HomeMy WebLinkAbout; ; 2010-2011 CAFR; 2011-06-30
COMPREHENSIVE ANNUAL
FINANCIAL REPORT
FISCAL YEAR ENDED
JUNE 30, 2011
1635 Faraday Avenue, Carlsbad, CA 92008
Website: www.carlsbadca.gov
Prepared by the Finance Department
COMPREHENSIVE ANNUAL
FINANCIAL REPORT
FISCAL YEAR ENDED
JUNE 30, 2011
1635 Faraday Avenue, Carlsbad, CA 92008
Website: www.carlsbadca.gov
Prepared by the Finance Department
Cover design by: Kelly Gilfillen
Cover design by: Kelly Gilfillen
Introductory Section Introductory Section
Introductory SectionIntroductory Section
Carlsbad . . .
¾ Provides a diverse and healthy economic base that creates opportunities for employment to
the residents of Carlsbad, economic vitality to the community, and the necessary revenues to
support City services.
¾ Provides programs, policies and decisions to implement the General Plan, enforce the
Growth Management Plan, maintain the safety and security of its citizens, and are based on
what is best for Carlsbad.
¾ Occupies a leadership role in local and regional planning, (e.g., water, beach, circulation, and
environmental issues) important to local governments actively involves addressing
governmental issues at the local, state and national levels.
¾ Provides an open government leading to the betterment of the community and encourages in
a non-partisan manner active citizen participation and involvement with the City Council and
the City’s Boards and Commissions.
And Carlsbad Efficiently and Effectively…
¾ Delivers top-quality public services.
¾ Manages its environment proactively, including:
Open space
Wildlife habitats
Water quality/conservation
Beach preservation
Air quality
Resource conservation and waste reduction
¾ Promotes a safe and efficient integrated transportation system.
¾ Maintains citywide “small town” community spirit.
¾ Provides a community where continuous and life-long learning is supported and encouraged
for people of all ages.
¾ Looks ahead and works to anticipate changes that are required now in order to make a better
future for its residents.
Carlsbad City Council
2011
Five-Year Vision Statements
City Council continues to clarify and pursue the vision of Carlsbad that
reflects the pride and quality of life for all who live, work, and play here.
1
Carlsbad . . .
¾ Provides a diverse and healthy economic base that creates opportunities for employment to
the residents of Carlsbad, economic vitality to the community, and the necessary revenues to
support City services.
¾ Provides programs, policies and decisions to implement the General Plan, enforce the
Growth Management Plan, maintain the safety and security of its citizens, and are based on
what is best for Carlsbad.
¾ Occupies a leadership role in local and regional planning, (e.g., water, beach, circulation, and
environmental issues) important to local governments actively involves addressing
governmental issues at the local, state and national levels.
¾ Provides an open government leading to the betterment of the community and encourages in
a non-partisan manner active citizen participation and involvement with the City Council and
the City’s Boards and Commissions.
And Carlsbad Efficiently and Effectively…
¾ Delivers top-quality public services.
¾ Manages its environment proactively, including:
Open space
Wildlife habitats
Water quality/conservation
Beach preservation
Air quality
Resource conservation and waste reduction
¾ Promotes a safe and efficient integrated transportation system.
¾ Maintains citywide “small town” community spirit.
¾ Provides a community where continuous and life-long learning is supported and encouraged
for people of all ages.
¾ Looks ahead and works to anticipate changes that are required now in order to make a better
future for its residents.
Carlsbad City Council
2011
Five-Year Vision Statements
City Council continues to clarify and pursue the vision of Carlsbad that
reflects the pride and quality of life for all who live, work, and play here.
1
2
2
3
Council is elected at large, on a staggered basis, for a term of four years. The City Clerk and City Treasurer are also elected to four-year terms. The
City Council appoints the City Manager and City Attorney. The city covers approximately 42 square miles and has a population of
106,555, with an expected built out population of 117,000 residents. Industries in the city include a major regional shopping center; a specialty outlet center; 34 hotels offering over 3,600 rooms for tourist lodging; over
20 auto dealers; high technology, multimedia and biomedical businesses; electronics, golf apparel and equipment manufacturers; several business and light industry parks; and numerous land developers building single and
multi-family housing in a variety of community settings.
This report includes financial statements for the city, the Housing Authority of the City of Carlsbad, the Carlsbad Public Improvement Corporation, the
Carlsbad Redevelopment Agency, the Carlsbad Public Financing Authority, and the Carlsbad Municipal Water District. Through these entities, Carlsbad
provides a full range of services to its citizens and customers including: Police protection services
Development services
Fire and paramedic services
Street construction and maintenance
Water delivery system
Library and arts programs
Wastewater system
Recreation programming for all ages
Solid waste services
Park lands
Housing programs
In addition to the full range of services normally associated with a
municipality, Carlsbad offers programs to help local residents and businesses. The city’s
Redevelopment Agency is comprised
of two areas: the 0.4 square mile Village Redevelopment area in
downtown and the South Coastal Carlsbad Redevelopment Area, which borders the Pacific Ocean south of the
Village Redevelopment Area. Low-
income families in Carlsbad receive assistance from the city’s Housing
Authority and older residents can take advantage of Carlsbad’s senior citizen programs.
Budget Process
The Carlsbad Municipal Code requires that the City Manager annually prepare a budget for the City
Council with a message describing important features, and assume
responsibility for the budget’s administration after adoption. The budget process begins in January each year with a review and update of the
City Council’s five-year vision statements and strategic goals for the
*
*
* *
S a n F r a n c i s c o
L o s A n g e l e s
S a n D i e g o
Oregon
N e v a d a
P a c i f i c O c e a n
N
E W
S Carlsbad
City of Carlsbad Community Vision
Small town feel, beach community character and connectedness Enhance Carlsbad’s defining attributes - its small town feel and beach community character. Build on the city’s culture of civic engagement, volunteerism and philanthropy.
Open space and the natural environment - Prioritize protection and enhancement of open space and the natural environment. Support and protect Carlsbad’s unique open
space and agricultural heritage. Access to recreation and active, healthy lifestyles - Promote active lifestyles and community health by furthering access to trails, parks, beaches and other recreation opportunities.
The local economy, business diversity and tourism - Strengthen the city’s strong and diverse economy and its position as an employment hub in north San Diego County. Promote business diversity, increased specialty retail and dining opportunities, and Carlsbad’s tourism.
Walking, biking, public transportation and connectivity - Increase travel options
through enhanced walking, bicycling and public transportation systems. Enhance mobility through increased connectivity and intelligent transportation management.
Sustainability - Build on the city’s sustainability initiatives to emerge as a leader in green development and sustainability. Pursue public/private partnerships, particularly on sustainable water, energy, recycling and foods.
History, the arts and cultural resources - Emphasize the arts by promoting a multitude of events and productions year round. Cutting edge venues to host world class
performances, and celebrate Carlsbad’s cultural heritage in dedicated facilities and programs. High quality education and community services Support quality, comprehensive education and lifelong learning opportunities, provide housing and community services for a changing population, and maintain a high standard for citywide public safety.
Neighborhood revitalization, community design and livability Revitalize neighborhoods and enhance citywide community design and livability.
Promote a greater mix of uses citywide, more activities along the coastline and link density to public transportation. Revitalize the downtown Village as a community focal point and a unique and memorable center for visitors, and rejuvenate the historic Barrio neighborhood.
4
Council is elected at large, on a staggered basis, for a term of four years. The City Clerk and City Treasurer are also elected to four-year terms. The
City Council appoints the City Manager and City Attorney. The city covers approximately 42 square miles and has a population of
106,555, with an expected built out population of 117,000 residents. Industries in the city include a major regional shopping center; a specialty outlet center; 34 hotels offering over 3,600 rooms for tourist lodging; over
20 auto dealers; high technology, multimedia and biomedical businesses; electronics, golf apparel and equipment manufacturers; several business and light industry parks; and numerous land developers building single and
multi-family housing in a variety of community settings.
This report includes financial statements for the city, the Housing Authority of the City of Carlsbad, the Carlsbad Public Improvement Corporation, the
Carlsbad Redevelopment Agency, the Carlsbad Public Financing Authority, and the Carlsbad Municipal Water District. Through these entities, Carlsbad
provides a full range of services to its citizens and customers including: Police protection services
Development services
Fire and paramedic services
Street construction and maintenance
Water delivery system
Library and arts programs
Wastewater system
Recreation programming for all ages
Solid waste services
Park lands
Housing programs
In addition to the full range of services normally associated with a
municipality, Carlsbad offers programs to help local residents and businesses. The city’s
Redevelopment Agency is comprised
of two areas: the 0.4 square mile Village Redevelopment area in
downtown and the South Coastal Carlsbad Redevelopment Area, which borders the Pacific Ocean south of the
Village Redevelopment Area. Low-
income families in Carlsbad receive assistance from the city’s Housing
Authority and older residents can take advantage of Carlsbad’s senior citizen programs.
Budget Process
The Carlsbad Municipal Code requires that the City Manager annually prepare a budget for the City
Council with a message describing important features, and assume
responsibility for the budget’s administration after adoption. The budget process begins in January each year with a review and update of the
City Council’s five-year vision statements and strategic goals for the
*
*
* *
S a n F r a n c i s c o
L o s A n g e l e s
S a n D i e g o
Oregon
N e v a d a
P a c i f i c O c e a n
N
E W
S Carlsbad
City of Carlsbad Community Vision
Small town feel, beach community character and connectedness Enhance Carlsbad’s defining attributes - its small town feel and beach community character. Build on the city’s culture of civic engagement, volunteerism and philanthropy.
Open space and the natural environment - Prioritize protection and enhancement of open space and the natural environment. Support and protect Carlsbad’s unique open
space and agricultural heritage. Access to recreation and active, healthy lifestyles - Promote active lifestyles and community health by furthering access to trails, parks, beaches and other recreation opportunities.
The local economy, business diversity and tourism - Strengthen the city’s strong and diverse economy and its position as an employment hub in north San Diego County. Promote business diversity, increased specialty retail and dining opportunities, and Carlsbad’s tourism.
Walking, biking, public transportation and connectivity - Increase travel options
through enhanced walking, bicycling and public transportation systems. Enhance mobility through increased connectivity and intelligent transportation management.
Sustainability - Build on the city’s sustainability initiatives to emerge as a leader in green development and sustainability. Pursue public/private partnerships, particularly on sustainable water, energy, recycling and foods.
History, the arts and cultural resources - Emphasize the arts by promoting a multitude of events and productions year round. Cutting edge venues to host world class
performances, and celebrate Carlsbad’s cultural heritage in dedicated facilities and programs. High quality education and community services Support quality, comprehensive education and lifelong learning opportunities, provide housing and community services for a changing population, and maintain a high standard for citywide public safety.
Neighborhood revitalization, community design and livability Revitalize neighborhoods and enhance citywide community design and livability.
Promote a greater mix of uses citywide, more activities along the coastline and link density to public transportation. Revitalize the downtown Village as a community focal point and a unique and memorable center for visitors, and rejuvenate the historic Barrio neighborhood.
4
city. The City Council also provides the city with its top priority projects, which further defines the Council’s vision. The goals and priority projects outline the methods used to achieve the vision and call
out areas upon which the City Council would like to place special emphasis during the year. Once the vision and priority projects are developed, city staff develops operational goals and work plans based on the
City Council’s direction. These goals and work plans provide the basis for the development of the annual budget. The City Council adopts the formal budget for all funds at the beginning of each fiscal year and
may amend those budgets throughout the year as necessary.
Budgetary control for the city is maintained through its accounting systems. Expenditures may not exceed budgeted figures at the fund level. Monthly reports summarizing the results of operations for the city’s
more significant funds are provided to the City Council.
FACTORS AFFECTING FINANCIAL CONDITION Economic Profile
The University of San Diego (USD) monitors the structure of the San Diego economy through its Index of Leading Economic Indicators. The USD index tracks six variables to evaluate growth trends in the San
Diego economy: unemployment filings, help wanted advertising, local stock prices, consumer confidence, building permits and the strength of the national economy. The index shows a continued two-year upward
trend, increasing by almost six percent in March 2011, as compared to March 2010.
Carlsbad’s economy is tied closely to that of the San Diego
region. As we continue a slow recovery from the worst
economic recession since the Great Depression, we are seeing
improvement in most of the city’s General Fund revenues,
which are expected to increase by $2.3 million, or 2.1 percent,
in fiscal year 2011-12. Continued weakness in the
residential housing market is adversely affecting property tax
receipts, and a 0.2 percent decrease is anticipated in the
coming year. However, the city’s sales taxes, transient occupancy taxes and development related revenues are projected to increase in
step with the economic recovery.
During Fiscal Year 2009-10, development related revenues began to turn around from historic lows experienced in Fiscal Year 2008-09. In Fiscal Year 2011-12, development-related revenues are anticipated
to decrease slightly as a result of the depressed housing market activity. In Fiscal Year 2009-10, there were 339 units permitted for residential housing. For Fiscal Year 2010-11, 212 residential units were permitted
through April 2011. For Fiscal Year 2011-12, 187 permits are projected to be issued for residential housing. The commercial and industrial building activity remained weak for Fiscal Year 2009-10 and
Fiscal Year 2010-11, and is expected to continue to be weak in the coming fiscal year. Due to subdued activity in residential and commercial development, building-related revenues are expected to drop by 9.5
percent in Fiscal Year 2011-12.
5
city. The City Council also provides the city with its top priority projects, which further defines the Council’s vision. The goals and priority projects outline the methods used to achieve the vision and call
out areas upon which the City Council would like to place special emphasis during the year. Once the vision and priority projects are developed, city staff develops operational goals and work plans based on the
City Council’s direction. These goals and work plans provide the basis for the development of the annual budget. The City Council adopts the formal budget for all funds at the beginning of each fiscal year and
may amend those budgets throughout the year as necessary.
Budgetary control for the city is maintained through its accounting systems. Expenditures may not exceed budgeted figures at the fund level. Monthly reports summarizing the results of operations for the city’s
more significant funds are provided to the City Council.
FACTORS AFFECTING FINANCIAL CONDITION Economic Profile
The University of San Diego (USD) monitors the structure of the San Diego economy through its Index of Leading Economic Indicators. The USD index tracks six variables to evaluate growth trends in the San
Diego economy: unemployment filings, help wanted advertising, local stock prices, consumer confidence, building permits and the strength of the national economy. The index shows a continued two-year upward
trend, increasing by almost six percent in March 2011, as compared to March 2010.
Carlsbad’s economy is tied closely to that of the San Diego
region. As we continue a slow recovery from the worst
economic recession since the Great Depression, we are seeing
improvement in most of the city’s General Fund revenues,
which are expected to increase by $2.3 million, or 2.1 percent,
in fiscal year 2011-12. Continued weakness in the
residential housing market is adversely affecting property tax
receipts, and a 0.2 percent decrease is anticipated in the
coming year. However, the city’s sales taxes, transient occupancy taxes and development related revenues are projected to increase in
step with the economic recovery.
During Fiscal Year 2009-10, development related revenues began to turn around from historic lows experienced in Fiscal Year 2008-09. In Fiscal Year 2011-12, development-related revenues are anticipated
to decrease slightly as a result of the depressed housing market activity. In Fiscal Year 2009-10, there were 339 units permitted for residential housing. For Fiscal Year 2010-11, 212 residential units were permitted
through April 2011. For Fiscal Year 2011-12, 187 permits are projected to be issued for residential housing. The commercial and industrial building activity remained weak for Fiscal Year 2009-10 and
Fiscal Year 2010-11, and is expected to continue to be weak in the coming fiscal year. Due to subdued activity in residential and commercial development, building-related revenues are expected to drop by 9.5
percent in Fiscal Year 2011-12.
5
Housing prices in Carlsbad continued their downward trend during the last
year. According to DataQuick, the median price for a Carlsbad home fell to
$626,000 in April, down over eight percent compared to last year. The total
assessed values in the city are close to $24 billion, a decrease of approximately
one percent compared to the prior fiscal year (Fiscal Year 2009-10). According
to recent growth projections prepared for the city, Carlsbad will add 1,033 units
over the next five fiscal years and develop an additional 1.6 million square
feet of commercial and industrial space.
Since 1992, commercial and industrial development in Carlsbad averaged approximately 1.1 million square feet per year. As opportunities for new development diminish, commercial and industrial development is
tapering off, falling to an average of slightly under 300 square feet per year over the next five fiscal years. Due to the economic recession, commercial and industrial development now is expected to average
300,000 square feet per year over the next five years. Large industrial commercial developments in the next five years include Bressi Ranch, Carlsbad Raceway and Palomar Forum, Dos Colinas Retirement
Community, and the Floral Trade Center. Commercial office space vacancy has witnessed a decline over the past year, falling from over 30 percent in the last quarter of 2009 to approximately 24 percent in the
first quarter of 2011. Industrial vacancy fell for the same period, from almost 14 percent to 13 percent.
Commercial development has brought much needed entertainment and shopping venues to citizens and visitors, alike, as well as generating additional sales tax to help pay for city services. Carlsbad is home to
Car Country Carlsbad, an auto mall; the Carlsbad Premium Outlets, a specialty outlet center; Plaza Camino Real, a regional shopping mall; a Costco center; and the Forum at Carlsbad, a commercial center with
upscale retail shops, restaurants and other commercial uses.
Development has also enhanced Carlsbad’s reputation as a destination for tourism. The city is host to a major family theme park, Legoland, and has two luxury resorts available for its visitors, the Park Hyatt at
Aviara and the La Costa Resort & Spa. There are also a number of other quality hotels and motels in the city, with the most recent additions being the Sheraton Carlsbad Resort and Spa, Homewood Suites and
Hampton Inn.
The City of Carlsbad opened a municipal golf course in the summer of 2007, which has further enhanced the tourism attractions the city offers. The Crossings at Carlsbad is an 18-hole golf course set in the rolling
hills and canyons of Carlsbad. With ocean views, high quality greens, a first class restaurant and clubhouse, and linkages to hiking trails, The Crossings at Carlsbad is a destination spot for golfers and non-golfers,
alike.
Overall, for Fiscal Year 2011-12, General Fund revenue is projected to increase by approximately two
percent from the previous year’s estimates. Most sources of tax revenue, with the exception of property taxes, are expected to increase slightly in Fiscal Year 2011-12. Sales tax and TOT revenues are projected
to increase by approximately three and five percent, respectively, due to the improved local economic conditions experienced to date. Home values, however, continue to decline, and the County Assessor has estimated that the city should expect assessed values to decrease by almost 0.2 percent for Fiscal Year 2011-12. New building permits are expected to decrease slightly and the development related revenue items
have been adjusted accordingly for Fiscal Year 2011-12.
6
Housing prices in Carlsbad continued their downward trend during the last
year. According to DataQuick, the median price for a Carlsbad home fell to
$626,000 in April, down over eight percent compared to last year. The total
assessed values in the city are close to $24 billion, a decrease of approximately
one percent compared to the prior fiscal year (Fiscal Year 2009-10). According
to recent growth projections prepared for the city, Carlsbad will add 1,033 units
over the next five fiscal years and develop an additional 1.6 million square
feet of commercial and industrial space.
Since 1992, commercial and industrial development in Carlsbad averaged approximately 1.1 million square feet per year. As opportunities for new development diminish, commercial and industrial development is
tapering off, falling to an average of slightly under 300 square feet per year over the next five fiscal years. Due to the economic recession, commercial and industrial development now is expected to average
300,000 square feet per year over the next five years. Large industrial commercial developments in the next five years include Bressi Ranch, Carlsbad Raceway and Palomar Forum, Dos Colinas Retirement
Community, and the Floral Trade Center. Commercial office space vacancy has witnessed a decline over the past year, falling from over 30 percent in the last quarter of 2009 to approximately 24 percent in the
first quarter of 2011. Industrial vacancy fell for the same period, from almost 14 percent to 13 percent.
Commercial development has brought much needed entertainment and shopping venues to citizens and visitors, alike, as well as generating additional sales tax to help pay for city services. Carlsbad is home to
Car Country Carlsbad, an auto mall; the Carlsbad Premium Outlets, a specialty outlet center; Plaza Camino Real, a regional shopping mall; a Costco center; and the Forum at Carlsbad, a commercial center with
upscale retail shops, restaurants and other commercial uses.
Development has also enhanced Carlsbad’s reputation as a destination for tourism. The city is host to a major family theme park, Legoland, and has two luxury resorts available for its visitors, the Park Hyatt at
Aviara and the La Costa Resort & Spa. There are also a number of other quality hotels and motels in the city, with the most recent additions being the Sheraton Carlsbad Resort and Spa, Homewood Suites and
Hampton Inn.
The City of Carlsbad opened a municipal golf course in the summer of 2007, which has further enhanced the tourism attractions the city offers. The Crossings at Carlsbad is an 18-hole golf course set in the rolling
hills and canyons of Carlsbad. With ocean views, high quality greens, a first class restaurant and clubhouse, and linkages to hiking trails, The Crossings at Carlsbad is a destination spot for golfers and non-golfers,
alike.
Overall, for Fiscal Year 2011-12, General Fund revenue is projected to increase by approximately two
percent from the previous year’s estimates. Most sources of tax revenue, with the exception of property taxes, are expected to increase slightly in Fiscal Year 2011-12. Sales tax and TOT revenues are projected
to increase by approximately three and five percent, respectively, due to the improved local economic conditions experienced to date. Home values, however, continue to decline, and the County Assessor has estimated that the city should expect assessed values to decrease by almost 0.2 percent for Fiscal Year 2011-12. New building permits are expected to decrease slightly and the development related revenue items
have been adjusted accordingly for Fiscal Year 2011-12.
6
State of California In January 2011, California swore in Governor Jerry Brown, who inherited an ongoing budgetary crisis that has been exacerbated by the most severe economic downturn since the
Great Depression. The State of California has been in a severe fiscal crisis for a number of years and has relied on a number of dubious strategies to balance its budget, including reliance
on one-time revenues, borrowing from various state funds, and raiding city, county and special district funds. Federal and state maintenance of effort requirements, legal constraints and the passage of
several State propositions in the November elections have further limited the state’s options for addressing the ongoing structural imbalance.
On June 30, 2011 Governor Brown signed the Fiscal Year 2011-12 budget. Within this budget are several
items that may impact local agencies. The most significant for the City of Carlsbad are the components that eliminate the statutory authority of redevelopment agencies and that take away funds from public
safety programs and vehicle license fees, both of which are being challenged with lawsuits. The elimination of the redevelopment agencies does allow for successor agencies to be formed, but only for
servicing existing debt. Any revenues in excess of the required debt repayment will be redistributed to schools and other local agencies based on existing property tax allocation laws. Local agencies can prevent
the elimination of their redevelopment agencies by making a remittance payment to the various districts that overlap with their redevelopment agencies; for local agencies, this would amount to approximately
$1.7 billion in 2011-12 and $400 million in the future years. Also, within the budget is a trigger at the state level to reduce expenditures if estimated revenues fall short of projections. In December 2011, the State’s
Department of Finance will review this trigger and determine if cuts are needed, which may further impact local agencies. Due to revenue fluctuations, at this time it is anticipated that the State’s Fiscal Year 2011-
12 budget will be revised in January 2012.
As a result of continued attacks on cities’ revenues, a coalition of cities, counties and special districts supported Proposition 22, which was approved by the voters in November 2010. The measure included a
provision to stop the Legislature from raiding local government and gas tax funds that are programmed at the local level for vital services. Proposition 22, along with Proposition 1A which was passed in 2004,
should provide added protection to local agencies in the future. Also passed in the November election were Propositions 25 and 26. Proposition 25 requires forfeiture of legislative pay if the June 15 Constitutional
deadline for passing a budget is missed. This measure provides greater incentive for the timely adoption of the state budget, allowing local governments to include the effects of state decisions in their budgets.
Proposition 26 expanded the definition of “tax,” leaving state and local governments with less discretion in implementing new revenue sources.
Long-Term Financial Planning It is the City Council’s goal to ensure that the city remains in good financial health, and the city has taken a
number of steps to attain this goal. One of these is the Growth Management Plan. This plan was adopted by the citizens to ensure that all necessary public facilities are either constructed along with development or
that a financing plan is in place to pay for the facilities prior to the development of the property. Thus, the initial capital facilities needed to support the growing population are provided without financially
impacting the city or its current residents. The city also prepares a 15+ year Capital Improvement Program. As part of the Capital Improvement Program, the city annually calculates the amounts needed to
pay for the various projects as well as the anticipated operating budget impacts from those projects. In this way, the city can anticipate the effects of development from both a capital and an operating perspective.
In order to assure that the city has the funds to replace these facilities as they age, an Infrastructure
Replacement Fund was created. With this fund, the city sets aside money on an annual basis for major maintenance and replacement of its infrastructure. Much of the city’s infrastructure is relatively new; thus,
the city is just now beginning to experience the impact of major maintenance requirements. By setting aside funds now, the citizens of Carlsbad can be assured that the proper maintenance and replacement, as
needed, will be performed on streets, parks, and the many facilities for which the city is responsible. For Fiscal Year 2011-12, the City Council approved allocating 6.5 percent of General Fund revenues, or $7.4
million, to the Infrastructure Replacement Fund.
7
State of California In January 2011, California swore in Governor Jerry Brown, who inherited an ongoing budgetary crisis that has been exacerbated by the most severe economic downturn since the
Great Depression. The State of California has been in a severe fiscal crisis for a number of years and has relied on a number of dubious strategies to balance its budget, including reliance
on one-time revenues, borrowing from various state funds, and raiding city, county and special district funds. Federal and state maintenance of effort requirements, legal constraints and the passage of
several State propositions in the November elections have further limited the state’s options for addressing the ongoing structural imbalance.
On June 30, 2011 Governor Brown signed the Fiscal Year 2011-12 budget. Within this budget are several
items that may impact local agencies. The most significant for the City of Carlsbad are the components that eliminate the statutory authority of redevelopment agencies and that take away funds from public
safety programs and vehicle license fees, both of which are being challenged with lawsuits. The elimination of the redevelopment agencies does allow for successor agencies to be formed, but only for
servicing existing debt. Any revenues in excess of the required debt repayment will be redistributed to schools and other local agencies based on existing property tax allocation laws. Local agencies can prevent
the elimination of their redevelopment agencies by making a remittance payment to the various districts that overlap with their redevelopment agencies; for local agencies, this would amount to approximately
$1.7 billion in 2011-12 and $400 million in the future years. Also, within the budget is a trigger at the state level to reduce expenditures if estimated revenues fall short of projections. In December 2011, the State’s
Department of Finance will review this trigger and determine if cuts are needed, which may further impact local agencies. Due to revenue fluctuations, at this time it is anticipated that the State’s Fiscal Year 2011-
12 budget will be revised in January 2012.
As a result of continued attacks on cities’ revenues, a coalition of cities, counties and special districts supported Proposition 22, which was approved by the voters in November 2010. The measure included a
provision to stop the Legislature from raiding local government and gas tax funds that are programmed at the local level for vital services. Proposition 22, along with Proposition 1A which was passed in 2004,
should provide added protection to local agencies in the future. Also passed in the November election were Propositions 25 and 26. Proposition 25 requires forfeiture of legislative pay if the June 15 Constitutional
deadline for passing a budget is missed. This measure provides greater incentive for the timely adoption of the state budget, allowing local governments to include the effects of state decisions in their budgets.
Proposition 26 expanded the definition of “tax,” leaving state and local governments with less discretion in implementing new revenue sources.
Long-Term Financial Planning It is the City Council’s goal to ensure that the city remains in good financial health, and the city has taken a
number of steps to attain this goal. One of these is the Growth Management Plan. This plan was adopted by the citizens to ensure that all necessary public facilities are either constructed along with development or
that a financing plan is in place to pay for the facilities prior to the development of the property. Thus, the initial capital facilities needed to support the growing population are provided without financially
impacting the city or its current residents. The city also prepares a 15+ year Capital Improvement Program. As part of the Capital Improvement Program, the city annually calculates the amounts needed to
pay for the various projects as well as the anticipated operating budget impacts from those projects. In this way, the city can anticipate the effects of development from both a capital and an operating perspective.
In order to assure that the city has the funds to replace these facilities as they age, an Infrastructure
Replacement Fund was created. With this fund, the city sets aside money on an annual basis for major maintenance and replacement of its infrastructure. Much of the city’s infrastructure is relatively new; thus,
the city is just now beginning to experience the impact of major maintenance requirements. By setting aside funds now, the citizens of Carlsbad can be assured that the proper maintenance and replacement, as
needed, will be performed on streets, parks, and the many facilities for which the city is responsible. For Fiscal Year 2011-12, the City Council approved allocating 6.5 percent of General Fund revenues, or $7.4
million, to the Infrastructure Replacement Fund.
7
While the City of Carlsbad has a long-term history of maintaining sufficient reserves, the City Council took formal action during Fiscal Year 2007-08 to adopt a reserve policy which was revised in Fiscal Year 2010-
11. The General Fund Reserve Policy sets a minimum reserve of 30 percent of the General Fund expenditures and also establishes a target reserve of between 40 percent to 50 percent. This reserve can be
used by the City Council for emergencies or one-time purposes.
In addition to these steps, the city also prepares a ten-year financial forecast for the General Fund each year, in order to understand the fiscal impact of actions taken today on the city’s future. The current
forecast assumes limited growth in residential and commercial development over the next decade and captures the expected revenue impacts from major projects that are expected to be completed during the
forecast period. The operating costs of new city facilities supported by the General Fund, such as Alga Norte Park, are also captured in the ten-year forecast. The forecast also assumes that the Carlsbad
Crossings Golf Course will require an ongoing subsidy from the General Fund and, while this subsidy is expected to decrease over time, it is no longer treated as a loan.
Economic conditions at the national, state, and local level are expected to continue improving at a modest
rate and to provide a boost to most of our major sources of revenue. Home sales, however, are not expected to increase in the next fiscal year and values will continue to subdue property tax receipts.
Overall, General Fund revenues are expected to cover ongoing costs in the coming decade, as depicted on the following graph:
The forecast also assumes that General Fund revenues will increase slightly, almost two percent, in Fiscal Year 2011-12, assuming unforeseen events do not derail a tepid economic recovery. To project
expenditures, all known changes in personnel and maintenance and operations costs are accounted for. However, the city was still in negotiations with its General Employee association at the time of budget
adoption, and the results of those negotiations have not been yet been included in the current ten-year forecast.
The forecast assumes that the city’s cost for employee health care will increase by five percent, annually,
over the life of the forecast. Pension plan costs are projected to increase by approximately 1.3 percent for
8
While the City of Carlsbad has a long-term history of maintaining sufficient reserves, the City Council took formal action during Fiscal Year 2007-08 to adopt a reserve policy which was revised in Fiscal Year 2010-
11. The General Fund Reserve Policy sets a minimum reserve of 30 percent of the General Fund expenditures and also establishes a target reserve of between 40 percent to 50 percent. This reserve can be
used by the City Council for emergencies or one-time purposes.
In addition to these steps, the city also prepares a ten-year financial forecast for the General Fund each year, in order to understand the fiscal impact of actions taken today on the city’s future. The current
forecast assumes limited growth in residential and commercial development over the next decade and captures the expected revenue impacts from major projects that are expected to be completed during the
forecast period. The operating costs of new city facilities supported by the General Fund, such as Alga Norte Park, are also captured in the ten-year forecast. The forecast also assumes that the Carlsbad
Crossings Golf Course will require an ongoing subsidy from the General Fund and, while this subsidy is expected to decrease over time, it is no longer treated as a loan.
Economic conditions at the national, state, and local level are expected to continue improving at a modest
rate and to provide a boost to most of our major sources of revenue. Home sales, however, are not expected to increase in the next fiscal year and values will continue to subdue property tax receipts.
Overall, General Fund revenues are expected to cover ongoing costs in the coming decade, as depicted on the following graph:
The forecast also assumes that General Fund revenues will increase slightly, almost two percent, in Fiscal Year 2011-12, assuming unforeseen events do not derail a tepid economic recovery. To project
expenditures, all known changes in personnel and maintenance and operations costs are accounted for. However, the city was still in negotiations with its General Employee association at the time of budget
adoption, and the results of those negotiations have not been yet been included in the current ten-year forecast.
The forecast assumes that the city’s cost for employee health care will increase by five percent, annually,
over the life of the forecast. Pension plan costs are projected to increase by approximately 1.3 percent for
8
miscellaneous employees, due primarily to investment losses sustained by CalPERS in Fiscal Year 2008-09 and updated actuarial assumptions. Pension costs for safety employees increase in Fiscal Year 2011-12 by
approximately 3.8 percent. The forecast also assumes that $1.4 million is set aside to stabilize future CalPERS increases or to address unfunded liabilities in both the safety and miscellaneous retirement plans.
The forecast further assumes that no new positions are authorized until Fiscal Year 2013-14. Negotiated salary step increases and cost of living increases between 0.5 percent and 3.5 percent have been added to
personnel costs. Finally, the forecast includes estimated operating costs for all capital projects in the timeframes shown in the Capital Improvement Program (CIP).
As indicated in the previous graph, the General Fund is balanced for Fiscal Year 2011-12 and modest
surpluses are anticipated after that. However, the fragile economic recovery currently underway faces many threats in the coming years and, while the ten-year forecast employs conservative estimates, these
modest surpluses could evaporate if the economy stumbles.
The ability to anticipate changes in revenue sources and to balance those resources against the costs related to ongoing and future programs, services, and infrastructure requirements is critical to the financial health
of the city. The city relies on the General Fund forecast to effectively manage fiscal resources and map a sustainable and responsible path for attaining the goals of the community. The tumultuous economic
environment experienced in the past few years makes this long-term perspective even more important.
Cash Management
The City Treasurer, an elected official, is charged with the design of an effective cash management and investment program consistent with legal requirements and the city’s Investment Policy. The city annually
adopts a comprehensive investment policy specifying investment objectives, such as type and term of investments, reporting requirements, and investment oversight. The city’s investments generally include
federal agencies, corporate notes, and investments in the State Treasurer’s investment pool. The modified duration of the investments in the city’s investment pool as of June 30, 2011 was 1.791. The average return
realized on the pooled investments declined from 2.52 percent in Fiscal Year 2009-10 to 2.06 percent for Fiscal Year 2010-11, and it is expected to further decline this fiscal year.
Investment income shown in the financial
statements includes changes in the fair value of investments as required under GAAP.
Increases or declines in fair value during the current year, however, do not necessarily
represent trends that will continue, nor is it always possible to realize such amounts. This
is especially true as the city holds most of its investments to maturity rather than selling
them at fair value.
The graph at the right shows the amount of unrealized income reflected in the portfolio
over the last few years. The total portfolio had an unrealized gain of 1.26 percent for Fiscal
Year 2010-11. According to the City Treasurer, “It is likely that a downward trend will
continue in Fiscal Year 2011-12 as investments with higher interest rates are called and
reinvested at today’s lower market rates.”
-2.50%
-2.00%
-1.50%
-1.00%
-0.50%
0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
3.00%Unreal G/L %
Historical Unrealized Gains/Losses
as Percent of Amortized Cost
July 2005 – June 2011
9
miscellaneous employees, due primarily to investment losses sustained by CalPERS in Fiscal Year 2008-09 and updated actuarial assumptions. Pension costs for safety employees increase in Fiscal Year 2011-12 by
approximately 3.8 percent. The forecast also assumes that $1.4 million is set aside to stabilize future CalPERS increases or to address unfunded liabilities in both the safety and miscellaneous retirement plans.
The forecast further assumes that no new positions are authorized until Fiscal Year 2013-14. Negotiated salary step increases and cost of living increases between 0.5 percent and 3.5 percent have been added to
personnel costs. Finally, the forecast includes estimated operating costs for all capital projects in the timeframes shown in the Capital Improvement Program (CIP).
As indicated in the previous graph, the General Fund is balanced for Fiscal Year 2011-12 and modest
surpluses are anticipated after that. However, the fragile economic recovery currently underway faces many threats in the coming years and, while the ten-year forecast employs conservative estimates, these
modest surpluses could evaporate if the economy stumbles.
The ability to anticipate changes in revenue sources and to balance those resources against the costs related to ongoing and future programs, services, and infrastructure requirements is critical to the financial health
of the city. The city relies on the General Fund forecast to effectively manage fiscal resources and map a sustainable and responsible path for attaining the goals of the community. The tumultuous economic
environment experienced in the past few years makes this long-term perspective even more important.
Cash Management
The City Treasurer, an elected official, is charged with the design of an effective cash management and investment program consistent with legal requirements and the city’s Investment Policy. The city annually
adopts a comprehensive investment policy specifying investment objectives, such as type and term of investments, reporting requirements, and investment oversight. The city’s investments generally include
federal agencies, corporate notes, and investments in the State Treasurer’s investment pool. The modified duration of the investments in the city’s investment pool as of June 30, 2011 was 1.791. The average return
realized on the pooled investments declined from 2.52 percent in Fiscal Year 2009-10 to 2.06 percent for Fiscal Year 2010-11, and it is expected to further decline this fiscal year.
Investment income shown in the financial
statements includes changes in the fair value of investments as required under GAAP.
Increases or declines in fair value during the current year, however, do not necessarily
represent trends that will continue, nor is it always possible to realize such amounts. This
is especially true as the city holds most of its investments to maturity rather than selling
them at fair value.
The graph at the right shows the amount of unrealized income reflected in the portfolio
over the last few years. The total portfolio had an unrealized gain of 1.26 percent for Fiscal
Year 2010-11. According to the City Treasurer, “It is likely that a downward trend will
continue in Fiscal Year 2011-12 as investments with higher interest rates are called and
reinvested at today’s lower market rates.”
-2.50%
-2.00%
-1.50%
-1.00%
-0.50%
0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
3.00%Unreal G/L %
Historical Unrealized Gains/Losses
as Percent of Amortized Cost
July 2005 – June 2011
9
Major Initiatives and Projects
Due to ongoing economic uncertainty, the Fiscal Year 2011-12 Operating Budget did not provide for
additional major initiatives. In the city’s Capital Budget, several significant projects are in design or under construction over the next few years. Some of the notable capital projects include the following:
Alga Norte Park and Aquatic Center – The park site is located on 32
acres in the Southeast Quadrant along Poinsettia Lane between El Camino Real and Alicante Road. Planned amenities include lighted ball
fields, soccer fields, picnic areas, tot lots, a skate park, a dog park, restrooms, parking facilities, and an aquatic center featuring a 56-meter competition pool, a 25-meter 12-lane instruction pool, and a warm water therapy pool and a water play area for toddlers. The swimming pool
complex was one of the projects approved by the voters through Proposition C in 2002. Construction is expected to begin in the summer
of 2012. The total cost of the park and aquatic center is currently budgeted at $50.4 million.
Leo Carrillo Phase III – Phase III includes the renovation of additional buildings, construction of additional restrooms and an arboretum area. The total cost of the remainder of Phase III is
approximately $1.9 million and design is expected to begin in Fiscal Year 2014-15.
Poinsettia Park Community Center – Phase III of this 42-acre park includes amenities such as a community facility, gymnasium, enclosed soccer field, tot lot, picnic areas, tennis complex, clubhouse, stadium court and additional parking. The cost is expected to be approximately $15 million. The timing of the design is scheduled to begin in Fiscal Year 2013-14.
Maintenance and Operations Center – The city has planned the construction of a Maintenance and Operations Center (M&O Center) to physically bring together the maintenance functions to a single
facility. The M&O Center will be located on the available property adjacent to the Fleet Maintenance/Public Safety Center. It is anticipated that the M&O Center will include offices and
support space, workshops, outside storage, warehouse and parking to accommodate the city’s maintenance personnel. This combined group of maintenance functions includes segments of the
Utilities, Transportation, Parks and Recreation, and Property and Environmental Management departments. The cost of the project is approximately $28.1 million.
Relocation of Fire Station No. 3 - Fire Station No. 3 is currently located at the corner of Chestnut and Catalina. As the city grows
eastward, relocation of this station is needed to help ensure the six
minute response time. The site for the new station is in Robertson Ranch. Total cost is projected at $9.2 million.
Traffic Signal Program – In keeping with the City Council’s goal of improving traffic flow, the Fiscal Year 2011-12 CIP includes funding for the new Traffic Signal Program project. This project will
upgrade traffic signal hardware and software in conjunction with the creation of a communications network that will be used to manage traffic signal operations and thereby improve the flow of traffic. A
total of $5.6 million has been included in the CIP with a $2.3 million appropriation in Fiscal Year 2011-12.
Avenida Encinas Widening - Widening to full secondary arterial standards along Avenida Encinas from Palomar Airport Road to just south of Embarcadero Lane is scheduled for design in Fiscal Year 2012-13.
The CIP includes $5.4 million to fund this project.
10
Major Initiatives and Projects
Due to ongoing economic uncertainty, the Fiscal Year 2011-12 Operating Budget did not provide for
additional major initiatives. In the city’s Capital Budget, several significant projects are in design or under construction over the next few years. Some of the notable capital projects include the following:
Alga Norte Park and Aquatic Center – The park site is located on 32
acres in the Southeast Quadrant along Poinsettia Lane between El Camino Real and Alicante Road. Planned amenities include lighted ball
fields, soccer fields, picnic areas, tot lots, a skate park, a dog park, restrooms, parking facilities, and an aquatic center featuring a 56-meter competition pool, a 25-meter 12-lane instruction pool, and a warm water therapy pool and a water play area for toddlers. The swimming pool
complex was one of the projects approved by the voters through Proposition C in 2002. Construction is expected to begin in the summer
of 2012. The total cost of the park and aquatic center is currently budgeted at $50.4 million.
Leo Carrillo Phase III – Phase III includes the renovation of additional buildings, construction of additional restrooms and an arboretum area. The total cost of the remainder of Phase III is
approximately $1.9 million and design is expected to begin in Fiscal Year 2014-15.
Poinsettia Park Community Center – Phase III of this 42-acre park includes amenities such as a community facility, gymnasium, enclosed soccer field, tot lot, picnic areas, tennis complex, clubhouse, stadium court and additional parking. The cost is expected to be approximately $15 million. The timing of the design is scheduled to begin in Fiscal Year 2013-14.
Maintenance and Operations Center – The city has planned the construction of a Maintenance and Operations Center (M&O Center) to physically bring together the maintenance functions to a single
facility. The M&O Center will be located on the available property adjacent to the Fleet Maintenance/Public Safety Center. It is anticipated that the M&O Center will include offices and
support space, workshops, outside storage, warehouse and parking to accommodate the city’s maintenance personnel. This combined group of maintenance functions includes segments of the
Utilities, Transportation, Parks and Recreation, and Property and Environmental Management departments. The cost of the project is approximately $28.1 million.
Relocation of Fire Station No. 3 - Fire Station No. 3 is currently located at the corner of Chestnut and Catalina. As the city grows
eastward, relocation of this station is needed to help ensure the six
minute response time. The site for the new station is in Robertson Ranch. Total cost is projected at $9.2 million.
Traffic Signal Program – In keeping with the City Council’s goal of improving traffic flow, the Fiscal Year 2011-12 CIP includes funding for the new Traffic Signal Program project. This project will
upgrade traffic signal hardware and software in conjunction with the creation of a communications network that will be used to manage traffic signal operations and thereby improve the flow of traffic. A
total of $5.6 million has been included in the CIP with a $2.3 million appropriation in Fiscal Year 2011-12.
Avenida Encinas Widening - Widening to full secondary arterial standards along Avenida Encinas from Palomar Airport Road to just south of Embarcadero Lane is scheduled for design in Fiscal Year 2012-13.
The CIP includes $5.4 million to fund this project.
10
El Camino Real Widening – There are a number of projects that are scheduled over the next five years that will focus on the widening of El Camino Real to prime arterial roadway standards. The projects
include widening from Cassia Road to Camino Vida Roble, Arenal Road to La Costa Avenue, Lisa Street to Crestview Drive and Tamarack to Chestnut. The total estimated costs for these projects are $19.5
million.
Pavement Management – Carlsbad’s local streets are maintained on a regular cycle to ensure a good
riding surface and to extend the life of the street. Part of the maintenance program is the sealing and overlay of the existing street surface. In addition, any problem areas are addressed as they are identified.
The Fiscal Year 2011-12 CIP has $3.7 million budgeted for this program.
Poinsettia Lane Reach E - This project includes completion of the final link along Poinsettia Lane
between Cassia Road east to Skimmer Court. The total cost is approximately $13.9 million and the CIP program funding for design is scheduled for Fiscal Year 2013-14.
Vista/Carlsbad Interceptor & Agua Hedionda Lift Station Replacement – This project consists of a set of individual projects that will ultimately construct a parallel
sewer interceptor system to accommodate existing and future sewer flows from the cities of Vista and Carlsbad. The individual projects include a main in Jefferson Street,
replacement of the Agua Hedionda Lift Station, and a main from the lift station to the Encina Wastewater Facility. The overall total cost estimate for this set of projects totals $55.1 million, of which $17.3 million is to be funded by the City of Carlsbad, with the remainder of $37.8 million to be funded by the City of Vista.
Wastewater – Other major wastewater facilities scheduled for construction or
replacement within the next five years include:
o Buena Interceptor Sewer Improvements
o Buena Vista Lift Station Improvements
o Home Plant Lift Station Replacement and Forcemain
o Simsbury Sewer Extension
Water/Recycled Water Lines – Major water/recycled water facilities scheduled for construction or
replacement within the next five years include:
o Maerkle Floating Cover Replacement and Pump Station Improvements
o Tri-Agencies Water Transmission Pipeline Replacement
o Reservoir Repair/Maintenance Program
o 12-inch Recycled Water Transmission Main – Carlsbad Water Recycling Facility to Chinquapin
Maerkle Reservoir Storage – Construction of a buried 16 million gallon water storage reservoir next to
the existing reservoir is planned in order to provide additional emergency storage and meet the 10-day storage criteria based on ultimate demands. The total cost is estimated at $14.8 million.
Agua Hedionda Channel – The project includes dredging approximately 40,000 cubic yards of accumulated sediment from the Agua Hedionda and Calavera Creek Channels adjacent to the Rancho
Carlsbad Community. Current cost estimates have been updated to include the need to acquire and restore 6.53 acres of wetland mitigation. The total estimated cost of the project is $6.0 million. The
funded portion of this project, however, is $5.5 million, and staff is pursuing grant funding to make up the difference.
AWARDS AND ACKNOWLEDGEMENTS
11
El Camino Real Widening – There are a number of projects that are scheduled over the next five years that will focus on the widening of El Camino Real to prime arterial roadway standards. The projects
include widening from Cassia Road to Camino Vida Roble, Arenal Road to La Costa Avenue, Lisa Street to Crestview Drive and Tamarack to Chestnut. The total estimated costs for these projects are $19.5
million.
Pavement Management – Carlsbad’s local streets are maintained on a regular cycle to ensure a good
riding surface and to extend the life of the street. Part of the maintenance program is the sealing and overlay of the existing street surface. In addition, any problem areas are addressed as they are identified.
The Fiscal Year 2011-12 CIP has $3.7 million budgeted for this program.
Poinsettia Lane Reach E - This project includes completion of the final link along Poinsettia Lane
between Cassia Road east to Skimmer Court. The total cost is approximately $13.9 million and the CIP program funding for design is scheduled for Fiscal Year 2013-14.
Vista/Carlsbad Interceptor & Agua Hedionda Lift Station Replacement – This project consists of a set of individual projects that will ultimately construct a parallel
sewer interceptor system to accommodate existing and future sewer flows from the cities of Vista and Carlsbad. The individual projects include a main in Jefferson Street,
replacement of the Agua Hedionda Lift Station, and a main from the lift station to the Encina Wastewater Facility. The overall total cost estimate for this set of projects totals $55.1 million, of which $17.3 million is to be funded by the City of Carlsbad, with the remainder of $37.8 million to be funded by the City of Vista.
Wastewater – Other major wastewater facilities scheduled for construction or
replacement within the next five years include:
o Buena Interceptor Sewer Improvements
o Buena Vista Lift Station Improvements
o Home Plant Lift Station Replacement and Forcemain
o Simsbury Sewer Extension
Water/Recycled Water Lines – Major water/recycled water facilities scheduled for construction or
replacement within the next five years include:
o Maerkle Floating Cover Replacement and Pump Station Improvements
o Tri-Agencies Water Transmission Pipeline Replacement
o Reservoir Repair/Maintenance Program
o 12-inch Recycled Water Transmission Main – Carlsbad Water Recycling Facility to Chinquapin
Maerkle Reservoir Storage – Construction of a buried 16 million gallon water storage reservoir next to
the existing reservoir is planned in order to provide additional emergency storage and meet the 10-day storage criteria based on ultimate demands. The total cost is estimated at $14.8 million.
Agua Hedionda Channel – The project includes dredging approximately 40,000 cubic yards of accumulated sediment from the Agua Hedionda and Calavera Creek Channels adjacent to the Rancho
Carlsbad Community. Current cost estimates have been updated to include the need to acquire and restore 6.53 acres of wetland mitigation. The total estimated cost of the project is $6.0 million. The
funded portion of this project, however, is $5.5 million, and staff is pursuing grant funding to make up the difference.
AWARDS AND ACKNOWLEDGEMENTS
11
12
13
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Traffic SafetyCommissionUndergroundUtility AdvisoryCommitteeArtsCommissionHistoricPreservationCommissionLibrary BoardofTrusteesSerra CooperativeLibrary SystemAdvisory BoardParks & RecCommissionSeniorCommissionBeachPreservationCommitteeHousingCommissionHousing &RedevelopmentCommissionPlanningCommissionCarlsbad TourismB.I.D. AdvisoryBoardELECTORATECity ManagerCity TreasurerMayor & CouncilCity ClerkCity AttorneyAssistant City ManagerCommunity &Economic DevelopmentHousing & Neighborhood ServicesFirePoliceParks & RecreationLibrary & ArtsFinanceHuman ResourcesInformation TechnologyProperty & Environmental ManagementInternal ServicesPublic SafetyCommunity DevelopmentCommunity ServicesRevised Feb. 2011KEYElectedCouncil AppointedReporting RelationshipProgramsCity of CarlsbadOrganization ChartDeputy City ManagerTransportationUtilitiesPublic Works16 Traffic SafetyCommissionUndergroundUtility AdvisoryCommitteeArtsCommissionHistoricPreservationCommissionLibrary BoardofTrusteesSerra CooperativeLibrary SystemAdvisory BoardParks & RecCommissionSeniorCommissionBeachPreservationCommitteeHousingCommissionHousing &RedevelopmentCommissionPlanningCommissionCarlsbad TourismB.I.D. AdvisoryBoardELECTORATECity ManagerCity TreasurerMayor & CouncilCity ClerkCity AttorneyAssistant City ManagerCommunity &Economic DevelopmentHousing & Neighborhood ServicesFirePoliceParks & RecreationLibrary & ArtsFinanceHuman ResourcesInformation TechnologyProperty & Environmental ManagementInternal ServicesPublic SafetyCommunity DevelopmentCommunity ServicesRevised Feb. 2011KEYElectedCouncil AppointedReporting RelationshipProgramsCity of CarlsbadOrganization ChartDeputy City ManagerTransportationUtilitiesPublic Works16
Financial Section Financial Section
Financial SectionFinancial Section
17 17
18 18
Management’s Discussion and Analysis
Management of the City of Carlsbad (“city”) provides readers this overview and analysis of the financial activities of the city for the fiscal year ended June 30, 2011. The intent is to assist the reader of these financial statements in
better understanding the impact of financial decisions made by the city. This analysis will focus on the significant changes in an effort to explain the city’s overall financial condition. The information presented here should be
considered in conjunction with the additional information furnished in the letter of transmittal.
Overview of the Financial Statements
This section of the annual report consists of four parts – management’s discussion and analysis (this section), the basic financial statements, required supplementary information, and an optional section that presents combining statements for non-
major governmental funds and internal service funds. The basic financial
statements include two kinds of statements that present different views of the city.
The first two statements are Government-wide Financial Statements
that provide both long-term and short-term information about the city’s
overall financial status.
The remaining statements are Fund Financial Statements that focus on individual parts of the city government, reporting the city’s operations in more detail than the Government-wide Statements.
The Governmental Funds Statements detail how general government services such as public
safety were financed in the short-term as well as what remains for future spending.
Proprietary Fund Statements offer short- and long-term financial information about the activities the city
operates like businesses, such as the providing of water and wastewater services.
Fiduciary Fund Statements provide information about the financial relationships – such as contractor and
miscellaneous deposits – in which the city acts solely as a trustee or agent for the benefit of others to whom the resources belong.
The financial statements also include notes that explain some of the information in the financial statements and
provide more detailed data. The statements are accompanied by required supplementary information that further explains and supports the information in the financial statements. In addition to these required elements, included is
a section with combining fund statements that provides detail about the non-major governmental funds, internal service funds, and fiduciary funds, which are added together and presented in single columns in the basic financial
statements.
The remainder of this overview section of management’s discussion and analysis explains the structure and contents of each of the statements.
Management’s Discussion and
Analysis
Basic Financial Statements
Required Supplementary Information
Required Components of the City of Carlsbad’s Annual Financial Report
Notes to the Financial
Statements
Government-wide Financial Statements
Fund Financial Statements
Summary Detail
19
Management’s Discussion and Analysis
Management of the City of Carlsbad (“city”) provides readers this overview and analysis of the financial activities of the city for the fiscal year ended June 30, 2011. The intent is to assist the reader of these financial statements in
better understanding the impact of financial decisions made by the city. This analysis will focus on the significant changes in an effort to explain the city’s overall financial condition. The information presented here should be
considered in conjunction with the additional information furnished in the letter of transmittal.
Overview of the Financial Statements
This section of the annual report consists of four parts – management’s discussion and analysis (this section), the basic financial statements, required supplementary information, and an optional section that presents combining statements for non-
major governmental funds and internal service funds. The basic financial
statements include two kinds of statements that present different views of the city.
The first two statements are Government-wide Financial Statements
that provide both long-term and short-term information about the city’s
overall financial status.
The remaining statements are Fund Financial Statements that focus on individual parts of the city government, reporting the city’s operations in more detail than the Government-wide Statements.
The Governmental Funds Statements detail how general government services such as public
safety were financed in the short-term as well as what remains for future spending.
Proprietary Fund Statements offer short- and long-term financial information about the activities the city
operates like businesses, such as the providing of water and wastewater services.
Fiduciary Fund Statements provide information about the financial relationships – such as contractor and
miscellaneous deposits – in which the city acts solely as a trustee or agent for the benefit of others to whom the resources belong.
The financial statements also include notes that explain some of the information in the financial statements and
provide more detailed data. The statements are accompanied by required supplementary information that further explains and supports the information in the financial statements. In addition to these required elements, included is
a section with combining fund statements that provides detail about the non-major governmental funds, internal service funds, and fiduciary funds, which are added together and presented in single columns in the basic financial
statements.
The remainder of this overview section of management’s discussion and analysis explains the structure and contents of each of the statements.
Management’s Discussion and
Analysis
Basic Financial Statements
Required Supplementary Information
Required Components of the City of Carlsbad’s Annual Financial Report
Notes to the Financial
Statements
Government-wide Financial Statements
Fund Financial Statements
Summary Detail
19
Government-wide Financial Statements
The Government-wide Financial Statements report information about the city as a whole using accounting methods similar to those used by private-sector companies. The Statement of Net Assets includes all of the city’s assets and liabilities. All of the current year’s revenues and expenses are accounted for in the Statement of Activities
regardless of when cash is received or paid. The two Government-wide Financial Statements report the city’s net assets and how they have changed. Net assets
– the difference between the city’s assets and liabilities – are one way to measure the city’s financial health, or position. Over time, increases or decreases in the city’s net assets are an indicator of whether the city’s financial health is improving or deteriorating, respectively. One needs to consider additional non-financial factors, such as
changes in the city’s property tax base and the condition of the city’s infrastructure, to assess the overall health of the city.
The Government-wide Financial Statements of the city are divided into two categories:
Governmental activities – Most of the city’s basic services, such as police, fire, public works, community
services, community development, and internal services, are included here. Taxes, revenues from other governments and agencies, income from property and investments, grants and contributions, and charges for
services finance most of these activities.
Business-type activities – The city charges fees to customers to cover the cost of certain services it provides.
The city’s water, wastewater, solid waste and municipal golf course operations are the primary business-type activities.
Fund Financial Statements The Fund Financial Statements provide more detailed information about the city’s most significant funds – not the
city as a whole. Funds are accounting devices that the city uses to keep track of specific sources of funding and spending for particular purposes.
Some funds are required by state law and bond covenants, while the city establishes other funds to control and manage money for particular purposes (such as the developer impact fee funds) or to show that it is properly using certain taxes and grants (such as the Section 8 Rental Assistance Fund).
The city has three kinds of funds:
Governmental funds – Most of the city’s basic services are included in governmental funds. These funds are
used to account for (1) cash and other financial assets that can readily be converted to cash flow in and out, and (2) balances left at year-end that are available for spending. Consequently, the Governmental Funds Statements provide a detailed short-term view that helps the reader determine the amount of financial resources
that can be spent in the near future to finance the city’s programs. These statements are presented on a
modified accrual basis of accounting. A reconciliation between the long-term and short-term focus of the Government-wide Financial Statements is provided immediately following each statement. There are currently
four governmental fund types being used by the city: the General Fund, special revenue funds, debt service funds and capital project funds.
Proprietary funds – Services for which the city charges customers a fee are generally reported in proprietary funds. Proprietary funds, like the Government-wide Financial Statements, provide both long- and short-term
financial information, and are presented on an accrual basis of accounting.
There are two types of proprietary funds: enterprise funds and internal service funds.
We use enterprise funds to report activities that provide business-type services, generally to external customers – such as water, wastewater, solid waste and golf services. In both the Government-wide
Financial Statements and the Fund Financial Statements, these funds are shown under business-type activities.
20
Government-wide Financial Statements
The Government-wide Financial Statements report information about the city as a whole using accounting methods similar to those used by private-sector companies. The Statement of Net Assets includes all of the city’s assets and liabilities. All of the current year’s revenues and expenses are accounted for in the Statement of Activities
regardless of when cash is received or paid. The two Government-wide Financial Statements report the city’s net assets and how they have changed. Net assets
– the difference between the city’s assets and liabilities – are one way to measure the city’s financial health, or position. Over time, increases or decreases in the city’s net assets are an indicator of whether the city’s financial health is improving or deteriorating, respectively. One needs to consider additional non-financial factors, such as
changes in the city’s property tax base and the condition of the city’s infrastructure, to assess the overall health of the city.
The Government-wide Financial Statements of the city are divided into two categories:
Governmental activities – Most of the city’s basic services, such as police, fire, public works, community
services, community development, and internal services, are included here. Taxes, revenues from other governments and agencies, income from property and investments, grants and contributions, and charges for
services finance most of these activities.
Business-type activities – The city charges fees to customers to cover the cost of certain services it provides.
The city’s water, wastewater, solid waste and municipal golf course operations are the primary business-type activities.
Fund Financial Statements The Fund Financial Statements provide more detailed information about the city’s most significant funds – not the
city as a whole. Funds are accounting devices that the city uses to keep track of specific sources of funding and spending for particular purposes.
Some funds are required by state law and bond covenants, while the city establishes other funds to control and manage money for particular purposes (such as the developer impact fee funds) or to show that it is properly using certain taxes and grants (such as the Section 8 Rental Assistance Fund).
The city has three kinds of funds:
Governmental funds – Most of the city’s basic services are included in governmental funds. These funds are
used to account for (1) cash and other financial assets that can readily be converted to cash flow in and out, and (2) balances left at year-end that are available for spending. Consequently, the Governmental Funds Statements provide a detailed short-term view that helps the reader determine the amount of financial resources
that can be spent in the near future to finance the city’s programs. These statements are presented on a
modified accrual basis of accounting. A reconciliation between the long-term and short-term focus of the Government-wide Financial Statements is provided immediately following each statement. There are currently
four governmental fund types being used by the city: the General Fund, special revenue funds, debt service funds and capital project funds.
Proprietary funds – Services for which the city charges customers a fee are generally reported in proprietary funds. Proprietary funds, like the Government-wide Financial Statements, provide both long- and short-term
financial information, and are presented on an accrual basis of accounting.
There are two types of proprietary funds: enterprise funds and internal service funds.
We use enterprise funds to report activities that provide business-type services, generally to external customers – such as water, wastewater, solid waste and golf services. In both the Government-wide
Financial Statements and the Fund Financial Statements, these funds are shown under business-type activities.
20
We use internal service funds to report activities that provide services and supplies for the city’s other
programs and activities – such as fleet, workers’ compensation, and information technology.
Fiduciary funds – These funds are used to account for situations where the city’s role is purely custodial, such as the receipt, temporary investment, and remittance of fiduciary resources to individuals, private
organizations, or other governments. All of the city’s fiduciary activities are reported in a separate Statement of Fiduciary Assets and Liabilities. These activities are excluded from the city’s Government-wide Financial
Statements because the city cannot use these assets to finance its operations.
Financial Analysis of the City as a Whole
Net Assets The city’s combined net assets as of June 30, 2011, as shown below, were $1.7 billion. The city’s net assets
increased by $23.8 million during the current fiscal year. Over $19 million of the increase was in current assets which was the result of revenues exceeding expenditures by over $26 million. As noted earlier, net assets may serve over time as a useful indicator of the city’s financial position. For the City of
Carlsbad, assets currently exceed liabilities by $1.7 billion at the close of the most recent fiscal year.
A large portion of the city’s net assets (64 percent) reflects its investment in capital assets (i.e., land, buildings, machinery, equipment, and infrastructure); less any related debt used to acquire those assets that is still outstanding.
The city uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the city’s investment in its capital assets is reported net of related debt, it should be noted
that the resources needed to repay this debt must be provided from other sources since the capital assets themselves would not be used to liquidate these liabilities.
An additional portion of the city’s net assets (17 percent) represents resources that are subject to external restrictions
on how they may be used. The remaining balance of unrestricted net assets ($323.1 million) may be used to meet the government’s ongoing obligations to citizens and creditors.
Just under 49 percent of the $323.1 million in unrestricted governmental activities net assets is attributable to the General Fund. Net assets invested in capital assets net of related debt for the city increased by $4.1 million during
Total
Percentage
Change
2010 2011 2010 2011 2010 2011 2010-11
Current and other assets $523.0 $538.4 $90.9 $95.4 $613.9 $633.8 3.2%
Capital assets 778.0 784.6 363.4 358.2 1,141.4 1,142.8 0.1%
Total assets 1,301.0 1,323.0 454.3 453.6 1,755.3 1,776.6 1.2%
Long-term debt outstanding 10.3 10.3 48.4 45.7 58.7 56.0 -4.6%
Other liabilities 16.2 16.4 9.9 10.0 26.1 26.4 1.1%
Total liabilities 26.5 26.7 58.3 55.7 84.8 82.4 -2.8%
Net assets
Invested in capital assets,
net of related debt 767.7 774.3 317.2 314.7 1,084.9 1,089.0 0.4%
Restricted 227.0 237.2 44.2 45.0 271.2 282.2 4.1%
Unrestricted 279.8 284.8 34.6 38.3 314.4 323.1 2.8%
Total net assets $1,274.5 $1,296.3 $396.0 $398.0 $1,670.5 $1,694.3 1.4%
Total
CITY OF CARLSBAD'S NET ASSETS
(in millions of dollars)
Governmental
Activities
Business-Type
Activities
21
We use internal service funds to report activities that provide services and supplies for the city’s other
programs and activities – such as fleet, workers’ compensation, and information technology.
Fiduciary funds – These funds are used to account for situations where the city’s role is purely custodial, such as the receipt, temporary investment, and remittance of fiduciary resources to individuals, private
organizations, or other governments. All of the city’s fiduciary activities are reported in a separate Statement of Fiduciary Assets and Liabilities. These activities are excluded from the city’s Government-wide Financial
Statements because the city cannot use these assets to finance its operations.
Financial Analysis of the City as a Whole
Net Assets The city’s combined net assets as of June 30, 2011, as shown below, were $1.7 billion. The city’s net assets
increased by $23.8 million during the current fiscal year. Over $19 million of the increase was in current assets which was the result of revenues exceeding expenditures by over $26 million. As noted earlier, net assets may serve over time as a useful indicator of the city’s financial position. For the City of
Carlsbad, assets currently exceed liabilities by $1.7 billion at the close of the most recent fiscal year.
A large portion of the city’s net assets (64 percent) reflects its investment in capital assets (i.e., land, buildings, machinery, equipment, and infrastructure); less any related debt used to acquire those assets that is still outstanding.
The city uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the city’s investment in its capital assets is reported net of related debt, it should be noted
that the resources needed to repay this debt must be provided from other sources since the capital assets themselves would not be used to liquidate these liabilities.
An additional portion of the city’s net assets (17 percent) represents resources that are subject to external restrictions
on how they may be used. The remaining balance of unrestricted net assets ($323.1 million) may be used to meet the government’s ongoing obligations to citizens and creditors.
Just under 49 percent of the $323.1 million in unrestricted governmental activities net assets is attributable to the General Fund. Net assets invested in capital assets net of related debt for the city increased by $4.1 million during
Total
Percentage
Change
2010 2011 2010 2011 2010 2011 2010-11
Current and other assets $523.0 $538.4 $90.9 $95.4 $613.9 $633.8 3.2%
Capital assets 778.0 784.6 363.4 358.2 1,141.4 1,142.8 0.1%
Total assets 1,301.0 1,323.0 454.3 453.6 1,755.3 1,776.6 1.2%
Long-term debt outstanding 10.3 10.3 48.4 45.7 58.7 56.0 -4.6%
Other liabilities 16.2 16.4 9.9 10.0 26.1 26.4 1.1%
Total liabilities 26.5 26.7 58.3 55.7 84.8 82.4 -2.8%
Net assets
Invested in capital assets,
net of related debt 767.7 774.3 317.2 314.7 1,084.9 1,089.0 0.4%
Restricted 227.0 237.2 44.2 45.0 271.2 282.2 4.1%
Unrestricted 279.8 284.8 34.6 38.3 314.4 323.1 2.8%
Total net assets $1,274.5 $1,296.3 $396.0 $398.0 $1,670.5 $1,694.3 1.4%
Total
CITY OF CARLSBAD'S NET ASSETS
(in millions of dollars)
Governmental
Activities
Business-Type
Activities
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Total
Percentage
Change
2010 2011 2010 2011 2010 2011 2010-11
Revenues
Program revenues
Charges for services $15.1 $17.1 $48.1 $49.6 $63.2 $66.7 5.5%
Operating grants and contributions 11.4 12.0 1.7 1.3 13.1 13.3 1.5%
Capital grants and contributions 32.5 13.6 17.9 5.6 50.4 19.2 -61.9%
General revenues
Property taxes 55.1 54.0 2.8 2.8 57.9 56.8 -1.9%
Sales and use taxes 23.0 25.7 - - 23.0 25.7 11.7%
Other taxes 21.0 21.1 - - 21.0 21.1 0.5%
Income from property and investments 12.5 8.4 3.7 2.1 16.2 10.5 -35.2%
Other 0.4 0.3 0.2 3.6 0.6 3.9 550.0%
Total revenues 171.0 152.2 74.4 65.0 245.4 217.2 -11.5%
Expenses
General government 23.0 16.9 - - 23.0 16.9 -26.5%
Public safety 44.4 45.0 - - 44.4 45.0 1.4%
Community development 18.9 17.0 - - 18.9 17.0 -10.1%
Community services 18.8 25.1 - - 18.8 25.1 33.5%
Public works 35.4 25.8 - - 35.4 25.8 -27.1%
Interest on long-term debt 0.5 0.5 - - 0.5 0.5 0.0%
Carlsbad Municipal Water District - - 33.9 35.0 33.9 35.0 3.2%
Golf course - - 11.9 11.5 11.9 11.5 -3.4%
Wastewater - - 10.4 11.7 10.4 11.7 12.5%
Solid waste - - 2.6 2.6 2.6 2.6 0.0%
Total expenses 141.0 130.3 58.8 60.8 199.8 191.1 -4.4%
Excess (deficiency) before transfers 30.0 21.9 15.6 4.2 45.6 26.1 -42.8%
Transfers (0.4) (0.1) 0.4 0.1 - -
Increase (decrease) in net assets 29.6 21.8 16.0 4.3 45.6 26.1 -42.8%
Beginning net assets (as restated) 1,244.9 1,274.5 380.0 393.6 1,624.9 1,668.1 2.7%
Ending net assets $1,274.5 $1,296.3 $396.0 $397.9 $1,670.5 $1,694.2 1.4%
Activities Activities Total
CITY OF CARLSBAD'S CHANGES IN NET ASSETS
(in millions of dollars)
Governmental Business-type
Fiscal Year 2010-11 due primarily to the receipt of developer donated assets during the year (infrastructure assets in
La Costa Greens, Bressi Ranch and Sheraton Resort), and the construction of several storm drain and waterline projects.. A portion of business-type net assets represents the city’s municipal golf course. At the end of Fiscal Year 2010-11, there is a large deficit in unrestricted net assets for the Golf Course Fund. This is the result of the
General Fund advancing money to the Golf Course Fund for the construction of the course and partially subsidizing the operations of the course. Changes in Net Assets The condensed summary of activities, which follows, shows that net assets increased by $26.1 million during the
year. This increase occurs when spending is less than the revenues received. There were several reasons for the increase in net assets: an emphasis on efficiencies resulting in a reduction in expenses/expenditures; a citywide
restructuring initiative that either eliminated or unfunded 17.25 positions; $18 million in “savings” in the General Fund being carried forward into the new fiscal year by various major service areas within the city to enhance and
provide for future services and programs; the build-up of cash reserves in the city’s capital project and enterprise funds for future capital project construction and acquisition; revenues received in the city’s special revenue funds for
future services and programs; and the donation of infrastructure assets from developers.
Approximately 66 percent of the revenues of the city’s governmental funds are generated through taxes collected
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Total
Percentage
Change
2010 2011 2010 2011 2010 2011 2010-11
Revenues
Program revenues
Charges for services $15.1 $17.1 $48.1 $49.6 $63.2 $66.7 5.5%
Operating grants and contributions 11.4 12.0 1.7 1.3 13.1 13.3 1.5%
Capital grants and contributions 32.5 13.6 17.9 5.6 50.4 19.2 -61.9%
General revenues
Property taxes 55.1 54.0 2.8 2.8 57.9 56.8 -1.9%
Sales and use taxes 23.0 25.7 - - 23.0 25.7 11.7%
Other taxes 21.0 21.1 - - 21.0 21.1 0.5%
Income from property and investments 12.5 8.4 3.7 2.1 16.2 10.5 -35.2%
Other 0.4 0.3 0.2 3.6 0.6 3.9 550.0%
Total revenues 171.0 152.2 74.4 65.0 245.4 217.2 -11.5%
Expenses
General government 23.0 16.9 - - 23.0 16.9 -26.5%
Public safety 44.4 45.0 - - 44.4 45.0 1.4%
Community development 18.9 17.0 - - 18.9 17.0 -10.1%
Community services 18.8 25.1 - - 18.8 25.1 33.5%
Public works 35.4 25.8 - - 35.4 25.8 -27.1%
Interest on long-term debt 0.5 0.5 - - 0.5 0.5 0.0%
Carlsbad Municipal Water District - - 33.9 35.0 33.9 35.0 3.2%
Golf course - - 11.9 11.5 11.9 11.5 -3.4%
Wastewater - - 10.4 11.7 10.4 11.7 12.5%
Solid waste - - 2.6 2.6 2.6 2.6 0.0%
Total expenses 141.0 130.3 58.8 60.8 199.8 191.1 -4.4%
Excess (deficiency) before transfers 30.0 21.9 15.6 4.2 45.6 26.1 -42.8%
Transfers (0.4) (0.1) 0.4 0.1 - -
Increase (decrease) in net assets 29.6 21.8 16.0 4.3 45.6 26.1 -42.8%
Beginning net assets (as restated) 1,244.9 1,274.5 380.0 393.6 1,624.9 1,668.1 2.7%
Ending net assets $1,274.5 $1,296.3 $396.0 $397.9 $1,670.5 $1,694.2 1.4%
Activities Activities Total
CITY OF CARLSBAD'S CHANGES IN NET ASSETS
(in millions of dollars)
Governmental Business-type
Fiscal Year 2010-11 due primarily to the receipt of developer donated assets during the year (infrastructure assets in
La Costa Greens, Bressi Ranch and Sheraton Resort), and the construction of several storm drain and waterline projects.. A portion of business-type net assets represents the city’s municipal golf course. At the end of Fiscal Year 2010-11, there is a large deficit in unrestricted net assets for the Golf Course Fund. This is the result of the
General Fund advancing money to the Golf Course Fund for the construction of the course and partially subsidizing the operations of the course. Changes in Net Assets The condensed summary of activities, which follows, shows that net assets increased by $26.1 million during the
year. This increase occurs when spending is less than the revenues received. There were several reasons for the increase in net assets: an emphasis on efficiencies resulting in a reduction in expenses/expenditures; a citywide
restructuring initiative that either eliminated or unfunded 17.25 positions; $18 million in “savings” in the General Fund being carried forward into the new fiscal year by various major service areas within the city to enhance and
provide for future services and programs; the build-up of cash reserves in the city’s capital project and enterprise funds for future capital project construction and acquisition; revenues received in the city’s special revenue funds for
future services and programs; and the donation of infrastructure assets from developers.
Approximately 66 percent of the revenues of the city’s governmental funds are generated through taxes collected
22
(property, sales, transient occupancy tax, etc.), and just under 76 percent of the city’s business-type revenue is
generated through charges for
services. The chart to the right graphically depicts the city’s revenue sources.
The slight recovery from the great recession has resulted in increases in
our leading revenues; sales taxes and transient occupancy taxes. Property taxes tend to be a lagging revenue,
meaning they don’t rebound as quickly as the leading revenues, which explains the slight decrease in
property tax revenues. The Federal Reserve, in an effort to stimulate the economy, has lowered interest rates to historic lows, affecting the city’s
income from property and investments. As development
throughout the city has picked up from the prior year, developer impact fees (capital contributions), developer contributed assets (capital
contributions) and permitted activity (charges for services) have increased as well. Another factor affecting
charges for services was water and wastewater rate increases that went into effect in January 2011.
The total cost of all programs and services was just over $191.1 million in Fiscal Year 2010-11. The most significant factor affecting the changes in expenses from Fiscal Year 2009-10 to Fiscal Year 2011 was a city
realignment of organization structure to better serve the changing needs of the community as well as to allow for
increased efficiencies with fewer resources. Budgets were reallocated among various departments based on personnel tasks assigned to each of the new and continuing departments.
General Government (9 percent)
This segment of the city is divided into three major groups:
the Policy and Leadership group, the Internal Services
group and non-departmental charges. The Policy and
Leadership group encompasses all elected officials, the chief
executive offices for the city, the Communications team and
Records Management. The Internal Services group includes
Finance, Human Resources, Information Technology, Risk
Management, and Property and Environmental Management.
Also included in General
General Government9%
Public Safety24%
Community Development9%
Community Services13%
Public Works13%
Golf Course6%
Solid Waste1%
Water19%
Wastewater6%
City of Carlsbad
Functional Expenses for Fiscal Year 2010-11$191.1 Million
Property Taxes (26%)
Charges for Services (31%)
Federal Aid (4%)
Sales Tax (12%)
Other Taxes (4%)
Income from Property and
Investments (5%)
Contributions
from Property Owners (11%)Other (2%)
City of Carlsbad
Sources of Revenue for Fiscal Year 2010-11
$217.2 Million
TOT (5%)TOT (5%)
23
(property, sales, transient occupancy tax, etc.), and just under 76 percent of the city’s business-type revenue is
generated through charges for
services. The chart to the right graphically depicts the city’s revenue sources.
The slight recovery from the great recession has resulted in increases in
our leading revenues; sales taxes and transient occupancy taxes. Property taxes tend to be a lagging revenue,
meaning they don’t rebound as quickly as the leading revenues, which explains the slight decrease in
property tax revenues. The Federal Reserve, in an effort to stimulate the economy, has lowered interest rates to historic lows, affecting the city’s
income from property and investments. As development
throughout the city has picked up from the prior year, developer impact fees (capital contributions), developer contributed assets (capital
contributions) and permitted activity (charges for services) have increased as well. Another factor affecting
charges for services was water and wastewater rate increases that went into effect in January 2011.
The total cost of all programs and services was just over $191.1 million in Fiscal Year 2010-11. The most significant factor affecting the changes in expenses from Fiscal Year 2009-10 to Fiscal Year 2011 was a city
realignment of organization structure to better serve the changing needs of the community as well as to allow for
increased efficiencies with fewer resources. Budgets were reallocated among various departments based on personnel tasks assigned to each of the new and continuing departments.
General Government (9 percent)
This segment of the city is divided into three major groups:
the Policy and Leadership group, the Internal Services
group and non-departmental charges. The Policy and
Leadership group encompasses all elected officials, the chief
executive offices for the city, the Communications team and
Records Management. The Internal Services group includes
Finance, Human Resources, Information Technology, Risk
Management, and Property and Environmental Management.
Also included in General
General Government9%
Public Safety24%
Community Development9%
Community Services13%
Public Works13%
Golf Course6%
Solid Waste1%
Water19%
Wastewater6%
City of Carlsbad
Functional Expenses for Fiscal Year 2010-11$191.1 Million
Property Taxes (26%)
Charges for Services (31%)
Federal Aid (4%)
Sales Tax (12%)
Other Taxes (4%)
Income from Property and
Investments (5%)
Contributions
from Property Owners (11%)Other (2%)
City of Carlsbad
Sources of Revenue for Fiscal Year 2010-11
$217.2 Million
TOT (5%)TOT (5%)
23
Government are any Council directed special projects.
Public Safety (24 percent) Public Safety has always been a top City Council priority. This major service area includes the Police
Department, whose goal is to provide quality service to the community to ensure the preservation of life and property and the maintenance of law and order. The Fire Department is also part of this major service area
with a mission to enhance the quality of life by delivering exceptional services in safeguarding lives, property, and our environment.
Community Development (9 percent)
The mission of Community Development is helping people build a strong community by guiding and facilitating high quality projects, preserving the environment, providing for diverse housing and employment, and maintaining a strong economic base. Community Development encompasses Land Use Planning, Economic Development, the Hiring Center, Housing and Neighborhood Services, and Building Inspection.
Community Services (13 percent)
Community Services consists of the Libraries, Cultural Arts, Parks and Recreation, and Senior Citizen
programs. These programs are provided to a wide range of people, and assist in their education and cultural development.
Public Works (13 percent)
Public Works is responsible for building and maintaining all of the infrastructure assets of the city. This service area includes Transportation, Storm Drains, Medians, Street Trees, the Buena Vista Channel, Street
Lighting, and Traffic Sign and Signal Maintenance programs.
Golf Course (6 percent)
The City of Carlsbad opened a municipal golf course in the summer of 2007, which further enhances the
tourism attractions the city offers. The municipal golf course, The Crossings at Carlsbad, is an 18-hole, destination golf course set in the rolling hills and canyons of Carlsbad. With ocean views, a high quality golf
experience, a first class restaurant and clubhouse, and linkages to hiking trails, The Crossings at Carlsbad is a destination spot for golfers and non-golfers alike.
Solid Waste (1 percent)
The Solid Waste Division of the Utilities Department promotes cost-effective solid waste management
programs through recycling, source reduction, composting, solid waste transfer, and other non-traditional programs. In addition, solid waste is responsible for the following projects: funding for citywide programs
related to storm water protection from pollution; coordination with local, state and federal governments; and compliance with the Existing Development section of the National Pollutant Discharge Elimination System
(NPDES) Urban Storm Water Permit issued by the San Diego Regional Water Control Board are accomplished in this area.
Water Operations (19 percent) The Carlsbad Municipal Water District, a subsidiary of the City of Carlsbad, provides potable and recycled water service to approximately 85 percent of the city (approximately 28,000 customers). The District
purchases 100 percent of its potable water as treated water from the Metropolitan Water District and the San Diego County Water Authority. The District also provides recycled water for irrigation purposes.
24
Government are any Council directed special projects.
Public Safety (24 percent) Public Safety has always been a top City Council priority. This major service area includes the Police
Department, whose goal is to provide quality service to the community to ensure the preservation of life and property and the maintenance of law and order. The Fire Department is also part of this major service area
with a mission to enhance the quality of life by delivering exceptional services in safeguarding lives, property, and our environment.
Community Development (9 percent)
The mission of Community Development is helping people build a strong community by guiding and facilitating high quality projects, preserving the environment, providing for diverse housing and employment, and maintaining a strong economic base. Community Development encompasses Land Use Planning, Economic Development, the Hiring Center, Housing and Neighborhood Services, and Building Inspection.
Community Services (13 percent)
Community Services consists of the Libraries, Cultural Arts, Parks and Recreation, and Senior Citizen
programs. These programs are provided to a wide range of people, and assist in their education and cultural development.
Public Works (13 percent)
Public Works is responsible for building and maintaining all of the infrastructure assets of the city. This service area includes Transportation, Storm Drains, Medians, Street Trees, the Buena Vista Channel, Street
Lighting, and Traffic Sign and Signal Maintenance programs.
Golf Course (6 percent)
The City of Carlsbad opened a municipal golf course in the summer of 2007, which further enhances the
tourism attractions the city offers. The municipal golf course, The Crossings at Carlsbad, is an 18-hole, destination golf course set in the rolling hills and canyons of Carlsbad. With ocean views, a high quality golf
experience, a first class restaurant and clubhouse, and linkages to hiking trails, The Crossings at Carlsbad is a destination spot for golfers and non-golfers alike.
Solid Waste (1 percent)
The Solid Waste Division of the Utilities Department promotes cost-effective solid waste management
programs through recycling, source reduction, composting, solid waste transfer, and other non-traditional programs. In addition, solid waste is responsible for the following projects: funding for citywide programs
related to storm water protection from pollution; coordination with local, state and federal governments; and compliance with the Existing Development section of the National Pollutant Discharge Elimination System
(NPDES) Urban Storm Water Permit issued by the San Diego Regional Water Control Board are accomplished in this area.
Water Operations (19 percent) The Carlsbad Municipal Water District, a subsidiary of the City of Carlsbad, provides potable and recycled water service to approximately 85 percent of the city (approximately 28,000 customers). The District
purchases 100 percent of its potable water as treated water from the Metropolitan Water District and the San Diego County Water Authority. The District also provides recycled water for irrigation purposes.
24
Wastewater Operations (6 percent)
The City of Carlsbad operates and maintains a sanitary wastewater collection system, which covers
approximately 65 percent of the geographic area of the city. Wastewater is treated by the Encina Wastewater Treatment Plant, a facility jointly owned by the cities of Carlsbad and Vista, the Leucadia Wastewater District,
the Vallecitos Water District, the Buena Sanitation District, and the City of Encinitas.
The following sections will provide information about the operations of the governmental and business-type activities separately.
Governmental Activities The increase in net assets for governmental activities was $21.8 million. This increase was generated by total
revenues of governmental activities of $152.2 million ($42.7 million in program revenues and $109.5 million in general revenues) offset by $130.3 million in total costs of governmental activities and a $135,000 transfer to the
Solid Waste Fund.
The table below presents the total cost of each of the city’s major programs, as well as each function’s program revenue (fees generated by the activities, contributions, and intergovernmental aid). The net cost (the difference
between adjoining bars in the graph) shows the financial burden that was placed on the city’s taxpayers by each of these functions (costs covered by general revenues).
Revenues are generated through several sources to cover the cost of the city’s programs. These revenues include
fees and charges paid by those who directly benefit from the programs ($17.1 million), grants and contributions from other governments and organizations which subsidize certain programs ($25.6 million), and taxes and other
revenues (such as income from property and investments) received by the city to pay for the “public benefit” portion, totaling $110 million.
Program revenues are almost equal to program expenses in Public Works. The majority of Public Works revenues
are used to acquire and build capital assets (versus covering operating expenses). In addition, the donation of capital assets from developers is reflected in the program revenues for Public Works. Capital assets are generally
constructed or purchased once sufficient revenue has been accumulated to pay for the cost. The city has entered into a new stage of its lifecycle, from a developing or growing stage to a mature stage. As the city continues to mature
and approach build-out, the city will not see as many master planned projects being developed. In past years, these projects constructed new facilities, roads, parks, and other city-owned infrastructure. The city is now moving to a
more maintenance oriented city and will use funding sources such as the Infrastructure Replacement Fund to maintain and replace these assets. However, there are still several master planned communities that were recently
25
Wastewater Operations (6 percent)
The City of Carlsbad operates and maintains a sanitary wastewater collection system, which covers
approximately 65 percent of the geographic area of the city. Wastewater is treated by the Encina Wastewater Treatment Plant, a facility jointly owned by the cities of Carlsbad and Vista, the Leucadia Wastewater District,
the Vallecitos Water District, the Buena Sanitation District, and the City of Encinitas.
The following sections will provide information about the operations of the governmental and business-type activities separately.
Governmental Activities The increase in net assets for governmental activities was $21.8 million. This increase was generated by total
revenues of governmental activities of $152.2 million ($42.7 million in program revenues and $109.5 million in general revenues) offset by $130.3 million in total costs of governmental activities and a $135,000 transfer to the
Solid Waste Fund.
The table below presents the total cost of each of the city’s major programs, as well as each function’s program revenue (fees generated by the activities, contributions, and intergovernmental aid). The net cost (the difference
between adjoining bars in the graph) shows the financial burden that was placed on the city’s taxpayers by each of these functions (costs covered by general revenues).
Revenues are generated through several sources to cover the cost of the city’s programs. These revenues include
fees and charges paid by those who directly benefit from the programs ($17.1 million), grants and contributions from other governments and organizations which subsidize certain programs ($25.6 million), and taxes and other
revenues (such as income from property and investments) received by the city to pay for the “public benefit” portion, totaling $110 million.
Program revenues are almost equal to program expenses in Public Works. The majority of Public Works revenues
are used to acquire and build capital assets (versus covering operating expenses). In addition, the donation of capital assets from developers is reflected in the program revenues for Public Works. Capital assets are generally
constructed or purchased once sufficient revenue has been accumulated to pay for the cost. The city has entered into a new stage of its lifecycle, from a developing or growing stage to a mature stage. As the city continues to mature
and approach build-out, the city will not see as many master planned projects being developed. In past years, these projects constructed new facilities, roads, parks, and other city-owned infrastructure. The city is now moving to a
more maintenance oriented city and will use funding sources such as the Infrastructure Replacement Fund to maintain and replace these assets. However, there are still several master planned communities that were recently
25
completed or are near completion (La Costa Greens, La Costa Oaks, La Costa Ridge and Robertson Ranch); these
developers recently dedicated infrastructure to the city as required to develop in the city.
Business-Type Activities
$0
$10
$20
$30
$40
Water GolfCourse Wastewater Solid Waste
Business-Type Activities
Program Revenues and ExpensesFiscal Year 2010-11(in millions)
Program Revenues
Program Expenses
Program revenues for the city’s business-type activities totaled $56.5 million for the year, while functional expenses equaled $60.8 million.
Water program revenues are higher than program expenses primarily due to capital contributions in the form of capital connection fees and developer constructed assets donated to the city; the combined amount of these
contributions was just under of $4.1 million. Capital construction expenses are spread over the life of an asset as annual depreciation charges (program expenses). The city’s golf course enterprise was in its fourth full year of operation. Golf course operating expenses included
interest on the advance from the General Fund and interest related to the golf course bonds issued for the construction of the course, and depreciation related to the new golf course assets, resulting in a net loss in just under
of $5.6 million.
A more detailed discussion of each of the enterprises can be found in the Proprietary Funds Section.
Financial Analysis of the City’s Funds As noted earlier, the city uses fund accounting to ensure and demonstrate compliance with finance-related legal
requirements. In the current Comprehensive Annual Financial Report (CAFR), the implementation of Government
Accounting Standards Board (GASB) No. 54 resulted in the Community Activity Grants Fund being combined with the General Fund for financial statement presentation.
Governmental Funds
The focus of the city’s governmental funds is to provide information on near-term inflows, outflows, and balances of
spendable resources. Such information is useful in assessing the city’s financing requirements. In particular, unassigned fund balances may serve as a useful measure of a government’s net resources available for spending at
the end of the fiscal year.
26
completed or are near completion (La Costa Greens, La Costa Oaks, La Costa Ridge and Robertson Ranch); these
developers recently dedicated infrastructure to the city as required to develop in the city.
Business-Type Activities
$0
$10
$20
$30
$40
Water GolfCourse Wastewater Solid Waste
Business-Type Activities
Program Revenues and ExpensesFiscal Year 2010-11(in millions)
Program Revenues
Program Expenses
Program revenues for the city’s business-type activities totaled $56.5 million for the year, while functional expenses equaled $60.8 million.
Water program revenues are higher than program expenses primarily due to capital contributions in the form of capital connection fees and developer constructed assets donated to the city; the combined amount of these
contributions was just under of $4.1 million. Capital construction expenses are spread over the life of an asset as annual depreciation charges (program expenses). The city’s golf course enterprise was in its fourth full year of operation. Golf course operating expenses included
interest on the advance from the General Fund and interest related to the golf course bonds issued for the construction of the course, and depreciation related to the new golf course assets, resulting in a net loss in just under
of $5.6 million.
A more detailed discussion of each of the enterprises can be found in the Proprietary Funds Section.
Financial Analysis of the City’s Funds As noted earlier, the city uses fund accounting to ensure and demonstrate compliance with finance-related legal
requirements. In the current Comprehensive Annual Financial Report (CAFR), the implementation of Government
Accounting Standards Board (GASB) No. 54 resulted in the Community Activity Grants Fund being combined with the General Fund for financial statement presentation.
Governmental Funds
The focus of the city’s governmental funds is to provide information on near-term inflows, outflows, and balances of
spendable resources. Such information is useful in assessing the city’s financing requirements. In particular, unassigned fund balances may serve as a useful measure of a government’s net resources available for spending at
the end of the fiscal year.
26
The city implemented
GASB 54 which created
five fund balance classifications instead of the three shown in prior
years. These new fund balance classifications: nonspendable, restricted,
committed, assigned and unassigned, comprise a hierarchy based
primarily on the extent to which a government is bound to observe
constraints imposed upon the use of the resources reported in governmental funds.
Detail of the fund balances by
classification is shown in Note 11. As of the end of the current fiscal year, the city’s governmental funds reported combined ending fund balances of
$478.3 million, up $13 million from the year before. Approximately 11 percent of this ($54.6 million) constitutes nonspendable fund balances, mostly comprised of advances to other funds. Restricted fund balances can only be spent for a specific purpose stipulated by law and make up about 50 percent ($236.8 million). Assigned fund
balances are intended to be used by the city for specific purposes but do not meet the
criteria to be classified as restricted or committed. These make up 31 percent
($147 million) of the city’s
fund balance. Approximately 8 percent
($38.9 million) of the fund balance is unassigned which is available for spending at
the city council’s discretion.
The General Fund is the
main operating fund of the city, and at the end of the fiscal year had a total fund
balance of $136 million, an
increase of $6.5 million. The unassigned fund balance
portion of the General Fund was $54.5 million. The increase in revenues
was primarily due to the increases in the leading tax
revenues, sales tax and transient occupancy taxes. As the economy began to
Total
Increase Percentage
(Decrease) Change
2010 2011
Revenues
Taxes $93.1 $95.5 $2.4 2.6%
Intergovernmental 1.7 1.9 0.2 11.8%
Licenses and permits 1.5 1.6 0.1 6.7%
Charges for services 6.7 6.5 (0.2) -3.0%
Fines and forfeitures 1.1 1.0 (0.1) -9.1%
Income from property and investments 3.7 2.6 (1.1) -29.7%
Miscellaneous 1.0 2.5 1.5 150.0%
Total revenues 108.8 111.6 2.8 2.6%
Expenditures
General government 12.3 18.2 5.9 48.0%
Interdepartmental charges (4.0) (3.0)1.0 -25.0%
Public safety 44.5 44.2 (0.3) -0.7%
Community development 7.0 9.5 2.5 35.7%
Community services 16.2 23.4 7.2 44.4%
Public works 21.1 9.8 (11.3) -53.6%
Capital outlay 4.0 0.0 (4.0) 100.0%
Total expenses 101.1 102.1 1.0 1.0%
Excess (deficiency) before transfers 7.7 9.5
Transfers in 5.3 0.2
Transfers out (10.1) (8.9)
Increase (decrease) in fund balance 2.9 0.8
Beginning fund balance (as restated)125.6 129.6
Ending fund balance $128.5 $130.4
2010-11
Total
STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE
GENERAL FUND
(in millions of dollars)
Nonspendable,
($54.6 million) 11%
Restricted Purposes ($236.8 million) 50%
Assigned($147.0 million)
31%
Unassigned($38.9 million)8%
Governmental Fund Balances(in millions)$478.3 Million
27
The city implemented
GASB 54 which created
five fund balance classifications instead of the three shown in prior
years. These new fund balance classifications: nonspendable, restricted,
committed, assigned and unassigned, comprise a hierarchy based
primarily on the extent to which a government is bound to observe
constraints imposed upon the use of the resources reported in governmental funds.
Detail of the fund balances by
classification is shown in Note 11. As of the end of the current fiscal year, the city’s governmental funds reported combined ending fund balances of
$478.3 million, up $13 million from the year before. Approximately 11 percent of this ($54.6 million) constitutes nonspendable fund balances, mostly comprised of advances to other funds. Restricted fund balances can only be spent for a specific purpose stipulated by law and make up about 50 percent ($236.8 million). Assigned fund
balances are intended to be used by the city for specific purposes but do not meet the
criteria to be classified as restricted or committed. These make up 31 percent
($147 million) of the city’s
fund balance. Approximately 8 percent
($38.9 million) of the fund balance is unassigned which is available for spending at
the city council’s discretion.
The General Fund is the
main operating fund of the city, and at the end of the fiscal year had a total fund
balance of $136 million, an
increase of $6.5 million. The unassigned fund balance
portion of the General Fund was $54.5 million. The increase in revenues
was primarily due to the increases in the leading tax
revenues, sales tax and transient occupancy taxes. As the economy began to
Total
Increase Percentage
(Decrease) Change
2010 2011
Revenues
Taxes $93.1 $95.5 $2.4 2.6%
Intergovernmental 1.7 1.9 0.2 11.8%
Licenses and permits 1.5 1.6 0.1 6.7%
Charges for services 6.7 6.5 (0.2) -3.0%
Fines and forfeitures 1.1 1.0 (0.1) -9.1%
Income from property and investments 3.7 2.6 (1.1) -29.7%
Miscellaneous 1.0 2.5 1.5 150.0%
Total revenues 108.8 111.6 2.8 2.6%
Expenditures
General government 12.3 18.2 5.9 48.0%
Interdepartmental charges (4.0) (3.0)1.0 -25.0%
Public safety 44.5 44.2 (0.3) -0.7%
Community development 7.0 9.5 2.5 35.7%
Community services 16.2 23.4 7.2 44.4%
Public works 21.1 9.8 (11.3) -53.6%
Capital outlay 4.0 0.0 (4.0) 100.0%
Total expenses 101.1 102.1 1.0 1.0%
Excess (deficiency) before transfers 7.7 9.5
Transfers in 5.3 0.2
Transfers out (10.1) (8.9)
Increase (decrease) in fund balance 2.9 0.8
Beginning fund balance (as restated)125.6 129.6
Ending fund balance $128.5 $130.4
2010-11
Total
STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE
GENERAL FUND
(in millions of dollars)
Nonspendable,
($54.6 million) 11%
Restricted Purposes ($236.8 million) 50%
Assigned($147.0 million)
31%
Unassigned($38.9 million)8%
Governmental Fund Balances(in millions)$478.3 Million
27
show signs of improvement, these revenues improved and resulted in the majority of the increases in the General
Fund. Decreases were realized in property taxes, which are lagging revenues, as well as a reduction in the yield on
the Treasurer’s portfolio (decreased income from property and investments); and franchise taxes which decreased as a result of a drop in the “in lieu” taxes generated by a decline in the operation of the power plant in Carlsbad.
As the city was preparing its 2010-11 Fiscal Year budget, the new organizational structure was incorporated with no increases in department budgets. Positions were eliminated as a result of the realignment process which resulted in a decrease of 17.25 full-time and limited-term positions. Overall the General Fund budget increased by $300,000.
Net decreases in personnel costs were partially offset by increases in maintenance and operation costs. The majority of the increases were in transfers out from the General Fund to other city funds for infrastructure replacement and median maintenance.
One major governmental fund, the Redevelopment Debt Service Fund, had a negative fund balance of just under $18.7 million. This deficit was created when the city’s General Fund loaned the agency money to cover debt service
charges during the period soon after the agency’s bonds were issued, but prior to the agency being able to support the debt service with property tax increment revenues alone. Over the past couple of fiscal years, the agency has begun to repay the $20.2 million advance back to the city’s General Fund, as the tax increment collected within the redevelopment area grows. During the fiscal year, the Agency transferred over $1.8 million to the Redevelopment
Agency Capital Funds to assist with the funding of the operations in the Redevelopment Operating/CIP Funds. These transfers led to a reduction in the fund balance of the Redevelopment Debt Service Funds of just under
$835,000. The General Capital Construction Fund had over $8.5 million in capital expenditures during the fiscal year which was predominantly for the construction of the Joint First Responders Training Facility and a smaller amount ($1.4 million) for the Human Capital Management Project. These costs led to a reduction in the General Capital Construction fund balance of just under $7.4 million.
The three remaining major governmental funds, which are all capital project funds, had increases in their fund balances during the year. These increases in fund balances are predominantly designated for the construction or
purchase of future capital assets.
Proprietary Funds
The purpose of the city’s proprietary funds is to provide short- and long-term financial information about the city’s business-type activities. The analysis focuses on the determination of operating income, changes in net assets (cost
recovery), financial position, and cash flows.
$0
$10
$20
$30
$40
$50
Water Golf CourseWastewater Solid Waste
Business-Type Activities
Operating Revenues and ExpensesFiscal Year 2010-11(in millions)
Operating Revenues
Operating Expenses
The Carlsbad Municipal Water District (CMWD) funds had an operating gain of approximately $747,000 for the
year. Impacted by the continued annual increases in water rates (about 14 percent in January 2011), residents continued to conserve water and reduce water consumption by about 7 percent during the year. The State of
California has been in a drought for about eight years. The drought, technically speaking, is “officially over” and
28
show signs of improvement, these revenues improved and resulted in the majority of the increases in the General
Fund. Decreases were realized in property taxes, which are lagging revenues, as well as a reduction in the yield on
the Treasurer’s portfolio (decreased income from property and investments); and franchise taxes which decreased as a result of a drop in the “in lieu” taxes generated by a decline in the operation of the power plant in Carlsbad.
As the city was preparing its 2010-11 Fiscal Year budget, the new organizational structure was incorporated with no increases in department budgets. Positions were eliminated as a result of the realignment process which resulted in a decrease of 17.25 full-time and limited-term positions. Overall the General Fund budget increased by $300,000.
Net decreases in personnel costs were partially offset by increases in maintenance and operation costs. The majority of the increases were in transfers out from the General Fund to other city funds for infrastructure replacement and median maintenance.
One major governmental fund, the Redevelopment Debt Service Fund, had a negative fund balance of just under $18.7 million. This deficit was created when the city’s General Fund loaned the agency money to cover debt service
charges during the period soon after the agency’s bonds were issued, but prior to the agency being able to support the debt service with property tax increment revenues alone. Over the past couple of fiscal years, the agency has begun to repay the $20.2 million advance back to the city’s General Fund, as the tax increment collected within the redevelopment area grows. During the fiscal year, the Agency transferred over $1.8 million to the Redevelopment
Agency Capital Funds to assist with the funding of the operations in the Redevelopment Operating/CIP Funds. These transfers led to a reduction in the fund balance of the Redevelopment Debt Service Funds of just under
$835,000. The General Capital Construction Fund had over $8.5 million in capital expenditures during the fiscal year which was predominantly for the construction of the Joint First Responders Training Facility and a smaller amount ($1.4 million) for the Human Capital Management Project. These costs led to a reduction in the General Capital Construction fund balance of just under $7.4 million.
The three remaining major governmental funds, which are all capital project funds, had increases in their fund balances during the year. These increases in fund balances are predominantly designated for the construction or
purchase of future capital assets.
Proprietary Funds
The purpose of the city’s proprietary funds is to provide short- and long-term financial information about the city’s business-type activities. The analysis focuses on the determination of operating income, changes in net assets (cost
recovery), financial position, and cash flows.
$0
$10
$20
$30
$40
$50
Water Golf CourseWastewater Solid Waste
Business-Type Activities
Operating Revenues and ExpensesFiscal Year 2010-11(in millions)
Operating Revenues
Operating Expenses
The Carlsbad Municipal Water District (CMWD) funds had an operating gain of approximately $747,000 for the
year. Impacted by the continued annual increases in water rates (about 14 percent in January 2011), residents continued to conserve water and reduce water consumption by about 7 percent during the year. The State of
California has been in a drought for about eight years. The drought, technically speaking, is “officially over” and
28
most restrictions have been lifted. Consumers are being advised however, to continue to use water wisely and reduce
where practical because water in general, is a dwindling resource. Operating revenues of $35.1 million exceeded
operating expenses by $747,000. The largest factor is the increase in water sales revenue, due to the increased rates. The cost of purchased water from the Metropolitan Water District and the San Diego County Water Authority (suppliers of the District’s potable water) continues to increase, and therefore CMWD rates must increase to cover
the added cost. Investment earnings on the capital replacement funds and property tax receipts added to the operating gain, resulting in income before transfers and capital contributions of $3.4 million.
In the fourth year of operation, the Golf Course Fund had an operating loss of $3.8 million, largely due to depreciating the enterprise's assets. When golf course operating revenues are not sufficient to cover golf course operating expenses, the General Fund will make contributions in the form of lease payments to pay for the shortfall.
Although food and beverage sales at the golf course restaurant (The Canyons) were strong, golf rounds were below anticipated levels due to the economic recession.
The Wastewater Funds had an annual operating loss of $1.4 million for the fiscal year. Total revenues from operations decreased $1.8 million from the previous year; in the previous year the City received a $2.4 million reimbursement from the City of Vista for their share of a portion of the Vista-Carlsbad Wastewater Interceptor Project. In addition, wastewater operating expenses increased by $1.2 million. There was a one-time adjustment
($1.0 million) made to better reflect the value of the City’s share of the Encina Wastewater Authority’s assets. In addition, depreciation expense increased by $400,000; a result of new infrastructure added to the sewer system.
Solid Waste Operations and Storm Water Programs are combined on the city’s financial reports, and showed a net operating income of $646,000 for the year. Both revenues and expenses were relatively flat when compared to the prior fiscal year.
Unrestricted net assets for the Water, Golf Course, Wastewater, and Solid Waste Operations at the end of the year amounted to $38.1 million, or approximately 9.6 percent of the total enterprise fund net assets. The unrestricted net
assets may be used for rate stabilization, fluctuations in operating expenses, and unforeseen repairs and maintenance. Approximately 11.3 percent of the net assets of all the proprietary funds are restricted for future capital construction of new and replacement water and wastewater infrastructure assets. Since the funding for the
replacement of infrastructure assets is not restricted, it is reflected in the Statement of Net Assets as unrestricted. The city does, however, account for and monitor these amounts in separate funds to ensure that water and wastewater assets can be replaced when needed. The large unrestricted net assets deficit balance in the Golf Course
Fund represents funds advanced from the city’s General Fund that were used to fund construction and pre-opening
costs, as well as operating losses of the municipal golf course.
General Fund Budgetary Highlights for Fiscal Year 2011 Management monitors revenues during the year and updates estimated revenue figures when new information is
received by the city. General Fund revenue estimates were only modified slightly during the year as compared to
the originally budgeted estimates. Some of the factors that led to the $961,000 increase in revenue estimates included:
Several new federal and state grants were applied for and received during the year.
Funds received from developers for Expedited Fire Plan Check fees.
Sales tax revenue received as a result a slight recovery in the economy.
Transfer of funds from a library Special Revenue Fund to the General Fund.
The slight increase from the total original expenditure budget to the final budget amounted to $64,000, due
predominantly to the appropriations of the grant money received and sales tax audit expenses.
The difference between the final budgeted expenditures and the actual expenditures for the year (on a budgetary basis) of $17.5 million can be generally summarized as follows:
29
most restrictions have been lifted. Consumers are being advised however, to continue to use water wisely and reduce
where practical because water in general, is a dwindling resource. Operating revenues of $35.1 million exceeded
operating expenses by $747,000. The largest factor is the increase in water sales revenue, due to the increased rates. The cost of purchased water from the Metropolitan Water District and the San Diego County Water Authority (suppliers of the District’s potable water) continues to increase, and therefore CMWD rates must increase to cover
the added cost. Investment earnings on the capital replacement funds and property tax receipts added to the operating gain, resulting in income before transfers and capital contributions of $3.4 million.
In the fourth year of operation, the Golf Course Fund had an operating loss of $3.8 million, largely due to depreciating the enterprise's assets. When golf course operating revenues are not sufficient to cover golf course operating expenses, the General Fund will make contributions in the form of lease payments to pay for the shortfall.
Although food and beverage sales at the golf course restaurant (The Canyons) were strong, golf rounds were below anticipated levels due to the economic recession.
The Wastewater Funds had an annual operating loss of $1.4 million for the fiscal year. Total revenues from operations decreased $1.8 million from the previous year; in the previous year the City received a $2.4 million reimbursement from the City of Vista for their share of a portion of the Vista-Carlsbad Wastewater Interceptor Project. In addition, wastewater operating expenses increased by $1.2 million. There was a one-time adjustment
($1.0 million) made to better reflect the value of the City’s share of the Encina Wastewater Authority’s assets. In addition, depreciation expense increased by $400,000; a result of new infrastructure added to the sewer system.
Solid Waste Operations and Storm Water Programs are combined on the city’s financial reports, and showed a net operating income of $646,000 for the year. Both revenues and expenses were relatively flat when compared to the prior fiscal year.
Unrestricted net assets for the Water, Golf Course, Wastewater, and Solid Waste Operations at the end of the year amounted to $38.1 million, or approximately 9.6 percent of the total enterprise fund net assets. The unrestricted net
assets may be used for rate stabilization, fluctuations in operating expenses, and unforeseen repairs and maintenance. Approximately 11.3 percent of the net assets of all the proprietary funds are restricted for future capital construction of new and replacement water and wastewater infrastructure assets. Since the funding for the
replacement of infrastructure assets is not restricted, it is reflected in the Statement of Net Assets as unrestricted. The city does, however, account for and monitor these amounts in separate funds to ensure that water and wastewater assets can be replaced when needed. The large unrestricted net assets deficit balance in the Golf Course
Fund represents funds advanced from the city’s General Fund that were used to fund construction and pre-opening
costs, as well as operating losses of the municipal golf course.
General Fund Budgetary Highlights for Fiscal Year 2011 Management monitors revenues during the year and updates estimated revenue figures when new information is
received by the city. General Fund revenue estimates were only modified slightly during the year as compared to
the originally budgeted estimates. Some of the factors that led to the $961,000 increase in revenue estimates included:
Several new federal and state grants were applied for and received during the year.
Funds received from developers for Expedited Fire Plan Check fees.
Sales tax revenue received as a result a slight recovery in the economy.
Transfer of funds from a library Special Revenue Fund to the General Fund.
The slight increase from the total original expenditure budget to the final budget amounted to $64,000, due
predominantly to the appropriations of the grant money received and sales tax audit expenses.
The difference between the final budgeted expenditures and the actual expenditures for the year (on a budgetary basis) of $17.5 million can be generally summarized as follows:
29
$17.5 million in “savings” by the various major service areas within the city. Current year savings were
generated from:
Unfilled vacancies.
Overall awareness of fiscal responsibility throughout the city.
Deferral of projects.
$17.5 million in “savings” are planned to be used for:
The continuation of the human capital management system software upgrade.
Automated library system upgrade.
New library catalog search tool.
Library public copier/printer equipment replacement.
Innovation projects throughout the city.
Additional training and development throughout the city.
Other one-time capital outlay items, as needed, throughout the City.
For purposes of budgetary presentation, actual revenues have been adjusted to exclude unrealized gains and losses in investments pursuant to GASB 31; actual expenditures have been adjusted to include remaining encumbrances.
Capital Asset and Debt Administration Capital Assets
At the end of Fiscal Year 2010-11, the city had recorded investments of just over $1.1 billion in a broad range of
capital assets, including park facilities, land, buildings, roads, bridges, drainage facilities, water and sewer lines, police and fire vehicles, and other maintenance equipment. This number includes infrastructure assets of the general
government which are required per GASB 34.
Total
Percentage
Change Change
2010 2011 2010 2011 2010 2011 2010-11 2010-11
Land $145.3 $146.7 $9.3 $9.3 $154.6 $156.0 $1.4 0.9%
Construction in progress 144.1 156.9 19.2 22.4 163.3 179.3 16.0 9.8%
Buildings and other structures 78.8 78.9 40.2 40.2 119.0 119.1 0.1 0.1%
Improvements other than buildings 45.1 45.4 50.9 50.9 96.0 96.3 0.3 0.3%
Machinery and equipment 26.7 27.1 2.4 2.4 29.1 29.5 0.4 1.4%
Infrastructure 536.0 544.1 286.0 290.4 822.0 834.5 12.5 1.5%
Wastewater treatment facility - - 51.8 52.2 51.8 52.2 0.4 0.8%
976.0 999.1 459.8 467.8 1,435.8 1,466.9 31.1 2.2%
Accumulated depreciation (198.0) (214.5) (99.2) (109.6) (297.2) (324.1) (26.9) 9.1%
Total $778.0 $784.6 $360.6 $358.2 $1,138.6 $1,142.8 $4.2 0.4%
Activities Activities Total
CITY OF CARLSBAD'S CAPITAL ASSETS
(in millions of dollars)
Governmental Business-Type
Some of this year’s major capital asset additions included:
Developer-dedicated streets, drainage facilities, traffic signals, water and sewer lines and streetlights at:
o La Costa Greens
o Bressi Ranch
o Sheraton Resort and Timeshares
Several waterline projects.
Several storm drain projects.
30
$17.5 million in “savings” by the various major service areas within the city. Current year savings were
generated from:
Unfilled vacancies.
Overall awareness of fiscal responsibility throughout the city.
Deferral of projects.
$17.5 million in “savings” are planned to be used for:
The continuation of the human capital management system software upgrade.
Automated library system upgrade.
New library catalog search tool.
Library public copier/printer equipment replacement.
Innovation projects throughout the city.
Additional training and development throughout the city.
Other one-time capital outlay items, as needed, throughout the City.
For purposes of budgetary presentation, actual revenues have been adjusted to exclude unrealized gains and losses in investments pursuant to GASB 31; actual expenditures have been adjusted to include remaining encumbrances.
Capital Asset and Debt Administration Capital Assets
At the end of Fiscal Year 2010-11, the city had recorded investments of just over $1.1 billion in a broad range of
capital assets, including park facilities, land, buildings, roads, bridges, drainage facilities, water and sewer lines, police and fire vehicles, and other maintenance equipment. This number includes infrastructure assets of the general
government which are required per GASB 34.
Total
Percentage
Change Change
2010 2011 2010 2011 2010 2011 2010-11 2010-11
Land $145.3 $146.7 $9.3 $9.3 $154.6 $156.0 $1.4 0.9%
Construction in progress 144.1 156.9 19.2 22.4 163.3 179.3 16.0 9.8%
Buildings and other structures 78.8 78.9 40.2 40.2 119.0 119.1 0.1 0.1%
Improvements other than buildings 45.1 45.4 50.9 50.9 96.0 96.3 0.3 0.3%
Machinery and equipment 26.7 27.1 2.4 2.4 29.1 29.5 0.4 1.4%
Infrastructure 536.0 544.1 286.0 290.4 822.0 834.5 12.5 1.5%
Wastewater treatment facility - - 51.8 52.2 51.8 52.2 0.4 0.8%
976.0 999.1 459.8 467.8 1,435.8 1,466.9 31.1 2.2%
Accumulated depreciation (198.0) (214.5) (99.2) (109.6) (297.2) (324.1) (26.9) 9.1%
Total $778.0 $784.6 $360.6 $358.2 $1,138.6 $1,142.8 $4.2 0.4%
Activities Activities Total
CITY OF CARLSBAD'S CAPITAL ASSETS
(in millions of dollars)
Governmental Business-Type
Some of this year’s major capital asset additions included:
Developer-dedicated streets, drainage facilities, traffic signals, water and sewer lines and streetlights at:
o La Costa Greens
o Bressi Ranch
o Sheraton Resort and Timeshares
Several waterline projects.
Several storm drain projects.
30
In addition to carrying forward appropriations of $179.1 million for previously budgeted projects, the city’s Fiscal
Year 2011-12 capital budget appropriates an additional $64.7 million for capital projects. These additional appropriations are principally for the pavement management program, Fire Station No. 3 relocation, the city maintenance and operations center, new traffic signals, miscellaneous street projects, enhancing the wastewater
collection system, additional water and recycled water lines, the water reservoir repair/replacement program, several drainage projects, improvements at the Encina water pollution control facility, construction of the Vista/Carlsbad sewer interceptor, and miscellaneous civic projects, loans and repayments. These projects will be financed by
development fees, infrastructure and replacement transfers from the General Fund, special district fees and taxes, water and wastewater replacement reserves, and other sources including grants and contributions from other agencies. More detailed information about the city’s capital assets is presented in Note 6 to the financial statements
and in the city’s Capital Improvement Program document, which can be obtained from the Finance Department.
Long-Term Debt
At year-end, the city had $56.0 million in bonds, loans, capital leases and agreements, a decrease of $2.7 million from last year, as shown in the table below. Payments made on all of the city’s outstanding debt created this reduction in the city’s debt. More detail about the city’s long-term liabilities is presented in Note 8 to the financial
statements.
Economic Factors and Next Year’s Budgets and Rates for Fiscal Year 2012
The State of California adopted its Fiscal Year 2011-12 Annual Budget with the following provisions affecting
the city:
The state implemented the “Triple Flip” in Fiscal Year 2004-05, whereby the city’s sales tax receipts were
reduced by one-quarter, and this reduction was made up with property taxes equating to the same amount. This will continue in the 2011-12 Fiscal Year.
The “Triple Flip” swap will have no effect on the ultimate amount of revenue the city receives, but it will result in a delay in the timing of the receipt of money by the city.
Components that eliminate the statutory authority of redevelopment agencies and take away funds from public safety programs and vehicle license fees.
Prop 26 which expanded the definition of “tax”, leaving state and local governments with less discretion in implementing new revenue sources.
If state revenues fall short of projections there is a trigger to determine if cuts are necessary which could impact local agencies.
Net assessed values in the city stand at almost $23.4 billion, a 1 percent decrease from the prior fiscal year.
Sales tax revenues are projected to continue to rebound slightly with a 3 percent forecasted increase in the Fiscal Year 2011-12 Budget.
PERS rates for the miscellaneous plan have increased for Fiscal Year 2011-12 from 21.1 percent to 22.3
percent, and have increased significantly from 28.0 percent to 32.1 percent for the safety plan.
Total
Percentage
Change
2010 2011 2010 2011 2010 2011 2010-11
Bonds $10.3 $9.7 $18.0 $17.7 $28.3 $27.4 -3.2%
Loans - 0.6 25.7 24.2 25.7 24.8 -3.5%
Installment purchase agreement - - 4.1 3.4 4.1 3.4 -17.1%
Obligations under capital leases - - 0.5 0.3 0.5 0.3 -40.0%
Adjusted By: Deferred charges/discounts - - 0.1 0.1 0.1 0.1 100.0%
Total $10.3 $10.3 $48.4 $45.7 $58.7 $56.0 -4.6%
Activities Activities Total
CITY OF CARLSBAD'S OUTSTANDING DEBT
(in millions of dollars)
Governmental Business-Type
31
In addition to carrying forward appropriations of $179.1 million for previously budgeted projects, the city’s Fiscal
Year 2011-12 capital budget appropriates an additional $64.7 million for capital projects. These additional appropriations are principally for the pavement management program, Fire Station No. 3 relocation, the city maintenance and operations center, new traffic signals, miscellaneous street projects, enhancing the wastewater
collection system, additional water and recycled water lines, the water reservoir repair/replacement program, several drainage projects, improvements at the Encina water pollution control facility, construction of the Vista/Carlsbad sewer interceptor, and miscellaneous civic projects, loans and repayments. These projects will be financed by
development fees, infrastructure and replacement transfers from the General Fund, special district fees and taxes, water and wastewater replacement reserves, and other sources including grants and contributions from other agencies. More detailed information about the city’s capital assets is presented in Note 6 to the financial statements
and in the city’s Capital Improvement Program document, which can be obtained from the Finance Department.
Long-Term Debt
At year-end, the city had $56.0 million in bonds, loans, capital leases and agreements, a decrease of $2.7 million from last year, as shown in the table below. Payments made on all of the city’s outstanding debt created this reduction in the city’s debt. More detail about the city’s long-term liabilities is presented in Note 8 to the financial
statements.
Economic Factors and Next Year’s Budgets and Rates for Fiscal Year 2012
The State of California adopted its Fiscal Year 2011-12 Annual Budget with the following provisions affecting
the city:
The state implemented the “Triple Flip” in Fiscal Year 2004-05, whereby the city’s sales tax receipts were
reduced by one-quarter, and this reduction was made up with property taxes equating to the same amount. This will continue in the 2011-12 Fiscal Year.
The “Triple Flip” swap will have no effect on the ultimate amount of revenue the city receives, but it will result in a delay in the timing of the receipt of money by the city.
Components that eliminate the statutory authority of redevelopment agencies and take away funds from public safety programs and vehicle license fees.
Prop 26 which expanded the definition of “tax”, leaving state and local governments with less discretion in implementing new revenue sources.
If state revenues fall short of projections there is a trigger to determine if cuts are necessary which could impact local agencies.
Net assessed values in the city stand at almost $23.4 billion, a 1 percent decrease from the prior fiscal year.
Sales tax revenues are projected to continue to rebound slightly with a 3 percent forecasted increase in the Fiscal Year 2011-12 Budget.
PERS rates for the miscellaneous plan have increased for Fiscal Year 2011-12 from 21.1 percent to 22.3
percent, and have increased significantly from 28.0 percent to 32.1 percent for the safety plan.
Total
Percentage
Change
2010 2011 2010 2011 2010 2011 2010-11
Bonds $10.3 $9.7 $18.0 $17.7 $28.3 $27.4 -3.2%
Loans - 0.6 25.7 24.2 25.7 24.8 -3.5%
Installment purchase agreement - - 4.1 3.4 4.1 3.4 -17.1%
Obligations under capital leases - - 0.5 0.3 0.5 0.3 -40.0%
Adjusted By: Deferred charges/discounts - - 0.1 0.1 0.1 0.1 100.0%
Total $10.3 $10.3 $48.4 $45.7 $58.7 $56.0 -4.6%
Activities Activities Total
CITY OF CARLSBAD'S OUTSTANDING DEBT
(in millions of dollars)
Governmental Business-Type
31
The prior downward reassessment of the Encina power plant due to a reduction in electricity generated
continues to affect projected tax increment revenues in the South Coastal Carlsbad Redevelopment Area and the franchise fees received by the city.
Median home prices in Carlsbad have decreased by 8.1 percent from March 2010 ($681,000) to April 2011
($626,000).
Due to recent indicators that the economy is slowly recovering from the recession, forecasted revenues for
sales taxes and transient occupancy taxes have been increased slightly.
Due to the overall downturn in the economy, most city departments were not given additional maintenance and operational funding to cover changes in the Consumer Price Index (CPI) and growth in the city, minimal new
capital outlay, and additional personnel funding for only existing contractual obligations.
Through Memorandum of Understandings (MOUs), the Carlsbad Police Officers’ Association (CPOA) will be
receiving a $62 per pay period increase in their education incentive effective January 1, 2012. For the Carlsbad City Employees’ Association (CCEA), the Employer Paid Member Contribution (EPMC) paid by the
city will decrease from 7 percent to 3.5 percent effective December 1, 2011 and from 3.5 percent to 0 percent effective December 1, 2012. The management employees will receive a 3 percent salary increase effective
December 1, 2011 and the Employer Paid Member Contribution (EPMC) paid by the city will decrease from 7 percent to 3.5 percent effective December 1, 2011. The Carlsbad Firefighters’ Association is currently
negotiating a new contract, with the expiration of their existing contract on December 31, 2011.
These factors were considered when preparing the City of Carlsbad’s General Fund budget for Fiscal Year 2011-12. Budgeted expenditures are expected to increase 2.2 percent to $111.8 million. The total personnel budget for Fiscal
Year 2011-12 is $72.8 million, which is 0.4 percent more than the previous year’s personnel budget of $72.5 million. The total maintenance and operations budget for Fiscal Year 2011-12 is $29.4 million, which is 0.3 percent
higher than the previous year’s budget of $29.3 million. There is $110,000 in major capital outlay purchases planned in the General Fund for Fiscal Year 2011-12. Operating transfers out of the General Fund are budgeted at
$9.5 million, a $1.9 million increase from the prior fiscal year. This is due to the city budgeting a $1.4 million transfer to the Golf Course Enterprise Fund. Adding to the adopted budget of $111.8 million for the General Fund,
approximately $17.5 million in unspent Fiscal Year 2010-11 budgeted expenditures will be carried over to Fiscal Year 2011-12, as well as $6.1 million in open encumbrances as of June 30, 2011.
As the city is approaching the buildout of its remaining vacant land, the city is now ushering in a new era focusing
on maintaining infrastructure rather than building it. In an effort to address this issue, the city has developed an Infrastructure Replacement Fund (IRF). In this fund, the city sets aside money on an annual basis for major
maintenance and replacement of its infrastructure. In the Fiscal Year 2011-12 Operating Budget, the city has budgeted a $7.4 million transfer from the General Fund to the IRF to meet future needs.
During the current fiscal year, the Unassigned fund balance in the General Fund increased by $3 million to $54.5
million due to fiscal discipline and the elimination and/or unfunding of 17.25 positions. Based on Fiscal Year 2011-12 projections, unassigned General Fund balance is expected to grow to $55 million.
There appears to be sufficient revenue projected to build the projects listed in the Fiscal Year 2011-12 Capital
Improvement Program (CIP).
The city’s business-type activities reflect the following:
The combined fixed and variable costs of water purchased from the San Diego County Water Authority are
projected to rise about 18 percent and 9 percent respectively in Fiscal Year 2011-12. In December 2011, a public hearing will be held to determine how much water rates will increase effective January 1, 2012. The
proposed rate increases are needed to fund the additional cost of purchased water, and to maintain an adequate reserve balance.
Proposed wastewater rate increases will also be discussed during the public hearing to be held in December 2011. If approved, these rates would be effective January 1, 2012. This proposed rate increase is needed to
assist with higher depreciation expenses from the addition of completed facilities to the inventory, and to maintain an adequate reserve balance.
32
The prior downward reassessment of the Encina power plant due to a reduction in electricity generated
continues to affect projected tax increment revenues in the South Coastal Carlsbad Redevelopment Area and the franchise fees received by the city.
Median home prices in Carlsbad have decreased by 8.1 percent from March 2010 ($681,000) to April 2011
($626,000).
Due to recent indicators that the economy is slowly recovering from the recession, forecasted revenues for
sales taxes and transient occupancy taxes have been increased slightly.
Due to the overall downturn in the economy, most city departments were not given additional maintenance and operational funding to cover changes in the Consumer Price Index (CPI) and growth in the city, minimal new
capital outlay, and additional personnel funding for only existing contractual obligations.
Through Memorandum of Understandings (MOUs), the Carlsbad Police Officers’ Association (CPOA) will be
receiving a $62 per pay period increase in their education incentive effective January 1, 2012. For the Carlsbad City Employees’ Association (CCEA), the Employer Paid Member Contribution (EPMC) paid by the
city will decrease from 7 percent to 3.5 percent effective December 1, 2011 and from 3.5 percent to 0 percent effective December 1, 2012. The management employees will receive a 3 percent salary increase effective
December 1, 2011 and the Employer Paid Member Contribution (EPMC) paid by the city will decrease from 7 percent to 3.5 percent effective December 1, 2011. The Carlsbad Firefighters’ Association is currently
negotiating a new contract, with the expiration of their existing contract on December 31, 2011.
These factors were considered when preparing the City of Carlsbad’s General Fund budget for Fiscal Year 2011-12. Budgeted expenditures are expected to increase 2.2 percent to $111.8 million. The total personnel budget for Fiscal
Year 2011-12 is $72.8 million, which is 0.4 percent more than the previous year’s personnel budget of $72.5 million. The total maintenance and operations budget for Fiscal Year 2011-12 is $29.4 million, which is 0.3 percent
higher than the previous year’s budget of $29.3 million. There is $110,000 in major capital outlay purchases planned in the General Fund for Fiscal Year 2011-12. Operating transfers out of the General Fund are budgeted at
$9.5 million, a $1.9 million increase from the prior fiscal year. This is due to the city budgeting a $1.4 million transfer to the Golf Course Enterprise Fund. Adding to the adopted budget of $111.8 million for the General Fund,
approximately $17.5 million in unspent Fiscal Year 2010-11 budgeted expenditures will be carried over to Fiscal Year 2011-12, as well as $6.1 million in open encumbrances as of June 30, 2011.
As the city is approaching the buildout of its remaining vacant land, the city is now ushering in a new era focusing
on maintaining infrastructure rather than building it. In an effort to address this issue, the city has developed an Infrastructure Replacement Fund (IRF). In this fund, the city sets aside money on an annual basis for major
maintenance and replacement of its infrastructure. In the Fiscal Year 2011-12 Operating Budget, the city has budgeted a $7.4 million transfer from the General Fund to the IRF to meet future needs.
During the current fiscal year, the Unassigned fund balance in the General Fund increased by $3 million to $54.5
million due to fiscal discipline and the elimination and/or unfunding of 17.25 positions. Based on Fiscal Year 2011-12 projections, unassigned General Fund balance is expected to grow to $55 million.
There appears to be sufficient revenue projected to build the projects listed in the Fiscal Year 2011-12 Capital
Improvement Program (CIP).
The city’s business-type activities reflect the following:
The combined fixed and variable costs of water purchased from the San Diego County Water Authority are
projected to rise about 18 percent and 9 percent respectively in Fiscal Year 2011-12. In December 2011, a public hearing will be held to determine how much water rates will increase effective January 1, 2012. The
proposed rate increases are needed to fund the additional cost of purchased water, and to maintain an adequate reserve balance.
Proposed wastewater rate increases will also be discussed during the public hearing to be held in December 2011. If approved, these rates would be effective January 1, 2012. This proposed rate increase is needed to
assist with higher depreciation expenses from the addition of completed facilities to the inventory, and to maintain an adequate reserve balance.
32
The golf course budget is brought forward on a calendar year basis in December of each year. The Calendar
Year 2011 budget reflects a projected operating loss of over $1.4 million. This projected deficit will require additional transfers from the city’s General Fund during the calendar year.
There are no projected significant changes in other revenue sources.
Contacting the City’s Financial Management This financial report is designed to provide the citizens, taxpayers, customers, investors, and creditors with a general
overview of the city’s finances and to demonstrate the city’s accountability for the money it receives. If you have any questions about this report or need additional information, contact the Finance Department,
1635 Faraday Avenue, Carlsbad, CA 92008, (760) 602-2430, or visit us online at www.carlsbadca.gov.
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Statistical Section
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Statistical SectionStatistical Section
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