03/31/22
EXPENDITURE STATUS BY DEPARTMENT
GENERAL FUND
May 17, 2022 Item #6 Page 22 of 25
Monthly Financial Report _________________________________________________________________ 9
Council Contingency
The City Council has allocated $500,000 out of the General Fund budget for unanticipated emergencies or
unforeseen program needs. Below is a listing of the City Council’s contingency:
Donations
Carlsbad Municipal Code 2.08.100 authorizes the city manager to accept donations on behalf of the city in an
amount or of value of up to $5,000 per donation. These donations shall be used in accordance with the donor’s
intent or added to the city’s contingency account. Below is a listing of all donations, excluding minor food
donations such as donuts, that have been accepted during fiscal year 2021-22:
CONTINGENCY ACCOUNT
USE OF FUNDS
RESOLUTION
EXPLANATION AMOUNT DATE NUMBER
ADOPTED BUDGET $500,000
USES:
For the cost of producing and installing no parking signs on Avenida Encinas (17,100) 7/20/2021 2021-174
To shelter pets belonging to people experiencing homelessness (29,825) 9/28/2021 2021-219
Community spirit grant for Carlsbad High School (996) 10/20/2021 NA - See Note 1
Consultant for alternative housing sites (Housing Element Program)(97,169) 2/15/2022 2022-044
TOTAL USES (145,090)
AVAILABLE BALANCE $354,910
Note 1 - City Council Policy 51 gives authorization to the City Manager to approve Community Spirit Grants less than $5,000.
Department Intention Qtr. 1 Qtr. 2 Jan.Feb Mar Qtr. 3 Total
Parks & Recreation Congregate Meals/Guest Cash Donations $3,611 $2,513 $687 $634 $1,037 $2,358 $8,482
Parks & Recreation Home Meals Cash Donations 3,932 3,338 717 700 264 1,681 8,951
Parks & Recreation Senior Transportation Cash Donations 0 5 20 8 43 71 76
Parks & Recreation Leo Carrillo Ranch Cash Donations 835 2,418 440 282 2,425 3,147 6,400
Parks & Recreation Opportunity Grant Donations 2,966 2,258 700 937 2,314 3,951 9,175
Parks & Recreation Senior Center Cash Donations 399 1,380 39 124 594 757 2,536
Parks & Recreation Teens Program Cash Donations 0 1 3 0 0 3 4
Parks & Recreation Parks Maintenance Cash Donations 825 0 0 0 0 0 825
Subtotal - Parks & Recreation $12,567 $11,913 $2,606 $2,685 $6,677 $11,968 $36,448
Library & Cultural Arts Book purchases $135 $275 $50 $50 $50 $150 $560
Library & Cultural Arts Support Library Programs and Services 15 2,600 1,172 0 35 1,207 3,822
Subtotal - Library & Cultural Arts $150 $2,875 $1,222 $50 $85 $1,357 $4,382
Fire Food and small gifts for crews $0 $2,320 $0 $0 $125 $125 $2,445
Fire Sunglasses for lifeguard program 0 400 0 0 0 0 400
Fire Toys for sick or scared children 350 0 0 0 0 0 350
Subtotal - Fire $350 $2,720 $0 $0 $125 $125 $3,195
Total Donations $13,067 $17,508 $3,828 $2,735 $6,887 $13,450 $44,025
Donations Fiscal Year 2021-22
May 17, 2022 Item #6 Page 23 of 25
Monthly Financial Report _________________________________________________________________ 10
Water Enterprise
Revenues
• A 3.0% decrease in water volume sales led to lower water delivery revenues, offset by an increase
in water rates (beginning in Mar 2022).
• Interest earnings have decreased year-over-year due to a 18% decrease in the yield of the
Treasurer’s portfolio offset partially by a 5.8% increase in the average cash balance.
• The increase in property taxes is primarily due to increase in assesed property values
• The increase in other revenues was due to $1 million from consolidation of city and district
CalPERS plans offset by $0.4 million higher refund in prior year for the Carlsbad Municipal Water
District’s share of damages awarded for rates that were unlawfully assessed to the city between
2011 and 2014, total refunded is $3.1 million.
Expenses
• The increase in staffing expenses includes an annual required contribution to the city’s unfunded
pension liability balance with CalPERS and salary increases, offset by vacancies experienced thus
far in the fiscal year.
• Higher interdepartmental expenses resulted from increased personnel related costs, and
maintenance and operations costs for shared services.
• Purchased water expenses have increased from the prior year due to a 5.0% rate increase in the
variable cost of water purchased from the San Diego County Water Authority (SDCWA) offset by
a 2.5% decrease in the amount of water purchased.
• A decrease in captial outlay was from fiscal year 2020-21 purchase of industrial vacuum truck.
CHANGE FROM
BUDGET YTD (*) YTD (*) YTD 2020-21 TO PERCENT
FY 2021-22 3/31/2021 3/31/2022 YTD 2021-22 CHANGE
REVENUES:
WATER DELIVERY 40,583,097$ 30,796,226$ 30,322,078$ (474,148)$ -1.5%
INTEREST 374,897 322,615 259,028 (63,587) -19.7%
MISC. SERVICE CHARGES 281,081 231,957 210,981 (20,976) -9.0%
PROPERTY TAXES 3,687,900 2,793,273 2,916,091 122,818 4.4%
FINES, FORFEITURES & PENALTIES 104,651 4,415 93,895 89,480 2026.7%
OTHER REVENUES 434,829 2,018,304 2,680,209 661,905 32.8%
TOTAL OPERATING REVENUE 45,466,455 36,166,790 36,482,282 315,492 0.9%
EXPENSES:
STAFFING 4,347,140 2,691,952 2,987,396 295,444 11.0%
INTERDEPARTMENTAL SERVICES 2,969,197 2,036,122 2,207,606 171,484 8.4%
PURCHASED WATER 26,700,000 18,012,390 18,754,280 741,890 4.1%
MWD/CWA FIXED CHARGES 6,860,000 5,035,472 5,042,759 7,287 0.1%
OUTSIDE SERVICES/MAINTENANCE 2,603,249 616,696 625,643 8,947 1.5%
DEPRECIATION/REPLACEMENT 4,500,000 3,150,000 3,375,000 225,000 7.1%
MISCELLANEOUS EXPENSES 992,104 478,956 493,862 14,906 3.1%
CAPITAL OUTLAY 0 413,198 16,958 (396,240) -95.9%
TOTAL OPERATING EXPENSES 48,971,690 32,434,786 33,503,504 1,068,719 3.3%
OPERATING INCOME/(LOSS)(3,505,235)$ 3,732,004$ 2,978,778$ (753,227)$ -20.2%
(*) Adjusted to reflect timing differences for water purchases and depreciation.
WATER OPERATIONS FUND
March 31, 2022
1%
1.9%
3.3%
1%
May 17, 2022 Item #6 Page 24 of 25
Monthly Financial Report _________________________________________________________________ 11
Wastewater Enterprise
Revenues
• Charges for current services are higher than in the prior year due primarily to a 20% rate increase
that began in March 2022 coupled with development throughout the city. Commercial customer
water usage is also higher in the current year because commercial/industrial wastewater rates
in Carlsbad are based on water usage, and commercial customers had significantly decreased
during the peak of the COVID-19 pandemic related shutdown.
• Interest earnings decreased due to a 18% decrease in the yield of the Treasurer’s portfolio offset
partially by a 3% increase in the monthly average cash balance.
• The decrease in other revenues is due to a nonrecurring reimbursement from the City of
Oceanside for a wastewater bypass 2020 storm events.
Expenses
• The increase in staffing expenses is mostly from an increase in the annual required contribution
to the city’s unfunded pension liability balance with CalPERS.
• Encina plant services to date are a combination of actuals and an estimate of the annual Encina
expense prorated monthly.
• The decrease in outside services is primarily due heating and lighting costs.
• The capital outlay in fiscal year 2021-22 was for the procurement of a utility truck.
CHANGE FROM
BUDGET YTD* YTD* YTD 2020-21 TO PERCENT
FY 2021-22 3/31/2021 3/31/2022 YTD 2021-22 CHANGE
REVENUES:
CHARGES FOR CURRENT SERVICES 13,773,859 10,223,262 11,330,025 1,106,763 10.8%
INTEREST 75,000 96,559 74,094 (22,465) -23.3%
OTHER REVENUES 115,002 243,311 106,914 (136,397) -56.1%
TOTAL OPERATING REVENUE 13,963,861 10,563,132 11,511,033 947,901 9.0%
EXPENSES:
STAFFING 2,891,648 1,628,425 1,926,466 298,041 18.3%
INTERDEPARTMENTAL SERVICES 1,357,384 1,046,497 1,007,995 (38,502) -3.7%
ENCINA PLANT SERVICES 4,665,000 5,149,913 5,700,951 551,038 10.7%
OUTSIDE SERVICES/MAINTENANCE 1,359,394 273,972 256,096 (17,876) -6.5%
DEPRECIATION/REPLACEMENT 5,300,000 3,750,000 3,975,000 225,000 6.0%
MISCELLANEOUS EXPENSES 776,802 386,614 427,250 40,636 10.5%
CAPITAL OUTLAY 35,135 28,987 46,811 17,824 61.5%
TOTAL OPERATING EXPENSES 16,385,363 12,264,408 13,340,569 1,076,161 8.8%
OPERATING INCOME/LOSS (2,421,502) (1,701,276) (1,829,536) (128,260) 7.5%
(*) Adjusted to reflect timing differences for Encina quarterly invoices and depreciation.
WASTEWATER OPERATIONS FUND
March 31, 2022
12.9%
9%
9%
May 17, 2022 Item #6 Page 25 of 25
Matt Sanford, Economic Development Manager
Roxanne Muhlmeister, Assistant Finance Director
May 17, 2022
Economic and Financial
Update: Q3 FY 2021-22
TODAY’S PRESENTATION
•Economic update
•Financial update
ECONOMIC AND FINANCIAL UPDATE
ECONOMIC UPDATE
3
•Timeframe analyzed
o Third quarter FY2021-2022 (Jan. –Mar. 2022)
•Macro Trends
•Local Impact
ECONOMIC AND FINANCIAL UPDATE
EVOLVING ECONOMIC CONDITIONS
•Despite waning COVID-19 impact, macro-disruptions continue to
affect Carlsbad businesses, some of which have a nexus to COVID-19
o Supply chain issues
o Inflation
o Rising fuel prices
o Russian invasion of Ukraine
o Worker/talent shortage
•Disruptions create a degree of operational uncertainty
•With the Economic Insights and Intelligence (Ei2) capability,Carlsbad has thus
far been well positioned to anticipate and address oncoming challenges
quickly and robustly
ECONOMIC AND FINANCIAL UPDATE
GLOBAL PRESSURES
Several macro-economic disruptions are impacting operations, locally.
•Russian invasion of Ukraine has led to increasing fuel prices
•Manufacturing and supply chain issues related to COVID-19
outbreaks and lockdowns in China
•Global semiconductor shortage is delaying tech products
ECONOMIC AND FINANCIAL UPDATE
INFLATION CONCERNS
•Sustained cost increases are driving
concern for businesses
•San Diego area prices are up 2.1%
over the past two months
•Over-the-year prices are up 7.9%
(5.6% less food and energy)
ECONOMIC AND FINANCIAL UPDATE
WORKER/TALENT SHORTAGE
•EDD March unemployment data
o California unemployment rate:
4.2%, (1.6% improvement)
o County unemployment rate:
3.4%, (1.3% improvement)
o Carlsbad unemployment rate:
3.1%, (.8% improvement)
0
1
2
3
4
5
6
7
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Carlsbad Unemployment Rate 2021 vs 2022
2021 2022
ECONOMIC AND FINANCIAL UPDATE
8
ECONOMIC AND FINANCIAL UPDATE
ECONOMIC RECOVERY
•Most sectors are continuing to or have fully recovered
•Cases in the county have started to rise, following a sharp decline in February as Omicron subsided
•High vaccine rates and continued mitigations have kept hospitalizations and deaths very low
•Innovation economy sectors, like life-sciences, tech, and manufacturing are continuing to expand
ECONOMIC AND FINANCIAL UPDATE
CARLSBAD ECONOMY
•Carlsbad’s GRP was $14.6 billion in 2021
•Carlsbad’s GRP was $13.6 billion in 2020 & 2019
•Carlsbad’s economy grew by approximately
$1 billion in the last year
ECONOMIC AND FINANCIAL UPDATE
CARLSBAD ECONOMY
ECONOMIC AND FINANCIAL UPDATE
Top Five Industry Expansions - 2021
Top Five Industries Contractions - 2021
Machinery Manufacturing $170,356,513 $166,897,336 -$3,459,177
Electrical Equipment, Appliance, & Component Mfg.$41,709,816 $39,306,251 -$2,403,565
Broadcasting (except Internet)$30,930,544 $28,703,260 -$2,227,284
Telecommunications $67,502,217 $66,522,186 -$980,030
Pipeline Transportation $8,267,344 $7,567,474 -$699,870
Management of Companies and Enterprises $1,387,807,048 $1,562,456,261 $174,649,212
Professional, Scientific, and Technical Services $1,863,945,969 $2,020,184,103 $156,238,134
Chemical Manufacturing $643,685,714 $798,069,390 $154,383,676
Merchant Wholesalers, Nondurable Goods $529,860,193 $628,281,781 $98,421,588
Administrative and Support Services $309,018,816 $374,945,699 $65,926,883
Industry 2020 Earnings 2021 Earnings Change
Industry 2020 Earnings 2021 Earnings Change
CARLSBAD JOBS
•June through September saw 15,628 unique job postings
•Slight increase from previous quarter
•Eight consecutive quarters of increased hiring demand
o Manufacturing
o Administrative Services
o Professional, Scientific & Technical
•Average salary for posted jobs was $44,200
•Employers in Accommodation and Food Services continue
noting trouble filling jobs
ECONOMIC AND FINANCIAL UPDATE
COMMERCIAL REAL ESTATE
•Vacancy rates for industrial properties are 2.9%
•Vacancy rates for office properties are 13%
•Vacancy rates for retail properties are up to 8.3%
ECONOMIC AND FINANCIAL UPDATE
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
14.00%
16.00%
2021 Q1 2021 Q2 2021 Q3 2021 Q4 2022 Q1
Carlsbad Commercial Vacancy Rates
Carlsbad Retail Carlsbad Office Carlsbad Industrial
RESIDENTIAL REAL ESTATE
•Median home values ended the quarter at $1.44 million
•Median home values have risen 28.5% over the past year
•The continued rise in home values is partially attributed to
constrained supply, low interest rates, and a strong demand
in the region
ECONOMIC AND FINANCIAL UPDATE
$600,000
$700,000
$800,000
$900,000
$1,000,000
$1,100,000
$1,200,000
$1,300,000
$1,400,000
$1,500,000
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Carlsbad Median Home Price
2020 2021 2022
CARLSBAD TOURISM
•Normalizing activity
•Steeper than usual decline in the fall
•Room rates have kept above 2019 levels
ECONOMIC AND FINANCIAL UPDATE
50
100
150
200
250
300
350
400
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Avgerage Daily Rate 2022
City of Carlsbad San Diego County, CA
City of Oceanside, CA City of Newport Beach, CA
City of Carlsbad, 2019
0
20
40
60
80
100
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Hotel Occupancy 2022
City of Carlsbad San Diego County, CA
City of Oceanside, CA City of Newport Beach, CA
City of Carlsbad, 2019
NEW DEVELOPMENT
& BUSINESS ACTIVITY
•Business licenses issued was strongest in two years
•Home builder optimism is rising, but costs are a challenge
ECONOMIC AND FINANCIAL UPDATE
0
500
1000
1500
2000
2500
3000
Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022
Business Licenses Issued by Quarter
Non-Residential Residential Outside City Total
0
200
400
600
800
1000
1200
Commercial Residential Commercial Residential Commercial Residential
2020 2021 2022
Building Permits Issued
Q1 Q2 Q3 Q4
KEY TAKEAWAYS
•Global disruptions are impacting Carlsbad business
operations
•Increased prices are becoming a top concern for
businesses
•So far, Carlsbad’s economy has remained resilient and
continues to grow
•Hospitality & Tourism industry is projecting a robust
recovery but staffing issues could hamper progress
ECONOMIC AND FINANCIAL UPDATE
FINANCIAL UPDATE
ECONOMIC AND FINANCIAL UPDATE
•Fiscal Year 2021-22 to date through March 31, 2022
GENERAL FUND REVENUES
(third quarter of fy 2021-22)
GENERAL FUND REVENUES
Revenue category
Actual
FY 2020-21
Actual
FY 2021-22
$
difference
%
difference
Property tax $47.0 $48.6 $1.6 3%
Sales tax 30.1 38.8 8.7 29%
Transient occupancy tax 8.5 22.2 13.7 161%
Other taxes 7.6 8.7 1.1 15%
Income from inv. and property 4.4 3.9 -0.5 -10%
Development related revenue 2.2 2.9 0.7 30%
Other revenues 12.5 12.4 -0.1 -1%
Total $112.3 $137.5 $25.2 22%
(in millions)
data through third quarter of each fiscal year
Revenue category
Expected
FY 2021-22
Actual
FY 2021-22
$
difference
%
difference
Property tax $46.8 $48.6 $1.8 4%
Sales tax 32.5 38.8 6.3 20%
Transient occupancy tax 10.1 22.2 12.1 120%
Other taxes 7.3 8.7 1.4 19%
Income from inv. and property 2.8 3.9 1.1 43%
Development related revenue 1.4 2.9 1.5 113%
Other revenues 10.8 12.4 1.6 14%
Total $111.7 $137.5 $25.8 23%
GENERAL FUND REVENUES
(in millions)
data through third quarter of each fiscal year
PROPERTY TAX
•Majority of property taxes collected in Dec. and April
•Assessed values in Carlsbad increased by 3.14%
•Increase in property tax revenue due to:
•Increased assessed values
•Increased supplemental property taxes
ECONOMIC AND FINANCIAL UPDATE
SALES TAX
•Majority of receipts are from Q2-Q4 2021
and a portion of Q1 2022
•Key gains seen in automobile dealers,
jewelry and luggage stores, clothing and
department stores
ECONOMIC AND FINANCIAL UPDATE
TRANSIENT OCCUPANCY TAX
ECONOMIC AND FINANCIAL UPDATE
•Revenues to date represent June through Feb. stays
•Increase of $13.7 million or 161% compared to prior year
•Average occupancy during the last 12 months has been
63% compared to 43% for the same period in the prior year
•The majority of TOT collected to date is from tourists versus
group events
OTHER TAXES
•Business license tax revenues are up due to one-time payments of overdue renewals and penalties combined with a small increase in new business licenses
•Franchise taxes are down slightly and the majority comes in April from SDG&E
•Transfer taxes on property sales have increased due to an increase in property transfers
ECONOMIC AND FINANCIAL UPDATE
INCOME FROM INVESTMENTS
AND PROPERTY
•Revenue decreased by 10% compared to prior year
•Investment income continues decline
•Yield of city’s portfolio is 1.14% versus 1.39% in the
prior year
•Income from property rentals increased by 48%
compared to prior year
ECONOMIC AND FINANCIAL UPDATE
OTHER REVENUES
•Ambulance fees, fines and forfeitures,
interdepartmental charges, recreation fees,
development fees, reimbursements, and a variety
of other revenues are included in other revenues
•Other reimbursements decreased
•Recreation fees continue to increase
ECONOMIC AND FINANCIAL UPDATE
GENERAL FUND EXPENDITURES & ENCUMBRANCES
(third quarter of fy 2021-22)
GENERAL FUND EXPENDITURES & ENCUMBRANCES
(in millions)
Category
FY 2021-22
Appropriation
Quarter 3
FY 2020-21
Quarter 3
FY 2021-22
% of Budget
Spent/Committed
to Date
Personnel $121.4 $75.4 $85.7 71%
Maintenance & operations 72.0 42.2 50.7 70%
Transfers out 26.8 5.2 24.9 93%
Capital outlay 1.5 1.2 1.5 99%
COVID-19 & Innovation 0.5 2.3 0.3 65%
Contingency 0.4 0.0 0.0 0%
Total $222.6 $126.3 $163.1 73%
GENERAL FUND EXPENDITURES & ENCUMBRANCES
(in millions)
Category FY 2021-22
Appropriation
QTR 3 EXP
FY 2021-22
% of Budget
Spent to Date
OPEN POs
at 3/31/21
% of Budget
Spent/Committed
to Date
Personnel $121.4 $85.7 71%$0.0 71%
Maintenance & operations 72.0 35.1 49%15.6 70%
Transfers out 26.8 24.9 93%0.0 93%
Capital outlay 1.5 1.1 75%0.4 99%
COVID-19 & Innovation 0.5 0.1 15%0.2 65%
Contingency 0.4 0.0 0%0.0 0%
Total $222.6 $146.9 66%$16.2 73%
GENERAL FUND BUDGET
ECONOMIC AND FINANCIAL UPDATE
•Adopted budget of $184.6 million
•Working budget of $222.6 million
•Available budget remaining of $59.4 million, or 27%
•Includes actual expenditures through March 2022
•Includes open purchase order commitments
WATER AND WASTEWATER
ECONOMIC AND FINANCIAL UPDATE
Compared to prior year through third quarter:
•Water revenues are up 0.9% and expenses are
up 3.3%
•Wastewater revenues are up 9.0% and
expenses are up 8.8%
GOLF COURSE
ECONOMIC AND FINANCIAL UPDATE
•Net income $830,000 higher than last year
•Driven by continued demand for golf and an
increase in food & beverage sales
NEXT STEPS
•Monitor revenues and expenditures
•Publish economic and financial status reports:
carlsbadca.gov/doingbusiness
carlsbadca.gov/departments/finance/financial-reports
•Return with fiscal year end update
ECONOMIC AND FINANCIAL UPDATE