Glossary of Terms

Actual Budget
What was actually spent during the budget year and the revenues that were actually received. The city may not spend more than what is approved in the adopted budget. 

Adopted Budget
The final approved budget that includes how much money may be spent from different city funds and how many positions are approved for the city’s workforce.

Appropriation
A specific amount of money authorized by the City Council for an approved work program or individual project. 

Assessed Valuation
A dollar value placed on real estate or other property by the County of San Diego as a basis for levying property taxes. 

Balanced Budget
A budget in which planned expenditures do not exceed planned funds available. 

Beginning/Ending Fund Balance
Unencumbered resources available in a fund from the prior/current year after payment of the prior/current year expenses. 

Branch
The city’s departments are organized into branches for the purpose of budgeting and management. The branches are called Administrative Services, Community Services, Policy & Leadership, Public Safety and Public Works.

Budget
An annual financial plan that identifies revenues, types and levels of services to be provided and the amount of funds that can be spent. 

Capital Budget 
A budget that plans for the purchase, maintenance, or improvement of the city’s fixed assets such as buildings, parks, and roads. This budget is a component of the Capital Improvement Program and includes significant expenses that are typically spread over several years.

Capital Improvement Program
A multi-year financial plan containing proposed construction of physical assets such as park, street, sewage and recreation facilities. The 15-year program outlines the expenditure plan for future capital projects and the corresponding revenues to pay for those expenditures. 

Capital Outlay
Equipment (fixed assets) with a value $1,000 or more and an estimated useful life of more than one year, such as vehicles and office furniture. 

Carlsbad Community Vision
A set of nine core values and vision statements developed through consultation with the community in 2010 that serve as a guide for city leaders as they serve the city. 

Carry Forwards / Contingency Funds
At the end of the fiscal year, if there is money left over, city staff may request to carry part of or all of this money forward to the next fiscal year. This money may only be used for one-time expenses, like a special program or the purchase of supplies for a single event. 

Credit Rating
An independent assessment of whether the city is a good credit risk. Criteria include overall financial management, leadership stability, debt and the city’s economic base. Cities with a high rating can borrow money at a lower interest rate. The City of Carlsbad has the highest rating possible, which is AAA.

Encumbrance
A legal obligation to pay funds, before the spending has actually occurred.  

Enterprise Fund
Used to account for operations that are financed and operated in a manner similar to private business enterprises—where the intent is that the costs (expenses, including depreciation) of providing goods or services to the general public on a continuing basis be financed or recovered primarily through user charges.

Expenditure 
The actual spending of funds set aside by appropriation for identified goods and services. 

Fee
A general term used for any charge levied by government for providing a service or permitting an activity. 

Fiscal Year 
A 12-month period used for accounting purposes and preparing financial statements. A city's fiscal year might not align with the calendar year; for example, Carlsbad’s fiscal year is from July 1 to June 30. The federal government’s fiscal year is from Oct. 1 to Sept. 30.

Forecast
The city estimates spending and revenues over the next five years so it can ensure a balanced budget. 

Full-time Equivalent (FTE)
The hours worked by one employee on a full-time basis, used to convert the hours worked by several part-time employees into the hours worked by full-time employees. Two employees each working 1,000 hours equals 1.0 full-time equivalent employee. 

Fund 
A set of interrelated accounts to record revenues and expenditures associated with a specific purpose. 

Fund Balance
The amount of financial resources available for use. 

General Fund
The primary fund used by the city for which revenues and expenditures are not legally restricted for use. Examples of departments operating within the General Fund include Fire, Library, and the City Manager's Office. The largest revenue sources for the general fund are from property, sales and transient occupancy tax (the tax visitors pay when they stay at a local hotel or short-term vacation rental).

Growth Management Standards
Acceptable service levels that have been established for 11 public facility categories, like roads, parks and libraries. 

Interfund Transfers
Payments from one fund to another fund, primarily for work or services provided. 

Internal Service Fund
Funds the activities that provide services or supplies for other funds or departments of the government on a cost-reimbursement basis. Examples include fleets, information technology, and human resources.

Maintenance and Operations
A general category used for classifying expenditures for materials, supplies and services that are normally used within the fiscal year. 

One-Time Money / Ongoing Expenses
One-time money is for something that is only expected to be needed one time. Ongoing expenses are costs that reoccur every year. It is not good practice to use one-time money to pay for ongoing expenses. 

Operating Budget
The annual appropriation of funds for ongoing program costs, which include salaries, benefits, maintenance and operations and capital outlay items. Carlsbad's Operating Budget encompasses one fiscal year. 

Personnel Costs 
Expenditures associated with providing the staff necessary to provide the desired levels of services, including salary and benefits. 

Preliminary Budget
A draft of the city’s proposed budget that is presented to the public and the City Council about a month before the final budget will be presented for approval. 

Revenue
The income that a city receives, which can come from various sources such as taxes, fees, grants, and interest on investments.

Special Revenue Fund
Funds used to account for specific revenue sources that are legally restricted to expenditure for particular purposes. For example, money from the gas tax fund may only be used for road improvements.

Strategic Digital Transformation Investment Program
A five-year expenditure plan for future technology projects and the corresponding revenues necessary to pay for them.

Structural Deficit
When a city’s projected ongoing spending is more than its projected ongoing revenues. 

Surplus
The amount of money left over once all the city’s projected or actual spending is accounted for. 

Transfer
Transfers refer to the movement of money between different funds within the city’s financial accounts. These transfers are usually made to allocate resources appropriately, manage cash flow, support specific projects and ensure funds are available where they are needed most.

Unassigned Fund Balance
The portion of a fund’s balance that is not restricted by legal or contractual requirements and is available for any purpose.

Budget laws and best practices

Several codes and laws govern the preparation, adoption, and management of city budgets. These include constitutional amendments, statutes, regulatory frameworks, and city-specific laws and policies designed to ensure fiscal responsibility and transparency. 

California Government Code
Provides general laws on how local governments, including cities, should prepare and adopt their budgets. It outlines the processes for public hearings, budget adoption timelines, and requirements for budget publication.

GANN Limit (Article XIII B of the California Constitution)
Enacted in 1979 through Proposition 4, the GANN Limit, named after Paul Gann, restricts the amount of revenue that California state and local governments can spend. It essentially sets a spending ceiling based on the prior year's expenditures adjusted for changes in cost of living, population, and other factors. 

Government Finance Officers Association
The GFOA provides best practices and guidelines on various aspects of government finance, including budgeting, financial reporting, capital planning and debt management. These guidelines help ensure that financial operations are conducted ethically, legally and efficiently. The City of Carlsbad’s budget and financial reports comply with these standards.

Proposition 218 (The Right to Vote on Taxes Act)
Passed in 1996, this constitutional amendment enhances taxpayer rights and requires voter approval for new or increased general taxes, assessments, and certain user fees. It emphasizes transparency and accountability in local government fiscal management.

Proposition 13
A significant property tax reform measure passed in 1978, it caps the annual increase of real property taxes to no more than 2% per year until the property is sold. It also requires a two-thirds majority vote in the Legislature for California state taxes and a two-thirds vote requirement for local taxes designated for specific projects or programs.

The Brown Act (California Government Code Sections 54950-54963)
This act requires open meetings for local legislative bodies, ensuring that deliberations and actions, including those related to budgeting, are conducted openly.

City Council Policies
The City Council maintains policies specific to how Carlsbad will manage its finances:

General Fund Reserve Guidelines (Policy 74)
Establishes a target of maintaining in reserve at least the equivalent 40% of the previous fiscal year’s annual operating expenditures. This is like a saving account or rainy day fund that is available for the following uses:

• Reduce the risk of financial impacts resulting from a natural disaster or other catastrophic events
• Respond to the challenges of a changing economic environment, including prolonged downturns in the local, state or national economy
• Demonstrate continued prudent fiscal management and creditworthiness

Pension Funding (Policy 86)
Establishes a goal for maintaining a pension funding ratio of 80% and the strategies the city will use to achieve this goal. This means the city will aim to have a pension debt no larger than 20% of the actual projected cost to pay the current and future retirement benefits owned to employees. Keeping this debt low reduces the amount of money the city will pay in the long run.

General Fund Surplus (Policy 87)
Defines what counts as general fund surplus funds and outlines how these funds will be used, starting with making sure the city’s reserves and pension funding are meeting their targets. After that, they may be used to fund one-time needs. Surplus funds should generally not be used to pay for ongoing expenses.

Internal Audits (Policy 89)
Outlines how performance audits will be conducted on a regular basis to improve the economy, efficiency and effectiveness of city government. Specifies the reporting relationships of the city’s internal auditor to maximize independence and accountability.

Long Term General Fund Capital Funding (Policy 91)
Describes how the city will help ensure funding is available for long-term, large value capital purchases, such as roads, building, parks and information technology infrastructure. The policy commits to the goal of setting aside the equivalent of 6% of budgeted general fund annual revenues to pay for future capital needs.

Debt Management (Policy 94)
Establishes guidelines for how the city will manage current and future debt.

Cost Recovery (Policy 95)
Authorizes fees and charges for certain municipal services, provided the fees and charges do not exceed the reasonable cost of providing such services. This policy sets forth cost recovery targets, timelines for fee increases, annual cost inflation adjustments, and how often the city will evaluate the current cost of providing services.

Utilities Reserve (Policy 96)
Sets targeted reserve account balances to ensure the stability of the water and wastewater funds and provides guidance for how these funds will be managed.

Pension Trust (Policy 98)
Describes how the city will pre-fund pension costs through a trust account so if pension costs suddenly increase, the city will have money available to cover the increase. A trust account also allows the city to direct how those funds are invested, with the goal of earning a better rate of return than the city’s General Fund.