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Carlsbad City Hall. Photo by Steve Puterski
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Council approves General Fund surplus policy

CARLSBAD — Two months ago the City Council addressed several key financial policies relating to surplus, reserves and pensions.

During its Aug. 27 meeting, the council approved the final policy addressing General Fund surpluses.

During its June 18 meeting, the council approved the General Fund Reserve and pension policies to address and ensure the financial health and future of the city. The pension policy establishes the city to fund those at 80% including a $20 million payment to its pension responsibilities.

Over the past three fiscal years, the city has paid more than $40 million toward its pension obligations, said Laura Rocha, Carlsbad’s deputy city manager.

To get to the 80% threshold, Rocha said the city is “very, very close,” to the mark.

Mayor Matt Hall said the pension system is unreliable and risky.

“I see this as a bottomless pit,” he added. “We keep throwing money at it. I don’t think this is ever going to change until the people who benefit from this pay more.”

Rocha said the new policy addresses replenishing any General Fund reserve and pension liability deficiencies. In addition, the city will not use year-end surplus funds to fund ongoing operations unless approved by the City Council and the city manager is authorized to approve “carry forwards” of any unspent and unencumbered budget items of $100,000 or less into the next fiscal year.

“These items would be around, potentially something that came up during the year that did not come up for that next year’s budget,” Rocha said.

Also, the city manager may recommend the use of surplus funds to address “unforeseen and non-recurring” situations, Rocha said. Finally, the staff would report each year to the council regarding the policy.

Councilwoman Cori Schumacher said is it important for the council to think about the policy for years to come.

“There could be councils that changes the policy,” she said. “It needs to be what are the possible ways where it’s not airtight enough. It’s critically needed.”

City Manager Scott Chadwick said the policy is solid and reassured Schumacher the carry forward item is to prevent one-time expenditures from being consistent year to year.

“I would certainly want our internal auditor to focus their attention on, to make sure that we are consistent with our policies and procedures,” he added. “That’s the intent behind this.”

In June, Rocha broke down three policies presented to the council. The first centers on the California Public Employees’ Retirement System (CalPERS), which the council approved.

The five objectives focus on actuarially determined contributions (ADC), funding discipline, intergenerational equity, contributions as a stable percentage of payroll and accountability and transparency.

The second policy covers the General Fund surplus so the city may meet reserve policies and long-term liabilities, such as pension costs, and the Innovation Fund split equally.

The council tabled the policy until approving it on Aug. 27.

The third policy focuses on the General Fund reserve to serve as a framework to meet the city’s financial requirements and unexpected events such as natural disasters or a recession.

Each policy must be reviewed at least every five years or at the council’s discretion.

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