Carlsbad Has Great Credit

by The Editors on March 26, 2009

Carlsbad CityStandard & Poor’s recently upgraded the City of Carlsbadistan’s credit rating from AA to AAA, according to a release sent out by the city.

Carlsbad, with a population that now exceeds 100,000, is located just 35 miles north of San Diego. Growth in the city has been in our view strong over the past five years with 10%-13% annual assessed valuation growth and good trends in local sales and transient occupancy tax taxes. We view the Legoland theme park and several resort hotels as strong tourism magnets. Also, we believe that strong financial management has resulted in healthy general fund surpluses and reserves, and a new formal policy requires and unreserved fund balance of no less than 30% of expenditures, although the city targets 40%-50%. The city actively monitors its budget and has made adjustments in fiscal 2009 to account for slowing TOT and sales taxes, in particular auto sales. We understand that adjustments are also being made in the 2010 budget to preserve its strong liquidity.”

Looks like City of Carlsbad Finance Director Lisa Irvine is doing a great job. Follow the jump for the entire press release.
Carlsbad Earns Top Credit Rating
S&P cites city’s strong financial management

CARLSBAD, Calif. – Citing the City of Carlsbad’s strong financial management Standard & Poor’s has upgraded the city’s credit rating from AA to AAA, the highest rating possible. According to a March 18, 2009, Standard & Poor’s report:

“Carlsbad, with a population that now exceeds 100,000, is located just 35 miles north of San Diego. Growth in the city has been in our view strong over the past five years with 10%-13% annual assessed valuation growth and good trends in local sales and transient occupancy tax taxes. We view the Legoland theme park and several resort hotels as strong tourism magnets. Also, we believe that strong financial management has resulted in healthy general fund surpluses and reserves, and a new formal policy requires and unreserved fund balance of no less than 30% of expenditures, although the city targets 40%-50%. The city actively monitors its budget and has made adjustments in fiscal 2009 to account for slowing TOT and sales taxes, in particular auto sales. We understand that adjustments are also being made in the 2010 budget to preserve its strong liquidity.”

A credit rating assesses an organization’s credit-worthiness and serves as an indicator to potential investors of debt securities, such as bonds. Organizations with higher credit ratings usually can borrow money at lower interest rates.

“Achieving a triple A rating from Standard & Poor’s is great validation of our prudent approach to financial management, especially in this tough economy,” said Lisa Irvine, City of Carlsbad finance director.

Although the City of Carlsbad is on solid financial footing, the recession is having an effect on its major sources of revenues. Since last fiscal year, projected sales tax revenue is down 6.2 percent, transient occupancy tax, or “hotel” tax, is down 5.5 percent and development related revenues are down 48 percent.

The City of Carlsbad forecasts projected annual revenues and spending over a 10-year period so it can make adjustments as needed to maintain a balanced budget. In January, the city reduced its fiscal year 2008-2009 budget by approximately $5 million to ensure the city continues to maintain a balanced budget. Based on projected revenues, the city will likely make additional reductions in the fiscal year 2009-2010 budget, which goes into effect July 1.

The city has developed a number of strategies for managing its budget so it can adapt to a changing economy while minimizing effects on city services. All city departments have identified possible ways to increase efficiency, including using technology and streamlining operations. The city is reducing the size of its workforce, primarily by not filling open positions unless they are critically necessary to maintain core city functions. City staff also have identified options for cutting back on city services, if needed, focusing first on those with the smallest direct effect on the community. Regular updates on the city budget and financial forecasts are available on the city Web site at www.carlsbadca.gov/finance.

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