ENCINITAS — The city’s financial standing improved by several millions of dollars during the last fiscal year, according to the most recent annual comprehensive financial report.
The city partnered with Davis Farr certified public accountants to create the report, which performed an audit of the city’s financial records. The audit received an unmodified opinion, which is the highest score receivable.
According to a presentation to the City Council on Jan. 25, the city’s assets increased by $7.4 million due to increases in capital assets and implementation of GASB 87, a new lease accounting standard.
The city also experienced a substantial $41 million drop (or 26.3%) in total liabilities due to a $29 million decrease in the net pension liability fund and unearned revenues as a result of recognizing revenue received from the prior year that had not been spent in relation to American Rescue Plan Act funds.
The city’s $137.3 million in total revenue outpaced its $118.6 million in total expenses for the fiscal year ending in 2022. The upswing is attributed to a $7.8 million increase in general revenue due to $3 million collected from increased property values and taxes, plus $3.4 million increases in other taxes primarily related to transient occupancy taxes from the new Alila Marea Beach Resort and short term vacation rentals.
“In total, the city’s financial situation improved by $18.7 million due to an increase in governmental activities,” said Shannon Ayala, a CPA and partner with Davis Farr.
The general fund increased by $2.1 million after transfering funds to other city department accounts.
Deputy Mayor Joy Lyndes congratulated the city’s finance team for the positive results from the audit.
“It’s really a sign of a healthy city,” Lyndes said. “I think the future is looking good as we continue to have documented success in how we manage ourselves financially.”
Despite the positive numbers, Councilmember Bruce Ehlers gave a word of caution to how the city’s finances will look in the following year due to increases in pension and potential changes in the market.
“We shouldn’t get too giddy in the positive move in the net position this year because there may be an equally reversing one next year,” Ehlers said.