CARLSBAD — The City Council on June 18 approved a balanced general fund operating budget for the upcoming fiscal year. The approved budget’s meager $600,000 surplus is expected to skyrocket to $17 million the following year.
Deputy City Manager Laura Rocha said within the next five years, the city will be able to replace projected spending shortfalls with surpluses thanks to efforts from staff and elected officials over the last few years.
Rocha said the City Council helped by creating or updating budget policies that provide more precise direction on budget priorities and financial strategies, directing staff to reduce ongoing expenses to close the deficit, and establishing a five-year vision on prioritizing city capital improvement projects.
The deputy city manager also said staff began implementing new budget practices five years ago, including eliminating automatic annual budget increases based on inflation and automatic rollover of unspent funds. Staff also saved significant dollars by cutting back on spending.
“We gave all departments direction to hold the line on spending for three years and to reduce ongoing spending for the last two years,” Rocha said. “Because of this gradual approach, we’ve been able to maintain acceptable service levels and minimize disruption from budget cuts.”
According to Finance Director Zach Korach, the city projects a $600,000 for the newly approved 2024-2025 operating budget, which goes into effect on July 1, followed by a $17 million surplus peak in 2025-2026 that begins to decrease over the next three consecutive years.
“We’re starting to see a serious slowdown and decline in revenue in sales tax and transient occupancy tax,” Korach said.
This year, the transient occupancy tax rate fell flat at nearly $35 million – the same as the 2023-2024 fiscal year. Korach said this is likely the “new normal” as potential visitors tread more cautiously when spending money while the cost of living expenses and inflation are high.
Staff also reduced several positions last year and are now in the new operating budget.
In the current fiscal year, staff reduced 12 full-time equivalent positions, the majority of which were part-time; in the upcoming year, staff plans to eliminate another 12 full-time equivalent positions, however this time the majority will be full-time positions that are tossed out.
Most positions are vacant, except a part-time communications and engagement position and two full-time positions, including chief innovation officer and senior diversity equity and inclusion manager.
Staff reassured council members that the programs started and controlled under the lens of the DEI manager would continue through its human resources department, with some responsibilities divided amongst the other city departments.
“Not one aspect of the program will end,” said HR Director Judy Von Kalinowski.
Despite staff reassurance that its DEI programs would continue, Mayor Pro Tem Priya Bhat-Patel opposed eliminating the DEI manager position.
“I truly feel we’re doing a disservice by not giving this position more time,” Bhat-Patel said.
Others on the council felt differently.
“Just because you don’t have someone with a title does not mean the work isn’t going to be done,” said Councilmember Carolyn Luna.
The new fiscal year will go into effect July 1.
