Carlsbad reviews midyear economic and financial update; council approves staff budget recommendations

City staff presented an economic and financial update and a midyear budget review on March 3; after questions from council and public comment, the council unanimously approved the staff recommendations for midyear appropriations and budget adjustments.

Economic Development Director Matt Sanford summarized regional indicators and local conditions. He reported that Carlsbad’s gross regional product for 2024 was $16.8 billion, a 0.3% contraction from 2023, and described five key local industries—life sciences, tech, sports and active-lifestyle, clean tech and tourism. Sanford noted risks from shifting federal policy, including potential NIH funding reductions and tariff exposure, and said declining consumer confidence and rising inflationary concern warrant monitoring.

Finance Director Zach Korach reviewed revenues and expenditures for the first six months of fiscal 2024–25. Major figures presented: property taxes through six months were $34.4 million (up about 5% due to assessed value increases); transient-occupancy tax rose about 3%; and total general-fund revenues were up approximately $3.5 million (about 3%) compared with the same period last year. Korach cautioned that sales tax receipts include a prior-quarter taxpayer correction for a large auto dealer; excluding that correction, taxable sales were down an estimated 6.2% from the same quarter a year earlier.

Korach said the city’s adopted fiscal 2025 budget estimated a year-end general-fund reserve ratio of 55%—about $36 million above the council’s 40% reserve-policy target (Council Policy No. 74). He reported $122,000,000 of available budget remaining as of Dec. 31 after expenditures and encumbrances.

The midyear requests approved by the council included a mix of general- and non-general-fund items. Key general-fund requests described in the packet and presented at the meeting included:

- $850,000 (one-time) for initial multi-department wildfire mitigation actions and related vegetation/brush management work across preserves and urban forests. - $95,000 for an electric vehicle for the newly appointed fire marshal (one-time capital request). - $40,000 (one-time) to reopen Dove and Cole libraries on Sundays from 1 p.m. to 5 p.m.; staff indicated reopening could occur in roughly three months and estimated an ongoing $90,000 cost in subsequent budgets to maintain expanded hours.

Significant non-general-fund requests included authority for fleet replacements ($1.2 million) to cover out-of-cycle replacements (an ambulance estimated at $360,000 and a sewer jutter truck estimated at $900,000) and an additional $350,000 to cover higher-than-budgeted demand-based potable-water purchase charges from the San Diego County Water Authority.

Korach and the city manager emphasized that departments were asked to absorb operating impacts where possible and that requests had been vetted and approved by the city manager before appearing in the midyear package. The recommended action presented to council was to receive the economic update, accept the midyear budget review and adopt the resolutions approving additional appropriations where needed.

Public commenters raised concerns about the proposed reallocation of Carlsbad Municipal Water District funds and the timing or transparency of rate increases. Glenn Bernard and Mike Borrello asked that council clearly explain any transfers or uses of utility funds and urged alternative savings or funding strategies rather than rate increases. A member of the public thanked the council for the library-hours proposal.

After discussion and clarification on individual requests and fund sources, a motion to adopt staff’s midyear recommendations was made, seconded and approved unanimously. Staff said next steps include continued monitoring of revenues and expenditures, posting of full financial details on the city website, a third-quarter update in early May and presentation of the preliminary fiscal 2025–26 operating budget to council on May 20; a public community workshop on the preliminary budget is scheduled for May 22.