HomeMy WebLinkAbout2023-11-14; City Council; ; Economic and Financial Update for the First Quarter of Fiscal Year 2023-24CA Review JRT
Meeting Date: Nov. 14, 2023
To: Mayor and City Council
From: Scott Chadwick, City Manager
Staff Contact: Roxanne Muhlmeister, Assistant Finance Director
roxanne.muhlmeister@carlsbadca.gov, 442-339-2417
Matt Sanford, Economic Development Manager
matt.sanford@carlsbadca.gov, 442-339-5987
Subject: Economic and Financial Update for the First Quarter of Fiscal Year 2023-
24
Districts: All
Recommended Actions
Receive a report on the economic and financial update for the first quarter of fiscal year 2023-
24 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 pandemic 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
This report also details recent economic trends and information on current impacts to our local
economy. 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.
Explanation & Analysis
Economic update
Carlsbad’s 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. 14, 2023 Item #6 Page 1 of 26
The gross regional product for Carlsbad is $16.6 billion, indicating that Carlsbad has 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, the tax on local
hospitality stays, among the county’s 18 cities.
Carlsbad’s economy has remained resilient despite greater economic uncertainty. After rising
0.8% in the previous quarter, unemployment has hovered around 4% for this quarter. One of
the things affecting unemployment levels is the downsizing from pandemic employment levels,
which were artificially high as companies held onto employees during the uncertainty caused by
COVID-19. The tech industry layoffs seen elsewhere in the country in previous quarters have
had some impact in Carlsbad, with ViaSat, Thermo Fisher, L3 Harris, and others all performing
recent reductions in force.
This quarter, Carlsbad also saw an increase in industrial vacancy rates, now at 7.9%. This is
largely attributable to two properties vacated by Amazon in the Carlsbad Raceway and Oaks
North areas, and some other newer developments coming online. While industrial vacancy
rates are elevated, strong demand is likely to bring them back down over the coming quarters.
Office vacancy continues to tick up slightly, now at 12.7% as some office leases held by
employers with remote or hybrid work have expired, and leases have not been renewed. This is
a trend seen in major metro areas across the country. However, Carlsbad remains relatively
well positioned, as some employers with previous large office leases in major cities may open
or maintain smaller satellite offices closer to where employees live.
Retail vacancy, now at 5.4% continues to improve, as high demand continues. However, the low
availability of retail space is driving up costs for businesses.
The tourism industry is considering 2022, which was fueled by so-called “revenge travel” an
anomaly in terms of occupancy and average daily rate. In comparison, 2023 saw a slowdown in
tourism, although the demand is more like pre-pandemic norms. Industry representatives have
stated that group travel, which accounts for about 15% of overall travel to Carlsbad, still lags
pre-pandemic levels, but continues to recover.
Despite elevated interest rates, home values in Carlsbad have begun to rise again. The current
median home price is $1.45 million, after three months of value increases.
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 full economic scan for the first quarter of fiscal year
2023-24 is provided as Exhibit 1. Staff also publish relevant data on the city’s economic
development site, carlsbadca.gov/doingbusiness.
Financial update
The COVID-19 pandemic created immense uncertainty in the city’s revenues, most notably in
sales tax and transient occupancy tax, the tax assessed on local hotel, motel and short-term
vacation rental stays. The fiscal year 2021-22 adopted budget had anticipated continued
adverse impacts from the pandemic with moderate recovery. However, General Fund revenues
in total, specifically property, sales and transient occupancy tax revenues, reached historically
Nov. 14, 2023 Item #6 Page 2 of 26
high levels. This was mainly due to the staggered removal of COVID-19 restrictions, coupled
with pent-up demand and inflationary increases.
During the development of the fiscal year 2022-23 adopted budget, unprecedented inflationary
increases and its anticipated impacts on disposable income, personal savings, tourism, and the
housing market drove the need for conservative revenue estimating and budget tightening. As
fiscal year 2022-23 came to a close, the General Fund’s primary revenue sources continued to
persevere through the high inflationary period, sustained by strong consumer demand.
As we enter fiscal year 2023-24, and despite the recent positive historical revenue
performance, monitoring the city’s revenues and expenditures and taking necessary proactive
steps towards mitigating economic uncertainty is as critical as ever. The September 2023
Financial Status Report is provided as Exhibit 2.
Revenues
The General Fund’s top three revenue sources – property, sales and transient occupancy tax –
reached historic highs in fiscal year 2022-23. The fiscal year 2023-24 adopted budget took a
conservative approach at estimating these revenue sources since revenue growth appears to be
leveling off. 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 2023-24 with the same period in the prior
fiscal year.
Fiscal year 2023-24 year to date revenues as of September 2023
compared to fiscal year 2022-23 as of September 2022
Revenue category Change ($) Change (%)
Transient occupancy tax $30,974 0.3%
Property tax $895,362 27%
Sales tax $2,361,275 18%
Charges for services $522,760 17%
Investments, property income $345,472 25%
Interdepartmental charges $106,821 8%
Licenses and permits $38,497 6%
Other revenues sources -$80,483 -26%
Fines and forfeitures -$24,309 -19%
Intergovernmental $522,548 471%
Other taxes $259,546 11%
Total Revenues $4,978,463 13%
As noted above, the city’s three major revenue sources are property tax, sales tax and transient
occupancy tax.
Nov. 14, 2023 Item #6 Page 3 of 26
Property tax
The majority of property tax revenue is collected in December and April each year. Increases of
$900,000 for the first quarter are due to an increase in assessed property values along with a
higher number of property owners paying their annual taxes early when compared to last year.
Aircraft taxes revenues have also increased due to an increase in aircraft assessed values
combined with an increase in the number of aircrafts being housed at the airport.
Sales tax
For the first three months of the fiscal year, sales tax revenues are $2.4 million higher than the
same period in the previous fiscal year. Sales tax revenues to date represent receipts that were
collected for the second quarter of calendar year 2023 as well as the first advance of the city’s
sales tax revenues from the third calendar quarter of 2023. In fiscal year 2021-22, the city
experienced accelerated recovery after the impacts of the COVID-19 pandemic. Fiscal year
2022-23 saw historically high levels of sales tax revenues. The city is anticipating that this
growth in sales will level off and slowdown this fiscal year.
For sales occurring in the second calendar quarter of 2023 (the most recent data available), key
year-over-year gains were seen in new auto sales and light industry. The largest economic
segments in the city are automobile dealers, general retail stores, and restaurants. Together,
they generate approximately 70% of the city’s sales tax revenues.
A significant portion of the year-over-year increase is attributed to the auto sales sector and a
correction in methodology for how respective sales were being assigned and reported. It has
not yet been determined whether this will be a one-time or ongoing experience.
Transient occupancy tax
Year-to-date transient occupancy tax figures represent taxes collected on hotel receipts
through the month of August 2023. The revenues received in the first quarter represent a slight
increase of $31,000, or 0.3% when compared to the same year to date period last year.
Expenditures and encumbrances
Overview
Total General Fund expenditures and encumbrances – those funds either spent or committed
for specific expenses – through the month of September 2023 are $72.4 million, compared to
$79.5 million at the same time last year. The remaining budget available through the fiscal year
ending June 30, 2024, is $168.7 million, or 70%.
Excluding transfers out, contingencies, and non-departmental charges, the percentage available
on September 30, 2023, is 67.5%, slightly more than the 67.0% available on Sept. 30, 2022.
Pension funding
CalPERS, the state pension system for government employees, and pension funding has been
and will continue to be a challenge for participating agencies like the City of Carlsbad. 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
Nov. 14, 2023 Item #6 Page 4 of 26
$56.4 million to decrease future costs related to the city’s unfunded actuarial liability and strive
to achieve a funded status of 80% in accordance with City Council Policy No. 86.
CalPERS latest actuarial valuation report (as of June 30, 2022) indicated the city had a combined
pension funded status of 74.6%, reduced from the prior year’s status of 86%. This reduction
was predominantly driven by CalPERS’ fiscal year 2021-22 investment loss of -6.1%. This
negative return will not impact the city’s required contributions until fiscal year 2024-25.
The City Council approved the establishment of a Public Agencies Post-Employment Benefits
Trust (Section 115 Trust) on September 12, 2023. This trust allows the city to stabilize pension
cost volatility, maintain local control over the city’s assets and earn a potentially higher rate of
return than if the assets were kept within the General Fund. The City Council approved an initial
trust contribution of $10 million on September 26, 2023.
Enterprise funds
The city’s water and wastewater enterprise funds1 continue to operate in line with budgeted
expectations. Operations at the city’s municipal golf course, The Crossings at Carlsbad, have
remained relatively consistent year over year.
Fiscal Analysis
This is an informational item with no fiscal impact.
Next Steps
Staff will continue to develop tools to understand the economy, attract businesses and cultivate
talent, and provide quarterly updates to the City Council on the economic outlook and the city’s
finances.
Environmental Evaluation
This action does not require environmental review because it 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 or a reasonably foreseeable indirect physical change in the environment.
Exhibits
1. Economic Scan Fiscal Year 2023-24 Q1
2. September 2023 Financial Status Report
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. 14, 2023 Item #6 Page 5 of 26
1
First Quarter, Fiscal Year 2023-2024
The following scan provides an overview of key economic indicators for July, August and September 2023
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, 2022. Data revised Q2, 2023)
$16.6B
In 2022, Carlsbad had the second largest gross regional product
in San Diego County at nearly $16.6B, 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 to $15.1 billion. From 2021 to 2022, Carlsbad’s GRP grew by $1.5B. This growth
was seen across almost all industry categories, and was led by
manufacturing, wholesale trade, hospitality, and professional,
scientific, & technical services.
JOBS
Unemployment Rate (Source: California Employment Development Department, Sept. 2023 Report)
Carlsbad’s labor market loosened slightly, with unemployment hovering at about 4% for the quarter (3.9% in September). This
loosening has been seen across industries and is noted by some as a normalization as pandemic-era employment trends, which
saw greater employee retention, return to normal. Overall, unemployment remains low and employers continue to hire. The
unemployment rate in September was 4.9% at the state level and 4% at the county level.
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Carlsbad Unemployment Rate 2022 vs 2023
2022 2023
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Unemployment Rate Comparison 2023
Carlsbad San Diego County
North County Avg w/o Carlsbad California
Innovation + Economic Development Department
Exhibit 1
Nov. 14, 2023 Item #6 Page 6 of 26
2
Job Postings (Source: Lightcast, July - Sept. 2023)
11,398
There were 11,398 unique job postings in Carlsbad between July and September, a decrease of 1,863 jobs from the previous quarter.
The median advertised salary for these postings was $51,100, which
is on average $1,500 less than jobs posted in the previous quarter.
Of jobs posted, 70% indicated an education requirement of High
School/GED or no requirement listed. 65% of postings indicated less than a year of experience or no experience was required, indicating
there are a number of entry-level jobs being posted.
TALENT + WORKFORCE
Education (Source: 2021 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. More than
60% of working-age residents hold a
bachelor’s degree, with nearly 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.
0.00%
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Degree
Educational Attainment Comparison Percent of
Population Over 25 Years Old
National California San Diego County 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
Proximity in Miles from CarlsbadNov. 14, 2023 Item #6 Page 7 of 26
3
CAPITAL
Interest Rates (Source: U.S. Department of the Treasury, Sept. 2023)
National interest rates continue to rise as the Federal Reserve raises rates to combat inflation, although the pace of rate
increases has slowed. One-year rates are currently at 5.46%. Ten-year rates are currently at 4.59%. 30-year rates are
currently at 4.73%. Some economists are predicting that the Fed may be done raising rates, although the organization has
not ruled out subsequent increases in the future. Inflation figures have improved dramatically over the past year, now at 4.7% annual inflation for San Diego County, and the economy remains strong. There is growing optimism that a recession
may have been averted, or that it be will be mild if it occurs.
September 2022
One-year interest rate 4.05%
10-year interest rate 3.83%
30-year interest rate 3.79%
September 2023
One-year interest rate 5.46%
10-year interest rate 4.59%
30-year interest rate 4.73%
COMMERCIAL REAL ESTATE
Market Vacancy Rates and Rent per Square Foot (Source: CoStar, Sept. 2023)
Commercial vacancy rates went down in office and retail
categories this quarter. Industrial vacancy jumped up to 6.4%,
largely attributed to a select few parcels that were vacated.
The industrial vacancy rate in September was 7.9%. The
office vacancy rate in September was 12.7%. Retail vacancy in
September was 5.4%.
Rental rates were relatively steady across all categories. Average
market rents per square foot, per year for office rates in
September were $38.06. Industrial rates in September were
$22.30. Retail rates in September were $44.80.
Commercial developers are largely holding off on new
developments and office space elsewhere in the region and the
county is seeing a rise in vacancy and a drop in value, an indicator
of instability. This trend is predicted to continue.
7.9%
Industrial vacancy rate
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
14.00%
16.00%
18.00%
2020Q1 2020Q2 2020Q3 2020Q4 2021Q1 2021Q2 2021Q3 2021Q4 2022Q1 2022Q2 2022Q3 2022Q42023Q12023Q22023Q3
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 2022 Q4 2023 Q1 2023 Q2 2023 Q3
Nov. 14, 2023 Item #6 Page 8 of 26
4
TOURISM
Occupancy averaged 75.7% in the first quarter, which lags the same quarter for 2022 (79.3%). The surge in travel in 2022, known
in the industry as “revenge travel” is unlikely to be sustained in 2023 or beyond, according to industry experts. 2023 is seen by
those in the industry as a normalization year.
42 With 42 hotels in Carlsbad, tourism is a major industry in terms of
employment and economic impact. It is also a major contributor
to city revenue, through TOT and sales tax generation. Below
are several indicators reflecting the health of the city’s tourism economy.
Hotel Occupancy (Source: Smith Travel Research, Sept. 2023 Report)
Carlsbad’s average daily room rate (ADR) remains higher than historic norms, but is lower than the same quarter of 2022. ADR
averaged $255.43 in the fourth quarter, compared to $262.95 for the same quarter in 2022. ADR is likely to remain higher than
pre-pandemic levels, as hotel costs have also increased over time.
Hotel Average Daily Room Rate (Source: Smith Travel Research, Sept. 2023 Report)
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Hotel Occupancy 2023
City of Carlsbad San Diego County, CA City of Oceanside, CA City of Newport Beach, CA
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Nov. 14, 2023 Item #6 Page 9 of 26
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 - Sept. 2023)
Home prices rebounded this quarter despite rising interest rates. The continued rise in interest
rates did impact property values in Carlsbad but high consumer demand is keeping prices elevated.
Median home prices rose consistently in Carlsbad this quarter. The current median home price is
$1.47 million, an increase of about $50,000 over the last quarter.
$600,000.00
$700,000.00
$800,000.00
$900,000.00
$1,000,000.00
$1,100,000.00
$1,200,000.00
$1,300,000.00
$1,400,000.00
$1,500,000.00
$1,600,000.00
2019 2020 2021 2022 2023
Carlsbad Median Home Price
$600,000.00
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$1,000,000.00
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$1,300,000.00
$1,400,000.00
$1,500,000.00
Jan Feb Mar Apr May Jun Jul Aug Sep
Median Home Price Comparison -2023
Carlsbad Escondidio Oceanside San Marcos Vista
Nov. 14, 2023 Item #6 Page 10 of 26
6
BUSINESS ACTIVITY
Business Licenses (Source: City of Carlsbad, Sept. 2023)
There were a total of 2,436 business licenses issued last quarter, including 1067 non-residential, 620 residential, and 749 outside-
the-city licenses. This is an increase of 138 total businesses over the same quarter of 2022.
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 6,654 businesses
in Carlsbad.
Building Permits (Source: City of Carlsbad, Sept. 2023)
Between July and September, permit activity decreased significantly for residential building permits (992), indicating
a slowdown in development activity. Before this quarter, the number of residential building permits issued had been
generally increasing over the past several years.
Commercial permits issued (109), also slowed slightly this quarter. It is too early to tell whether the trend will continue.
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Nov. 14, 2023 Item #6 Page 11 of 26
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.
Cleantech (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. 14, 2023 Item #6 Page 12 of 26
8
INDUSTRY IMPACT
Largest Industries (Source: Lightcast, Sept. 2023)
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. 14, 2023 Item #6 Page 13 of 26
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 Nov. 14, 2023
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. 14, 2023 Item #6 Page 14 of 26
Exhibit 2
This report summarizes the City of Carlsbad’s General Fund revenues and expenditures through September
30, 2023. It compares revenues and expenditures for the first three months of fiscal year 2023-24 and fiscal
year 2022-23. In addition, the financial status of the Water, Wastewater and Golf Course Enterprise Funds 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 ($4.2 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 6.26% for fiscal
year 2023-24. This is the 11th 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. The increase in this year’s assessed values
is due to increases in the assessed values of residential and commercial properties in the city; the city saw a
smaller increase in industrial property values for the year. This is the ninth 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). Although increases in residential assessed values were recorded for fiscal year 2023-24, the
county is now experiencing historically low for-sale housing inventory with housing prices remaining steady.
The property taxes for the first three months of the fiscal year have increased by 27% as compared to the prior
fiscal year. The primary reasons for the increase are:
• Current taxes are up by $211,000 or 18.4% mainly due to increased assessed property values along with
a higher number of property owners paying their annual taxes early when compared to last year. The
first large receipt of taxes will be received by the city in December.
• Aircraft taxes are also up $750,000 or 42% due to an increase in aircraft assessed values (32%) combined
with an increase in the number of aircrafts being housed at the airport.
Sales Taxes ($15.7 million) – For the first three months of the fiscal year, sales
tax revenues are $2.4 million higher than the same period in the previous fiscal
year. Sales tax revenues to date for the current fiscal year represent the city’s
sales tax revenues for the second calendar quarter of 2023 and the first advance
for the third calendar quarter of 2023.
In fiscal year 2021-22, the city experienced accelerated recovery after the impacts
of the COVID-19 pandemic. Fiscal year 2022-23 saw historically high levels of sales tax revenues. The city is
anticipating that this growth in sales will level off and slowdown this fiscal year.
For sales occurring in the second calendar quarter of 2023 (the most recent data available), key year-over-year
gains were seen in new auto sales and light industry. The largest economic segments in the city are automobile
dealers, general retail stores, and restaurants. Together, they generate approximately 70% of the city’s sales tax
revenues.
September 30, 2023
27%
18%
Nov. 14, 2023 Item #6 Page 15 of 26
Quarterly Financial Report _______________________________________________________________ 2
A significant portion of the year-over-year increase is attributed to the auto sales sector and a correction in
methodology for how respective sales were being assigned and reported. It is not yet determined whether this
will be a one-time or ongoing experience.
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 $32.8 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 2023. TOT collected for the first three months of the fiscal year
reflects a slight increase of $31,000 or 0.3%, more than the previous year.
Currently, there are 4,768 hotel rooms in service (of 5,059 total rooms built in the city and 423 registered short-
term vacation rentals. The average occupancy of hotel rooms over the most recent 12 months has been 72.3%
which is slightly lower than 72.7% 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 $6.4 million for the current fiscal year. Business license revenues are
up $34,000, or 2%, from the previous fiscal year. The increase is due to an increase
in license renewal revenue offset by a reduction in penalty revenue from overdue
business license renewals when compared to the prior year.
There are currently 9,395 licensed businesses operating within the city, 167 less than the prior year. The majority
of taxed businesses (6,291 businesses) are located in Carlsbad, with 2,300 of these businesses home-based.
Interdepartmental Charges ($1.5 million) – Interdepartmental charges are up by
$106,800 when compared with the same period last year. These charges are
generated through engineering services charged to capital projects (up $61,000
due to more staff time charged to capital projects); reimbursed work from other
funds; and miscellaneous interdepartmental expenses charged to funds outside
the General Fund for services performed by departments within the General
Fund (up $45,600).
Income from Investments and Property ($1.7 million) – For the first three
months of the fiscal year, income from investments and property is up $345,500
compared to the previous fiscal year. This increase is largely due to a 63% rise in
yield from 1.51% as of September 2022 to 2.33% as of September 2023 along
with a 10.8% increase in the average cash balance held in the General Fund.
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 a target range of 5.25%-5.5% as
of July 2023. While 2022 saw repeated and large interest rate hikes, 2023 has experienced smaller interest rate
hikes at a slower and more deliberate pace.
Recreation Fees ($1.4 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 $85,150 compared to last year at this time. Half
of this increase is attributable to an increase in aquatic lesson revenue.
8%
0.3%
6%
25%
2%
Nov. 14, 2023 Item #6 Page 16 of 26
Quarterly Financial Report _______________________________________________________________ 3
Development Related Revenues ($1 million) – Development related revenues,
which include building permits, planning fees, building department fees, and
engineering fees, reflect a 15% decrease 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 the first fiscal quarter of fiscal year 2023-24 included permits associated with the new residential
construction of 24 second dwelling units, 12 condominiums, 6 single family homes, 259 apartments (Aviara
Apartments) and various homeowner improvements. Commercial permit activity included permits associated
with a preschool (13,500 sq. ft.) There were no commercial buildings permitted during the first quarter.
One source of development related revenue is building permits, which are up 7% compared to last fiscal year.
The year-to-date valuation of new construction in the current fiscal year is $105 million. This represents a $51
million, or 94%, increase over the previous fiscal year.
Franchise Tax ($917,000) – 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 $7.1 million for the current fiscal year. Year-to-
date franchise taxes are $183,000 higher when compared to the same period
last year.
Cable television franchise revenues (Spectrum and AT&T) are down $17,000 representing a relatively nominal
amount of change for subscription services (premium video, equipment rental, on-demand, and programming
services). An increase in trash collection revenue of $200,000 resulted from the city’s most recent contract with
Republic Services, the city’s waste services provider.
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 2024.
Ambulance Fees ($1.6 million) – The city bills any individual who is transported
in one of the city’s ambulances. Through September 2023, receipts from
ambulance fees are up $621,000, or 64%, compared to last fiscal year. The
increase in revenue for the first three months of the fiscal year is mainly due to
changes to the ambulance fee schedule that the City Council approved in June
2023 along with an increase in the number of billable transports, 1,914 in the
first three months of fiscal year 2023-24 versus 1,892 at the same time in the prior
fiscal year.
Other Revenue Sources ($234,000) – Other revenue sources have decreased by
$80,500 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; and
miscellaneous reimbursed expenses and refunds of prior year fees. The decrease
to date is related to higher amounts received for developer funded studies in the
prior fiscal year when compared to the current fiscal year.
15%
64%
25%
26%
Nov. 14, 2023 Item #6 Page 17 of 26
Quarterly Financial Report _______________________________________________________________ 4
Other Licenses and Permits ($229,000) – 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 $5,000 is
primarily a result of increased right of way permits when compared to the same
period last year.
Fines and Forfeitures ($104,000) – 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 $25,000 is mainly due to
decreases in code violation assessments ($22,500) when compared to the
previous fiscal year as well as the elimination of overdue fines ($8,000) for library
materials offset by a small increase in parking and vehicle citations and fees.
Intergovernmental Revenues ($633,500) – Intergovernmental revenues include
homeowners property tax exemption revenue and miscellaneous receipts and
grants received from the state or federal governments, as well as local school
districts. Various miscellaneous receipts comprise the $663,500 received this
year which represents an increase of 471% over the same period last year. This
increase is mainly due to state reimbursements received for two planning related
state grant awards.
Transfer Taxes ($158,000) – 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
increased over the same period last year due to an increase in property transfers.
Other Charges or Fees ($122,700) – 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
$25,000, or 26% mainly due to an increase in annual fire inspection fees and false
alarm response fees when compared to the prior fiscal year.
A detailed schedule of General Fund revenues is provided on the following page.
2%
19%
37%
471%
26%
Nov. 14, 2023 Item #6 Page 18 of 26
Quarterly Financial Report _______________________________________________________________ 5
REVENUE
REVENUE EXPECTED ACTUAL ACTUAL CHANGE FROM
BUDGETED THROUGH FY 2023 FY 2024 YTD 2023 TO PERCENT
FOR FY 2023-24 09/30/23 AS OF 09/30/22 AS OF 09/30/23 YTD 2024 CHANGE
TAXES
PROPERTY TAX $84,246,868 $3,244,993 $3,359,126 $4,254,488 $895,362 27%
SALES TAX 51,064,943 12,109,909 13,324,521 15,685,796 2,361,275 18%
TRANSIENT OCCUPANCY TAX 32,861,193 11,136,397 11,617,301 11,648,275 30,974 0.3%
FRANCHISE TAX 7,084,717 663,854 734,049 917,206 183,157 25%
BUSINESS LICENSE TAX 6,435,502 1,501,335 1,482,976 1,517,020 34,044 2%
TRANSFER TAX 1,624,950 137,290 115,537 157,882 42,345 37%
TOTAL TAXES 183,318,173 28,793,778 30,633,510 34,180,667 3,547,157 12%
INTERGOVERNMENTAL
VEHICLE LICENSE FEES 83,951 0 0 0 0 0%
HOMEOWNERS EXEMPTIONS 353,000 0 0 0 0 0%
OTHER REIMBURSEMENT 599,000 32,861 111,012 633,560 522,548 471%
TOTAL INTERGOVERNMENTAL 1,035,951 32,861 111,012 633,560 522,548 471%
LICENSES AND PERMITS
BUILDING PERMITS 1,250,000 263,477 464,022 497,495 33,473 7%
OTHER LICENSES & PERMITS 850,500 193,552 224,176 229,200 5,024 2%
TOTAL LICENSES & PERMITS 2,100,500 457,029 688,198 726,695 38,497 6%
CHARGES FOR SERVICES
PLANNING FEES 442,000 119,079 159,061 156,746 (2,315)-1%
BUILDING DEPARTMENT FEES 861,000 301,312 333,599 186,209 (147,390) -44%
ENGINEERING FEES 774,000 157,085 201,082 141,848 (59,234) -29%
AMBULANCE FEES 6,798,000 1,519,213 976,342 1,597,552 621,210 64%
RECREATION FEES 2,598,600 1,123,696 1,352,274 1,437,430 85,156 6%
OTHER CHARGES OR FEES 1,584,245 116,239 97,395 122,728 25,333 26%
TOTAL CHARGES FOR SERVICES 13,057,845 3,336,624 3,119,753 3,642,513 522,760 17%
FINES AND FORFEITURES 276,200 87,879 128,207 103,898 (24,309) -19%
INCOME FROM INVESTMENTS & PROPERTY 5,948,225 1,171,511 1,360,344 1,705,816 345,472 25%
INTERDEPARTMENTAL CHARGES 5,746,232 1,336,516 1,393,584 1,500,405 106,821 8%
OTHER REVENUE SOURCES 987,000 146,426 314,739 234,256 (80,483) -26%
TRANSFERS IN 10,000 0 0 0 0 0%
TOTAL GENERAL FUND $212,480,126 $35,362,624 37,749,347 $42,727,810 $4,978,463 13.2%
(1)
(1) Calculated General Fund revenues are 21% above estimates as of September 30, 2023.
GENERAL FUNDREVENUE COMPARISON
Nov. 14, 2023 Item #6 Page 19 of 26
Quarterly Financial Report _______________________________________________________________ 6
Expenditures
Total General Fund expenditures and encumbrances-those funds either spent or committed for specific
expenses- through the month of September 2023 are $72.4 million, compared to $79.5 million at the same time
last year. The remaining budget available through the fiscal year ending June 30, 2024, is $168.7 million, or 70%.
If funds were spent in the same proportion as the previous year, the General Fund would have 64.4% or $144.1
million available. Excluding transfers out, contingencies, and non-departmental charges, the percentage
available on September 30, 2023, is 67.5%, slightly more than the 67.0% available on September 30, 2022.
The fiscal year 2023-24 budget was developed with a focus on resiliency over the long-term and reflects a call
for departments to increase efficiency and find new ways to reduce ongoing spending. In addition to lowering
base spending in the General Fund by $2.3 million at a time when inflation is 6%, the adopted budget reduced
city staffing by the equivalent of 12 positions.
With the development and adoption of the city’s fiscal year 2023-24 budget, the city forecasted that ongoing
spending will exceed ongoing revenues as soon as fiscal year 2025-26. Since the adoption of this year’s budget
and the close of fiscal year 2022-23, staff presented an updated forecast at the City Council meeting of October
24, 2023, that showed this shortfall is now projected to occur in fiscal year 2028-29, which was driven by
stronger-than-expected revenue performance. This year’s budget scales back custodial services, nonessential
park maintenance, printing and other administrative expenses, travel and training for city staff, and city cell
phone use, among other areas expected to have a minimal impact on the community.
The adopted General Fund budget for fiscal year 2023-24 increased by 9.3% or $18.5 million when compared to
last fiscal year due to:
• Increased personnel costs (increase of $6 million or 4.8%):
o $5.2 million in salaries and wages due to negotiated salary increases offset by a reduction in total full-
time equivalent positions of 12.06.
o $0.2 million in health insurance and retirement benefits costs.
o $0.6 million increase in other personnel costs (Medicare, unemployment and disability benefits).
• Increased maintenance and operations costs (increase of $5.6 million):
o Overall, total maintenance and operations costs are projecting an increase, however, this category
includes a one-time appropriation of $5.22 million from General Fund reserves toward regional efforts
to lower the railroad tracks in Carlsbad. Excluding this one-time use of reserves, the maintenance and
operations costs are projected to increase just 0.7% for fiscal year 2023-24 when compared to fiscal year
2022-23. With year-over-year increases in inflation of 8.2% and 6.4%, respectively, this relatively minor
increase in maintenance and operations is a tremendous achievement that was accomplished through a
strategic analysis of budget reductions.
• Increase in transfers to other city funds (increase of $8.3 million):
o The city annually budgets 6% of General Fund revenues as a transfer to the Infrastructure Replacement
Fund, General Capital Construction Fund and The Technology Investment Capital Fund to help fund
major new construction, maintenance and replacement of city infrastructure and facilities and the city’s
future technology needs.
o $7.4 million in additional transfers was budgeted for the General Capital Construction Fund and
funded by the General Fund’s budgeted operating surplus. The General Capital Construction Fund is
funded by the General Fund and includes many capital projects programmed in the future. The level of
funding necessary to fully fund these projects is an increasing concern. This one-time transfer amount
will assist with funding the city’s general capital construction into the future.
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
Nov. 14, 2023 Item #6 Page 20 of 26
Quarterly Financial Report _______________________________________________________________ 7
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, 2022), the city had a combined pension funded status of
74.6%, reduced from the prior year’s status of 86%. This reduction was predominantly driven by CalPERS’ fiscal
year 2021-22 investment loss of -6.1%. This negative return will not impact the city’s required contributions until
fiscal year 2024-25.
The City Council approved the establishment of a Public Agencies Post-Employment Benefits Trust (Section 115
Trust) on September 12, 2023. This trust allows the city to stabilize pension cost volatility, maintain local control
over the city’s assets and earn a potentially higher rate of return than if the assets were kept within the General
Fund. The City Council approved an initial trust contribution of $10 million on September 26, 2023.
City staff will continue to provide regular financial updates to the City Council throughout fiscal year 2023-24.
Identifying a potential structural deficit early has allowed the city to take a thoughtful approach to solutions,
exploring new ways to reduce spending and increase revenue.
A detailed schedule of General Fund expenditures is provided on the next page.
Nov. 14, 2023 Item #6 Page 21 of 26
Quarterly Financial Report _______________________________________________________________ 8
ADOPTED WORKING
BUDGET BUDGET AMOUNT AVAILABLE %
DEPARTMENT DESCRIPTION FY 2023-24 FY 2023-24 (a)COMMITTED (b)BALANCE AVAILABLE (c)
POLICY AND LEADERSHIP GROUP
CITY ATTORNEY $2,115,596 $2,115,596 $567,062 $1,548,534 73.2%
CITY CLERK 1,274,455 1,298,267 302,046 996,221 76.7%
CITY COUNCIL 607,078 609,881 123,155 486,726 79.8%
CITY MANAGER 2,184,823 2,298,394 627,624 1,670,770 72.7%
CITY TREASURER 279,149 279,149 52,238 226,911 81.3%
COMMUNICATIONS & ENGAGEMENT 1,953,098 2,227,156 829,532 1,397,624 62.8%
TOTAL POLICY AND LEADERSHIP GROUP 8,414,199 8,828,443 2,501,657 6,326,786 71.7%
ADMINISTRATIVE SERVICES
ADMINISTRATION 784,107 807,692 203,945 603,747 74.7%
FINANCE 5,323,368 5,726,992 1,538,763 4,188,229 73.1%
HUMAN RESOURCES 5,029,995 5,238,274 1,375,131 3,863,143 73.7%
INNOVATION & ECONOMIC DEVELOPMENT 2,608,489 2,812,757 930,802 1,881,955 66.9%
TOTAL ADMINISTRATIVE SERVICES 13,745,959 14,585,715 4,048,641 10,537,074 72.2%
PUBLIC SAFETY
POLICE 55,615,155 60,314,650 18,678,724 41,635,926 69.0%
FIRE 37,882,886 41,689,777 13,074,905 28,614,872 68.6%
TOTAL PUBLIC SAFETY 93,498,041 102,004,427 31,753,629 70,250,798 68.9%
COMMUNITY SERVICES
COMMUNITY SERVICES ADMINISTRATION 585,411 733,802 303,818 429,984 58.6%
COMMUNITY DEVELOPMENT 11,012,958 13,516,576 4,645,525 8,871,051 65.6%
HOUSING & HOMELESS SERVICES 2,765,195 3,219,743 1,493,435 1,726,308 53.6%
LIBRARY & CULTURAL ARTS 13,637,285 14,157,554 3,728,345 10,429,209 73.7%
PARKS & RECREATION 21,055,565 22,019,703 8,970,320 13,049,383 59.3%
TOTAL COMMUNITY SERVICES 49,056,414 53,647,378 19,141,443 34,505,935 64.3%
PUBLIC WORKS
PUBLIC WORKS ADMINISTRATION 1,562,272 1,595,344 406,690 1,188,654 74.5%
CONSTRUCTION MANAGEMENT & INSPECTIONS 3,257,906 3,341,081 1,011,810 2,329,271 69.7%
ENVIRONMENTAL SUSTAINABILITY 1,178,783 1,580,542 701,681 878,861 55.6%
FACILITIES 7,497,115 8,752,270 3,558,612 5,193,658 59.3%
TRANSPORTATION 9,732,215 10,876,588 3,500,972 7,375,616 67.8%
TOTAL PUBLIC WORKS 23,228,291 26,145,825 9,179,765 16,966,060 64.9%
NON-DEPARTMENTAL & CONTINGENCY
(d)OTHER NON-DEPARTMENTAL 1,356,700 2,062,990 349,001 1,713,989 83.1%
VILLAGE TRENCHING 5,220,000 5,220,000 0 5,220,000 100.0%
OPERATING TRANSFERS OUT 21,910,000 28,210,000 5,477,499 22,732,501 80.6%
CONTINGENCY 500,000 500,000 0 500,000 100.0%
TOTAL NON-DEPT & CONTINGENCY 28,986,700 35,992,990 5,826,500 30,166,490 83.8%
TOTAL GENERAL FUND $216,929,604 $241,204,778 $72,451,635 $168,753,143 70.0%
(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 mid-yearcouncil approvals.
(b) Actual expenditures on a budgetary basis include encumbrances and exclude non-budgeted items.
(c) Amount available would be 64.4% 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 09/30/23
EXPENDITURE STATUS BY DEPARTMENTGENERAL FUND
Nov. 14, 2023 Item #6 Page 22 of 26
Quarterly 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, that have been accepted
during fiscal year 2023-24:
CONTINGENCY ACCOUNT
USE OF FUNDS
EXPLANATION AMOUNT
ADOPTED BUDGET $500,000
USES:
NONE AS OF SEPTEMBER 30, 2023 0
TOTAL USES 0
AVAILABLE BALANCE $500,000
Note 1 - City Council Policy 51 gives authorization to the City Manager, or designee,
to approve Winning Teams and Community Spirit Grants up to $5,000 per grant.
Department Intention July Aug.Sept.Total
Parks & Recreation Leo Carrillo Ranch Cash Donations $458 $450 $2,592 $3,500
Parks & Recreation Opportunity Grant Donations 769 745 497 2,011
Parks & Recreation Senior Center Cash Donations 195 210 224 629
Parks & Recreation Senior Meals Cash Donations 2,310 2,028 2,061 6,399
Parks & Recreation Senior Transportation Cash Donations 112 180 111 403
Parks & Recreation Special Events Cash Donations 0 0 1,000 1,000
Parks & Recreation Teen Program Cash Donations 0 0 1 1
Parks & Recreation Parks Maintenance Cash Donations 1,850 0 0 1,850
Subtotal - Parks & Recreation $5,694 $3,613 $6,486 $15,793
Library & Cultural Arts Book Purchases $0 $0 $0 $0
Library & Cultural Arts Support Library Programs and Services 0 2 100 102
Subtotal - Library & Cultural Arts $0 $2 $100 $102
Fire Food gifts for crews $0 $0 $24 $24
Fire Misc. supplies and equipment 0 0 0 0
Subtotal - Fire $0 $0 $24 $24
Total Donations $5,694 $3,615 $6,610 $15,919
DONATIONS FISCAL YEAR 2023 - 24
Nov. 14, 2023 Item #6 Page 23 of 26
Quarterly Financial Report _______________________________________________________________ 10
Water Enterprise
Revenues
• Decrease in water operating revenues due to 6.13% decrease in water volume sales, offset by
increase in user rates effective January 2023.
• Interest earnings increased due to a 63% increase in the yield of the Treasurer’s portfolio offset
by a 3.3% decrease in the monthly average cash balance.
• The increase in misc. service charges is due to reimbursement for interdepartmental labor
charges.
• The increase in property taxes is primarily due to increase in assesed property values.
• The increase in fines is due to reinstatement of customer late charges starting in January 2022.
Expenses
• The increase in staffing expenses includes salary increases combined with an annual required
contribution to the city’s unfunded pension liability balance with CalPERS.
• Higher interdepartmental expenses resulted from increased personnel related costs, and
general liability insurance.
• Purchased water expenses have decreased from the prior year due to a 7.8% rate increase in
the variable cost of water purchased from the San Diego County Water Authority (SDCWA)
offset by a 4.9% decrease in the amount of water purchased.
• Captial outlay decrease due to additional fleet vehicle purchase in prior year.
CHANGE FROM
BUDGET YTD*YTD*YTD 2022-23 TO PERCENTFY 2023-24 9/30/2022 9/30/2023 YTD 2023-24 CHANGE
REVENUES:
WATER DELIVERY 41,688,000$ 11,736,959$ 11,385,376$ (351,583)$ -3.0%
INTEREST 389,000 78,085 163,692 85,607 109.6%
MISC. SERVICE CHARGES 441,000 77,839 105,302 27,463 35.3%
PROPERTY TAXES 4,729,000 89,197 98,806 9,609 10.8%
FINES, FORFEITURES & PENALTIES 411,000 1,422 93,049 91,627 6443.5%
OTHER REVENUES 491,000 102,196 110,740 8,544 8.4%
TOTAL OPERATING REVENUE 48,149,000 12,085,698 11,956,965 (128,733) -1.1%
EXPENSES:
STAFFING 4,782,779 1,083,427 1,223,068 139,641 12.9%
INTERDEPARTMENTAL SERVICES 3,765,584 735,291 941,222 205,931 28.0%
PURCHASED WATER 30,805,000 7,519,662 8,114,418 594,756 7.9%
MWD/CWA FIXED CHARGES 7,550,000 1,697,695 1,699,401 1,706 0.1%
OUTSIDE SERVICES/MAINTENANCE 2,491,059 116,077 86,970 (29,107) -25.1%
DEPRECIATION/REPLACEMENT 5,000,000 1,125,000 1,250,000 125,000 11.1%
MISCELLANEOUS EXPENSES 986,543 101,965 117,516 15,551 15.3%
CAPITAL OUTLAY 99,302 0 60,936 60,936 100.0%
TOTAL OPERATING EXPENSES 55,480,267 12,379,116 13,493,531 1,114,414 9.0%
OPERATING INCOME/(LOSS)(7,331,267)$ (293,418)$ (1,536,566)$ (1,243,147)$ 423.7%
*Adjusted to reflect timing differences for water purchases and depreciation.
WATER OPERATIONS FUND
September 30, 2023
9.0%
1.1%
Nov. 14, 2023 Item #6 Page 24 of 26
Quarterly 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 in January 2023.
• Interest earnings increased due to a 63% increase in the yield of the Treasurer’s portfolio
combined with a 39.5% increase in the monthly average cash balance.
• The increase in other revenues is due to customer late charges resuming after the COVID-19
pandemic in January 2022 and reimbursement for interdepartmental labor charges.
Expenses
• The increase in staffing expenses is driven by salary increases combined with an 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.
• Higher miscellaneous expenses from purchase of parts and chemicals.
• The capital outlay in fiscal year 2022-23 was for lift station land acquisition costs.
CHANGE FROM
BUDGET YTD*YTD*YTD 2022-23 TO PERCENTFY 2023-24 9/30/2022 9/30/2023 YTD 2023-24 CHANGE
REVENUES:
CHARGES FOR CURRENT SERVICES 21,939,000 3,971,433 5,558,309 1,586,876 40.0%
INTEREST 110,000 21,878 59,065 37,187 170.0%
OTHER REVENUES 307,000 24,962 105,731 80,769 323.6%
TOTAL OPERATING REVENUE 22,356,000 4,018,273 5,723,105 1,704,832 42.4%
EXPENSES:
STAFFING 3,322,088 682,898 839,807 156,909 23.0%
INTERDEPARTMENTAL SERVICES 1,929,134 337,343 481,667 144,324 42.8%
ENCINA PLANT SERVICES 6,000,000 1,075,000 1,972,764 897,764 83.5%
OUTSIDE SERVICES/MAINTENANCE 1,993,412 86,839 117,705 30,866 35.5%
DEPRECIATION/REPLACEMENT 5,300,000 1,325,000 1,325,000 0 0.0%
MISCELLANEOUS EXPENSES 827,614 77,590 143,149 65,559 84.5%
CAPITAL OUTLAY 24,651 28,719 245 (28,474) -99.1%
TOTAL OPERATING EXPENSES 19,396,899 3,613,389 4,880,337 1,266,948 35.1%
OPERATING INCOME/LOSS 2,959,101 404,884 842,768 437,884 108.2%
(*) Adjusted to reflect timing differences for Encina quarterly invoices and depreciation.
WASTEWATER OPERATIONS FUND
September 30, 2023
42.4%
35.1%
Nov. 14, 2023 Item #6 Page 25 of 26
Quarterly Financial Report _______________________________________________________________ 12
Golf Course Enterprise
Revenues
• Primary operating revenues at the golf course have remained relatively consistent year over
year. Inclement weather during the first quarter offset strong continued demand, moderate rate
increases, and positive practice center activities.
• Other revenues increased notably over the prior period due to timing adjustments related to
interest earnings on cash and investments on hand.
Expenses
• General & Administrative costs increased over the prior period as a result of cost of living
increases and lingering inflation.
• This increase was absorbed by prudent operational spend over grounds maintenance, food &
beverage, and the pro shop.
• Depreciation has decresed by 78% when compared to the prior year. This is due to the fact that
the original course land improvements are now fully depreciated.
• Miscellaneous expenses appears to have increased significantly; however, the prior period
experienced a one-time accounting adjustment for legal expenses that reduced the bottom line
expense total.
6.0%
3%
Nov. 14, 2023 Item #6 Page 26 of 26
Matt Sanford, Economic Development Manager
Roxanne Muhlmeister, Assistant Finance Director
November 14, 2023
Economic and Financial
Update: Q1 FY 2023-24
TODAY’S PRESENTATION
•Today’s report will cover Fiscal Year 2023 – 2024, First Quarter
o July through September 2023
•Economic update
•Financial update
ECONOMIC AND FINANCIAL UPDATE
2
CARLSBAD ECONOMY
•Carlsbad’s GRP was $16.6 billion in 2022
•Carlsbad’s economy grew by approximately
$800 million since 2021.
•GRP data for 2023 will be available in January, 2024
ECONOMIC AND FINANCIAL UPDATE
3
EVOLVING ECONOMIC CONDITIONS
•Macro-disruptions continue to affect Carlsbad’s economy and businesses
o Lingering Inflation
o High fuel prices
o Higher cost of capital
o Uncertainty due to global turmoil
o Layoffs in tech and life sciences
o Reemergence of international travel
•Disruptions create a degree of operational uncertainty
ECONOMIC AND FINANCIAL UPDATE
4
INFLATION CONCERNS
•Inflation has continued a downward
trend over the past year
•San Diego area prices are up 1.3%
over the past two months
•Over-the-year prices are up 4.7%
(4.8% less food and energy)
o The September 2022 report was 8.2%
ECONOMIC AND FINANCIAL UPDATE
Consumer Price Index for All Urban Consumers
for San Diego-Carlsbad MSA
5
WORKER/TALENT SHORTAGE
•EDD September unemployment data
o California unemployment rate:
4.9%, (.2% improvement)
o County unemployment rate: 4%,
(.3% improvement)
o Carlsbad unemployment rate:
3.9%, (.3% improvement)
ECONOMIC AND FINANCIAL UPDATE
0
1
2
3
4
5
6
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Carlsbad Unemployment Rate 2022 vs 2023
2022 2023
6
CARLSBAD JOBS
•June through September saw 11,398 unique job postings
•This is a drop of 1,863 jobs from the previous quarter
•Continues a slide in new job postings
•Average salary for posted jobs was $51,100
•An Increase of more than $5,000 per year from the same
quarter, last year.
•Entry Level jobs account for 2/3rds of available jobs
ECONOMIC AND FINANCIAL UPDATE
7
COMMERCIAL REAL ESTATE
•Vacancy rates for industrial properties are 7.9%
•Vacancy rates for office properties are 12.7%
•Vacancy rates for retail properties are up to 5.4%
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
2022
Q4
2023
Q1
2023
Q2
2023
Q3
Carlsbad Commercial Vacancy Rates
Carlsbad Retail Carlsbad Office Carlsbad Industrial8
RESIDENTIAL REAL ESTATE
•Median home values are currently at $1.45 million
•Despite higher interest rates, housing demand has kept
values elevated
ECONOMIC AND FINANCIAL UPDATE
$600,000.00
$700,000.00
$800,000.00
$900,000.00
$1,000,000.00
$1,100,000.00
$1,200,000.00
$1,300,000.00
$1,400,000.00
$1,500,000.00
$1,600,000.00
2019 2020 2021 2022 2023
Carlsbad Median Home Price
9
CARLSBAD TOURISM
•Softening in tourism, compared to 2022
•Group Travel is still recovering from the pandemic
•2023 is likely to represent a “new normal” in visitor trends
ECONOMIC AND FINANCIAL UPDATE
0.00
50.00
100.00
150.00
200.00
250.00
300.00
350.00
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-
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9
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2
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3
Ap
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2
3
Ju
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3
Carlsbad Hotel Average Daily Rate
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
90.0
100.0
Ju
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3
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3
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-
2
3
Carlsbad Hotel Occupancy
10
NEW DEVELOPMENT
& BUSINESS ACTIVITY
•There are an estimated 6,654 current businesses in Carlsbad
•Residential building permit drop likely caused by the
statewide change in Solar Incentives
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
Q4
2022
Q1
2023
Q2
2023
Q3
2023
Business Licenses Issued by Quarter
Non-Residential Residential Outside City Total
0
200
400
600
800
1000
1200
1400
1600
Co
m
m
e
r
c
i
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l
Re
s
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i
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l
2020 2021 2022 2023
Building Permits Issued
Q1 Q2 Q3 Q4
11
KEY TAKEAWAYS
•Macro-trends continue to impact Carlsbad business
operations
•The labor market is loosening across industries
•Despite disruptions, Carlsbad’s economy continues to be
resilient
ECONOMIC AND FINANCIAL UPDATE
12
GENERAL FUND REVENUES
first quarter of fiscal year
13
GENERAL FUND REVENUES
Revenue category
Actual
FY 2022-23
Actual
FY 2023-24
$
difference
%
difference
Property tax $3.4 $4.3 $0.9 27%
Sales tax 13.3 15.7 2.4 18%
Transient occupancy tax 11.6 11.6 0.0 0%
Other taxes 2.3 2.6 0.3 11%
Income from inv. and property 1.3 1.7 0.4 25%
Development related revenue 1.2 1.0 -0.2 -15%
Other revenues 4.6 5.8 1.2 26%
Total $37.7 $42.7 $5.0 13%
first quarter of fiscal year (in millions)
14
Revenue category
Expected
FY 2023-24
Actual
FY 2023-24
$
difference
%
difference
Property tax $3.2 $4.2 $1.0 31%
Sales tax 12.1 15.7 3.6 30%
Transient occupancy tax 11.1 11.6 0.5 5%
Other taxes 2.3 2.6 0.3 13%
Income from inv. and property 1.2 1.7 0.5 46%
Development related revenue 1.0 1.0 0.1 17%
Other revenues 4.5 5.9 1.4 29%
Total $35.4 $42.7 $7.4 21%
GENERAL FUND REVENUES
(in millions)
16
GENERAL FUND BUDGET
ECONOMIC AND FINANCIAL UPDATE
•Adopted budget of $216.9 million
•Working budget of $241.2 million
•Available budget remaining of $168.7 million, or 70%
•Includes actual expenditures through Sept. 2023
•Includes open purchase order commitments
15
GENERAL FUND EXPENDITURES & ENCUMBRANCES
first quarter of fiscal year
16
GENERAL FUND EXPENDITURES
(in millions)
Category
FY 2023-24
Appropriation
QTR 1 EXP
FY 2023-24
% of Budget
Spent to Date
OPEN POs
at 9/30/23
Personnel $130.1 $34.8 27%$0.0
Maintenance & operations 70.7 11.4 16%15.8
Transfers out 28.2 5.5 19%0.0
Capital outlay 6.5 1.5 24%3.4
Village Trenching 5.2 0.0 0%0.0
Contingency 0.5 0.0 0%0.0
Total $241.2 $53.2 22%$19.2
17
WATER AND WASTEWATER
ECONOMIC AND FINANCIAL UPDATE
Compared to prior year through Q1:
•Water revenues are down 1% and
expenses are up 9%
•Wastewater revenues are up 42% and
expenses are up 35%
18
GOLF COURSE
ECONOMIC AND FINANCIAL UPDATE
Compared to prior year through Q1:
•Net income $285,000 higher than last year
•Golf Course revenues are up 6% and
expenses are down 3%
19
NEXT STEPS
•Monitor revenues and expenditures
•Publish economic and financial status reports:
carlsbadca.gov/doingbusiness
carlsbadca.gov/departments/finance/financial-reports
•Return in February 2024 with mid-year update
ECONOMIC AND FINANCIAL UPDATE
20