Carlsbad council backs $20.3 million in one-time uses of surplus, boosts pension trust and shifts $6 million to stormwater

The Carlsbad City Council on a unanimous vote approved resolutions to carry forward prior-year unspent budgets, make a $7.5 million contribution to the city’s Section 115 pension trust and transfer $6 million to the stormwater protection program.

City Finance Director Zach Korach told the council that preliminary fiscal year 2024–25 figures show $245,000,000 in revenues against $233,000,000 in expenditures, producing an $11,700,000 surplus. When combined with $14,000,000 in unspent and unencumbered budgets as of June 30, 2025, staff said the council’s total carry-forward authority is about $25,700,000. Korach said staff’s recommended one-time uses total $20,300,000, leaving roughly $5,400,000 in remaining authority.

The nut of the proposal was three items: (1) carry-forward of authorized but uncompleted projects and purchases, (2) a $7.5 million contribution that represents the third of five planned annual Section 115 trust payments aimed at shoring up pension funding, and (3) a $6 million transfer to the stormwater protection program to address a projected operating deficit in that enterprise.

Korach described the city’s reserve position and pension context in detail. He said the general fund reserve stood at $167,000,000 — about a 69% reserve ratio — as of June 30, 2025. Under the staff recommendations, the reserve would fall to an estimated $146,900,000, or roughly 61% of annual operating expenditures, leaving almost $50,000,000 above the city policy target. He also summarized CalPERS actuarial history, noting the city’s combined funded ratio is about 78.6% after recent gains and trust contributions, a shortfall of roughly $13,000,000 from an 80% policy target.

Council members questioned and commented on specific items and strategy. Councilmember Shin praised the city’s conservative budgeting and said the results reflect a culture of fiscal discipline. Finance Director Korach answered technical questions about the accounting treatment for Section 115 trust contributions, explaining that contributions are recorded as restricted fund balance rather than a conventional appropriation because the dollars remain city assets held in trust. City Manager Joshua Sharfstein clarified that funds contributed to the trust must be used for pension activities but can reimburse the general fund for retirement-related costs if needed.

Korach identified examples among the carry-forward requests: software for first-due fire inspections, vehicle outfitting for public safety, public art maintenance contracts, irrigation upgrades at the public safety training center, and a major carry-forward tied to the Carlsbad Village trenching project. The trenching request was listed at $5,220,000 in the adopted fiscal year 2024 budget and remains part of the $6,000,000 in general-fund carry-forward items that require council approval.

Council members also heard staff note non-general-fund carry-forward requests of about $6,200,000 for items such as fleet and information-technology replacements, Affordable Housing Trust property acquisitions, and ADA compliance work for the city website.

Direct quotes

“Revenues for the fiscal year came in preliminarily at $245,000,000, actual expenditures of $233,000,000 resulting in an actual surplus of $11,700,000,” Finance Director Zach Korach said during the presentation.

“For any of the contributions that the city makes to its own Section 115, it does not require an appropriation because the funds technically are not leaving the city,” Korach added when a council member asked why the $7.5 million was shown as “not required appropriation.”

“The funds that have been contributed in the past and into the future will be required to be used for pension activities,” City Manager Joshua Sharfstein said. “With that said, yes, we can use those dollars to reimburse the general fund for retirement-related costs that it has incurred.”

Mayor Pro Tem Bhatt Patel moved adoption of the resolutions; the motion was seconded and passed unanimously.

The council’s action authorizes the listed carry-forwards and the Section 115 contribution and permits the $6 million transfer to the stormwater protection program. Staff indicated the recommendations are intended to preserve the city’s long-term pension funding plan while addressing near-term needs in the stormwater program and completing prior-year projects.

Background and what’s next

Korach noted the city’s adopted reserve policy target of 40% and referenced national guidance from the Government Finance Officers Association that often cites 15%–20% as a minimum for many jurisdictions. Staff emphasized the higher target reflects Carlsbad’s chosen policy to sustain operations through large revenue shocks or disasters. If adopted items proceed as proposed, staff said the city should remain on track with its five-year pension funding plan to reach the 80% funded goal before fiscal year 2028, assuming target investment returns.

Councilmembers requested that staff continue to return to council with updates on large projects and the pension trust timeline. The resolutions take effect as approved and direct staff to implement the carry-forward appropriations and trust contribution.