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Carlsbad budget takes hit, still projecting surplus

CARLSBAD — Tax revenues have dropped and a national recession is consuming the nation, but the city of Carlsbad is able to produce a surplus of $1.2 million with its Fiscal Year 2020-21 budget.

The City Council approved its operating and Capital Improvement Program budgets during its June 23 meeting, although City Manager Scott Chadwick cautioned the council the city will keep close tabs on its operating budget.  It’s why city staff will return with quarterly updates to the council as the economic environment continues to change.

Regardless, the city’s General Fund revenues for the FY 2020-21 budget are projected at $164.8 million with $163.6 million in expenditures, according to Roxanne Muhlmeister, the city’s finance manager.

The city doubled its housing and homeless budget to include a housing subsidy program of $400,000 and investing $8 million in new CIP projects. As for cuts, Chadwick said all travel and non-essential trainings have been eliminated.

“Because the investments made by the City Council, some made by previous councils and some by this council, we can present a balanced budget,” Chadwick said. “Because we have a balanced budget doesn’t mean we’re out of the woods yet.”

The city was on target for record revenues as of January, according to Laura Rocha, deputy city manager. However, the COVID-19 pandemic and the closure of non-essential business gutted tax revenues, the primary revenue driver for the city.

In total, Rocha said the city took an $11 million hit for this fiscal year and a $16 million decline next year. Still, property taxes helped keep Carlsbad’s budget in the black, while sales and hotel (transient occupancy) taxes dropped significantly.

The totals include $74.2 million from property tax and $36.3 million and $18.5 million from sales and hotel taxes, respectively, Muhlmeister said. Those three sources make up nearly 80% of the city’s revenue. However, the city is projecting a $92.5 million in reserves.

“Back in January, we were seeing record numbers for revenues,” Rocha said. “But since COVID … those forecasts changed, extreme to what we had projected back in January.”

City departments begin outlining their budgets in January, but due to the pandemic, they had to re-evaluate those numbers at a furious pace as economic forecasts quickly changed, Rocha said.

As for the CIP budget, the city is estimating operating revenues $287.4 million and $292.5 million in expenditures. While it appears to those budgets are in the negative, the difference is due to the CIP projects already approved and funded from years past, according to Paz Gomez, deputy city manager of Public Works.

She said this year’s CIP budget is being scaled back and the council approved the recommendation to remove 16 projects. The budget is $29.1 million with about $22.7 million allocated for wastewater, water and street projects, Gomez added.

Also, the council approved to hold a workshop regarding the Carlsbad Police Department and will include information on a citizen’s review committee on police practices, use of force, officers rights under police officer’s bill of rights and any other procedures, according to Mayor Matt Hall.

Additionally, once the fifth council member is elected in November, the council will bring back the General Plan and Growth Management Plan for re-evaluating and potential updates. Several residents spoke about the need to update those two items to reflect the city’s future and inclusion of opportunities for minority business owners and residents.

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