CARLSBAD — Despite signs of a cooling consumer economy, Carlsbad has reported gains in tourism, business licensing and labor market performance, according to an economic and financial update presented at Tuesday’s council meeting.
Carlsbad is the second-largest economy in San Diego County. In 2024, the city’s estimated gross regional product was $16.8 billion, a $50 million decrease from the previous year.
According to a staff report, the city reported steady growth across several key revenue sources during the first nine months of the 2024-25 fiscal year, led by growth in property taxes, hotel taxes and business licensing fees.
Property taxes, the city’s largest revenue stream at $58 million annually, rose 3% compared to last year.
City analysts reported that sales tax revenue, totaling $44.9 million, remained relatively flat, increasing by just $109,000, or 0.2% year-over-year, primarily due to inflation and increased economic caution among consumers. Auto sales, consumer goods and restaurants generate nearly 80% of Carlsbad’s total sales tax revenue.
Transient occupancy tax (TOT, or hotel tax), the city’s third-largest General Fund revenue source, brought in $26.6 million over the nine-month period, a 5% increase over last year. Carlsbad currently has 5,059 hotel rooms and 449 registered short-term rentals, and a 10% hotel tax is collected on stays shorter than 30 days at these temporary dwellings.
Hotel occupancy rose to an average of 68.7% in the third quarter of the fiscal year, up two percentage points from last year. The average daily room rate also climbed to $204.37, a nearly $10 increase from 2024.
Economic Development Director Matt Sanford said the city’s hospitality industry benefited from increased group travel, although leisure and individual travel were down.
“Changing international traveler sentiment and economic uncertainty is expected to have an impact on tourism in the coming year,” Sanford told the council.
Carlsbad issued 2,796 new business licenses last quarter, an increase of 480 from last year. The city now has over 10,000 licensed businesses, with an estimated 6,881 physically located within the city limits. The city reported an estimated $6.6 million in business license revenue for the current fiscal year, an increase of $109,000 or 2.25% from the previous fiscal year.
The largest employers by district are Pretty Please Fashion, Carlsbad Village Yoga Co-Op, and Laguna Estates (District 1); Viasat Inc., Legoland, Thermo Fisher, and Ionis Pharmaceuticals (District 2); Costco, Aerotek, and Hilton Garden Inn (District 3); and Omni La Costa, La Costa Glen Carlsbad CCRC, Ralphs Grocery Company and Vons (District 4).
The city’s unemployment rate dropped slightly to 4.1% in March, remaining lower than the county and state averages. Employers posted 6,043 job openings during the most recent quarter (January-March), an increase from the previous quarter but slightly below the same period last year.
However, staff also reported signs of weakening consumer demand “in response to sustained inflationary increases since 2021, as well as heightened economic uncertainty with the new (Trump) administration.”
Related to expenditures, the city continues to monitor pension obligations closely, noting a slight decline in its funded status under CalPERS from 74.6% to 73.7%, per the staff report. Since 2016, the city has made $56.4 million in additional discretionary payments toward pension liabilities to reach an 80% funded ratio.
The city will present its preliminary budget for fiscal year 2025-26 on May 20, followed by a public workshop on May 22 at the Faraday Center.
