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Carlsbad third-quarter economic and mid-year budget update: revenues up modestly, sales tax flat
Summary
City staff reported a modest rise in general fund revenues year over year and highlighted local economic indicators including a 4.1% unemployment rate, median home price of $1.54 million, and hotel occupancy of 68.7%. Staff warned of trade and inflationary headwinds and outlined next steps for the budget process.
City staff on May 2025 presented an economic and financial update for the first three quarters of fiscal year 2024–25 and a mid-year budget review, reporting that general fund revenues are up about $4.3 million (roughly 3%) year over year but that sales tax growth has been minimal.
Matt Sanford, Economic Development Director, said Carlsbad’s economy remains diverse and resilient but noted external pressures including federal funding pullbacks, tariff uncertainty and inflation. “If [the tariff pause] holds, this would greatly reduce the burden for a number of businesses,” Sanford said about a temporary federal pause on tariffs for many Chinese imports, while adding that the short-term nature of the announcement leaves businesses uncertain.
Zach Korach, Finance Director, reviewed revenues and expenditures through the first three quarters. Highlights from the staff presentation included: - Carlsbad unemployment at about 4.1% at the end of the quarter. (San Diego County: roughly 4.2%; California: 5.3%). - Median home price reported at $1,540,000 in March (4.3% year-over-year increase). - Hotel occupancy averaged 68.7% for the quarter and average daily room rate was $204.37. - General fund revenues were approximately $4.3 million (3%) higher than the previous year for the same period. - The city’s working general fund budget is $255.9 million with roughly $70 million (27%) still available at the quarter mark. - Water revenues rose about 9% (in part due to rate increases); wastewater revenues rose about 18% (driven in part by a 20% rate increase and Encina Wastewater Authority contractual changes).
Korach noted that sales tax growth was essentially flat for the period and that inflation-adjusted gross receipts show a pullback in consumer demand compared with prior years. He also highlighted that one-time accounting corrections (an adjustment tied to an auto dealer) contributed to some year-over-year differences.
Council members asked clarifying questions on tariffs, sales tax versus inflation, and timing for the upcoming preliminary budget. Staff said the preliminary budget will be presented to council on May 20, with a community budget workshop scheduled May 22 from 5:30–7:30 p.m. at the Faraday Center.
Ending: Council members thanked staff for the data-driven update and emphasized the need to monitor economic indicators closely as the city prepares its preliminary budget for fiscal year 2025–26.
