Database.yml encoding is utf8, yet connections aren't

$ cat config/database.yml
common: &common
adapter: mysql
username: whaaaaaaaaa!
host: 127.0.0.1
encoding: utf8

development:
database: delivery_log_dev
<<: *common

$ ./script/console
Loading development environment (Rails 2.1.0)

Delivery.connection.charset
=> “latin1”

Why is the encoding not set correctly?
Thanks!