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HomeMy WebLinkAboutFiscal Year 2009-10 Financial StatementC'amvy,dtaoiue atumtat 0 i� t 3tepaW, i City of Newport Beach Fiscal Year Ended June 30, 2010 E�i emc4y Comprehensive Annual Financial Report For the Fiscal Year Ended June 30, 2010 Prepared by the Administrative Services Department Tracy McCraner, Director The City of Newport Beach was incorporated September 1, 1906 The present City Seal was adopted July 22, 1957 INTRODUCTORY SECTION o U W U7 } H U D H Z CITY OF NEWPORT BEACH Comprehensive Annual Financial Report Year Ended June 30, 2010 TABLE OF CONTENTS INTRODUCTORY SECTION (Unaudited) Tableof Contents ......................................................................................... ..............................1 Letterof Transmittal... .............................................. ............... ................................................. 5 GFOA Certificate of Achievement for Excellence in Financial Reporting ... .............................19 Listof City Officials ..................................................................................... .............................20 OrganizationChart ...................................................................................... .............................21 FINANCIAL SECTION Independent Auditors' Report ............................................................... .............................25 Management's Discussion and Analysis ............................................. .............................29 (Required Supplementary Information) Basic Financial Statements Government -wide Financial Statements: Statement of Net Assets .................................................................... .............................51 Statement of Activities ...................................................................... ............................... 52 Fund Financial Statements: Governmental Funds: BalanceSheet ................................................................................. .............................57 Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Assets ............................................................ .............................57 Statement of Revenues, Expenditures and Changes in Fund Balances ...................... 58 Reconciliation of Statement of Revenues, Expenditures and Changes In Fund Balances of Governmental Funds to the Statement of Activities ..............60 Budgetary Comparison Statements: GeneralFund ............................................................................ .............................61 Tide and Submerged Land Fund ............................................... .............................63 Proprietary Funds: Statement of Net Assets ............................................................. ............................... 67 Statement of Revenues, Expenses and Changes in Fund Net Assets .....................68 Statement of Cash Flows ............................................................. .............................69 Fiduciary Funds: Statement of Fiduciary Assets and Liabilities — Agency Funds ..... ............................... 73 Notes to the Financial Statements ..................................................... .............................77 Supplementary Schedules Non -Major Governmental Funds: Combining Balance Sheet .................................. ............................... ............................136 Combining Statement of Revenues, Expenditures and Changes in FundBalances ................................................... ............................... ............................144 Budgetary Comparison Schedules: StateGas Tax Fund ........................................... ............................... ............................151 Asset Forfeiture Fund ........................................ ............................... ............................152 OTSDUI Grant Fund ......................................... ............................... ............................153 186 JAGFund ........................................................... ............................... ............................154 Circulation and Transportation Fund .................. ............................... ............................155 Building Excise Tax Fund ................................... ............................... ............................156 Combined Transportation Fund ......................... ............................... ............................157 Community Development Block Grant Fund ...... ............................... ............................158 Air Quality Management District Fund ............... ............................... ............................159 Environmental Liability Fund ................................ ............................... ..........................160 194 Supplemental Law Enforcement Fund ............... ............................... ............................161 Traffic Congestion Relief Fund ........................... ............................... ............................162 Newport Coast Annexation Fund ........................ ............................... ...........................163 Proposition 1B Transportation Fund .................. ............................... ............................164 Contributions Fund ........................................................ ............................... 165 Internal Service Funds: Combining Statement of Net Assets .................. ............................... ............................169 Combining Statement of Revenues, Expenses and Changes in Fund Net Assets....... 170 Combining Statement of Cash Flows ................. ............................... ............................171 Fiduciary Funds: Combining Statement of Fiduciary Assets and Liabilities ................. ............................175 Statement of Changes in Fiduciary Net Assets .. ............................... ............................176 STATISTICAL SECTION (Unaudited) Financial Trends: NetAssets by Component ....................................... ............................... ............................179 Changesin Net Assets ............................................. ............................... ............................180 Fund Balances of Governmental Funds ................... ............................... ............................182 Changes in Fund Balance of Governmental Funds . ............................... ............................183 Revenue Capacity: Assessed Value and Estimated Actual Value of Taxable Property ......... ............................185 Property Tax Rates, Direct and Overlapping Governments, Last Ten Fiscal Years ........... 186 Principal Property Taxpayers as of June 30, 2010 .. ............................... ............................187 Property Tax Levies & Collections ........................... ............................... ............................188 Debt Capacity: Ratio of Outstanding Debt by Type .......................... ............................... ............................190 Outstanding Debt Serviced by the General Fund .... ............................... ............................192 Schedule of Direct and Overlapping Debt ................. ............................... ...........................193 Computation of Legal Debt Margin ................................... ................ .................................. 194 Revenue Bond Coverage, Last Ten Fiscal Years .... ............................... ............................196 Demographic and Economic Information Demographic and Economic Statistics, Last Ten Fiscal Years ............... ............................198 PrincipalEmployers ................................................. ............................... ............................199 Operating Information: Full Time City Employees by Function ...................... ............................... ...........................201 Operating Indicators by Function ............................. ............................... ............................202 Capital Asset Statistics by Function ......................... ............................... ............................204 Water Sold by Customer Type ................................. ............................... ............................206 WaterRates ............................................................. ............................... ............................207 MajorWater Customers ........................................... ............................... ............................208 G7 This page left blank intentionally. CITY OF NEWPORT BEACH ADMINISTRATIVE SERVICES Tracy M. McCraner, Director/ Treasurer December 22, 2010 Honorable Mayor and Members of the City Council, and Citizens of the City of Newport Beach Newport Beach, California The City Charter and California state law require that the City of Newport Beach issue annually a complete set of financial statements and that an independent firm of certified public accountants audit this report in conformance with generally accepted auditing standards (GARS). The Comprehensive Annual Financial Report (CAFR) of the City of Newport Beach for the year ended June 30, 2010, is hereby submitted. The CAFR was prepared in conformance with generally accepted accounting principles (GAAP) as promulgated by the Governmental Accounting Standards Board (GASB). This report consists of City management's representations concerning the finances of the City of Newport Beach. Responsibility for the accuracy and completeness of the data presented rests with the City. Management of the City is also responsible for establishing and maintaining an internal control structure designed to ensure that the assets of the government are protected from loss, theft, or misuse, and to ensure that adequate accounting data is compiled to allow for the preparation of financial statements in conformity with generally accepted accounting principles. The internal control structure is designed to provide reasonable, but not absolute, assurance that these objectives are met. The concept of reasonable assurance recognizes that: (1) the cost of a control should not exceed the benefits likely to be derived; and (2) the valuation of costs and benefits requires estimates and judgments by management. We believe the information presented in this report is complete and accurate in all material respects, and that it is reported in a manner designed to fairly present the financial position and results of operations of the various activities of the City of Newport Beach. The City of Newport Beach's financial statements have been audited by Mayer Hoffman McCann P.C., a firm of licensed certified public accountants. The goal of the audit was to provide reasonable assurance that the financial statements of the City of Newport Beach for the fiscal year ended June 30, 2010, are free of material misstatement. The independent audit involved examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements; assessing the accounting principles used and significant estimates made by management; and evaluating the overall financial statement presentation. The independent auditor concluded, based on the audit, that there was a reasonable basis for rendering an unqualified opinion that the City of Newport Beach's financial statements for the year ended June 30, 2010, are fairly presented in conformity with GAAP. The independent auditor's report is presented as the first component of the financial section of this report. 3300 Newport Boulevard • Post Office Box 1768 • Newport Beach, California 92658 -8915 Telephone: (949) 644 -3127 . Fax: (949) 644 -3339 •Website: www.newportbeachca.us 5 A narrative introduction, overview, and analysis accompany the basic financial statements in the form of the Management's Discussion and Analysis (MD &A). The letter of transmittal is designed to complement the MD &A and should be read in conjunction with it. The City of Newport Beach MD &A can be found immediately following the report of the independent auditors and will provide further information regarding the format and content of this report. PROFILE OF THE CITY The City of Newport Beach is located in the coastal center of Orange County, in the heart of Southern California, with Los Angeles County to the north and San Diego County to the south. There are currently 34 cities within the County offering one of the finest climates in the United States. Orange County is now the second largest county in California trailing only Los Angeles and surpassing San Diego and is the sixth largest county in the nation. The general vicinity of Newport Beach and the County of Orange relative to the counties of Los Angeles, San Bernardino, Riverside and San Diego is illustrated on the map below: Angeles County San Bernardino 0 0 County v\ Riverside Orange County �COaOty NEWPORT B(ACH v Sanl Diego County ■ 0 The City of Newport Beach is one of Southern California's most scenic and dynamic communities. It surrounds Newport Bay, well known for its picturesque islands and one of the greatest natural yacht harbors in the world, accommodating over 9,000 boats of all types docked within its 21 square mile harbor area. This bay area and the ten miles of ocean beach offer outstanding fishing, swimming, surfing, and aquatic sports activities. The City has a permanent population of 86,738 which typically grows to over 100,000 during the summer months, including 20,000 to 100,000 tourists daily. There are fine residential areas, modern shopping facilities, and a quality school system. A major campus of the University of California is located immediately adjacent to the City, and eight other colleges are within a 30 -mile radius. The following map illustrates the communities within the City of Newport Beach; the City's bay, recreational harbor and beachfront topography; and the City's location relative to the bordering cities of Costa Mesa to the north, Irvine to the east and Laguna Beach to the south. Costs Mesa L,EU hM The 7 3 e h The City of Newport Beach was incorporated September 1, 1906. The current City Charter was adopted in 1954, updated in 1974 and recently amended in November 2010. The City operates under a Council- Manager form of government. Council Members are elected by district but voted on by the population as a whole, and serve four -year staggered terms. The governing council consists of the mayor and six other members and is responsible for among other things, policy- making, passing local ordinances, adopting the budget, appointing committees and hiring the City Manager, City Attorney, and City Clerk. The City Manager is responsible for carrying out the policies and ordinances of the City Council, for overseeing the day to day operations of the City, and for appointing heads of departments. The City of Newport Beach is a full service city providing its residents and visitors with the following functional services: general governance, legal, financial, information technology, and administrative management; police, fire, paramedic, lifeguard, and emergency medical transport services; engineering, construction, and maintenance of public facilities, public streets, beaches, and parks; planning, zoning, and economic development services; building inspection, plan check, and code enforcement services; libraries and cultural and arts services; recreation and senior services; and water, wastewater, rubbish disposal, and street light utility services. The City provides water and sewer service to most areas within City limits, but it does not provide gas, electrical, or other utility service. Public elementary and secondary education is provided by school districts, which are separate government entities. Component Unit: The City's financial statements present the financial activity of the City of Newport Beach (the primary government) and the Newport Beach Public Facilities Corporation (a component unit of the City). The Corporation is blended into the City's financial statements because of its operational and financial relationship with the City. Even though it is a legally separate organization, City of Newport Beach elected officials have continuing accountability for fiscal matters of the Corporation. Additional information about the Newport Beach Public Facilities Corporation and the reporting entity in general can be found in Footnote 1a of the notes to the financial statements. Budget: The annual budget serves as the foundation for the City of Newport Beach's financial planning and control. The Administrative Services Department, with City Manager direction, develops budget guidelines and appropriation limits for each department every year in January. The departments then submit revenue and expenditure appropriation requests which are summarized by the Administrative Services Department and presented to the City Manager for review. The City Manager then meets with each department and prepares a proposed budget document for the City Council. The City Council holds a budget hearing and adopts a budget on or before June 30, the close of the City's fiscal year. Budgets are adopted for the General Fund and Special Revenue Funds. The legal level of budgetary control is at the fund level. The City Manager is authorized to transfer budgeted amounts between departments within any fund; however, any revisions which D increase the total appropriations of any fund over $10,000 must be approved by the City Council. LOCAL ECONOMIC MIX From 1950 to 2009, the population of the City increased from 12,120 to 86,738. As vacant land becomes increasingly scarce, population growth is expected to flatten considerably as the City becomes relatively built -out. According to the Center for Demographic Research at California State University Fullerton, the City of Newport Beach will be home to an estimated 91,321 residents by the year 2015. For FY 2009 -2010, General Fund revenues approximated $147 million. The top three individual revenue sources, Property Taxes, Sales Taxes and Sales Tax in Lieu, and Transient Occupancy Taxes (TOT), represent 71.6% of all General Fund revenues. Tax revenues in total, including business licenses, franchise fees and other taxes represent nearly 77% of all General Fund revenues while only 23% is generated by other revenue sources. General Fund Revenues ■ Property Taxes ■ Sales Taxes ■ Sales Tax In Lieu _ ■ Transient Occupancy Taxes ■ Other Taxes 7.8% %2 ■ All Other Sources 3.1 11.8% Property Taxes: Property taxes account for nearly 49% of all General Fund revenues. The City receives, on average, approximately 16.5% of the property taxes generated within City limits. The remainder goes to school districts, the County, and other government entities. In Fiscal Year 2009 -10 the State borrowed 8 % of property tax revenues from counties, cities and special districts, all to be repaid within three years, in accordance with Proposition 1A (2004) approved by voters in 2004. The City's share of the borrowing was approximately $6.2 million. The City recovered the full amount of the borrowing in Fiscal Year 2009 -10 by participating in a securitization program through the California Statewide Communities Development Authority. 7 Sales Taxes: In March of 2004, voters approved Proposition 57 which allowed the State to enact revenue swapping procedures commonly referred to as the "Triple Flip." In doing so, Sales Taxes were reallocated to cities in two separate revenue streams, "Sales Taxes" and "Sales Taxes in Lieu," which impacted the timing and distribution method but did not materially impact the revenue category in total. Sales Taxes in total represent 14.9% of all General Fund revenues. The City's sales tax base is generated from a relatively diverse business community and is not dependent on any one merchant or industry. The following chart demonstrates the diversity of the City sales tax revenue. The largest segment, "New Auto Sales" accounts for 21.1% of total sales taxes and is represented by ten dealerships. The next largest segment, "Restaurants," accounts for 19.8% of total sales taxes and is represented by 310 restaurants. The "Other" categorization accounts for another 13.3% and is represented by 794 businesses. Sales Tax by Business Segment 2.0% 3.3% 4.3 4.9% - 6.5 %- 7.2% 7.3% 10.2% ■ New Auto Sales -10 • Restaurants -310 • Leasing -58 • Apparel Stores -187 • Department Stores - 20 • Miscellaneous Retail -766 • Service Stations -16 • Food Markets - 40 • Office Equipment -78 • Light Industry -148 • Other -794 Transient Occupancy Taxes (TOT): The TOT accrues to the City at a rate of 10% of room charges (with 18% of this collection going to the local Conference and Visitors Bureau). The City distinguishes its transient occupancy taxpayers in two broad property type categories, commercial and residential property. The commercial category is composed of approximately twenty inns, motels, hotels and resorts and accounts for 89% of TOT revenues. The residential category is made up of some 700 vacation rentals representing only 11% of TOT revenue. Together, they account for nearly $11.4 million in annual TOT revenue. 10 Commercial Property: Inns, Motels and Hotels Residential Property: Vacation Rentals Annual Revenue Percent (In Millions) of Total $10.4 91.3% $ 1.0 8.7% $11.4 100% ECONOMIC OUTLOOK & FACTORS EFFECTING FISCAL PLANNING U.S. Economy: The National Bureau of Economic Research (NBER) determined that the national recession that began in December 2007 and ended in June 2009 was the longest recession since World War II and the most severe since the Great Depression. Following the deep 1981 -82 recession, the U.S. economy bounced right back with real Gross Domestic Product (GDP) growing 4.5% in 1983 and 7.2% in 1984. By contrast, current data and consensus amongst economists, suggests a slower recovery than previously expected. As illustrated below, the California Legislative Analyst Office (LAO), projects the GDP growth will be 2.6% in 2010, 2.2 % in 2011, and no higher than 3.1% in 2012. Unemployment currently at 9.6% nationally is forecast to remain above 9% through 2012. 4.0% 3.0% 2.0% 1.0% -2.0% -3.0% U.S. Real GDP Growth 2004 I 2005 1 2006 1 2007 2010 201 1 2008 1 2009 I Estimate d I Projected Projected ItSeriesl1 3.6% 1 3.1% 1 2.9% 1 2.0% 1 0.4% 1 -2.6% 1 2.6% 1 2.2% 1 3.1% 1 Source: LAO's Economic Forecast 11 State of California Economic Recovery: Though the economic outlook for the State mirrors that of the nation as a whole, problems in the job market appear to be more pronounced in California than the rest of the nation resulting in a much slower recovery. While the U.S. unemployment rate has increased 5 percentage points since 2007, unemployment in California has increased 9 percentage points and unemployment is projected to remain at over 10% through 2012. With a large `hidden inventory' of homes in default or facing foreclosure, tight credit and a 40% employment decline in the construction section since 2007, recovery in the housing market is forecast to be slow. California State Budget: The State budget is of great concern to all cities, including Newport Beach. The State's inability to achieve meaningful on -going budget solutions has resulted in massive lingering budget problems in the coming months and into the foreseeable future. As depicted by the following chart, the LAO projects that absent corrective action, the State will have a $6.1 billion deficit for 2010 -11 and a $19.2 billion shortfall between revenues and expenditures in 2011 -12 with similar projections for the succeeding years. 0 -5 -10 -15 -20 -25 State Budget Operating Shortfalls (In Billions) 2009 -10 2010 -11 2011 -12 2012 -13 2013 -14 2014 -15 Source: lAO's California Fiscal Outlook Three major budget - related measures were approved by voters at the November 2nd general election. Proposition 25 changes the vote threshold needed to send a budget bill to the Governor from two- thirds to a simple majority, which will help make it easier for the Legislature to pass an on -time budget each year. The effects of voters approving Proposition 22 and Proposition 26, which restrict the Legislature's ability to use certain transportation special funds to help balance the budget and raise the vote threshold for passing certain fees from a simple majority to two - thirds respectively, will reduce General Fund solutions by nearly $800 million, as estimated by the LAO. 12 Considering the projected annual shortfalls, the LAO recommends that the State consider a multi -year approach and minimize the use of risky budgetary measures that it believes contribute to fiscal year -end deficits. LOCALECONOMY Local Impact of the State's Budget Crisis — On October 8, 2010, the Governor signed the 2010 Budget Act (the "2010 -11 State Budget Act ") to address a then - projected $19.3 billion shortfall in revenues. The funding provisions included in the 2010 -11 State Budget Act are expected to have minor impacts on City operations. The City has reviewed the 2010 -11 Budget Act and reflected the reductions included therein in its Fiscal Year 2010 -11 Adopted Budget. The primary impact to the City from the 2010 -11 Budget Act is the delay of new Highway Users Tax Account payments. City monthly payments for the remainder of Fiscal Year 2010 -11 will be increased and adjusted to compensate for the deferral. Given the current state of the State's economy and the projected imbalance in the State's budget, the City cannot fully anticipate the impact of the State's continuing budget challenges on the revenues or expenditures of the City. The City cannot predict the extent of any additional fiscal problems that will be encountered in this or in any future fiscal years, and, it is not clear what measures will be taken by the State or federal government to address the continuing economic downturn. Future State budgets could be affected by national economic conditions and the factors over which the City will have no control. Also, the City cannot predict what actions will be taken in the future by the State Legislature and the Governor to address the State's current and future budget deficits or the impact that such actions will have on the City's finances and operations. To the extent that the State budget process results in reduced revenues or increased expenses to the City, the City will be required to make adjustments to its budget. Property Taxes: Unlike many cities, property taxes, not sales taxes, are the number one source of revenue for the City of Newport Beach, representing 46.7% of all General Fund revenues. Due to the limited supply of scenic coastal property and the unique access to the scenic Newport Bay and one of the best recreational yacht harbors, the Newport Beach community has been developed into affluent residential neighborhoods and high -end commercial districts. Despite the dramatic declines in the real estate market, sales data for the month of October, 2010, demonstrates the relatively high density of affluence throughout the residential communities. Median home sales prices in all areas of the City approach or exceed $1 million. 13 CITY OF NEWPORT BEACH Median Home Sales* Comparitive Month Ending October Median Median Number of Number of Newport Beach Sales Price Sales Price Home Sales Home Sales Zip Code 2009 2010 2009 2010 92625 $ 1,410,000 $ 1,550,000 26 19 92660 $ 907,500 $ 968,250 37 39 92661 $ 2,000,000 $ 1,737,500 5 6 92662 n/a $ 1,645,000 0 2 92663 $ 950,000 $ 1,300,000 30 19 92657 $ 1,840,000 $ 1,135,000 19 14 All Orange County $ 400,000 $ 432,000 2,177 2,528 * Source: DataQuick Information Systems Due to a vigorous demand for coastal property, the City has enjoyed long -term growth trends with its number one revenue source. Over a ten -year period, assessed valuation increased an average of 8.88% per annum and 6.45% over a twenty -year period. Since Californians passed Proposition 13 in 1978, assessed property value is reassessed to market value only when the property changes ownership. Otherwise, the assessed value grows by no more than 2% per year. This practice creates a constant lag and buffer between assessed and market values, effectively insulating the tax base from more erratic market value gyrations. Although assessed value growth has slowed for the last several years and will likely continue to decrease in 2010 -11, we are hopeful that assessed valuations will modestly rebound in years thereafter. 14 14.00% 12.00% 10.00% 8.00% 6.00% 4.00% 2.00% 0.00% -2.00% 20 Year Assessed P rope rty Value Growth *The 2000 -03 datapoint was normalized to reduce the impact the Newport Coast Annexation had on the assessed valuation growth trendline. Although the City has normally been any able to rely on steady growth in assessed valuation of 4% or more, it is probable the City will build the 2010 -11 budget assumptions around a zero growth scenario with contingencies for a decline of assessed valuation. Sales and Transient Occupancy Revenues: Because sales tax and TOT revenues follow consumer behavior, they are much more volatile than property taxes. The current economic recession, falling home prices and tightening credit policies have significantly depressed consumer spending patterns. Sales taxes were down by $0.5 million during 2009 -10 and are expected to remain flat in 2009 -10 until employment conditions improve and consumer confidence is restored. Transient occupancy tax collections generally follow a similar trend as sales taxes and were just a tad up in 2009 -10 due to a full year's operation of a luxury resort. TOT revenues are currently expected remain at 2009 -10 revenue levels before modestly rebounding in 2011 -12. 15 SAS eased Value GmMh — Trrendline (3 Yr Avemge Growth) o m w w m N m m rr �n co r m rn rn rn m rn rn rn rn w m w rn rn rn o o o N o o N �`+ g ro 0 o N v 0 0 N u� 0 0 N w 0 0 M r 0 0 N m 0 0 N o� o 0 0 0 N N *The 2000 -03 datapoint was normalized to reduce the impact the Newport Coast Annexation had on the assessed valuation growth trendline. Although the City has normally been any able to rely on steady growth in assessed valuation of 4% or more, it is probable the City will build the 2010 -11 budget assumptions around a zero growth scenario with contingencies for a decline of assessed valuation. Sales and Transient Occupancy Revenues: Because sales tax and TOT revenues follow consumer behavior, they are much more volatile than property taxes. The current economic recession, falling home prices and tightening credit policies have significantly depressed consumer spending patterns. Sales taxes were down by $0.5 million during 2009 -10 and are expected to remain flat in 2009 -10 until employment conditions improve and consumer confidence is restored. Transient occupancy tax collections generally follow a similar trend as sales taxes and were just a tad up in 2009 -10 due to a full year's operation of a luxury resort. TOT revenues are currently expected remain at 2009 -10 revenue levels before modestly rebounding in 2011 -12. 15 IKCki"I;I V 4Iy1ki /_1ki [y /_1 aUA_1ZIZII�M The City takes long -term financial planning seriously and has developed several master replacement plans for its critical assets and infrastructure including major facilities, street pavement, water and sewer infrastructure, and City vehicles and heavy equipment. The City has a 30 year Facilities Replacement Plan (FFP) in place with a long -term comprehensive view of City facilities with annual contributions to FFP not to exceed 5 % of General Fund Operating Budget. The plan which was recognized by the League of California Cities with the prestigious Helen Putnam Award of Excellence in Internal Administration, had cash reserves of $27.5 million as of June 30, 2010. The City exercises prudent Risk Management maintaining excess liability coverage and retains actuaries to reliably predict and fund long -term liabilities including workers compensation, general claim liabilities, pension liabilities and post employment health care liabilities. Reserve levels and annual required funding contributions are set by Council policy. Except for the implied subsidy component of the City's post employment health care plan (OPEB liability), the City policy is to fund the cash subsidy of our OPEB liability and pension liabilities at 100% of the actuarially determined annual required contribution (ARC). Because the City pays the entire ARC each year, its net pension and net OPEB obligation at the end of each year is $0 (except for the implied subsidy component of OPEB which is funded on a pay -as- you -go basis). To close a projected deficit in FY 2009 -10 General Fund, the City implemented an Early Retirement Incentive Program (ERIP) in December 2009 by providing eligible participating employees with a supplemental to their normal PERS retirement benefits through an additional payment from the City. Fifty -one employees elected to participate in the program, thus reducing the deficit by $1.8 million. The program will help reduce annual payroll costs by $3 million in the General Fund. See footnote 11 in the notes to the financial statements. To mitigate the rising cost of pension plans, the City negotiated cost sharing agreements with certain safety employee associations to contribute 3.5% of base pay to offset the PERS member contribution. Regarding OPEB plan liabilities, the City closed the defined benefit component of the OPEB plan to new participants in 2006. The new plan resembles a defined contribution style plan through which once the contribution is made the employee account, the employer has no further funding obligation to the plan. See footnote10 and 12 of the notes to the financial statements for further information on the funding status of the City's pension and OPEB plans. Stewardship: The City has long taken a conservative approach to forecasting revenues, often assuming a "worst case scenario." This fiscal conservatism has created a stable financial base. As a result, even in a downturn, the City of Newport Beach is able to maintain its services at a high level, while reducing expenses to accommodate reduced revenues. The City's fiscal discipline has allowed it to prepare balanced budgets and save, both during prosperous and difficult economic periods. While the current recession is much deeper than expected, management and the 16 Council were able to act swiftly to trim the operating budget at the midpoint of the 2009 -10 fiscal year, averting a decline in the fund balance of the General Fund. The General Fund ended the year with a $82.2 million fund balance, a net increase of $2.5 million. Of this amount, $5.5 million is reserved and is not available to finance new activities because it has already been committed to fulfill contractual obligations or is otherwise legally restricted beyond the City Council's control. Within the Council's discretion, the City Council has designated $18.9 million for contingencies for unexpected emergencies, $17.3 million for unspecified future appropriations, $3.5 million for capital projects that were not completed during the fiscal year and $37.0 million designated for other special purposes including $27.5 million designated for the City's facilities replacement plan such as the new Civic Center and $5.0 million designated to offset unexpected increases in PERS pension costs. 2010 -11 Cost Saving Measures: The City has taken various measures to reduce budget shortfalls in 2010 -11. The City entered a second phase restructuring effort to affect additional long -term cost savings and improved efficiencies; outsourcing their Street Sweeping Program, saving $0.5 million a year, and in partnership with fire, lifeguards, and police associations, negotiated for public safety to pick up $0.9 million in annual pension expense, up from zero last year. In December 2010, the City reached agreements with some non - safety employee bargaining units requiring employees to pay more for their retirement cost. The City will continue to look at various additional sharing arrangements pertaining to pension. Major Initiative: 2010 Civic Center Certificates of Participation (COPs) Issued In November 2010, the City entered the capital markets issuing nearly $128 million of Certificates of Participation (COPs), made up of $20.1 million in 2010A Certificates of Tax Exempt bonds and $106.6 million in 2010B Certificates of federally taxable direct pay Build America Bonds (BABS). All Three rating agencies (S& P, Fitch and Moody's) rated the City of Newport Beach as an AAA underlying City rating, making it one of only five California cities and the first Orange County city to receive this triple award from all three rating agencies. The City COPS were very well received by both the tax - exempt and taxable markets. General investor sentiment cited several reasons for the strong demand: the City's top ratings and well known name, the City's solid credit story, the lease structure and project, as well as a long history of conservative fiscal management and policies. A portion of the proceeds was used to refinance the City's 1998 outstanding Library COPs. Construction proceeds of $123 million will be used to make construction progress payments so that progress already made on the Civic Center site can continue and remain on schedule for the anticipated completion in late 2012. 17 I_\' P1_1N 11~ '1_1ki II1_191 :V1611A121010 �j14ki I &y Awards: The City has prepared a comprehensive annual financial report for the past 18 years. The City has received awards for excellence in financial reporting each of those years. The Government Finance Officers Association of the United States and Canada (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the City of Newport Beach for its comprehensive annual financial report for the fiscal year ended June 30, 2009. In order to be awarded a Certificate of Achievement, a government unit must publish an easily readable and efficiently organized comprehensive annual financial report. This report must satisfy both generally accepted accounting principles and applicable legal requirements. A Certificate of Achievement is valid for a period of one year only. We believe our current comprehensive annual financial report continues to conform to the Certificate of Achievement program requirements and we are submitting it to GFOA to determine its eligibility for another certificate. Acknowledgments: Preparation of this report was accomplished through the efficient and dedicated services of virtually everyone in the City's Accounting Division and the Graphics and Print Services unit. In addition, members of the Administrative Services Department would like to thank the City Manager, and the Mayor and City Council for their interest and support in planning and conducting the financial operations of the City in a responsible and progressive manner. We would also like to thank our auditors, Mayer Hoffman McCann P.C., for their time and assistance in the preparation of the report. This report was completely prepared and published by City employees. David A Kiff City Manager 18 Tr Ay McCraner Administrative Services Director Certificate of Achievement for Excellence in Financial Reporting Presented to City of Newport Beach California For its Comprehensive Annual Financial Report for the Fiscal Year Ended June 30, 2009 A Certificate of Achievement for Excellence in Financial Reporting is presented by the Government Finance Officers Association of the United States and Canada to government units and public employee retirement systems whose comprehensive annual financial reports (CAFRs) achieve the highest standards in government accounting and financial reporting. ce,01 V tsdio M$ u"i A \b C4lPOtAtICV .� ?Hartc President Executive Director 19 L to R: Mayor Pro Tern Michael F. Henn, Mayor Keith D. Curry, Council Members: Edward D. Selich, Leslie J. Daigle, Nancy Gardner, Steven Rosansky and Don Webb City Attorney David R. Hunt Dana M. Smith .............................. Tracy M. McCraner ....................... Jay Elbettar ... ............................... Steven Parker ............................... Mark Harmon . ............................... Terri L. Cassidy ............................ Cynthia Cowell ............................. Vacant........... ............................... Jay Johnson .. ............................... Steve Badum . ............................... Laura Detweiler ............................ George Murdoch .......................... City Manager Dave Kiff 20 City Clerk Leilani Brown .......... ............................... Assistant City Manager ...........Administrative Services Director /Treasurer ..................... ............................... Building Director ........................ I .......................... Interim Fire Chief ...... ............................... General Services Director .... ............................... Human Resources Director ............... ........................Library Services Director ............................ .......................Planning Director ............................ ............................... Police Chief ............. ............................... Public Works Director ................. Recreation & Senior Services Director ...................... ............................... Utilities Director ELECTORATE r DUILDINGCODE 1 BOARD OF APPEALB r- -- -- -1 CIVIL SERVICE ROARD CITY CLERK L- - - -- -J r- - - - - -� PL NNING COMMISSION L- - - - - -J ASSISTANT CITY MANAGER CommunTy antl Emremic U— Idpmant Code Enffiddi PLANNING Land Use and Development Long -Range Planning Planning Commission Support Housing Programs BUILDING Adminiatrafion Plan ChecklPelmit Services Public Counter Inspections Use and Occupancy Residential Building Records FIRE Fire Suppression (Operations) Ocean Lifeguards Training and Educetion Hazardous Materials Fire Prevention Junior Lifeguard! Program Administration Emergency Medical Services POLICE Patrol Suppod Services Traffic Chief of Police Detective MAYOR a COUNCIL II CITYATTORNEY I CITY MANAGER ADMINISTRATIVE SERVICES AccountinglReportinglBudgeting Treasury Management Billing &Receivables PayrolllACmuma Payable I Cashiering Geographic Information Systems Revenue Information Technology Purchasing& Warehousing Printing &Postal Services O ELECTED OFFICIALS Fiscal Year 2009 -2010 r — — — — — — i BOARD OF LIBRARY TRUSTEES L- - - - - -J r— PARKS, —B BEACHES& 1 RECREATION COMMISSION CITYARTB COMMISSION L- - - - - -J r- - - - - -� HARBOR COMMISSION L— - - - - -J ASSISTANTCITYMANAGER Madder Re— Fuelk lMOrnnaeon Envlrmmental Enfomemnrt UTILITIES Water sedvice Wastewater Dollars. Electrical Services Oil & Gas Production Administration Street Lights GENERAL SERVICES Parks and Trees Operations Support Field Maintenance Toms, Signs &Markings Building Maintenance denied Collection Equipment Maintenance Recycling PUBLIC WORKS Engineering CIP Design & Construction Infrastructure Master Planning Development Services Traffic Planning & Engineering Public Right Way Permitting LIBRARY SERVICES Central Libary, & Branches Information & Reference Services Adult &Yacht Programs Arts &Culturel Services Literacy Services Board of Library Tmsteea Sudden City Arts Commiss'Ion Support Sister City Associatdn Suppon RECREATION & SENIOR SERVICES ouch &Aduti Spuds Progr'ama Senior Programa & Services IaygmundrPark Development Special Events mility ManagementlRese nations PEP R Commiscion Suppod HUMAN RESOURCES Recruitment General Liability EmployieASbor Relall Benefits Administration Classiddiicumcom's,mudion Workers COmpensafion Citywide Training Retiree Counseling &Benefits Civil Service Spend Support Griavande" Discipiinea r - - -- i L COUNCIL APPOINTED BOARDS & COMMISSIONS COUNCIL APPOINTED POSITIONS CITY DEPARTMENTS 21 This page left blank intentionally. 22 FINANCIAL SECTION INDEPENDENT Z AUDITORS' REPORT O U W U) J Q_ U Z Q Z Lz Mayer Hoffman McCann P.C. An Independent CPA Firm 2301 Dupont Drive, Suite 200 Irvine, California 92612 949 - 474 -2020 ph 949- 263 -5520 fx www.mhm - pc.com City Council City of Newport Beach Newport Beach, California INDEPENDENT AUDITORS' REPORT We have audited the accompanying basic financial statements of the governmental activities, the business -type activities, each major fund, and the aggregate remaining fund information of the City of Newport Beach, California, as of and for the year ended June 30, 2010, which collectively comprise the City's basic financial statements, as listed in the table of contents. These financial statements are the responsibility of the City of Newport Beach's management. Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the basic financial statements are free of material misstatement. An audit includes examining; on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and the significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions. In our opinion, the basic financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business -type activities, each major fund, and the aggregate remaining fund information of the City of Newport Beach, as of June 30, 2010, and the respective changes in financial position and cash flows, where applicable, of the City of Newport Beach, California and the respective budgetary comparison information for the general fund and major special revenue funds of the City for the year then ended in conformity with accounting principles generally accepted in the United States of America. The information identified in the accompanying table of contents as management's discussion and analysis and required supplementary information is not a required part of the basic financial statements, but is supplementary information required by the accounting standards generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the required supplementary information. However, we did not audit the information and express no opinion on it. 25 City Council City of Newport Beach Newport Beach, California Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City of Newport Beach's basic financial statements. The introductory section, combining and individual nonmajor fiind financial statements, schedules and statistical tables are presented for purposes of additional analysis and are not a required part of the basic financial statements. The combining and individual nonmajor fund financial statements and schedules have been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, are fairly stated in all material respects in relation to the basic financial statements taken as a whole. The introductory section and statistical tables have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we express no opinion on them. In accordance with Government Auditing Standards, we have also issued a report dated December 23, 2010 on our consideration of the City's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, grant agreements and other matters. The purpose of that report is to describe the scope of our testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Avditin; Standards and should be considered in assessing the results of our audit. Irvine, California December 23, 2010 26 FINANCIAL SECTION MANAGEMENTS Z DISCUSSION AND ANALYSIS O H U W Ul J a_ U Z Q Z Lz MANAGEMENT'S DISCUSSION AND ANALYSIS This section of the City of Newport Beach's Comprehensive Annual Financial Report (CAFR) presents management's discussion and analysis of the City's financial performance during the fiscal year that ended on June 30, 2010. This analysis should be read in conjunction with the Transmittal Letter at the front of this report and the accompanying Basic Financial Statements. FINANCIAL HIGHLIGHTS Long -term Economic Resource (Government -wide) Focus — Economic resources are differentiated from financial resources in that the economic measurement focus measures changes in net assets as soon as the event occurs regardless of the timing of related cash flows. Therefore, this measurement focus includes both current spendable resources and fixed non - spendable assets, and long -term claims against these assets. The resulting net assets utilizing this measurement focus provides one measure of the City's overall long -term financial condition. • The assets of the City exceeded liabilities at the close of the most recent fiscal year by $2.324 billion. The vast majority of this figure is represented by illiquid capital assets including land and infrastructure. Capital assets net of accumulated depreciation and any related debt totaled $2.193 billion, while the remaining balance of net assets totaled $130.5 million. Of this amount, $96.1 million represents unrestricted net assets that may be used to meet the City's ongoing obligations to citizens and creditors for both governmental and business -type activities. • The City's total net assets increased $1.8 million (0.08 %) to $2.324 billion as a result of current year activities. The increase is attributable to a half - year's savings in payroll due to the implementation of an Early Retirement Incentive Program and stronger tightening by the City Manager for all General Fund expenditures. • The City's total liabilities increased by $1.2 million, from $50.6 million to $51.8 million, during the current fiscal year. The increase is the net result of regular debt service payments of $3.4 million offset by a net increase in our estimate of our OPEB liability of $2.0 million, an addition of $4.4 million for an Early Retirement Incentive Program and $1.5 million to Purchase Agreement Payable as well as an increase of $5.7 million in various internal service fund liabilities. Short -term Financial Resources (Fund) Focus — The financial resources focus measures inflows of current spendable assets. The resulting net difference between current financial assets and current financial liabilities otherwise known as fund balance (or net working capital in the private sector) is a measure of the City's ability to finance activities in the near term. 29 • At the close of the current fiscal year, the City's Governmental Funds reported a combined ending fund balance of $110.2 million, a decrease of $10.9 million. Approximately $95.4 million is unreserved fund balance available to fund current obligations at the City Council's discretion. Of the $95.4 million unreserved fund balance, City Council has designated $18.9 million for contingencies in unexpected financial emergencies, $17.3 million for unspecified future appropriations, $4.3 million for capital projects that were not completed during the fiscal year, and $37.0 million designated for other special purposes including $27.5 million for facilities identified for replacement in the City's facilities replacement plan. The remaining $17.5 million is made up of smaller amounts designated across various funds. • The General Fund reported an increase of $2.5 million in fund balance after transferring $20.7 million to other funds. Of this transfer, $20.1 million represented a routine transfer to subsidize the operations of the Tide and Submerged Land Fund and a $0.5 million transfer to the Debt Service Fund. • At the end of the current fiscal year, unreserved fund balance for the General Fund was $76.7 million, or 52.3% of total General Fund expenditures and Tidelands subsidy. Although unreserved and available to fund current obligations, 100% of this balance is designated for contingencies, capital projects, appropriations, and other special purposes. COI94:01NVAW01aI off 1:8ylki /_1ki [d /_1 W-'3 IF_A121 JI;I IN &I The financial section of the comprehensive annual financial report contains the following information: Independent Auditors' Report, Management's Discussion and Analysis (this section), the Basic Financial Statements, and the Supplementary Information section, an optional section that presents combining and budgetary schedules for individual non - major funds. The Basic Financial Statements are comprised of three components: 1) Government -wide Financial Statements, 2) Fund Financial Statements and, 3) Notes to the Financial Statements. Management's Discussion and Analysis is intended to be an introduction to the Basic Financial Statements. BASIC FINANCIAL STATEMENTS Government -wide Financial Statements — The Government -wide Financial Statements are intended to provide a "Big Picture" view of the City as a whole using accounting methods similar to those used by private sector companies. The statement of net assets includes all of the City's assets (including non - spendable assets like streets, roads, and land rights) and liabilities (including long -term liabilities that may be paid over twenty or so more years). All of the current year revenues and expenses are accounted for in the statement of activities regardless of when cash is received or paid. The two Government -wide Financial Statements report the City's net assets and how they have changed. Net assets — the difference between the City's assets and liabilities — is one way to measure the City's financial health, or position. Over time, increases or 30 decreases in the City's net assets are an indicator of whether its financial health is improving or deteriorating, respectively. To assess the overall health of the City, one should also consider additional non - financial factors such as changes in the City's property tax base and the condition of the City's roads. The Government -wide Financial Statements of the City are divided into two categories: Governmental Activities — This statement depicts the extent to which programs are self - supporting and the net amount provided by property taxes and other general revenues. Most of the City's basic services are included in this category, such as the public safety, public works, community development, community services, and general administration. Taxes and other general revenues finance most of these activities. Business -type Activities — The City accounts for its Water and Wastewater utilities as business enterprises. The City charges fees to customers to recover the cost of providing Water and Wastewater services. Fund Financial Statements — Funds are accounting devices that the City uses to track and control resources intended for specific purposes. The Fund Financial Statements provide more detailed information about the City's most significant funds (major funds) but not the City as a whole. Some funds are required by State and Federal law or by bond covenants. Other funds are utilized simply to control and manage resources intended for particular purposes. The City utilizes three broad categories of funds: Governmental Funds — Governmental Funds are used to account for essentially the same functions reported as Governmental Activities in the Government -wide Financial Statements. However, unlike the Government -wide Financial Statements, Governmental Fund Financial Statements utilize the financial resources measurement focus and thus concentrate on near -term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Consequently, the Governmental Fund Financial Statements provide a detailed short-term view that helps a reader determine whether there are more or fewer financial resources that can be spent in the near future to finance City programs. Also included in the Governmental Funds are Permanent Funds. These funds are used to report resources that are legally restricted to the extent that only earnings, not principal, may be used for purposes that support City programs. Proprietary Funds — Services for which the City charges customers a fee are generally reported in Proprietary Funds (Enterprise Funds and Internal Service Funds). Like the Government -wide Financial Statements, these funds provide both long and short -term financial information utilizing the economic resources measurement focus. The City's Enterprise Funds (Water and Wastewater Funds) are individual funds represented in the combined presentation of Business -type 31 Activities in the Government -wide Financial Statements. The individual fund presentation provides more detailed information about each business segment, its operating statements, and statements of cash flow. The City also uses Internal Service Funds that are utilized to report and allocate the cost of certain centrally managed and operated activities (e.g. fleet maintenance, risk management, retiree insurance, etc.). Because the Internal Service Funds primarily serve the government, they are reported with Governmental Activities rather than the Business -type Activities in the Government -wide Financial Statements. Fiduciary Funds — The City utilizes Fiduciary Funds to account for assets held by the City in a trustee capacity, or as an agent for other governmental entities, private organizations, or individuals. All of the City's fiduciary activities are reported in a separate statement of fiduciary net assets and a statement of changes in fiduciary net assets. We exclude these activities from the City's Government -wide Financial Statements because the City cannot use these assets to finance its operations. Notes to the Financial Statements — The financial statements also include the Notes to the Financial Statements that provide important narrative details about the information contained in the financial statements. Information contained in the Notes to the Financial Statements is critical to a reader's full understanding of the Government - wide and Fund Financial Statements. Supplementary Information — In addition to the required elements of the Basic Financial Statements, we have also included a Supplementary Information section, which includes budgetary and combining schedules that provide additional details about the City's non -major Governmental Funds, Internal Service Funds, and Fiduciary Funds. GOVERNMENT -WIDE FINANCIAL ANALYSIS Net Assets — Net assets may serve as a useful indicator of a government's overall financial condition over time. The City's combined net assets for the year ended June 30, 2010, as shown in Table 1, were $2.324 billion, increasing $1.8 million over the prior year due to the implementation of an Early Retirement Incentive Program and stronger fiscal constraints mandated by the City Manager for all General Fund Departmental expenditures. 32 Current and other assets Capital assets Total assets Other liabilities Long -term liabilities outstanding Total liabilities Net assets Invested in capital assets, net of debt Restricted Unrestricted Total net assets Table 1 Net Assets (in thousands) Governmental Activities 2009 2010 $ 182,934 $ 175,006 2,084,794 2,101,052 2,267,728 2,276,058 16,594 19,094 49,009 51,766 65,603 70,860 2,061,636 2,084,912 44,213 34,237 96,276 86,049 $ 2,202,125 $ 2,205,198 Business -Type Activities 2009 2010 2010 $ 15,234 $ 12,257 108,642 108,450 123,876 120,707 2,346 2,084 1,585 50,594 3,931 2,084 108,510 108,450 11,435 10,174 $119,945 $ 118,624 Total 2009 2010 $ 198,168 $ 187,263 2,193,436 2,209,502 2,391,604 2,396,765 18,940 21,178 50,594 51,766 69,534 72,944 2,170,146 2,193,362 44,213 34,237 107,711 96,223 $ 2,322,070 $ 2,323,822 Invested in Capital Assets - By far the largest component of net assets, $2.193 billion (94.4 %), reflects the City's investment in capital assets (e.g., land, buildings, infrastructure, and equipment) less accumulated depreciation and any related outstanding debt used to acquire those assets. The City's capital assets do not represent a financial resource and consequently are not readily available for funding current obligations. Restricted Assets - An additional portion of the City's net assets, $34.2 million (1.5%), represents resources that are subject to external restrictions on how they may be used. Unrestricted Assets - The remaining balance of unrestricted net assets, $96.2 million (4.1 %), may be used to meet the City's ongoing obligations to citizens and creditors. • Overall, the City's net assets increased $1.8 million in the current fiscal year. Total net assets increased $1.8 million (0.08%) to $2.324 billion as a result of current year activities. The increase is attributable to a half - year's savings in payroll due to the implementation of an Early Retirement Incentive Program. Other key financial activity for the year ended June 30, 2010, is shown in Table 2. 33 Table 2 Changes in Net Assets (in thousands) Governmental Activities Business -Type Activities 2009 2010 2009 2010 Revenues: Program Revenues: Charges for services $ 36,739 $ Operating grants and capital contributions 13,404 Capital grants and contributions 24,634 General Revenues: Taxes: Property taxes Sales tax Sales tax in -lieu Transient occupancy taxes Other taxes Intergovernmental (Unrestricted): Motor Vehicle License Tax Investment related income Miscellaneous Total revenues Expenses: General government Public safety Public works Community development Community services Interest Water Wastewater Total expenses Increases in net assets Net asset at beginning of year Net assets at end of year Total 2009 2010 37,789 $ 20,446 $ 20,781 $ 57,185 $ 58,570 15,678 - - 13,404 15,678 12,350 - - 24,634 12,350 70,127 72,000 - - 70,127 72,000 17,926 17,441 - - 17,926 17,441 7,503 4,540 - - 7,503 4,540 11,171 11,401 - - 11,171 11,401 8,465 7,943 - - 8,465 7,943 356 315 - - 356 315 2,862 1,414 511 229 3,373 1,643 1,863 1,820 - - 1,863 1,820 195,050 182,691 20,957 21,010 216,007 203,701 16,431 17,083 - - 16,431 17,083 79,301 79,403 - - 79,301 79,403 45,600 55,445 - - 45,600 55,445 10,284 10,082 - - 10,284 10,082 20,589 17,232 - - 20,589 17,232 437 373 - - 437 373 - - 18,211 18,733 18,211 18,733 3,753 3,599 3,753 3,599 172,642 179,618 21,964 22,332 194,606 201,950 22,408 3,073 (1,007) (1,322) 21,401 1,751 2,179,717 2,202,125 120,953 119,946 2,300,670 2,322,071 $2,202,125 $ 2,205,198 $119,946 $ 118,624 $2,322,071 $2,323,822 Governmental Activities - The cost of all governmental activities in the current fiscal year was $179.6 million. As shown in the statement of activities, $37.8 million of the cost was paid by those who directly benefited from the programs, $28 million was financed by contributions and grants received from other governmental organizations, developers, and property owners for both capital and operating activities, and $113.8 million was subsidized through general City revenues. Net assets for governmental activities of the City at the beginning of the year were $2.2 billion, and increased by $3.1 million by the end of the year. The increase is attributable to a half - year's savings in salaries and benefits due to the implementation of an Early Retirement Incentive Program and City Manager mandated cost reduction across all General Fund departments. 34 The City is a full service city providing residents and visitors with the following functional services: General Government is comprised of six departments (City Council, City Clerk, City Manager, City Attorney, Human Resources, and Administrative Services) providing general governance, executive management, legal services, records management, risk management, finance, accounting, and information technology services. Public Safety is comprised of two departments (Police and Fire) providing general law enforcement, fire suppression and prevention services, paramedic and medical transport services, disaster preparedness, and ocean lifeguard services. Public Works is comprised of two departments (Public Works and General Services) providing engineering, construction and maintenance of public streets, highways, buildings, beaches, parks, and related infrastructure; as well as traffic engineering, street lighting, and trash disposal services. Community Development is comprised of two departments (Planning and Building) that provide planning and zoning services, economic development services, and building plan check and code enforcement services. Community Services is comprised of two departments (Library Services and Recreation & Senior Services) providing library services, cultural and arts programs, recreation services, and senior social and transportation services. Business Enterprise Operations are overseen by one department (Utilities) providing water and wastewater services. Each program's net cost (total cost less revenues generated by the activities) is presented in Tables 3 and 4. The net cost shows the extent to which the City's general taxes support each of the City's programs. 35 General government Public safety Public works Community development Community services Interest 80.000 70.000 60.000 50.000 40.000 30.000 20.000 10.000 Table 3 Governmental Activities (in thousands) 2009 Total Cost Net Cost of Service of Service $ 16,431 $ (13,773) 79,301 (62,513) 45,600 (14,666) 10,284 (5,431) 20,589 (1,045) 437 (437) $ 172,642 $ (97,865) 2010 Total Cost Net Cost of Service of Service $ 17,083 $ (14,078) 79,403 (61,456) 55,445 (27,170) 10,082 (5,276) 17,232 (5,449) 373 (373) $ 179,618 $ (113,801) Table 4 Program Expenses and Revenue - Governmental Activities Year Ended June 30, 2010 (in millions) General Public Safety Public Works Community Community Interest Government Development Services ■ Total Expenses ■ Program Revenues ■ Program Revenues Of the $113.8 million net cost, general revenues were used to finance the following governmental activities, $61.5 million was utilized for public safety, $27.2 million was utilized for public works, $14.0 million was utilized for general government, $5.4 million was utilized for community services, $5.3 million was utilized for community development and $0.4 million was utilized for interest on long -term debt. The net cost of funding Public Works activities increased dramatically over 2009 by $12.5 million. This was primarily attributed to the following factors: $7.0 million in one- time contributions from community fund raising was received during FY 2009 for the 36 OASIS Senior Center, which opened in September 2010; due to timing differences in revenue collections and expenses for the Assessment Districts, 2009 revenues were greater than expenses causing net cost to be lower compared to FY 2010; and finally, there was a one -time transfer to the Newport Mesa Unified School District (NMUSD) from the Bonita Canyon Development Fund of $1.0 million which was used to finance school district construction related projects. Table 5 Governmental Activities Year Ended June 30, 2010 Sources of Revenue 2% 21% i Charges for Services Contributions 15% Taxes 62 Other 37 Functional Expenses 10% 9% 6% ■ General Government ■ Public Safety ❑ Public Works 0 31% 44% ■ Community Development ❑ Community Services Major Governmental Activities in the current fiscal year included the following: Revenues: Excluding transfers, total program and general revenues in the current year amounted to $182.7 million. Of this amount, 36.0% represents program generated revenue (20.7% charges for services and 15.3% capital grants and contributions), while the remaining 64.0% represents general revenue sources (62.2% taxes and 1.8% from other sources). • The City reported capital contributions of $10.6 million in public works program revenues and $1.8 million in community services program revenues for a total of $12.4 million in capital contributions. The majority of these contributions are related to the property owner contributions associated with the new assessment district, the funding from OC RDA for the utility underground project in the West Santa Ana Heights and donations related to the construction of the OASIS Senior Center. • The $3.4 million decrease in General Revenues over the prior year is a combination of a few key factors: o In spite of the poor economy, the City, unlike most other cities, has enjoyed long -term stability in its number one revenue source at $72.0 million, due to a constant demand for coastal property. Over the past ten years, assessed values have increased an average of 8.88% per year. Assessed property values increased only 1.76% in the current 38 year versus 5.91% in the prior year. Property tax collections, in total, including unsecured property and prior year collections, increased $1.9 million or 2.7% in the current year. Sales tax in -lieu however, decreased $2.9 million, or 39.5% due to a $1.2 million correction from the State for an over advance in 2009, as well as a result of reduced consumer spending. o At nearly $17.4 million and $11.4 million respectively, sales taxes and transient occupancy taxes represent the number two and three top individual revenue sources for the City. Due to the depressed economic activity, sales taxes decreased $0.5 million, or 2.7% from the prior year while transient occupancy taxes increased just slightly by $0.2 million or 2.1% from the prior year, due to a full year's operations of a luxury resort which opened in FY 2009. o Investment income decreased $1.4 million or 50.6% from the prior year due to lower interest rates offset by an increase in fair value of investments in the current year. An increase in the fair value of investments usually occurs in a falling interest rate environment when the stated rate of return exceeds the current market rate. Expenses: • In the current year, expenses for all governmental activities totaled $179.6 million. Overall, an increase of $7.0 million, 4.0 %, over the prior year, this is primarily attributable to the following factors: • Public Works expenses increased $9.8 million, 22 %, when compared to prior year primarily due to utility undergrounding activities in both the West Santa Ana Heights community and in Assessment District. Also, there was a one -time transfer to the Newport Mesa Unified School District (NMUSD) from the Bonita Canyon Development Fund of $1.0 million which was used to finance school district capital improvements. • Community Services expenses decreased $3.4 million, 16 %, due to a decrease in maintenance costs for libraries and community recreation and senior centers in the current year. Business -type Activities — Business -type activities are financed primarily by fees charged to external parties for goods and services. The City's two business -type activities, water and wastewater utilities, produced a $1.3 million decrease in net assets. The decrease in net assets was comprised of an operating loss of $1.5 million primarily due to an increase in cost of purchase of water offset by a decrease in sale of water due to water conservation measures placed by the City, non - operating revenues of $224,502, and an off - setting ($22,199) consolidation adjustment related to internal service fund activities. 39 Table 6 Program Expense & Revenue - Business -type Activities Year Ended June 30, 2010 (in millions) 20.000 18.000 16.000 14.000 12.000 10.000 8.000 6.000 4.000 2.000 Water W astewate r ■Total Expenses ■ Program Revenues Major Business -type Activities in the current fiscal year included the following: Water Of the $18.7 million in water related expenses, $8.2 million (43.9°/x) is for the purchase of water, $3.8 million (20.4 %) covers employee related costs , $3.2 million (17.3 %) is for maintenance, supplies, and depreciation of the water system, $1.7 million (9.2 %) is for professional services, and the remaining $1.8 million (9.2 %) is collectively attributable to other miscellaneous expenses. Wastewater Of the $3.6 million in wastewater related expenses, $1.5 million (42.0 %) is for maintenance, supplies, and depreciation of the wastewater system, $1.5 million (41.8 %) is for employee related costs, and the remaining $582,297 (16.2 %) is attributable to professional services and other miscellaneous expenses. 40 FINANCIAL ANALYSIS OF THE CITY'S FUNDS As noted earlier, the City uses fund accounting to highlight available financial resources and to ensure and demonstrate compliance with finance - related legal requirements. Governmental Funds — Utilizing the financial resources measurement focus, the City's Governmental Funds provide information on near -term inflows and outflows, and balances of spendable resources. This information is useful in assessing the City's financing requirements. In particular, unreserved fund balance may serve as a useful measure of a government's net resources available for spending at the end of the fiscal year. Fund Balance — As of the end of the current fiscal year, the City's Governmental Funds reported combined fund balances of $110.2 million, a decrease of $10.9 million from the prior year. The General Fund represented $82.2 million or 74.6% of the combined fund balances of the Governmental Funds. Reserved Fund Balance — The City has $14.8 million in fund balance that is reserved to indicate it is not available to finance new activities because it has already been committed: 1) to fulfill contractual obligations and purchase orders approximating $6.3 million, 2) for permanent endowment approximating $4.6 million, 3) as a reserve for affordable housing approximating $1.6 million, and 4) for a variety of other restrictions that make these resources unavailable for spending approximating $2.3 million. Unreserved Fund Balance — The remaining $95.4 million is classified as unreserved fund balance, which is available for spending at the City Council's discretion but may be designated for special purposes. Of the $95.4 million unreserved fund balance, City Council has designated $18.9 million for contingencies for unexpected financial emergencies, $17.3 million for unspecified future appropriations as approved by Council, $4.3 million for capital projects that were not completed during the fiscal year, and $37.0 million designated for other special purposes including $27.5 million for facilities identified for replacement in the City's facilities replacement plan. The remaining $17.5 million is made up of smaller amounts designated across various funds. Major activities in the Governmental Funds in the current fiscal year included the following: • The General Fund ended the year with a $82.2 million fund balance, a net increase of $2.5 million after transferring $20.7 million to other funds ($20.1 million represented a routine transfer to subsidize the operations of the Tide and Submerged Land Fund and $0.6 million represented various nonrecurring transfers to other funds). The net increase in fund balance of $2.5 million was higher than last year's net change in fund balance of $0.6 million due to the implementation of the Early Retirement Incentive Program (ERIP) resulting in 41 cost savings to the City of $1.4 million, a reduction in annual pension costs of $167 thousand related to employee contribution, and stronger tightening by the City Manager for all General Fund expenditures. • The activities of the Tide and Submerged Land Fund are routinely subsidized by the General Fund. At year end, the General Fund transferred sufficient resources ($20.1 million) to cover the Tide and Submerged Land Fund's deficit and other outstanding commitments and designations of fund balance. The Tide and Submerged Land Fund ended the current year with $2.4 million in fund balance. • The Civic Center commenced with grading and excavation costs contributing to expenditures of $10.5 million in the City Hall Improvement Fund. Proprietary Funds — The City's Proprietary Funds (Enterprise and Internal Service Funds) presented in the Fund Financial Statements section basically provide the same type of information in the Government -wide Financial Statements, but include individual segment information. Major activities in the Enterprise Funds in the current fiscal year included the following: • Despite a $0.4 million increase in charges for services in the Water Fund, net assets decreased $1.1 million due to increase in cost of purchase of water offset by a decrease in sale of water due to water conservation measures placed by the City in the sale of water. Net assets in Wastewater Fund decreased by $0.2 million. Unrestricted net assets at year end were $6.5 million for the Water Fund, and $3.8 million in the Wastewater Fund. • Other factors concerning the finances of these two funds have already been addressed above in the discussion of the City's business -type activities. Major activities in the Internal Service Funds in the current fiscal year included the following: • Net assets in the Internal Service Funds decreased $2.1 million in the current year. The decrease was primarily due to the implementation of ERIP and the recognition of the liability in the current year. 42 GENERAL FUND BUDGETARY HIGHLIGHTS Changes to Original Budget Final budgeted revenues for the General Fund increased $0.7 million from the original budget during the year ended June 30, 2010. Significant factors contributing to this fluctuation are highlighted as follows: • Final budgeted intergovernmental revenues increased $0.24 million from the original budget, $0.25 million in charges for services and $0.21 million in unexpected other revenues due to increase in public safety grants and staff service charges related to these grants, and higher than expected other revenues. Final budgeted expenditures for the General Fund decreased $28.3 million from the original budget during the year ended June 30, 2010. Significant factors contributing to this fluctuation are highlighted as follows: • Budgeted expenditures for general government decreased $0.8 million due to a combination of salary savings from the implementation of ERIP, City Manager mandated budget reductions and a routine allocation of expenditures from General Fund cost centers to the Tideland Fund for code enforcement services utilized in support of tidelands operations. • Public safety and public works functions were decreased by $21.0 million and $4.0 million respectively. This budget reduction was primarily due to a routine allocation of expenditures from General Fund cost centers to the Tideland Fund for police, fire and beach maintenance services utilized in support of tidelands operations. Other factors contributing were City Manager mandated budget reductions in both functions and salary savings from the implementation of ERIP in the public works function. • Budgeted expenditures for community development decreased $0.2 million due to City Manager mandated budget reductions. • Final budgeted capital outlays from the General Fund decreased $2.4 million from the original budget during the year ended June 30, 2010 due to Council approved reductions of $0.4 million and budgetary reductions to reflect project timing differences which are re- budgeted in the following fiscal year for 1) Prop 50 Buck Gully Stabilization, 2) Streetlight Conversion Program, 3) Ocean Front Alley Replacement, 4) China Cove Slope and Drainage Improvements, 5) Newport Coast Community Center Air Conditioner Replacement, as well as 6) various smaller budgetary decreases. • During the current year, final transfers out budgeted for the General Fund varied from the original budget by approximately $17.4 million primarily due to the expenditure allocation to the Tidelands Fund. 43 Variance with Final Budget Actual revenues were $4.2 million below final budgeted revenues for the year ended June 30, 2010, due to the continued economic recession. Significant factors contributing to this negative variance are summarized as follows: • A $0.8 million positive variance was realized due to higher than expected property tax revenues. Newport Beach has not been as significantly impacted with housing troubles. • Lower than expected sales and sales in -lieu tax due to the lower economy as well as a $1.2 million State correction for a 2009 advance approximated $5.4 million reduction compared to the original budget • Transient Occupancy tax revenues were lower than expected by $1.6 million due to the recession as travelers are staying home • A $1.0 million positive variance in other revenue was realized due to a one -time recognition of revenues allowed in customer deposits for a reduction in related liability. Actual General Fund expenditures of $126.7 million were significantly less than final budgetary estimates of $132.4 million. Significant factors contributing to the $5.7 million positive variances are summarized as follows: • A $0.6 million negative variance was realized from capital improvement projects due to higher maintenance costs. • A total of $6.3 million in positive variances was realized in Public Safety, Public Works, Community Services, Community Development and General Government due to implementation of ERIP, managerial action to reduce operating expenditures, temporary vacancies and under - filling of positions to ensure budgetary control for lower anticipated revenues. In spite of the $4.2 million lower than expected revenues, conservative budgeting, implementation of ERIP, managerial action, increased fiscal discipline, timing of expenditures, strong fiscal policies and continued streamlining contributed to the $2.5 million net increase in General Fund, fund balance. CAPITAL ASSET AND DEBT ADMINISTRATION Capital Assets The City's investment in capital assets for governmental and business -type activities as of June 30, 2010, amounts to $2.21 billion (net of accumulated depreciation). This investment is comprised of a broad range of capital assets including land, buildings, machinery and equipment, park facilities, road improvements, storm drains, piers, oil wells, sound walls and bridges. The total net increase (including additions and 44 deletions) of $16.1 million represents a 0.7% increase over last year. The $16.1 million net increase is the result of additions of $24.8 million, and deletions of $8.7 million. Table 7 Capital Assets at Year End (net of depreciation, in thousands) Major capital asset events during the current fiscal year included the following: • The City capitalized $24.8 million in capital assets in the current year. Of the $24.8 million, $17.5 million net was paid for through current year expenses and the remaining $7.3 million represents additions from work in progress started in previous years. • Of the $24.3 million capitalized as governmental assets in the current year, $6.6 million represents additions from work in progress started in previous years. The $0.5 million capitalized in the current year as business -type assets represented additions for infrastructure consisting of major repairs and upgrades to the water mains and water wells. Additional information on the City's capital assets can be found in Note (5) of the Notes to the Financial Statements. 45 Governmental Activities Business -Type Activities Total 2009 2010 2009 2010 2009 2010 Land $ 1,815,781 $ 1,819,673 $ 2,016 $ 2,016 $ 1,817,797 $ 1,821,689 Structures 54,515 54,663 89 83 54,604 54,746 Equipment 8,365 7,836 107 83 8,472 7,919 Infrastructure 192,966 191,656 105,515 105,585 298,481 297,241 Work in progress 13,167 27,224 915 683 14,082 27,907 Totals $ 2,084,794 $ 2,101,052 $ 108,642 $ 108,450 $ 2,193,436 $ 2,209,502 Major capital asset events during the current fiscal year included the following: • The City capitalized $24.8 million in capital assets in the current year. Of the $24.8 million, $17.5 million net was paid for through current year expenses and the remaining $7.3 million represents additions from work in progress started in previous years. • Of the $24.3 million capitalized as governmental assets in the current year, $6.6 million represents additions from work in progress started in previous years. The $0.5 million capitalized in the current year as business -type assets represented additions for infrastructure consisting of major repairs and upgrades to the water mains and water wells. Additional information on the City's capital assets can be found in Note (5) of the Notes to the Financial Statements. 45 Long -term Debt At the end of the current fiscal year, the City had total long -term debt outstanding of $16.7 million for all governmental and business -type activities. Table 8 Outstanding Debt at Year -End (in thousands) The City's total debt decreased $1.9 million during the current fiscal year. The cumulative decrease is the result of expected debt service payments and the addition of $1.5 million to Purchase Agreement Payable for the two adjacent parcels of land located at 608 East Balboa Boulevard and 209 Washington Street which the City intends to convert to a parking lot. Additional information on the City's long -term debt obligation can be found in Note (6) of the Notes to the Financial Statements. FACTORS AFFECTING NEXT YEAR'S BUDGET • Each January, the City Council establishes priorities for the coming year(s). The financial implications of these priorities are considered when the budget is developed. The 2010 priorities include an array of goals including minimizing the adverse impacts of John Wayne Airport, implementing group home regulations, adopting a 15 -point Fiscal Sustainability Plan, enhancing public safety services, updating the City's harbor fees, updating the City Charter, breaking ground on the Civic Center Project, including the park, starting construction of the Sunset Ridge Park and the Marina Park, achieving the highest bond rating, dredging the Lower Bay and the Rhine Channel and initiating a results -based budgeting system. • After the date of this report's balance sheet but prior to the issuance of this report, the City issued nearly $128 million of Certificates of Participation (COPs) in Tax Exempt Bonds and Build America Bonds (BABS). See Note (17) in the Notes to financial statements. All three rating agencies (S &P, Fitch and Moody's) rated the City of Newport Beach as an AAA underlying City rating, making it one of only five California cities to receive this triple award. 46 Governmental Business -Type Total Activities Activities 2009 2010 2009 2010 2009 2010 Certificates of participation $ 4,335 $ 3,990 $ - $ - $ 4,335 $ 3,990 Note payable 1,120 933 - - 1,120 933 Pre - annexation agreement 9,600 8,400 - - 9,600 8,400 CDBG Loan 1,972 1,883 - - 1,972 1,883 Purchase Installment Agreement - 1,500 - - - 1,500 Revenue bonds - - 1,585 - 1,585 - Totals $ 17,027 $ 16,706 $ 1,585 $ - 18,612 $ 16,706 The City's total debt decreased $1.9 million during the current fiscal year. The cumulative decrease is the result of expected debt service payments and the addition of $1.5 million to Purchase Agreement Payable for the two adjacent parcels of land located at 608 East Balboa Boulevard and 209 Washington Street which the City intends to convert to a parking lot. Additional information on the City's long -term debt obligation can be found in Note (6) of the Notes to the Financial Statements. FACTORS AFFECTING NEXT YEAR'S BUDGET • Each January, the City Council establishes priorities for the coming year(s). The financial implications of these priorities are considered when the budget is developed. The 2010 priorities include an array of goals including minimizing the adverse impacts of John Wayne Airport, implementing group home regulations, adopting a 15 -point Fiscal Sustainability Plan, enhancing public safety services, updating the City's harbor fees, updating the City Charter, breaking ground on the Civic Center Project, including the park, starting construction of the Sunset Ridge Park and the Marina Park, achieving the highest bond rating, dredging the Lower Bay and the Rhine Channel and initiating a results -based budgeting system. • After the date of this report's balance sheet but prior to the issuance of this report, the City issued nearly $128 million of Certificates of Participation (COPs) in Tax Exempt Bonds and Build America Bonds (BABS). See Note (17) in the Notes to financial statements. All three rating agencies (S &P, Fitch and Moody's) rated the City of Newport Beach as an AAA underlying City rating, making it one of only five California cities to receive this triple award. 46 • Management projects that the Fiscal Year 2010 -11 General Fund revenues will decrease approximately $1.0 million from Fiscal Year 2009 -10 actual revenues. Property Tax revenues are budgeted to decrease by approximately $1.4 million in Fiscal Year 2010 -11. However, updated assessed valuation information from the Auditor Controller's Office reflects a projected 0.16 % increase in net taxable value in the City. Management expects sales tax revenues to remain the same as Fiscal Year 2009 -10 at $17.4 million and transient occupancy tax revenues estimated at $11.6 million, a slight increase of 1.4% over Fiscal Year 2009 -10 actual revenues. • Management has also been advised by CalPERS that pension costs are likely to increase substantially by 2011 -12 due to recent losses in the equities markets. In order to reduce the pension costs, the City negotiated with fire, lifeguard and police associations to pick up $0.9 million in annual pension costs and is evaluating other measures to help reduce the annual cost to the City. • In May, 2010, the City Council amended Resolutions 2000 -38 and 2004 -43 increasing parking meter fees and parking lot fees for an estimated increase to projected General Fund parking revenues of approximately $2.0 million. • In December, 2010, the City Council also approved Harbor Fee increases for Moorings and the Balboa Yacht Basin. Rates will be effective January 2011 and March 2011 respectively. The estimated annual increases to revenues are $400,000 and $180,000 respectively. CONTACTING THE CITY'S FINANCIAL MANAGEMENT This financial report is designed to provide our citizens, taxpayers, customers, and investors and creditors with a general overview of the City's finances and to demonstrate the City's accountability for the money it receives. If you have questions about this report or need additional financial information, contact the City's Administrative Services Department, 3300 Newport Boulevard, Newport Beach, CA 92663 -3884, (949) 644 -3146. The City's Budgets, Comprehensive Annual Financial Reports as well as other City financial information can be found on the City's website at: www. NewportBeachCA .00v /financialinfo. 47 This page left blank intentionally. 48 FINANCIAL SECTION G❑VERNMENT -WIDE FINANCIAL STATEMENTS z 0 U W Ln J Q_ U z Q z Lz CITY OF NEWPORT BEACH Statement of Net Assets June 30. 2010 Net Assets: Invested in capital assets, net of related debt Governmental Business -type Restricted for: Activities Activities Total Assets: Public works 27,051,894 - 27,051,894 Cash and investments (note 4) $ 152,980,445 $ 7,902,104 $ 160,882,549 Receivables: Nonexpendable 4,629,781 - Accounts 6,069,942 4,438,984 10,508,926 Notes 471,250 - 471,250 Interest 981,924 - 981,924 Intergovernmental receivables 7,685,901 - 7,685,901 Cash with fiscal agent (note 4) 2,156,931 - 2,156,931 Internal balances 83,530 (83,530) - Investment in joint venture (note 15) 2,778,443 2,778,443 Prepaid items 1,303,478 1,303,478 Inventory 493,704 - 493,704 Capital assets, (note 5): Non - depreciable 1,846,897,368 2,699,137 1,849,596,505 Depreciable 408,164,533 158,641,076 566,805,609 Accumulated depreciation (154,009,401) (52,890,366) (206,899,767) Total assets 2,276,058,048 120,707,405 2,396,765,453 Liabilities: Accounts payable 8,462,700 1,869,627 10,332,327 Accrued salaries and benefits 4,281,432 150,738 4,432,170 Accrued interest payable 99,804 - 99,804 Deposits payable 2,587,984 63,281 2,651,265 Unearned revenue 3,661,845 - 3,661,845 Noncurrent liabilities (note 6): Due within one year 9,360,999 9,360,999 Due in more than one year 42,404,642 - 42,404,642 Total liabilities 70,859,406 2,083,646 72,943,052 Net Assets: Invested in capital assets, net of related debt 2,084,912,221 108,449,847 2,193,362,068 Restricted for: Public safety 694,675 - 694,675 Public works 27,051,894 - 27,051,894 Debt Service 565,655 - 565,655 Permanent Funds: Nonexpendable 4,629,781 - 4,629,781 Expendable 1,294,924 - 1,294,924 Unrestricted 86,049,492 10,173,912 96,223,404 Total net assets $ 2,205,198,642 $ 118,623,759 $ 2,323,822,401 See accompanying notes to basic financial statements 51 Functions /Programs Primary government: Governmental activities: General government Public safety Public works Community development Community services Interest on long -term debt Total governmental activities Business -type activities: Water Wastewater Total business -type activities Total primary government CITY OF NEWPORT BEACH Statement of Activities Year Ended June 30, 2010 18,732,351 17,412,634 3,599,034 3,368,327 22,331,385 20,780,961 - 17,412,634 3,368,327 - 20,780,961 $ 201,949,330 $ 58,570,252 $ 15,677,617 $ 12,350,100 $ 86,597,969 See accompanying notes to basic financial statements 52 General revenues: Taxes: Property tax Sales tax Sales tax in -lieu Transient occupancy tax Business license tax Franchise tax Other taxes Intergovernmental (Unrestricted): Motor vehicle license tax Investment income Net increase in fair value of investments Other Total general revenues Change in net assets Net assets at beginning of year Net assets at end of year Program Revenues Operating Capital Total Charges for Grants and Grants and Program Expenses services Contributions Contributions Revenues $ 17,082,705 $ 2,909,603 $ 95,091 $ - $ 3,004,694 79,402,600 15,006,601 2,939,996 - 17,946,597 55,445,327 6,392,877 11,306,707 10,575,912 28,275,496 10,082,454 4,806,745 - - 45806,745 17,232,357 8,673,465 1,335,823 1,774,188 11,783,476 372,502 - - - 179,617,945 37,789,291 15,677,617 12,350,100 65,817,008 18,732,351 17,412,634 3,599,034 3,368,327 22,331,385 20,780,961 - 17,412,634 3,368,327 - 20,780,961 $ 201,949,330 $ 58,570,252 $ 15,677,617 $ 12,350,100 $ 86,597,969 See accompanying notes to basic financial statements 52 General revenues: Taxes: Property tax Sales tax Sales tax in -lieu Transient occupancy tax Business license tax Franchise tax Other taxes Intergovernmental (Unrestricted): Motor vehicle license tax Investment income Net increase in fair value of investments Other Total general revenues Change in net assets Net assets at beginning of year Net assets at end of year Net (Expense) Revenue and Changes in Net Assets Primary Government Governmental Business -type Activities Activities Total $ (14,078,011) $ - $ (14,078,011) (61,456,003) - (61,456,003) (27,169,831) - (27,169,831) (5,275,709) - (5,275,709) (5,448,881) - (5,448,881) (372,502) - (372,502) (113,800,937) - (113,800,937) - (1,319,717) (1,319,717) (230,707) (230,707) - (1,550,424) (1,550,424) $ (113,800,937) $ (1,550,424) $ (115,351,361) 71,999,680 - 71,999,680 17,440,736 - 17,440,736 4,539,946 - 4,539,946 11,400,710 - 11,400,710 4,026,614 - 4,026,614 3,715,946 - 3,715,946 201,893 - 201,893 314,957 314,957 706,855 128,399 835,254 707,200 100,117 807,317 1,820,272 1,820,272 116,874,809 228,516 117,103,325 3,073,872 (1,321,908) 1,751,964 2,202,124,770 119,945,667 2,322,070,437 $ 2,205,198,642 $ 118,623,759 $ 2,323,822,401 See accompanying notes to basic financial statements 53 This page left blank intentionally. 54 FINANCIAL SECTION FUND FINANCIAL STATEMENTS GOVERNMENTAL FUNDS z 0 U W Ul J a_ U z Q z It GOVERNMENTAL FUNDS Major Funds The General Fund is used to account for fiscal resources which are dedicated to governmental operations of the City, and not required to be accounted for in another fund. The Tide and Submerged Land Fund is a Special Revenue Fund used to account for all revenues and expenditures related to the operation of the City's tidelands, including beaches and marinas. The City Hall Improvement Fund is used to account for the design and construction of a new Civic Center Complex. Non -major Funds Non -major governmental funds are those governmental funds which do not meet the criteria of a major fund. For reporting purposes in this section, they are combined together as Other Governmental Funds. 56 CITY OF NEWPORT BEACH Governmental Funds Balance Sheet June 30, 2010 See accompanying notes to basic financial statements 57 Tide and Other Submerged City Hall Governmental Assets General Land Improvements Funds Totals Cash and investments $ 69,651,676 $ 3,049,169 $ - $ 39,535,506 $ 112,236,351 Receivables: Accounts 4,138,979 438,280 - 597,277 5,174,536 Notes 471,250 - 471,250 Interest 981,924 - - - 981,924 Intergovernmental receivables 4,948,641 - - 2,737,260 7,685,901 Cash with fiscal agent - - - 2,156,931 2,156,931 Due from other funds (note13) 12,760,751 - - - 12,760,751 Prepaid items 932,148 - - - 932,148 Inventory 238,274 - - - 238,274 Total assets $ 94,123,643 $ 3,487,449 $ $ 45,026,974 $ 142,638,066 Liabilities and Fund Balances Liabilities: Accounts payable $ 3,403,362 $ 860,640 $ 2,427,210 $ 1,484,759 $ 8,175,971 Accrued payroll 4,204,908 32,615 - - 4,237,523 Deposits payable 2,427,955 160,029 - - 2,587,984 Unearned revenue 1,904,552 - - 1,757,293 3,661,845 Unavailable revenue 25,000 - - 1,790,674 1,815,674 Due to other funds (note 13) 8,100,127 3,840,229 11,940,356 Total liabilities 11,965,777 1,053,284 10,527,337 8,872,955 32,419,353 Fund balances: Reserved for encumbrances 2,273,036 1,187,264 - 2,843,245 6,303,545 Reserved for debt service - - - 565,655 565,655 Reserved for permanent endowment - - - 4,629,781 4,629,781 Reserved for affordable housing 1,557,773 - - - 1,557,773 Reserved for prepaid items 932,148 - - 137,728 1,069,876 Reserved for inventories 238,274 - - - 238,274 Reserved for long -term receivable 471,250 - - - 471,250 Unreserved: Designated for special purposes 37,001,474 404,361 - - 37,405,835 Designated, reported in: Special revenue funds - - - 26,770,037 26,770,037 Capital projects funds - - - 5,279,056 5,279,056 Permanent funds - - - 1,294,924 1,294,924 Designated for contingencies 18,695,125 - - - 18,895,125 Designated for capital projects 3,495,487 842,540 - - 4,338,027 Designated for appropriations 17,293,299 - - - 17,293,299 Undesignated, reported in: Special Revenue Funds - - - (43,410) (43,410) Capital projects funds (10,527,337) (5,322,997) (15,850,334) Total fund balances 82,157,866 2,434,165 (10,527,337) 36,154,019 110,218,713 Total liabilities and and fund balances $ 94,123,643 $ 3,487,449 $ $ 45,026,974 $ 142,638,066 See accompanying notes to basic financial statements 57 CITY OF NEWPORT BEACH Governmental Funds Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Assets June 30, 2010 Fund balances of governmental funds $ 110,218,713 Amounts reported for governmental activities in the statement of net assets are different because: Capital assets net of accumulated depreciation have not been included as financial resources in governmental fund activity. Amount excludes capital assets from internal service funds which are added below. 2,094,702,395 Long term debt that have not been reported in the governmental fund activity. Amounts exclude long -term debt activity from internal service funds which have been added below: Certificates of participation payable (3,990,000) Note payable (932,934) Pre - annexation agreement (8,400,000) CDBG loan (1,883,000) Purchase Agreement Payable (1,500,000) Accrued interest payable for the current portion of interest due on long -term debt has not been reported in the governmental funds. (99,804) Some of the revenue will be collected after year -end, but is not available soon enough to pay for the current period's expenditures, and therefore is reported as unavailable revenue in the governmental funds. 1,815,674 Internal service funds are used by management to charge the costs of certain activities, such as self- insurance, workers' compensation, compensated absences, retiree insurance and fleet management, to individual funds. The assets (including capital assets) and liabilities of the internal service funds must be added to the statement of net assets. 12,405,625 Investment in joint ventures is not a current financial resource and therefore not reported in the governmental funds. 2,778,443 Internal balance created by the consolidation of internal service fund activities related to enterprise funds is not reported in the governmental funds. 83,530 Net assets of governmental activities $ 2,205,198,642 See accompanying notes to basic financial statements 58 CITY OF NEWPORT BEACH Governmental Funds Statement of Revenues, Expenditures and Changes in Fund Balances Year Ended June 30, 2010 See accompanying notes to basic financial statements 59 Tide and Other Submerged City Hall Governmental General Land Improvements Funds Totals Revenues Taxes and assessments: Property tax $ 71,999,679 $ - $ - $ - $ 71,999,679 Sales tax 17,440,736 - - - 17,440,736 Sales tax in -lieu 4,539,946 - - - 4,539,946 Transient occupancy tax 11,400,710 - - - 11,400,710 Othertaxes 7,976,309 - - 452,063 8,428,372 Intergovernmental 2,693,785 - - 12,685,913 15,379,698 Licenses and permits 2,603,618 1,272,402 - 74,947 3,950,967 Charges for services 15,210,962 82,400 - - 15,293,362 Fines and forfeitures 3,739,303 242 - 366,087 4,105,632 Investment income 706,855 37,846 - 545,189 1,289,890 Net increase in fair value of investments 707,200 38,947 - 409,216 1,155,363 Property income 6,080,577 8,544,346 - - 14,624,923 Donations 124,703 - - 5,372,937 5,497,640 Other 1,690,499 - 5,955,775 7,646,274 Total revenues 146,914,882 9,976,183 - 25,862,127 182,753,192 Expenditures Current: General government 15,086,125 83,421 - - 15,169,546 Public safety 56,108,046 20,654,193 - 440,206 77,202,445 Public works 25,681,411 3,995,923 - 10,245,072 39,922,406 Community development 8,097,847 338,125 - 1,120,094 9,556,066 Community services 13,109,514 1,806,716 - - 14,916,230 Capital outlay 8,627,010 1,197,037 8,776,524 18,196,082 36,796,653 Debt service (note 6): Principal - 186,679 - 1,634,000 1,820,679 Interest and fiscal charges - 50,383 - 332,914 383,297 Total expenditures 126,709,953 28,312,477 8,776,524 31,968,368 195,767,322 Excess (deficiency) of revenues over expenditures 20,204,929 (18,336,294) (8,776,524) (6,106,241) (13,014,130) Other financing sources (uses) Transfers in (note 14) 1,519,725 20,130,495 - 730,301 22,380,521 Transfers out (note 14) (20,677,752) - - (1,102,769) (21,780,521) Issuance of debt 1,500,000 1,500,000 Total other financing sources (uses) (17,658,027) 20,130,495 (372,468) 2,100,000 Net change in fund balances 2,546,902 1,794,201 (8;776,524) (6,478,709) (10,914,130) Fund balances, beginning 79,610,964 639,964 (1,750,813) 42,632,728 121,132,843 Fund balances, ending $ 82,157,866 $ 2,434,165 $ (10,527,337) $ 36,154,019 $ 110,218,713 See accompanying notes to basic financial statements 59 CITY OF NEWPORT BEACH Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmenal Funds to the Statement of Activities Year ended June 30, 2010 Net change in fund balances - total governmental funds $ (10,914,130) Amounts reported for governmental activities in the statement of activities differ from the amounts reported in the statement of activities because: Governmental funds report capital outlays as expenditures. However, in the statement of activities, the costs of those assets is allocated over their estimated useful lives as depreciation expense. This is the amount by which capital outlays exceeded depreciation in the current period. 16,716,517 Payment of debt service principal is an expenditure in the governmental funds, but the repayment reduces long -term liabilities in the statement of net assets. 1,820,679 Issuance of debt (1,500,000) Accrued Interest for debt service. This is the net change in accrued interest for the current period. 10,795 Some of the revenue will be collected after year -end, but is not available soon enough to pay for the current period's expenditures, and therefore is reported as unavailable revenue in the governmental funds.This is the net change in unearned revenue for the current period. (1,063,460) Internal service funds are used by management to charge the costs of certain activities, such as self- insurance, workers' compensation, compensated absences, retiree insurance and fleet management, to individual funds. The net revenue of the internal service funds is reported in the statement of activities. (2,113,119) Investment in joint ventures creates an explicit, measurable equity interest reported only in the statement of activities. 94,391 Internal balance created by the consolidation of internal service funds activities related to enterprise funds is reflected as a reduction of revenues in the statement of activities. 22,199 Change in net assets of governmental activities $ 3,073,872 See accompanying notes to basic financial statements RE CITY OF NEWPORT BEACH General Fund Budgetary Comparison Statement For the Year Ended June 30, 2010 61 Variance with Final Budget Budgeted Amounts Positive Original Final Actual (Negative) Revenues Taxes and assessments: Property $ 71,119,504 $ 71,119,504 $ 71,999,679 $ 880,175 Sales 19,656,428 19,656,428 17,440,736 (2,215,692) Sales tax in -lieu 7,690,691 7,690,691 4,539,946 (3,150,745) Transient occupancy 13,000,000 13,000,000 11,400,710 (1,599,290) Othertaxes 7,634,000 7,634,000 7,976,309 342,309 Intergovernmental 2,258,512 2,503,190 2,693,785 190,595 Licenses and permits 2,947,790 2,947,790 2,603,618 (344,172) Charges for services 14,445,353 14,697,021 15,210,962 513,941 Fines and forfeitures 3,645,000 3,645,000 3,739,303 94,303 Investment income 1,400,000 1,400,000 706,855 (693,145) Net increase in fair value of investments - - 707,200 707,200 Property income 6,018,404 6,018,404 6,080,577 62,173 Donations 100,000 131,926 124,703 (7,223) Other 495,600 710,618 1,690,499 979,881 Total revenues 150,411,282 151,154,572 146,914,882 (4,239,690) Expenditures General government: City council 1,279,249 1,167,130 1,163,486 3,644 City clerk 381,140 401,466 382,393 19,073 City attorney 2,430,349 2,888,766 2,688,217 200,549 City manager 1,655,746 1,259,664 1,163,956 95,708 Administrative services 8,383,109 7,759,152 7,356,232 402,920 Human resources 2,430,349 2,301,035 2,331,841 (30,806) Total General government 16,559,943 15,777,213 15,086,125 691,088 Public safety: Police 45,223,429 36,761,928 35,374,156 1,387,772 Fire 34,073,227 21,530,337 20,733,890 796,447 Total Public safety 79,296,656 58,292,265 56,108,046 2,184,219 Public works: General services 23,903,433 20,455,263 19,445,196 1,010,067 Public works 5,867,705 5,361,403 5,077,221 284,182 Utilities 1,467,754 1,372,929 1,158,994 213,935 Total Public works 31,238,891 27,189,595 25,681,411 1,508,184 61 CITY OF NEWPORT BEACH General Fund Budgetary Comparison Statement (continued) Variance with Final Budget Budgeted Amounts Positive Original Final Actual (Negative) Community development Planning 3,584,870 3,595,785 3,126,090 469,695 Building 4,858,614 4,602,820 4,408,215 194,605 Code and Water Quality Enforcement 768,329 780,411 563,542 216,869 Total Community development 9,211,813 8,979,016 6,097,847 881,169 sources (uses) (3,295,698) Community services: (17,658,027) 3,015,423 Net change in fund balance (13,609,074) Library Services 6,793,449 6,905,280 6,554,183 351,097 Recreation and senior services 7,246,217 7,225,823 6,555,331 670,492 Total Community services 14,039,666 14,131,103 13,109,514 1,021,589 Capital outlay 10,377,688 8,015,598 6,627,010 (611,412) Total expenditures 132,384,790 160,724,658 126,709,953 5,674,837 Excess (deficiency) of revenues over expenditures (10,313,376) 18,769,782 20,204,929 1,435,147 Other financing sources (uses) Transfers in - 600,000 1,519,725 919,725 Transfers out (3,295,698) (21,273,450) (20,677,752) 595,698 Issuance of debt - - 1,500,000 1,500,000 Total other financing sources (uses) (3,295,698) (20,673,450) (17,658,027) 3,015,423 Net change in fund balance (13,609,074) (1,903,668) 2,546,902 4,450,570 Fund balance, beginning 79,610,964 79,610,964 79,610,964 - Fund balance, ending $ 66,001,890 $ 77,707,296 $ 82,157,866 $ 4,450,570 62 Revenues Intergovernmental Licenses and permits Charges for services Fines and forfeitures Investment income Net increase in fair value of investments Property income Total revenues Expenditures General government Public safety Public works Community services Community development Capital outlay Debt service: Principal Interest and fiscal charges Total expenditures CITY OF NEWPORT BEACH Tide and Submerged Land Budgetary Comparison Statement For the Year Ended June 30, 2010 Excess (deficiency) of revenues over expenditures 937,586 (20,210,701) (18,336,294) 1,874,407 Other financing sources (uses) Transfers in Transfers out Total other financing sources (uses) Net change in fund balance Fund balance, beginning 19,984,366 20,130,495 146,129 (5,346,685) (5,346,685) 19,984,366 20,130,495 146,129 (4,409,099) (226,335) 1,794,201 2,020,536 639,964 639,964 639,964 Fund balance, ending $ (3,769,135) $ 413,629 $ 2,434,165 $ 2,020,536 63 Variance with Final Budget Budgeted Amounts Positive Original Final Actual (Negative) 1,309,600 1,309,600 1,272,402 (37,198) 41,000 41,000 82,400 41,400 1,000 1,000 242 (758) 75,000 75,000 37,846 (37,154) 38,947 38,947 8,109,110 8,109,110 8,544,346 435,236 9,535,710 9,535,710 9,976,183 440,473 - 83,421 83,421 - - 20,654,193 20,654,193 - 793,720 4,056,131 3,995,923 60,208 1,924,804 2,305,708 1,806,716 498,992 - 396,565 338,125 58,440 5,642,538 2,013,331 1,197,037 816,294 186,679 186,679 186,679 - 50,383 50,383 50,383 8,598,124 29,746,411 28,312,477 1,433,934 Excess (deficiency) of revenues over expenditures 937,586 (20,210,701) (18,336,294) 1,874,407 Other financing sources (uses) Transfers in Transfers out Total other financing sources (uses) Net change in fund balance Fund balance, beginning 19,984,366 20,130,495 146,129 (5,346,685) (5,346,685) 19,984,366 20,130,495 146,129 (4,409,099) (226,335) 1,794,201 2,020,536 639,964 639,964 639,964 Fund balance, ending $ (3,769,135) $ 413,629 $ 2,434,165 $ 2,020,536 63 This page left blank intentionally. 64 FINANCIAL SECTION FUND 9 FINANCIAL STATEMENTS PROPRIETARY FUNDS z 0 U W Ul J a_ U z Q z It PROPRIETARY FUNDS Business -type Activities The Water Fund is a Major Fund used to account for the operations of the City's water utility, a self - supporting activity which is entirely financed though user charges. The Wastewater Fund is a Major Fund used to account for the operations of the City's wastewater system, a self - supporting activity which is entirely financed through user charges. Governmental Activities The Internal Service Funds are used to allocate the cost of providing goods and services by one department to other departments on a cost reimbursement basis. MA CITY OF NEWPORT BEACH Proprietary Fund Statement of Net Assets June 30, 2010 Assets Current assets: Cash and investments Receivables: Accounts Inventories Prepaid items Total current assets Non - current assets: Capital assets (note 5): Land Structures Equipment Infrastructure Work in progress Less accumulated depreciation Total capital assets (net of accumulated depreciation) Total noncurrent assets Total assets Liabilities Current liabilities: Accounts payable Accrued payroll Deposits payable Due to General fund Workers' compensation - current General liability - current Compensated absences - current Early retirement incentive program - current Total current liabilities Non - current liabilities (note 6): Workers' compensation General liability Compensated absences Early retirement incentive program Net OPEB obligation Total noncurrent liabilities Total liabilities Net Assets Invested in capital assets, net of related debt Unrestricted Total Net Assets Adjustment to reflect the consolidation of internal service fund activities related to enterprise funds Net assets of business -type activities Enterprise Funds 2,016,450 - 2,016,450 Governmental 205,793 - Total Activities 291,888 - Enterprise Internal Service Water Wastewater Funds Funds $ 4,579,953 $ 3,322,151 $ 7,902,104 $ 40,744,094 3,778,832 660,152 4,438,984 895,406 - - - 255,430 - - - 371,330 8,358,785 3,982,303 12,341,088 42,266,260 2,016,450 - 2,016,450 - 205,793 - 205,793 - 291,888 - 291,888 23,022,523 115,518,007 42,625,388 158,143,395 - 454,696 227,991 682,687 - (39,242,601) (13,647,765) (52,890,366) (16,672,418) 79,244,233 29,205,614 108,449,847 6,350,105 79,244,233 29,205,614 108,449,847 6,350,105 87,603,018 33,187,917 120,790,935 48,616,365 1,716,159 153,468 1,869,627 286,729 111,860 38,878 150,738 43,909 63,257 24 63,281 - - - - 820,395 - - - 3,080,500 - - - 1,260,729 - - - 1,557,331 938,520 1,891,276 192,370 2,083,646 7,988,113 - - - 9,241,500 - - - 2,559,662 - - - 7,438,548 - - - 2,510,917 - - - 6,472,000 28,222,627 1,891,276 192,370 2,083,646 36,210,740 79,244,233 29,205,614 108,449,847 6,350,105 6,467,509 3,789,933 10,257,442 6,055,520 $ 85,711,742 $32,995,547 118,707,289 $ 12,405,625 (83,530) $ 118,623,759 See accompanying notes to basic financial statements 67 CITY OF NEWPORT BEACH Proprietary Fund Statement of Revenues, Expenses and Changes in Fund Net Assets For the Year Ended June 30, 2010 Enterprise Funds Operating revenues: Charges for sales and services: Water sales Charges for services Sewer service and connection fees Retiree Reimbursements Employee Contributions Other Total operating revenues Operating expenses: Purchase of water Salaries and benefits Depreciation Professional services Maintenance and supplies System maintenance Fleet parts and supplies Workers compensation Claims and judgments Compensated absences OPEB ARC - Cash subsidy OPEB ARC - Implied subsidy Other Total operating expenses Operating income (loss) Nonoperating revenues (expenses): Investment income Net increase in fair value of investments (Lass) on removal of capital assets Other fiscal charges Total nonoperating revenues Income (loss) before transfers Transfers in (note 14) Transfers out (note 14) Change in net assets Net assets, beginning of year Net assets, end of year Adjustment to reflect the consolidation of internal service fund activities related to enterprise funds Change in net assets of business -type activities Governmental Total Activities Enterprise Internal Service Water Wastewater Funds Funds $ 17,269,587 $ - $ 17,269,587 3,363,459 143,047 4,868 17,412,634 3,368,327 16,298,899 3,363,459 - - 1,119,262 - 329,234 147,915 217,901 20,780,961 17,965,296 8,221,667 - 8,221,667 - 3,824,526 1,506,063 5,330,589 1,459,423 1,540,875 566,182 2,107,057 1,814,442 1,727,920 334,666 2,062,586 51,431 1,585,478 646,030 2,231,508 813,819 121,900 298,462 420,362 452,466 - - - 3,530,130 - - - 201,308 - - - 2,022,943 - - - 4,409,833 - - - 2,016,000 - - - 2,477,000 1,686,515 244,888 1,931,403 1,115,115 18,708,881 3,596,291 22,305,172 20,363,910 (1,296,247) (227,964) (1,524,211) (2,398,614) 93,511 34,888 64,215 35,902 (2,764) - (1,250) - 153,712 70,790 (1,142,535) (157,174) (1,142,535) (157,174) 86,854,277 33,152,721 $ 85,711,742 $ 32,995,547 See accompanying notes to basic financial statements R0 128,399 444,227 100,117 457,145 (2,764) (15,877) (1,250) - 224,502 885,495 (1,299,709) (1,513,119) - (600,000) (1,299,709) (2,113,119) (22,199) $ (1,321,908) 14,518,744 $ 12,405,625 CITY OF NEWPORT BEACH Proprietary Fund Statement of Cash Flows For the Year ended June 30, 2010 See accompanying notes to basic financial statements M0 Enterprise Funds Governmental Total Activities Enterprise Internal Service Water Wastewater Funds Funds Cash Flows from operating activities: Cash received from customers or user departments $ 17,317,363 $ 3,459,786 $ 20,777,149 $ 17,593,471 Cash payments to employees for services (3,827,292) (1,512,077) (5,339,369) (8,331,566) Cash payments to suppliers for goods and services (11,944,684) (1,218,015) (13,162,699) (7,838,657) Cash received (payments made) for other operating activities (1,543,468) (240,020) (1,783,488) 547,135 Net cash provided by operating activities 1,919 489,674 491,593 1,970,383 Cash Flows from noncapital financing activities: Cash received from other funds - - - 358,208 Cash paid to other funds (600,000) Net cash provided by noncapital financing activities (241,792) Cash Flows from capital related financing activities: Acquisition of capital assets (1,716,744) (200,831) (1;917,575) (1,478,229) Proceeds from sale of capital assets - - - 105,934 Principal payments on long -term liabilities (1,585,000) - (1,585,000) - Otherfiscalcharges (1,250) (1,250) Net cash (used) for capital related financing activities (3,302,994) (200,831) (3,503,825) (1,372,295) Cash Flows from investing activities: Interest on investments 157,726 70,790 228,516 901,372 Net cash provided by investing activities 157,726 70,790 226,516 901,372 Net increase (decrease) in cash and cash equivalents (3,143,349) 359,633 (2,783,716) 1,257,668 Cash and cash equivalents, beginning 7,723,302 2,962,518 10,685,820 39,486,426 Cash and cash equivalents, ending $ 4,579,953 $ 3,322,151 $ 7,902,104 $ 40,744,094 Reconciliation of cash equivalents to the statement of net assets Cash and investments reported on statement of net assets $ 4,579,953 $ 3,322,151 $ 7,902,104 40,744,094 Cash and cash equivalents $ 4,579,953 $ 3,322,151 $ 7,902,104 $ 40,744,094 Reconciliation of operating income to net cash used for operating activities: Operating income (loss) $ (1,296,247) $ (227,964) $ (1,524,211) $ (2,398,614) Adjustments to reconcile operating income to net cash used for operating activities: Depreciation 1,540,875 566,182 2,107,057 1,814,442 (Increase) decrease in accounts receivable 49,889 96,327 146,216 (5,359) Decrease in inventories - - - 4,301 (Increase) decrease in prepaid items 25,000 - 25,000 (209,751) Increase (decrease) in accounts payable and accrued payroll (279,822) 55,129 (224,693) (311,521) (Decrease) in accrued interest payable (35,663) - (35,663) - (Decrease) in deposits payable (2,113) - (2,113) - Increase in workers' compensation - - - 429,000 (Decrease) in general liability - - - (2,077,346) (Decrease) in compensated absences - - - (788,206) Increase in early retirement incentive program - - - 3,449,437 Increase in net OPEB obligation 2,064,000 Total adjustments 1,298,166 717,638 2,015,804 4,368,997 Net cash used for operating activities $ 1,919 $ 489,674 $ 491,593 $ 1,970,383 Non -cash investing, capital and fnancina activities: Net increase in fair value of investments $ 64,215 $ 35,903 $ 100,117 $ 457,145 (Loss) on disposal of capital assets (2,764) (2,764) $ (15,877) Total of non-cash activities $ 61,451 $ 35,903 $ 97,353 $ 441,268 See accompanying notes to basic financial statements M0 This page left blank intentionally. 70 FINANCIAL SECTION FUND FINANCIAL STATEMENTS FIDUCIARY FUNDS z 0 U W Ul J a_ U z Q z It FIDUCIARY FUNDS Agency Funds, a type of Fiduciary Funds, are used to account for assets held by the City as an agent for other government entities, private organizations, or individuals. 72 CITY OF NEWPORT BEACH Agency Funds Statement of Fiduciary Assets and Liabilities June 30, 2010 Assets Totals Cash and investments (note 4) $ 4,370,075 Cash with fiscal agent (note 4) 4,618,481 Prepaid items 75,085 Intergovernmental receivable 88,344 Total assets $ 9,151,985 Liabilities Due to bondholders $ 7,301,247 Due to others 304,031 Due to ILJAOC 1,546,707 Total liabilities $ 9,151,985 See accompanying notes to basic financial statements 73 This page left blank intentionally. 74 FINANCIAL SECTION z 0 U W Cn J Q_ U NOTES TO THE z Q FINANCIAL STATEMENTS z lz CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30. 2010 (1) Summary of Significant Accounting Policies The basic financial statements of the City of Newport Beach (the "City ") have been prepared in conformity with generally accepted accounting principles ( "GAAP ") as applicable to government units. The Governmental Accounting Standards Board ( "GASB ") is the accepted standard - setting body for establishing governmental accounting and financial reporting principles. a. Reporting Entity The City of Newport Beach was incorporated on September 1, 1906. The current City Charter was adopted in 1954. Since adoption, the Charter has been amended several times. The most recent Charter amendment was approved by the voters on November 2, 2010, see Subsequent Events note for additional disclosure. The City operates under a Council- Manager form of government and provides the following services: public safety (police, fire, and marine), highway and streets, cultural and recreation, public improvements, planning and zoning, utilities, and general administrative services. The financial statements present the financial activity of the City of Newport Beach (the primary government) and its component unit. The component unit discussed below is included in the City's reporting entity because of the significance of its operational or financial relationship with the City. This entity is legally separate from the City. However, the City of Newport Beach's elected officials have continuing full or partial accountability for fiscal matters of the component unit. The financial reporting entity consists of: (1) the City, (2) organizations for which the City is financially accountable, and (3) organizations for which the nature and significance of their relationship with the City are such that exclusion would cause the City's financial statements to be misleading or incomplete. An organization is fiscally dependent on the primary government if it is unable to adopt its budget, levy taxes or set rates or charges, or issue bonded debt without approval by the primary government. In a blended presentation, a component unit's balances and transactions are reported in a manner similar to the balances and transactions of the City. Component units are presented on a blended basis when the component unit's governing body is substantially the same as the City's or the component unit provides services almost entirely to the City. Blended Component Unit The financial statements of the City of Newport Beach include the financial activities of the Newport Beach Public Facilities Corporation (the "Corporation "). The Corporation was formed on March 9, 1992, for the purpose of assisting the City of Newport Beach in the financing of public improvements, including a public 77 CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30. 2010 library and most recently the new civic center project. The Corporation is governed by a Board of Directors which is comprised of the seven City Councilmembers of the City of Newport Beach. The Corporation's financial data and transactions are included in the debt service fund. Separate financial statements are not prepared for the Corporation. The debt service fund is used solely to account for the activities of the Corporation and contains no other City debt financing activities. b. Basis of Accounting and Measurement Focus The basic financial statements of the City are composed of the following: Government -wide financial statements Fund financial statements Notes to the financial statements Financial reporting is based upon all GASB pronouncements, as well as the FASB Statements and Interpretations, APB Opinions, and Accounting Research Bulletins that were issued on or after November 30, 1989 that do not conflict with or contradict GASB pronouncements. Government -wide Financial Statements Government -wide financial statements display information about the reporting government as a whole, except for its fiduciary activities. These statements include separate columns for the governmental and business -type activities of the primary government (including its blended component units). The City of Newport Beach has no discretely presented component units. Eliminations have been made in the Statement of Activities so that certain allocated expenses are recorded only once (by the function to which they were allocated). However, general government expenses have not been allocated as indirect expenses to the various functions of the City. Government -wide financial statements are presented using the economic resources measurement focus and the accrual basis of accounting. Under the economic resources measurement focus, all (both current and long -term) economic resources and obligations of the reporting government are reported in the government -wide financial statements. Basis of accounting refers to when revenues and expenses are recognized in the accounts and reported in the financial statements. Under the accrual basis of accounting, revenues, expenses, gains, losses, assets, and liabilities resulting from exchange and exchange -like transactions are recognized when the exchange takes place. Program revenues include charges for services, special assessments, and payments made by parties outside of the reporting government's citizenry if that money is restricted to a particular program. Program revenues are netted with 78 CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30. 2010 program expenses in the statement of activities to present the net cost of each program. Amounts paid to acquire capital assets are capitalized as assets in the government -wide financial statements, rather than reported as an expenditure. Proceeds of long -term debt are recorded as a liability in the government -wide financial statements, rather than as another financing source. Amounts paid to reduce long -term indebtedness of the reporting government are reported as a reduction of the related liability, rather than as an expenditure. Fund Financial Statements The underlying accounting system of the City is organized and operated on the basis of separate funds, each of which is considered to be a separate accounting entity. The operations of each fund are accounted for with a separate set of self - balancing accounts that comprise its assets, liabilities, fund equity, revenues and expenditures or expenses, as appropriate. Governmental resources are allocated to and accounted for in individual funds based upon the purposes for which they are to be spent and the means by which spending activities are controlled. Fund financial statements for the primary government's governmental, proprietary, and fiduciary funds are presented after the government -wide financial statements. These statements display information about major funds individually and non -major funds in the aggregate for governmental and enterprise funds. Fiduciary statements include financial information for fiduciary funds. Fiduciary funds of the City primarily represent assets held by the City in a custodial capacity for other individuals or organizations. Governmental Funds In the fund financial statements, governmental funds are presented using the modified- accrual basis of accounting. Their revenues are recognized when they become measurable and available as net current assets. Measurable means that the amounts can be estimated, or otherwise determined. Available means that the amounts were collected during the reporting period or soon enough thereafter to be available to finance the expenditures accrued for the reporting period. The City uses an availability period of 60 days for all revenues except Sales Taxes. The fiscal year sales tax clean up payment is received in September, beyond our traditional 60 day availability criteria. However, this payment is significant to this revenue category in that it adjusts the fiscal years amounts to reflect the economic climate for the year. In an effort to be more consistent with our analytical comparisons and benchmarking we have modified our availability criteria to 90 days for sales tax revenues only. Property taxes, sales taxes, franchise taxes, gas taxes, motor vehicle license fee, transient occupancy taxes, grants, and interest associated with the current fiscal period are all considered to be susceptible to accrual and so have been 79 CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30. 2010 recognized as revenues of the current fiscal period to the extent normally collected within the availability period. Other revenue items are considered to be measurable and available when cash is received by the City. Revenue recognition is subject to the measurability and availability criteria for the governmental funds in the fund financial statements. Exchange transactions are recognized as revenues in the period in which they are earned (i.e., the related goods or services are provided). Locally imposed derived tax revenues are recognized as revenues in the period in which the underlying exchange transaction upon which they are based takes place. Imposed non - exchange transactions are recognized as revenues in the period for which they were imposed. If the period of use is not specified, they are recognized as revenues when an enforceable legal claim to the revenues arises or when they are received, whichever occurs first. Government - mandated and voluntary non - exchange transactions are recognized as revenues when all applicable eligibility requirements have been met. In the fund financial statements, governmental funds are presented using the current financial resources measurement focus. This means that only current assets and current liabilities are generally included on their balance sheets. The reported fund balance (net current assets) is considered to be a measure of "available spendable resources." Governmental fund operating statements present increases (revenues and other financing sources) and decreases (expenditures and other financing uses) in net current assets. Accordingly, they are said to present a summary of sources and uses of "available spendable resources' during a period. Non - current portions of long -term receivables due to governmental funds are reported on their balance sheets in spite of their spending measurement focus. Special reporting treatments are used to indicate, however, that they should not be considered "available spendable resources," since they do not represent net current assets. Recognition of governmental fund type revenue represented by non - current receivables is deferred until they become current receivables. Non- current portions of other long -term receivables are offset by fund balance reserve accounts. Revenues, expenses, gains, losses, assets, and liabilities resulting from non - exchange transaction are recognized in accordance with the requirements of GASB Statement No. 33. Because of their spending measurement focus, expenditure recognition for governmental fund types excludes amounts represented by non- current liabilities. Since they do not affect net current assets, such long -term amounts are not recognized as governmental fund type expenditures or fund liabilities. Amounts expended to acquire capital assets are recorded as expenditures in the year that resources were expended, rather than as fund assets. The proceeds of long -term debt are recorded as other financing sources rather than as a fund 80 CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30. 2010 liability. Amounts paid to reduce long -term indebtedness are reported as fund expenditures. When both restricted and unrestricted resources are combined in a fund, expenses are considered to be paid first from restricted resources, and then from unrestricted resources. Permanent Funds, also referred to as Endowment Funds, are governmental funds used to report resources that are legally restricted to the extent that only earnings, and not principal, may be used for purposes that support City programs. The amount of investment earnings available for expenditure is reported as Designated Fund Balance in the fund level financial statements. The endowment principal is reported as Restricted for Permanent Endowments in the Statement of Net Assets. The State law governing the spending of endowment funds investment earnings is California Probate Code Section 18504. Proprietary & Fiduciary Funds The City's enterprise and internal service funds are proprietary funds. In the fund financial statements, proprietary and fiduciary funds are presented using the accrual basis of accounting. Revenues are recognized when they are earned and expenses are recognized when the related goods or services are delivered. In the fund financial statements, proprietary funds are presented using the economic resources measurement focus. This means that all assets and all liabilities (whether current or non - current) associated with their activity are included on their balance sheets. Proprietary fund type operating statements present increases (revenues) and decreases (expenses) in total net assets. Proprietary fund operating revenues, such as charges for services, result from exchange transactions associated with principal activity of the fund. Exchange transactions are those in which each party receives and gives up essentially equal values. Non - operating revenues, such as subsidies, taxes, and investment earnings result from non - exchange transactions or ancillary activities. Amounts paid to acquire capital assets are capitalized as assets in the proprietary fund financial statements, rather than reported as expenditure. Proceeds of long -term debt are recorded as a liability in the proprietary fund financial statements, rather than as other financing source. Amounts paid to reduce long -term indebtedness of the proprietary funds are reported as a reduction of the related liability, rather than as expenditure. Agency funds are custodial in nature (assets equal liabilities) and do not involve the recording of City revenues and expenses. 81 CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30. 2010 C. Fund Classifications The City utilizes the following broad categories of funds: Major Funds Major funds are those funds which are either material or of particular importance. Major Governmental Funds — Governmental funds are generally used to account for tax supported activities. The following governmental funds met the criteria of a major fund: General Fund The General Fund is the general operating fund of the City. It is used to account for all activities, except those required to be accounted for in another fund. Tide and Submerged Land The Tide and Submerged Land Fund is used to account for all revenues and expenditures related to the operation of the City's tidelands, including beaches and marinas. City Hall Improvements Fund The City Hall Improvements Fund is used to account for the design and construction of a new Civic Center Complex. Major Proprietary Funds — Proprietary funds are used to report an activity for which a fee is charged to external users to recover the cost of operation. Water Fund The Water Fund is an enterprise fund used to account for the activities associated with the transmission and distribution of potable water by the City to its users. Wastewater Fund The Wastewater Fund is an enterprise fund used to account for the activities associated with providing sewer services by the City to its users. Internal Service Funds — The Internal Service Funds are used to account for the City's self- insured general liability and workers' compensation, compensated absences, retiree insurance, and the cost of maintaining and replacing the City's rolling stock fleet. City departments are the primary users of these services and are charged a fee on a cost reimbursement basis. Fiduciary Funds — The Fiduciary Funds are used to account for assets held by the City as an agent for property owners with special assessments, local businesses in business improvements districts, and other individuals who have made miscellaneous special deposits with the City. 82 CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30. 2010 d. Cash and Investments For purposes of the statement of cash flows, cash and cash equivalents are defined to be cash on hand, demand deposits and highly liquid investments with a maturity of three months or less from the date of purchase. For financial statement presentation purposes, cash and cash equivalents are shown as cash and investments and restricted cash and investments in the proprietary funds. Investments Investments are generally stated at fair value. Cash and investments are pooled to maximize investment yields. The net change in fair value and interest earned on the investments is allocated to the respective funds based on each fund's average monthly cash and investments balance. The City's investment in LAIF is $2,723,956 at June 30, 2010. This investment value is based on information provided by the State Treasurer's Office. The carrying value of the City's position in the fund is materially consistent with the fair value of the fund shares. This pool is under the regulatory oversight of the State Treasurer's Office. The LAIF Board consists of five members as designated by Statute. The Chairman is the State Treasurer, or his designated representative. Two members qualified by training and experience in the field of investment of finance, and two members who are treasurers, finance or fiscal officers or business managers employed by any County, City or local district or municipal corporation of this state, are appointed by the State Treasurer. The term of each appointment is two years, or at the pleasure of the appointing authority. e. Notes Receivable This is a promissory note between the City of Newport Beach and the City Manager. The City Manager and the City of Newport Beach entered into an employment agreement on August 18, 2009. This agreement provided incentives to the City Manager, in the form of an equity contribution, to allow him to re- locate within the incorporated boundaries of Newport Beach. The promissory note documents the terms and conditions by which the City Manager will repay the City when the property is sold, or he retires /terminates, whichever occurs first. 83 CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30. 2010 f. Intergovernmental Receivables Intergovernmental receivables represent grant reimbursement requests, capital project billings, and pending transfers of taxes and fees collected by other government agencies. As of June 30, 2010, the balance of this account was $7,685,901. g. Inventories Inventories are valued at cost, which approximates market, using the first -in, first - out method. The City follows the consumption method for inventory control. The costs of governmental fund type inventories are recorded as expenditures when consumed. h. Capital Assets Capital assets, which include land, structures, equipment, and infrastructure assets, are reported in the applicable governmental or business -type activities columns in the Government -wide Financial Statements. Capital assets are recorded at cost where historical records are available and at an estimated original cost where no historical records exist. Equipment purchased in excess of $5,000 is capitalized if it has an expected useful life of three years or more. Building, infrastructure, and improvements are capitalized if cost is in excess of $30,000. The cost of normal maintenance and repairs that do not add to the value of the asset's lives are not capitalized. The City chose to value and report on infrastructure assets in their entirety (e.g. Prior to 1980). Major capital outlay for capital assets and improvements are capitalized as projects are constructed. For debt - financed capital assets, interest incurred during the construction phase is reflected in the capitalization value of the asset constructed, net of interest earned on the invested proceeds over the same period. Capital assets acquired through lease obligations are valued at the present value of future lease payments at the date acquired. Contributed capital assets are valued at their estimated fair market value at the date of contribution. Capital assets used in operations are depreciated over their estimated useful lives using the straight -line method in the government -wide financial statements and in the fund financial statements of the proprietary funds. Depreciation is charged as an expense against operations and accumulated depreciation is reported on the respective balance sheet. The range of lives used for depreciation purposes for each capital asset class as follows: Structures 30 -75 years Equipment 3 -15 years Infrastructure 20 -75 years 84 1• CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30. 2010 Claims and Judgments The City accounts for material claims and judgments and associated legal and administrative costs when it is probable that the liability claim has been incurred and the amount of the loss can be reasonably estimated. The City records the estimated loss liabilities in the Internal Service Fund. Included therein are claims incurred but not reported, which consists of (a) known loss events expected to be presented as claims later, (b) unknown loss events that are expected to become claims, and (c) expected future development on claims already reported. This is based upon historical actual results that have established a reliable pattern supplemented by specific information about current matters. Small dollar claims and judgments are recorded as expenditures when paid. Property Taxes The assessment, levy, and collection of property taxes are the responsibility of the County of Orange. The City records property taxes as revenue when received from the County, except at year -end, when property taxes received within 60 days are accrued as revenue. Property taxes are assessed and collected each fiscal year according to the following property tax calendar: Lien date Levy date Due dates Collection dates k. Compensated Absences March 1 July 1 November 1 — 1 t installment March 1 — 2nd installment December 10 — 1st installment April 10 — 2nd installment It is the City's policy to permit employees to accumulate earned but unused vacation and limited amounts of earned but unused sick leave benefits, which will be paid to employees upon separation from City service. Beginning in fiscal year 1990, the City adopted a general leave plan to replace the traditional vacation and sick leave plan. The City uses a general leave plan which permits a maximum of three years' accrual for every employee, above which the excess is paid out as current compensation. All employees hired prior to January 1, 1990, were given the option of remaining in the traditional vacation and sick leave plan or enrolling in the general leave plan. All employees hired on or after January 1, 1990, are automatically enrolled in the general leave plan. Compensated absences are accrued in the Compensated Absence Internal Service Fund when employee services have been rendered and when it becomes probable that the City will compensate the employees for benefits through paid time off or cash payments at termination or retirement. Benefits that have been earned but are not yet available for use because employees have not met certain conditions are accrued to the extent it is probable that the employees will meet the conditions for compensation in the future. 85 CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30. 2010 Deposits Payable In the government -wide and fund level financial statements, deposits payable represent monies collected for developer deposits, demolition deposits, planning deposits and others, for services which have not yet been performed. These unspent portions are reported as liabilities on the financial statements. M. Unearned Revenue /Unavailable (Deferred) Revenue In the government -wide and the fund level financial statements, unearned revenues are those where asset recognition (availability criteria) has been met, but the revenue recognition criteria have not been met. In the governmental funds financial statements, unavailable revenue represents revenues which have been earned but have not yet met the availability criteria for revenue recognition based on the modified accrual basis of accounting. Reserved and Desianated Fund Balances The City has set up 'reserves" of fund equity to segregate fund balances which are not appropriable for expenditure in future periods, or which are legally set aside for a specific future use. Fund "designations" also may be established to indicate tentative plans for financial resource utilization in a future period. The following provides explanations as to the nature and purpose of each reserve and designation. Reserved for encumbrances Amounts reserved for encumbrances are commitments for materials and services on purchase orders and contracts that are legally committed but not expended by fiscal year end. Reserved for debt service This account sets aside a portion of fund balance to meet the annual debt service requirements. Reserved for permanent endowment This account reflects a permanent endowment established for the maintenance and dredging of Upper Newport Bay. 86 CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30. 2010 Reserved for affordable housing This account reflects amounts collected from developers to build affordable housing to all income levels in compliance with State planning laws. Reserved for prepaid items This account reflects prepaid items which are not available, spendable resources. Reserved for inventories This account reflects the value of inventories purchased by the City but not yet issued to the operating departments. Reserved for long -term receivable This account reflects the value of the note receivable which is not an available and spendable resource. Designated for special purposes This account reflects funds that have been designated for special projects which vary in nature. Designated for contingencies Contingency designations represent funds for unexpected emergencies. Designated for capital projects This account reflects unspent appropriations committed to capital projects in the prior year. Designation for appropriations This account reflects unspent appropriations that may be utilized to augment the operating budget. Designated for Special Revenue Funds This account reflects unspent appropriations committed to special revenue funds in the prior year. Designated for Permanent Funds This account reflects both the spendable amount of investment earnings available as well as the non - spendable amount of endowment principal. 87 CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30. 2010 (2) Reconciliation of Government -wide and Fund Financial Statements a. Explanation of Differences Between Governmental Funds Balance Sheet and the Statement of Net Assets The "total fund balances" of the City's governmental funds $110,218,713 differs from "net assets' of governmental activities $2,205,198,642 reported in the statement of net assets. This difference primarily results from the long -term economic focus of the statement of net assets versus the current financial resources focus of the governmental fund balance sheets. Capital Related Items When capital assets (property, plant, and equipment) that are to be used in governmental activities are purchased or constructed, the cost of those assets are reported as expenditures in governmental funds. However, the statement of net assets includes those capital assets among the assets of the City as a whole. Cost of capital assets $2,232,039,378 Accumulated depreciation (137,336,983) Total capital assets, net* $2,094,702,395 *Amount excludes net capital assets of $6,350,105 from Internal Service funds. Long -term Debt Transactions Long -term liabilities applicable to the City's governmental activities are not due and payable in the current period and accordingly are not reported as fund liabilities. All liabilities (both current and long -term) are reported in the statement of net assets. Balances at June 30, 2010 were: Certificates of participation $ 3,990,000 Note payable 932,934 Pre - annexation agreement 8,400,000 CDBG Loan 1,883,000 Purchase Agreement Payable 1,500.000 Total $16.705.934 88 CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30. 2010 Accrued Interest Accrued liabilities in the statement of net assets differ from the amount reported in governmental funds due to accrued interest on outstanding debt payable (see Note 6). Accrued interest added J99 804 Investment in Joint Venture Investment in joint ventures is not a current financial resource and hence reported only in the statement of net assets. Net equity in joint venture $2.778.443 Unavailable Revenue Some of the revenue will be collected after year -end, but is not available soon enough to pay for current period's expenditures, and therefore is reported as unavailable revenue in the governmental funds. Unavailable revenue $1.815.674 Internal Service Funds Internal service funds are used by management to charge the costs of certain activities (such as equipment management and self- insurance authorities) to individual funds. The assets (including capital assets) and liabilities of the internal service funds are included in governmental activities in the statement of net assets, because they primarily serve governmental activities of the City. Internal Service Funds $12.405.625 Reclassifications and Eliminations Interfund balances must generally be eliminated in the government -wide statements, except for net residual amounts due between governmental activities. Amounts involving fiduciary funds should be reported as external transactions. Any allocations must reduce the expenses of the function from which the expenses are being allocated, so that expenses are reported only once — in the function in which they are allocated. Investments in joint ventures are not a current financial resource and are not reported in the governmental funds. Therefore, it is added for the statement of net assets. Interfund balance created due to the consolidation of internal service activities to governmental and enterprise funds is not reported in the fund statements and must be added to the statement of net assets. 89 CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30. 2010 Explanation of Differences betweeen Government Funds Balance Sheet and the Statement of Net Assets Assets Cash and investments Receivables: Accounts Notes Interest Intergovernmental receivables Cash with fiscal agent Interfund balances Investment in joint venture Prepaid items Inventory Capital assets Accumulated depreciation Total assets Liabilities and Fund Balances / Net Assets Total Capital Governmental Related Funds Items 112,236,351 $ 5,174,536 471,250 981,924 7,685,901 2,156,931 12,760,751 932,148 238,274 - 2,232,039,378 F Long -term Accumulated Debt Depreciation Transactions (137,336,983) S - $ 142,638,066 $ 2,232,039,378 $ (137,336,983) $ - Liabilities: Accounts payable 8,175,971 Accrued payroll 4,237,523 - - - Accrued interest payable - Deposits payable 2,587,984 Claims payable - - - - Workers' compensation payable - - - - Compensated absences payable - - - - Early retirement incentive program - - - - Unearned revenue 3,661,845 - - - Unavailable revenue 1,815,674 - - - Due to other funds 11,940,356 - - - Long -term liabilities - - - 16,705,934 Total liabilities 32,419,353 16,705,934 Fund balances /net assets 110,218,713 2,232,039,378 (137,336,983) (16,705,934) Total liabilities and and fund balances / net assets $ 142,638,066 $ 2,232,039,378 _L_(13 $ - 90 CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30. 2010 Investment Internal Reclassifications - Interest in Joint Unavailable Service and Statement of Payable Venture Revenue Funds Eliminations Net Assets $ $ $ $ 40,744,094 $ - $ 152,980,445 895,406 - 6,069,942 - - 471,250 1,260,729 - - 981,924 - - - 7,685,901 1,557,331 - - 2,156,931 - (12,677,221) 83,530 2,778,443 - - 2,778,443 - 371,330 - 1,303,478 - 255,430 - 493,704 820,395 23,022,523 - 2,255,061,901 (16,672,418) - (154,009,401) $ $ 2,778,443 $ $ 48,616,365 $ (12,677,221) $ 2,276,058,048 $ $ 286,729 - $ 8,462,700 - 43,909 - 4,281,432 99,804 - - 99,804 - - - 2,587,984 1,260,729 - 1,260,729 3,080,500 - 3,080,500 1,557,331 - 1,557,331 938,520 - 938,520 - - 3,661,845 (1,815,674) - - - 820,395 (12,760,751) - 28,222,627 44,928,561 99,804 (1,815,674) 36,210,740 (12,760,751) 70,859,406 (99,804) 2,778,443 1,815,674 12,405,625 83,530 2,205,198,642 $ - $ 2,778.443 $ - $ 48,616,365 $ (12,677,221) $ 2,276,058,048 91 CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30. 2010 b. Explanation of Differences between Enterprise Funds and Government - wide Statement of Net Assets Total net assets of the City's Enterprise Funds of $118,707,289 differs from net assets of the business -type activities of $118,623,759 reported in the government -wide statement of net assets. The difference, ($83,530), results from the consolidation of internal service fund activities related to the enterprise funds. Explanation of Differences between Enterprise Funds and Government -wide Statement of Net Assets 92 Total Internal Government wide Enterprise Service Statement of Assets Funds Funds Net Assets Cash and investments $ 7,902,104 $ $ 7,902,104 Receivables: Accounts 4,438,984 4,438,984 Interfund balances - (83,530) (83,530) Capital assets, net 108,449,847 108,449,847 Total assets $ 120,790,935 $ (83,530) $ 120,707,405 Liabilities and Fund Balances I Net Assets Liabilities: Accounts payable $ 1,869,627 $ - $ 1,869,627 Accrued payroll 150,738 - 150,738 Deposits payable 63,281 - 63,281 Total liabilities 2,083,646 - 2,083,646 Net Assets Invested in capital assets, net of related debt $ 108,449,847 - $ 108,449,847 Unrestricted 10,257,442 (83,530) 10,173,912 $ 118,707,289 $ (83,530) $ 118,623,759 92 CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30. 2010 C. Explanation of Differences between Governmental Fund Operating Statements and the Statement of Activities The "net change in fund balances" for governmental funds ($10,914,130) differs from the "change in net assets' for governmental activities $3,073,872 reported in the statement of activities. The differences arise primarily from the long -term economic focus of the statement of activities versus the current financial resources focus of the governmental funds. The effect of the difference is illustrated below. Capital Related Items When capital assets that are to be used in governmental activities are purchased or constructed, the resources expended for those assets are reported as expenditures in governmental funds. However, in the statement of activities, the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense. In governmental funds, significant maintenance projects are reclassified as functional expenses in the statement of net assets. Also, contributed capital is not recorded in governmental funds; therefore it is added for the statement of net assets. Capital Outlay $ 34,329,714 Transfers out of WIP (6,634,505) Capital Outlays expended 27,695,209 Internal Service funds - asset additions (1,478,229) Governmental funds - asset additions (3,279,632) Net change in capital related items $ 22,937,348 Depreciation expense ($10,002,880) Deletions in IS accumulated depreciation 1,814,442 Deletions in Governmental funds accumulated depreciation 1,967,607 Net change in accumulated depreciation $ (6,220,831) 93 CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30. 2010 Long -Term Debt Transactions Repayment of debt service is reported as an expenditure in governmental funds and, thus, has the effect of reducing fund balance because current financial resources have been used. Issuance of debt is reported as an other financing source in governmental funds, thus increasing fund balance. For the City as a whole, however, the principal payments reduce the liabilities, and proceeds from long term debt increase liabilities in the statement of net assets. Certificates of Participation $ 345,000 Note payable 186,679 Pre - annexation agreement 1,200,000 CDBG loan 89,000 Purchase Agreement Payable (1,500,000) Total principal payments made $ 320,679 Accrued Interest Interest accrued on outstanding debt payable is not recorded as an expenditure in governmental funds, and, thus has been added to the statement of activities. Net change in accrued interest 10 795 Investment in Joint Venture Investment in joint ventures creates an explicit, measurable equity interest reported only in the statement of activities. Net change in investment in joint venture 94 391 Unavailable Revenue Some of the revenue will be collected after year -end, but is not available soon enough to pay for current period's expenditures, and therefore is reported as unavailable revenue in the governmental funds. Net change in unavailable revenue $1.063.460 94 CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30. 2010 Internal Service Funds Internal service funds are used by management to charge the costs of certain activities, such as equipment management and self- insurance activities, to individual funds. The adjustments for internal service funds "closes" those funds by reimbursing or charging additional amounts to participating departments in individual funds for costs over or under charged for those activities. Net change in Internal Service Funds $2A1 3 .11 9 Reclassification and Eliminations Interfund balances must generally be eliminated in the government -wide financial statements, except for net residual amounts due between governmental and business -type activities. Any allocations must reduce the expenses of the function from which the expenses are being allocated, so that expenses are reported only once — in the function in which they are allocated. Amounts involving fiduciary funds should be reported as external transactions. 95 CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30. 2010 Explanation of Differences between Governmental Fund Operating Statements and the Statement of Activities Revenues: Taxes and assessments Intergovernmental Licenses and permits Charges for services Fines and forfeitures Investment income Net increase in fair value of investments Property income Share of joint venture net gain Donations Loss on sale of capital assets Other Total revenues Expenditures: Current: General government Public safety Public works Community development Community services Capital outlay Debt service: Principal retirement Interest and fiscal charges Total expenses Other financing sources (uses): Transfers in Transfers out Issuance of debt Total other financing sources (uses) Net change in fund balances / net assets Total Capital Governmental Related Funds Items $ 113,809,443 $ 15,379,698 3,950,967 15,293,362 4,105,632 1,289,890 1,155,363 14,624,923 Accumulated Depreciation Long -term Debt Transactions 5,497,640 - - - 7,646,274 182,753,192 15,169,546 307,422 - 77,202,445 1,478,229 (592,357) - 39,922,406 3,152,068 5,213,292 - 9,556,066 - 105,731 - 14,916,230 127,564 1,186,743 - 36,796,653 (27,695,209) - - 1,820,679 - - (1,820,679) 383,297 - - - 195,767,322 (22,937,348) 6,220,831 (1,820,679) 22,380,521 - - - (21,780,521) - - - 1,500,000 - - (1,500,000) 2,100,000 - (1,500,000) (10,914,130) 22,937,348 (6,220,831) 320,679 Fund balances /net assets beginning of year 121,132,843 2,209,102,030 (131,116,152) (17,026,613) Fund balances /net assets end of year $ 110,218,713 $ 2,232,039,378 $ (137,336,983) $ (16,705,934) 96 CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30. 2010 - - - - (22,380,521) - (600,000) 22,380,521 - (600,000) 10,795 94,391 (1,063,460) (2,113,119) 22,199 3,073,872 (110,599) Investment 2,879,134 Internal Reclassifications 2,202,124,770 Accrued in Joint Unavailable Service and Statement of Interest Venture Revenue Fund Eliminations Activities $ - $ - $ - $ 113,809,443 - - (1,063,460) - - 14,316,238 - - - - - 3,950,967 - - - - 22,199 15,315,561 - - - - - 4,105,632 - - - 444,227 - 1,734,117 - - - 457,145 - 1,612,508 - - - - - 14,624,923 - 94,391 - - - 94,391 - - - - - 5,497,640 - - - (15,877) - (15,877) 7,646,274 94,391 (1,063,460) 885,495 22,199 182,691,817 - - - 609,478 996,259 17,082,705 - - - 1,200,755 113,528 79,402,600 - - - (231,501) 7,389,062 55,445,327 - - - 407,392 13,265 10,082,454 - - - 412,490 589,330 17,232,357 - - - - (9,101,444) - (10,795) - - - - 372,502 (10,795) - - 2,398,614 - 179,617,945 - - - - (22,380,521) - (600,000) 22,380,521 - (600,000) 10,795 94,391 (1,063,460) (2,113,119) 22,199 3,073,872 (110,599) 2,684,052 2,879,134 14,518,744 61,331 2,202,124,770 $ (99;804) $ 2,778,443 $ 1,815,674 $ 12,405,625 $ 83,530 $ 2,205,198,642 97 CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30. 2010 d. Explanation of Differences between Enterprise Funds Operating Statement and the Statement of Activities The change in net assets for the City's enterprise funds ($1,299,709) differs from the change in net assets of the business -type activities ($1,321,908) reported in the government -wide statement of activities. The difference, ($22,199), results from the consolidation of internal service fund activities related to the enterprise funds. Explanation of Differences between Enterprise Funds Operating Statement and the Statement of Activities Total Internal Business -type activities Enterprise Service Statement of Funds Fund Activities Operating revenues: Charges for sales and services: Water sales $ 17,269,587 $ - $ 17,269,587 Sewer service and connection fees 3,363,459 - 3,363,459 Other 147,915 - 147,915 Total operating revenues 20,780,961 - 20,780,961 Operating expenses Purchase of Water 8,221,667 - 8,221,667 Salaries and wages 5,330,589 - 5,330,589 Depreciation 2,107,057 - 2,107,057 Professional Services 2,062,586 - 2,062,586 Maintenance and supplies 2,231,508 22,199 2,253,707 System maintenance 420,362 - 420,362 Other 1,931,403 1,931,403 Total operating expenses 22,305,172 22,199 22,327,371 Operating income (1,524,211) (22,199) (1,546,410) Nonoperating revenues (expenses): Investment income 128,399 - 128,399 Net decrease in fair value of investments 100,117 - 100,117 Loss on removal of capital assets (2,764) - (2,764) Other (1,250) - (1,250) Total nonoperating revenues (expenses) 224,502 - 224,502 Change in net assets (1,299,709) (22,199) (1,321,908) Net assets, beginning of year 120,006,998 (61,331) 119,945,667 Net assets, end of year $ 118,707,289 $ (83,530) $ 118,623,759 98 CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30. 2010 (3) Budgetary Control and Compliance The City adheres to the following general procedures in establishing the budgetary data reflected in the financial statements: • During April, the City Manager submits to the City Council a proposed operating budget for the fiscal year commencing the following July 1. The operating budget includes proposed expenditures and the means of financing them. Public hearings are conducted at City Council meetings to obtain taxpayer comments. Prior to July 1, the budget is legally adopted through passage of an appropriation resolution. • Budgets are adopted on an annual basis consistent with generally accepted accounting principles for General and Special Revenue Funds. • The City of Newport Beach does not present budget information on Capital Projects Funds since the City approved project - length budgets. These project - length budgets authorize total expenditures over the duration of a construction project rather than year -by -year budgeting. • The City of Newport Beach does not present budget information on Debt Service and Permanent Funds since the City is not required to and does not adopt an annual budget. • The budget is formally integrated into the accounting system and employed as a management control device during the year. • The legal level of budgetary control is at the fund level. The City Manager is authorized to transfer budgeted amounts between departments within any fund; however, any revisions which alter the total appropriations of any fund must be approved by City Council. • At fiscal year -end, budget appropriations lapse. Budget appropriations for incomplete capital projects are re- budgeted in the following fiscal year by Council action and are included in the revisions noted above. Projects that are not started during the budget year are reevaluated in the following year. • Encumbrances represent commitments related to unperformed contracts for goods and services. The City utilizes an encumbrance system as a management control technique to assist in controlling expenditures. Under this system, encumbrance accounting for the expenditure of funds is recorded in order to indicate outstanding commitments and is employed in the governmental fund types. Encumbrances outstanding at year -end are reported as reservations of fund balances since they do not constitute expenditures or liabilities. Encumbrances and their related budgets are honored in the subsequent year to fulfill these commitments and are presented in the original adopted budget. m (4) CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30. 2010 Expenditures exceeded appropriations in the following governmental funds. Justice Assistance Grant Contributions Appropriations Expenditures $ 67,197 $ 67,957 $ - $ 1,648,609 The following funds reported deficit fund balances: Special Revenue Funds OTS DUI Grant $ 39,952 Community Development Block Grant $ 3,458 Capital Proiects City Hall Improvements $ 10,527,337 Marine Science Center $ 125,421 OASIS Senior Center $ 2,598,614 Misc SAH Projects $ 367,847 Marina Park $ 1,178,259 Sunset Ridge Park $ 903,158 Police Facility $ 2,175 Lifeguard Headquarters $ 30,179 Internal Service Funds Compensated Absences $ 10,593,629 Retiree Insurance $ 6,249,249 Variance $ (760) $ (1,648,609) The City's intentions are to eliminate deficit fund balances through future grant funding, other future revenue sources, or interfund transfers. Cash and Investments Cash and investments as of June 30, 2010 are classified in the accompanying financial statements as follows: Statement of net assets: Cash and investments Cash with fiscal agent Fiduciary funds: Cash and investments Cash with fiscal agent Total cash and investments m $ 160,882,549 2,156,931 4,370,075 4,618,481 $ 172,028,036 CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30. 2010 Cash and investments as of June 30, 2010 consist of the following: Cash on hand $ 52,244 Deposits with financial institutions 6,542,589 Investments 165,433,203 Total cash and investments $ 172,028,036 Investments Authorized by the California Government Code and the Entity's Investment Policy The table below identifies the investment types that are authorized for the City by the California Government Code (or the City's investment policy, where more restrictive). The table also identifies certain provisions of the California Government Code (or the City's investment policy, where more restrictive) that address interest rate risk and concentration of credit risk. This table does not address investments of debt proceeds held by bond trustee that are governed by the provisions of debt agreements of the City, rather than the general provisions of the California Government Code or the City's investment policy. 101 Maximum Maximum Maximum Percentage Investment Authorized Investment Type Maturity of Portfolio* in One Issuer Local Agency Bonds 5 years 15% None U.S. Treasury Obligations 5 years None None U.S. Agency Securities 5 years None None Banker's Acceptances 180 days 30% 10% Commercial Paper 270 days 25% 10% Negotiable Certificates of Deposit 1 year 30% 10% Repurchase Agreements 30 days None None Reverse Repurchase Agreements 30 days 10% of base value None Medium -Term Notes 4 years 30% None Mutual Funds N/A 20% 10% Money Market Mutual Funds N/A 20% 10% Mortgage Pass- Through Securities 5 years 20% None County Pooled Investment Funds N/A 5% None Local Agency Investment Fund (LAIF) N/A None None JPA Pools (other investment pools) N/A None None Excluding amounts held by bond trustee that are not subject to California Government Code restrictions. 101 CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30. 2010 Investments Authorized by Debt Agreements Investment of debt proceeds held by bond trustee (i.e. fiscal agent) are governed by provisions of the debt agreements, rather than the general provisions of the California Government Code or the City's investment policy. The table below identifies the investment types that are authorized for investments held by bond trustee. The table also identifies certain provisions of these debt agreements that address interest rate risk, credit risk, and concentration of credit risk. Disclosures Relating to Interest Rate Risk Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of an investment. Generally, the longer the maturity of an investment, the greater the sensitivity of its fair value to changes in market interest rates. One of the ways that the City manages its exposure to interest rate risk is by purchasing a combination of shorter term and longer term investments and by timing cash flows from maturities so that a portion of the portfolio is maturing or coming close to maturity evenly over time as necessary to provide the cash flow and liquidity needed for operations. 102 Maximum Maximum Percentage Investment Authorized Investment Type Maximum Maturity Allowed in One Issuer U.S. Treasury Obligations None None None U.S. Agency Securities None None None Banker's Acceptances 30 days - 360 days None None Commercial Paper 180 days - 270 days None 10% Money Market Mutual Funds N/A None None Investment Agreements None None None Certificates of Deposit None None None Demand Deposits 30 days - 360 days None None Time Deposits 30 days - 360 days None None Local Agency Bonds None None None Forward Delivery Agreement None None None Forward Purchase and Sale Agreement None None None Corporate Notes None None None Repurchase Agreements None None None Local Agency Investment Fund N/A None None Municipal Obligations None None None County Pooled Investment Funds N/A None None Disclosures Relating to Interest Rate Risk Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of an investment. Generally, the longer the maturity of an investment, the greater the sensitivity of its fair value to changes in market interest rates. One of the ways that the City manages its exposure to interest rate risk is by purchasing a combination of shorter term and longer term investments and by timing cash flows from maturities so that a portion of the portfolio is maturing or coming close to maturity evenly over time as necessary to provide the cash flow and liquidity needed for operations. 102 CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30. 2010 Information about the sensitivity of the fair values of the City's investments (including investments held by bond trustee) to market interest rate fluctuations is provided by the following table that shows the distribution of the City's investments by maturity: Investment Type Money Market Funds U.S. Treasury Notes U.S. Agencies Corporate Notes Certificate of Deposit Commercial Paper LAIF Foreign Bonds Mortgage - backed Securities Cash with Fiscal Agent: Money Market Funds Investment Agreements Total Investment Maturities In Years ' Fair Value Less than 1 1 1 to 3 r 3 to 5 1 More than 5 Total $ 2,088,513 $ 2,088,513 $ - $ - $ - $ 2,088,513 25,215,191 5,953,444 16,895,968 2,365,779 - 25,215,191 82,172,015 17,637,490 55,208,089 9,326,436 82,172,015 36,017,254 11,059,122 24,958,132 - - 36,017,254 1,600,032 1,600,032 - - - 1,600,032 6,548,099 6,548,099 - - - 6,548,099 2,723,956 2,723,956 - - - 2,723,956 2,021,480 1,402,352 619,128 - - 2,021,480 271,251 271,251 - - - 271,251 5,594,836 5,594,836 - - - 5,594,836 1,180,576 1,180,576 1,180,576 $ 165,433,203 $ 54,879,095 $ 97,681,317 $ 11,692,215 $ 1,180,576 $ 165,433,203 Investment agreements are recorded at cost (not fair value) because these agreements represent nonparticipating contracts that are nonnegotiable and whose redemption terms do not consider market rates. Investments with Fair Values Highly Sensitive to Interest Rate Fluctuations As of June 30, 2010 the City did not have any investments (including investments held by fiscal agent) whose fair values were highly sensitive to interest rate fluctuations. 103 CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30. 2010 Disclosures Relating to Credit Risk Generally, credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder of the investment. This is measured by the assignment of a rating by a nationally recognized statistical rating organization. Presented below is the minimum rating required by (where applicable) the California Government Code, the City's investment policy, or debt agreements, and the actual rating as of year end for each investment type. Concentration of Credit Risk The investment policy of the City contains no limitations on the amount that can be invested in any one issuer beyond that stipulated by the California Government Code. Investments in any one issuer that represent 5% or more of total City's investments are as follows: Issuer Investment Type Minimum Exempt Federal agency securities $ 10,758,239 FHLB Federal agency securities $ 19,869,601 FHLMC Federal agency securities $ 28,401,497 Legal From $ 22,109,216 Not Fair Value Rating Dish PAA AA, AA Nl- A+_ A A- Ay1+ A_t Rated Investment Type Money Market Funds 2,086,513 AAA $ - $ 1,916,831 $ - $ - $ - $ - $ - $ - $ - $ - $ 171,682 U.S. Treasury Notes 25,215,191 NIA 12,673,157 6,35,337 - - - - - 6,191,697 US. Agencies 82,172,015 NIA - 64,709,287 - - - - - - 1,124,716 - 16,338,012 Corporate Notes 36,017,254 A - 8,705,684 6.D86,149 3,318,427 5,351,738 4,977,454 5,668,550 1,709,252 - - - CertlficateotDeposit 1600,032 A -1 - - - - 799,784 - - 800,248 - - Commercial Paper 6,548,099 A -1 - 1,000,000 - - - - - - 449,828 5,098,270 - Logel Agency Investment FuM 2,723,956 NIA - - - - - - - - - - 2,723,956 Foreign Bonds 2,021,480 NIA - 619,128 - 595,448 606,904 - - - - - - Mortgage- backed Securities 271,251 AAA - 271,251 - - - - - - - - - Cash with Fiscal Agent: Money Mallet Funtls 5,594,836 AAA - 5,594,836 - - - - - - - - Investment Agreements 1,180,576 NIA - - - 1,180,576 - - - - - - - $ 165,433,203 $ 12,673,19 $ 89,167,354 $ 6,086,149 $ 5,094,451 $ 6,958,426 $ Q977p54 $ 5,868,550 $ 2,509,500 $ 1,574,544 $ 508,270 $ 25,425,346 Concentration of Credit Risk The investment policy of the City contains no limitations on the amount that can be invested in any one issuer beyond that stipulated by the California Government Code. Investments in any one issuer that represent 5% or more of total City's investments are as follows: Issuer Investment Type Reported Amount FFCB Federal agency securities $ 10,758,239 FHLB Federal agency securities $ 19,869,601 FHLMC Federal agency securities $ 28,401,497 FNMA Federal agency securities $ 22,109,216 Custodial Credit Risk Custodial credit risk for deposits is the risk that, in the event of the failure of a depository financial institution, a government will not be able to recover its deposits or will not be able to recover collateral securities that are in the possession of an outside party. The custodial credit risk for investments is the risk that, in the event of the failure of the counterparty (e.g., broker - dealer) to a transaction, a government will not be able to recover the value of its investment or collateral securities that are in the possession of another party. The California Government Code and the City's investment policy do not contain legal or policy requirements that would limit the exposure to custodial credit risk for deposits or investments, other than the following provision for deposits: The 104 CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30. 2010 California Government Code requires that a financial institution secure deposits made by state or local governmental units by pledging securities in an undivided collateral pool held by a depository regulated under state law (unless so waived by the governmental unit). The fair value of the pledged securities in the collateral pool must equal at least 110% of the total amount deposited by the public agencies. California law also allows financial institutions to secure City deposits by pledging first trust deed mortgage notes having a value of 150% of the secured public deposits. As of June 30, 2010, none of the City's deposits with financial institutions in excess of federal depository amounts were held in uncol lateral ized accounts. As of June 30, 2010, City investments in the following investment types were held by the same broker - dealer (counterparty) that was used by the City to buy the securities: Investment Tvoe Reoorted Amount Money Market Funds $ 1,822,947 U.S. Treasury Notes 10,384,282 U.S. Agencies 21,324,599 Certificate of Deposit 1,600,032 Corporate Notes 13,885,608 Mortgage backed Securities 271,251 Foreign Bonds 2,021,480 Commercial Paper 6,548,099 For investments identified herein as restricted cash with fiscal agent, the fiscal agent selects the investment under the terms of the applicable trust agreement, acquires the investment, and holds the investment on behalf of the reporting government. Investment in State Investment Pool The City is a voluntary participant in the Local Agency Investment Fund (LAIF) that is regulated by the California Government Code under the oversight of the Treasurer of the State of California. The fair value of the City's investment in this pool is reported in the accompanying financial statements at amounts based upon the City's pro -rata share of the fair value provided by LAIF for the entire LAIF portfolio (in relation to the amortized cost of that portfolio). The balance available for withdrawal is based on the accounting records maintained by LAIF, which are recorded on an amortized cost basis. LAIF is not rated. 105 CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30. 2010 (5) Capital Assets Capital asset activity for the year ended June 30, 2010 was as follows: Governmental Activities: Non - depreciable: Land and rights of way Work in progress Depreciable: Structures Equipment Infrastructure Less accumulated depreciation for: Structures Equipment Infrastructure Net Capital Assets Beginning Balance Balance Additions Deletions June 30, 2010 $ 1,815,781,269 13,167,176 68,279,097 27,760,801 306,805,139 2,231,793,482 (13,764,261) (19,396,158) (113,839,057) (146,999,476) $ 3,891,844 $ 20,691,584 (6,634,505) 1,530,756 1,760,332 6,455,198 34,329,714 (1,370,077) (2,167,125) (6,465,678) (10,002,880) (127,564) (1,147,158) (3,152,068) (11,061,295) 115,052 1,025,347 1,852,556 2,992,955 $ 1,819,673,113 27,224,255 69,682,289 28,373,975 310,108,269 2,255,061,901 (15,019,286) (20,537,936) (118,452,179) (154,009,401) $ 2,084,794,006 $ 24,326,834 _L( $ 2,101,052,500 Governmental Activites capital assets net of accumulated depreciation at June 30, 2010 are comprised of the following: General Capital Assets, net $ 2,094,702,395 Internal Service Fund Capital Assets, net 6,350,105 $ 2,101,052,500 lim CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30. 2010 Business -type Activities: Less accumulated depreciation for Structures Beginning (5,145) (122,465) Balance (184,944) Balance Additions Deletions June 30, 2010 Non - depreciable: (52,558,647) Public works (50,789,321) (2,107,057) 6,012 Land $ 2,016,450 $ - $ - $ 2,016,450 Work in progress 915,153 479,687 (712,153) 682,687 Depreciable: 566,182 $ 10,002,880 $ 2,107,057 Structures 205,793 - 205,793 Equipment 291,888 - 291,888 Infrastructure 156,002,130 2,150,041 (8,776) 158,143,395 159,431,414 2,629,728 (720,929) 161,340,213 Less accumulated depreciation for Structures (117,320) (5,145) (122,465) Equipment (184,944) (24,310) - (209,254) Infrastructure (50,487,057) (2,077,602) 6,012 (52,558,647) Public works (50,789,321) (2,107,057) 6,012 (52,890,366) 105,731 Net $ 108,642,093 522,671 _L _L14,917 $ 108,449,847 Depreciation expense was charged in the following functions in the Statement of Activities: 'Internal Service Fund depreciation of $1,814,442 is allocated to governmental functions above. 107 Governmental Business -type Activities" Activities General government $ 307,422 $ - Public safety 1,222,084 - Public works 7,065,848 - Community development 105,731 - Community service 1,301,795 - Water - 1,540,875 Wastewater - 566,182 $ 10,002,880 $ 2,107,057 'Internal Service Fund depreciation of $1,814,442 is allocated to governmental functions above. 107 CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30. 2010 (6) Lonq -Term Debt Changes in Long -Term Liabilities Long -term liability for the year ended June 30, 2010, was as follows: Governmental activities: Certificates of participation payable Note payable Pre - annexation agreement CDBG Loan Purchase Agreement Payable Workers' compensations payable Claims and judgements payable Compensated absences Early Retirement Incentive Program (see note 11) Net OPEB obligation Total governmental activities Business -type activities: Water Revenue Bonds payable 11,893,000 3,530,130 (3,101,130) 12,322,000 3,080,500 5,897,737 201,308 (2,278,654) 3,820,391 1,260,729 9,784,085 2,022,943 (2,811,149) 8,995,879 1,557,331 - 4,409,833 (960,396) 3,449,437 862,359 4,408,000 4,493,000 (2,429,000) 6,472,000 - 49,009,435 16,157,214 (13,401,008) 51,765,641 9,360,999 1,585,000 - (1,585,000) Total $ 50,594,435 $16,157,214 $ (14,986,008) $ 51,765,641 $ 9,360,999 Internal service funds predominantly serve the governmental funds. Accordingly, long- term liabilities for them are included as part of the above totals for governmental activities. Also, liabilities for workers' compensation, claims and judgments, compensated absences, and net OPEB obligation are typically liquidated from the Internal Service funds through resources collected from individual funds. 108 Amounts Beginning Ending Due Within Balance Additions Deletions Balance One Year $ 4,335,000 $ - $ (345,000) $ 3,990,000 $ 360,000 1,119,613 - (186,679) 932,934 195,080 9,600,000 - (1,200,000) 8,400,000 1,200,000 1,972,000 - (89,000) 1,883,000 95,000 - 1,500,000 - 1,500,000 750,000 11,893,000 3,530,130 (3,101,130) 12,322,000 3,080,500 5,897,737 201,308 (2,278,654) 3,820,391 1,260,729 9,784,085 2,022,943 (2,811,149) 8,995,879 1,557,331 - 4,409,833 (960,396) 3,449,437 862,359 4,408,000 4,493,000 (2,429,000) 6,472,000 - 49,009,435 16,157,214 (13,401,008) 51,765,641 9,360,999 1,585,000 - (1,585,000) Total $ 50,594,435 $16,157,214 $ (14,986,008) $ 51,765,641 $ 9,360,999 Internal service funds predominantly serve the governmental funds. Accordingly, long- term liabilities for them are included as part of the above totals for governmental activities. Also, liabilities for workers' compensation, claims and judgments, compensated absences, and net OPEB obligation are typically liquidated from the Internal Service funds through resources collected from individual funds. 108 CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30. 2010 Governmental Activities • Certificates of Participation In Fiscal Year 1998 -99, the Newport Beach Public Facilities Corporation issued $7,330,000 of Refunding Certificates of Participation to advance refund the 1992 Certificates of Participation used to finance the construction of the Central Library. The refunding was undertaken to reduce total debt service payments over the next twenty years by $690,228 and resulted in an economic gain of $495,745. The Refunded Certificates were executed and delivered pursuant to the Prior Trust Agreement. The City has previously entered into a project lease with the Newport Beach Public Facilities Corporation to lease certain property, facilities, improvements, and equipment. The lease payments made by the City are held by a trustee who makes semi - annual payments on the Certificates of Participation. The lease payments began May 15, 1994, and are in amounts sufficient to cover the payment of principal and interest of the Certificates. The 1998 Certificates consist of $2,995,000 of Serial Certificates with interest rates from 3.6% to 4.55% and $4,335,000 of Term Certificates with interest rates from 5.05% to 5.15 %. Interest on the Certificates is payable semiannually on June 1 and December 1 of each year. Future principal payments range from $360,000 to $535,000 through June 1, 2019. Principal payments are payable annually on June 1 of each year. At June 30, 2010, the City has a required cash reserve balance for debt service of $565,778, which is recorded as a restricted asset and reservation of fund balance in the Debt Service Fund. The outstanding balance at June 30, 2010, amounted to $3,990,000. The annual amortization requirements of the Certificates of Participation are as follows: Year Ending June 30 Principal Interest Total 2011 360,000 203,025 563,025 2012 380,000 184,845 564,845 2013 400,000 165,655 565,655 2014 420,000 145,455 565,455 2015 440,000 175,258 615,258 2016 -2019 1,990,000 211,177 2,201,177 $ 3,990,000 $ 1,085,415 $ 5,075,415 • Note Payable Note payable consists of a note to the California Department of Boating and Waterways in 1987 for a loan in the amount of $3,300,000. The note is payable in thirty annual principal and interest installments of $237,062 at 4.5% rate of interest 109 CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30. 2010 beginning August 1, 1987. The outstanding balance at June 30, 2010, amounted to $932,934. The annual amortization requirements for the Note Payable are as follows: Year Ending Principal Interest Total June 30 Principal Interest Total 2011 195,080 41,982 237,062 2012 203,859 33,203 237,062 2013 213,032 24,030 237,062 2014 222,609 14,443 237,052 2015 48,095 4,426 52,521 2016 50,259 2,262 52,521 $ 932,934 $ 120,346 $ 1,053,280 • Newport Coast Pre - Annexation Agreement Payable In conjunction with the January 1, 2002, annexation of Newport Coast, the City entered into an agreement payable with the Newport Coast Committee for a total of $18,000,000 to reduce property owner assessments used to finance certain road and street improvements. The principal -only agreement which began in the 2003 fiscal year, is payable over a period of fifteen years in equal installments of $1,200,000. The outstanding balance at June 30, 2010, amounted to $8,400,000. • CDBG Loan In fiscal year 2003, the City received $2,400,000 in Section 108 loan proceeds to assist with the funding for the Balboa Village Improvement Program. The loan is collateralized by future Community Development Block Grant allocations with an average interest rate of 6.5 %. Future principal payments range from $95,000 to $208,000 through June 30, 2023. The outstanding balance at June 30, 2010, amounted to $1,883,000. The annual amortization requirements for the CDBG Loan are as follows: Year Ending June 30 Principal Interest Total 2011 95,000 104,345 199,345 2012 102,000 99,653 201,653 2013 108,000 94,485 202,485 2014 116,000 88,722 204,722 2015 123,000 82,315 205,315 2016 -2019 583,000 252,565 835,565 20202023 756,000 95,595 851,595 $ 1,883,000 $ 817,680 $ 2,700,680 110 CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30. 2010 • Purchase Agreement Payable In Fiscal Year 2010, the City entered into an agreement with a private property owner for the purchase of two adjacent parcels of land located at 608 East Balboa Boulevard and 209 Washington Street. The purchase price was $3.5 million. The City paid $2 million by the close of escrow with the remaining $1.5 million to be paid in two annual installments with a 2% interest. The outstanding balance at June 30, 2010 amounted to $1,500,000. The annual amortization requirements for the Purchase Agreement are as follows: Year Ending June 30 2011 2012 • Claims and Judgments Principal Interest Total 750,000 30,000 780,000 750,000 30,000 780,000 $ 1,500,000 $ 60,000 $ 1,560,000 The City retains the risk of loss for general liability and workers' compensation claims as described in note (8). These amounts represent estimates of amounts to be paid for reported general liability and workers' compensation claims including incurred - but- not - reported claims based upon past experience, modified for current trends and information. While the ultimate amount of losses incurred through June 30, 2010, is dependent on future developments, based upon information from the City's attorneys, the City's claims administrators and others involved with the administration of the programs, City management believes the accrual is adequate to cover such losses. The estimated liability at June 30, 2010, for general liability amounted to $3,820,391 and for workers' compensation was $12,322,000. • Compensated Absences The City's policies relating to compensated absences are described in Note (1). This liability, to be paid in future years from available and future resources, at June 30, 2010, is $8,995,879. • Early Retirement Incentive Program (ERIP) In Fiscal year 2009 -10, the City approved and implemented and Early Retirement Incentive Program (ERIP) to 166 eligible employees to help mitigate declining General Fund revenues and institute long -term structural changes to avert future budget shortfalls. A total of 51 people participated and the estimated liability at June 30, 2010 is $3,449,437. See Note (11) in the notes to financial statements. ill CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30. 2010 • Net OPEB Obligation (NOO) The net OPEB obligation is the difference between the ARC and the actual contributions made. The City has elected to fund the cash subsidy portion $2,016,000 of the ARC. As for the implied subsidy $4,408,000, the City has elected to fund it on a pay -as- you -go basis, thus resulting in net OPEB obligation of $6,472,000. Business -type activities • Water Revenue Bonds In Fiscal Year 1998 -99, the City issued $14,225,000 of Refunding Water Revenue Bonds to refund the 1994 Water Revenue Bonds used to finance the construction and acquisition of water storage and transmission facilities. The refunding was undertaken to reduce total debt service payments over a ten -year period by $481,153 and resulted in an economic gain of $418,469. The bonds are secured by a pledge of net revenues of the water fund. The 1998 Serial Bonds bear interest ranging from 3.6% to 4.5 %. The bonds have been paid off and there is no outstanding balance at June 30, 2010. (7) Limited Obligation Bonds Special Assessment Districts Bonds The City has issued certain Assessment District and Community Facilities District Bonds. Although the City collects and disburses funds for these districts, the City has no obligation or duty to pay any delinquency out of any available funds of the City. Neither the faith and credit nor the taxing power of the City is pledged to the payment of the bonds, and therefore the bonded indebtedness is not shown in the financial statements of the City. The City holds reserve funds on behalf of bondholders; the assets are recorded in the Special Assessment Agency Fund. Bonds outstanding at June 30, 2010, for each district under the Bond Acts of 1911 and 1915, and other special assessments, are as follows: 112 CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30. 2010 Other Limited Obligation Bonds The City has issued revenue bonds for the purpose of advancing the net proceeds of the bonds to Hoag Memorial Hospital Presbyterian for the purposes of financing the acquisition, construction and equipping of health facilities located within the City. The bonds are limited obligations of the City payable from payments required to be made by Hoag Memorial Hospital. The City is not obligated to pay the principal or interest of the bonds except from payments made by Hoag, and neither the faith and credit nor the taxing power of the City is pledged to the payment of the principal and interest on the bonds. Bonds outstanding at June 30, 2010, are as follows: Series 2008C Series 2008D Series 2008E Series 2008F Series 2009A Series 2009B Series 2009C Series 2009D Series 2009E $70,095,000 $80,000,000 $80,000,000 $90,000,000 $66,835,000 $36,605,000 $36,605,000 $35,490,000 $35,490,000 The revenue bonds are subject to, at the option of Hoag Memorial Hospital Presbyterian, optional and mandatory tender for purchase. If no tender or purchase is made, varying redemption payments on the 2008 Series bonds commence on December 1, 2012, and 113 Bonds Outstanding Assessment District Original Issue June 30, 2010 No. 68 Newport Shores 3,813,562 2,610,000 No. 69 West Newport 4,978,498 3,350,000 No. 70 Bay Shores 1,380,996 880,000 No. 71 Balboa Boulevard 796,942 105,000 No. 74 Island Avenue 222,629 115,000 No. 75 Balboa Business 821,204 570,000 No. 78 Little Balboa Island 1,348,196 395,000 No. 79 Beacon Bay 1,215,134 575,000 No. 82 Corona del Mar 274,967 115,000 No. 86 Balboa Peninsula 300,174 160,000 No. 92 Coast Highway 1,425,000 1,375,000 No. 99 -2 Ocean Front 1,953,952 1,928,952 No. 101 Central Balboa 2,467,597 2,290,000 No. 103 Peninsula Point 3,295,700 3,250,700 No. 95 -1 CIOSA Refunding Series A 15,495,000 7,380,000 Other Limited Obligation Bonds The City has issued revenue bonds for the purpose of advancing the net proceeds of the bonds to Hoag Memorial Hospital Presbyterian for the purposes of financing the acquisition, construction and equipping of health facilities located within the City. The bonds are limited obligations of the City payable from payments required to be made by Hoag Memorial Hospital. The City is not obligated to pay the principal or interest of the bonds except from payments made by Hoag, and neither the faith and credit nor the taxing power of the City is pledged to the payment of the principal and interest on the bonds. Bonds outstanding at June 30, 2010, are as follows: Series 2008C Series 2008D Series 2008E Series 2008F Series 2009A Series 2009B Series 2009C Series 2009D Series 2009E $70,095,000 $80,000,000 $80,000,000 $90,000,000 $66,835,000 $36,605,000 $36,605,000 $35,490,000 $35,490,000 The revenue bonds are subject to, at the option of Hoag Memorial Hospital Presbyterian, optional and mandatory tender for purchase. If no tender or purchase is made, varying redemption payments on the 2008 Series bonds commence on December 1, 2012, and 113 CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30. 2010 are required to be made through December 1, 2028. For the 2009 Series bonds, varying redemption payments commence on December 1, 2014, and are required to be made through December 1, 2038. (8) Risk Management — General Liability and Workers' Compensation The City is exposed to various risks of loss related to torts, theft of, damage to, and destruction of assets, errors and omissions, injuries to employees, and natural disasters. The City carries commercial insurance with independent third parties for loss risks associated with real and personal property, and automotive liability. The City purchases fidelity bonds for employees in key positions. Settled claims from these risks have not exceeded commercial insurance coverage for the past three years. For general liability, the City has excess insurance coverage of $26 million per occurrence with a self- insured retention (SIR) of $500,000 per occurrence. For workers' compensation and employer's liability insurance, the City has excess insurance coverage of $1,000,000 per occurrence with a $1,000,000 SIR. This coverage provides for work - related accidents and diseases. The Insurance Reserve fund was established to account for costs associated with general liability and workers' compensation. The Insurance Reserve fund is accounted for as an internal service fund where assets are set aside for risk management, administration, claim settlements and benefit distribution. A premium is charged to each fund that accounts for part-time or full -time employees. The total charge allocated to each of the funds is calculated using trends in actual experience after considering unexpected and unusual claims. Fund Liabilities are reported when it is probable that a loss has occurred and the amount of the loss can be reasonably estimated. Liabilities include an amount for claims that have been incurred but not reported (IBNR). Claims liabilities are calculated considering the effects of inflation, recent claim settlement trends including frequency and amount of payouts and other economic and social factors. The total liability claims payable include $16,142,391 which represents the discounted present value at June 30, 2010; the claims were discounted using an interest rate of five percent. 114 CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30. 2010 For the past three years, no payment on any claim or judgment has exceeded the amount of applicable insurance. (9) Deferred Compensation Plan The City offers its employees a deferred compensation plan created in accordance with Internal Revenue Code Section 457. The plan, available to all City employees, permits them to defer a portion of their salary until future years. Section 457 plan assets were placed in trust for the exclusive benefit of all employees and their beneficiaries. Therefore, all employee assets held in Section 457 plans are not the property of the City and are not subject to the claims of the City's general creditors. The assets under the plan, which are not included in the accompanying financial statements, totaled $62,439,165 at June 30, 2010. (10) Pension Plan Plan Description - Defined Benefit Plan The City contributes to the California Public Employees Retirement System (PERS), an agent multiple - employer public employee defined benefit pension plan. PERS provides retirement and disability benefits, annual cost -of- living adjustments, and death benefits to plan members and beneficiaries. PERS acts as a common investment and administrative agent for participating public entities within the State of California. Copies of PERS' annual financial report may be obtained from their executive office: 400 P Street, Sacramento, CA 95814. Funding Policy Participants are required to contribute 8% (9% for safety employees) of their annual covered salary. The City makes the contribution required of City safety employees on their behalf and for their account. In January 2008, non - safety employees modified their PERS benefits and agreed to contribute 1 % of the required 8% of annual salary for the participant contribution and 2.42% of the City's employer contribution which is discussed below. Benefit provisions and all other requirements are established by State statues and City contract with employee bargaining groups. 115 General Liability Workers' Compensation June 30, 2009 June 30, 2010 June 30, 2009 June 30, 2010 Unpaid claims, beginning of fiscal year $ 5,613,525 $ 5,897,737 $ 11,334,000 $ 11,893,000 Incurred claims (including IBNR) 3,589,622 201,308 3,216,337 3,530,130 Claim payments (3,305,410) (2,278,654) (2,657,337) (3,101,130) Unpaid claims, end of fiscal year $ 5,897,737 $ 3,820,391 $ 11,893,000 $ 12,322,000 For the past three years, no payment on any claim or judgment has exceeded the amount of applicable insurance. (9) Deferred Compensation Plan The City offers its employees a deferred compensation plan created in accordance with Internal Revenue Code Section 457. The plan, available to all City employees, permits them to defer a portion of their salary until future years. Section 457 plan assets were placed in trust for the exclusive benefit of all employees and their beneficiaries. Therefore, all employee assets held in Section 457 plans are not the property of the City and are not subject to the claims of the City's general creditors. The assets under the plan, which are not included in the accompanying financial statements, totaled $62,439,165 at June 30, 2010. (10) Pension Plan Plan Description - Defined Benefit Plan The City contributes to the California Public Employees Retirement System (PERS), an agent multiple - employer public employee defined benefit pension plan. PERS provides retirement and disability benefits, annual cost -of- living adjustments, and death benefits to plan members and beneficiaries. PERS acts as a common investment and administrative agent for participating public entities within the State of California. Copies of PERS' annual financial report may be obtained from their executive office: 400 P Street, Sacramento, CA 95814. Funding Policy Participants are required to contribute 8% (9% for safety employees) of their annual covered salary. The City makes the contribution required of City safety employees on their behalf and for their account. In January 2008, non - safety employees modified their PERS benefits and agreed to contribute 1 % of the required 8% of annual salary for the participant contribution and 2.42% of the City's employer contribution which is discussed below. Benefit provisions and all other requirements are established by State statues and City contract with employee bargaining groups. 115 CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30. 2010 Under GASB 27, an employer reports an annual pension cost (APC) equal to the annual required contribution (ARC) plus an adjustment for the cumulative difference between the APC and the employer's actual plan contributions for the year. The cumulative difference is called the net pension obligation (NPO). The ARC for the period July 1, 2009 to June 30, 2010 has been determined by an actuarial valuation of the plan as of June 30, 2005. The contribution rate indicated for the period is 9.055% for non - safety employees and 29.67% for safety employees of annual covered payroll. Without the cost sharing agreement with non - safety employees, the contribution rate would be 11.475% for non - safety employees. In order to calculate the dollar value of the ARC for inclusion in financial statements prepared as of June 30, 2010, the contribution rate is multiplied by the payroll of covered employees that were paid during the period from July 1, 2009 to June 30, 2010. Annual Pension Cost For 2010, the City's annual pension cost of $17,821,702 for PIERS was equal to the City's required and actual contributions. A summary of principle assumptions and methods used to determine the annual required contribution is shown below: Individual Salary A merit scale varying by Growth duration of employment coupled with an assumed annual inflation growth of 3.0% and an annual production growth of 0.25% 116 Safety Plan June 30, 2007 Entry Age Actuarial Cost Method Level Percent of Payroll 31 Years as of the Valuation Date 15 -Year Smoothed Market 7.75% (net of administrative expenses) 3.25% to 13.15% depending on age, service, and type of employment 3.00% 3.25% A merit scale varying by duration of employment coupled with an assumed annual inflation growth of 3.0% and an annual production growth of 0.25% Miscellaneous Plan Valuation Date June 30, 2007 Actuarial Cost Method Entry Age Actuarial Cost Method Amortization Method Level Percent of Payroll Average Remaining 24 Years as of the Valuation Period Date Asset Valuation Method 15 -Year Smoothed Market Actuarial Assumptions: Investment Rate of 7.75% (net of administrative Return expenses) Projected Salary 3.25% to 14.45% depending Increases on age, service, and type of employment Inflation Rate 3.00% Payroll Growth 3.25% Individual Salary A merit scale varying by Growth duration of employment coupled with an assumed annual inflation growth of 3.0% and an annual production growth of 0.25% 116 Safety Plan June 30, 2007 Entry Age Actuarial Cost Method Level Percent of Payroll 31 Years as of the Valuation Date 15 -Year Smoothed Market 7.75% (net of administrative expenses) 3.25% to 13.15% depending on age, service, and type of employment 3.00% 3.25% A merit scale varying by duration of employment coupled with an assumed annual inflation growth of 3.0% and an annual production growth of 0.25% CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30. 2010 Initial unfunded liabilities are amortized over a closed period that depends on the plan's date of entry into PERS. Subsequent plan amendments are amortized as a level percent of pay over a closed 20 -year period. Gains and losses that occur in the operation of the plan are amortized over a 30 -year rolling period, which results in an amortization of about 6% of unamortized gains and losses each year. If the plan's accrued liability exceeds the actuarial value of plan assets, then the amortization payment on the total unfunded liability may not be lower than the payment calculated over a 30 -year amortization period. THREE -YEAR TREND INFORMATION FOR PERS ($ Amount in Thousands) Fiscal Annual Pension Year Cost (APQ 6/30108 $16,454 6/30/09 $18,405 6/30/10 $17,822 Percentage of Net Pension APC Contributed Obligation 100% $0 100% $0 100% $0 The Schedule of Funding Progress, below, shows the recent history of the actuarial value of assets, actuarial accrued liability, their relationship, and the relationship of the unfunded actuarial accrued liability to payroll. The Schedule of Funding Progress, below, presents multiyear trend information about whether the actuarial value of the plan assets is increasing or decreasing overtime, relative to the actuarial accrued liability for benefits. 117 CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30. 2010 SCHEDULE OF FUNDING PROGRESS FOR PERS ($ Amount in Thousands) More current information regarding actuarial data is not yet available from PERS. Plan Description - Defined Contribution Plan Pursuant to City Council Resolution No. 91 -106, the City entered into a defined contribution plan administrated by the private administrator known as Public Agency Retirement System ( "PARS ") for all of its part-time employees, pursuant to the requirements of Section 11332 of the Social Security Act. The City Council has the authority for establishing and amending the plan's provisions per the Resolution. In a defined contribution plan, benefits depend solely on amounts contributed to the plan plus investment earnings. All part-time employees are eligible to participate from the date of employment. Federal legislation requires contributions of at least 7.5% to a retirement plan, and City Council resolved to match the employees' contributions of 3.75 %. The City's contributions for each employee (and interest earned by the accounts) are fully vested immediately. For the year ended June 30, 2010, the City's covered payroll for employees participating in the plan was $2,963,110. Employees made contributions of $111,117 (3.75% of current covered payroll), which was matched by the employer in the same amount. Assets of the plan totaled $1,615,399 at June 30, 2010. 118 Entry Age Unfunded Normal Actuarial Liability Annual Valuation Accrued Value of (Excess Covered UAAL as a Date Liability Assets Assets) Funded Status Payroll % of Payroll AVA Market (A) (B) (A - B) (B /A) Value (C) [(A -B) / C] 06/30/2007 Misc. $ 192,178 $178,524 $ 13,654 92.9% 107.7% $ 36,795 37.108% Safety 308,552 250,062 58,490 81.0% 94.7% 25,035 233.633% Total $ 500,730 $428,586 $ 72,144 85.6% 99.7% $ 61,830 116.681% 06/30/2008 Misc. $ 217,378 $195,954 $ 21,424 90.1% 95.2% $ 41,148 52.066% Safety 336,061 264,634 71,427 78.7% 86.9% 28,056 254.587% Total $ 553,439 $460,588 $ 92,851 83.2% 90.2% $ 69,204 134.170% 06/30/2009 Misc. $ 249,666 $207,818 $ 41,848 83.2% 61.1% $ 42,893 97.564% Safety 366,918 274,649 92,269 74.9% 54.8% 30,253 304.991% Total $ 616,584 $482,467 $134,117 78.2% 57.4% $ 73,146 183.355% More current information regarding actuarial data is not yet available from PERS. Plan Description - Defined Contribution Plan Pursuant to City Council Resolution No. 91 -106, the City entered into a defined contribution plan administrated by the private administrator known as Public Agency Retirement System ( "PARS ") for all of its part-time employees, pursuant to the requirements of Section 11332 of the Social Security Act. The City Council has the authority for establishing and amending the plan's provisions per the Resolution. In a defined contribution plan, benefits depend solely on amounts contributed to the plan plus investment earnings. All part-time employees are eligible to participate from the date of employment. Federal legislation requires contributions of at least 7.5% to a retirement plan, and City Council resolved to match the employees' contributions of 3.75 %. The City's contributions for each employee (and interest earned by the accounts) are fully vested immediately. For the year ended June 30, 2010, the City's covered payroll for employees participating in the plan was $2,963,110. Employees made contributions of $111,117 (3.75% of current covered payroll), which was matched by the employer in the same amount. Assets of the plan totaled $1,615,399 at June 30, 2010. 118 CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30. 2010 (11) Early Retirement Incentive Program (ERIP) In October, 2009, the City Council approved Resolution 2009 -73 authorizing an Early Retirement Incentive Program (ERIP) to eligible employees, under the condition the program would meet the immediate and future fiscal, managerial and operational goals of the City to help mitigate declining General Fund revenues and institute long -term structural changes to avert future budget shortfalls and ensure that the City remains financially sound. There were 166 employees who met the following eligibility requirements: • Full -time, miscellaneous (non- safety) employee • 50 years of age or older as of January 31, 2010 • Eligible to retire from PIERS with at least five years of service • Have at least three years of service with the City as of January 31, 2010 • Would actually retire from the PERS system • Not the City Manager, City Clerk, or the City Attorney A total of 51 people participated and were approved by the Council for the Early Retirement Incentive Program through the Public Agency Retirement Systems ( "PARS ") Supplemental Retirement Program ( "SRP "). The Supplemental Retirement Plan offered through PARS allowed the City to set the payment, eligibility, and refilling based on the City's needs, as well as allowing the expense to be known and quantifiable. The benefit to the participating employee is paid via a 15 -year annuity of 7% of Final Pay up to $75,000 and 6% of amount of Final Pay over $75,000, and it complements and is in addition to an employee's CalPERS retirement benefit. The City is funding the cost of this annuity in annual installments over a five year period. The total estimated cost to fund the ERIP benefit approximates $950,000 for the first five years. After considering the costs of implementing the ERIP plan and the estimated reduction to the City payroll, the net savings are expected to reach nearly $3.1 million annually. In accordance with GASB 47, a liability for the recognition of the accrual cost for this benefit has been recognized in the amount of $4.4 million. This cost excludes a consideration of discounting the cash flows associated with the five year funding of the program due to the immateriality of such consideration. (12) Post Employment Health Care Benefits (OPEB) The following description of the City of Newport Beach Medical Expense Reimbursement Plan (the "Plan ") provides only general information. Participants should refer to the Plan agreement for a more complete description of the Plan's provisions. Plan Description Effective January 2006, the City and employee associations agreed to major changes in the Post Employment Healthcare Plan. All employees and eligible retirees will participate in a Health Reimbursement Arrangement ( "HRA ") sponsored by the City, the single 119 CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30. 2010 employer of the plan and held in trust and managed by ING (Trustee), under IRS Revenue Ruling 2002 -41 (June 26, 2002) and IRS Notice 2002 -45 (June 26, 2002). All employees hired after January 1, 2006, and certain employees hired prior to this date, as well as employees who elected to fully convert (Fully Converted) to a defined contribution formula, participate in a program that requires mandatory employee and employer contributions. However, once these contributions have been made to the employee's account, the City has no further funding obligation to the Plan on their behalf. Certain employees hired prior to January 1, 2006, had the option to retain a hybrid of the former defined benefit Plan, or to fully convert to the new Plan. Employees electing to retain a hybrid of the former defined benefit formula (Hybrid) participate in a program requiring mandatory defined contributions by employees and employer, as well as a defined benefit consisting of an ongoing contribution, from the City to the participant's HRA account, each month after retirement. Additionally, these employees are eligible to receive health care benefits under the City's group health care plans. However, in order to receive these benefits these employees are required to pay the City $100 per month, up until their retirement, to offset the unfunded portion of post employment health benefits existing at the inception of the Plan. Employees who retired prior to January 1, 2006, continue to receive an ongoing defined benefit consisting of a contribution made by the City to the participant's HRA account each month. The defined benefit portion of the plan is closed to new participants. Total participants involved in the plan were 1,181 as of June 30, 2010, consisting of 462 miscellaneous employees, 271 safety employees, and 448 retirees and their beneficiaries. Copies of PERS' annual financial report may be obtained from their executive office: 400 P Street, Sacramento, CA 95814. Benefits Provided The City provides post - employment medical, dental and vision benefits to its retirees, the same benefits as those afforded to active employees, with the general exception that once a retiree becomes eligible for Medicare (that is, reaches age 65), he or she must join a Medicare HMO or a Medicare Supplement plan, with Medicare becoming the primary payor. Employees become eligible to retire and receive City -paid healthcare benefits upon attaining age 50 (safety) or age 55 (miscellaneous) and 5 years of covered PERS service or upon disability before age 50. The payment of benefits, for the purpose of reimbursing eligible health care expenses, cease upon the earliest of the following: (1) the date of the participant's, their spouse's, or qualified dependant's death; (2) the date the balance of any fully converted participant account reaches zero, if no further contributions will be made to said account; or (3) the date of termination of the Plan. 120 CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30. 2010 Plan Contributions Contributions to the Plan are based on the participant's status as "Fully Converted" or "Hybrid" as described above. All employees contribute 1% of their annual salary. Fully Converted employees also receive a contribution from the City of $1.50 per month for each year of service and age, after five years of employment. Additionally, Fully Converted employees who previously participated in the defined benefit program receive a one -time contribution from the City upon retirement. This contribution consists of $100 per month for every month paid into the defined benefit program, up to a maximum of 180 months. Further, the City contributes a percentage of any flexible leave bank conversions. The percentage contributed to the HRA account is based on the bargaining unit each employee is associated with. Hybrid employees receive a one -time contribution of $75 per month for every month paid into the defined benefit program, up to a maximum of 180 months. For Hybrid employees, the City also contributes a percentage of any flexible leave bank conversions. The percentage contributed to the HRA account is based on the bargaining unit each employee is associated with. Upon retirement, Hybrid employees receive a defined benefit consisting of a monthly contribution, made by the City, to the participant's HRA account of approximately $400. Employees who retired prior to January 1, 2006, continue to receive a defined benefit consisting of a monthly contribution, made by the City, to the participant's HRA account each month of approximately $400 (approximately $425 for certain retired Police employees). The defined benefit component of the plan is closed to new participants; however, an actuarial valuation is utilized to determine the accrued liability and funding requirements associated with this component of the plan. Actuarial Valuation, Assumptions and Methods Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality, and the healthcare cost trend. Amounts determined regarding the funded status of the plan and the annual required contributions of the employer are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. The schedule of funding progress, presented as required supplementary information following the notes to the financial statements, presents multi -year trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for the benefits. Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and the plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of 121 CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30. 2010 benefit costs between employer and plan members to that point. The actuarial methods and assumptions used include techniques that are designed to reduce the effects of short -term volatility in actuarial accrued liabilities and the actuarial assets, consistent with the long -term perspective of the calculations. Valuation Date: June 30, 2008 Actuarial Cost Method: Entry Age Normal Cost Method (same as CaIPERS) Amortization Method: Level percent of payroll over fixed 20 years Amortization Period: Level contribution amount over fixed 20 years Projected Salary Increases: 3.25% per year Discount Rate: 7.75 % for cash subsidy, pre- funding through CaIPERS OPEB Trust 5% for implied subsidy, no pre- funding, benefits paid from the City's General fund Health Care Cost Trend Rate: 9.3% grading down to 4.5% Implied Subsidy Because one of the two health plans offered by the City is a non - community -rated plan and retirees are offered the same premium rates as active employees, GASB 45 requires that an implied subsidy (the difference between expected claims and premiums paid for retirees) be valued for the life of the retiree and accrued as a cost of the retiree health care plan. The City has elected to fund the implied subsidy on a pay -as- you -go basis since employer contributions to active and retiree medical plans are fixed, and significant uncertainty exists whether additional cash flows will occur in the future as a result of the implied subsidy. 122 CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30. 2010 Three -Year Annual Required Contribution (ARC) Trend The 2009 -10 Annual Required Contribution (ARC) includes the Normal Cost plus a 20 -year amortization of the Unfunded AAL (in 000's): 2009/10 Cash Subsidy $ - $ 2,016 $ 2,016 $ 2,016 $ - 100% $ 73,308 2.8% $ - Implied Subsidy 4,408 2,603 2,477 413 2,190 15.9% 73,308 3.6% 6,472 Current Year 52.6% Annual ARC As ' ACC is equal to the ARC adjusted for interest and amortization of the NOO. Beginning Actual OPEB Percentage Covered a %of Ending Fiscal Year Balance ARC' AOC Contribution Obligation Contributed Payroll Payroll Balance 2007/08 Cash Subsidy $ - $ 2,629 $ 2,629 $ 2,629 $ - 100% $ 54,748 4.8% $ - Implied Subsidy - 2,646 427 427 2,221 16.1% 54,748 4.8% 2,221 Net OPEB Obligation $ $ 5,277 $ 3,056 $ 3,056 $ 2,221 57.9% $ 54,748 9.6% $ 2,221 2008/09 Cash Subsidy $ - $ 2,720 $ 2,720 $ 2,720 $ - 100% $ 56,527 4.8% $ - Implied Subsidy 2,221 2,734 2,703 516 2,218 18.9% 56,527 4.8% 4,408 Net OPEB Obligation $ 2,221 $ 5,454 $ 5,423 $ 3,236 $ 2,218 59.3% $ 56,527 9.6% $ 4,408 2009/10 Cash Subsidy $ - $ 2,016 $ 2,016 $ 2,016 $ - 100% $ 73,308 2.8% $ - Implied Subsidy 4,408 2,603 2,477 413 2,190 15.9% 73,308 3.6% 6,472 Net OPEB Obligation $ 4,408 $ 4,619 $ 4.493 $ 2,429 $ 2,190 52.6% $ 73,308 6.3% $ Q472 ' ACC is equal to the ARC adjusted for interest and amortization of the NOO. 123 CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30. 2010 Three -Year Net OPEB Oblioation (N00) Trend The NOO is the historical difference between the ARC and actual contributions. If the City always contributes the entire ARC, then the NOO would equal zero. Benefit payments are considered contributions. Contributions in excess of benefit payments must be segregated in a trust for the sole purpose of paying Plan benefits in order to be considered Plan Assets for the purpose of GASB 45. The June 30, 2010, NOO is determined as follows (in 000's): Prefunding Contributions & Benefit Fiscal Year July 1, NOO AOC Payments June 30, NOO 2007/08 Cash Subsidy $ 6,200 ' $ 2,629 $ (8,829) z $ - Implied Subsidy 2,648 (427) 3 2,221 Total $ 6,200 $ 5,277 $ (9,256) $ 2,221 2008/09 Cash Subsidy $ - $ 2,720 $ (2,720) $ - Implied Subsidy 2,221 2,703 (516) ° 4,408 Total $ 2,221 $ 5,423 $ (3,236) $ 4,408 2009/10 Cash Subsidy $ - $ 2,016 $ (2,016) $ - Implied Subsidy 4,408 2,477 (413) s 6,472 Total $ 4,408 $ 4,493 $ (2,429) $ 6,472 1 - Based on a prior period adjustment to the cash subsidy component of the NOO 2 - 2007 -2008 AOC and $6.2 million payment on retroactive NOO 3 - 2007 -2008 estimated implied subsidy 4 - 2008 -2009 estimated implied subsidy 5 - 2009 -2010 estimated implied subsidy 124 CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30. 2010 Annual OPEB Cost (AOC) The AOC is equal to the ARC, except when the City has a Net OPEB Obligation (NOO) at the beginning of the year. In that case, the AOC will equal the ARC adjusted for expected interest on the NOO and reduced by an amortization of the NOO. The 2009 -10 ACC is determined as follows (in 000's): Two -Year Funding Status Trend The schedule below shows the actuarial accrued liability (AAL), actuarial value of assets, funded status, and the relationship of the unfunded actuarial accrued liability (UAAL) to payroll as of the most recent valuation date. Actuarial Actuarial Unfunded AOC as UAAL as Valuation Interest Amortization AAL % of Covered ARC on NOO of NOO Total AOC Payroll Cash Subsidy $2,016 Payroll 06/30/2006 $ 2,016 3.6% Implied Subsidy 2,603 220 (346) 2,477 4.4% Total $4,619 $ 220 $ (346) $ 4,493 7.9% Two -Year Funding Status Trend The schedule below shows the actuarial accrued liability (AAL), actuarial value of assets, funded status, and the relationship of the unfunded actuarial accrued liability (UAAL) to payroll as of the most recent valuation date. 125 Actuarial Actuarial Unfunded Annual UAAL as Valuation Accrued Value of AAL Funded Covered a %of Date Liability Assets (UAAL) Status Payroll Payroll 06/30/2006 Cash Subsidy $29,639 $ - $29,639 0.0% $54,748 54.1% Implied Subsidy 26,409 - 26,409 0.0% $54,748 48.2% Total $56,048 $ - $56,048 0.0% $54,748 102.4% 06/30/2008 Cash Subsidy $28,842 $ 8,785 $20,057 30.5% $56,527 35.5% Implied Subsidy 20,173 - 20,173 0.0% $56,527 35.7% Total $49,015 $8,785 $40,230 0.0% $56,527 71.2% 125 CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30. 2010 (13) Interfund Receivables and Payables At June 30, 2010, interund receivables and payable were as follows: Due from Due to General Fund $12,760,751 $ - Internal Service Funds 820,395 Nonmajor Funds 3,840,229 City Hall Improvements (Major fund) 8,100,127 Total $12,760,751 12,760,751 The above balances are primarily due to reclassification of negative cash balance in the city wide cash pool. (14) Interfund Transfers Interfund transfers at June 30, 2010, consisted of the following: Transfers In Tide and Submerged Non -Major General Fund Land Funds Total General Fund $ - $ 20,130,495 547,257 $ 20,677,752 O= Contributions 160,000 - - 160,000 m a Fund v Internal Service F 600,000 600,000 Fund Non -Major Funds 759,725 183,044 942,769 Total $ 1,519,725 $ 20,130,495 $ 730,301 $ 22,380,521 The City typically uses transfers to fund ongoing subsidies. The general fund transferred $20,130,495 to subsidize for the maintenance and operation of the Tide and Submerged Land Fund. As required by the pre- annexation agreement, interest accrued in the amount of $201,059 in the Newport Coast Annexation fund, is due to and was subsequently transferred to the General Fund. 126 CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30. 2010 (15) Joint Venture Agreements Bonita Canvon Public Facilities Financina Authorit The Bonita Canyon Public Facilities Financing Authority (Authority) is a joint venture formed by the City of Newport Beach, Irvine Unified School District, and Newport-Mesa Unified School District. The Authority's Board is comprised of two members appointed by each of the member agencies. The Authority created Community Facilities District 98 -1 to finance public facilities that will benefit the properties within their boundaries. The Authority issued $45,000,000 of special tax bonds that will be repaid by special assessments; the City is not obligated in any manner to repay the bonds. The Authority paid the City $30,577,712 (81.7 %) to pay for the costs of acquiring and constructing public facilities including parks and road improvements. At June 30, 2010, the contributions from property owners are held in trust as cash with fiscal agent totaling $100,000. The City does not make any annual contributions to this joint venture. The City does not include the Authority as a component unit, as the City is not financially accountable for the Authority's activities and the Authority is not fiscally dependent on the City. The City's equity interest in this joint venture is not readily determinable. Complete separate financial statements can be obtained at the Newport Mesa Unified School District, 2985 Bear Street, Suite 8M, Costa Mesa, California. Air Borne Law Enforcement The City is a participant in a joint venture agreement with the City of Costa Mesa for the operation of the Air Borne Law Enforcement program (ABLE). The oversight Board consists of the Chiefs of Police of Costa Mesa and Newport Beach and one appointee for each Member Agency for a total of four Board Members. The cities have a 50% interest in the venture, with each city having provided an initial investment of two helicopters and related equipment. The City of Newport Beach's cost of participating in the ABLE program is recorded in the General Fund, which provides for the maintenance and operation of the program as well as replacement of capital equipment used in the operation of the program. Annually, the amounts paid by the City to this joint venture are approximately $1,000,000. Operation costs are offset by fees collected from surrounding cities that may subscribe to regular patrol or request assistance on an as- needed basis. Shared equally between the cities of Newport Beach and Costa Mesa, the City's share of net income from subscribers and other cities amounts to $86,929 for fiscal year 2009- 10. The City's 50% interest in the net equity of this joint venture at June 30, 2010, amounts to $2,626,770. Complete separate financial statements can be obtained at the City of Costa Mesa at 77 Fair Drive, Costa Mesa, California. Metro Cities Fire Authority The City of Newport Beach is a member of a joint venture agreement with the cities of Anaheim, Fountain Valley, Fullerton, Garden Grove, Huntington Beach, and Orange for the operation of a communication network to provide fire suppression, emergency medical assistance, and rescue services. The oversight board consists of one voting member and one alternate appointed by the governing body of each member agency. 127 CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30. 2010 The City of Newport Beach's costs are based each fiscal year upon the number of recorded incidents attributable to the City divided by the recorded incidents attributable to all members during the year and, are recorded in the General Fund as an expenditure for service. Upon termination of the agreement, the proceeds from the sale of the property and assets of the joint venture will be paid to each member agency pursuant to their fair share percentage. Annually, the amounts paid by the City to this joint venture are approximately $536,500. The City's 10.61% interest in the net equity of this joint venture at June 30, 2010, amounts to $151,673. Complete separate financial statements can be obtained at the Metro Cities Fire Authority offices at 201 S. Anaheim Boulevard, Suite 302, Anaheim, California. Integrated Law and Justice Agency of Orange County The City is a participant in a joint venture agreement with the several other public agencies of Orange County for the operation of the Integrated Law and Justice Agency of Orange County ( ILJAOC). The Integrated Law and Justice Agency of Orange County went into effect fiscal year 2007. The ILJAOC consists of 23 member agencies with an oversight board consisting of 12 members from the participating member agencies. The City acts as a treasurer for the ILJAOC and as such the activities of the ILJAOC are recorded in an Agency Fund. Annually, each member agency pays a percentage of the operating and replacement costs for the ILJAOC. The City's annual contribution and interest in the net equity of this joint venture at June 30, 2010, was immaterial. Complete separate financial statements can be obtained at the City of Newport Beach, 3300 Newport Boulevard, Newport Beach, California. (16) Commitments and Contingencies .�7 , rF1I"�- TiGIRR:. rCTTTii� Numerous claims and suits have been filed against the City in the normal course of business. The estimated liability under such claims, based upon information received from the City Attorney, contracted attorneys and the Risk Manager, has been estimated and recorded as accrued claims and judgments payable (See Note 6). Circulation Improvement and Open Space Agreement The City entered into a Circulation Improvement and Open Space Agreement (CIOSA) with a developer whereby the City received a loan of $14,395,572 to be used only for certain transportation and circulation improvements. The City agreed to match the contribution (without interest) by pledging 50% of future Fair Share Fees (developer impact fees) which are recorded in the Circulation and Transportation Special Revenue Fund. During the year ended June 30, 2010, the City received $366,087 of Fair Share Fees, and $183,044 was paid to the CIOSA Construction capital projects fund. Through June 30, 2010, $4,158,408 of Fair Share Fees has been paid. No additional liability has been recorded, because any future repayment is uncertain; any amounts not contributed by February 20, 2016, will be forgiven. 128 CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30. 2010 Newport Coast Pre - Annexation Aareement In Fiscal Year 2001 -02, the City entered into a Pre- Annexation Agreement with the Newport Coast Committee that stipulated certain terms and conditions for the annexation of property collectively known as Newport Coast. In conjunction with the annexation, the City also agreed to sell the water service rights for the annexed area to Irvine Ranch Water District for $25.0 million. Among other basic provisions, the Pre- Annexation Agreement stipulates specific requirements for the use of proceeds from the sale of the water rights to Irvine Ranch Water District. The City has entered into an agreement to reimburse Newport Coast residents $18.0 million of the $25.0 million for certain public road and street improvements previously financed by property owner assessments. The assessment debt relief will be provided to Newport Coast residents in equal installments of $1.2 million over 15 years. The remaining $7.0 million was used in locating, planning, and constructing a Community Center within the annexed area. Operating Agreements The City of Newport Beach first entered into an agreement with Visit Newport Beach Inc. (VNB), a legally separate non - profit marketing organization, in 1987. The primary responsibility of the VNB is to attract additional visitor business by promoting the City as the premier tourist and business destination in Orange County. The VNB is governed by an Executive Committee comprised of seven individuals not appointed by the City Council of the City of Newport Beach. The current agreement was entered into on May 12, 2004 and subsequently amended on March 10, 2009 extending the agreement through June 30, 2014. The City pays VNB 18% of the Total Transient Occupancy Tax collected during the fiscal year. For the Fiscal Year ending June 30, 2010, the City paid VNB $2,661,176. Contractual commitments Construction and contractual commitments for major construction projects are as follows: Civic Center OASIS Senior Center Sewer Pump Station Master Plan Improvements Traffic Signal Modernization Phases 4 & 7 Lido Isle Street Rehabilitation 129 Total Project Project To Date Unexpended Budget Expenditures Commitments $28,949,982 $8,776,524 $20,298,251 $13,440,285 $9,654,411 $3,866,721 $2,507,640 $343,494 $2,168,473 $1,201,000 $376,959 $823,203 $750,000 $98,797 $595,263 CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30. 2010 (17) Subsequent Events 2010 Civic Center Certificates of Participation (COPs) Subsequent to year end, the City issued nearly $128 million of Certificates of Participation (COPs), made up of $20.1 million in 2010A Certificates of Tax Exempt bonds and $106.6 million in 2010B Certificates of federally taxable direct pay Build America Bonds (BABS). A portion of the proceeds was used to refinance the City's 1998 $3.9 million outstanding Library COPs and pay $1.3 million cost of issuance of the Bonds. The rest of the proceeds will be used to make construction progress payments so that progress already made on the Civic Center site can continue and remain on schedule for the anticipated completion in late 2012. Charter Amendments On November 2, 2010, Voters approved Measure V amending 14 different parts of the Newport Beach city charter. The Newport Beach city charter was originally adopted in 1955 and was updated in 1974. The most specific changes to the city charter are summaries, rather than the full text of new ordinances to be published to meet the city's publication requirements; sales of city -owned waterfront land would no longer be listed in the city's charter and would continue to be subject to a public vote; a committee considering whether the city's voting districts needed to be redrawn to meet every 4 years instead of every 10 years; the current requirement that the city manager live in the city to be deleted among others. The full amendment can be viewed on the city's website. Fiscal Year 2010 -11 State Budget The City receives a significant portion of its funding from the State. Changes in the revenues received by the State can affect the amount of funding, if any, to be received from the State by the City and other counties in the State. The City has reviewed the State's 2010 -11 Budget Act and reflected the reductions included therein in its Fiscal Year 20100 -11 Adopted Budget. The primary impact to the City from the 2010 -11 Budget Act, is the delay of new Highway Users Tax Account payments. 130 FINANCIAL SECTION z 0 U W U] J a_ U z Q z SUPPLEMENTARY 1.1- INFORMATION NON-MAJOR GOVERNMENTALFIJNOS Non -major Special Revenue Funds Special Revenue Funds are used to account for the proceeds of specific revenue sources which are legally restricted to expenditures for specified purposes. The City of Newport Beach Special Revenue Funds are as follows: The State Gas Tax Fund accounts for all State Gas Tax related revenues and expenditures, including street repair, construction, and maintenance. State law requires that these funds be used exclusively for maintenance of the street and highway system. The Asset Forfeiture Fund was established to account for all revenues resulting from the seizure of assets in conjunction with criminal cases (primarily drug trafficking). It is the City's policy that all such funds shall be used for enhancement of law enforcement programs. The Office of the Traffic Safety DUI Grant Fund (OTS) is used to account for federal funding of the Selective Traffic Enforcement Program (STEP). These funds are used exclusively for DUI enforcement. The Justice Assistance Grant Fund (JAG) is used to account for federal support of law enforcement activities. The Circulation and Transportation Fund is used to account for fair share revenues collected from developers and restricted for capital improvement projects meeting the circulation element of the City's General Plan. The Building Excise Tax Fund is used to account for revenues received from builders or developers on building or remodeling projects within the City. Expenditures from this fund are used exclusively for public safety, libraries, parks, beaches, or recreational activities. The Combined Transportation Fund is used to account for the revenues and expenditures of funds received from the Orange County Combined Transportation Funding Program. Expenditures from this fund are used exclusively for transportation related purposes. The Community Development Block Grant Fund is used to account for revenues and expenditures relating to the City's Community Development Block Grant program. These funds are received from the Federal Department of Housing and Urban Development and must be expended exclusively on programs for low or moderate income individuals /families. The Air Quality Management District Fund is used to account for revenues received from the South Coast Air Quality Management District restricted for the use of reducing air pollution. The Environmental Liability Fund is used to account for solid waste fees restricted for mitigation of future environmental liability relating to the handling of solid waste. The Supplemental Law Enforcement Services Fund (SLESF) is used to account for revenues received from the county to be used exclusively for front line law enforcement services. The Traffic Congestion Relief Fund is used to account for all revenues received from the State Treasury related to Assembly Bill 2928. State law requires that these funds be used exclusively for maintenance or reconstruction costs on public streets and roads. 132 The Newport Coast Annexation Fund is used to account for revenues and expenditures related to the Newport Coast Annexation Agreement. The Prop f B Fund is used to account for all revenues and expenditures related to the Prop 1 B fund. State law requires that these funds be used exclusively for all transportation related projects, including state highway safety and rehabilitation projects, local street and road improvements, congestion relief, traffic reduction and traffic safety. The Contributions Fund is used to account for revenues received from other government agencies or private developers and expended for specific streets, highway, construction, or water quality projects. Non -major Debt Service Funds Debt Service Funds are used to account for debt service transactions including revenue collections and payments of principal and interest on long -term obligations of the City. The City of Newport Beach Debt Service Fund is as follows: The Library COP Fund is used to account for the debt service transactions related to the Certificates of Participation used to finance the construction of the Central Library. Non -major Capital Projects Funds Capital Projects Funds are used to account for resources used for the acquisition and construction of capital facilities by the City, except those financed by Enterprise Funds. The City of Newport Beach Capital Projects Funds are as follows: The Assessment District Fund is used to account for the receipt and expenditure of funds received from 1911 Act and 1915 Act Assessment Districts for capital improvement projects. The CIOSA Construction Fund is used to account for the receipt and expenditure of funds for the Circulation Improvement and Open Space Agreement (CIOSA). The improvements include street and frontage improvements. The Bonita Canyon Development Fund is used to account for the receipt and expenditure of funds for the Bonita Canyon Public Facilities Agreement. The improvements include certain public parks and recreation facilities, and street improvements and facilities. The Oil Spill Remediation Fund is used to account for the receipt of the settlement proceeds from the American Trader Company. These funds must be used on projects affecting the areas damaged by the spill. The Fire Station 7 Fund is used to account for the property acquisition, design and construction of a new fire station which will replace a temporary fire station that provides service in the northern part of the city. The Marine Science Center Fund is used to account for the design and construction of a new Marine Science Center. The Mariners Library Fund is a Special Revenue Fund used to account for revenues and expenditures of funds for the Mariners Library Capital Project. The Oasis Senior Center Fund is used to account for revenues and expenditures associated with the development and construction of the Oasis Senior Center. 133 The Misc. Santa Ana Heights Projects Fund is used to account for various grants and projects associated with providing public works, parks and recreation opportunities within the part of the City known as Santa Ana Heights. The Marina Park Fund is used to account for the design and construction of the Marina Park. The Sunset Ridge Park Fund is used to account for the design and construction of the Sunset Ridge Park. The Police Facility Fund is used to account for expenditures for the future space needs expected of the existing facility buildings, including detailed facility planning and budgetary guidelines for possible building rehabilitation and /or expansion projects. The Lifeguard Headquarters Fund is used to account for expenditures for the future space needs expected of the existing headquarters buildings, including detailed facility planning and budgetary guidelines for possible building rehabilitation and /or expansion projects. Non -major Permanent Funds Permanent Funds are used to report resources that are legally restricted for the extent that only earnings, not principal, may be used for purposes that support the reporting government's programs. The City of Newport Beach Permanent Fund is as follows: The Bay Dredging Fund is used to account for the receipt of permanent endowments intended to fund the ongoing cost of maintaining and dredging of the Upper Newport Bay. The Ackerman Fund is used to account for the receipt of permanent endowments intended as follows: 75% of the fund's investment proceeds will be used for the purchase of High Tech Library Equipment while the remaining 25% will be used for Scholarships for needy students. 134 This page left blank intentionally. 135 Assets Cash and investments Receivables: Accounts Intergovernmental receivables Cash with fiscal agent Total Assets Liabilities and Fund Balances Liabilities: Accounts payable Unearned revenue Unavailable revenue Due to other funds Total Liabilities Fund balances: Reserved for encumbrances Reserved for debt service Reserved for permanent endowment Reserved for prepaid items Unreserved: Designated for special purposes Undesignated Total fund balances Total liabilities and fund balances CITY OF NEWPORT BEACH Combining Balance Sheet Non -Major Governmental Funds June 30, 2010 Special Revenue Circulation State Asset OTS and Gas Tax Forfeiture DUI Grant JAG Transportation $ 3,585,591 $ 526,531 $ - $ - $ 5,361,656 - 12,834 - 16,654 - $ 3,585,591 $ 539,365 $ - $ 16,654 $ 5,361,656 $ - $ 157,005 - 39,952 16,654 - - - 39,952 16,654 157,005 1,124,312 - - 2,461,279 539,365 - - - (39,952) 3,585,591 539,365 (39,952) $ 3,585,591 $ 539,365 $ - 136 737,890 4,466,761 5,204,651 $ 16,654 $ 5,361,656 Special Revenue Building Community Air Quality Excise Combined Development Management Environmental Tax Transportation Block Grant District Liability $ 287,899 $ 3,370,938 $ - $ 402,526 $ 3,512,295 - 173,213 - - 12,355 - 298,412 38,585 - - $ 287,899 $ 3,842,563 $ 38,585 $ 402,526 $ 3,524,650 H $ 21,288 $ 17,723 $ 108,290 - - 107,363 3,458 - 20,862 - 236,941 42,043 $ 16,483 16,483 4,600 385,877 - - 21,016 - - - - 137,728 283,299 3,219,745 - 402,526 3,349,423 - - (3,458) - - 287,899 3,605,622 (3,458) 402,526 3,508,167 $ 287,899 $ 3,842,563 $ 38,585 $ 402,526 $ 3,524,650 (continued) 137 Assets Cash and investments Receivables: Accounts Intergovernmental receivables Cash with fiscal agent Total Assets Liabilities and Fund Balances Liabilities: Accounts payable Unearned revenue Unavailable revenue Due to other funds Total Liabilities Fund balances: Reserved for encumbrances Reserved for debt service Reserved for permanent endowment Reserved for prepaid items Unreserved: Designated for special purposes Undesignated Total fund balances Total liabilities and fund balances CITY OF NEWPORT BEACH Combining Balance Sheet Non -Major Governmental Funds June 30, 2010 (continued) 31,231 31,231 539,149 539,149 $ 31,231 $ 539,149 $ 138 8,400,000 8,400,000 8,400,000 $ 103,193 103,193 6,730 375,546 382,276 485,469 Special Revenue Supplemental Traffic Newport Law Congestion Coast Prop 1B Enforcement Relief Annexation Transportation $ - $ 321,930 $ 8,400,000 $ 485,469 31,231 217,219 - - $ 31,231 $ 539,149 $ 8,400,000 $ 485,469 31,231 31,231 539,149 539,149 $ 31,231 $ 539,149 $ 138 8,400,000 8,400,000 8,400,000 $ 103,193 103,193 6,730 375,546 382,276 485,469 $ 50,000 $ - $ 5,991 $ - 380,027 - - - 1,312,559 - - 1,742,586 - 5,991 - 250,494 - 194,982 - 565,655 - - 2,732,944 - 4,675,239 450,330 2,983,438 565,655 4,870,221 450,330 100,000 100,000 $ 4,726,024 $ 565,655 $ 4,876,212 $ 450,330 $ 100,000 (continued) 139 Debt Service Capital Projects Library Assessment CIOSA Bonita Canyon Contributions COP District Construction Development $ 2,559,284 $ - $ 3,384,936 $ 450,330 $ - 44,415 - - - - 2,122,325 - - - - 565,655 1,491,276 - 100,000 $ 4,726,024 $ 565,655 $ 4,876,212 $ 450,330 $ 100,000 $ 50,000 $ - $ 5,991 $ - 380,027 - - - 1,312,559 - - 1,742,586 - 5,991 - 250,494 - 194,982 - 565,655 - - 2,732,944 - 4,675,239 450,330 2,983,438 565,655 4,870,221 450,330 100,000 100,000 $ 4,726,024 $ 565,655 $ 4,876,212 $ 450,330 $ 100,000 (continued) 139 Assets CITY OF NEWPORT BEACH Combining Balance Sheet Non -Major Governmental Funds June 30, 2010 (continued) Cash and investments Receivables: Accounts Intergovernmental receivables Cash with fiscal agent Total Assets Liabilities and Fund Balances Liabilities: Accounts payable Unearned revenue Unavailable revenue Due to other funds Total Liabilities Fund balances: Reserved for encumbrances Reserved for debt service Reserved for permanent endowment Reserved for prepaid items Unreserved: Designated for special purposes Undesignated Total fund balances Total liabilities and fund balances Capital Projects Marine Mariners Oasis Fire Station 7 Science Center Library Senior Center $ 53,487 $ - $ - $ - $ 53,487 B11 53,487 53,487 $ 53,487 $ 140 $ 1,058,294 125,421 - 1,540,320 125,421 - 2,598,614 (125,421) - (2,598,614) Capital Projects Misc Marina Sunset Police Lifeguard SAH Projects Park Ridge Park Facility Headquarters $ 907,929 $ - $ - $ - $ - 367,294 - - - - $ 1,275,223 $ 6,800 $ 42,877 $ 5,105 $ - $ - 1,268,976 - - - - 367,294 - - - - - 1,135,382 898,053 2,175 30,179 1,643,070 1,178,259 903,158 2,175 30,179 117,344 - - - (367,847) (1,295,603) (903,158) (2,175) (30,179) $ 1,275,223 $ - $ - $ - $ - (continued) 141 Assets Cash and investments Receivables: Accounts Intergovernmental receivables Cash with fiscal agent Total Assets Liabilities and Fund Balances Liabilities: Accounts payable Unearned revenue Unavailable revenue Due to other funds Total Liabilities Fund balances: Reserved for encumbrances Reserved for debt service Reserved for permanent endowment Reserved for prepaid items Unreserved: Designated for special purposes Undesignated Total fund balances Total liabilities and fund balances CITY OF NEWPORT BEACH Combining Balance Sheet Non -Major Governmental Funds June 30, 2010 (continued) Permanent Fund Total Other Ackerman Governmental Bay Dredging Donation Funds $ 4,762,727 $ 1,161,978 $ 39,535,506 - - 597,277 - - 2,737,260 - - 2,156,931 $ 4,762,727 $ 1,161,978 $ 45,026,974 $ - $ 1,484,759 - 1,757,293 1,790,674 3,840,229 - 8,872,955 3,857,000 905,727 4,762,727 $ 4,762,727 $ 142 2,843,245 565,655 772,781 4,629,781 - 137,728 389,197 33,344,017 - (5,366,407) 1,161,978 36,154,019 1,161,978 $ 45,026,974 This page left blank intentionally. 143 Revenues: Other taxes Intergovernmental Licenses, permits and fees Fines and forfeitures Investment income Net increase in fair value of investments Donations Other Total revenues Expenditures: Current: Public safety Public works Community development Community services Capital outlay Debt service: Principal Interest and fiscal charges Total expenditures Excess (deficiency) of revenues over expenditures Other financing sources (uses): Transfers in Transfers out Total other financing sources (uses) Net change in fund balances Fund balances (deficit), beginning Fund balances (deficit), ending CITY OF NEWPORT BEACH Non -Major Governmental Fund Types Combining Statement of Revenues, Expenditures and Changes in Fund Balances For the Year ended June 30, 2010 Special Revenue State Asset OTS Gas Tax Forfeiture DUI Grant JAG 1,384,963 316,650 183,537 67,672 33,195 3,700 - 285 34,160 3,808 - - 1,452,318 324,158 183,537 67,957 71,789 180,640 67,957 471,280 - - - 471,280 71,789 180,640 67,957 981,038 252,369 2,897 (160,000) - (160,000) - 821,038 252,369 2,897 - 2,764,553 286,996 (42,849) - $ 3,585,591 $ 539,365 $ (39,952) $ - 144 Special Revenue Circulation Building Community Air Quality and Excise Combined Development Management Environmental Transportation Tax Transportation Block Grant District Liability S - $ - $ - $ - $ - $ 452,063 - - 1,797,798 470,499 97,868 - - 74,947 - - - - 366,087 - - - - - 45,761 3,188 38,710 - 5,238 36,172 47,092 3,281 39,836 - 5,389 37,224 3,675,000 - - - - - 4,133,940 81,416 1,876,344 470,499 108,495 525,459 - 14,342 108,537 134,720 - - 684,073 56,052 2,087,816 141,702 154,000 - - - - 89,000 - - - - - 108,535 - - 684,073 56,052 2,087,816 473,957 168,342 108,537 3,449,867 25,364 (211,472) (3,458) (59,847) 416,922 (263,044) - - - - (263,044) - - - - 3,186,823 25,364 (211,472) (3,458) (59,847) 416,922 2,017,828 262,535 3,817,094 - 462,373 3,091,245 $ 5,204.651 $ 287,899 $ 3,605,622 $ (3,458) $ 402,526 $ 3,508,167 (continued) 145 CITY OF NEWPORT BEACH Non -Major Governmental Fund Types Combining Statement of Revenues, Expenditures and Changes in Fund Balances For the Year ended June 30, 2010 (continued) Expenditures: Current: Public safety 119,820 - - - Public works - - - - Community development - - - - Community services - - - - Capital outlay - 638,840 - 945,210 Debt service: Principal - - 1,200,000 - Interest and fiscal charges - - - - Total expenditures 119,820 638,840 1,200,000 945,210 Excess (deficiency) of revenues over expenditures - 145,678 (998,941) (921,101) Other financing sources (uses): Transfers in - - - - Transfers out - - (201,059) - Total other financing sources (uses) - - (201,059) - Net change in fund balances - 145,678 (1,200,000) Special Revenue Fund balances, beginning - 393,471 9,600,000 1,303,377 Supplemental Traff ic Newport 382,276 Law Congestion Coast Prop 1B Enforcement Relief Annexation Transportation Revenues: Other taxes S - $ - $ - $ - Intergovernmental 119,072 781,202 - - Licenses, permits and fees - - - - Fines and forfeitures - - - Investment income 748 1,634 99,089 11,882 Net increase in fair value of investments - 1,682 101,970 12,227 Donations - - - - Other - - Total revenues 119,820 784,518 201,059 24,109 Expenditures: Current: Public safety 119,820 - - - Public works - - - - Community development - - - - Community services - - - - Capital outlay - 638,840 - 945,210 Debt service: Principal - - 1,200,000 - Interest and fiscal charges - - - - Total expenditures 119,820 638,840 1,200,000 945,210 Excess (deficiency) of revenues over expenditures - 145,678 (998,941) (921,101) Other financing sources (uses): Transfers in - - - - Transfers out - - (201,059) - Total other financing sources (uses) - - (201,059) - Net change in fund balances - 145,678 (1,200,000) (921,101) Fund balances, beginning - 393,471 9,600,000 1,303,377 Fund balances (deficit), ending $ - $ 539,149 $ 8,400,000 $ 382,276 146 Debt Service Capital Projects 4,195,274 - 1,031,884 - 1,648,609 - - 1,708,817 - - - 345,000 - - - - - 224,379 - - - - 1,648,609 569,379 4,195,274 1,708,817 1,031,884 - 524,705 (547,380) 1,659,516 (1,668,532) (877,962) 1,169 547,257 (160,000) (160,000) 547,257 364,705 (123) 183,044 183,044 1,659,516 (1,485,488) (877,962) 1,169 2,618,733 565,778 3,210,705 1,935,818 977,962 52,318 $ 2,983,438 $ 565,655 $ 4,870,221 $ 450,330 $ 100,000 $ 53,487 (continued) 147 Library Assessment CIOSA Bonita Canyon Contributions COP District Construction Development Fire Station 7 $ - S - S - S - $ - S - 1,903,669 - - - - - 47,127 21,999 26,063 19,854 51 576 48,498 - 26,823 20,431 - 593 174,020 - - - - - - - 5,801,904 - 153,871 - 2,173,314 21,999 5,854,790 40,285 153,922 1,169 4,195,274 - 1,031,884 - 1,648,609 - - 1,708,817 - - - 345,000 - - - - - 224,379 - - - - 1,648,609 569,379 4,195,274 1,708,817 1,031,884 - 524,705 (547,380) 1,659,516 (1,668,532) (877,962) 1,169 547,257 (160,000) (160,000) 547,257 364,705 (123) 183,044 183,044 1,659,516 (1,485,488) (877,962) 1,169 2,618,733 565,778 3,210,705 1,935,818 977,962 52,318 $ 2,983,438 $ 565,655 $ 4,870,221 $ 450,330 $ 100,000 $ 53,487 (continued) 147 CITY OF NEWPORT BEACH Non -Major Governmental Fund Types Combining Statement of Revenues, Expenditures and Changes in Fund Balances For the Year ended June 30, 2010 (continued) Revenues: Other taxes Intergovernmental Licenses, permits and fees Fines and forfeitures Investment income Net increase in fair value of investments Donations Other Total revenues Expenditures: Current: Public safety Public works Community development Community services Capital outlay Debt service: Principal Interest and fiscal charges Total expenditures Excess (deficiency) of revenues over expenditures Other financing sources (uses): Transfers in Transfers out Total other financing sources (uses) Net change in fund balances Fund balances, beginning Fund balances (deficit), ending Marine Mariners Oasis Misc Science Center Library Senior Center SAH Projects $ - $ S $ 300,000 318,074 - 4,944,909 - 592 45,962 - - - 1,523,917 - 300,000 318,666 1,569,879 4,944,909 5,273 - 9,654,410 5,273 4,895,035 9,654,410 4,895,035 294,727 318,666 (8,084,531) 49,874 (318,666) - (318,666) - 294,727 - (8,084,531) 49,874 (420,148) - 5,485,917 (417,721) $ (125,421) $ - $ (2,598,614) $ (367,847) 148 Capital Projects Marina Sunset Police Lifequard Park Ridge Park Facility Headquarters S $ $ S 320,867 659,857 - 320,867 659,857 - (320,867) (659,857) - (320,867) (659,857) - (857,392) (243,301) (2,175) (30,179) S (1,178,259) $ 903,158) $ 2,175) $ (30,179) (continued) 149 CITY OF NEWPORT BEACH Non -Major Governmental Fund Types Combining Statement of Revenues, Expenditures and Changes in Fund Balances For the Year ended June 30, 2010 (continued) Revenues: Othertaxes Intergovernmental Licenses, permits and fees Fines and forfeitures Investment income Net increase in fair value of investments Donations Other Total revenues Expenditures: Current: Public safety Public works Community development Community services Capital outlay Debt service: Principal Interest and fiscal charges Total expenditures Permanent Funds 440,206 - 10,245,072 4,650 1,120,094 - 18,196,082 1,634,000 - 332,914 4,650 31,968,368 Excess (deficiency) of revenues over expenditures 104,074 20,841 (6,106,241) Other financing sources (uses): Transfers in - - 730,301 Transfers out - - (1,102,769) Total other financing sources (uses) - - (372,468) Net change in fund balances 104,074 Total (6,478,709) Fund balances, beginning Other 1,141,137 Ackerman Governmental Bay Dredging Donation Funds S - $ - $ 452,063 - - 12,685,913 - 74,947 - 366,087 51,291 12,573 505,690 52,783 12,918 448,715 - - 5,372,937 - - 5,955,775 104,074 25,491 25,862,127 440,206 - 10,245,072 4,650 1,120,094 - 18,196,082 1,634,000 - 332,914 4,650 31,968,368 Excess (deficiency) of revenues over expenditures 104,074 20,841 (6,106,241) Other financing sources (uses): Transfers in - - 730,301 Transfers out - - (1,102,769) Total other financing sources (uses) - - (372,468) Net change in fund balances 104,074 20,841 (6,478,709) Fund balances, beginning 4,658,653 1,141,137 42,632,728 Fund balances (deficit), ending $ 4,762,727 $ 1,161,978 $ 36,154,019 150 CITY OF NEWPORT BEACH Budgetary Comparison Schedule State Gas Tax Special Revenue Fund For the Year Ended June 30, 2010 Variance with Final Budget Budgeted Amounts Positive Original Final Actual (Negative) Revenues: Intergovernmental $ 1,361,251 $ 1,361,251 $ 1,384,963 $ 23,712 Investment income 40,000 40,000 33,195 (6,805) Net increase in fair value of investments - - 34,160 34,160 Total revenues 1,401,251 1,401,251 1,452,318 51,067 Expenditures: Capital outlay Total Expenditures Excess (deficiency) of revenues over expenditures Other financing uses: Transfers out Net change in fund balance Fund balance, beginning Fund balance (deficit), ending 2,982,087 689,337 471,280 218,057 2,982,087 689,337 471,280 (218,057) (1,580,836) 711,914 981,038 269,124 (160,000) (160,000) (160,000) (1,740,836) 551,914 821,038 269,124 2,764,553 2,764,553 2,764,553 -- S 1,023,717 $ 3,316,467 3,585,591 $ 269,124 151 CITY OF NEWPORT BEACH Budgetary Comparison Schedule Asset Forfeiture Special Revenue Fund For the Year Ended June 30, 2010 Expenditures Public safety 106,072 106,072 Variance Net change in fund balance (63,072) (63,072) with Final Fund balance, beginning 286,996 286,996 Budget Fund balance, ending Budget Amounts $ 223,924 Positive Original Final Actual (Negative) Revenues: Intergovernmental $ 40,000 $ 40,000 $ 316,650 $ 276,650 Investment income 3,000 3,000 3,700 700 Net increase in fair value of investments - - 3,808 3,808 Total revenues 43,000 43,000 324,158 281,158 Expenditures Public safety 106,072 106,072 71,789 34,283 Net change in fund balance (63,072) (63,072) 252,369 315,441 Fund balance, beginning 286,996 286,996 286,996 - Fund balance, ending $ 223,924 $ 223,924 $ 539,365 $ 315,441 152 CITY OF NEWPORT BEACH Budgetary Comparison Schedule OTS DUI Grant Special Revenue Fund For the Year Ended June 30, 2010 Variance with Final Budget Budget Amounts Positive Original Final Actual (Negative) Revenues: Intergovernmental $ 105,643 S 297,643 $ 183,537 $ (114,106) Total revenues 105,643 297,643 183,537 (114,106) Expenditures Public safety $ 64,167 $ 256,167 $ 180,640 75,527 Net change in fund balance 41,476 41,476 2,897 (38,579) Fund balance (deficit), beginning (42,849) (42,849) (42,849) - Fund balance (deficit), ending $ (1,373) $ (1,373) $ (39,952) $ (38,579) 153 CITY OF NEWPORT BEACH Budgetary Comparison Schedule JAG Special Revenue Fund For the Year Ended June 30, 2010 154 Variance with Final Budget Budget Amounts Positive Original Final Actual (Negative) Revenues: Intergovernmental $ 67,197 $ 67,197 $ 67,672 $ 475 Investment income - - 285 285 Total revenues 67,197 67,197 67,957 760 Expenditures Public safety 67,197 67,197 67,957 (760) Net change in fund balance - - - - Fund balance (deficit), beginning - - - - Fund balance (deficit), ending $ - $ - $ - $ - 154 CITY OF NEWPORT BEACH Budgetary Comparison Schedule Circulation and Transportation Special Revenue Fund For the Year Ended June 30, 2010 155 Variance with Final Budget Budgeted Amounts Positive Original Final Actual (Negative) Revenues: Licenses, permits and fees $ 615,000 $ 615,000 $ 366,087 $ (248,913) Investment income 36,500 36,500 45,761 9,261 Net increase in fair value of investments - - 47,092 47,092 Donations - - 3,675,000 3,675,000 Total revenues 651,500 651,500 4,133,940 3,482,440 Expenditures: Capital outlay 2,105,201 1,541,311 684,073 857,238 Excess (deficiency) of revenues over expenditures (1,453,701) (889,811) 3,449,867 4,339,678 Other financing uses: Transfers out (80,000) (80,000) (263,044) (183,044) Net change in fund balance (1,533,701) (969,811) 3,186,823 4,156,634 Fund balance, beginning 2,017,828 2,017,828 2,017,828 - Fund balance, ending $ 484,127 $ 1,048,017 $ 5,204,651 $ 4,156,634 155 CITY OF NEWPORT BEACH Budgetary Comparison Schedule Building Excise Tax Special Revenue Fund For the Year Ended June 30, 2010 156 Variance with Final Budget Budgeted Amounts Positive Original Final Actual (Negative) Revenues: Licenses, permits and fees $ 100,000 $ 100,000 $ 74,947 $ (25,053) Investment income 500 500 3,188 2,688 Net increase in fair value of investments - - 3,281 3,281 Total revenues 100,500 100,500 81,416 (19,084) Expenditures: Capital outlay 90,200 69,800 56,052 13,748 Net change in fund balance 10,300 30,700 25,364 (5,336) Fund balance, beginning 262,535 262,535 262,535 - Fund balance, ending $ 272,835 $ 293,235 $ 287,899 $ (5,336) 156 CITY OF NEWPORT BEACH Budgetary Comparison Schedule Combined Transportation Special Revenue Fund For the Year Ended June 30, 2010 Revenues: Intergovernmental Investment income Net increase in fair value of investments Total revenues Expenditures: Capital outlay Net change in fund balance Fund balance, beginning Fund balance (deficit), ending (3,618,655) (1,172,302) (211,472) 3,817,094 3,817,094 3,817,094 $ 198,439 $ 2,644,792 $ 3,605,622 157 960,830 $ 960,830 Variance with Final Budget Budgeted Amounts Positive Original Final Actual (Negative) $ 2,757,977 $ 2,757,977 $ 1,797,798 $ (960,179) 70,000 70,000 38,710 (31,290) - - 39,836 39,836 2,827,977 2,827,977 1,876,344 (951,633) 6,446,632 4 000 279 2,087 816 1,912,463 (3,618,655) (1,172,302) (211,472) 3,817,094 3,817,094 3,817,094 $ 198,439 $ 2,644,792 $ 3,605,622 157 960,830 $ 960,830 CITY OF NEWPORT BEACH Budgetary Comparison Schedule Community Development Block Grant Special Revenue Fund For the Year Ended June 30, 2010 Revenues: Intergovernmental Total revenues Expenditures: Community development Capital outlay Debt service: Principal Interest and fiscal charges Total expenditures Net change in fund balance Fund balance (deficit), beginning Fund balance (deficit), ending $ - $ (20,000) $ (3,458) $ 16,542 158 Variance with Final Budget Budgeted Amounts Positive Original Final Actual (Negative) $ 473,957 $ 453,957 $ 470,499 $ 16,542 473,957 453,957 470,499 16,542 134,720 134,720 134,720 - 141,702 141,702 141,702 - 89,000 89,000 89,000 - 108,535 108,535 108,535 - 473,957 473,957 473,957 - - (20,000) (3,458) 16,542 $ - $ (20,000) $ (3,458) $ 16,542 158 CITY OF NEWPORT BEACH Budgetary Comparison Schedule Air Quality Management District Special Revenue Fund For the Year Ended June 30, 2010 Expenditures Public works 26,415 26,415 14,342 Variance Capital outlay - 154,000 154,000 with Final Total expenditures 26,415 180,415 168,342 Budget Net change in fund balance Budgeted Amounts (59,847) Positive Fund balance, beginning Original Final Actual (Negative) Revenues: $ 541,958 $ 387,958 $402,526 $ 14,568 Intergovernmental $ 100,000 $ 100,000 $ 97,868 $ (2,132) Investment income 6,000 6,000 5,238 (762) Net increase in fair value of investments - - 5,389 5,389 Total revenues 106,000 106,000 108,495 2,495 Expenditures Public works 26,415 26,415 14,342 12,073 Capital outlay - 154,000 154,000 - Total expenditures 26,415 180,415 168,342 12,073 Net change in fund balance 79,585 (74,415) (59,847) 14,568 Fund balance, beginning 462,373 462,373 462,373 - Fund balance, ending $ 541,958 $ 387,958 $402,526 $ 14,568 159 CITY OF NEWPORT BEACH Budgetary Comparison Schedule Environmental Liability Special Revenue Fund For the Year Ended June 30, 2010 Expenditures Public works $ 152,473 $ 152,473 $ 108,537 Variance Total expenditures 152,473 152,473 108,537 with Final Net change in fund balance 352,527 352,527 416,922 Budget Fund balance, beginning Budgeted Amounts 3,091,245 Positive Fund balance, ending Original Final Actual (Negative) Revenues: Taxes $ 420,000 $ 420,000 $ 452,063 $ 32,063 Investment income 45,000 45,000 36,172 (8,828) Net increase in fair value of investments - - 37,224 37,224 Other Revenue 40,000 40,000 (40,000) Total revenues 505,000 505,000 525,459 20,459 Expenditures Public works $ 152,473 $ 152,473 $ 108,537 $ 43,936 Total expenditures 152,473 152,473 108,537 43,936 Net change in fund balance 352,527 352,527 416,922 64,395 Fund balance, beginning 3,091,245 3,091,245 3,091,245 - Fund balance, ending $ 3,443,772 $ 3,443,772 $ 3,508,167 $ 64,395 160 CITY OF NEWPORT BEACH Budgetary Comparison Schedule Supplemental Law Enforcement Special Revenue Fund For the Year Ended June 30, 2010 Revenues: Intergovernmental Investment income Total revenues Expenditures: Public safety Net change in fund balance Fund balance, beginning Fund balance, ending Variance with Final Budget Budgeted Amounts Positive Original Final Actual (Negative) $ 160,000 $ 160,000 $ 119,072 $ (40,928) 750 750 748 (2) 160,750 160,750 119,820 (40,930) 160,750 160,750 119,820 40,930 161 CITY OF NEWPORT BEACH Budgetary Comparison Schedule Traffic Congestion Special Revenue Fund For the Year Ended June 30, 2010 162 Variance with Final Budget Budgeted Amounts Positive Original Final Actual (Negative) Revenues: Intergovernmental $ 803,268 $ 1,000,612 $ 781,202 $ (219,410) Investment income 4,000 4,000 1,634 (2,366) Net increase in fair value of investments - - 1,682 1,682 Total revenues 807,268 1,004,612 784,518 (220,094) Expenditures: Capital outlay 1,342,058 1,342,058 638,840 703,218 Net change in fund balance (534,790) (337,446) 145,678 483,124 Fund balance, beginning 393,471 393,471 393,471 - Fund balance, ending $ (141,319) $ 56,025 $ 539,149 $ 483,124 162 CITY OF NEWPORT BEACH Newport Coast Annexation Budgetary Comparison Statement For the Year Ended June 30, 2010 163 Variance with Final Budget Budgeted Amounts Positive Original Final Actual (Negative) Revenues Investment income $ 250,000 $ 250,000 $ 99,089 $ (150,911) Net increase in fair value of investments - - 101,970 101,970 Total revenues 250,000 250,000 201,059 (48,941) Expenditures Debt service: Principal 1,200,000 1,200,000 1,200,000 - Total expenditures 1,200,000 1,200,000 1,200,000 - Excess (deficiency) of revenues over expenditures (950,000) (950,000) (998,941) (48,941) Other financing uses Transfers in - - - - Transfers out (1,400,000) (200,000) (201,059) (1,059) Total other financing (uses) (1,400,000) (200,000) (201,059) (1,059) Net change in fund balance (2,350,000) (1,150,000) (1,200,000) (50,000) Fund balance, beginning 9,600,000 9,600,000 9,600,000 - Fund balance, ending $ 7,250,000 $ 8,450,000 $ 8,400,000 $ (50,000) 163 CITY OF NEWPORT BEACH Budgetary Comparison Schedule Proposition 1B Transportation Special Revenue Fund For the Year Ended June 30, 2010 Revenues: Investment income Net increase in fair value of investments Total revenues Expenditures: Capital outlay Net change in fund balance Fund balance, beginning Fund balance, ending 164 Variance with Final Budget Budgeted Amounts Positive Original Final Actual (Negative) $ 27,000 $ 27,000 $ 11,882 $ (15,118) - - 12,227 12,227 27,000 27,000 24,109 (2,891) - 1,252,014 943,845 308,169 27,000 (1,225,014) (919,736) 305,278 1,303,377 1,303,377 1,303,377 - $ 1,330,377 $ 78,363 $ 383,641 8 305,278 164 CITY OF NEWPORT BEACH Contributions Fund Budgetary Comparison Statement For the Year Ended June 30, 2010 Expenditures: Capital outlay 4,136,227 - 1,648,609 (1,648,609) Excess (deficiency) of revenues over expenditures (2,165,603) 3,678,081 524,705 (3,153,376) Other financing sources (uses): Transfers in - - - - Transfers out - (160,000) (160,000) Net change in fund balance (2,165,603) 3,678,081 364,705 (3,313,376) Fund balance, beginning 2,618,733 2,618,733 2,618,733 - Fund balance, ending $ 453,130 $ 6,296,814 $ 2,983,438 $ (3,313,376) 165 Variance with Final Budget Budgeted Amounts Positive Original Final Actual (Negative) Revenues: Intergovernmental $ 1,774,624 $ 3,479,294 $ 1,903,669 $ (1,575,625) Investment income 75,000 75,000 47,127 (27,873) Net increase in fair value of investments - - 48,498 48,498 Donations 121,000 123,787 174,020 50,233 Total revenues 1,970,624 3,678,081 2,173,314 (1,504,767) Expenditures: Capital outlay 4,136,227 - 1,648,609 (1,648,609) Excess (deficiency) of revenues over expenditures (2,165,603) 3,678,081 524,705 (3,153,376) Other financing sources (uses): Transfers in - - - - Transfers out - (160,000) (160,000) Net change in fund balance (2,165,603) 3,678,081 364,705 (3,313,376) Fund balance, beginning 2,618,733 2,618,733 2,618,733 - Fund balance, ending $ 453,130 $ 6,296,814 $ 2,983,438 $ (3,313,376) 165 This page left blank intentionally. Im FINANCIAL SECTION SUPPLEMENTARY INFORMATION INTERNAL SERVICE FUNDS z 0 U W Ul J Q_ U z Q z Iz INTERNAL SERVICE FUNDS The Internal Service Funds are used to allocate the cost of providing goods and services by one department to other departments on a cost reimbursement basis. The City of Newport Beach Internal Service Funds are listed below: The Insurance Reserve Fund is used to account for the City's self- insured general liability and workers' compensation program. The Compensated Absences Fund is used to account for the City's accumulated liability for compensated absences. The Retiree Insurance Fund is used to account for the cost of providing post - employment Health Care Benefit. The Equipment Fund is used to account for the cost of maintaining and replacing the City's rolling stock fleet and the rental of the fleet to operating departments. M CITY OF NEWPORT BEACH All Internal Service Funds Combining Statement of Net Assets June 30, 2010 Liabilities Current liabilities Accounts payable and accrued liabilities $ 168,001 $ 1,463 $ - $ 117,265 Total Accrued payroll Insurance Compensated Retiree Equipment Internal Assets Reserve Absence Insurance Maintenance Service Funds Current assets: 3,080,500 - - - 3,080,500 Cash and investments $ 21,834,597 $ 1,841,034 $ - $ 17,068,463 $ 40,744,094 Receivables: - 1,557,331 - - 1,557,331 Accounts 130,059 12,116 749,816 3,415 895,406 Inventories - - - 255,430 255,430 Prepaid items 78,000 293,330 371,330 Total current assets 22,042,656 1,853,150 1,043,146 17,327,308 42,266,260 Non - current assets: 2,559,662 - - - 2,559,662 Capital assets: - 7,438,548 - - 7,438,548 Equipment - - - 23,022,523 23,022,523 Less accumulated depreciation 6,472,000 (16,672,418) (16,672,418) Total capital assets (net of 11,801,162 9,949,465 6,472,000 - 28,222,627 accumulated depreciation) - - - 6,350,105 6,350,105 Total assets 22,042,656 1,853,150 1,043,146 23,677,413 48,616,365 Liabilities Current liabilities Accounts payable and accrued liabilities $ 168,001 $ 1,463 $ - $ 117,265 $ 286,729 Accrued payroll - - - 43,909 43,909 Due to general fund - - 820,395 - 820,395 Workers' compensation - current 3,080,500 - - - 3,080,500 General liability - current 1,260,729 - - - 1,260,729 Compensated absences - current - 1,557,331 - - 1,557,331 Early retirement incentive program - current - 938,520 - - 938,520 Total current liabilities 4,509,230 2,497,314 820,395 161,174 7,988,113 Non - current liabilities: Workers' compensation 9,241,500 - - - 9,241,500 General liability 2,559,662 - - - 2,559,662 Compensated absences - 7,438,548 - - 7,438,548 Early retirement incentive program - current 2,510,917 2,510,917 Net OPEB obligation 6,472,000 6,472,000 Total Noncurrent liabilities 11,801,162 9,949,465 6,472,000 - 28,222,627 Total liabilities 16,310,392 12,446,779 7,292,395 161,174 36,210;740 Net Assets Invested in capital assets, net of related debt - - - 6,350,105 6,350,105 Unrestricted 5,732,264 (10,593,629) (6,249,249) 17,166,134 6,055,520 Total net assets $ 5,732,264 $ (10,593,629) $ (6,249,249) $ 23,516,239 $ 12,405,625 169 CITY OF NEWPORT BEACH Internal Service Funds Combining Statement of Revenues, Expenses and Changes in Fund Net Assets For the Year Ended June 30, 2010 170 Total Insurance Compensated Retiree Equipment Internal Reserve Absence Insurance Maintenance Service Funds Operating revenues: Charges for services $ 5,909,794 $ 2,383,307 $ 2,016,000 $ 5,989,798 $ 16,298,899 Retiree reimbursements - - 1,119,262 - 1,119,262 Employee contributions - - 329,234 - 329,234 Other 158,499 12,116 47,286 217,901 Total operating revenues 6,068,293 2,395,423 3,511,782 5,989,798 17,965,296 Operating expenses: Salaries and wages - - - 1,459,423 1,459,423 Depreciation - - - 1,814,442 1,814,442 Professional services - - - 51,431 51,431 Maintenance and supplies - - - 813,819 813,819 Fleet parts and supplies - - - 452,466 452,466 Workers'compensation 3,530,130 - - - 3,530,130 Claims and judgments 201,308 - - - 201,308 Compensated absences - 2,022,943 - - 2,022,943 Early Retirement Incentive Program - 4,409,833 - - 4,409,833 OPEB ARC- Cash subsidy - - 2,016,000 - 2,016,000 OPEB ARC- Implied subsidy - - 2,477,000 - 2,477,000 Other 1,115,115 1,115,115 Total operating expenses 3,731,438 6,432,776 5,608,115 4,591,581 20,363,910 Operating income (loss) 2,336,855 (4,037,353) (2,096,333) 1,398,217 (2,398,614) Nonoperating revenues (expenses): Investment income 235,672 24,673 - 183,682 444,227 Net Increase in fair value of investments 242,731 25,390 - 189,024 457,145 (Loss) on sale of capital assets - - - (15,877) (15,877) Total nonoperating revenues 478,603 50,063 - 356,829 885,495 Income (loss) before transfers 2,815,458 (3,987,290) (2,096,333) 1,755,046 (1,513,119) Transfers in - - - - Transfer out (600,000) (600,000) Change in net assets 2,815,458 (3,987,290) (2,096,333) 1,155,046 (2,113,119) Net assets (accumulated deficit), beginning 2,916,806 (6,606,339) (4,152,916) 22,361,193 14,518,744 Net assets, (accumulated deficit), ending $ 5,732,264 $ (10,593,629) $ (6,249,249) $ 23,516,239 $ 12,405,625 170 CITY OF NEWPORT BEACH Combining Statement of Cash Flows - Internal Service Funds For the Year Ended June 30, 2010 Total Insurance Compensated Retiree Equipment Internal Reserve Absences Insurance Maintenance Service Funds Cash flows from operating activities Receipts from user departments $ 6,087,377 $ 2,371,191 $ 3,135,262 $ 5,999,641 $ 17,593,471 Payments to employees (3,101,130) (3,771,545) - (1,458,891) (8,331,566) Payments to suppliers (2,671,115) 1,463 (3,869,990) (1,299,015) (7,838,657) Other operating cash receipts 158,499 12,116 376,520 1,814,442 547,135 Net cash provided (used) for operating activities 473,631 (1,386,775) (358,208) 3,241,735 1,970,383 Cash flows from noncapital financing activities: 177,583 (12,116) (180,669) 9,843 (5,359) Cash received from other funds - - 358,208 - 358,208 Cash paid to other funds - - - (600,000) (600,000) Net cash provided (used)by noncapital financing 358 208 (600.000) (241.792) Cash flows from capital and related financing activities: Acquisition of capital assets Proceeds from sale of capital assets Net cash used for capital and related financing activities Cash flows from investing activities: Interest on investments Net cash provided for investing activities Net increase (decrease) in cash and cash equivalents Cash and cash equivalents, beginning Cash and cash equivalents, ending Reconciliation of operating income to net cash provided (used) by operating activities: Cash flows from operating activities 478,603 50,063 478,603 50,063 (1,478,229) (1,478,229) 105,934 105,934 (1,372,295) (1,372,295) 372,706 901,372 372,706 901,372 952,234 (1,336,712) - 1,642,146 1,257,668 20,882,363 3,177,746 15,426,317 39,486,426 $ 21,834,597 $ 1,841,034 $ $ 17,068,463 $ 40,744,094 Operating income (loss) $ 2,336,855 $ (4,037,353) $ (2,096,333) $ 1,398,217 $ (2,398,614) Adjustments to reconcile operating income (loss) to net cash provided by operating activities: Depreciation - - - 1,814,442 1,814,442 Changes in operating assets and liabilities: (Increase) decrease in accounts receivable 177,583 (12,116) (180,669) 9,843 (5,359) Decrease in inventories - - - 4,301 4,301 (increase) in prepaid items (78,000) - (131,751) - (209,751) Increase (decrease) in accounts payable and accrued payroll (314,461) 1,463 (13,455) 14,932 (311,521) Increase in workers' compensation 429,000 - - - 429,000 (Decrease) in general liability (2,077,346) - - - (2,077,346) (Decrease) in compensated absences - (788,206) - - (788,206) Increase in early retirement incentive program - 3,449,437 - - 3,449,437 Increase in net OPEB obligation 2,064,000 2,064,000 Total adjustments (1,863,224) 2,650,578 1,738,125 1,843,518 4,368,997 Net cash provided (used) by operating activities $ 473.631 $ (1.386.7751 $ (358.2081 $ 3.241.735 $ 1.970.383 Non -cash investing, capital, and financing activities: Net increase in fair value of investments 242,731 25,390 - 189,024 457,145 (Loss) on sale of capital assets (15,877) (15,877) Total of non -cash activities $ 242,731 $ 25,390 $ $ 173,147 $ 441,268 171 This page left blank intentionally. 172 FINANCIAL SECTION z 0 U W Ul J Q_ U z Q z Lz SUPPLEMENTARY INFORMATION FIDUCIARY FUNDS FIDUCIARY FUNDS Fiduciary Funds are used to account for assets held by the City in a trustee capacity, or as an agent for other government entities, private organizations, or individuals. The City of Newport Beach Fiduciary Funds are listed below: The Special Assessment District Fund is used to account for funds received from affected property owners and payable to holders of 1911 Act, 1915 Act and other special assessment bonds. The Business Improvement District Fund is used to account for monies collected from local business districts for district property improvements and business enhancement. The Integrated Law and Justice Agency for Orange County (ILJAOC) Fund is used to account for monies collected from member agencies for the operation of ILJAOC. 174 CITY OF NEWPORT BEACH Agency Funds Combining Statement of Fiduciary Assets and Liabilities June 30, 2010 Liabilities Due to bondholders $ 7,301,247 $ - $ - $ 7,301,247 Due to others - 198,047 105,984 304,031 Due to ILJAOC - - 1,546,707 1,546,707 Total liabilities $ 7,301,247 $ 198,047 $ 1,652,691 $ 9,151,985 175 Special Business Assessment District Improvement ILJAOC Assets Fund Fund Fund Totals Cash and investments $ 2,682,766 $ 198,047 $ 1,489,262 $ 4,370,075 Cash with fiscal agent 4,618,481 - - 4,618,481 Prepaid items - 75,085 75,085 Intergovernmental receivable - - 88,344 88,344 Total assets $ 7,301,247 $ 198,047 $ 1,652,691 $ 9,151,985 Liabilities Due to bondholders $ 7,301,247 $ - $ - $ 7,301,247 Due to others - 198,047 105,984 304,031 Due to ILJAOC - - 1,546,707 1,546,707 Total liabilities $ 7,301,247 $ 198,047 $ 1,652,691 $ 9,151,985 175 CITY OF NEWPORT BEACH Statement of Changes in Fiduciary Net Assets All Agency Funds For the Year Ended June 30, 2010 Business Improvement District: Assets Cash and investments $ 229,398 $ 527,231 $ (558,582) $ 198,047 Liabilities Due to others $ 229,398 $ 527,231 $ (558,582) $ 198,047 ILJAOC: Balance $ 6,690,646 $ (6,149,206) Balance Due to others June 30, 2009 Additions Deductions June 30, 2010 Special Assessment: 1,037,964 508,743 1,546,707 Assets Cash and investments $ 985,979 $ Cash and investments $ 2,658,042 $ 4,190,694 $ (4,165,970) $ 2,682,766 Cash with fiscal agent 4,101,765 2,499,952 (1,983,236) 4,618,481 Total Assets $ 6,759,807 $ 6,690,646 _L±,149,2061 $ 7,301,247 Liabilities 8,344 88,344 Due to bondholders $ 6,759,807 $ 6,690,646 $ (6,149,206) $ 7,301,247 Business Improvement District: Assets Cash and investments $ 229,398 $ 527,231 $ (558,582) $ 198,047 Liabilities Due to others $ 229,398 $ 527,231 $ (558,582) $ 198,047 ILJAOC: $ 6,759,807 $ 6,690,646 $ (6,149,206) $ 7,301,247 Due to others 259,607 603,006 Assets 304,031 Due to ILJAOC 1,037,964 508,743 1,546,707 Total Liabilities Cash and investments $ 985,979 $ 503,283 $ $ 1,489,262 Prepaid items 2,194 75,085 (2,194) 75,085 Intergovernmental receivable 80,000 8,344 88,344 Total Assets $ 1,068,173 $ 586,712 $ (2,194) $ 1,652,691 Liabilities Due to others $ 30,209 $ 75,775 $ $ 105,984 Due to ILJAOC 1,037,964 508,743 1,546,707 Total Liabilitites $ 1,068,173 $ 584,518 $ $ 1,652,691 Totals - All Agency Funds: Assets Cash and investments $ 3,873,419 $ 5,221,208 $ (4,724,552) $ 4,370,075 Cash with fiscal agent 4,101,765 2,499,952 (1,983,236) 4,618,481 Prepaid items 2,194 75,085 (2,194) 75,085 Intergovernmental receivable 80,000 8,344 88,344 Total Assets $ 8,057,378 $ 7,804,589 _L±,709,9821 $ 9,151,985 Liabilities Due to bondholders $ 6,759,807 $ 6,690,646 $ (6,149,206) $ 7,301,247 Due to others 259,607 603,006 (558,582) 304,031 Due to ILJAOC 1,037,964 508,743 1,546,707 Total Liabilities $ 8,057,378 $ 7,802,395 $ (6,707,788) $ 9,151,985 176 STATISTICAL SECTION z U W Cf1 J Q U_ H N H Q H U7 FINANCIAL TRENDS This section of the City of Newport Beach's Comprehensive Annual Financial Report (CAFR) presents detailed information as a context for understanding what the information in the financial statements, note disclosures, and required supplementary information says about the City's overall financial health. The statistical information presented herein is un- audited. The following schedules contain trend information illustrating how the City's financial performance and well -being has changed over time: • Net Assets by Component • Changes in Net Assets • Fund Balances of Governmental Funds • Changes in Fund Balance of Governmental Funds Sources: Unless otherwise noted, the information in these schedules is derived from the Comprehensive annual financial reports and underlying accounting records for the relevant year. 178 CITY OF NEWPORT BEACH Net Assets by Component Last Nine Fiscal Years (accrual basis of accounting Fiscal Year 2002 2003 2004 2005' 2006 2007 2008 2009 2010 Govemmenlal activities: nvested In Capital assets, net of related debt $13916]]813 $1,4123]2465 61$12651096 $ 1,915346863 $ 2D05,643661 $ 2,02701 $ 2,050,925,370 $ 2,061635842 S 2,065012,025 Restricted 38,689,956 37,650,692 45,494,082 54,285,743 51,901,103 35,017.831 40,988,923 44,212.]4] 34236,929 Uniessal 41,095,786 49,322,283 46,]]2,913 61,894,956 56,662,229 75,989,169 87,802,996 96,276,361 85,949,688 Trial governmental activities $14]1463555 $1 499 345 440 $1 804 918 091 $ 2 031 529 562 $ 2 114 208 983 $ 2 138 033 053 $ 21]9 ]1]289 $ 2202124]70 $ _2205198642 Business -type activities: Invested In capipl assets, not of related debt S 87,470,314 $ 91,912,205 $ 94,206,704 $ 99,641,411 S 104602,266 $ 107,231,308 $ 1O,313,603 $ 105510,361 $ 108,449,847 Restricted - - - - - - - - - Unrestricted 25123500 24,22],5]9 21,493,528 10665,535 16.907367 15608,357 13,63002] 11,435,306 10,173912 Total businoss-rype activities $ 113.593.814 S 116.139.]84 _L115 ]00.232 _L112 .306.946 _L121 509 633 _LIP 039 665 _L120 952 630 _L_119 M 661 _L--M 623 759 Pri mary govomment I averred In capital assets, net of related debt $16]9,140,12] $ 1504284670 $ 1,606,857,800 $ 2,014 anti $ 2,110245,917 5 2,134257,361 S 2,151 $ 2.170.148,003 S 2,193p61872 Restricted 38,689,956 37,650,692 45,494,082 54285 .743 51901,103 35.017 ,831 40,988,923 44,212.]4] 34.236,929 Unrestricted 67,219,286 73,549,862 0.266,441 81,560.491 73,569:596 91,797,526 101,442,023 10,]11,68] 96,123,600 Total primary government 81,585,057,369 $ 1,615,465224 $ 1,720,618,323 $ 2,150836,528 S 2,235,716,816 $ 2,261,072,718 S 2300,669,919 $ 2,3220]0,437 3 2323822,401 ' 2005 data varies form trend because of increased capital assets related to PCH Relinquishment The Cily efNetvpad Beach Implemented CASE 34 far the fiscal year ended June 30 2002. Inkrmation Prior the implementation of GASB 34 is not available. 179 CITY OF NEWPORT BEACH Changes In Net Assets Last Mae Fiscal Years (accrual basis of accounting) Pmgram revenues: Fiscal Year Govemmental activities: 20M 2003 2004 2005 2006 2007 2008 2009 2010 Fxpensxs Govemmental services: 2,270,082 3,006162 2,109,141 2,412769 2,623,472 2,9441100 3,055982 2,543680 2,909603 General government 3 12,792,860 $ 10,799,630 3 11,428,379 $ 11,378,69 $ 14,509.827 $ 14,166,168 $ 15;556,657 $ 16.430,529 $ 17,082,705 Public safety 47,188918 56,521,871 58178633 63214,291 67 ,789,121 89795,3M 75821,082 79,301800 79,402800 Public vmrka 30,34,516 32,089038 38,127,832 46,359,871 33,870,3a9 39,179,844 42,631,401 45,600,429 55,445,327 Community development 4,471,397 5,782,215 6,229]85 6,437,006 6.157,925 9,020,868 10,052,671 10,283,526 10,082454 Community urvices 11,044,086 10,404286 14,741$04 13,073,215 13.803,755 23304,053 1% %41 20,581 17,232357 Iharman on fungi debt 517,102 673,994 542,126 5081869 479,529 523,401 533,569 437,207 372,502 Tota190vommentill activities expenses 106,314,879 116,270,983 129248,259 140,971,861 138,610518 155911 IMi741,168 172642,387 178,617,945 ausirmica eravines:. Water 14,606,514 14,540,036 17,185,034 14,467,233 16,228,213 17,399.900 20,14$517 18.210.789 18 ,732,351 Wastewater 2588833 3,115,136 3,363954 2,740,508 3.143,629 3,259,837 342:1,592 3,753,042 3,598031 Total busineea{ypt activities expenses 17,395,347 17,655,172 20,548,988 17,208,141 19;371,842 20,659,737 23,5n 109 21.91 22331,385 Total primary government 2,945,84 2,768,941 2862793 2950,92 3,311,509 3,535.050 355$780 3;479,565 3,368,327 expenses 123,710228 133,926,155 149,797,247 158,1 In 502 19,982,358 178,649,457 187,313,277 194,605,218 201,949,330 Pmgram revenues: Govemmental activities: Cbargea for aarvions: General government 2,270,082 3,006162 2,109,141 2,412769 2,623,472 2,9441100 3,055982 2,543680 2,909603 Public safety 10.549,410 11,603564 15,739912 16,250,493 13,669,509 15,756327 18,649400 14,]5],266 15008801 Public narks 5,436,948 Soon own 5,401 Me 6,031,248 5,133,728 5,482,19 5,616,118 5.532,871 6,394,817 Cammuniry bevelopment 3,236,483 4,022904 5,196,276 Sin Sib 5,6501 5682636 5,59],309 4,852.534 4,806,745 Community varvices 2,538899 6,039226 3,848666 3952862 % 433 ,278 9,054$04 9,2M 513 9,052,330 8673,465 Gpe an, Grants and Contrlbuticns: 7,891,059 8,750,565 10681,329 17,460,834 12,72,599 16.172,023 15,778,851 13,404.286 15.64,617 Capital Grants and Canlnbutiane: 1,562458 4,146,728 674,815 20,205,848 ' 69473,891 ° 5904,716 31,037,915 ° 24,633,716 12,350,100 Total governmental activism, program revenues 331780,339 42,508217 43,729,603 71,478,012. 118,773,566 61,9981773 88,939068 74,78883 65,817,008 Bus cal activities: Charge, fm services: Water 16,611 16,489284 18,430,500 17S73 196 17,923,523 17,918968 17,270511 18,968,821 17,412834 Wastewater 2,945,84 2,768,941 2862793 2950,92 3,311,509 3,535.050 355$780 3;479,565 3,368,327 Total mammal advised program revenues 19,611,528 19,258,225 21312.793 20,473,858 21234,612 21051018 20,82{291 20446,186 20780961 Total primary gavernment program revenues 53,091,67 61,838,M2 65,042 296 91,951,880 140,0O8.178 83450491 107,762,379 95,223069 86,597,969 Net revended no,ansem: Govemmentel activism. (7283 4540) (73,611766) (85518,756) (69,493,49) (19,836,950) (93,993,247) (76,BIY2 00) (97,1165504) (113,800,937) 6usinessrype activities 2,216,181 1,63053 763,805 3,265727 1,862,70 794,281 (2,748,818) (1,517,645) (l,550424) Total net revenuen napensem $ (70,618,359) $ (72,087,713) $ (84,754951) $ (66,228,122) S (17,974,180) $ (93,198,966) $ (79,550,998) $ (99388149) $ (115 351,361) 2005 data varies from trend because of',humma t capital assets relatetl ro PGH Relinquishment. 206 data varies from trend accounts of increasnd capital assets relatetl most to Bristol St. Rafe guar ment, Noopen Coast Community Center. and Fire Station N 7. 2008 data vanes from trend because an Increased capital assets related to Santa Ana Heights Annexation. The Cin, of Newport Beach Implemented GASB 34 ]or, the fiscal year coded June 30 2002. so- --Imi pnorN the implamenlecan of GASB 34 is oral available. 180 Cl OF NEWPORT BEACH Changes In Net Aaeeb Last Nine Fiscal Years (accrual basis of accounting) $80,000,000 $70,000,000 $60,000,000 $50,000,000 $40,000,000 $x0,000,000 $20,000,000 $10,000,000 Primary Revenue Sources 2002 2003 2004 2005 2006 2007 2008 2009 2010 nhwMi wuc Tarim oirznua,tOxuj¢ncy Torte 181 Fiscal Year 2002 2003 2004 2005 2006 2007 2008 2009 2010 General revenues and other oranges in net assets: Govemmental activists: Taxes: Properly farces 3 33,503,659 $ 39,4]4,864 $ 43,631,829 $ 46,3D3 NO S 57.888.545 $ 63003,057 $ 6],388,838 $ 70.126.680 $ 71,99$680 Sales sax 16,]96,5]1 20,133598 21,843880 18,97 Ka 21465,55] 21088,118 21,855,242 17,925,956 17,440236 Sales tax In -lieu - - - 5,339,827 5,720,028 ],346,253 8,017,539 7,503,113 4,53$946 Transient occupancy taxes 7,690655 8,055,266 8,045,132 9,215,362 9.832.]29 12,059.006 12,]51,518 11.170,956 11,400,710 Business license 2,4]0,85] 2,030845 2,63012] 3,458, 165 3,846,381 3,70,172 4,119,108 4,213,8,12 4,026614 Franchise taxes 2235,641 2,4&5,504 22&5,519 3,02$4]6 3,162,508 4,613,932 3,853,119 3,961,634 3,715,946 Motor vehicle license fees 4,380,0]0 3;970,103 3,624,917 6,395 NO 300,751 391,559 304,920 355,237 314,957 Mato, vehicle fine. ]11,693 ]42,95] - - - - - - - Otherbuse 34L820 314,725 266,642 240,534 508,331 515,126 3]3,350 230,115 201,893 nmormani Nwme 2,1]1,4]4 2,111,451 584,415 12!19,0]4 1,939,941 3,175,582 3,655314 1]64,82] 708855 Na lnaease m fair value of Investments 1,093,913 318,686 (360586) (258,125) (715,615) (545533) 508485 1,096,048 ]0]200 Gain on sale of assets 180,238 130950 - Other 12,570 1,294,628 214,536 ]61,111 76,90] 2,232,0]0 1,858,883 1,06$9]] 1,820,72 Properly Income 3,]]1.556 - - - - - - - - Fred of joins venture net 2,120532 389,418 146819 ISO, 325 (513,791) 253207 Capital conitlhuliore 835290,102 9,638,]92 102,713421 213,779 NO Sale of au lca n9MS 25,OCO,NO - - - - - - - - Tmnsfers 33,27 5],]83 40.00 Toml governmental activities 941,241,399 90,3M 148 185364438 30$552363 131,254,352 117,904553 124,686316 120,272,985 118,874809 Bushes a-type activities: Investment income 888,]]9 505,619 203,041 424,157 549.012 792,936 Still 374,893 128,399 Net increase in fair value of mestmen. 428,199 440,697 (87,078) (81,921) (161 (9,185) 72,913 135,789 lOC1 17 Prcpetty income 21,100 29,600 29,280 26910 - - - - Capital contributions - - 215,331 - - - - - - Transfers (M Z77) (5]]83) - (40,000) - Tealbusioess-typeactivities 1,344,078 942,919 302,]91 363,2(16 339.917 ]35,]51 661,]83 510,682 228,516 Total primary government 942,591,4]] 100,246,06] 18068],229 308,915569 104,594,269 118,640,301 125341 O F 120,]83,68] 111,103325 Changes in net assets Governmental activities 868 ,412,859 25,612,382 100,845 682 239,058,514 84.417.402 23911,306 47,864;236 22.407,481 3,0]3,0]2 Business -type activities 3,560259 2,545,9]2 1,066596 3,620,933 2,202.60] 1.530,032 (2,08],035) (1,006,963) (1.321,908) Total primary government $ 8]1,9]3,116 5 28,158,354 5 101 912278 5 242,68],44] 3 86.620,OB9 $ 25441,338 $ 45,791,201 S 21,400,518 $ 1,751,964 $80,000,000 $70,000,000 $60,000,000 $50,000,000 $40,000,000 $x0,000,000 $20,000,000 $10,000,000 Primary Revenue Sources 2002 2003 2004 2005 2006 2007 2008 2009 2010 nhwMi wuc Tarim oirznua,tOxuj¢ncy Torte 181 CITY OF NEWPORT BEACH Fund Balances of Governmental Funds Last Nine Fiscal Years (modified accrual basis of accounting) Fiscal Year 2002 2003 2004 2005 2006 2007 2008 2009 2010 General fund: Reserved $ 3,165,787 $ 4,393,418 $ 6,678,579 $ 4,673,198 $ 9,374,722 IS 7,233,703 $ 6,807,094 $ 5,907,205 $ 5,472,481 Unreserved 25,171,551 31,929,366 37,765,801 49,814,197 45.212,339 62,679,499 72,252.045 73,703,759 76,685,385 Total general fund $28,337,338 $36,322,784 $44,444,380 $54,487,395 $54,587.061 $69,913,202 $79,059,139 $ 79,610,964 It 82,157.866 Tide and submerged land fund: Reserved $ 294,876 $ 457,717 $ 340,208 $ 552,713 $ 538,965 $ 642,985 $ 1,415,088 $ 351,012 $ 1,187,264 Unreserved 238,822 356,075 120,328 194,174 27,633 143,946 259,701 288,952 1,246,901 Total tide and submerged land fund $ 533,698 $ 813,852 $ 460,536 $ 746,887 $ 566,598 $ 786,931 $ 1,674,789 $ 639,964 $ 2,434,165 Mariners library fund: Reserved $ - $ 382,900 $ 142,016 $ 1,029,047 $ - $ - $ - $ - $ - Unreserved 596,800 824,438 (1,750,160) (2,061,268) Total Manners library fund $ $ 979,700 It 966,454 It 1,029,047 $(1,750,160) $(2,061,268) $ $ $ Contributions fund Reserved $ 7,501 $ - $ - $ 1,155,638 $ 3,223,047 $ 1,656,459 $ 856,506 $ 641,469 $ - Unreserved (457,464) (956,689) 1,042,147 794,249 1,9n.264 Total Contributions fund 8 7,501 S(45_7,464( S (956.689) S 2.197185 S 1223 047 S 1.656459 5 1.650 755 S 2.618,733 5 City hall improvements fund: Reserved S - 5 - $ - $ - $ - 5 - 5 - 5 - $ - Unreserved (10,527,337) Total City hall improvements fund $ $ $ $ $ $ $ $ $ (10,527,337) All other governmental funds: Reserved $ 4,669,957 $ 4,693,197 $ 3,973,823 $12230,132 $18,157,202 11 8,958,652 $ 9,788,771 $ 7,838,748 $ 8,176,409 Unreserved, reported in: Spepal revenue funds 11,057,395 18,789,098 16,895,613 10,099,453 7,506,021 18,684,221 20,617,006 21,582,975 26,726,627 Capital projects funds 7,120,032 - - 6,076,969 2,077,124 (1,196,933) 3,271,954 7,671,450 (43.941) Permanent funds 15 285,506 404,771 660,029 934,648 1,170,009 1,294,924 Total all other governmental funds $22,847,399 $23,482,295 $20,869,436 528,692,060 $28,145,118 527.105,969 S34.612 379 $ 38,263,182 $ 36,154,019 $90.000,000 $80.000,000 $70,000000 360,000.000 $501000,000 540,000,009 $3co0goo0 $29,000,009 $10,000.000 $- Fund Balances 3002 2003 2004 2005 2006 2907 2009 2009 2010 anlal Gaiaral r,od .Trial all. G-adal FUMs The City o /Newport Beach ❑a9 elected to show only nine years o /data for Nis scM1edule. 182 CITY OF NEWPORT BEACH Changes in Fund Balances of Governmental Funds Last Nine Fiscal Years (modified accrual basis of accounting) ' Arnaud to include Property Tax -In lieu of VLF which was previously national a. intargav indina tal revenue The Cify of Nawporf Beach has amned to show only nine years of for this schetlula. 183 Fiscal Year 2002 2003 2004 2005 2006 2007 2008 2009 2010 Revenues: Taxes $ 65,878,471 $ 72,864,836 $ 79,874,751 5 91,606,863 ' $ 102,737,810 $ 112,230,054 $118,758,201 $115,711,574 $ 113,809,443 ludetgovemmenfal 25227,740 10,379,792 15108,023 19,513,589 14,842,994 18,866,929 21,005,429 11,434885 15,379,698 Ummas and permits 3,350,958 4,397,520 5,429,632 4.968234 5,708,965 4.574,659 6.474.789 5,883,515 3,950.967 Charges for services 10,338,569 11,155294 11516,782 13,104,478 13,135,366 14,452,723 15,073,178 14,498.120 15,293,362 Fines and forfeitures 3,384,164 3,44$826 3,605,963 3422,735 3,841843 4.126,351 4,662,442 4,572,611 4,105,632 IMestment income 2,758557 1,941,046 887,513 2,356,747 3,847,982 5,431,137 5463,066 3,245677 1,289,890 Net increase decrease) in fair value of Investments 1,268,972 1,468,682 (360,586) (493,879) (1,325211) (625881) 720,488 1,472,335 1,155,363 Preperty income 10,130,165 10,947,021 11,857,671 12,337,339 13,625,142 13,965,815 15,217,803 14,032,342 14,624,923 Denafons 746,774 11819,159 2,704,367 1087,826 883,405 1,379,461 2,159,637 6,760,140 5,497,640 (bumobutions from pmpmly owners - - - 14,779,013 - - - - - Oil 1.782,60 2,590,504 478,200 98Q446 1,0.12,882 1,967,465 4,205,095 8,501,014 7,646,274 Total revenues 125,867,066 121,013.680 132,102,316 163663,391 158,341,178 176,36],713 193.740,128 186,112,213 182,753,192 Expenditures Current. General govemmand 12292008 9,689,275 11024,256 10,920,667 12,531200 13,706,061 14,508,103 15,567,654 15,169,546 Public safety 47,841,176 53,035.377 56,84%718 59.482134 65262.069 68,843.947 73,486,413 78,554,344 77,202,445 Public welds 19,418,067 21,259,782 22,780,896 24,365,996 26,430)51 28,352,293 30,108,941 30,619,405 39,922,406 Commumbcsid etopment 4,586,192 5,457,498 5,723,031 6.14,917 7,900,503 7,753,035 8.703,841 9,971,536 91556,066 Commuoityservices 9,418,041 9,382,608 10,827,346 10,351;414 12,730,727 13,988,589 14,478,146 17,485,605 14,916,230 capital oufay 38,613,906 14,684,897 15,188,550 33,486,048 24,811,237 45,615,169 20,524,638 26,002,338 36,796,653 Principal retirement 1,291,099 1,822,913 1,668,350 1,688,801 1,715,542 3,736,587 3,263,948 3;292,841 1,820,679 Interest and fiscal charges 466,974 529,808 520,228 499,077 480,909 458,035 577,299 482,908 383,297 Total expendiwres 133,927,463 115,862,158 124,582,375 146,93%054 151,862,938 182,453,716 165,651,329 181,976,431 195,767,322 Eismas (di fc cut of revenues over (under) expenditures (8,060,397) 5,151,522 7,519,941 16.724,337 6,478,240 (6,086.003) 28.088,799 4,135,782 (13,014.130) Mar financing scurr¢s (uses): Transfers in 10,927,460 14,376,167 16,553,395 20,601957 25,194,920 20,271,396 27,583,922 23,354,366 22,380.521 Treosters out (11,669,089) (14,342,890) (18,495,612) (20,612,176) (31,177,725) (22521,396) (36,076,952) (23,354,366) (21,780,521) Proceeds from issuance of debt 18,000100 2,630,736 51004000 1,500,000 Total Poor firencing sources (uses) 17,258371 2,664013 (1,942.217) (10,219) (5,982,805) 2756000 (8,493.030) 0 2100.000 Net mange in fund balances $ 9,197,974 $ 7,815,535 $ 5,577,724 $ 16,714,118 $ 495,435 $ (3,336,003) $ 19,595,769 $ 4,135,782 $ (10,914,130) Debt service as a percentage of noncapitalexpenditures 1.8% 22% 18% 17% 17% 28% 25% 23% 13% ' Arnaud to include Property Tax -In lieu of VLF which was previously national a. intargav indina tal revenue The Cify of Nawporf Beach has amned to show only nine years of for this schetlula. 183 REVENUE CAPACITY This section of the City of Newport Beach's Comprehensive Annual Financial Report (CAFR) presents detailed information as a context for understanding what the information in the financial statements, note disclosures, and required supplementary information says about the City's overall financial health. The statistical information presented herein is un- audited. The following schedules present factors affecting the City's ability to generate its own revenue and its most significant local revenue source, the property tax: • Assessed Value and Estimated Actual Value of Taxable Property • Direct and Overlapping Property Tax Rates • Principal Property Tax Payers • Property Tax Levies and Collections Sources: Unless otherwise noted, the information in these schedules is derived from the Comprehensive annual financial reports and underlying accounting records for the relevant year. 184 CITY OF NEWPORT BEACH Assessed Value and Estimated Actual Value of Taxable Property Last Ten Fiscal Years City Fiscal Year Taxable Assessed Total Direct Ended June Value Tax Rate 30 Public Utility Secured Unsecured 2001 2,000 15,087,602,671 915,394,966 16,002,999,637 1.000% 2002 2,000 16,515,797,641 913,075,074 17,428,874,715 1.000% 2003 16,531,505 21,339,270,499 1,085,951,066 22,425,221,565 1.000% 2004 16,531,505 23,219,166,299 1,372,432,950 24,591,599,249 1.000% 2005 53,310 25,193,662,254 1,484,019,033 26,677,681,287 1.000% 2006 53,310 28,136,607,566 1,914,106,993 30,050,714,559 1.000% 2007 53,310 31,423,473,042 1,569,867,249 32,993,340,291 1.000% 2008 53,310 34,188,568,583 1,668,015,342 35,856,583,925 1.000% 2009 699,230 36,436,106,070 1,538,539,482 37,974,645,552 1.000% 2010 699,230 37,078,595,810 1,564,808,312 38,643,404,122 1.000% NOTE: In 1978 the voters of the State of California passed Proposition 13 which limited property taxes to a total maximum rate of 1 % based upon the assessed value of the property being taxed. Each year, the assessed value of property may be increased by an "inflation factor" (limited to a maximum increase of 2 %). With few exceptions, property is only re- assessed at the time that it is sold to a new owner. At that point, the new assessed value is reassessed at the purchase price of the property sold. The assessed valuation data shown above represents the only data currently available with respect to the actual market value of taxable property and is subject to the limitations described above. Source: County of Orange Auditor - Controller's Office 185 CITY OF NEWPORT BEACH Direct and Overlapping Property Tax Rates (Rate per $100 of assessed value) Last Ten Fiscal Years Overlapping Rates Water Districts 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 City Direct Rates: 0.004 0.004 0.004 School Districts 0.0000 0.0069 City basic rate $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $1.000 Total City Direct Rate 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 Overlapping Rates Water Districts 0.009 0.008 0.007 0.006 0.005 0.005 0.005 0.004 0.004 0.004 School Districts 0.0000 0.0069 0.0067 0.0122 0.0343 0.0349 0.0315 0.0308 0.0302 0.0340 Total Overlapping Rate 0.009 0.015 0.013 0.018 0.040 0.040 0.036 0.035 0.034 0.038 Total Direct & Overlapping Rate $ 1.009 $ 1.015 $ 1.013 $ 1.018 $ 1.040 $ 1.040 $ 1.036 $ 1.035 $ 1.034 $1.038 NOTE: In 1978, California voters passed Proposition 13 which sets the property tax rate at a 1.00% fixed amount. This 1.00% is shared by all taxing agencies for which the subject property resides within. In addition to the 1.00% fixed amount, property owners are charged taxes as a percentage of assessed property values for the payment of other debt obligations. Source: Orange County Auditor Controller's Office 186 CITY OF NEWPORT BEACH Principal Property Taxpayers Current Year and Nine Years Ago 2010 Source: HdL, Caren and Cone Co. 187 rrr Percent of Total Percent of Total Taxable Assessed City Taxable Taxpayer Value Rank Assessed Value The Irvine Company $ 1,845,922,190 1 4.78% Rockwell Semiconductor 145,017,612 2 0.38% Newport Bluffs LLC 138,143,707 3 0.36% Balboa Bay Club Inc. 128,568,741 4 0.33% 100 Bayview, LLC 124,169,842 5 0.32% UDR Newport Beach North LP 117,788,896 6 0.30% Coronado South Apartments LP 114,618,841 7 0.30% Newport Healthcare Center 103,942,105 8 0.27% Jazz Semiconductor Inc 103,174,333 9 0.27% HHR Newport Beach LLC 86,937,291 10 0.22% $ 2,908,283,558 7.53% Source: HdL, Caren and Cone Co. 187 rrr Percent of Total Taxable Assessed City Taxable Value Assessed Value Rank $ 850,168,670 1 5.31% 503,723,684 2 3.15% N/A 0.00% N/A 0.00% N/A 0.00% 63,233,000 6 0.40% N/A 0.00% N/A 0.00% N/A 0.00% N/A 0.00% $ 1,417,125,354 8.86% Fiscal Year Taxes Levied for Ended June the Fiscal Year 30 2002 2003 2004 2005 2006 2007 2008 2009 2010 31,298,541 37,092,528 42,469,238 45,111,328 47,286,816 70,194,492 69,315,117 71,006,357 68,412,731 CITY OF NEWPORT BEACH Property Tax Levies and Collections Last Nine Fiscal Years Collected within the Fiscal Year of Levv Total Collections to Date Percent of Collections in Levy Percent of Subsequent Amount Levy Years 30,651,143 97.93% 102,001 36,351,026 98.00% 529,986 41,420,410 97.53% 670,685 54,063,951 119.85%2 483,804 45,558,039 96.34% 728,365 68,820,402 98.04% 808,765 68,242,326 98.45% 846,904 70,879,909 99.82% (294,366) 62,858,260 91.88% (1,227,109) Total Collections to Date Includes estimated levy for Newport Coast properties that were annexed on January 1, 2002. 2 Collections include nearly $10 million of Property Tax in lieu of Sales Tax and Vehicle License Fees not included in the levy. Source: Orange County Auditor Controller's Office The City of Newport Beach has elected to show only nine years of data for this schedule due to the fact that previous years data could not be verified. 188 Percent of Amount Levy 30,753,144 98.26% 36,881,012 99.43% 42,091,095 99.11% 54,547,755 2 120.92% 46,286,404 97.88% 69,629,167 99.19% 69,089,231 99.67% 70,585,543 99.41% 61,631,151 90.09% Includes estimated levy for Newport Coast properties that were annexed on January 1, 2002. 2 Collections include nearly $10 million of Property Tax in lieu of Sales Tax and Vehicle License Fees not included in the levy. Source: Orange County Auditor Controller's Office The City of Newport Beach has elected to show only nine years of data for this schedule due to the fact that previous years data could not be verified. 188 This section of the City of Newport Beach's Comprehensive Annual Financial Report (CAFR) presents detailed information as a context for understanding what the information in the financial statements, note disclosures, and required supplementary information says about the City's overall financial health. The statistical information presented herein is un- audited. The following schedules exhibit the City's levels of outstanding debt over time, to help readers assess the affordability of the current level of outstanding debt, and the City's ability to issue additional debt: • Ratios of Outstanding Debt by Type • Ratios of General Bonded Debt Outstanding • Direct and Overlapping Debt • Legal Debt Margin Information • Pledged Revenue Coverage Sources: Unless otherwise noted, the information in these schedules is derived from the Comprehensive annual financial reports and underlying accounting records for the relevant year. 189 Note: This excludes claims and judgements and employee compensated absence liabilities. Details regarding the City's outstanding debt can be found in the notes to the financial statements. These ratios are calculated using personal income and population for the prior calendar year. 190 CITY OF NEWPORT BEACH Ratios of Outstanding Debt by Type Last Ten Fiscal Years Governmental Activities Fiscal Year Pre- Purchase Ended Certificates of Annexation Agreement June 30 Participation Note Payable Agreement CDBG Loan Capital Leases Payable 2001 6,610,000 2,350,930 N/A N/A 914,830 N/A 2002 6,365,000 2,219,660 18,000,000 N/A 1,150,927 N/A 2003 6,110,000 2,082,483 16,800,000 2,400,000 1,293,586 N/A 2004 5,845,000 1,939,133 15,600,000 2,340,000 862,975 N/A 2005 5,570,000 1,789,332 14,400,000 2,276,000 420,773 N/A 2006 5,280,000 1,632,789 13,200,000 2,207,000 166,056 N/A 2007 4,980,000 1,469,202 12,000,000 2,134,000 49,490 3,000,000 2008 4,665,000 1,298,254 10,800,000 2,056,000 - 1,500,000 2009 4,335,000 1,119,613 9,600,000 1,972,000 - N/A 2010 3,990,000 932,934 8,400,000 1,883,000 1,500,000 Note: This excludes claims and judgements and employee compensated absence liabilities. Details regarding the City's outstanding debt can be found in the notes to the financial statements. These ratios are calculated using personal income and population for the prior calendar year. 190 Total Governmental Activities Business -type Activities Water Revenue Total Business- Bonds type Activities Total Primary Government Percentage of Persona Income ' I Debt Per Capita ' 9,875,760 12,095,000 12,095,000 21,970,760 0.47% 297 27,735,587 10,950,000 10,950,000 38,685,587 0.88% 552 28,686,069 9,765,000 9,765,000 38,451,069 0.79% 508 26,587,108 8,535,000 8,535,000 35,122,108 0.66% 442 24,456,105 7,255,000 7,255,000 31,711,105 0.58% 392 22,485,845 5,925,000 5,925,000 28,410,845 0.50% 342 23,632,692 4,540,000 4,540,000 28,172,692 0.44% 338 20,319,254 3,095,000 3,095,000 23,414,254 0.36% 278 17,026,613 1,585,000 1,585,000 18,611,613 0.28% 215 16,705,934 - - 16,705,934 0.25% 193 191 CITY OF NEWPORT BEACH Outstanding Debt Serviced by the General Fund Last Ten Fiscal Years (In Thousands, except Per Capita) Assessed value was used because the actual value of taxable property is not readily available in the State of California. 192 Purchase Percent of Fiscal Year Certificates of Agreement Assessed Ended June 30 Participation Payable Total Value' Per Capita 2001 6,845 N/A 6,845 0.05% 93 2002 6,610 N/A 6,610 0.04% 94 2003 6,365 N/A 6,365 0.04% 84 2004 6,110 N/A 6,110 0.03% 77 2005 5,845 N/A 5,845 0.02% 72 2006 5,570 N/A 5,570 0.02% 67 2007 5,280 3,000 8,280 0.03% 99 2008 4,980 1,500 6,480 0.02% 77 2009 4,335 N/A 4,335 0.01% 50 2010 3,990 1,500 5,490 0.01% 63 Assessed value was used because the actual value of taxable property is not readily available in the State of California. 192 CITY OF NEWPORT BEACH Direct and Overlapping Debt June 30, 2010 City Assessed Valuation: Redevelopment Agency Incremental Valuation: Adjusted Assessed Valuation: OVERLAPPING TAX AND ASSESSMENT DEBT: Metropolitan Water District Coast Community College District Rancho Santiago Community College District Laguna Beach Unified School District Laguna Beach U.S.D. Community Facilities District No. 98 -1 Newport Mesa Unified School District Newport Mesa U.S.O. Community Facilities District No. 90 -1 Santa Ana Unified School District Irvine Ranch Water District Improvement Districts Bonita Canyon Public Facilities Financing Authority Community Facilities District No. 98 -1 City of Newport Beach Special Improvement District No. 95 -1 City of Newport Beach 1915 Act Bonds Orange County Assessment District No. 88 -1 Orange County Reassessment District No. 99 -1 R Orange County Assessment District No. 01 -1 Orange County Reassessment District No. 01 -1 R TOTAL OVERLAPPING TAX AND ASSESSMENT DEBT DIRECT AND OVERLAPPING GENERAL FUND DEBT: OVERLAPPING GENERAL FUND DEBT: Orange County General Fund Obligations Orange County Pension Obligations Orange County Board of Education Certificates of Participation Municipal Water District of O.C. Water Facilities Corporation South Orange County Community College District Certificates of Participation Santa Ana Unified School District Certificates of Participation Irvine Ranch Water District Certificates of Participation City of Newport Beach Certificates of Participation TOTAL GROSS OVERLAPPING GENERAL FUND DEBT Less: MWDOC Water Facilities Corporation (100% self - supporting) TOTAL NET DIRECT AND OVERLAPPING GENERAL FUND DEBT GROSS COMBINED TOTAL DEBT (2) NET COMBINED TOTAL DEBT Percentage Applicable r 2.086% 35.120% 3.908% 15.236% 100.000% 71.997% 100.000% 9.117% 16.895 % - 100.000% $ 38,643,404,122 894,901,662 $ 37,748,502,460 Outstanding Debt 6/30/10 264,219,990 326,768,867 313,655,757 32,800,000 9,680,000 160,553,480 13,390,000 265,093,737 60,167,278 100.000% 41,275,000 100.000% 339,457,004 7,380,000 100.000% 10.080% 17,719,652 100.000% 14,120,003 34,718,296 100.000% 9.117% 13,835,000 100.000% 85,144,998 53,769,000 100.000% 6,505,000 1,621,531,057 10.080% $ 339,457,004 10.080% 56,834,147 10.080% 19,230,000 11.918% 14,120,003 3.105% 17,375,008 9.117% 53,953,746 11.436% 85,144,998 100.000% 3,990,000 590,104,906 Estimated Share of Overlapping Debt 5,511,629 114,761,226 12,257,667 4,997,408 9,680,000 115,593,689 13,390,000 24,168,596 47,315,471 41,275,000 7,380,000 17,719,652 34,718,296 13,835,000 53,769,000 6,505,000 522,877,634 $ 34,217,266 5,728,882 1,938,384 1,682,822 539,494 4,918,963 9,737,182 3,990,000 62,752,993 (1,682,822) $ 61,070,171 586,965,657 585,282,805 1 The percentage of overlapping agency's assessed valuation located within boundaries of the city. 2 Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue and tax allocation bonds and nonbonded capital lease obligations. Ratios to 2009 -10 Assessed Valuation: Total Overlapping Tax and Assessment Debt 1.360% Ratios to Adjusted Assessed Valuation: Combined Direct Debt ($3,990,000) 0.010% Gross Combined Total Debt 1.550% Net Combined Total Debt 1.550% STATE SCHOOL BUILDING AID REPAYABLE AS OF 6/30/10: $0 Source : California Municipal Statistics, Inc. 193 CITY OF NEWPORT BEACH Legal Debt Margin Information Last Ten Fiscal Years 2001 2002 2003 2004 Assessed valuation $ 16,002,999,637 $ 17,428,874,715 $ 22,425,221,565 $ 24,591,599,249 Conversion percentage 25% 25% 25% 25% Adjusted assessed valuation 4,000,749,909 4,357,218,679 5,606,305,391 6,147,899,812 Debt limit percentage 15% 15% 15% 15% Debt limit 600,112,486 653,582,802 840,945,809 922,184,972 Total net debt applicable to limit: General obligation bonds Legal debt margin $ 600,112,486 S 653,582.802 $ 840,945.809 S 922.184.972 Total debt applicable to the limit as a percentage of debt limit 0.0% 0.0% 0.0% 0.0% NOTE: The Government Code of the State of California provides for a legal debt limit of 15% of gross assessed valuation. However, this provision was enacted when assessed valuation was based upon 25% of market value. Effective with the 1981 -82 fiscal year, each parcel is now assessed at 100% of market value (as of the most recent change in ownership for that parcel). The computations shown above reflect a conversion of assessed valuation data for each fiscal year from the current full valuation perspective to the 25% level that was in effect at the time that the legal debt margin was enacted by the State of Source: City Administrative Servic 194 Fiscal Year 2005 2006 2007 2008 2009 2010 $ 26,677,681,287 $ 30,050,714,559 $ 32,993,340,291 $ 35,856,583,925 $ 37,974,645,552 $ 38,643,404,122 25% 25% 25% 25% 25% 25% 6,669,420,322 7,512,678,640 8,248,335,073 8,964,145,981 9,493,661,388 9,660,851,031 15% 15% 15% 15% 15% 15% 1,000,413,048 1,126,901,796 1,237,250,261 1,344,621,897 1,424,049,208 1,449,127,655 $ 1,000,413,048 $ 1,126,901,796 $ 1,237 250261 S 1,344,621,897 $ 1,424.049,208 8 1,449,127,655 0.0% 0.0% 00% 0.0% 0.0% 0.0% 195 CITY OF NEWPORT BEACH Pledged- Revenue Coverage Last Ten Fiscal Years ' Gross revenues includes operating revenues, interest, property, and intergovernmental revenues in the Water Fund. 2 Total Water Fund operating expenses do not include interest or depreciation expenses. 196 Water Revenue Bonds Debt Service Fiscal Year Less Operating Net Available Ended Water Revenue Expenses' Revenue June 30 Principal Interest Coverage 2001 17,839,320 11,784,120 6,055,200 1,145,000 510,224 3.66 2002 17,809,919 13,257,934 4,551,985 1,105,000 465,572 2.90 2003 17,326,604 12,430,144 4,896,460 1,185,000 418,172 3.05 2004 18,321,122 15,261,360 3,059,762 1,230,000 367,742 1.92 2005 17,878,016 12,967,118 4,910,898 1,280,000 314,622 3.08 2006 18,026,750 14,190,147 3,836,603 1,330,000 258,762 2.41 2007 18,534,689 15,614,885 2,919,804 1,385,000 199,900 1.84 2008 16,709,021 17,518,263 (809,242) 1,445,000 137,765 (0.51) 2009 17,259,977 16,437,227 822,750 1,510,000 71,325 0.52 2010 17,567,596 17,168,006 399,590 1,585,000 - 0.25 ' Gross revenues includes operating revenues, interest, property, and intergovernmental revenues in the Water Fund. 2 Total Water Fund operating expenses do not include interest or depreciation expenses. 196 ��Ti �[iZr] 7a11'.I [ _ ► � d�P►L�] � TC�71 �17i : t7 7 ��F_� � CiP►I This section of the City of Newport Beach's Comprehensive Annual Financial Report (CAFR) presents detailed information as a context for understanding what the information in the financial statements, note disclosures, and required supplementary information says about the City's overall financial health. The statistical information presented herein is un- audited. The following schedules depict demographic and economic indicators to assist the reader in understanding the socio- economic, environment in which the City's financial activities take place: • Demographic and Economic Statistics • Principal Employers Sources: Unless otherwise noted, the information in these schedules is derived from the Comprehensive annual financial reports and underlying accounting records for the relevant year. 197 CITY OF NEWPORT BEACH Demographic and Economic Statistics Last Ten Fiscal Years Fiscal Year Population(l) Personal Income Per Capita Unemployment 3 (in thousands) Income Rate 2001 70,032 4,413,066 63,015 1.6% 2002 75,662 4,865,294 64,303 2.5% 2003 79,392 5,325,060 67,073 2.4% 2004 80,800 5,434,285 67,256 1.9% 2005 83,120 5,635,370 67,798 2.4% 2006 83,361 6,335,186 75,997 2.1% 2007 84,218 6,518,052 77,395 2.6% 2008 84,554 7,059,752 83,494 2.4% 2009 86,252 7,468,216 86,586 6.1% 2010 86,738 6,676,484 76,973 6.0% �1� Population estimates are as of January 1 of the year shown and do not reflect revised estimates made available after the date the information was collected for the City's Comprehensive Annual Financial Report. Sources: t1� California State Department of Finance, E -4 Population Estimates for Cities, Counties and State 2001 -2010 (z) U.S. Census Bureau - American Community Survey lal State of California, Employment Development Department 198 CITY OF NEWPORT BEACH Principal Employers' Current Year and 5 years ago ' Figures reflect number of employees of employeer at the time the information was collected 2 Information for nine years ago is not available. 3 The Island Hotel was formerly the Four Seasons Hotel. Source:InfoGroup 199 2010 20052 Number of Percent of Total Number of Percent of Total Employer Employees Rank Employment Employees Rank Employment Hoag Memorial Hospital 4,001 1 4.91% 3,640 1 N/A Conexant Systems Inc 1,650 2 2.02% 650 6 N/A Pacific Life Insurance 1,513 3 1.86% 2,788 2 N/A Glidewell Dental 1,400 4 1.72% N/A - N/A City of Newport Beach 940 5 1.15% 788 4 N/A US Bank 883 6 1.08% N/A - N/A B. Alan Whitson Company 750 7 0.92% N/A - N/A Newport-Mesa Unified School District 545 8 0.67% N/A - N/A Marriott- Newport Beach 510 9 0.63% 475 9 N/A The Island Hotel 500 10 0.61% 525 3 8 N/A Fletcher Jones Motor Cars Inc. 500 10 0.61% N/A - N/A Balboa Bay Club and Resort 500 10 0.61% N/A - N/A PIMCO Advisors 500 10 0.61% 530 7 N/A ' Figures reflect number of employees of employeer at the time the information was collected 2 Information for nine years ago is not available. 3 The Island Hotel was formerly the Four Seasons Hotel. Source:InfoGroup 199 This section of the City of Newport Beach's Comprehensive Annual Financial Report (CAFR) presents detailed information as a context for understanding what the information in the financial statements, note disclosures, and required supplementary information says about the City's overall financial health. The statistical information presented herein is un- audited. The following schedules present information on the City's operations and resources including service and infrastructure data to facilitate the readers understanding of how financial statement information relates to the services the City provides and the activities it performs: • Full Time City Employees by Functions • Operating Indicators by Function • Capital Asset Statistics by Function • Water Sold by Customer Type • Water Rates • Major Water Customers Sources: Unless otherwise noted, the information in these schedules is derived from the Comprehensive annual financial reports and underlying accounting records for the relevant year. ? CITY OF NEWPORT BEACH Full -time City Employees by Function Last Ten Fiscal Years Function 2001 2002 Full -Time Employees as of June 30, 2010 2003 2004 2005 2006 2007 2008 2009 2010 General government 75 77 77 84 86 90 93 93 99 92 Public safety 358 384 384 385 385 388 393 397 397 394 Community development 42 44 46 46 47 48 52 56 57 53 Public works 155 163 164 162 162 163 163 165 160 147 Community services 53 57 58 57 60 65 66 68 71 69 Balboa yacht basin 1 1 1 1 1 - - - - - Water 34 33 33 33 34 34 34 35 35 36 Wastewater 10 12 12 13 13 13 13 13 13 14 Total 728 771 775 781 788 801 814 827 832 805 Source: City Administrative Services Department 201 CITY OF NEWPORT BEACH Operating Indicators by Function Last Ten Fiscal Years Police: Adult Arrests Parking Citations Issued Fire: Fire Responses Fire Inspections General Services: Street Patching (tons of mix) Sidewalk Repair (square feet) Recreation & Senior Services: Co- Sponsored Youth Organizations Senior Transportation Services Water: New connections Average daily consumption (hundred cubic ft.) Sewer: New connections Miles of Pipe Cleaned Library Services: Library Circulation of Materials Source: City of Newport Beach Fiscal Year 2001 2002 2003 2004 3,494 3,684 3,485 3,201 74,068 73,191 68,907 71,076 365 359 442 423 6,173 6,400 4,460 4,500 5,000 5,500 5,500 5,000 50,000 50,000 55,000 50,000 165,464 188,689 200,077 185,627 11,000 10,917 12,094 12,041 154 118 99 53 17 17 17 17 N/A N/A 50 25 N/A 202 262 293 1,250,713 1,263,200 1,347,583 1,392,346 202 Fiscal Year 2005 2006 2007 2008 2009 2010 3,079 2,999 3,289 3,196 3,245 2,931 72,665 74,780 67,170 70,150 65,176 62,845 228 214 175 393 371 338 4,550 6,470 7,136 7,250 6,912 7,000 4,500 4,600 4,980 4,644 3,882 3,467 50,000 55,000 59,459 58,000 49,644 49,540 194,749 194,722 201,258 258,635 318,779 321,200 11,936 12,628 14,728 15,279 15,984 15,306 55 52 95 60 26 19 17 17 17 17 17 17.25 24 24 45 45 12 9 205 335 226 212 209 305 1,475,025 1,443,078 1,622,573 1,701,476 1,575,518 1,818,709 203 CITY OF NEWPORT BEACH Capital Asset Statistics by Function Last Ten Fiscal Years Fiscal Year 2001 2002 2003 2004 Police: Stations 1 1 1 1 Fire: Fire stations 6 7 7 7 Lifeguard Headquarters 1 1 1 1 Public works: Streets (miles) 315 325 333 333 Streetlights N/A 7,277 7,277 7,277 Traffic signals 121 130 131 131 Recreation & Senior Services: Parks 45 47 47 47 Community centers 10 11 11 11 Aquatic Center 1 1 1 1 Water: Water mains (miles) 282.35 294.81 294.81 294.81 Maximum daily capacity (thousands of gallons) 20,959 20,796 21,291 20,092 Wastewater: Sanitary sewers (miles) 200.02 176.90 178.40 179.15 Storm sewers (miles) 103.08 51.40 53.50 57.60 Library Services: Libraries 4 4 4 4 Source: City of Newport Beach 204 Fiscal Year 2005 2006 2007 2008 2009 2010 1 1 1 1 1 1 8 8 8 8 8 8 1 1 1 1 1 1 333 333 395 395 395 395 7,277 7,277 7,278 7,278 7,278 7,278 144 147 147 148 148 148 47 47 47 48 49 49 11 11 12 13 13 13 1 1 1 1 1 1 298.42 299.88 300.35 300.17 300.31 303.27 20,633 19,369 20,392 20,365 19,707 19,341 179.15 179.15 202.80 202.80 202.80 202.80 57.60 57.60 95.50 95.50 95.50 95.50 4 4 4 4 4 4 205 Source: City Utilities Department RM CITY OF NEWPORT BEACH Water Sold by Type of Customer Last Ten Fiscal Years (in hundred cubic feet) Fiscal Year 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Type of Customer: Residential 4,227,699 4,459,302 4,430,485 4,362,402 4,289,629 4,190,791 4,492,489 4,046,969 3,989,816 4,251,996 Commercial 1,487,538 1,552,366 1,604,931 1,659,565 1,568,462 1,440,377 1,302,578 1,184,904 1,188,553 1,165,128 Government 678,594 480,809 597,395 486,051 487,189 607,650 601,659 361,457 420,697 349,334 Total 6,393,831 6,492,477 6,632,811 6,508,018 6,345,280 6,238,818 6,396,726 5,593,330 5,599,066 5,766,458 Total direct rate per 100 cubic ft. 2.00 2.00 2.00 2.00 2.00 2.08 2.08 2.08 2.08 2.20 Source: City Utilities Department RM MllvL *]a:IAIA90]39- ]=F_C9:I Water Rates Last Ten Fiscal Years Fiscal Year Ended June Monthly Rate per 30 Base Rate 100 cubic ft 2001 9.90 2.25 2002 9.90 2.25 2003 10.00 2.25 2004 10.20 2.25 2005 10.35 2.25 2006 12.37 2.43 2007 12.37 2.43 2008 12.37 2.43 2009 12.37 2.43 2010 14.59 2.55 Note: Rates are based on 3/4" meter, which is the standard household meter size. The City charges an excess -use rate above normal demand. 207 CITY OF NEWPORT BEACH Major Water Customers Current Year and Nine Years Ago 2010 9nni' $ 1,188,799 6.77% $ 787,478 4.42% I Information for fiscal years ended prior to 2001, is not available. Source: City Revenue Division KIN Percent of Total Percent of Total Water Customer Water Charges Rank Water Revenues Water Charges Rank Water Revenues Hoag Memorial Hospital $ 198,395 1 1.13% $ 101,436 6 0.57% Irvine Apartment Management 167,800 2 0.96% N/A 0.00% Big Canyon Country Club 147,818 3 0.84% 169,900 2 0.95% The Irvine Company 129,008 4 0.73% 267,688 1 1.50% Newport Beach Country Club 109,492 5 0.62% 152,362 3 0.86% Park Newport Ltd 86,428 6 0.49% 150,062 4 0.84% Bluffs Homeowners Association 84,605 7 0.48% N/A 0.00% UDR Newport Beach 79,293 8 0.45% N/A 0.00% East Bluff Village 75,722 9 0.43% N/A 0.00% Newport-Mesa USD 72,176 10 0.41% N/A 0.00% Pacific View - Pierce Bros. 54,650 11 0.31% 47,466 11 0.27% Spyglass Hill Community Assoc. 49,440 12 0.28% N/A 0.00% IOICIPMS Engineerting Department 48,632 13 0.28% N/A 0.00% Newport Dunes Resort 42,618 14 0.24% N/A 0.00% Balboa Village Community Association 41,117 15 0.23% N/A 0.00% $ 1,188,799 6.77% $ 787,478 4.42% I Information for fiscal years ended prior to 2001, is not available. Source: City Revenue Division KIN City of Newport Beach 3300 Newport Blvd. Newport Beach, CA 92663 (949) 644 -3123 www.newportbeachca.gov /financial info