HomeMy WebLinkAbout2022-11-15; City Council; ; Economic and Financial Update for the First Quarter of Fiscal Year 2022-23CA Review CKM
Meeting Date: Nov. 15, 2022
To: Mayor and City Council
From: Scott Chadwick, City Manager
Staff Contact: Zach Korach, Finance Director
zach.korach@carlsbadca.gov, 442-339-2127
Subject: Economic and Financial Update for the First Quarter of Fiscal Year
2022-23
Districts: All
Recommended Action
Receive a report on the economic and financial update for the first quarter of fiscal year 2022-
23 and provide direction as appropriate.
Executive Summary
The City Manager has committed to providing quarterly updates to the City Council on the
economic outlook and the city’s finances. The update reviews the city’s economic and fiscal
health and serves as a measure of budgetary performance. While substantial recovery from the
COVID-19 has occurred, economic uncertainty has increased fueled by, among other factors,
geopolitical conflict and rising inflation. In this report, staff will provide a presentation on:
• 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 positive economic trends in the recovery from the most severe period of the
pandemic as well as information pertaining to the economic uncertainty driven by continued
increases in inflation. In line with regional trends, Carlsbad saw increases in revenues in almost
all categories when compared to 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
Nov. 15, 2022 Item #15 Page 1 of 25
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
the forefront in areas of technology and innovation, and the city’s hospitality and tourism
industry generate 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 businesses, with unemployment spiking to
13.8% in April 2020. 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. Many
businesses recovered rapidly and resumed growth.
Unemployment continued its downward trend reaching a low of 2.4% in May, before rising
slightly to 3% in August. In September Carlsbad unemployment dipped back down to 2.7%. The
unemployment rate in September was 3.9% at the state level and 3.1% at the county level.
Ongoing inflation and concerns of a recession are impacting the labor market. While it remains
tight for now, some employers have noted a slight easing in their ability to find workers. Going
into the holidays, many national retailers have projected slower seasonal hiring than previous
years. This may affect unemployment rates in the second quarter.
Global disruptions also continue to impact our local, state, and national economy due to supply
chains, oil supplies, energy costs, and inflation. Employers cite worker shortages, supply chain
issues and rising costs as the biggest challenges to doing business today.
To ensure the city remains responsive to the changing landscape, staff have capitalized on
greater in-house economic data capabilities and analytics developed over the past year to
publish a quarterly economic scan. The Economic Scan FY2022-2023 Q1 is presented as Exhibit
2. 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 and cultivate talent.
Financial update
The COVID-19 pandemic created immense uncertainty in the city’s revenues, most notably in
sales tax and transient occupancy tax. The fiscal year 2021-22 adopted budget had anticipated
continued adverse impacts from the pandemic with moderate recovery. However, based on
unaudited actuals for fiscal year 2021-22, General Fund revenues in total, specifically property,
sales and transient occupancy tax revenues reached historically high levels. This was mainly due
to the staggered lessening of COVID-19 restrictions, coupled with pent-up demand and
inflationary increases.
While recovery from the pandemic was accelerated compared to original estimations, new
uncertainty surrounding the economy is rising. Significant inflation and its impacts on
disposable income, personal savings, tourism and the housing market indicate that maintaining
a conservative outlook for the city’s revenues is prudent.
Nov. 15, 2022 Item #15 Page 2 of 25
Revenues
The majority of health order restrictions on businesses have been lifted since the fiscal year
2021-22 budget was adopted in June 2021, and the results have been positive across most of
the city’s revenue streams. The General Fund’s top three revenue sources – property, sales and
transient occupancy tax – reached historic highs in fiscal year 2021-22. The fiscal year 2022-23
adopted budget took a conservative approach at estimating these revenue sources. However,
year-over-year increases through the first quarter are notably positive given the amount of
uncertainty in the economy. The table below shows the differences in revenue when comparing
quarter 1 of fiscal year 2022-23 with the same period in the prior fiscal year.
Fiscal year 2022-23 revenues for the first quarter compared to fiscal year 2021-22 Q1
revenues
Revenue category Change ($) Change (%)
Transient occupancy tax $1,566,737 16%
Property tax $816,293 32%
Licenses and permits $775,866 26%
Sales tax $673,105 5%
Investments, property income $160,119 13%
Interdepartmental charges $141,568 11%
Fines and forfeitures $35,813 38%
Intergovernmental $7,415 7%
Other revenues sources ($36,504) -11%
Other taxes ($610,880) -21%
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.
Fluctuations through the first quarter are due to an increase in assessed property values
and aircraft taxes as a result of additional aircrafts being housed at the airport.
• Most of these sales tax revenues represent receipts that were collected for the second
calendar quarter of 2022, but they also include a portion of the city’s sales tax receipts
from October 2021 through March 2022, as well as the first advance of the city’s sales
tax revenues from the third calendar quarter of 2022. The prior fiscal year saw
accelerated recovery from the impacts of COVID-19 and ended the year reaching
historical levels of revenues. The first quarter of fiscal year 2022-23 experienced gains
over the same period last year, primarily in general retail, food products, and
transportation. While much uncertainty remains surrounding inflation and its impacts to
disposable income and savings, increased inflation appears to be boosting the level of
sales tax revenues through the first quarter.
Nov. 15, 2022 Item #15 Page 3 of 25
• Year-to-date transient occupancy tax figures represent taxes collected on hotel receipts
through the month of August 2022. The revenues received during the first quarter
represent an increase of $1.6 million or 16% compared to the same period last year. This
increase is largely due to an increase in hotel stays as well as an increase in average daily
room rate.
Expenditures and encumbrances
Total General Fund expenditures and encumbrances through the month of September 2022 are
$79.6 million, compared to $79.2 million at the same time last year. While the year-over-year
change is only $400,000, or 0.5%, there are varying factors in how each of the respective years’
expenditure totals are derived.
During the first quarter of fiscal year 2021-22, City Council authorized:
• $10.7 million transfer related to the Technology Investment Program in support of the
Strategic Digital Transformation Investment Program
• $7.8 million transfer to the General Capital Construction Fund from fiscal year 2020-21
General Fund surplus
• $5.5 million additional discretionary payment to CalPERS
During the first quarter of fiscal year 2022-23, City Council authorized:
• $10.2 million transfer to the city’s Workers’ Compensation Internal Service Fund
• $1 million transfer to the city’s Risk Management Internal Service Fund
• $1.4 million transfer to the city’s Fleet Maintenance Internal Service Fund
While surplus authorizations in accordance with City Council Policy Statement No. 87 were
higher in fiscal year 2021-22 and resulted in additional expenditures through the first three
quarters, the fiscal year 2022-23 adopted budget was $13.8 million, or 7.5%, greater than the
previous year, which contributed to comparable expenditure totals in both years.
Excluding the transfers out, contingencies, and non-departmental charges, the percentage
available on Sept. 30, 2022, is 67%, slightly less than the 68% available on Sept. 30, 2021.
CalPERS and pension funding has been and will continue to be a challenge for participating
agencies. CalPERS administers the city’s defined benefit pension plan, and costs have been
increasing in past years as CalPERS addresses a structural shortfall in plan assets to cover
unfunded liabilities.
In support of CalPERS’s 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. Since fiscal year 2016-17, the City Council has approved additional discretionary
payments totaling $56.4 million to decrease future costs of the city’s unfunded actuarial liability
and strive to achieve a funded status of 80% in accordance with City Council Policy Statement
No. 86, the city’s pension funding policy.
In CalPERS’s latest actuarial valuation report (as of June 30, 2021), the city had a combined
pension funded status of 86% which was predominantly driven by CalPERS’s fiscal year 2020-21
investment return of 21.3%. This positive return will not impact the city’s required
contributions until fiscal year 2023-24. CalPERS recently announced preliminary net investment
Nov. 15, 2022 Item #15 Page 4 of 25
return of -6.1% for fiscal year 2021-22, which will significantly reduce the city’s total funded
status and have a tremendous impact on the city’s future costs. This negative return will not
impact the city’s required contributions until fiscal year 2024-25. Staff will continue to monitor
CalPERS’s strategies and performance and report to City Council as necessary and appropriate.
Staff will continue to monitor spending and intends to return to the City Council in early 2023
with a midyear review of the General Fund’s budget. Staff plans to propose adjustments to
current year revenue forecasts and may propose expenditure adjustments in line with the city’s
evolving economic situation.
Enterprise funds
The city’s water and wastewater enterprise funds1 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.
Fiscal Analysis
This is an informational item with no fiscal impact.
Next Steps
Staff will continue to provide quarterly updates to the City Council on the economic outlook
and the city’s finances.
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. 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. September 2022 Financial Status Report
2. September 2022 Economic Scan
1 Enterprise funds are government funds usually used to account for operations that are financed and operated in
a manner similar to private business enterprises, with the services provided paid for primarily through user
charges.
Nov. 15, 2022 Item #15 Page 5 of 25
This report summarizes the City of Carlsbad’s General Fund revenues and expenditures through September
30, 2022. It compares revenues and expenditures for the first three months of fiscal year 2022‐23 and fiscal
year 2021‐22. 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 ($3.3 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 8.13% for fiscal year 2022‐
23.This is the tenth 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 eighth 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 three months of the fiscal year have increased by 32% as compared to the prior
fiscal year. The primary reasons for the increase are:
Current taxes are up by $192,000 or 20% mainly due to increased assessed values.
Supplemental and surplus property taxes are $111,000 higher when compared with the prior year.
Aircraft taxes are also up $501,000 or 39% due to an increase in aircrafts being housed at the airport.
Sales Taxes ($13.3 million) – For the first three months of the fiscal year, sales
tax revenues are $673,000 higher than the same period in the previous fiscal year.
Sales tax revenues for the current fiscal year represent the city’s first advance for
the third calendar quarter of 2022, the second calendar quarter of 2022 sales tax
revenues and a portion of the city’s first calendar quarter of 2022 sales tax
revenues.
In the prior fiscal year, the city saw accelerated recovery from the impacts of 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. FY 2021‐22 experienced historically high
levels of sales tax revenues.
For sales occurring in the second calendar quarter of 2022 (the most recent data available), key year‐over‐year
gains were seen in general retail, food products, transportation, and business‐to‐business During the same
period, key declines were seen in construction. The largest economic segments in the city are automobile
dealers, general merchandise stores, and restaurants. Together, they generate 82% of the city’s sales tax
revenues.
September 30, 2022
32%
5%
Exhibit 1
Nov. 15, 2022 Item #15 Page 6 of 25
Monthly Financial Report _________________________________________________________________ 2
Transient Occupancy Tax ($11.6 million) – The city’s third highest General Fund
revenue source on an annual basis is Transient Occupancy Tax (TOT or hotel tax),
estimated at $28.8 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 August 2022. TOT collected for the three months of the fiscal year
reflects an increase of $1.6 million, or 16%, more than the previous year.
Currently, there are 4,775 hotel rooms in service (of 5,056 total rooms built in the city), 668 timeshares and 382
registered short‐term vacation rentals. The average occupancy of hotel rooms over the most recent 12 months
has been 73% which is up from 59% at this time last year.
Business License Tax ($1.5 million) – All entities doing business in the City of
Carlsbad are required to have a valid business license. Business license revenue is
estimated at $6.2 million for the current fiscal year. Business license revenues are
down $466,000 or 24%, from the previous fiscal year. The decrease is due to a
reduction in payments received for overdue business license renewals and
penalties that were received last year and as a result of COVID‐19.
There are currently 9,562 licensed businesses operating within the city, 57 more than the prior year. The majority
of taxed businesses (6,359 businesses) are located in Carlsbad, with 2,391 of these businesses home‐based.
Interdepartmental Charges ($1.4 million) – Interdepartmental charges are up
by $141,000 when compared with the same period last year. These charges are
generated through engineering services charged to capital projects (up $89,000
due to more staff time charged to capital projects); reimbursed work from other
funds (no change); and miscellaneous interdepartmental expenses charged to
funds outside the General Fund for services performed by departments within
the General Fund (up $52,000).
Income from Investments and Property ($1.4 million) – For the first three
months of the fiscal year, income from investments and property is up $160,000
compared to the previous fiscal year. This increase is largely due to a rise in yield
from 1.15% as of September 2021 to 1.51% as of September 2022.
Throughout the pandemic, the Federal Reserve had maintained an effective
benchmark rate between 0 and 0.25%. However, inflation has been on a historic
rise for much of the last year and resulted in the Federal Reserve increasing benchmark rates all the way to 3%‐
3.25%. With future rate hikes anticipated, the portfolio’s yield will continue on an upward trend.
Recreation Fees ($1.3 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 $290,000 compared to last year at this time.
While programs began to reopen more in the summer of 2021, this increase can
also be attributed to recovery growth since the onset of the pandemic.
11%
16%
27%
24%
13%
24%
Nov. 15, 2022 Item #15 Page 7 of 25
Monthly Financial Report _________________________________________________________________ 3
Development Related Revenues ($1.1 million) – Development related revenues,
which include building permits, planning fees, building department fees, and
engineering fees, reflect a 20% increase for the first three 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 September 2022
included permits associated with commercial permit revisions, reroofing, second dwelling units, single family
detached, and tenant improvements.
One source of development related revenue is building permits, which are up 30% compared to last fiscal year.
The year‐to‐date valuation of new construction in the current fiscal year is $54.4 million. This represents a $8.5
million, or 18.5%, increase over the previous fiscal year.
Franchise Tax ($734,000) – Franchise taxes are generated from public utility
sources, such as San Diego Gas & Electric (SDG&E), trash collection franchises, and
cable franchises conducting business within city limits. Franchise tax revenue is
estimated to be at $6.9 million for the current fiscal year. Year‐to‐date franchise
taxes are $14,000 lower when compared to the same period last year.
Cable television franchise revenues (Spectrum and AT&T) are up $9,000
representing a relatively nominal amount of change for subscription services (premium video, equipment rental,
on‐demand, and programming services). A decrease in trash collection revenue of $23,000 resulted from the
city’s new contract with Republic and represents a relatively nominal amount of change when considering
applied rates and the number of trash customers.
SDG&E pays franchise taxes for the use of public land over which they transport gas and electric services. In
addition, SDG&E pays an “in‐lieu” franchise tax based on the value of gas and electricity transported through
SDG&E lines but purchased from another source. The “in‐lieu” tax was put in place to capture the franchise
taxes on gas and electricity that is transported using public lands, but which would not otherwise be included in
the calculations for franchise taxes. Approximately 46% of the city’s franchise taxes are anticipated to be
received from SDG&E in April 2023.
Ambulance Fees ($976,000) – The city bills any individual who is transported in
one of the city’s ambulances. Through September 2022, receipts from ambulance
fees are up $308,000, or 46%, compared to last fiscal year. The increase in revenue
for the first three months of the fiscal year is mainly due to an increase in the
number of billable transports, 1,802 in the first three months of fiscal year 2022‐
23 versus 1,419 in the prior fiscal year.
Other Revenue Sources ($305,000) – Other revenue sources have decreased by
$36,500 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 a reduction in miscellaneous reimbursements related to the regional Innovate 78 initiative.
Carlsbad was the lead agency in the prior fiscal year and was reimbursed from neighboring cities for this shared
agency cost.
20%
46%
11%
2%
Nov. 15, 2022 Item #15 Page 8 of 25
Monthly Financial Report _________________________________________________________________ 4
Other Licenses and Permits ($224,000) – 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 decrease of $19,000 is
primarily a result of decreased coastal development permits compared to the
same period last year.
Fines and Forfeitures ($129,000) – 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 increase to date of $36,000 is mainly due to
increases in code violations.
Intergovernmental Revenues ($111,000) – 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 $111,000 received this year which
represents a nominal increase over the same period last year.
Transfer Taxes ($115,000) – When real property is sold, the County Assessor’s
Office charges a transfer tax. The transfer tax rate in San Diego County is $0.0011
multiplied by the selling price of the property. The city receives 50% of the
transfer tax charged for sales within the City of Carlsbad. Revenues have
decreased over the same period last year due to a decrease in property transfers.
Other Charges or Fees ($97,000) – Other charges or fees are generated through
the sale of city documents, such as staff reports, blueprints and copies; general
fees collected for false alarms, easements and agreements, weed abatement and
kiosk signs; and general services, such as mutual aid response, mall police
services, emergency response services, reports, etc. These fees are up by $500 or
1% and have remained relatively flat over the same period last year.
A detailed schedule of General Fund revenues is provided on the following page.
1%
8%
38%
7%
53%
Nov. 15, 2022 Item #15 Page 9 of 25
Monthly Financial Report _________________________________________________________________ 5
REVENUE
REVENUE EXPECTED ACTUAL ACTUAL CHANGE FROM
BUDGETED THROUGH FY 2022 FY 2023 YTD 2022 TO PERCENT
FOR FY 2022‐23 09/30/22 AS OF 09/30/21 AS OF 09/30/22 YTD 2023 CHANGE
TAXES
PROPERTY TAX $81,508,000 $2,590,268 $2,542,833 $3,359,126 $816,293 32%
SALES TAX 49,123,000 12,144,023 12,651,416 13,324,521 673,105 5%
TRANSIENT OCCUPANCY TAX 28,803,000 8,934,001 10,050,564 11,617,301 1,566,737 16%
FRANCHISE TAX 6,958,000 816,870 747,949 734,049 (13,900)‐2%
BUSINESS LICENSE TAX 6,242,000 1,837,641 1,948,716 1,482,976 (465,740)‐24%
TRANSFER TAX 1,570,000 177,829 246,777 115,537 (131,240)‐53%
TOTAL TAXES 174,204,000 26,500,631 28,188,255 30,633,510 2,445,255 9%
INTERGOVERNMENTAL
VEHICLE LICENSE FEES 50,000 0 0 0 0 0%
HOMEOWNERS EXEMPTIONS 353,000 0 0 0 0 0%
OTHER REIMBURSEMENT 737,809 10,303 103,597 111,012 7,415 7%
TOTAL INTERGOVERNMENTAL 1,140,809 10,303 103,597 111,012 7,415 7%
LICENSES AND PERMITS
BUILDING PERMITS 900,000 189,937 356,975 464,022 107,047 30%
OTHER LICENSES & PERMITS 963,000 222,545 243,600 224,176 (19,424)‐8%
TOTAL LICENSES & PERMITS 1,863,000 412,482 600,575 688,198 87,623 15%
CHARGES FOR SERVICES
PLANNING FEES 456,000 128,068 195,634 159,061 (36,573)‐19%
BUILDING DEPARTMENT FEES 895,317 209,449 202,045 333,599 131,554 65%
ENGINEERING FEES 608,900 134,319 206,323 201,082 (5,241)‐3%
AMBULANCE FEES 3,850,000 751,102 668,244 976,342 308,098 46%
RECREATION FEES 2,315,500 910,707 1,062,368 1,352,274 289,906 27%
OTHER CHARGES OR FEES 1,504,300 85,289 96,896 97,395 499 1%
TOTAL CHARGES FOR SERVICES 9,630,017 2,218,934 2,431,510 3,119,753 688,243 28%
FINES AND FORFEITURES 210,750 57,516 93,594 129,407 35,813 38%
INCOME FROM INVESTMENTS & PROPERTY 5,481,000 1,178,132 1,200,225 1,360,344 160,119 13%
INTERDEPARTMENTAL CHARGES 5,236,449 1,233,601 1,252,016 1,393,584 141,568 11%
OTHER REVENUE SOURCES 996,029 287,483 341,243 304,739 (36,504)‐11%
TRANSFERS IN 10,000 10,000 10,000 0 (10,000)‐100%
TOTAL GENERAL FUND $198,772,054 $31,909,082 $34,221,015 $37,740,547 $3,519,532 10.3%
(1)
(1) Calculated General Fund revenues are 18% above estimates as of September 30, 2022.
GENERAL FUND
REVENUE COMPARISON
Nov. 15, 2022 Item #15 Page 10 of 25
Monthly Financial Report _________________________________________________________________ 6
Expenditures
Total General Fund expenditures and encumbrances through the month of September 2022 are $79.6 million,
compared to $79.2 million at the same time last year. While the year‐over‐year change is only $400,000 or 0.5%,
there are varying factors in how each of the respective years’ expenditure totals are derived. During the first
quarter of fiscal year 2021‐22, City Council authorized a $10.7 million transfer related to the Technology
Investment Program in support of the Strategic Digital Transformation Investment Program, a $7.8 million
transfer to the General Capital Construction Fund from fiscal year 2020‐21 General Fund surplus, and a $5.5
million additional discretionary payment to CalPERS. During the first quarter of fiscal year 2022‐23, City Council
authorized a $10.2 million transfer to the city’s Workers’ Compensation Internal Service Fund, $1 million transfer
to the city’s Risk Management Internal Service Fund, and $1.4 million to the city’s Fleet Maintenance Internal
Service Fund. While surplus authorizations in accordance with City Council Policy Statement No. 87 were higher
in fiscal year 2021‐22 and resulted in additional expenditures through the first three quarters, the fiscal year
2022‐23 adopted budget was $13.8 million or 7.5% greater than the previous year which contributed to
comparable expenditure totals in both years.
The remaining budget available through the fiscal year ending September 30, 2022 is $144.1 million, or 64.4%.
If funds were spent in the same proportion as the previous year, the General Fund would have 63.3% or $136.8
million available.
Excluding the transfers out, contingencies, and non‐departmental charges, the percentage available on
September 30, 2022, is 67%, slightly less than the 68% available on September 30, 2021.
The adopted General Fund budget for fiscal year 2022‐23 increased by 7.5% or $13.8 million due to:
Increased personnel costs (increase of $9.8 million):
o $5.5 million in salaries and wages due to the addition of 24 new full‐time positions and 3.4 full‐time
equivalent part‐time positions.
o $3.5 million in health insurance and retirement benefits costs
o $0.8 million increase in other personnel costs (Medicare, unemployment and disability benefits)
o ($2.0) million in vacancy savings. The fiscal year 2022‐23 budget introduced a mechanism for accounting
for vacancy savings at the beginning of the budget cycle rather than at the end. This mechanism (1)
reduces the amount of budget in the General Fund, (2) closer alignment between budgeted and actual
personnel costs, (3) increased alignment with the city’s 10‐year forecast
Decreased maintenance and operations costs (decrease of $1.1 million):
o Under the direction of the City Manager, departments were instructed to identify budgetary savings for
fiscal year 2022‐23 which resulted in a $1.5 million reduction in base operating costs.
$6.5 million increase in transfers. This increase was a result of a temporary reduction in capital project
transfers in fiscal year 2021‐22 as a result of COVID‐19 and its anticipated adverse fiscal impacts.
CalPERS and pension funding has been and will continue to be a challenge for participating agencies. CalPERS
administers the city’s defined benefit pension plan and costs have been increasing in past years as CalPERS
addresses a structural shortfall in plan assets to cover unfunded liabilities. 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. Since fiscal year 2016‐17, the City Council has approved
additional discretionary payments of $56.4 million to decrease future costs of the city’s unfunded actuarial
liability and strive to achieve a funded status of 80% in accordance with City Council Policy Statement No. 86.
CalPERS latest actuarial valuation report (as of June 30, 2021), the city had a combined pension funded status of
86% which was predominantly driven by CalPERS’ fiscal year 2020‐21 investment return of 21.3%. This positive
return will not impact the city’s required contributions until fiscal year 2023‐24. CalPERS recently announced
preliminary net investment return of ‐6.1% for fiscal year 2021‐22 which will significantly reduce the city’s total
funded status and have a tremendous impact on the city’s future costs. This negative return will not impact the
Nov. 15, 2022 Item #15 Page 11 of 25
Monthly Financial Report _________________________________________________________________ 7
city’s required contributions until fiscal year 2024‐25. Staff will continue to monitor CalPERS’ strategies and
performance and report to City Council as necessary and appropriate.
The city will continue monitoring spending and intends to return to the City Council in early 2023 with a
midyear review of the General Fund’s budget. Staff plans to propose adjustments to current year revenue
forecasts and may propose expenditure adjustments in line with the city’s evolving economic situation.
A detailed schedule of General Fund expenditures is provided below.
ADOPTED WORKING
BUDGET BUDGET AMOUNT AVAILABLE %
DEPARTMENT DESCRIPTION FY 2022‐23 FY 2022‐23 (a) COMMITTED (b) BALANCE AVAILABLE (c)
POLICY AND LEADERSHIP GROUP
CITY ATTORNEY $2,033,508 $2,029,455 $587,800 $1,441,655 71.0%
CITY CLERK SERVICES 1,394,162 1,450,310 246,304 1,204,006 83.0%
CITY COUNCIL 652,220 652,049 136,972 515,077 79.0%
CITY MANAGER 2,156,145 2,328,593 682,634 1,645,959 70.7%
CITY TREASURER 249,945 249,664 38,444 211,220 84.6%
COMMUNICATIONS & ENGAGEMENT 1,979,186 2,407,081 999,186 1,407,895 58.5%
TOTAL POLICY AND LEADERSHIP GROUP 8,465,166 9,117,152 2,691,340 6,425,812 70.5%
ADMINISTRATIVE SERVICES
ADMINISTRATION 747,797 754,170 206,965 547,205 72.6%
FINANCE 5,472,176 6,064,795 1,797,561 4,267,234 70.4%
HUMAN RESOURCES 5,264,775 5,530,229 1,435,411 4,094,818 74.0%
INNOVATION & ECONOMIC DEVELOPMENT 2,585,951 2,700,033 698,721 2,001,312 74.1%
TOTAL ADMINISTRATIVE SERVICES 14,070,699 15,049,227 4,138,658 10,910,569 72.5%
PUBLIC SAFETY
POLICE 51,240,884 54,047,488 16,942,963 37,104,525 68.7%
FIRE 37,756,943 39,367,248 11,434,502 27,932,746 71.0%
TOTAL PUBLIC SAFETY 88,997,827 93,414,736 28,377,465 65,037,271 69.6%
COMMUNITY SERVICES
COMMUNITY SERVICES ADMINISTRATION 675,917 833,892 343,248 490,644 58.8%
COMMUNITY DEVELOPMENT 10,384,700 12,701,501 4,927,788 7,773,713 61.2%
HOUSING & HOMELESS SERVICES 3,134,115 3,928,349 1,737,647 2,190,702 55.8%
LIBRARY & CULTURAL ARTS 14,088,425 14,681,425 3,759,521 10,921,904 74.4%
PARKS & RECREATION 21,167,014 22,499,540 9,091,559 13,407,981 59.6%
TOTAL COMMUNITY SERVICES 49,450,171 54,644,707 19,859,763 34,784,944 63.7%
PUBLIC WORKS
PUBLIC WORKS ADMINISTRATION 1,440,649 1,458,318 447,671 1,010,647 69.3%
CONSTRUCTION MANAGEMENT & INSPECTIONS 3,262,768 3,524,909 1,075,858 2,449,051 69.5%
ENVIRONMENTAL SUSTAINABILITY 1,159,789 1,644,685 775,237 869,448 52.9%
FACILITIES 6,768,736 8,415,460 3,450,743 4,964,717 59.0%
TRANSPORTATION 9,707,559 10,503,750 4,373,078 6,130,672 58.4%
TOTAL PUBLIC WORKS 22,339,501 25,547,122 10,122,587 15,424,535 60.4%
NON‐DEPARTMENTAL & CONTINGENCY
(d) OTHER NON‐DEPARTMENTAL 1,021,658 1,212,249 368,457 843,792 69.6%
OPERATING TRANSFERS OUT 13,600,000 24,208,252 14,008,257 10,199,995 42.1%
CONTINGENCY 500,000 493,085 0 493,085 100.0%
TOTAL NON‐DEPT & CONTINGENCY 15,121,658 25,913,586 14,376,714 11,536,872 44.5%
TOTAL GENERAL FUND $198,445,022 $223,686,530 $79,566,527 $144,120,003 64.4%
(a) Working budget includes the adopted budget, open encumbrances from the end of the prior fiscal year,
approved carry forwards of the prior fiscal year and all other council approvals.
(b) Actual expenditures on a budgetary basis include encumbrances and exclude non‐budgeted items.
(c) Amount available would be 63.3% 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 09/30/22
EXPENDITURE STATUS BY DEPARTMENT
GENERAL FUND
Nov. 15, 2022 Item #15 Page 12 of 25
Monthly Financial Report _________________________________________________________________ 8
Nov. 15, 2022 Item #15 Page 13 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 2022‐23:
CONTINGENCY ACCOUNT
USE OF FUNDS
RESOLUTION
EXPLANATION AMOUNT DATE NUMBER
ADOPTED BUDGET $500,000
USES:
Community Spirit Grant ‐ Carlsbad Educational Foundation‐Razorback Invitational (1,915) 8/8/2022 NA ‐ See Note 1
Community Spirit Grant ‐ Carlsbad Chamber of Commerce ‐ Older & Bolder Expo (5,000) 8/8/2022 NA ‐ See Note 1
TOTAL USES (6,915)
AVAILABLE BALANCE $493,085
Note 1 ‐ City Council Policy 51 gives authorization to the City Manager to approve Community Spirit Grants less than $5,000.
Department Intention July Aug. Sept. Qtr. 1
Parks & Recreation Leo Carrillo Ranch Cash Donations $4,970 $711 $485 $6,166
Parks & Recreation Opportunity Grant Donations 1,127 1,552 574 3,253
Parks & Recreation Senior Center Cash Donations 728 334 832 1,894
Parks & Recreation Senior Meals Cash Donations 1,063 1,284 $1,045 3,392
Parks & Recreation Senior Transportation Cash Donations 41 250 84 375
Parks & Recreation Special Events Cash Donations 1,000 0 0 1,000
Subtotal ‐ Parks & Recreation $8,929 $4,131 $3,020 $16,080
Library & Cultural Arts Book purchases $50 $50 $5,050 $5,150
Library & Cultural Arts Support Library Programs and Services 3 55 90 148
Subtotal ‐ Library & Cultural Arts $53 $105 $5,140 $5,298
Total Donations $8,982 $4,236 $8,160 $21,378
Donations Fiscal Year 2022 ‐ 23
Nov. 15, 2022 Item #15 Page 14 of 25
Monthly Financial Report _________________________________________________________________ 10
Water Enterprise
Revenues
Increase in water due to rate increases in March 2022 and January 2023 offset by a 1.6% decrease
in water volume sales.
Interest earnings increased due to a 22.6% increase in the yield of the Treasurer’s portfolio
combined with a 14.3% increase in the monthly average cash balance.
The increase in property taxes is primarily due to increase in assesed property values.
The increase in fines is due to reinstatement of late charges starting in January 2022.
Expenses
The increase in staffing expenses includes an annual required contribution to the city’s unfunded
pension liability balance with CalPERS and salary increases, and vacancies experienced in prior
fiscal year.
Higher interdepartmental expenses resulted from increased personnel related costs, and general
liability insurance.
Purchased water expenses have increased from the prior year due to a 7.7% rate increase in the
variable cost of water purchased from the San Diego County Water Authority (SDCWA) offset by
a 2.4% decrease in the amount of water purchased.
Miscellaneous expenses increased from timing of purchase of replacement meters.
CHANGE FROM
BUDGET YTD (*) YTD (*) YTD 2021‐22 TO PERCENT
FY 2022‐23 9/30/2021 9/30/2022 YTD 2022‐23 CHANGE
REVENUES:
WATER DELIVERY 41,300,000$ 11,736,959$ 11,769,181$ 32,222$ 0.3%
INTEREST 354,500 78,085 114,962 36,877 47.2%
MISC. SERVICE CHARGES 321,000 77,839 78,409 570 0.7%
PROPERTY TAXES 4,441,344 89,197 110,943 21,746 24.4%
FINES, FORFEITURES & PENALTIES 161,750 1,422 91,455 90,033 6331.4%
OTHER REVENUES 411,544 102,196 136,366 34,170 33.4%
TOTAL OPERATING REVENUE 46,990,138 12,085,698 12,301,316 215,618 1.8%
EXPENSES:
STAFFING 4,301,517 1,082,080 1,197,411 115,331 10.7%
INTERDEPARTMENTAL SERVICES 3,161,356 735,291 790,563 55,272 7.5%
PURCHASED WATER 27,300,000 7,230,458 7,519,662 289,204 4.0%
MWD/CWA FIXED CHARGES 6,885,000 1,671,418 1,697,695 26,277 1.6%
OUTSIDE SERVICES/MAINTENANCE 2,411,554 116,077 131,952 15,875 13.7%
DEPRECIATION/REPLACEMENT 5,000,000 1,125,000 1,249,997 124,997 11.1%
MISCELLANEOUS EXPENSES 1,106,939 101,965 176,361 74,396 73.0%
CAPITAL OUTLAY 77,088 0 0 0 100.0%
TOTAL OPERATING EXPENSES 50,243,454 12,062,289 12,763,640 701,351 5.8%
OPERATING INCOME/(LOSS) (3,253,316)$ 23,409$ (462,324)$ (485,733)$ ‐2075.0%
(*) Adjusted to reflect timing differences for water purchases and depreciation.
WATER OPERATIONS FUND
September 30, 2022
1%
1.9%
5.8%
1.8%
Nov. 15, 2022 Item #15 Page 15 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 went into effect Janaury 2023, the last rate increase was 20% in March 2022.
Interest earnings increased due to a 22.6% increase in the yield of the Treasurer’s portfolio
combined with a 14.3% increase in the monthly average cash balance.
The increase in other revenues is due to late charges starting in January 2022 and
reimbursement for interdepartmental labor charges.
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.
Higher interdepartmental expenses resulted from increased personnel related costs, and general
liability insurance.
The capital outlay in fiscal year 2021‐22 was for the procurement of a utility truck.
CHANGE FROM
BUDGET YTD* YTD* YTD 2021‐22 TO PERCENT
FY 2022‐23 9/30/2021 9/30/2022 YTD 2022‐23 CHANGE
REVENUES:
CHARGES FOR CURRENT SERVICES 19,000,000 3,971,433 4,683,343 711,910 17.9%
INTEREST 95,000 21,878 27,870 5,992 27.4%
OTHER REVENUES 181,500 24,962 83,126 58,164 233.0%
TOTAL OPERATING REVENUE 19,276,500 4,018,273 4,794,339 776,066 19.3%
EXPENSES:
STAFFING 2,971,244 681,551 780,076 98,525 14.5%
INTERDEPARTMENTAL SERVICES 1,519,845 337,343 378,947 41,604 12.3%
ENCINA PLANT SERVICES 4,665,000 979,258 968,397 (10,861)‐1.1%
OUTSIDE SERVICES/MAINTENANCE 1,825,185 86,839 73,919 (12,920)‐14.9%
DEPRECIATION/REPLACEMENT 5,300,000 1,325,000 1,324,997 (3) 0.0%
MISCELLANEOUS EXPENSES 1,158,133 77,590 73,300 (4,290)‐5.5%
CAPITAL OUTLAY 9,750 28,719 0 (28,719)‐100.0%
TOTAL OPERATING EXPENSES 17,449,157 3,516,300 3,599,636 83,336 2.4%
OPERATING INCOME/LOSS 1,827,343 501,973 1,194,703 692,730 138.0%
(*) Adjusted to reflect timing differences for Encina quarterly invoices and depreciation.
WASTEWATER OPERATIONS FUND
September 30, 2022
12.9%
2.4%
19.3%
2.4%
2.4%
Nov. 15, 2022 Item #15 Page 16 of 25
1
First Quarter, Fiscal Year 2022-2023
The following scan provides an overview of key economic indicators for July, August, and September 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: Lightcast, 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, Sept. 2022 Report)
Unemployment ticked up slightly to 3% in August before falling to 2.7% in September. The unemployment rate for the County
of San Diego was 3.1% in September and the State of California was 3.9%. The labor market remains tight, but some employers
have noted a slight easing in their ability to find workers. Going into the holidays, many national retailers have projected slower
seasonal hiring than previous years, which may impact unemployment rates in the second quarter.
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 Comparison 2022
Carlsbad San Diego County
North County Avg w/o Carlsbad California
Innovation + Economic Development Department
Exhibit 2
Nov. 15, 2022 Item #15 Page 17 of 25
2
Job Postings (Source: Lightcast, July - September 2022)
15,217
There were 15,217 unique job postings in Carlsbad between July and
September, a slight decrease from the previous quarter, and the first
quarterly decrease in the past ten quarters. The median advertised
salary for these postings was $45,700, which is on average $1,000
more than jobs posted in the previous quarter. Of jobs posted, 66%
indicated an education requirement of High School/GED or less.
Carlsbad employers have cited noted challenges in finding and
hiring entry-level workers, especially front-line service workers. This
has limited some industries growth.
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
Nov. 15, 2022 Item #15 Page 18 of 25
3
CAPITAL
Interest Rates (Source: U.S. Department of the Treasury, September 2022)
National interest rates, which dropped significantly during the pandemic have surged as the Federal Reserve has steadily
increased rates to fight inflation. One-year rates are currently at 4.05%. Ten-year rates are currently at 2.83%. 30-year
rates are currently at 3.79%. They have also indicated they plan for further rate-hikes of up to .75% over the next several
quarters. Most economists agree that these moves are likely to push the economy into a recession as a means to cool
inflation.
September 2021
One-year interest rate 0.09%
10-year interest rate 1.52%
30-year interest rate 2.08%
September 2022
One-year interest rate 4.05%
10-year interest rate 3.83%
30-year interest rate 3.79%
COMMERCIAL REAL ESTATE
Market Vacancy Rates and Rent per Square Foot (Source: CoStar, September 2022)
Commercial vacancy rates improved in the office and retail
segments this quarter, but ticked up in industrial. The industrial
vacancy rate is now at 5.7%, compared to 10.8% pre-pandemic.
The office vacancy rate is currently 10.8%, compared to 15.3%
pre-pandemic. Retail, which was disproportionately impacted
throughout the pandemic continues to see elevated vacancy
rates, although they have improved the past two quarters. Retail
vacancy is now at 6.3%, compared to 5.3% pre-pandemic.
Average market rents per square foot, per year have risen in
office and industrial categories this quarter. Office rates are
now $38.06. Industrial rates are now at $21. Retail rates have
decreased slightly to $42.51.
5.7%
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 2022 Q2 2022 Q3
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 2022 Q2 2022 Q3
Nov. 15, 2022 Item #15 Page 19 of 25
4
TOURISM
Throughout 2022, hotel occupancy more closely matched 2019 levels. However, 2022’s summer peak lagged 2019 levels slightly.
Occupancy caught up in September (72%), which eclipsed September 2019 levels (70%). The impacts of inflation and a potential
recession could hamper tourism globally, but Carlsbad is well-positioned as a destination that will could see strong tourism
through a recession. 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, September 2022 Report)
Carlsbad’s average daily room rate (ADR) remains higher than pre-pandemic levels. Despite lower summer occupancy numbers,
ADR remained consistently higher than 2019 levels. ADR was $303.68 in July, $264.30 in August, and $220.87 in September,
compared to $239.64, $213.68, and $160.22 in 2019, respectively. Baseline comparison is 2019, as it represents normal conditions.
Hotel Average Daily Room Rate (Source: Smith Travel Reports, September 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+
50.00
100.00
150.00
200.00
250.00
300.00
350.00
400.00
450.00
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Avg. Daily Rate 2019
City of Carlsbad+San Diego County, CA
City of Oceanside, CA+City of Newport Beach, CA+
50
100
150
200
250
300
350
400
450
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
Nov. 15, 2022 Item #15 Page 20 of 25
5
INCOME + HOUSING
Median Household Income (Source: 2021 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 2021 was $124,669, (adjusted for inflation), which was $33,666 higher than the county median income.
Carlsbad has generally outpaced the region in terms of household income growth.
Median Home Price (Source: Zillow Home Value Index - September 2022)
Home values in Carlsbad, along with San Diego County, rose significantly the past two years. This quarter, median home
prices dipped in the city for the first time since the first quarter of 2019. The median home price in Carlsbad was $1.45
million in September, a decrease of $63,000 since the June peak of $1.51 million. This value is seasonally adjusted and
only includes the middle price tier of homes. Carlsbad home values have risen 18% over the past year. The continued rise
in home values can be partially attributed to constrained supply and strong demand in the region.
$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
$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
$1,600,000
Jan Feb Mar Apr May Jun Jul Aug Sep
Median Home Price Comparison
Carlsbad North County Avg
Nov. 15, 2022 Item #15 Page 21 of 25
6
BUSINESS ACTIVITY
Business Licenses (Source: City of Carlsbad, September 2022)
There were a total of 2,308 business licenses issued last quarter, including 1,019 non-residential, 559 residential, and 730 outside-
the-city licenses. This is an increase of 239 over the same quarter of 2021.
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.
Building Permits (Source: City of Carlsbad, September 2022)
Between July and September, permit activity increased for residential building permits (1,220), and represented the largest
number of residential permits in the past three years. Commercial permits issued (99), was down slightly from last quarter.
The number of residential building permits issued has been generally increasing over the past several 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
1400
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 Q2 2022 Q3 2022
Business Licenses Issued by Quarter
Non-Residential Residential Outside City Total
Nov. 15, 2022 Item #15 Page 22 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.Nov. 15, 2022 Item #15 Page 23 of 25
8
INDUSTRY IMPACT
Largest Industries (Source: Lightcast, September 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
Nov. 15, 2022 Item #15 Page 24 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 was responsible for virtually the same number
of new patents as life sciences in 2019. It is also worth noting that clean technology, which is the industry cluster with the
lowest number of patents, has grown by more than 800% since 2009. All told, these four industry clusters accounted for
96% of all patents awarded to Carlsbad firms in 2019.
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 November 15, 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.
Nov. 15, 2022 Item #15 Page 25 of 25
Matt Sanford, Economic Development Manager
Zach Korach, Finance Director
November 15, 2022
Economic and Financial
Update: Q1 FY 2022-23
TODAY’S PRESENTATION
•Economic update
•Financial update
ECONOMIC AND FINANCIAL UPDATE
ECONOMIC UPDATE
3
•Timeframe analyzed
o First quarter FY2022-2023 (July –September 2022)
•Macro Trends
•Local Impact
ECONOMIC AND FINANCIAL UPDATE
EVOLVING ECONOMIC CONDITIONS
•Macro-disruptions continue to affect Carlsbad businesses
o Inflation
o Higher cost of capital
o Supply chain issues
o Uncertainty due to global turmoil
o Tight labor market
o Lingering COVID-19 impact
•Disruptions create a degree of operational uncertainty
ECONOMIC AND FINANCIAL UPDATE
INFLATION CONCERNS
•Cost increases are driving concern
for businesses and consumers
•San Diego area prices are up .9%
over the past two months
•Over-the-year prices are up 8.2%
(5.6% less food and energy)
ECONOMIC AND FINANCIAL UPDATE
WORKER/TALENT SHORTAGE
•EDD September unemployment data
o California unemployment rate:
3.9%, (.2% improvement)
o County unemployment rate:
3.1%, (3% improvement)
o Carlsbad unemployment rate:
2.7%, (.3% improvement)
ECONOMIC AND FINANCIAL UPDATE
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
7
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 JOBS
•June through September saw 15,217 unique job postings
•Slight decrease from the previous quarter
•First quarter with a decline in job-postings in the past ten
quarters
•Average salary for posted jobs was $45,700
•Employers in Accommodation and Food Services continue
noting trouble filling jobs
ECONOMIC AND FINANCIAL UPDATE
COMMERCIAL REAL ESTATE
•Vacancy rates for industrial properties are 5.7%
•Vacancy rates for office properties are 10.8%
•Vacancy rates for retail properties are up to 6.3%
ECONOMIC AND FINANCIAL UPDATE
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
14.00%
16.00%
18.00%
2020 Q1 2020 Q2 2020 Q3 2020 Q4 2021 Q1 2021 Q2 2021 Q3 2021 Q4 2022 Q1 2022 Q2 2022 Q3
Carlsbad Commercial Vacancy Rates
Carlsbad Retail Carlsbad Office Carlsbad Industrial
RESIDENTIAL REAL ESTATE
•Median home values ended the quarter at $1.45 million
•Median home values have risen 18% over the past year
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
$1,600,000
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
450
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 Q2 2022 Q3 2022
Business Licenses Issued by Quarter
Non-Residential Residential Outside City Total
0
200
400
600
800
1000
1200
1400
Commercial Residential Commercial Residential Commercial Residential
2020 2021 2022
Building Permits Issued
Q1 Q2 Q3 Q4
KEY TAKEAWAYS
•Global disruptions continue to impact Carlsbad business
operations
•Increased prices and inability to fill jobs are top concern
for businesses
•Carlsbad’s economy has continued to grow, but some
indicators are projecting a slight slowdown
ECONOMIC AND FINANCIAL UPDATE
GENERAL FUND REVENUES
(first quarter of fy 2022-23)
$0
$2,000,000
$4,000,000
$6,000,000
$8,000,000
$10,000,000
$12,000,000
$14,000,000
Property tax Sales tax Transient
occupancy tax
Other taxes Income from
inv. and prop.
Development
related revenue
Other revenues
FY 2021-22
FY 2022-23 Expected
FY 2022-23 Actual
GENERAL FUND REVENUES
Revenue category
Actual
FY 2021-22
Actual
FY 2022-23
$
difference
%
difference
Property tax $2.5 $3.4 $0.8 32%
Sales tax 12.7 13.3 0.7 5%
Transient occupancy tax 10.1 11.6 1.6 16%
Other taxes 2.9 2.3 -0.6 -21%
Income from inv. and property 1.2 1.4 0.2 13%
Development related revenue 1.0 1.2 0.2 20%
Other revenues 3.9 4.6 0.7 19%
Total $34.2 $37.7 $3.5 10%
(in millions)
GENERAL FUND BUDGET
ECONOMIC AND FINANCIAL UPDATE
•Adopted budget of $198.4 million
•Working budget of $223.7 million
•Available budget remaining of $144.1 million, or 63%
•Includes actual expenditures through Sep. 2022
•Includes open purchase order commitments
GENERAL FUND EXPENDITURES & ENCUMBRANCES
20
(first quarter of fy 2022-23)
$0
$20,000,000
$40,000,000
$60,000,000
$80,000,000
$100,000,000
$120,000,000
$140,000,000
Personnel Maintenance & operations Transfers out Other
FY 2022-23 Budget
Q1 FY 2021-22 Actual
Q1 FY 2022-23 Actual
GENERAL FUND EXPENDITURES
(in millions)
Category
FY 2022-23
Appropriation
QTR 1 EXP
FY 2022-23
% of Budget
Spent to Date
OPEN POs
at 9/30/22
Personnel $124.1 $34.2 28%$0.0
Maintenance & operations 69.9 10.4 15%18.1
Transfers out 24.2 14.0 58%0.0
Capital outlay 4.9 1.8 37%0.9
COVID-19 & Innovation 0.2 0.0 5%0.2
Contingency 0.5 0.0 0%0.0
Total $223.7 $60.4 27%$19.2
WATER AND WASTEWATER
ECONOMIC AND FINANCIAL UPDATE
Compared to prior year through Q1:
•Water revenues are up 1.8% and expenses are
up 5.8%
•Wastewater revenues are up 19.3% and
expenses are up 2.4%
GOLF COURSE
ECONOMIC AND FINANCIAL UPDATE
•Net income $60,000 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 in February 2023 with mid-year update
ECONOMIC AND FINANCIAL UPDATE