CARLSBAD — The city’s financial health amidst the COVID-19 pandemic remains in stable condition, according to an update to the Carlsbad City Council during its Jan. 26 meeting.
Ryan Green, a financial planner with the city, said revenues and expenditures are on target, although Transient Occupancy Tax (TOT), or hotel tax, has taken a huge hit due to the pandemic. According to Green’s report, the city is expecting to come up short on its TOT revenue projections.
Originally budgeted at $14.5 million for FY 2020 to 2021, the second-quarter report shows TOT down 55%, or $7.9 million. The average occupancy rate dropped to 49% compared to 74% in 2019, before the pandemic.
Despite a 5% decrease in total revenues compared to expectations, Green said this year was not going to be as robust as last year. The city was on track to break several projections, including TOT, in January and February 2020, before the pandemic hit.
“When you look at how the budget is tracking compared to estimates, (it’s doing) pretty well in every category with the exception of TOT,” Green explained. “Because TOT is so dependent on what happens with COVID and the timing of vaccines and the timing of reopening, we don’t really know what’s going to happen with TOT.”
However, property taxes are coming in higher than expected with a $2.6 million increase thanks to a 4.76% increase in assessed home values in the city. Also helping with property taxes are unsecured and delinquent taxes, along with aircraft based at Palomar-McClellan Airport, Green said.
The city collects property taxes from each aircraft based out of the regional airport.
Also, The Crossings at Carlsbad Golf Course has experienced a massive influx of revenue thanks to being one of the first, and few, limited recreation activities allowed during the pandemic. Revenue is up 58% to $3.1 million compared to 2019, and up 38% compared to the FY 2020 to 2021 budget. Food and beverage revenue is also up 3% and the 2021 actuals increased by 28% five months before the end of the fiscal year.
Green said it is a record year for the course as golf courses nationwide are experience a “boon.”
The city has also received $1.4 million in CARES Act funding to help recoup unexpected expenditure increases due to the pandemic, Green said.
“The city did a great job at monitoring revenues and expenses,” said Laura Rocha, deputy city manager. “We’re still in an unprecedented time. We may not know exactly what lies ahead, but Carlsbad has always prioritized fiscal responsibility.”
Expenditures, however, appears to outweigh revenues, but Green said the reasons include a one-time $8 million payment to its California Public Employees’ Retirement System (CalPERS) and from Capital Improvement Program projects, which were funded upon approval, so the city is not spending current General Fund revenues for those.
As for total expenditures, Green said the city is coming under those estimates minus the one-time costs. As a result, the total expenditures is 49% and the city has found areas where it has not spent as much money as originally budgeted.
Also, the city projected a $1.2 million surplus in June 2020 as part of its FY 2020 to 2021 budget. However, because there are so many variables, Green said it’s difficult to say if the surplus will increase, decrease or remain the same.