City of Carlsbad Budget in Brief 2021-22

F I SC AL YEAR

2021 – 22 BUDGET AT A GLANCE

The City of Carlsbad’s annual budget is where the city’s overall mission and City Council policy priorities are translated into daily operations. The budget explains where the city gets the money to carry out its mission and how that money will be spent in the year ahead.

More than a spending plan, the annual budget is also intended to provide a window into the complex and dynamic economic environment within which your local government operates. That’s why the annual budget also includes a discussion of local, state and national trends affecting city finances, as well as demographic information, regulations and policies that affect how, when and where the city invests resources.

About this guide This guide summarizes some of the main sections of the fiscal year 2021-22 annual budget. For a complete picture, the full budget is accessible on the city’s website and intentionally presented using clear, direct language and easy to understand charts and graphs.

After all, it’s your money. We want you to know how it is being used.

About your city government The City of Carlsbad is a municipal corporation following the council-manager form of government. The City Council, the city’s legislative body, defines the policy direction of the city. The City Manager oversees the day-to-day operations.

The City Council consists of an elected mayor and four elected City Council members. Each serves a four-year term. The city recently switched to electing City Council members by district instead of citywide. Each of the four City Council districts elects one City Council member. The Mayor continues to be elected citywide.

The budget cycle The public generally hears about the city’s budget in June, when the City Council holds its budget hearings and passes a budget for the next fiscal year, which starts in May or June.

But behind the scenes, city staff—with direction from the City Council— starts working on the budget months earlier, in November of the previous year. In reality, work on the city budget goes on all year long.

Each fall, the city’s Finance Department studies the previous year’s budget to determine what changes might be needed based on revenue projections and spending. Following this analysis, finance staff begins assembling a draft of the next fiscal year’s budget.

Department budgets After the first of the year, city departments begin working in earnest on their own budgets, in accordance with the goals established by the City Council. In a typical year, the department staff would start by looking at the spending plan from the previous year.

Changes to the budget could be needed based on anticipated changes in the consumer price index, salary increases, and new projects or initiatives.

Overall city budget In March, departments submit their budgets to the Finance Department, where staff analyze and assemble the overall city budget. The City Manager and a team of other city staff review the budget in April, and City Council members are briefed on the budget in May and June.

Adoption of the budget The City Council holds a final budget meeting in mid-to-late June to approve the new city budget, before the start of the new fiscal year on July 1. Even after the new budget is adopted, the Finance Department monitors both ongoing revenue and expenditures, recommending adjustments as necessary. And of course, by fall, the entire budget cycle begins once again for the new fiscal year.

2

2021-22 OPERATING BUDGET

Community Input Community priorities are a main driver of how and where to allocate resources in the annual budget. In addition to feedback gathered throughout the year, city staff seek out feedback on specific projects and upcoming initiatives as well as specific budget priorities. The Carlsbad Community Vision also continues to guide spending priorities.

Goal Workshops

Workplans

Due to the COVID-19 pandemic’s restrictions on in-person gatherings, the city adapted its public input channels so community members could continue to share their ideas through online platforms. The process started in early 2021, when the City Council identified three main goals to be funded through the fiscal year 2021-22 budget. City staff then developed work plans to support those goals and presented them for City Council and public feedback.

Preliminary Budget

Budget Adoption

The preliminary budget presented in May was another opportunity for the public to provide input, prior to the public hearing held in June, when the budget was adopted.

City Council Goals In addition to these three goals, this year’s budget reflects three priorities the City Council asked to be integrated into day-to-day activities. These include early and meaningful public engagement, technology infrastructure, and diversity, equity and inclusion.

Engage the community through a citizens committee to create a new plan to manage growth in Carlsbad in a way that maintains an excellent quality of life.

Reduce the homeless unsheltered population, among those who want help, by 50% within five years, with quarterly reports until we decrease the unsheltered homeless population or five years.

Bring Fire Department into conformance with Standards of Cover evaluation.

Spending priorities Investment in City Council goals Growth Management Homelessness Fire / Emergency Services

One-Time $350,000 $3,609,795 $1,940,675

Ongoing TBD $1,296,912 $2,535,074

Total FY-21-22 $350,000 $4,905,708 $4,475,749 Total $9,731,457

CITY OF CARLSBAD

3

Understanding the General Fund Not all budget dollars are the same. Some of the money the city receives goes into what is called the “general fund.” Money from the general fund is unrestricted, meaning it can be spent on day-to-day services, projects and other city initiatives, under the City Council’s discretion.

General Fund Most of the general fund money comes from three primary sources: property tax, sales tax and transient occupancy tax, also known as the hotel tax. Other sources of general fund money include building permit fees, business license tax, recreation fees and interest earnings.

The general fund pays for such core services as police and fire protection, libraries, parks and recreation, housing and neighborhood services, community and economic development, and street maintenance and repair.

The city gets just a portion of the sales and property taxes paid by residents. Property tax revenue growth has remained steady, and sales tax is projected to bounce back from a dip in 2020.

Property and Sales Tax

Sales Tax

E 20

22

E

SALES TAX

21

20

19 20

18

PROPERTY TAX

44

40

38

20

41

35

20

68

65

20

16 20

15

35

17

35

33

62

20

57

54

20

31

14

29

50

20

20

12

29

51

13

48

20

$ Millions

Property Tax 77

75

72

Fiscal Year

Tourism is projected to bounce back due to pent up demand for travel, but the local hospitality industry depends heavily on business travel and conferences, which are not expected to return as quickly.

4

2021-22 OPERATING BUDGET

TransientTransient Occupancy Tax Occupancy Taxes 30

25

$ Millions

Transient occupancy tax, the tax paid by visitors when they stay in a local hotel or vacation rental property, was significantly affected by the COVID-19 pandemic and is expected to take longer to recover.

20

15

10

5

0

2013

2014

2015

2016

2017

Fiscal Year

2018

2019

2020

2021e

2022e

Main sources of money The city’s General Fund covers most day-to-day city services, like police and fire protection, parks and libraries. The three main sources of revenue for the General Fund are property tax, sales tax and transient occupancy or hotel tax.

All Other Revenue

Development Revenues Business License Tax Franchise Taxes

15%

1% 43% Property Tax

3%

3%

TOT 10%

25% Sales Tax

General Fund Reserve The City Council has a policy to maintain at least the equivalent of 40% of that year’s General Fund operating budget in reserve. This is like a rainy day fund that can only be used in certain very specific circumstances. Having money in reserves helps the city better weather economic downturns without having to reduce services for the public.

The city projects that having the equivalent of 54% of its operating budget, or $95.5 million, in reserve by June 30, 2022, the end of the fiscal year.

CITY OF CARLSBAD

5

General Fund Revenue

$26M All Other Revenue $2M Development Revenues $6M Franchise License Tax $6M Business License Tax

15% 1% 3%

$77M Property Tax

43%

3%

$173M total

10%

$18M Transient Occupancy Tax

25% $44M Sales Tax

General Fund Expenditures $8.1M Policy & Leadership

$12.4M Administrative Services

City Council City Attorney’s Office City Manager’s Office Communications & Engagement City Clerk’s Office

$10.6M General City Programs and Projects

4% 6%

Non-departmental

$21.2M Public Works*

$50.0M Community Services Community Development Housing & Homeless Services Library & Cultural Arts Parks & Recreation

2021-22 OPERATING BUDGET

7%

11%

Environmental Management Facilities Transportation Construction Management & Inspections

6

Finance Human Resources Innovation & Economic Development

$82.3M Public Safety 45%

$184.4M total

27%

Police Fire

CIP Projects The City of Carlsbad Capital Improvement Program reflects the city’s ongoing commitment to maintaining the highest standards of quality facilities for our community today and in the future. Projects in the CIP include construction, rehabilitation or replacement of major infrastructure such as streets, libraries, parks, fire stations and administrative facilities; water, sewer and drainage facilities; and other facilities that are located on or in the ground.

$3.1M

WATER PROJECTS

New Spending

$7.2M

DRAINAGE PROJECTS

$2.6M

PARKS PROJECTS

$23.6M

TRANSPORTATION PROJECTS

$11.5M

$8.2M

WASTEWATER PROJECTS

CIVIC PROJECTS

Technology investments The Strategic Digital Transformation Investment Program was added as a seperate section of the budget this year. The program presents a comprehensive approach to planning for and funding digital transformation efforts throughout the city. It also serves as the strategic plan for technology and digital transformation combined with project descriptions, costs, funding sources and timelines. The purpose of this new program is to provide for an annual investment strategy, not a commitment for spending, and outline a five-year expenditure plan for future digital transformation and technology projects and the corresponding revenues necessary to pay for them.

49%

Build Capacity for Data-driven Decision Making

Enhance Accessibility and Transparency

Pursue Community wide Digital Transformation

36% Promote Security and Sustainability through Connectivity

6%

6%

3%

Foster a Vibrant Civic Engagement Culture

CITY OF CARLSBAD

7

Special Funds The city also receives money from a variety of other sources, which can only be used for specific purposes. These other sources include water, sewer and trash fees, gasoline taxes and developer fees, as well as other federal and state funding. Money collected from water and sewer customers must be used to purchase water and operate and maintain the water and sewer systems. Gasoline taxes must be used to pay for road improvements and repairs, and cannot be used on general city services. Development fees must be used for projects that serve the developments where the fees are generated.

Special Revenue + Trust Internal Service Enterprise General

EXPENDITURES $16.4 M $29.6 M $86.4 M $184.6 M TOTAL $317.0 M

Get involved If you made it to the end of this budget summary, you are likely the kind of person who might be interested in getting more involved in civic affairs. Please do! We have many ways to learn more about your city and become more engaged in the work we do:

Sign up for Citizens Academy

Consider serving on a board or commission Watch City Council meetings and provide feedback on topics that interest you Find out more on the city's website, carlsbadca.gov

8

2021-22 OPERATING BUDGET