CARLSBAD — On the surface, the latest draft budget from the city of Carlsbad looks concerning.
However, taking into consideration one-time expenditures and longer-term projects, the picture for Fiscal Year 2019-20 is positive. The city’s General Fund is projected for a $3.7 million surplus, even though the Operating and Capital Improvement Program expenditures exceed revenue.
City Manager Scott Chadwick and Deputy City Manager Laura Rocha presented the draft budget to the City Council during its May 21 meeting and said the General Fund is the most important component of the new budget for the city. The final budget will be presented to the City Council on June 18 for approval.
The draft budget is proposing a 7.6% increase in spending along with 39 new full-time hires across the city. A total of 70 new positions were proposed, but only 39 are being requested.
Chadwick, though, stressed this will not be common practice, but rather it’s a matter of reinforcing numerous departments to enhance services, provide more efficiency throughout the city along with being prepared for any economic downturns.
Additionally, Chadwick said it is important for the city to satisfy these needs sooner rather than later. For instance several departments have not added new positions in 10 to 20 years, but with how radically the world and technology has changed, the new positions are important to keep the city ahead of the curve.
“We are incredibly sound and as sound as we’ve ever been,” Chadwick said. “We’re in a way better position than probably 95% of cities in California because we do have sound finances. But we are also trying to address some critical needs for the organization. It’s a balancing act.”
The preliminary operating budget for FY 2019-20 is estimated at $296.9 million, a $20.8 million increase over last year. Operating revenues, meanwhile, are estimated at $291.8 million, which is a $1.9 million (0.6%) decrease over the same time for a difference of $5.1 million.
The CIP budget is approximately $53.4 million, while revenues are estimated at $51.4 million. The CIP includes infrastructure projects such as streets, water, sewer and facilities.
As for the General Fund, the operating budget is projected at $166.8 million with revenues estimated at $170.5 million. It is a 1.8% increase in the General Fund revenues and a 7% increase in expenditures from FY 2018-19.
In comparison, the 2018-19 operating and CIP budgets totaled $337.5 million in revenue and $342.3 in expenditures for a difference of $4.8 million. The General Fund, meanwhile, projected an $8.5 million surplus.
“There’s more one-time in nature expenses related to our restricted-type funds, such as Gas Tax,” Rocha said of the CIP budget expenditures. “We run a lot of those expenditures through our capital improvement projects, which are large in nature and ongoing over several years. There is a real restrictive nature in how we accumulate and use those funds year-to-year. ”
In addition to the budget, Chadwick and Rocha also presented three policies to address pension funding and General Fund surplus and reserves.
Those new positions, though, will come in on lower tiers for the city’s pension payment responsibility, thus lowering the cost owed by the city for years to come. The city instituted its own second tier several years ago, followed by the state with a third tier to lower those costs, Rocha said.
“We’re seeing employees come out of these higher tier benefit payment plans … and the new employees coming into tiers two and three,” she added. “Over time, it’s going to be a cost containment for a number of cities in CalPERS (California Public Employees’ Retirement System).”
The city’s largest source of revenue is from property tax, projected at $71 million and representing a 3.8% increase over last year. Sales tax is second at $37.3 million (3.6% increase) followed by the transient occupancy tax (hotels and short-term rentals) at $28.5 million, which is a 3.5% increase.
Development revenue is projected to decrease by 35.2% from $3.7 million to $2.4 million.
The largest General Fund expenditures are $101 million and $53.8 million reserved for personnel and maintenance and operations, respectively. The city also released its 15-year CIP budget, for a total estimated cost of about $615 million, which runs through FY 2032-33.
“This isn’t something we’re going to do every year,” Chadwick added. “We’re only going to ask for what we need, not what we want. That’s a big difference. We’re trying to make improvements holistically to make sure we’re building the most effective and best-run city, period.”