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Home My WebLink AboutFiscal Year 2010-11 Financial StatementCITY OF NEWPORT BEACH Comprehensive Anniml Fjnanriaj Report Fiscal Year Ended June 30, 2011 !EW PO\ Comprehensive Annual Financial Report For the Fiscal Year Ended June 30, 2011 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 INTRODUCT ■ RY = ECT CITY OF NEWPORT BEACH Comprehensive Annual Financial Report Year Ended June 30, 2011 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 .................................................................... .............................49 Statement of Activities ...................................................................... ............................... 50 Fund Financial Statements: Governmental Funds: BalanceSheet ................................................................................. .............................55 Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Assets ............................................................ .............................56 Statement of Revenues, Expenditures and Changes in Fund Balances ...................... 57 Reconciliation of Statement of Revenues, Expenditures and Changes In Fund Balances of Governmental Funds to the Statement of Activities ..............58 Budgetary Comparison Statements: GeneralFund ............................................................................ .............................59 Tide and Submerged Land Fund ............................................... .............................61 Proprietary Funds: Statement of Net Assets ............................................................. ............................... 65 Statement of Revenues, Expenses and Changes in Fund Net Assets .....................66 Statement of Cash Flows ............................................................. .............................67 Fiduciary Funds: Statement of Fiduciary Assets and Liabilities — Agency Funds ..... ............................... 71 Notes to the Financial Statements ..................................................... .............................75 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, 2011 .. ............................... ............................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 V 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 3 This page left blank intentionally. CITY OF NEWPORT BEACH December 22, 2011 Honorable Mayor and Members of the City Council, and Residents of the City of Newport Beach, California The City Charter and California state law require the City of Newport Beach to issue annually a complete set of financial statements and that an independent firm of certified public accountants audit these statements in conformance with generally accepted auditing standards (GAAS). The Comprehensive Annual Financial Report (CAFR) of the City of Newport Beach for the year ended June 30, 2011, 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 reflects 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 GAAP. 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 White Nelson Diehl Evans LLP, 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, 2011, 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. City Hall - 3300 Newport Boulevard - Post Office Box 1768 Newport Beach, California 92658 -8915 • www.newportbeachca.gov 5 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, 2011, 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. 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 a community of about 85,000 people located in the central coastal 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: C 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 85,376 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 Newport Beach; the 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. Cwta Mesa LICO We Ic Belb. The Crystal I Beech The City of Newport Beach was incorporated September 1, 1906. The City Charter was originally adopted in 1954 but has been updated and amended over time. 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 7 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 collection, rubbish disposal, and street light utility services. The City provides water and sewer service to most areas within City limits (special districts provide these services to some areas), but it does not provide gas, electrical, cable television, or other utility service. Public elementary and secondary education to Newport Beach's residents is provided by the Newport-Mesa Unified School District and the Laguna Beach Unified School District, 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 elected officials continue to be accountable 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 Note 1 a of the notes to the financial statements. 1111141'dfie]CL1900 1W1 Reflective of a mature community, vacant land has become increasingly scarce and the City is relatively built -out. Currently at 85,376, population has been very stable as indicated by the chart below: 100,000 90,000 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 0 Population 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Fiscal Year V Indicative of an affluent community, the effective buying income and median Household income are higher in Newport Beach than other areas of the State and the U.S. overall. As illustrated by the table below, Newport Beach Median Household Income is nearly twice that of the U.S. Median Household Income. City of Newport Beach $97,140 Orange County 70,880 California 57,708 USA 50,046 The leading industries are that of a highly educated workforce including professional, scientific, health -care, finance, insurance, legal and other management. Consequently, unemployment in Newport Beach has been significantly lower than elsewhere as illustrated in the chart below: MW 2005 2000 2007 2008 2009 2010 2011* Calendar Year ' through Oa. 31,2011 More detailed information concerning the city's demographics and statistics are contained within the Statistical Section of this report. LOCALECONOMY In an increasingly interconnected world, global events have had a profound impact on the U.S. economy. Fiscal Year 2010 -11 was plagued by global economic instability, a natural disaster in Japan, the European financial crisis, a sputtering US economy, debt ceiling drama and stubbornly high jobless rates. The net result was consistent consumer uncertainty and extraordinary volatility across all markets. E] While not immune to the effects of the recession, Newport Beach continued to fare relatively well during the recession due in part to strong governance, disciplined fiscal decisions and a strong underlying tax base. Even though revenues maintained minimal -to- flat revenue growth rate, City management has maintained a focus on the City Council's priorities, including adhering to a 15 -point Fiscal Sustainability Plan; strong revenue monitoring, analysis and reporting; and responsible, yet difficult, spending decisions. TOP THREE REVENUE SOURCES General Fund revenues were approximately $151 million during FY 2010 -11. The top three individual revenue sources, Property Taxes, Sales Taxes and Sales Tax in Lieu, and Transient Occupancy Taxes (TOT), represent 72.7% of all General Fund revenues. Tax revenues in total, including business licenses, franchise fees and other taxes represent nearly 78.1% of all General Fund revenues while only 21.9°/x, is generated by other revenue sources. General Fund Revenues ir ■ Property Taxes 22.0% ■Sales Taxes Sales Tax In Lieu 47.5% ■Transient Occupancy Taxes ■ Other Taxes ■ All Other Sources 4.2% 12.3% Property Taxes Property taxes are the number one source of revenue for the City of Newport Beach, representing almost half, 47.5 %, of all General Fund revenues. Property values in Newport Beach have remained strong due to the limited supply of scenic coastal property, low crime rates, desirable climate, and the quality of community services and amenities in and around Newport Beach. Consistent and vigorous demand for coastal property has allowed the City to enjoy long- term growth trends with its number one revenue source. Over a ten -year period, assessed valuation increased an average of 7% per annum and 5.6 %, over a twenty -year period. Since Californians passed Proposition 13 in 1978, assessed property value is reassessed 10 to market value only when the property changes ownership. Otherwise, the assessed value (AV) 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. While property tax growth rates have fallen sharply during the Great Recession, the City has experienced positive AV growth during each of the past 15 years as demonstrated by the chart below. This was even experienced during the recent Great Recession, many other cities experienced large decreases in their AV during 2008 through 2011. $45,000,000,000 $40,000,000,000 $35,000,000,000 $30,000,000,000 $25,000,000,000 $20,000,000,MO $15,000,000,000 $10,000,000,000 $5,000,000,000 Total Assessed Property Value Growth 8.48% 11.40% 11.23% 12.64% 8.68% m m 0 0 0 0 0 0 0 0 0 0 n' ao m a r'i m d 0 m m m o 0 0 0 0 0 m m m o 0 0 0 0 0 0 0 0 o a o The secured property tax valuation grew by 1.27% for FY 2011 -12, reflecting a +.75% CPI adjustment, new construction in the Fashion Island area and net reassessments from property sales and /or assessment appeals. Unsecured property taxes (e.g. business equipment, boats and other personal property) decreased -4.31%. The net result is that the overall property tax levy, as of September 30, 2011, grew by +1.03 %. While the City's FY 2011 -12 AV growth is +1.03 %, below long -term historical averages of 5 % -7 %, the City is encouraged that the housing market appears to have stabilized and that we have weathered the housing crisis maintaining positive growth during the recession. Despite declines in the regional real estate market, sales data for the month of October 2011, demonstrates the relatively high property values throughout the residential communities. Median home sales prices in all areas of the city far exceed the County wide median sales price of $405,000. 11 Median Median Numberof Numberof Newport Beach Sales Price Sales Price Home Sales Home Sales Zip Code 2010 2011 2010 2011 92625 $ 1,550,000 $ 1,375,000 19 9 92660 968,250 897,250 39 36 92661 1,737,500 912,500 6 2 92662 1,645,000 1,590,000 2 3 92663 1,300,000 650,000 19 22 92657 1,135,000 1,633,500 14 18 All Orange County 432,000 405,000 2,528 2,241 Source: DataQuick Information Systems Sales Taxes and Sales Taxes in Lieu 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 impact the revenue category in total. Sales Taxes in total represent 16.5% 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, "Restaurants," accounts for 20.4% of total sales taxes and is represented by 315 restaurants. The next largest segment, "New Auto Sales" accounts for 20.1 % of total sales taxes and is represented by nine premier dealerships. The "Other" categorization accounts for another 12.9% and is represented by 911 businesses. Sales Tax by Business Segment • Restaurants - 315 12 • New Auto Sales - 09 2.6% 12.9% ■Leasing -55 3.7% 20.4% •Apparel Stores -218 3.9% `� • Department Stores - 27 • Miscellaneous Retail - 852 5.6% Service Stations- 16 61% Food Markets - 47 Office Equipment - 89 71% 8.6% •Light Industry -181 Other - 911 12 Sales Tax revenue continues to trend upward, finishing up nearly 6% over the previous Fiscal Year. While improving, this activity is still short of the heights of the previous economic expansion as a weak job market, economic uncertainty and high energy prices restrain consumer spending. Restaurants regained the top sales tax producing segment by posting a year- over -year (YOY) increase of 5.8% - barely inching out the New Auto Sales category which grew by 1.2% (YOY). While considerably less in overall sales taxes generated, department stores, service stations, office equipment and light industry segments all posted impressive double digit YOY increases this Fiscal Year. The Fiscal Year 2010 -11 budget had built in a minimal growth factor for sales taxes due to the poor economy and high unemployment rate. However, at fiscal year -end Sales Tax revenues exceeded budget by approximately $1 million. Transient Occupancy Taxes (TOT) TOT accrues to the City at a rate of 10% of room charges (with 18% of this collection going to the local Destination Marketing Organization — Visit Newport Beach - to promote Newport Beach as a tourist destination). 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 (20) inns, motels, hotels and resorts and accounts for 89% of TOT revenues. The residential category is made up of some 700 short-term vacation rentals representing only 11 % of TOT revenue. Together, they accounted for $13.1 million in TOT revenue during FY 2010 -11. TOT increased nearly 15% over the prior year. Even though the economy did not show signs of marked improvement, the City's TOT revenues were up double digits throughout the entire year. While all hotels were up, the Pelican Hill Resort in the Newport Coast continued to outperform with its second full year of operations since opening at the height of the recession. The Pelican Hill Resort was named the #1 Resort in the United States by the readers of the luxury travel magazine, Conde Nast Traveler. As of the fiscal year end, actual TOT collections exceeded budget by $1.5 million. LONG TERM FINANCIAL PLANNING The City Council has adopted prudent fiscal policies concerning its investments, reserves, budget administration, revenue initiatives, competitive contracting, facility replacement planning and the like. These fiscal policies, such as the 15 -point Fiscal Sustainability Plan mentioned earlier, can be found on the City's website in the City Council section under City Government at www.newportbeachca.gov. Generally, the Fiscal Sustainability Plan and the City's Charter and other policies and codes direct that the annual budget serves as the foundation for the City of Newport Beach's financial planning and control. It allows the City Council to prioritize City expenditures strategically aligned with core community values. Appropriations for operating expenditures shall be balanced in relation to current revenue sources and will not over -rely on one -time revenue sources or reserves. When significant uncertainty exists concerning revenue volatility and pending obligations (such as pension costs), the City Council and City Manager reserve the right to impose any special fiscal control measures, including personnel hiring freezes, and other spending controls, whenever circumstances 13 warrant. The City Council may authorize the use of Contingency Reserves (set at 15% of the General Fund Operating Budget) only during emergency situations as set forth by the Council Reserve Policy. The City Council holds a budget hearing and adopts a budget on or before June 30 each year, the close of the City's fiscal year. FISCAL SUSTAINABILITY / FINANCIAL POLICIES 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. Smarter, Faster, Smaller The City has been proactive in restructuring itself in a phased, thoughtful way by making strategic cuts in department operations. Our goal has been to carefully evolve into a more modern (and smarter, faster, smaller) local government that maintains quality services while being more efficient and effective at doing so. As background, beginning in FY 2009 -10, General Fund revenues were trending to come in at an approximately $8 million deficit. As its first phase of restructuring, the City implemented an Early Retirement Incentive Program (ERIP) in December 2009 to reduce payroll without layoffs or "bumping ". Fifty -one employees elected to participate in the program, thus reducing the deficit by $1.8 million (half -year savings). The program has reduced annual payroll costs by $3 million in the General Fund. [See Footnote 11 in the notes to the financial statements.] Continuing in FY 2010 -11, the City has taken additional measures to avoid budgetary impacts as a result of the sputtering economy. The City entered a second phase of its restructuring effort to affect additional long -term cost savings and improved efficiencies by outsourcing and eliminating some less useful programs. The outsourcing included Street Sweeping (saving $0.5 million a year), airborne law enforcement operations (saving approximately $0.3 million /year), parking meter operations and enforcement (saving approximately $0.5 million in salary and benefit costs and potentially increasing existing City revenues), and some of our refuse collection and facility maintenance efforts To mitigate the rising cost of pension plans, the City negotiated cost sharing agreements with its miscellaneous employee associations to contribute 8.0% of base pay to offset the PERS employee contribution. This saves the City approximately $2.7 million per year, and in partnership with fire, lifeguards, and police associations, negotiated for public safety to contribute another $0.8 million in annual pension expense, up from zero the year before. This represents a total of $3.5 million in pension costs now paid by the employees. Through a combination of an early retirement plan, attrition, outsourcing and lay -offs, the full -time work -force has been reduced nearly 10% as depicted in the next chart. 14 840 820 800 N C O L 0 780 a w 0 760 740 720 "Still not Done" Historical Full Time Positions 827 2006 2007 2008 832 W Fiscal Year 2010 2011 t 758 2012 Ad o pted, We have survived the recession, but it was not without hard choices and significant budget reductions. We have increased General Fund Reserves in keeping with our Fiscal Sustainability Plan, but as our City Manager has said, we continue to look forward. This includes tackling our rising pension costs, replacing outdated I.T. infrastructure, working with our neighbors to share services where appropriate, and looking for other opportunities to contract out City services where it makes fiscal and service - related sense to do so. Our City has made these hard choices with the support of our Council and we will continue to move forward to be a smaller, faster, smarter organization. GENERAL FUND & FACILITIES REPLACEMENT (FINANCING) Overall General Fund revenues finished $3.8 million, or 2.6 %, higher than the prior year while expenditures finished $5 million, or 4 %, lower than the prior year. The net result would have produced a positive increase to the General Fund. However, the City had also planned, and budgeted, for a one -time transfer of $31.3 million in General Fund — Committed Fund Balance to the Facilities Replacement Fund — Committed Fund Balance. The result of this transfer and the net of other transfers in and out, produced a decrease in General Fund Balance of $19.4 million as illustrated in the following chart: 15 Non - spendable: Prepaid Items Inventories Long -Term Loan Receivable Restricted uommittea: Facilities Financing Plan' Contingency Reserve Recreation Reserves Parking Reserves Cable Franchise Other Miscellaneous Unassigned (Appropriations Reserve) Fund Balance Pre FFP Transfer FFP Transfer Out` Ending General Fund Balance 2010 2011 $ 932,148 $ 328,851 $ (603,297) 238,274 231,641 (6,633) 471,250 471,250 1,692,533 1,681,333 (11,200) 27,500,000 31,300,000 3,800,000 18,895,125 21,841,467 2,946,342 443,522 452,448 8,926 235,506 238,876 3,370 1,356,143 1,360,385 4,242 3,399,369 3,726,726 327,357 9,700,697 11,865,835 2,165,138 17,293,299 20,570,033 3,276,734 $ 82,157,866 $ 94,068,845 11,910,979 $ - $ (31,300,000) * (31,300,000) $ 82,157,866 $ 62,768,845 $ (19,389,021) Other noteworthy events during FY 2010 -11; the City Council approved increasing the City's General Fund Contingency Reserve to 15% from 12 %; thereby increasing this committed fund balance reserve by almost $3 million, and the City also increased its unassigned - appropriations reserve by more than $3 million at a time when many cities needed to access reserves to meet annual operating expenditures and commitments. Facilities Financing Plan (FFP) Commitment 8r Major Construction Initiatives 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. Council Policy F -28, approved in August 2009, establishes a long -term financing plan (FFP) for the replacement of all General Fund supported facilities (Civic Center, Fire Stations, Police Stations and Parks). The FFP provides a consistent, level funding plan to minimize negative impacts on the General Fund in any given year, while also ensuring the City is able to maintain its high quality facilities. The City has been committing (reserving prior to Fiscal Year 2011) these funds in a Facilities Financing "Reserve" within the General Fund. With the financing of the Civic Center Project and completion of the OASIS Senior Center, the City transferred $31.3 million to a separate fund that will be used to accumulate resources to pre -fund debt service or cash fund construction of projects on the Facilities Financing Plan, this will enhance the transparency of the FFP commitments and Council's intent, while not changing the nature of the Commitment. iR Beginning Balance 7/1/10 $ - Revenues Transfer In from General Fund 31,300,000 Interest Income 275,381 Total Revenues 31,575,381 Expenditures 2010 Civic Center COPS Debt Service (682,754) OASIS Construction (5,266,983) Total Expenditures (5,949,737) Ending Balance 6/30/11 25,625,644 In 2010 -11, $5 million of the FFP commitment was used to cash fund the remaining balance of the completed OASIS Senior Center construction. After accounting for interest earnings and net debt service payments on the 2010 Civic Center COPS, the remaining Fiscal Year 2010 -11 Facilities Replacement fund balance was $25.6 million. The balance of the Facilities Replacement fund has grown to more than $33.5 million after a major developer contribution dedicated to the facilities plan was received during our current Fiscal Year 2011 -12. Special Note: The FFP was the winner of the prestigious "Helen Putnam Award - Internal Administration category" from the League of California Cities in 2008. Major Initiative: 2010 Civic Center Certificates of Participation (COPs) Issued In November 2010, the City entered the capital markets issuing nearly $126.7 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) gave the City of Newport Beach 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 Civic Center 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 AWARDS AND ACKNOWLEDGMENTS Awards: The City has prepared a comprehensive annual financial report for the past 19 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 CAFR for the fiscal year ended June 30, 2010. 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 CAFR 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 Finance 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, White Nelson Diehl Evans LLP, for their time and assistance in the preparation of the report. This report was completely prepared and published by City employees. a David A. Kiff City Manager W, Tr y McCraner Finance Director Presented to City of Newport Beach California For its Comprehensive Annual Financial Report for the Fiscal Year Ended June 30, 2010 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. President Executive Director M Council Member Steven J.Rosansky Council Member District 2 Mayor District 1 City Attorney David R. Hunt City Manager Dave Kiff Council Member District 5 Council Member District 7 City Clerk Leilani Brown Dana M. Smith ...................................................................... ............................... ......................Assistant City Manager Tracy M. McCraner ...................................................... ............................... ........................Finance Director /Treasurer Kimberly Brandt ........................................... ............................... ......................Community Development Director MikeMorgan .......................................................................................................... ............................... Interim Fire Chief Terri L. Cassidy .................................................................................... ............................... Human Resources Director Cynthia Cowell ................................................................. ............................... ........................Library Services Director Mark Harmon ............................................................................... ............................... Municipal Operations Director JayJohnson ....................................................................................................................... ............................... Police Chief Steve Badum ................................................................................................. ............................... Public Works Director Laura Detweiler ......................................... ............................... .....................Recreation & Senior Services Director 20 r BUILDING CODE 1 L BOARD OFAPPEALS— J r-- - - - - -1 CIVIL SERVICE BOARD L-- - - - - -J r-- - - - - -1 PLANNING COMMISSION L-- - - - --J ELECTORATE MAYOR r BOARD OF LIBRARY 1 L r PARKS,BEACHES& 1 r-- - - - - -1 CITY ARTS COMMISSION r HARBORCOMMISSION 1 FIRE Fire Suppression (Operations) Ocean Ufeguands Training and Education Horrendous Materials Fire Prevention Junior Lifeguard Program Administration Emergency Medical Serviees PUBLIC WORKS Engineering CITY MANAGER restructure Master Planning I Ac Planning & Engineering CITY CLERK Harbor Resources ACM /Operations Civil Service Board Support Grievances & Disciplines CITYATTORNEY Housing Programs Residential Building Economic Development Code Enfo Business Improvement IT L - - - -J Public Informa ortnafion COUNCILAPPOINTED POSITIONS ADMINISTRATIVE SERVICES MUNICIPAL OPERATIONS AccountinglReperfnglButlgefng Treasury Management Ad nis_a.n Operations Support Billing & Receivables Payroll /Accounts Payable Equipment Maintenance Fill Maintenance Cashiering Parking Lots Administration Water Service Oil &Gas Production Revenue Printing & Postal Services Parks and Street Trees Refuse Collection Purchasing 8 Warehousing Electrical Services Wastewater Collecti, . FIRE Fire Suppression (Operations) Ocean Ufeguands Training and Education Horrendous Materials Fire Prevention Junior Lifeguard Program Administration Emergency Medical Serviees PUBLIC WORKS Engineering CID Design & Construction restructure Master Planning Development Services Ac Planning & Engineering Public Right of Way Permitting Harbor Resources NPDES &Water Duality POLICE LIBRARY SERVICES Patrol Support Services CAl l Library & Brunches Boand of Library Trustees Suppo Traffic Chief of Police Atlult &Youth Programs Information &Reference Service Detective Literacy Services Sister City ommissio0Support ArlsB Cultural Services City Arts Commission Support HUMAN RESOURCES Recruitment General Llabildy Employeed -abor Relations Benefits Administration Classifcetion /Compensation Workers'Compensation Citywide Training Retiree Counseling & Benefits Civil Service Board Support Grievances & Disciplines O ELECTED OFFICIALS Fiscal Year 2010 -2011 RECREATION & SENIOR SERVICES Youth & Adult Sports Programs Senior Programs & Services PlaygmuddrPad, Development Special Events sahib' M.nagem.nVR...tlons Marine Life Refuge PB &R Commission Support 21 CITY DEPARTMENTS COMMUNITY DEVELOPjRecords Land Use and Development Builtling In Long -Range Planning Plan ChecklPe Planning Commission Support Usa and O Housing Programs Residential Building Economic Development Code Enfo r - - - -, L - - - -J COUNCILAPPOINTED BOARDS & COMMISSIONS COUNCILAPPOINTED POSITIONS 21 CITY DEPARTMENTS This page left blank intentionally. 22 I INANC 23 INDEPENDENT AUDITORS' REPORT City Council Members City of Newport Beach Newport Beach, California We have audited the accompanying 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, 2011, 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, California'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 Auditine 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 financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the City of Newport Beach, California's internal control over financial reporting. Accordingly, we express no such opinion. 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 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 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, California, as of June 30, 2011, 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 and Tide and Submerged Land major governmental funds for the year then ended in conformity with accounting principles generally accepted in the United States of America. As described in Notes In and 17, the City of Newport Beach, California has implemented the provisions of Governmental Accounting Standards Board Statement Number 54, "Fund Balance Reporting and Governmental Fund Type Definitions ", for the year ended June 30, 2011. 2875 Michelle Drive, Suite 300, Irvine, CA 92606 • Tel: 714.978.1300 • Fax: 714.978.7893 Officer located in Orange and San Diego Counties 25 In accordance with Government Auditing Standards, we have also issued our report dated December 20, 2011 on our consideration of the City of Newport Beach, California's internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that 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 Auditing Standards and should be considered in assessing the results of our audit. The management's discussion and analysis, as listed in the table of contents as required supplementary information, is not a required part of the basic financial statements but is supplementary information required by the accounting principles generally accepted in the United States of America. This information is an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic or historical context. We have applied certain limited procedures to the management's discussion and analysis in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during the audit of the basic financial statements. We do not express an opinion or provide any assurance on the management's discussion and analysis because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City of Newport Beach, California's basic financial statements as a whole. The introductory section, supplementary information and statistical section, as listed in the table of contents, are presented for purposes of additional analysis and are not a required part of the basic financial statements. The supplementary information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. The information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the supplementary information is fairly stated in all material respects in relation to the basic financial statements taken as a whole. The introductory section and statistical section have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we express no opinion or provide any assurance on them. W 1 N eLs- on- D mQ C v o-rL S L u"-� December 20, 2011 Irvine, California ►z: SUMMIT NCE WA 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, 2011. This analysis should be read in conjunction with the Transmittal Letter at the front of this report and the accompanying Basic Financial Statements. OVERVIEW OF THE FINANCIAL STATEMENTS 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 use the economic resources measurement focus and basis of accounting which is similar to the accounting standard used by private sector companies. The government -wide financial statements are intended to provide a "Big Picture" view of the City. With the economic resources measurement focus and basis of accounting, changes in net assets are recognized as soon as the event occurs regardless of the timing of related cash flows. 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 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 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 29 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. Fund Financial Statements have a short-term focus measuring 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. The City utilizes three broad categories of funds: Governmental Funds — Unlike 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 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 30 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. ANALYSIS OF GOVERNMENT -WIDE FINANCIAL STATEMENTS Net Asset Discussion - As shown in Figure 1, Current assets and long -term liabilities increased approximately $125 million during the year primarily due to a $126.7 million issuance of Certificates of Participation (COPs) to fund the construction of a new Civic Center, park and parking structure. The financing, included a $1.2 million bond premium and approximately $4 million of refunding proceeds for the 1998 Library COPs and is discussed further in Note (6) of the Notes to the Financial Statements. 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 Figure 1 Net Assets (in thousands) Governmental Activities Business -Type Activities Total 2010 2011 2010 2011 2010 2011 $ 175,006 $ 298,131 $ 12,257 $ 12,999 $ 187,263 $ 311,130 2,101,052 2,126,458 108,450 108,976 2,209,502 2,235,434 2,276,058 2,424,589 120,707 121,975 2,396,765 2,546,564 19,094 28,675 51,766 177,070 70,860 205,745 2,084 3,556 2,084 3,556 21,178 32,231 51,766 177,070 72,944 209,301 2,084,912 2,087,403 108,450 108,976 2,193,362 2,196,379 34,237 63,940 - - 34,237 63,940 86,049 67,501 10,174 9,443 96,223 76,944 $ 2,205,198 $ 2,218,844 $118,624 $ 118,419 $ 2,323,822 $ 2,337,263 31 Capital assets increased $25.9 million primarily due to work -in- progress to date on the new Civic Center project. The City's combined net assets for the year ended June 30, 2011, were $2.337 billion, increasing $13.4 million (0.6 %) over the prior year. Net assets can serve as an important indicator of whether the City's overall financial condition is improving or deteriorating over time. The increase in the current year is attributable to modest revenue growth and various cost saving efforts including departmental restructuring, outsourcing, pension cost sharing agreements and an early retirement incentive plan implemented midway through the prior year. • Invested in Capital Assets 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. At $2.196 billion, they represent the largest component of net assets (94.0 %). The City's investment in capital assets do not represent a financial resource and consequently are not readily available for funding current obligations. • Restricted Assets totaled $63.9 million and increased nearly $29.7 million reflecting a $31.3 million transfer of unrestricted net assets to the Facilities Replacement Fund, where the funds will be used to accumulate resources to cash fund and or finance projects in the City's Facilities Financing Plan. The remaining balance of net assets $76.9 million or (3.3 %) are unrestricted and may be used to meet the City's ongoing obligations to citizens and creditors. Unrestricted net assets decreased $18.5 million as a net result of transferring $31.3 million from the General Fund to a Capital Projects Fund a restricted net asset purpose. 32 Governmental Activities Governmental activities are generally financed through taxes, intergovernmental revenues, and other nonexchange revenues. The Statement of Activities is intended illustrate how the cost of governmental activities are financed and determine the annual change in net assets. Figure 2 Changes in Net Assets (in thousands) 33 Governmental Activities Business -Type Activities Total 2010 2011 2010 2011 2010 2011 Revenues: Program Revenues: Charges for services $ 37,789 $ 35,910 $ 20,781 $ 23,445 $ 58,570 $ 59,355 Operating grants and capital contributions 15,678 10,710 - - 15,678 10,710 Capital grants and contributions 12,350 11,101 - - 12,350 11,101 General Revenues: Taxes: Property taxes 72,000 71,630 - - 72,000 71,630 Sales tax 17,441 18,455 - - 17,441 18,455 Sales tax in -lieu 4,540 6,284 - - 4,540 6,284 Transient occupancy taxes 11,401 13,083 - - 11,401 13,083 Other taxes 7,943 8,048 - - 7,943 8,048 Intergovernmental (Unrestricted): Motor Vehicle License Tax 315 403 - - 315 403 Investment related income 1,414 735 229 112 1,643 847 Miscellaneous 1,820 2,602 - - 1,820 2,602 Total revenues 182,691 178,961 21,010 23,557 203,701 202,518 Expenses: General government 17,083 15,857 - - 17,083 15,857 Public safety 79,403 78,128 - - 79,403 78,128 Public works 55,445 40,341 - - 55,445 40,341 Community development 10,082 8,638 - - 10,082 8,638 Community services 17,232 17,272 - - 17,232 17,272 Interest 373 5,079 - - 373 5,079 Water - - 18,733 19,825 18,733 19,825 Wastewater 3,599 3,937 3,599 3,937 Total expenses 179,618 165,315 22,332 23,762 201,950 189,077 Increase (decrease) in net assets 3,073 13,646 (1,322) (205) 1,751 13,441 Net asset at beginning of year 2,202,125 2,205,198 119,946 118,624 2,322,071 2,323,822 Net assets at end of year $2,205,198 $ 2,218,844 $118,624 $ 118,419 $2,323,822 $2,337,263 33 Revenue Discussion Figure 3 illustrates how the $178.9 million in revenue was derived. As shown, $35.9 million or 20% of the revenues were recovered by those who directly benefited from the programs as a Charge for Service. Another $21.8 million or 12% of the revenues were generated by contributions and grants received from governmental organizations, developers, and property owners for both capital and operating activities. The remaining $121.2 million or 68% represented general revenues of the City including taxes, intergovernmental transfers and other miscellaneous revenues. Figure 3 Governmental Activities Revenue Sources Year Ended June 30, 2011 Sources of Revenue 2°% As illustrated in Figure 2, operating grants and capital contributions declined $5 million due to fewer public safety grants and a one -time development impact contribution received in the prior fiscal year. In spite of the poor economy, property tax assessed valuation growth has remained positive for the past fifteen years averaging in excess of 7% annually during this same time period. However, the current trend is below average. Assessed property values 34 increased only 0.16% in the current year versus 1.76% in the prior year. In total, property tax collections, including unsecured property and prior year collections amounted to $71.6 million, decreasing $369,355 or 0.5% in the current year. This was a net result of a .6% increase in secured property tax revenues and a nearly 5.2% increase in unsecured property taxes and a 31.7% decrease in prior year collections, penalties and interest. At nearly $24.7 million, sales taxes, including sales tax -in -lieu, represent the second largest individual revenue source for the City. Excluding an anomaly in the sales tax -in- lieu, Sales taxes increased 5.6% over the prior year driven by solid improvements in the restaurant, department store and service station sectors. Sales taxes in -lieu appeared to increase 38% over the prior year. However, most of this increase is attributable to the State withholding $1.2 million in FY 2009 -10 due to an overpayment in FY 2008 -09 At $13.1 million, Transient occupancy taxes increased by $1.7 million or 14.8% from the prior year, due predominantly to a second full year operations of a new luxury resort, Pelican Hills, that opened at the height of the recession. Expenses Associated with Governmental Activities 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 Finance Department) 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. 35 Business Enterprise Operations are overseen by one department (Utilities) providing water and wastewater services. Figure 4 Government wide Functional Expenses Year Ended June 30, 2011 3% 5% 10% 11% Functional Expenses Public Safety 7 Public Works 47% I J Community Services General Government Community Development Interest • As illustrated in Figure 2, the current year, expenses for all governmental activities totaled $165.3 million. • Overall, a decrease of $14.3 million (8.0 %) from the prior year, which can be attributed to the following factors: o General Government expenses decreased $1.2 million (7.2 %) when compared to the prior year due to the City Manager's commitment to our Fiscal Sustainability Plan by which Department Heads have implemented structural changes through budget cuts, outsourcing, shared services and reorganization. o Public Safety expenses are down $1.3 million (1.6 %) in the current year. The decrease is due to the City Manager's commitment to our Fiscal Sustainability Plan by which Department Heads have implemented structural changes through budget cuts, outsourcing, shared services and reorganization c Public Works expenses were down $15.1 million (27.2 %) when compared to prior year. While some of this decrease is due in part to reorganization efforts, the primary reason for the dramatic decrease is 9t related to certain studies and periodic maintenance projects that were expensed to public works in the prior year including certain traffic studies, harbor dredging and undergrounding utility improvements that didn't result in capitalized assets of the City. o Community Development expenses decreased $1.4 million (14.3 %) in the current year, due to the City Manager's commitment to our Fiscal Sustainability Plan by which Department Heads have implemented structural changes through budget cuts, outsourcing, shared services and reorganization. o Interest expenses increased $4.7 million (1261.7 %) when compared to the prior year due the $126.7 million in Civic Center COPS issued in FY 2011. As illustrated in figures 5 and 6, the total illustrates the net cost of each service. The net cost represents the extent to which governmental activities are subsidized by taxes and other general revenues of the City. General government Public safety Public works Community development Community services Interest Figure 5 Governmental Activities (in thousands) 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) 37 2011 Total Cost Net Cost of Service of Service $ 15,857 $ (13,135) 78,128 (60,650) 40,341 (20,529) 8,638 (2,994) 17,272 (5,208) 5,079 (5,079) $ 165,315 $ (107,594) 80.0 70.0 60.0 50.0 40.0 30.0 20.0 10.0 0.0 25.0 20.0 15.0 10.0 5.0 0.0 Figure Program Expenses and Revenue- Governmental Activities Year Ended June 30, 2011 (in millions) General Public5afety Public Works Community Government Development ■Total Expenses ■ Program Revenues Figure 7 Program Expense & Revenue - Business -type Activities Year Ended June 30, 2011 (in millions) a: Major Business -type Activities in the current fiscal year included the following: Water Of the $19.8 million in water related expenses, $8.2 million (41.2°/x) is for the purchase of water, $3.8 million (18.9 %) covers employee related costs, $4.5 million (22.6 %) is for maintenance, supplies, and depreciation of the water system, $1.8 million (9.2 %) is for professional services, and the remaining $1.5 million (7.5 %) is collectively attributable to other miscellaneous expenses. Wastewater Of the $3.9 million in wastewater related expenses, $2.1 million (52.6 %) is for maintenance, supplies, and depreciation of the wastewater system, $1.4 million (36.0 %) is for employee related costs, and the remaining 456,136 (11.6 %) is attributable to professional services and other miscellaneous expenses. 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 and 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 $223.7 million, an increase of $113.5 million from the prior year. The General Fund represented $62.8 million or 28.1 % of the combined fund balances of the Governmental Funds. Nonspendable Fund Balance - The City has $6.9 million in fund balance classified as nonspendable to indicate that it cannot be readily converted to cash. Of the $6.9 million nonspendable fund balance, $1.6 million is for prepaid items, $231,641 is for inventories, $471,250 is for long -term loan receivable and $4.6 million is for permanent endowments. Restricted Fund Balance - The City has $38.1 million in fund balance classified as restricted to indicate that it has an externally imposed restriction on how the money may be spent. Of the $38.1 million restricted fund balance, $1.5 million is for Affordable Housing, $134,760 is for Hoag, $139,134 is for the Upper Newport Bay restoration, $1.5 million is restricted for the Civic Center COP, $27.7 million is restricted for various special revenue funds, $5.7 million is retricted for various capital projects and $1.4 million of earnings are restricted for permanent funds. 39 Committed Fund Balance — The City has $143.5 million in fund balance classified as committed to indicate that the City Council committed how the money will be spent. Of the $143.5 million committed fund balance, $21.8 million is committed to contingency reserves, $5.8 million is committed to the General Fund, $360,000 is committed to the Tide and Submerged Land Fund, $25.6 million is committed to the Facilities Replacement Fund, $89.1 million is committed to the City Hall Improvements Fund and $797,479 is committed to Capital Project Funds. Assigned Fund Balance — The City has $17.5 million in fund balance classified as assigned to indicate that the City manager has an assigned purpose or intent for how the money should be spent. Of the $17.5 million assigned fund balance, $11.9 million is assigned in the General Fund, $5.4 million is assigned in the Tide and Submerged Land Fund and $243,294 is assigned in Capital Project Funds. Unassigned Fund Balance — The remaining $17.6 million in fund balance is classified as unassigned to indicate that it is the residual balance not otherwise restricted. • Overall General Fund Revenues finished 2.6% higher than the prior year while expenditures finished 4.1 % lower. The net result is General Fund income before transfers and other financing sources and uses increased by nearly $5 million. General Fund expenditures were reduced by almost $7 million under budget. This was due to the City Manager's task to Department Director's to right -size each department as it should look by FY 2012 -13. The General Fund ended the year with a $62.8 million fund balance, a net decrease of $19.4 million after transferring $48.8 million to other funds, $17.4 million represented a routine transfer to subsidize the operations of the Tide and Submerged Land Fund and a planned $31.3 million transfer from the General Fund to the Facilities Replacement Fund. • 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 ($17.4 million) to subsidize for the maintenance and operation of the Tide and Submerged Land fund. The Tide and Submerged Land Fund ended the current year with $5.9 million in fund balance which represented project encumbrances and commitments. The Facilities Financing Fund Council Policy F -28, approved in August 2009, establishes a long -term financing plan (FFP) for the replacement of all General Fund supported facilities (Civic Center, Fire Stations, Police Stations and Parks). The FFP provides a consistent, level funding plan to minimize negative impacts on the General Fund in any given year, while also ensuring the City is able to maintain its high quality facilities. The City has been committing (reserving prior to Fiscal Year 2011) these funds in a Facilities Financing "Reserve" within the General Fund. With the financing of the Civic Center Project and completion of 40 the OASIS Senior Center, the City transferred $31.3 million to a separate fund that will be used to accumulate resources to pre -fund debt service or cash fund construction of projects on the Facilities Financing Plan, this will enhance the transparency of the FFP commitments and Council's intent, while not changing the nature of the Commitment. In 2010 -11, $5 million was used to cash fund the remaining balance of the completed OASIS Senior Center construction. After accounting for interest earnings and net debt service payments on the 2010 Civic Center COPs, the remaining Fiscal Year 2010 -11 FFP fund balance was $25.5 million. 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. Enterprise Fund results for the year included the following: Net Assets in the Water Fund increased $430,583. Wastewater Fund net assets decreased by $559,711 due to increasing energy, supply and systems maintenance costs. Major Internal Service Fund activity in the current fiscal year included the following: Net assets in the Internal Service Funds decreased $828,630 in the current year. The City prefunds the cash portion of the City's OPEB obligation in a prefunding trust. However, the primarily reason that Internal Service net assets decreased is that an implied subsidy expense accrual is required per GASB 45 and the City chooses to fund the implied subsidy component of the net OPEB cost on a pay - as- you -go basis. See Note (12) in the Notes to the Financial Statements for further information. GENERAL FUND BUDGETARY HIGHLIGHTS Changes to Original Budget Final budgeted revenues for the General Fund increased $321,420 from the original budget during the year ended June 30, 2011. Significant factors contributing to this fluctuation are highlighted as follows: Final budgeted intergovernmental revenues increased $301,497 from the original budget due to increase in public safety grants. Final budgeted expenditures for the General Fund decreased $17.7 million from the original budget during the year ended June 30, 2011. Significant factors contributing to this fluctuation are highlighted as follows: 41 • Public safety and public works functions were decreased by $16.1 million and $2.4 million respectively. This budget reduction was primarily due City Manager's commitment to our Fiscal Sustainability Plan by which Department Heads have implemented structural changes through budget cuts, outsourcing, shared services and reorganization. • Budgeted expenditures for community services increased $496,096 primarily due to an increase in estimated expenditure appropriations for the acceptance of a check from the Newport Public Library Foundation to cover operating costs. • During the current year, final transfers out budgeted for the General Fund varied from the original budget by approximately $21.0 million primarily due to the expenditure allocation to the Tidelands Fund. Variance with Final Budget Actual revenues were $4.2 million above final budgeted revenues for the year ended June 30, 2011 due to the continued moderate growth in the economy. Significant factors contributing to this favorable variance are summarized as follows: • A $1.0 million favorable variance was realized due to higher than expected property taxes revenues. • Higher than expected sales tax and sales tax -in -lieu of $1.0 million due to a continued moderate growth in the economy. • Transient Occupancy tax revenues were higher than expected by $1.5 million due to the continued moderate growth in economy. • Charges for services were higher than expected at a little over $0.9 million due to plan check fees, police emergency response fees, police jail booking fees and paramedic fees. Actual General Fund expenditures of $121.7 million were significantly less than final budgetary estimates of $130.9 million. Significant factors contributing to this $9.3 million surplus are summarized as follows: • A $1.6 million surplus was realized from capital improvement projects completed below budget. • A total of $7.8 million in favorable variances was realized in Public Safety, Public Works, Community Services, Community Development and General Government due to City Manager's commitment to our Fiscal Sustainability Plan by which Department Heads have implemented structural changes through budget cuts, outsourcing, shared services and reorganization 42 CAPITAL ASSET AND DEBT ADMINISTRATION Capital Assets The City's investment in capital assets for governmental and business -type activities as of June 30, 2011, amounts to $2.24 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 deletions) of $25.9 million represents a 1.2% increase over last year. The $25.9 million net increase is the result of additions of $28.9 million, and deletions of $3.0 million. Figure 8 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 $28.9 million in capital assets in both the Governmental and Business Type Activities in the current year. Of the $28.9 million, $27.2 million paid for through current year expenses was primarily for work in progress and the remaining $1.7 million represents additions from work in progress started in previous years. • Of the $28.1 million capitalized as governmental assets in the current year, the Civic Center Project contributed to the vast majority of the work in progress additions and $1.4 million to infrastructure additions. • The $797,294 capitalized in the current year as business -type assets represented majority in additions to work in progress . Additional information on the City's capital assets can be found in Note (5) of the Notes to the Financial Statements. 43 Governmental Activities Business -Type Activities Total 2010 2011 2010 2011 2010 2011 Land $ 1,819,673 $ 1,820,832 $ 2,016 $ 2,016 $ 1,821,689 $ 1,822,848 Structures 54,663 53,654 83 561 54,746 54,215 Equipment 7,836 8,503 83 78 7,919 8,581 Infrastructure 191,656 188,550 105,585 103,489 297,241 292,039 Work in progress 27,224 54,919 683 2,832 27,907 57,751 Totals $ 2,101,052 $ 2,126,458 $ 108,450 $ 108,976 $ 2,209,502 $ 2,235,434 Major capital asset events during the current fiscal year included the following: • The City capitalized $28.9 million in capital assets in both the Governmental and Business Type Activities in the current year. Of the $28.9 million, $27.2 million paid for through current year expenses was primarily for work in progress and the remaining $1.7 million represents additions from work in progress started in previous years. • Of the $28.1 million capitalized as governmental assets in the current year, the Civic Center Project contributed to the vast majority of the work in progress additions and $1.4 million to infrastructure additions. • The $797,294 capitalized in the current year as business -type assets represented majority in additions to work in progress . Additional information on the City's capital assets can be found in Note (5) of the Notes to the Financial Statements. 43 Long -term Debt At the end of the current fiscal year, the City had total long -term debt outstanding of $138.2 million for all governmental activities. Certificates of participation Bond premium Note payable Pre - annexation agreement CDBG Loan Purchase Installment Agreement Totals Figure 9 Outstanding Debt at Year -End (in thousands) Governmental Business -Type Total Activities Activities 2010 2011 2010 2011 2010 2011 $ 3,990 $ 126,660 - 1,085 933 738 8,400 7,200 1,883 1,788 1,500 750 $ 16,706 $ 138,221 $ 3,990 $ 126,660 - 1,085 933 738 8,400 7,200 1,883 1,788 1,500 750 $ 16,706 $ 138,221 The City's total debt increased $121.5 million during the current fiscal year. The increase is primarily due to the addition of $126.7 million of Certificates of Participation, and $1.2 million in bond premium related to the Civic Center Project. The proceeds of the financings were used to finance the construction of a new Civic Center Complex including, a parking structure and park. Approximately $4 million was used to refund 1998 Library COPs. 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 • The 2011 -12 secured property tax levy grew by +1.27% reflecting a +75% CPI adjustment, due to new construction and net reassessments from property sales and or assessment appeals. Unsecured property taxes (e.g. business equipment and boats) decreased -4.31 %. The net result is that the overall property tax levy, as of September 30, 2011, grew by +1.03% compared to fiscal year 2010 -11 as follows: Property Tax Assessed Valuation (AV) 2011 -2012 2010 -2011 Change fn AV %Change Secured 37,550,412,836 37,080,217,275 470,195,561 1.27 %. Unsecured 1,556,752,313 1,626,947,910 (70,195,597) -4.31% Total AV 39,107,165,149 38,707,165,185 399,999,964 1.03% • V, • The City Manager's core budget principles that were utilized to construct the 2011 -12 budget include: 1. Adhere of 2010's Fiscal Sustainability Plan. 2. Use the next 18 months to thoughtfully and deliberately change the way local governments does business. 3. Our City's long -term success depends upon our investment in infrastructure (streets, parks, facilities). 4. There are things we should not be doing. 5. Pension costs need to be addressed comprehensively and cooperatively. 6. Public Safety is paramount - but we need to be open to better ways of delivery of public safety services. • Pension Costs for both Miscellaneous and Public Safety to increase to $29 million by FY 2014, an estimated $8 million increase. However, next year's budget will reflect successful negotiations with both groups for increased pension cost sharing by all employees of approximately $3.5 million. • Continued departmental restructuring and adhering to our Fiscal Sustainability Plan. The General Fund only; All departments including Public Safety reduced budgets for a structural decrease of approximately $8 million in the next year. Increased investment in our infrastructure such as streets and roads. An increase of $1 million in FY 2012 growing by $5 million in two years. • Eliminate forty full time equivalent positions from personnel budget, resulting in a smaller more efficient organization. • The continued, yet modest growth in the economy resulted in a 1% estimated growth in Property Taxes of $700K; a 5 % growth rate in Sales Taxes of almost $1 million and a 10% growth rate in Transient Occupancy Taxes of almost $ 1.5 million. • STATUS OF LABOR CONTRACTS - Safety Bargaining Unit labor contracts including Police, Police Management, Fire, Fire Management and Lifeguard expire on December 31, 2011. Labor contracts with all other miscellaneous 45 employee bargaining units expire on June 30, 2012. The impact on the 2011 -12 and 2012 -13 budget is unknown. • STATE BUDGET - One year ago, the state faced ongoing budget imbalances of around $20 billion per year. By making difficult budgetary decisions, including the trigger cuts, the State has strengthened the its fiscal condition significantly. However, per the Legislative Analyst's Office (LAO) November 2011 forecast, the State will still face a $3 billion shortfall in 2011 -12 and a $10 billion shortfall in 2012 -13. Under the provisions of the budget 2011 -12 budget package, this revenue shortfall will translate into $2 billion of trigger cuts to state programs. While the Legislature has already cut State library funding as part of the FY 2011 -12 budget agreement, the trigger cuts will essentially eliminates all remaining state funding for the California Library Services Act, the State Literacy program, and the Public Library Foundation. These programs help fund services like local library transfer fees and funding for adult literacy programs. The cuts will not only eliminate all State funding for local library programs but also jeopardize federal funding for the Braille and Talking Book library programs. The net reduction in State Library funding to the City is approximately $300,000 which has already been factored into the City's 2011 -12 budget. Although it is not currently known how the State will deal with its 2012 -13 Budget challenge, the Governor has until January 10th to introduce the exact details. 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 Finance Department, 3300 Newport Boulevard, Newport Beach, CA 92663 -3884, (949) 644- 3126. 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.gov/financialinfo. IZ SUMMIT NCE 47 CITY OF NEWPORT BEACH Statement of Net Assets June 30. 2011 Assets: Cash and investments (note 4) Receivables: Accounts Notes Interest Intergovernmental receivables Cash with fiscal agent (note 4) Internal balances Inventory Investment in joint ventures (note 15) Prepaid items Deferred charges Capital assets, (note 5): Non - depreciable Depreciable Accumulated depreciation Total assets Liabilities: Accounts payable Accrued salaries and benefits Accrued interest payable Deposits payable Unearned revenue Noncurrent liabilities (note 6): Due within one year Due in more than one year Total liabilities Net Assets: Invested in capital assets, net of related debt Restricted for: Public safety Public works Community services Community Development Permanent Funds: Nonexpendable Expendable Unrestricted Total net assets Governmental Business -type Activities Activities Total $ 166,718,279 $ 7,994,308 $ 174,712,587 7,668,533 5,162,958 12,831,491 471,250 - 471,250 768,757 - 768,757 7,542,209 - 7,542,209 107,696,716 - 107,696,716 158,714 (158,714) - 536,627 - 536,627 2,528,033 - 2,528,033 2,855,042 - 2,855,042 1,187,048 - 1,187,048 1,875,750,430 4,848,408 1,880,598,838 410,393,539 159,017,345 569,410,884 (159,686,080) (54,889,294) (214,575,374) 2,424,589,097 121,975,011 2,546,564,108 11,905,297 3,311,178 15,216,475 4,438,845 185,230 4,624,075 4,037,373 - 4,037,373 2,110,129 59,156 2,169,285 6,183,506 - 6,183,506 11,359,316 11,359,316 165,710,430 - 165,710,430 205,744,896 3,555,564 209,300,460 2,087,403,003 1,037,903 52,955,530 3,607,847 305,948 108,976,459 2,196,379,462 1,037,903 52,955,530 3,607,847 305,948 4,629,781 4,629,781 1,403,273 - 1,403,273 67,500,916 9,442,988 76,943,904 $ 2,218,844,201 S 118,419,447 $ 2,337,263,648 See accompanying notes to basic financial statements 49 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, 2011 19,824,996 20,097,227 3,936,949 3,348,433 23,761,945 23,445,660 - 20,097,227 3,348,433 - 23,445,660 $ 189,077,451 $ 59,355,371 $ 10,710,266 $ 11,101,239 $ 81,166,876 See accompanying notes to basic financial statements 50 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 $ 15,857,397 $ 2,722,527 $ - $ - $ 2,722,527 78,128,006 15,686,314 1,791,929 - 17,478,243 40,341,323 2,938,315 7,641,295 9,233,015 19,812,625 8,637,525 5,599,737 43,500 - 5,643,237 17,272,374 8,962,818 1,233,542 1,868,224 12,064,584 5,078,881 - - - - 165,315,506 35,909,711 10,710,266 11,101,239 57,721,216 19,824,996 20,097,227 3,936,949 3,348,433 23,761,945 23,445,660 - 20,097,227 3,348,433 - 23,445,660 $ 189,077,451 $ 59,355,371 $ 10,710,266 $ 11,101,239 $ 81,166,876 See accompanying notes to basic financial statements 50 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 $ (13,134,870) $ - $ (13,134,870) (60,649,763) - (60,649,763) (20,528,698) - (20,528,698) (2,994,288) - (2,994,288) (5,207,790) - (5,207,790) (5,078,881) - (5,078,881) (107,594,290) - (107,594,290) - 272,231 272,231 (588,516) (588,516) - (316,285) (316,285) $ (107,594,290) $ (316,285) $ (107,910,575) 71,630,345 - 71,630,345 18,455,181 - 18,455,181 6,284,266 - 6,284,266 13,082,451 - 13,082,451 4,090,634 - 4,090,634 3,730,819 - 3,730,819 226,257 - 226,257 403,042 403,042 366,081 52,996 419,077 369,235 58,977 428,212 2,601,538 2,601,538 121,239,849 111,973 121,351,822 13,645,559 (204,312) 13,441,247 2,205,198,642 118,623,759 2,323,822,401 $ 2,218,844,201 $ 118,419,447 $ 2,337,263,648 See accompanying notes to basic financial statements 51 This page left blank intentionally. 52 I INANC 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 Facilities Replacement Fund is used to account for the receipt and expenditure of funds for the replacement of facilities. The City Hall Improvement Fund is used to account for the design and construction of a new Civic Center Complex. The Civic Center COP Fund is used to account for debt service transactions related to the Certificates of Participation issued to finance the construction of the Civic Center. 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. 54 Assets Cash and investments (note 4) Receivables: Accounts Notes Interest Intergovernmental receivables Cash with fiscal agent (note 4) Due from other funds (note 13) Prepaid items Inventory Total assets Liabilities and Fund Balances Liabilities: Accounts payable Accrued payroll Deposits payable Unearned revenue Unavailable revenue Due to other funds (note 13) Total liabilities Fund balances: Nonspendable: Prepaid items Inventories Long -Tenn Loan Receivable Permanent Endowment Restricted: Affordable housing Hoag Upper Newport Bay Restoration Other Committed: Contingency Reserve Other Assigned: Unassigned: Total fund balances Total liabilities and and fund balances CITY OF NEWPORT BEACH Governmental Funds Balance Sheet June 30, 2011 Tide and Other Submerged Facilities City Hall Civic Center Governmental General Land Replacement Improvements COP Funds Tafals $ 54,982,198 $ 6,328,807 $ 20,143,831 $ 75,000 $ - $ 42,757,036 $ 124,286,872 4,735,243 670,691 - - - 854,945 6,260,879 471,250 - - - - - 471,250 768,757 - - - - - 768,757 4,904,193 - - - - 2,638,016 7,542,209 - - - 99,165,945 6,971,983 1,558,788 107,696,716 9,340,106 - 5,481,813 - - - 14,821,919 328,851 - - 1,082,795 - 185,658 1,597,304 231,641 231,641 $ 75,762,239 $ 6,999,498 $ 25,625,644 $ 100,323,740 $ 6,971,983 $ 47,994,443 $ 263,677,547 $ 4,433,493 $ 930,604 $ - $ 5,147,794 $ 1,500 $ 944,088 $ 11,457,479 4,376,329 18,912 - - - - 4,395,241 1,949,545 160,584 - - - - 2,110,129 1,978,327 - - - - 4,205,179 6,183,506 255,700 - - - - 2,193,350 2,449,050 4,952,930 5,481,813 2,965,678 13,400,421 12,993,394 1,110,100 10,100,724 5,483,313 10,308,295 39,995,826 328,851 - - 1,082,795 - 185,658 1,597,304 231,641 - - - - - 231,641 471,250 - - - - - 471,250 - - - - - 4,629,781 4,629,781 1,546,573 - - - - - 1,546,573 134,760 - - - - - 134,760 - 139,134 - - - - 139,134 - - - - 1,488,670 34,818,038 36,306,708 21,841,467 - - - - - 21,841,467 5,778,435 360,000 25,625,644 89,140,221 - 797,479 121,701,779 11,865,835 5,390,264 - - - 243,294 17,499,393 20,570,033 (2;988,102) 17,581,931 62,768,845 5,889,398 25,625,644 90,223,016 1,488.670 37,686,148 223,681,721 S 75.762239 S 6.999,498 S 25,625.544 3 100.323.740 5 6.971.983 S 47.994.443 S 263,677.547 See accompanying notes to basic financial statements 55 CITY OF NEWPORT BEACH Governmental Funds Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Assets June 30, 2011 Fund balances of governmental funds $ 223,681,721 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. 2,119,520,844 Bond issue costs have not been amortized and deferred in the governmental funds and must be added to the statement of net assets. 1,187,048 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 (126,660,000) Premium payable (1,084,977) Note payable (737,854) Pre - annexation agreement (7,200,000) CDBG loan (1,788,000) Purchase Agreement Payable (750,000) Accrued interest payable for the current portion of interest due on long -term debt has not been reported in the governmental funds. (4,037,373) 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. 2,449,050 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. 11,576,995 Investment in joint ventures is not a current financial resource and therefore not reported in the governmental funds. 2,528,033 Internal balance created by the consolidation of internal service fund activities related to enterprise funds is not reported in the governmental funds. 158,714 Net assets of governmental activities $ 2,218,844,201 See accompanying notes to basic financial statements M Revenues Taxes and assessments: Property tax Sales tax Sales tax in -lieu Transient occupancy tax Other taxes Intergovernmental Licenses and permits Charges for services Fines and forfeitures Investment income Net increase in fair value of investments Property Income Donations Other Total revenues Expenditures Current: General government Public safety Public works Community development Community services Capital outlay Debt service (note 6): Principal Interest and fiscal charges Issuance of debt costs Total expenditures CITY OF NEWPORT BEACH Governmental Funds Statement of Revenues, Expenditures and Changes in Fund Balances Year Ended June 30, 2011 Tide and Other Submerged Facilities City Hall Civic Center Governmental General Land Replacement Improvements COP Funds Totals $ 71,630,345 $ - $ - $ - $ - $ - $ 71.630,345 18,455,181 - - - - - 18,455,181 6,284,266 - - - - - 6,284,266 13,082,451 - - - - - 13,082,451 8,076,293 - - - - 455,229 8,531,522 2,306,209 - - - 1,485,906 7,675,356 11,467,471 3,234,996 1,485,375 - - - 478,615 5;198,986 15,134,529 151,284 - - - - 15,285,813 3,542,294 2,935 - - - - 3,545,229 366,081 38,321 130,335 209,315 11,287 290,253 1,045,592 369,235 42,646 145,046 - - 325,390 882,317 6,798,036 8,740,351 - - - - 15,538,387 172,149 - - - - 1,617;924 1,70,073 1,283,259 3,808,268 5,091,527 150,735,324 10,460,912 275,381 209,315 1,497,193 14,651,035 177,829,160 14,934,808 489,926 - - - - 15,424,734 57,177,787 17,452,950 - - - 316,436 74,947,173 24,669,717 3,544,245 - - - 3,228,114 31,442,076 7,644,104 - - - - 786,709 8,430,813 14,215,086 1,446,925 - - - - 15,662,011 2,085,096 1,269,870 - 22,499,977 - 11,790,939 37,645,882 750,000 195,080 - - 3,990,000 1,295,000 6,230,080 211,139 41,982 - 29,356 792,790 104,345 1,179,612 over expenditures 1,219,071 (13980066) 1,219,071 121,687,737 24,440,978 23,748,404 4,782,790 17,521,543 192,181,452 Excess (deficiency) of revenues over expenditures 29,047,587 (13980066) 275,381 (23,539,089) (3285597) (2,870,508) (14352292) Other financing sources (uses) Transfers in (note 14) 331,088 17,435,299 31,300,000 - 4,208,612 5,488,621 58,763,620 Transfers out (note 14) (48,767,696) - (5,949,737) (3,525,858) - (520,329) (58,763,620) Issuance of debt - - - 126,660,000 - - 126,660,000 Issuance of debt premium 1,155,300 1,155,300 Total other financing sources (uses) (48,436,608) 17,435,299 25,350,263 124,289,442 4,208,612 4,968,292 127,815,300 Net change in fund balances (19,389,021) 3,455,233 25,625,644 100,750,353 923,015 2,097,784 113,463,008 Fund balances, beginning 82,157,866 2,434,165 (10,527,337) 565,655 35,588,364 110,218,713 Fund balances, ending $ 62,768,845 $ 5,889,398 $25,625,644 $90,223,016 $ 1,488,670 $37,686,148 $223,681,721 See accompanying notes to basic financial statements 57 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, 2011 Net change in fund balances - total governmental funds $ 113,463,008 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. 24,818,449 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. 6,230,080 Issuance of debt costs 1,219,072 Some expenses reported in the Statement of Activities do not require the use of current financial resources and therefore are not reported as expenditures in the governmental funds: Amortization of issuance costs (32,024) Issuance of debt (126,660,000) Issuance of debt premium (1,155,300) Premium on bonds are recognized as revenues in the period received, however, in the Statement of Net Assets, it is amortized over the life of the bond. 70,323 Accrued Interest for debt service. This is the net change in accrued interest for the current period. (3,937,569) 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. 633,376 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. (828,630) Investment in joint ventures creates an explicit, measurable equity interest reported only in the statement of activities. (250,410) 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. 75,184 Change in net assets of governmental activities $ 13,645.559 See accompanying notes to basic financial statements CITY OF NEWPORT BEACH General Fund Budgetary Comparison Statement For the Year Ended June 30, 2011 See accompanying notes to basic financial statements 59 Variance with Final Budget Budgeted Amounts Positive Original Final Actual (Negative) Revenues Taxes and assessments: Property $ 70,642,839 $ 70,642,839 $ 71,630,345 $ 987,506 Sales 17,374,734 17,374,734 18,455,181 1,080,447 Sales tax in -lieu 6,392,273 6,392,273 6,284,266 (108,007) Transient occupancy 11,555,034 11,555,034 13,082,451 1,527,417 Othertaxes 8,410,800 8,410,800 8,076,293 (334,507) Intergovernmental 1,897,825 2,199,322 2,306,209 106,887 Licenses and permits 2,663,975 2,663,975 3,234,996 571,021 Charges for services 13,949,718 14,184,905 15,134,529 949,624 Fines and forfeitures 3,651,000 3,651,000 3,542,294 (108,706) Investment income 1,050,000 1,050,000 366,081 (683,919) Net increase in fair value of investments - - 369,235 369,235 Property income 8,163,907 7,289,346 6,798,036 (491,310) Donations 50,000 264,927 172,149 (92,778) Other 383,050 827,420 1,283,259 455,839 Total revenues 146,185,155 146,506,575 150,735,324 4,228,749 Expenditures General government: City council 1,053,886 1,157,154 1,138,753 18,401 City clerk 493,978 501,377 453,521 47,856 City attorney 2,358,728 2,657,045 2,724,204 1,430,468 City manager 1,792,348 1,457,765 1,226,577 (5,768,882) Administrative services 7,839,781 7,691,257 7,226,647 464,610 Human resources 2,326,746 2,358,431 2,165,106 193,325 Total General government 15,865,467 15,823,029 14,934,808 (3,614,222) Public safety: Police 42,751,592 41,000,126 38,773,831 2,226,295 Fire 34,164,977 19,780,823 18,403,956 1,376,867 Total Public safety 76,916,569 60,780,949 57,177,787 3,603,162 Public works: General services 22,117,466 19,715,246 18,178,721 1,536,525 Public works 5,714,119 5,732,987 5,320,926 412,061 Utilities 1,336,290 1,346,771 1,170,070 176,701 Total Public works 29,167,875 26,795,004 24,669,717 2,125,287 See accompanying notes to basic financial statements 59 CITY OF NEWPORT BEACH General Fund Budgetary Comparison Statement (continued) Variance with Final Budget Budgeted Amounts Positive Original Final Actual (Negative) Community development Planning 3,303,298 3,286,618 2,870,470 416,148 Building 4,237,602 4,356,217 4,256,871 99,346 Code and Water Quality Enforcement 667,205 669,219 516,763 152,456 Total Community development 8,208,105 8,312,054 7,644,104 667,950 Community services: Parking Operations Library Services Recreation and senior services Total Community services Capital outlay Debt service: Principal Interest and Fiscal Charges Total Debt Service 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 balance Fund balance, beginning Fund balance, ending - 2,830 410,695 (407,865) 6,630,608 6,946,994 6,568,089 378,905 7,646,569 7,823,449 7,236,302 587,147 14,277,177 14,773,273 14,215,086 558,187 3,414,035 3,675,468 2,085,096 1,590,372 750,000 750,000 750,000 - 30,000 30,000 211,139 (181,139) 780,000 780,000 961,139 (181,139) 148,629,228 130,939,777 121,687,737 9,252,040 (2,444,073) 15,566,798 29,047,587 13,480,789 331,088 331,088 (33,428,000) (54,493,299) (48,767,696) 5,725,603 (33,428,000) (54,493,299) (48,436,608) 6,056,691 (35,872,073) (38,926,501) (19,389,021) 19,537,480 82,157,866 82,157,866 82,157,866 - $ 46,285,793 $ 43,231,365 $ 62,768,845 $ 19,537,480 See accompanying notes to basic financial statements Mf CITY OF NEWPORT BEACH Tide and Submerged Land Budgetary Comparison Statement For the Year Ended June 30, 2011 Total revenues Expenditures General government Public safety Public works Community services Community development Capital outlay Debt service: Principal Interest and fiscal charges Total expenditures 10,014,252 11,108,785 10,460,912 (647,873) 489,926 - 17,452,950 838,620 3,707,463 2,235,438 1,900,842 489,926 17,452,950 - 3,544,245 163,218 1,446,925 453,917 6,162,270 6,868,084 1,269,870 5,598,214 195,080 Variance with 195,080 - 41,982 41,982 41,982 - Final Budget 30,656,327 Budgeted Amounts Positive Original Final Actual (Negative) Revenues Licenses and permits 1,370,000 1,370,000 1,485,375 115,375 Charges for services 62,000 62,000 151,284 89,284 Fines and forfeitures 500 500 2,935 2,435 Investment income 75,000 80,967 38,321 (42,646) Net increase in fair value of investments - - 42,646 42,646 Property income 8,506,752 9,595,318 8,740,351 (854,967) Total revenues Expenditures General government Public safety Public works Community services Community development Capital outlay Debt service: Principal Interest and fiscal charges Total expenditures 10,014,252 11,108,785 10,460,912 (647,873) 489,926 - 17,452,950 838,620 3,707,463 2,235,438 1,900,842 489,926 17,452,950 - 3,544,245 163,218 1,446,925 453,917 6,162,270 6,868,084 1,269,870 5,598,214 195,080 195,080 195,080 - 41,982 41,982 41,982 - 9,473,390 30,656,327 24,440,978 6,215,349 Excess (deficiency) of revenues over expenditures 540,862 (19,547,542) (13,980,066) 5,567,476 Other financing sources (uses) Transfers in Transfers out Total other financing sources (uses) Net change in fund balance Fund balance, beginning 17,435,299 17,435,299 (2,051,460) (2,051,460) 17,435,299 17,435,299 (1,510,598) (2,112,243) 3,455,233 5,567,476 2,434,165 2,434,165 2,434,165 Fund balance, ending $ 923,567 $ 321,922 $ 5,889,398 $ 5,567,476 61 This page left blank intentionally. 62 FINANCIAL Fur FIN, M 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. M CITY OF NEWPORT BEACH Proprietary Fund Statement of Net Assets June 30, 2011 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 (note 13) 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 - current 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 (158,714) $ 118,419,447 See accompanying notes to basic financial statements M Enterprise Funds Governmental Total Activities Enterprise Internal Service Water Wastewater Funds Funds $ 6,346,050 $ 1,648,258 $ 7,994,308 $ 42,431,407 4,486,753 676,205 5,162,958 1,407,654 - - - 304,986 - - - 1,257,738 10,832,803 2,324,463 13,157,266 45,401,785 2,016,450 - 2,016,450 - 688,396 - 688,396 - 187,432 - 187,432 23,482,455 115,516,129 42,625,388 158,141,517 - 441,280 2,390,678 2,831,958 - (40,674,927) (14,214,367) (54,889,294) (16,545,410) 78,174,760 30,801,699 108,976,459 6,937,045 78,174,760 30,801,699 108,976,459 6,937,045 89,007,563 33,126,162 122,133,725 52,338,830 2,670,810 640,368 3,311,178 447,818 135,296 49,934 185,230 43,604 59,132 24 59,156 - - - - 1,421,498 - - - 3,284,036 - - - 1,079,277 - - - 1,969,425 960,396 2,865,238 690,326 3,555,564 9,206,054 - - - 11,335,964 - - - 2,878,854 - - - 6,936,171 - - - 1,920,792 8,484,000 31,555,781 2,865,238 690,326 3,555,564 40,761,835 78,174,760 30,801,699 108,976,459 6,937,045 7,967,565 1,634,137 9,601,702 4,639,950 $ 86,142,325 $32,435,836 $118,578,161 $ 11,576,995 (158,714) $ 118,419,447 See accompanying notes to basic financial statements M CITY OF NEWPORT BEACH Proprietary Fund Statement of Revenues, Expenses and Changes in Fund Net Assets For the Year Ended June 30, 2011 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 Early retirement incentive program 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 (Loss) on removal of capital assets 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 $ 19,950,208 $ 3,323,017 147,019 25,416 20,097,227 3,348,433 $ 19,950,208 - 16,177,529 3,323,017 - - 1,298,064 - 272,746 172,435 285,237 23,445,660 18,033,576 8,171,227 - 8,171,227 - 3,753,693 1,418,968 5,172,661 1,366,397 1,547,342 565,602 2,113,944 1,820,267 1,820,194 333,651 2,153,845 22,749 1,864,816 714,288 2,579,104 358,010 1,077,645 791,255 1,868,900 - - - - 467,924 - - - 5,229,876 - - - 1,872,592 - - - 2,155,738 - - - 392,147 - - - 2,128,000 - - - 2,502,000 1,485,609 122,485 1,608,094 1,220,261 19,720,526 3,947,249 23,667,775 19,535,961 376,701 (598,816) (222,115) (1,502,385) 34,488 18,508 52,996 299,166 38,380 20,597 58,977 332,935 (18,986) - (18,986) 41,654 53,882 39,105 92,987 673,755 430,583 (559,711) (129,128) (828,630) - - - 1,298,405 - - - (1,298,405) 430,583 (559,711) (129,128) (828,630) 85,711,742 32,995,547 $ 86,142,325 $ 32,435,836 (75,184) $ (204,312) See accompanying notes to basic financial statements •i 12,405,625 $ 11,576,995 CITY OF NEWPORT BEACH Proprietary Fund Statement of Cash Flows For the Year ended June 30, 2011 See accompanying notes to basic financial statements 67 Enterprise Funds Governmental Total Activities Enterprise Internal Service Water Wastewater Funds Funds Cash Flows from operating activities: Cash received from customers or user departments $ 19,238,164 $ 3,306,964 $ 22,545,128 $ 17,690,137 Cash payments to employees for services (3,730,256) (1,407,911) (5,138,167) (7,504,994) Cash payments to suppliers for goods and services (11,979,234) (1,352,295) (13,331,529) (7,732,387) Cash received (payments made) for other operating activities (1,338,590) (97,069) (1,435,659) 366,907 Net cash provided by operating activities 2,190,084 449,689 2,639,773 2,819,663 Cash flows from noncapital financing activities: Cash received from other funds - - - 1,899,508 Cash paid to other funds (1,298,405) Net cash provided by noncapital financing activities 601,103 Cash flows from capital related financing activities: Acquisition of capital assets (496,855) (2,162,687) (2,659,542) (2,564,020) Net cash (used) for capital related financing activities (496,855) (2,162,687) (2,659,542) (2,365,554) Cash flows from investing activities: Interest on investments 72,868 39,105 111,973 632,101 Net cash provided by investing activities 72,868 39,105 111,973 632,101 Net increase (decrease) in rash and cash equivalents 1,766,097 (1,673,893) 92,204 1,687,313 Cash and cash equivalents, beginning 4,579,953 3,322,151 7,902,104 40,744,094 Cash and cash equivalents, ending $ 6,346,050 $ 1,648,258 $ 7,994,308 $ 42,431,407 Reconciliation of cash equivalents to the statement of net assets Cash and investments reported on statement of net assets $ 6,346,050 $ 1,648,258 $ 7,994,308 42,431,407 Cash and cash equivalents $ 6,346,050 $ 1,648,258 $ 7,994,308 $ 42,431,407 Reconciliation of operating income to net cash used for operating activities: Operating income (loss) $ 376,701 $ (598,816) $ (222,115) $ (1,502,385) Adjustments to reconcile operating income to net cash used for operating activities: Depreciation 1,547,342 566,602 2,113,944 1,820,267 (Increase) in accounts receivable (707,921) (16,053) (723,974) (512,248) (increase) in inventories - - - (49,556) (Increase) in prepaid items - - - (886,408) Increase in accounts payable and accrued payroll 978,085 497,956 1,476,041 160,785 (Decrease) in deposits payable (4,123) - (4,123) - Increase in workers' compensation - - - 2,298,000 Increase in general liability - - - 137,740 (Decrease) in compensated absences - - - (90,283) (Decrease) in early retirement incentive program - - - (568,249) Increase in net OPEB obligation 2,012,000 Total adjustments 1,813,383 1,048,505 2,861,888 4,322,048 Net cash provided for operating activities $ 2,190,084 $ 449,689 $ 2,639,773 $ 2,819,663 Non -cash investing capital and financing activities: Net increase in fair value of investments $ 38,380 $ 20,597 $ 58,977 $ 332,935 Gain (loss) on disposal of capital assets (18,986) (18,986) 41,654 Total of non -cash activities $ 19,394 $ 20,597 $ 39,991 $ 374,589 See accompanying notes to basic financial statements 67 This page left blank intentionally. M FINANCIAL S" FUND FINANL''I F[ou[ M., 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. 70 CITY OF NEWPORT BEACH Agency Funds Statement of Fiduciary Assets and Liabilities June 30, 2011 Assets Totals Cash and investments (note 4) $ 5,389,881 Cash with fiscal agent (note 4) 4,397,355 Prepaid items 950 Intergovernmental receivable 69,396 Total assets $ 9,857,582 Liabilities Due to bondholders $ 7,406,633 Due to others 432,432 Due to ILJAOC 2,018,517 Total liabilities $ 9,857,582 See accompanying notes to basic financial statements 71 This page left blank intentionally. 72 FINANCIAL S 73 NOTES FINANE CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30, 2011 (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. 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 library and most recently the new civic center project. The Corporation is 75 CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30, 2011 governed by a Board of Directors which is comprised of the seven City Council Members 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 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 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 V CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30, 2011 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 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 77 CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30, 2011 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. 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 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. ELI CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30, 2011 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 Restricted Fund Balance in the fund level financial statements. The endowment principal is reported as Nonspendable 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. The authority for spending investment earnings for scholarships resides with the City Manager and for periodic maintenance dredging in the Newport Bay resides with the City Council. 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. 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. 79 CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30, 2011 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. Special Revenue Fund Tide and Submerged Land The Tide and Submerged Lan d expenditures related to the beaches and marinas. Capital Project Funds Fund is used to account for all revenues and operation of the City's tidelands, including Facilities Replacement Fund The Facilities Replacement Fund is used to account for the receipt and expenditure of funds for the replacement of facilities. City Hall Improvements Fund The City Hall Improvements Fund is used to account for the design and construction of a new Civic Center Complex. Debt Service Fund Civic Center COP The Civic Center COP Fund is used to account for debt service transactions related to the Certificates of Participation issued to finance the construction of the 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 L-A CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30, 2011 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. 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 $68,098,793 at June 30, 2011. 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 81 CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30, 2011 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. 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, 2011, the balance of this account was $7,542,209. 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. 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: E-M CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30, 2011 Structures 30 -75 years Equipment 3 -15 years Infrastructure 20 -75 years 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. j. 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 Jan 1 Levy date July 1 Due dates November 1 — 1st installment March 1 — 2nd installment Collection dates December 10 — 1st installment April 10 — 2 "d installment k. Compensated Absences 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 83 CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30, 2011 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. 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. Fund Balance Classifications Due to the implementation of GASB No. 54, governmental fund balance is made up of the different classifications and the following provides explanations as to the nature and purpose of each classification: Nonspendable fund balance That portion of fund balance that typically includes amounts that are either (a) not in a spendable form such as inventories and prepaid items, or (b) legally or contractually required to be maintained intact such as endowments. Restricted fund balance The portion of fund balance that reflects constraints placed on the use of resources (other than nonspendable items) that are either (a) externally imposed by creditors, grantors, contributors, or laws or regulations of other governments; or (b) imposed by law through constitutional provisions or enabling legislation. E3f CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30, 2011 Committed fund balance That portion of a fund balance that includes amounts that can only be used for specific purposes pursuant to constraints imposed by formal action by the government's highest level of decision making authority, and remain binding unless removed in the same manner. The City Council has authority to establish, modify, or rescind a fund balance commitment. Assigned fund balance That portion of a fund balance that includes amounts that are constrained by the City's intent to be used for specific purposes and do not meet the criteria to be classified as restricted or committed. Constraints imposed on the use of assigned amounts are more easily removed or modified than those imposed on amounts classified as committed. The City Manager or designee has the authority to establish, modify, or rescind a fund balance assignment. Unassigned fund balance That residual portion of a fund balance that is in spendable form and is not otherwise restricted, committed or assigned. These amounts are available to be used for any purpose. In the governmental fund statements, when expenditures are incurred for purposes for which both restricted and unrestricted (committed, assigned, or unassigned) fund balances are available, the City uses the most restrictive funds first. The City would use the appropriate funds in the following order: restricted, committed, assigned, and finally unassigned amounts. In the government -wide statements, when expenditures are incurred for purposes for which both restricted and unrestricted net assets are available, the City applied restricted assets first. o. Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of certain assets and liabilities, disclosure of contingent assets and liabilities, and the related amounts of revenues and expenditures. Actual results could differ from those estimates. Management believes that the estimates are reasonable. (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 $223,681,721 differs from "net assets" of governmental activities $2,218,844,201 reported in the U�L CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30, 2011 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 $2,262,661,514 Accumulated depreciation (143,140,670) Total capital assets, net* $2.119.520.844 *Amount excludes net capital assets of $6,937,045 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, 2011 were: Certificates of participation $126,660,000 Bond Premium 1,084,977 Note payable 737,854 Pre - annexation agreement 7,200,000 CDBG Loan 1,788,000 Purchase Agreement Payable 750.000 Total $138.220.831 Deferred Charges Deferred Charges represent the unamortized portion of bond issuance costs and reported only in the statement of net assets. Deferred charges 11,187 048 [% CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30, 2011 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 $4.037,373 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 $2 528 033 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 $2.449.050 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 $11.576.995 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. 87 CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30, 2011 Explanation of Differences betweeen Government Funds Balance Sheet and the Statement of Net Assets Liabilities and Fund Balances / Net Assets Liabilities: Total Capital Accounts payable Long -term $ - Governmental Related Accumulated Debt Assets Funds Items Depreciation Transactions Claims payable - Cash and investments $ 124,286,872 $ - $ - $ - Receivables: - - - Early retirement incentive program - - - Accounts 6,260,879 - - - Notes 471,250 - - - Interest 768,757 - - - Intergovernmental receivables 7,542,209 - - - Cash with fiscal agent 107,696,716 - - - Interfund balances 14,821,919 - - - Investmentinjoint venture - - - - Prepaid items 1,597,304 - - - Inventory 231,641 - - - Capital assets - 2,262,661,514 - - Deferred charges - - - 1,187,048 Accumulated depreciation - - (143,140,670) - Total assets $ 263,677,547 $ 2,262,661,514 $ (143,140,670) $ 1,187,048 Liabilities and Fund Balances / Net Assets Liabilities: Accounts payable $ 11,457,479 $ - Accrued payroll 4,395,241 - - - Accrued interest payable - - - - Deposits payable 2,110,129 - - - Claims payable - - - - Workers' compensation payable - - - - Compensated absences payable - - - - Early retirement incentive program - - - Unearned revenue 6,183,506 - - - Unavailable revenue 2,449,050 - - - Due to other funds 13,400,421 - - - Long -term liabilities - - - 138,220,831 Total liabilities 39,995,826 - - 138,220,831 Fund balances / net assets 223,681,721 2,262,661,514 (143,140,670) (137,033,783) Total liabilities and and fund balances / net assets $ 263,677,547 $ 2,262,661,514 $ (143,140,670) $ 1,187,048 M, CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30, 2011 Investment Internal Reclassifications - Interest in Joint Unavailable Service and Statement of Payable Venture Revenue Funds Eliminations Net Assets $ - 5 - $ - $ 42,431,407 $ - $ 166,718,279 - - - 1,407,654 - 7,668,533 - - - - - 471,250 - - - - - 768,757 - - - - - 7,542,209 - - - - - 107,696,716 - - - - (14,663,205) 158,714 - 2,528,033 - - - 2,528,033 - - - 1,257,738 - 2,855,042 - - - 304,986 - 536,627 - - - 23,482,455 - 2,286,143,969 - - - - - 1,187,048 - - - (16,545,410) - (159,686,080) $ - S 2,528,033 $ - $ 52,338,830 $ (14,663,205) $ 2,424,589,097 $ - $ - $ - $ 447,818 $ - $ 11,905,297 - - - 43,604 - 4,438,845 4,037,373 - - - - 4,037,373 - - - - - 2,110,129 - - - 1,079,277 - 1,079,277 - - - 3,284,036 - 3,284,036 - - - 1,969,425 - 1,969,425 - - 960,396 - 960,396 - - - - - 6,183,506 - - (2,449,050) - - - - - - 1,421,498 (14,821,919) - - - - 31,555,781 - 169,776,612 4,037,373 - (2,449,050) 40,761,835 (14,821,919) 205,744,896 (4,037,373) 2,528,033 2,449,050 11,576,995 158,714 2,218,844,201 $ - $ 2,528,033 $ - $ 52,338,830 $ (14,663,205) $ 2,424,589,097 M CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30, 2011 b. Explanation of Differences between Enterprise Funds and Government - wide Statement of Net Assets Total net assets of the City's Enterprise Funds of $118,578,161 differs from net assets of the business -type activities of $118,419,447 reported in the government -wide statement of net assets. The difference, ($158,714), 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 Assets Cash and investments Receivables: Accounts Interfund balances Capital assets, net Total assets Liabilities and Fund Balances / Net Assets Liabilities: Accounts payable Accrued payroll Deposits payable Total liabilities Total Internal Government wide Enterprise Service Statement of Funds Funds Net Assets $ 7,994,308 $ 5,162,958 108,976,459 a. - 5,162,958 (158,714) (158,714) - 108,976,459 $ 122,133,725 _L( $ 121,975,011 $ 3,311,178 $ - $ 3,311,178 185,230 - 185,230 59,156 - 59,156 3,555,564 3,555,564 Net Assets Invested in capital assets, net of related debt $ 108,976,459 - $ 108,976,459 Unrestricted 9,601,702 (158,714) 9,442,988 $ 118,578,161 $ (158,714) $ 118,419,447 bl C. CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30, 2011 Explanation of Differences between Governmental Fund Operating Statements and the Statement of Activities The "net change in fund balances" for governmental funds $113463008 differs , , from the "change in net assets' for governmental activities $13,645,559 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 $ 38,112,215 Transfers out of WIP (1,447,730) Capital Outlays expended 36,664,485 Internal Service funds -asset additions (2,564,020) Governmental funds - asset additions (3,478,329) Net change in capital related items $ 30,622,136 Depredation expense ($10,004,900) Deletions in IS accumulated depreciation 1,820,267 Deletions in Governmental funds accumulated depreciation 2,380,946 Net change in accumulated depreciation $ (5,803,687) 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. 91 CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30, 2011 Certificates of Participation $ 3,990,000 Note payable 195,080 Pre - annexation agreement 1,200,000 CDBG loan 95,000 Purchase Agreement Payable 750,000 Bond Issuance Costs 1,187,048 Civic Center Certificates of Participation (126,660,000) Bond Premium (1,084,977) Total proceeds ($120.327.849) 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 $3 937 569 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 250 410 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 W33,3 7 M CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30, 2011 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 1828 6-30 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. 93 CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30, 2011 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 Gain 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 Issuance of debt costs Total expenses Other financing sources (uses): Transfers in Transfers out Issuance of debt Issuance of debt premium Total other financing sources (uses) Net change in fund balances / net assets Total Governmental Capital Related Funds Items $ 117,983,765 $ 11,467,471 5,198,986 15,285,813 3,545,229 1,045,592 882,317 15,538,387 1,790,073 5,091,527 177,829,160 15,424,734 74,947,173 3,549,555 31,442,076 2,492,794 8,430,813 - 15,662,011 - 37,645,882 (36,664,485) 6,230,080 1,179,612 1,219,071 Accumulated Long -term Debt Depreciation Transactions 280,549 (1,567,106) 5,709,930 97,780 1,282,534 (6,230,080) (38,300) (1,219,071) 192,181,452 (30,622,136) 5,803,687 (7,487,451) 58,763,620 (58,763,620) 126,660,000 1,155,300 127,815,300 113,463,008 30,622,136 (126,660,000) (1,155,300) (127,815,300) (5,803,687) (120,327,849) Fund balances / net assets beginning of year 110,218,713 2,232,039,378 (137,336,983) (16,705,934) Fund balances / net assets end of year $ 223,681,721 $ 2,262,661,514 $ (143,140,670) _L_( IM" CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30, 2011 Accrued Investment in Unavailable Internal Reclassifications Statement of Interest Joint Venture Revenue Service Fund and Eliminations Activities $ - $ - $ - $ - $ - $ 117,983,765 - - 633,376 - - 12,100,847 - - - - - 5,198,986 - - - - 75,184 15,360,997 - - - - - 3,545,229 - - - 299,166 - 1,344,758 - - - 332,935 - 1,215,252 - - - - - 15,538,387 - (250,410) - - - (250,410) - - - - - 1,790,073 - - - 41,654 - 41,654 5,091,527 (250,410) 633,376 673,755 75,184 178,961,065 - - - 48,380 103,734 15,857,397 - - - 1,197,708 676 78,128,006 - - - (133,623) 830,146 40,341,323 - - - 106,208 2,724 8,637,525 - - - 283,712 44,117 17,272,374 - - - - (981,397) - 3,937,569 - - - - 5,078,881 3,937,569 - - 1,502,385 - 165,315,506 1,298,405 (60,062,025) (1,298,405) 60,062,025 (3,937,569) (250,410) 633,376 (828,630) 75,184 13,645,559 (99,804) 2,778,443 1,815,674 12,405,625 83,530 2,205,198,642 $ (4,037,373) $ 2,528,033 $ 2,449,050 $ 11,576,995 $ 158,714 $ 2,218,844,201 95 CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30, 2011 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 ($129,128) differs from the change in net assets of the business -type activities ($204,312) reported in the government -wide statement of activities. The difference, ($75,184), 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 $ 19,950,208 $ - $ 19,950,208 Sewer service and connection fees 3,323,017 - 3,323,017 Other 172,435 - 172,435 Total operating revenues 23,445,660 - 23,445,660 Operating expenses Purchase of Water 8,171,227 - 8,171,227 Salaries and wages 5,172,661 - 5,172,661 Depreciation 2,113,944 - 2,113,944 Professional Services 2,153,845 - 2,153,845 Maintenance and supplies 2,579,104 75,184 2,654,288 System maintenance 1,868,900 - 1,868,900 Other 1,608,094 - 1,608,094 Total operating expenses 23,667,775 75,184 23,742,959 Operating income (222,115) (75,184) (297,299) Nonoperating revenues (expenses): Investment income 52,996 - 52,996 Net decrease in fair value of investments 58,977 - 58,977 Loss on removal of capital assets (18,986) - (18,986) Other Total nonoperating revenues (expenses) 92,987 - 92,987 Change in net assets (129,128) (75,184) (204,312) Net assets, beginning of year 118,707,289 (83,530) 118,623,759 Net assets, end of year $ 118,578,161 $ (158,714) $ 118,419,447 34 CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30, 2011 (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 committed or restricted 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. 97 CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30, 2011 Expenditures exceeded appropriations in the following governmental funds. Appropriations Building Excise Tax $ 54,600 Supplemental Law Enforcement 80,150 Prop 1 B Transportation 308,169 The following funds reported deficit fund balances: Special Revenue Funds OTS DUI Grant Community Development Block Grant Capital Proiects Expenditures Variance $ 58,137 $ (3,537) 100,719 (20,569) 385,515 (77,346) $ 380 $ 41,369 Marine Science Center $ 125,421 Misc SAH Projects $ 48,383 Marina Park $ 1,525,415 Sunset Ridge Park $ 1,214,780 Police Facility $ 2,175 Lifeguard Headquarters $ 30,179 Internal Service Funds Compensated Absences Retiree Insurance $ 9,503,689 $ 8,353,793 The City's intentions are to eliminate deficit fund balances through future grant funding, other future revenue sources, or interfund transfers. IM-1 CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30, 2011 (4) Cash and Investments Cash and investments as of June 30, 2011, 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 $ 174,712,587 107,696,716 5,389,881 4,397,355 $ 292,196, 539 Cash and investments as of June 30, 2011, consist of the following: Cash on hand $ 25,921 Deposits with financial institutions 9,687,319 1 nvestments 282,483,299 Total cash and investments $ 292,196,539 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. M Maximum Maximum Maximum Percentage Investment Authorized Investment Type Maturity of Portfolio' in One Issuer Local Agency Bonds 3 years 15% 5% U.S. Treasury Obligations 5 years None None U.S. Agency Securities 5 years None None Banker's Acceptances 180 days 20% 5% Commercial Paper 270 days 25% 5% Negotiable Certificates of Deposit 2 years 30% 5% M CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30, 2011 Repurchase Agreements Reverse Repurchase Agreements Medium -Term Notes Mutual Funds Money Market Mutual Funds Mortgage Pass - Through Securities County Pooled Investment Funds Local Agency Investment Fund (LAIF) JPA Pools (other investment pools) 30 days 10% 5% 30 days 20% 5% 4 years 30% 5% N/A 20% None N/A 20% None 5 years 20% 5% N/A 5% None N/A None None N/A None None * Excluding amounts held by bond trustee that are not subject to California Government Code restrictions. 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. 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 5 years 30% 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 100 CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30, 2011 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. 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 Tvoe Money Market Funds U.S. Treasury Notes U.S. Agencies Corporate Notes Certificate of Deposit Commercial Paper LAIF Municipal Bond Cash with Fiscal Agent: Money Market Funds U.S. Treasury Notes U.S. Agencies Corporate Notes LAIF Investment Agreements Total Investment Maturities (In Years) ' Fair Value Less than 1 1 1 to 3 1 3 to 5 More than 5 Total $ 3,400,287 $ 3,400,287 $ - $ - $ - $ 3,400,287 20,725,523 8,553,863 9,813,064 2,358,595 - 20,725,523 91,536,911 16,197,247 64,091,378 11,248,285 - 91,536,911 34,919,608 6,214,944 27,566,457 1,138,207 - 34,919,608 1,500,236 1,500,236 - - - 1,500,236 574,748 574,748 - - - 574,748 17,020,953 17,020,953 - - - 17,020,953 710,960 - 710,960 - - 710,960 15,564,815 15,564,815 - - - 15,564,815 12,051,992 10,058,594 1,993,398 - - 12,051,992 30,687,993 10,149,150 20,538,843 - - 30,687,993 1,530,855 1,530,855 - - - 1,530,855 51,077,840 51,077,840 - - - 51,077,840 1,180,576 1,180,576 1,180,576 $ 282,483,299 $ 141,843,532 $ 124,714,102 $ 14,745,088 $ 1,180,576 $ 282,483,299 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, 2011, the City did not have any investments (including investments held by fiscal agent) whose fair values were highly sensitive to interest rate fluctuations. 101 CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30, 2011 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. Minimum Exempt Legal Fmm Not Fair Value Ratter, Glaclasure AAA AA, AA AA- A+ A A- AH Rated mMantTwe Investment Type Reported Amount FFCB Federal agency securities $ Mind, Merkel Funds 3,400287 AAA $ - $ 3,309,703 $ - $ - $ - $ - $ - $ - $ - $ 90584 U. S. Treasury Notes' 20,725.523 N/A - 20]25.523 - - - - - - - USA9enniea' 91536911 WA - 0,053.271 - - - - 1083,641 - - - CorporeteNOtes 34,919,600 A - 9,281,124 5.413,876 3,013,898 3.434,367 7,P6.053 5.134A66 865,824 - - Ce,4ficateefDeposit 1,500,238 A-1 700,000 - - 800,236 - - - - - Oommerciel Paper 574,748 A-1 - - - - - - - 574,748 - LOralA9encYlnvk9UentFund 17,020,953 N/A 17,02,953 Municipal Banda 710,960 AA - - 710880 Cash with Fiscal Agent Money Market Funs 15,584,815 AAA - 15,564,815 - - - - - - - - US_TreasuryNWes 120511992 N/A - 1$0$1992 - - - - - - - - U.8.A9enaers 30,667,893 WA - 30,687,993 - - - - - - - - Fun, —e N. 1,530.855 A - 1,53,855 - - - - - - - - LosalAgencylnvestmenlFUnd 51,0P,840 N/A - - - - - - - - - 51,0P,840 Investment Agreements 1,1W,576 N/A - - - - - 1,100,576 - - - - $ 282.483.299 $ 700.000 $ 10,205,216 $ 5,413,876 $ 3,724,858 $ 4.234.603 $ 8,956,629 $ 6.618107 $ 865,824 S 574,740 $ 60.189,377 U.S. Credit RaOng Downgrade' Buhseguent to June 3, 2011, Standard & Pw(s (S&P) downgraded United States Government Sponsored Agency Sacuntes and Treasury Notes (mm AAA W AA+ 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 $ 17,070,093 FHLB Federal agency securities $ 28,414,402 FHLMC Federal agency securities $ 35,781,567 FNMA Federal agency securities $ 39,063,087 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 102 CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30, 2011 for deposits or investments, other than the following provision for deposits: The 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, 2011, none of the City's deposits with financial institutions in excess of federal depository amounts were held in uncollateralized accounts. 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. 103 CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30, 2011 (5) Capital Assets Capital asset activity for the year ended June 30, 2011, was as follows: Governmental Activities: Beginning Balance Balance Additions Deletions June 30, 2011 Non - depreciable: Land and rights of way $ 1,819,673,113 Work in progress 27,224,255 Depreciable: Structures 69,682,289 Equipment 28,373,975 Infrastructure 310,108,269 2,255,061,901 $ 1,158,526 29,142, 266 372,914 2,953,832 4,484,677 38,112,215 $ - $ 1,820,831,639 (1,447,730) 54,918,791 (3,089,623) (2,492,794) (7,030,147) Less accumulated depreciation for: Structures (15,019,286) (1,381,680) - Equipment (20,537,936) (2,129,979) 2,932,807 Infrastructure (118,452,180) (6,493,241) 1,395,415 (154,009,402) (10,004,900) 4,328,222 Net Capital Assets $ 2,101,052,499 $ 28,107,315 $ (2,701,925) Go\,ernmental Actikities capital assets net of accumulated depreciation at June 30, 2011 are comprised of the following: General Capital Assets, net $ 2,119,520,844 Internal SeNce Fund Capital Assets, net 6,937,045 $ 2,126,457,889 104 70, 055, 203 28, 238,184 312,100,152 2,286,143,969 (16,400,966) (19, 735,108) (123,550,006) (159,686,080) $ 2,126,457,889 CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30, 2011 Business -type Activities: Depreciation expense was charged in the following functions in the Statement of Activities: Beginning Business -type Balance Activities Balance Additions Deletions June 30, 2011 Non - depreciable: - Public works 7,105,341 - Land $ 2,016,450 $ - $ - $ 2,016,450 Work in progress 682,687 2,400,967 (251,696) 2,831,958 Depreciable: 566,602 $ 10,004,900 $ 2,113,944 Structures 205,793 482,603 688,396 Equipment 291,888 7,352 (111,808) 187,432 Infrastructure 158,143,395 20,316 (22,194) 158,141,517 161,340,213 2,911,238 (385,698) 163,865,753 Less accumulated depreciation for: Structures (122,465) (5,145) - (127,610) Equipment (209,254) (11,867) 111,808 (109,313) Infrastructure (52,558,647) (2,096,932) 3,208 (54,652,371) (52,890,366) (2,113,944) 115,016 (54,889,294) Net Capital Assets $ 108,449,847 797,294 $ (270,682) $ 108,976,459 Depreciation expense was charged in the following functions in the Statement of Activities: "Internal Service Fund depreciation of $1,820,267 is allocated to governmental functions above. 105 Governmental Business -type Activities* Activities General government $ 280,549 $ - Public safety 1,238,696 - Public works 7,105,341 - Community development 97,780 - Community service 1,282,534 - Water - 1,547,342 Wastewater - 566,602 $ 10,004,900 $ 2,113,944 "Internal Service Fund depreciation of $1,820,267 is allocated to governmental functions above. 105 CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30, 2011 (6) Long -Term Debt Changes in Long -Term Liabilities Long -term liability for the year ended June 30, 2011, was as follows: Amounts Beginning Ending Due Within Balance Additions Deletions Balance One Year Governmental activities: Certificates of participation payable $ 3,990,000 $ 126,660,000 $ (3,990,000) $ 126,660,000 $ 1,740,000 Bond Premium - 1,155,300 (70,323) 1,084,977 70,323 Nate payable 932,934 - (195,080) 737,854 203,859 Pre - annexation agreement 8,400,000 - (1,200,000) 7,200,000 1,200,000 CDBG Loan 1,883,000 - (95,000) 1,788,000 102,000 Purchase Agreement Payable 1,500,000 - (750,000) 750,000 750,000 Workers' compensations payable 12,322,000 5,229,876 (2,931,876) 14,620,000 3,284,036 Claims and judgements payable 3,820,391 1,872,592 (1,734,852) 3,958,131 1,079,277 Compensated absences 8,995,879 2,155,738 (2,246,021) 8,905,596 1,969,425 Early Retirement Incentive Program (see note 11) 3,449,437 392,147 (960,396) 2,881,188 960,396 Net OPEB obligation 6,472,000 4,630,000 (2,618,000) 8,484,000 - Total governmental activities 51,765,641 142,095,653 (16,791,548) 177,069,746 11,359,316 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. M. CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30, 2011 Governmental Activities Certificates of Participation In Fiscal Year 2010 -11, the City issued $20,085,000 of Series 2010A (Tax Exempt) and $106,575,000 of Series 2010B (Federally Taxable Direct Pay Build America Bonds) Certificates of Participation. The 2010A Certificates were issued to prepay the $3,990,000 principal outstanding on the 1998 Library Certificates of Participation. The refunding was undertaken to reduce total debt service payments over the next nine years by $1,084,556 and resulted in a net present value savings of $429,500. Accordingly, the 1998 Library Certificates have been defeased pursuant to the defeasance provisions of the 1998 Trust Agreement. The remaining proceeds from the Series 2010A Certificates are to be used to finance the acquisition, improvement and equipping of the Civic Center Project. The Series 2010B Certificates were issued to provide additional financing for the Civic Center Project. The proceeds of the Certificates will also be applied to pay certain costs of issuance incurred in connection with the Certificates. 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 January 1, 2011, and are in amounts sufficient to cover the payment of principal and interest of the Certificates. Interest on the Certificates is payable semiannually on January 1 and July 1 of each year. The 2010A Certificates carry interest rates from 2.00% to 4.00 %, while the 2010B Certificates interest rates range from 4.45% to 7.17 %. The City has designated the Series 2010B Certificates as "Build America Bonds" (BABs) under the provisions of the American Recovery and Reinvestment Act of 2009. Thus, the City expects to receive refundable credits from the United States Treasury equal to 35% of the interest payable on the 2010B Certificates totaling $53,292,850. As of June 30, 2011 the City has received $1,485,906 of BABs Subsidy from the United States Treasury. Principal payments are payable annually on July 1 of each year. Future principal payments for the Series 2010A, which commence July 1, 2011 and continue through July 1, 2019, range from $410,000 to $3,185,000. The future principal payments for the Series 2010B Certificates, which commence July 1, 2018 and are payable through July 1, 2040, range from $2,900,000 to $7,245,000. The total outstanding balance at June 30, 2011 amounted to $126,660,000. The annual amortization requirements of the Certificates of Participation are as follows: 107 CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30, 2011 Year Ending June 30 Principal Interest Total 2012 1,740,000 7,911,367 9,651,367 2013 2014 2015 2016 2017 -2020 2021 -2024 2025 -2028 2029 -2032 2033 -2036 2037 -2041 • Note Payable Note payabl e Waterways i n thirty annual beginning Au $737,854. 2,690,000 2,775,000 2,860,000 2,940,000 12,960,000 12,895,000 15,060,000 18,025,000 21, 580,000 33,135,000 7,853,617 7,771,642 7,687,117 7,585,417 29,062,059 26,551,464 23,000,935 18,326,556 11,613,184 6,154,266 10,543,617 10,546,642 10, 547,117 10,525,417 42,022,059 39,446,464 38,060,935 36,351,556 33,193,184 39,289,266 $ 126,660,000 $ 153,517,623 $ 280,177,623 consists o 1987 for a principal and gust 1, 1987 f a note to the California Department of Boating and I oan in the amount of $3,300,000. The note is payable in interest installments of $237,062 at 4.5% rate of interest The outstanding balance at June 30, 2011, amounted to The annual amortization requirements for the Note Payable are as follows: Year Ending June 30 2012 2013 2014 2015 2016 Principal 203,859 213,032 222,609 Interest Total 33,203 24,030 14,443 48,095 4,426 50,259 2,262 237,062 237,062 237,052 52,521 52,521 $ 737,854 $ 78,364 $ 816,218 • 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, 2011, amounted to $7,200,000. M., CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30, 2011 • 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 $102,000 to $208,000 through June 30, 2023. The outstanding balance at June 30, 2011, amounted to $1,788,000. The annual amortization requirements for the CDBG Loan are as follows: Year Ending June 30 Principal Interest 2012 102,000 99,653 2013 108,000 94,485 2014 116,000 88,722 2015 123,000 82,315 2016 132,000 75,306 2017 -2020 622,000 217,815 2021 -2023 585,000 55,039 $ 1,788,000 $ 713,335 • Purchase Agreement Payable Total 201,653 202,485 204,722 205,315 207,306 839,815 640,039 $ 2,501,335 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, 2011, amounted to $750,000. The annual amortization requirements for the Purchase Agreement are as follows: Year Ending June 30 Principal Interest Total 2012 750,000 30,000 780,000 $ 750,000 $ 30,000 $ 780,000 • Claims and Judgments 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 109 CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30, 2011 June 30, 2011, 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, 2011, for general liability amounted to $3,958,131 and for workers' compensation was $14,620,000. • 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, 2011, is $8,905,596. • Early Retirement Incentive Program (ERIP) In Fiscal year 2009 -10, the City approved and implemented an 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, 2011 is $2,881,188. See Note (11) in the notes to financial statements. • 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 $2,128,000 of the ARC. As for the implied subsidy $6,472,000, the City has elected to fund it on a pay -as- you -go basis, thus resulting in net OPEB obligation of $8,484,000. See Note (12) in the notes to financial statements. (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, 2011, for each district under the Bond Acts of 1911 and 1915, and other special assessments, are as follows: 110 CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30, 2011 Bonds Outstanding Assessment District Original Issue June 30, 2011 No. 68 Newport Shores 3,813,562 2,380,000 No. 69 West Newport 4,978,498 3,060,000 No. 70 Bay Shores 1,380,996 770,000 No. 74 Island Avenue 222,629 100,000 No. 75 Balboa Business 821,204 520,000 No. 78 Little Balboa Island 1,348,196 270,000 No. 79 Beacon Bay 1,215,134 90,000 No. 82 Corona del Mar 274,967 100,000 No. 86 Balboa Peninsula 300,174 145,000 No. 92 Coast Highway 1,425,000 1,305,000 No. 99 -2 Ocean Front 1,953,952 1,835,000 No. 100 13 "/Balboa /Adams 2,670,000 2,670,000 No. 101 Central Balboa 2,467,597 2,165,000 No. 103 Peninsula Point 3,295,700 3,050,000 No. 95 -1 CIOSA Refunding Series A 15,495,000 6,140,000 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. Therefore the bonded indebtedness is not shown in the financial statements Bonds outstanding at June 30, 2011, are as follows: Series 2008C Series 2008D Series 2008E Series 2008F Series 2009A Series 2009D Series 2009E Series 2011A $70,095,000 $80,000,000 $80,000,000 $90,000,000 $66,835,000 $35,490,000 $35,490,000 $105,390,000 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 111 CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30, 2011 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. For the 2011 Series bonds, varying redemption payments begin on December 1, 2012 and are required to be made through December 1, 2040. (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 $50 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 $18,578,131 which represents the discounted present value at June 30, 2011; the claims were discounted using an interest rate of five percent. 112 CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30, 2011 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 $71,814,801 at June 30, 2011. (10) Pension Plans 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 December 2010, non- safety employees, except those in Police and Fire Associations, agreed to contribute 5.58% of the required 8% of annual salary for the participant contribution and 2.42% of the City's employer contribution which is discussed below. The 5.58% participant contribution was phased in 113 General Liability Workers' Compensation June 30, 2010 June 30, 2011 June 30, 2010 June 30, 2011 Unpaid claims, beginning of fiscal year $ 5,897,737 $ 3,820,391 $ 11,893,000 $ 12,322,000 Incurred claims (including I13NR) 201,308 1,872,592 3,530,130 5,229,876 Claim payments (2,278,654) (1,734,852) (3,101,130) (2,931,876) Unpaid claims, end of fiscal year $ 3,820,391 $ 3,958,131 $ 12,322,000 $ 14,620,000 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 $71,814,801 at June 30, 2011. (10) Pension Plans 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 December 2010, non- safety employees, except those in Police and Fire Associations, agreed to contribute 5.58% of the required 8% of annual salary for the participant contribution and 2.42% of the City's employer contribution which is discussed below. The 5.58% participant contribution was phased in 113 CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30, 2011 over a one -year period. Benefit provisions and all other requirements are established by State statues and City contract with employee bargaining groups. 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, 2010 to June 30, 2011, has been determined by an actuarial valuation of the plan as of June 30, 2008. The contribution rate indicated for the period is 8.406% for non - safety employees and 30.202% for safety employees of annual covered payroll. Without the cost sharing agreement with non - safety employees, the contribution rate would be 10.826% for non- safety employees. In order to calculate the dollar value of the ARC for inclusion in financial statements prepared as of June 30, 2011, the contribution rate is multiplied by the payroll of covered employees that were paid during the period from July 1, 2010 to June 30, 2011. Annual Pension Cost For 2011, the City's annual pension cost of $16,829,589 for PERS was equal to the City's required and actual contributions. A summary of principle assumptions and methods used to determine the annual required contribution is shown below: Valuation Date Actuarial Cost Method Amortization Method Average Remaining Period Asset Valuation Method Actuarial Assumptions: Investment Rate of Return Projected Salary Increases Inflation Rate Payroll Growth Miscellaneous Plan Safety Plan June 30, 2008 June 30, 2008 Entry Age Actuarial Cost Method Entry Age Actuarial Cost Method Level Percent of Payroll 25 Years as of the Valuation Date 15 -Year Smoothed Market 7.75% (net of administrative expenses) 3.25% to 14.45% depending on age, service, and type of employment 3.00% 3.25% Level Percent of Payroll 30 Years as of the Valuation Date 15 -Year Smoothed Market 7.75% (net of administrative expenses) 3.25% to 13.15% depending on age, service, and type of employment 3.00% 3.25% Individual Salary Growth A merit scale varying by duration A merit scale varying by duration of employment coupled with an of employment coupled with an assumed annual inflation growth assumed annual inflation growth of 3.0% and an annual of 3.0% and an annual production growth of 0.25% production growth of 0.25% 114 CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30, 2011 Initial unfunded liabilities are amortized over a closed period that depends on the plan's date of entry into PERS. Subsequent plan amendments are amortized as a level percent of pay over a closed 20 -year period. Gains and losses that occur in the operation of the plan are amortized over a 30 -year rolling period, which results in an amortization of about 6% of unamortized gains and losses each year. If the plan's accrued liability exceeds the actuarial value of plan assets, then the amortization payment on the total unfunded liability may not be lower than the payment calculated over a 30 -year amortization period. THREE -YEAR TREND INFORMATION FOR PERS ($ Amount in Thousands) Annual Pension Cost Percentage of Net Pension Fiscal Year (APC) APC Contributed Obligation 6/30/09 Misc. $6,835 100% $0 Safety $11,570 100% $0 Total $18,405 100% $0 6/30/10 Misc. $6,334 100% $0 Safety $11,488 100% $0 Total $17,822 100% $0 6/30/11 Misc. $6,074 100% $0 Safety $10,756 100% $0 Total $16,830 100% $0 The Schedule of Funding Progress, below, shows the recent history of the actuarial value of assets, actuarial accrued liability, their relationship, and the relationship of the unfunded actuarial accrued liability to payroll. The Schedule of Funding Progress, below, presents multiyear trend information about whether the actuarial value of the plan assets is increasing or decreasing overtime, relative to the actuarial accrued liability for benefits. 115 CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30, 2011 SCHEDULE OF FUNDING PROGRESS FOR PERS ($ 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, 2011, the City's covered payroll for employees participating in the plan was $2,719,120. Employees made contributions of $101,967 (3.75% of current covered payroll), which was matched by the employer in the same amount. Assets of the plan totaled $1,856,446 at June 30, 2011. 116 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] 06/30/2008 Misc. $ 217,378 $195,954 $ 21,424 90.1% 91.9% $ 41,148 52.066% Safety 336,061 264,634 71,427 78.7% 81.0% 28,056 254.587% Total $ 553,439 $460,588 $ 92,851 83.2% 85.3% $ 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% 06/30/2010 Misc. $ 269,463 $218,258 $ 51,205 81.0% 63.8% $ 40,588 126.158% Safety 382,338 284,617 97,721 74.4% 58.4% 29,753 328.441% Total $ 651,801 $502,875 $ 148,926 77.2% 60.6% $ 70,341 211.720% 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, 2011, the City's covered payroll for employees participating in the plan was $2,719,120. Employees made contributions of $101,967 (3.75% of current covered payroll), which was matched by the employer in the same amount. Assets of the plan totaled $1,856,446 at June 30, 2011. 116 CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30, 2011 (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 PERS 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 accrued cost for this benefit has been recognized in the Compensated Absence, Internal Service Fund. 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. The outstanding obligation at June 30, 2011 was $2,881,188. (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 117 CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30, 2011 in a Health Reimbursement Arrangement ( "HRA ") sponsored by the City, the single 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 1,209 as of June 30, 2011, consisting of 472 miscellaneous employees, 254 safety employees, and 483 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. 118 CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30, 2011 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 $2.50 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 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 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 119 CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30, 2011 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 CalPERS) 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 CalPERS 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. 120 CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30, 2011 Three -Year Annual Required Contribution (ARC) Trend The 2010 -11 Annual Required Contribution (ARC) includes the Normal Cost plus a 20 -year amortization of the Unfunded AAL (in 000's): ' AOC is equal to the ARC adjusted for interest and amoritization of the NOO 121 Current Year Annual ARC As Beginning Actual OPEB Percentage Covered a %of Ending Fiscal Year Balance ARC' ACC Contributiion Obligation Contributed Payroll Payroll Balance 2008/09 Cash Subsidy $ - $ 2,720 $ 2,720 $ 2,720 $ - 100% $ 56,527 4.8% $ - Implied Subsidy 2,221 2,734 2,703 516 2,187 18.9% 56,527 4.8% 4,408 Net OPEB Obligation $ 2,221 $ 5,454 $ 5,423 $ 3,236 $ 2,187 593% $ 56,527 96% $ 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 2,064 15.9% 73,308 3.6% 6,472 Net OPEB Obligation $ 4,408 $ 4,619 $ 4,493 $ 2,429 $ 2,064 52.6% $ 73,308 63% $ 6,472 2010 -11 Cash Subsidy $ - $ 2,128 $ 2,128 $ 2,128 $ - 100% $ 75,691 2.8% $ - Implied Subsidy 6472 2,686 2,502 490 2,012 18.2% 75,691 3.5% 8,484 Net OPEB Obligation $ 4,630 $ 2,618 $ 2,012 54.4% $ 75,691 6.4% $ 8,484 $ 6,472 $ 4.814 ' AOC is equal to the ARC adjusted for interest and amoritization of the NOO 121 CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30, 2011 Three -Year Net OPEB Obligation (NOO) 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, 2011, NOO is determined as follows (in 000's): Prefu nding Contributions & Benefit Fiscal Year July 1, NOO AOC Payments June 30, NOO 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) 2 6,472 Total $ 4,408 $ 4,493 $ (2,429) $ 6,472 2010/11 Cash Subsidy $ - $ 2,128 $ (2,128) $ - Implied Subsidy 6,472 2,502 (490) a 8,484 Total $ 6,472 $ 4,630 $ (2,618) $ 8,484 1 - 2008 -2009 estimated implied subsidy 2 - 2009 -2010 estimated implied subsidy 3 -2010 -2011 estimated implied subsidy 122 CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30, 2011 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 2010 -11 AOC 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 $2,128 Payroll 06/30/2006 $ 2,128 2.8% Implied Subsidy 2,686 324 (508) 2,502 3.3% Total $4,814 $ 324 $ (508) $ 4,630 6.1% 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. 123 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% 123 0 N c m H CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30, 2011 (13) Interfund Receivables and Payables At June 30, 2011, interfund receivables and payable were as follows: Due from General Fund $ 9,340,106 Facilities Financing Plan 5,481,813 Civic Center COP - Internal Service Funds Nonmajor Funds City Hall Improvements (Major fund) Total $14,821,919 Due to 5,481,813 1,421,498 2,965,678 4,952,930 $14,821,919 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, 2011, consisted of the following: Total $ 331,088 $ 17,435,299 $31,300,000 $ 4,208,612 $ 1,298,405 $ 5,488,621 $ 60,062,025 The City typically uses transfers to fund ongoing subsidies. The General Fund transferred $17,435,299 to subsidize for the maintenance and operation of the Tide and Submerged Land Fund and $31,300,000 to the Facilities Replacement Fund to cash fund construction projects for general fund supported facilities. The facilities 124 Transfers In Tide and Submerged Facilities Civic Center Internal Service Non -Major General Fund Land Replacement COP Fund Funds Total General Fund $ - $ 17,435,299 $31,300,000 $ - $ - 32,397 $ 48,767,696 Facilities - - - 682,754 - 5,266,983 $ 5,949,737 Replacement City Hall - - _ 3,525,858 - - $ 3,525,858 Improvements Internal Service - - - 1,298,405 - 1,298,405 Fund Non -Major Funds 331,088 - - - - 189,241 520,329 Total $ 331,088 $ 17,435,299 $31,300,000 $ 4,208,612 $ 1,298,405 $ 5,488,621 $ 60,062,025 The City typically uses transfers to fund ongoing subsidies. The General Fund transferred $17,435,299 to subsidize for the maintenance and operation of the Tide and Submerged Land Fund and $31,300,000 to the Facilities Replacement Fund to cash fund construction projects for general fund supported facilities. The facilities 124 CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30, 2011 replacement fund transferred $682,754 for the debt service payment related to the Civic Center COPs, and transferred $5,266,983 to cash fund construction of the Oasis Senior Center. The City Hall Improvement fund transferred $3,525,858 of Civic Center COP bond proceeds to defease the 1998 Library COPs. As required by the pre- annexation agreement, interest accrued in the amount of $117,601 in the Newport Coast Annexation fund, is due to and was subsequently transferred to the General Fund. (15) Joint Venture Agreements Bonita Canvon Public Facilities Financing 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, 2011, the contributions from property owners are held in trust as cash with fiscal agent totaling $67,497. 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 $240,141 for fiscal year 2010 -11. The City's 50% interest in the net equity of this joint venture at June 30, 2011, amounts to $2,386,629. Complete separate financial statements can be obtained at the City of Costa Mesa at 77 Fair Drive, Costa Mesa, California. 125 CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30, 2011 Metro Cities Fire Authorit 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. 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 $483,203. The City's 10.57% interest in the net equity of this joint venture at June 30, 2011, amounts to $141,404. 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, 2011, 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 Claims and Judgments 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). 126 CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30, 2011 Circulation Improvement and Coen Space Aareement 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, 2011, the City received $378,481 of Fair Share Fees, and $189,241 was paid to the CIOSA Construction capital projects fund. Through June 30, 2011, $4,347,649 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. Newport Coast Pre - Annexation Agreement 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. The outstanding Assessment debt relief balance at June 30, 2011 was $7.2 million. 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, 2011, the City paid VNB $2,879,421. 127 CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30, 2011 Contractual commitments Construction and contractual commitments for major construction projects are as follows: Total Project Budget Civic Center $120,751,876 Jamboree Road Widening over SR -73 $5,667,065 OASIS Senior Center $4,354,247 Rhine Channel Dredging $4,512,964 Lido Isle Street Rehabilitation $747,370 (17) Fund Balance Project To Date Exoenditures $22,499,977 $1,720,354 $3,313,467 $33,044 $183,021 Unexpended Commitments $98,046,123 $3,730,070 $801,718 $592,402 $470,420 In February 2009, the Governmental Accounting Standards Board (GASB) issued Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions. The objective of this Statement was to enhance the usefulness of fund balance information by providing clearer fund balance classifications that can be more consistently applied and by clarifying the existing governmental fund type definitions. This Statement was effective, and implemented by the City, for fiscal year ending June 30, 2011. Governmental Fund Balance under Statement No. 54, at June 30, 2011, is classified as follows: Nonspendable: Prepaid items Inventories Long -Term Loan Receivable Permanent Endowment Restricted: Affordable housing Hoag Upper Newport Bay Restoration Other CommMed: Cantlngency Reserve Other Assigned: Unassigned: Total fund balances 21,841,467 - - - - 21,841,467 Nan -Major Governmental Funds 25,625,644 89,140,221 - - 797,479 - 121,701,779 Title and 5,390,264 - - - - 243,294 - 17,499,393 20,570,033 (41,749) (2,946,353) 17,581,931 Submerged Facilities City Hall Civic Center Special Revenue Capital Project Permanent General Land Replacement Improvements COP Funds Funds Funds Totals 328,851 - - 1,082,795 - 185,658 - - 1,597,304 231,641 - - - - - - - 231,641 471,250 - - - - - - - 471,250 - - - - - - - 4,629,781 4,629,781 1,546,573 - - - - - - - 1,546,573 134,760 - - - - - - - 134,760 - 139,134 - - - - - - 139,134 - - - - 1,488,670 27,731,091 5,683,674 1,403,273 36,306,708 21,841,467 - - - - 21,841,467 5,778,435 360,000 25,625,644 89,140,221 - - 797,479 - 121,701,779 11,865,835 5,390,264 - - - - 243,294 - 17,499,393 20,570,033 (41,749) (2,946,353) 17,581,931 62,768,845 5,889,398 25,625,694 90,223,016 1,488,670 27,875,000 3,778,094 6,033,054 223,681,721 As discussed in Note 14, Interfund Transfers, the City elected to transfer $31.3 million out of General Fund Committed Fund Balance into a separately identifiable fund titled "Facilities Replacement Fund" during the fiscal year. The intent of this transfer was to better separate and identify the City Council's intent for this Committed Fund Balance for the readers and stakeholders of these financial statements. While Council has committed 128 CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30, 2011 these monies for future replacement or financing of the City's buildings and infrastructure, Council may elect in the future to re- allocate these funds for any other General Fund benefit. When compared to previous fiscal years, the General Fund Balances should be looked at in combination with the Facilities Replacement Fund Balances to ensure consistency. (18) Subsequent Event Dissolution of the Airborne Law Enforcement (ABLE) Program Effective July 1, 2011, the City of Newport Beach and the City of Costa Mesa jointly agreed to the dissolution of ABLE, terminating the Joint Power Agreement, selling off the helicopters, parts, vehicles and tools. 129 This page left blank intentionally. 130 FINANCIAL 131 5LJPPLEMEN�TARY� IN MEIR ToION 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 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 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. 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. 133 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 CITY OF NEWPORT BEACH Combining Balance Sheet Non -Major Governmental Funds June 30, 2011 136 Special Revenue Circulation State Asset OTS and Gas Tax Forfeiture DUI Grant JAG Transportation Assets Cash and investments $ 5,266,831 $ 764,538 $ - $ - $ 3,368,809 Receivables: Accounts - - - - - Intergovernmental receivables - 111,300 100,330 13,322 - Cash with fiscal agent - - - - - Due from other funds - - - - - Prepaid items - - - - - Total Assets $ 5,266,831 $ 875,838 $ 100,330 $ 13,322 $ 3,368,809 Liabilities and Fund Balances Liabilities: Accounts payable $ 29,289 $ 2,759 $ 431 $ - $ 41,686 Unearned revenue - - - - - Unavailable revenue - - - - - Due to other funds - - 100,279 13,322 - Total Liabilities 29,289 2,759 100,710 13,322 41,686 Fund balances: Nonspendable: Prepaid Items - - - - - Inventories - - - - - Long -Term Loan Receivable - - - - - Permanent Endowment - - - - - Restricted: 5,237,542 873,079 - - 3,327,123 Committed: - - - - - Assigned: - - - - - Unassigned: - - (380) - - Total fund balances 5,237,542 873,079 (380) - 3,327,123 Total liabilities and fund balances $ 5,266,831 $ 875,838 $ 100,330 $ 13,322 $ 3,368,809 136 Special Revenue Building Community Air Quality Excise Combined Development Management Environmental Tax Transportation Block Grant District Liability $ 356,406 $ 6,279,286 $ - $ 335,180 $ 3,758,273 - 781,875 - - - - 297,116 41,369 - - - - - - 185,658 $ 356,406 $ 7,358,277 $ 41,369 $ 335,180 $ 3,943,931 $ 21,649 $ 508,142 $ 41,084 $ 45 $ 9,053 - 2,549,506 - - - - 74,036 41,369 - - - - 285 - - 21,649 3,131,684 82,738 45 9,053 - - - - 185,658 334,757 4,226,593 - 335,135 3,749,220 - - (41,369) - - 334,757 4,226,593 (41,369) 335,135 3,934,878 $ 356,406 $ 7,358,277 $ 41,369 $ 335,180 $ 3,943,931 (continued) 137 CITY OF NEWPORT BEACH Combining Balance Sheet Non -Major Governmental Funds June 30, 2011 (continued) 138 Special Revenue Supplemental Traffic Newport Law Congestion Coast Prop 1B Enforcement Relief Annexation Transportation Assets Cash and investments $ - $ - $ 7,200,000 $ - Receivables: Accounts - - - - Intergovernmental receivables 11,316 - - - Cash with fiscal agent - - - - Due from other funds - - - - Prepaid items - - - - Total Assets $ 11,316 $ - $ 7,200,000 $ - Liabilities and Fund Balances Liabilities: Accounts payable $ - $ - $ - $ - Unearned revenue - - - - Unavailable revenue - - - - Due to other funds 11,316 - - - Total Liabilities 11,316 - - - Fund balances: Nonspendable: Prepaid Items - - - - Inventories - - - - Long -Term Loan Receivable - - - Permanent Endowment - - - - Restricted: - - 7,200,000 - Committed: - - - - Assigned: - - - - Unassigned: - - - - Total fund balances - - 7,200,000 - Total liabilities and fund balances $ 11,316 $ - $ 7,200,000 $ - 138 (continued) 139 Capital Projects Assessment CIOSA Bonita Canyon Contributions District Construction Development $ 2,819,111 $ 4,298,263 $ - $ - 57,512 563 - - 2,063,263 - - - - 1,491,291 - 67,497 $ 4,939,886 $ 5,790,117 $ - $ 67,497 $ 58,346 $ 128,643 $ - $ 45,290 370,635 - - - 2,063,263 - - - 7 2,492,244 128,643 - 45,297 2,447,642 5,661,474 - 22,200 2,447,642 5,661,474 - 22,200 $ 4,939,886 $ 5,790,117 $ - $ 67,497 (continued) 139 CITY OF NEWPORT BEACH Combining Balance Sheet Non -Major Governmental Funds June 30, 2011 (continued) 140 Capital Projects Marine Mariners Oasis Fire Station 7 Science Center Library Senior Center Assets Cash and investments $ - $ - $ - $ 1,040,773 Receivables: Accounts - - - - Intergovernmental receivables - - - - Cash with fiscal agent - - - - Due from other funds - - - - Prepaid items - - - - Total Assets $ - $ - $ - $ 1,040,773 Liabilities and Fund Balances Liabilities: Accounts payable $ - $ - $ - $ - Uneamed revenue - - - - Unavailable revenue - - - - Due to other funds - 125,421 - - Total Liabilities - 125,421 - - Fund balances: Nonspendable: Prepaid Items - - - - Inventories - - - - Long -Term Loan Receivable - - - - Permanent Endowment - - - - Restricted: - - - - Committed: - - - 797,479 Assigned: - - - 243,294 Unassigned: - (125,421) - - Total fund balances - (125,421) - 1,040,773 Total liabilities and fund balances $ - $ - $ - $ 1,040,773 140 Capital Projects Misc Marina Sunset Police Lifeguard SAH Projects Park Ridge Park Facility Headquarters $ 1,236,512 $ - $ - $ - $ - 14,995 - - - - y I,LJ I,JVI y y y y - $ 170 $ 45,580 $ 11,921 $ - $ - 1,285,038 - - - - 14,682 - - - - - 1,479,835 1,202,859 2,175 30,179 (48,383) (1,525,415) (1,214,780) (2,175) (30,179) (48,383) (1,525,415) (1,214,780) (2,175) (30,179) (continued) 141 CITY OF NEWPORT BEACH Combining Balance Sheet Non -Major Governmental Funds June 30, 2011 (continued) 142 Permanent Fund Total Other Ackerman Governmental Bay Dredging Donation Funds Assets Cash and investments $ 4,835,467 $ 1,197,587 $ 42,757,036 Receivables: Accounts - - 854,945 Intergovernmental receivables - - 2,638,016 Cash with fiscal agent - - 1,558,788 Due from other funds - - - Prepaid items - - 185,658 Total Assets $ 4,835,467 $ 1,197,587 $ 47,994,443 Liabilities and Fund Balances Liabilities: Accounts payable $ - $ - $ 944,088 Unearned revenue - - 4,205,179 Unavailable revenue - - 2,193,350 Due to other funds - - 2,965,678 Total Liabilities - - 10,308,295 Fund balances: Nonspendable: Prepaid Items - - 185,658 Inventories - - - Long -Term Loan Receivable - - - Permanent Endowment 3,857,000 772,781 4,629,781 Restricted: 978,467 424,806 34,818,038 Committed: - - 797,479 Assigned: - - 243,294 Unassigned: - - (2,988,102) Total fund balances 4,835,467 1,197,587 37,686,148 Total liabilities and fund balances $ 4,835,467 $ 1,197,587 $ 47,994,443 142 This page left blank intentionally. 143 Revenues: Other taxes Intergovernmental Licenses, permits and fees 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, 2011 Special Revenue State Asset OTS Gas Tax Forfeiture DUI Grant JAG 2,025,226 338,294 227,507 13,322 29,935 4,676 - - 33,313 5,204 - - 2,088,474 348,174 227,507 13,322 - 14,460 187,935 13,322 276,523 - - - 276,523 14,460 187,935 13,322 1,811,951 333,714 39,572 (160,000) - (160,000) - 1,651,951 333,714 39,572 - 3,585,591 539,365 (39,952) - $ 5,237,542 $ 873,079 $ (380) $ - 144 Special Revenue Circulation Building Community Air Quality and Excise Combined Development Management Environmental Transportation Tax Transportation Block Grant District Liability S - $ - $ - $ - $ - $ 455,229 - - 1,687,374 284,615 100,655 - 378,481 100,134 - - - - 31,198 2,300 28,474 - 2,676 26,370 32,956 2,561 31,687 - 2,979 29,347 - - 26,723 442,635 104,995 1,747,535 284,615 106,310 537,669 2,130,922 58,137 123,181 1,126,564 - 5,036 110,958 168,665 - - - 95,000 - - - - - 104,345 - - 2,130,922 58,137 1,126,564 322,526 173,701 110,958 (1,688,287) 46,858 620,971 (37,911) (67,391) 426.,711 (189,241) (189,241) (1,877,528) 46,858 620,971 (37,911) (67,391) 426,711 5,204,651 287,899 3,605,622 (3,458) 402,526 3,508,167 S 3,327,123 $ 334,757 $ 4,226,593 S (41,369) $ 335.135 $ 3,934,878 (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, 2011 (continued) Revenues: Other taxes Intergovernmental Licenses, permits and fees 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, ending 100,719 - - - 739,873 - 385,515 - 1,200,000 - 100,719 739,873 1,200,000 385,515 (539,149) (1,082,399) (382,276) - (117,601) (117,601) (539,149) (1,200,000) (382,276) 539,149 8,400,000 382,276 $ - $ - S 7,200,000 $ 146 Special Revenue Supplemental Traff ic Newport Law Congestion Coast Prop 1B Enforcement Relief Annexation Transportation 100,016 197,344 - - 377 1,600 53,931 1,533 326 1,780 63,670 1,706 100,719 200,724 117,601 3,239 100,719 - - - 739,873 - 385,515 - 1,200,000 - 100,719 739,873 1,200,000 385,515 (539,149) (1,082,399) (382,276) - (117,601) (117,601) (539,149) (1,200,000) (382,276) 539,149 8,400,000 382,276 $ - $ - S 7,200,000 $ 146 Capital Projects 2,977,343 - 77,805 2,949,158 - 642,114 - 2,949,158 2,977,343 642,114 77,805 (540,014) 785,696 (639,570) (77,800) 4,218 5,557 189,240 8 5,557 189,240 (53,487) (53,487) (535,796) 791,253 (450,330) (77,800) (53,487) 2,983,438 4,870,221 450,330 100,000 53,487 $ 2,447,642 S 5,661.474 S - $ 22,200 $ - (continued) 147 Assessment CIOSA Bonita Canyon Contributions District Construction Development Fire Station 7 $ $ S $ 2,324,567 - - - - 32,490 30,663 1,204 5 - 36,157 34,710 1,340 - - 15,930 - - - - 3,697,666 - - - 2,409,144 3,763,039 2,544 5 - 2,977,343 - 77,805 2,949,158 - 642,114 - 2,949,158 2,977,343 642,114 77,805 (540,014) 785,696 (639,570) (77,800) 4,218 5,557 189,240 8 5,557 189,240 (53,487) (53,487) (535,796) 791,253 (450,330) (77,800) (53,487) 2,983,438 4,870,221 450,330 100,000 53,487 $ 2,447,642 S 5,661.474 S - $ 22,200 $ - (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, 2011 (continued) Revenues: Othertaxes Intergovernmental Licenses, permits and fees 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 Marine Mariners Oasis Misc Science Center Library Senior Center SAH Projects $ S S $ - - - 376,436 - - 1,601,994 - 83,879 - - - 1,685,873 376,436 56,972 3,313,468 - 3,313,468 56,972 (1,627,595) 319,464 5,266,982 5,266,982 3,639,387 319,464 (125,421) - (2,598,614) (367,847) $ (125,421) $ - S 1,040,773 $ (48,383) 148 Capital Projects Marina Sunset Police Lifequard Park Ridge Park Facility Headquarters $ $ $ S 347,156 311,622 - 347,156 311,622 - (347,156) (311,622) - (347,156) (311,622) - (1,178,259) (903,158) (2,175) (30,179) $ (1,525,415) $ (1,214,780) $ (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, 2011 (continued) Revenues: Othertaxes Intergovernmental Licenses, permits and fees 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) Permanent Funds 316,436 - 3,228,114 4,750 786,709 11,790,939 - - 1,295,000 104,345 4,750 17,521,543 72,740 12,985 (2,870,508) 22,624 5,488,621 - (520,329) 22,624 4,968,292 Net change in fund balances 72,740 Total 2,097,784 Fund balances, beginning Other 1,161,978 Ackerman Governmental Bay Dredging Donation Funds $ - $ - $ 455,229 - - 7,675,356 478,615 34,427 8,394 290,253 38,313 9,341 325,390 - - 1,617,924 - 3,808,268 72,740 17,735 14,651,035 316,436 - 3,228,114 4,750 786,709 11,790,939 - - 1,295,000 104,345 4,750 17,521,543 72,740 12,985 (2,870,508) 22,624 5,488,621 - (520,329) 22,624 4,968,292 Net change in fund balances 72,740 35,609 2,097,784 Fund balances, beginning 4,762,727 1,161,978 35,588,364 Fund balances, ending $ 4,835,467 $ 1.197.587 $ 37.686.148 150 CITY OF NEWPORT BEACH Budgetary Comparison Schedule State Gas Tax Special Revenue Fund For the Year Ended June 30, 2011 Variance with Final Budget Budgeted Amounts Positive Original Final Actual (Negative) Revenues: Intergovernmental $ 2,179,232 $ 2,179,232 $ 2,025,226 $ (154,006) Investment income 31,107 31,107 29,935 (1,172) Net increase in fair value of investments - - 33,313 33,313 Total revenues 2,210,339 2,210,339 2,088,474 (121,865) 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, ending 3,220,182 3,220,182 276,523 2,943,659 3,220,182 3,220,182 276,523 (2,943,659) (1,009,843) (1,009,843) 1,811,951 2,821,794 (160,000) (160,000) (160,000) (1,169,843) (1,169,843) 1,651,951 2,821,794 3,585,591 3,585,591 3,585,591 - $ 2,415,748 $ 2,415,748 5,237,542 $ 2,821.794 151 CITY OF NEWPORT BEACH Budgetary Comparison Schedule Asset Forfeiture Special Revenue Fund For the Year Ended June 30, 2011 Expenditures Public safety 39,060 39,060 Variance Net change in fund balance (35,371) (35,371) with Final Fund balance, beginning 539,365 539,365 Budget Fund balance, ending Budget Amounts $ 503,994 Positive Original Final Actual (Negative) Revenues: Intergovernmental $ - $ - $ 338,294 $ 338,294 Investment income 3,689 3,689 4,676 987 Net increase in fair value of investments - - 5,204 5,204 Total revenues 3,689 3,689 348,174 344,485 Expenditures Public safety 39,060 39,060 14,460 24,600 Net change in fund balance (35,371) (35,371) 333,714 369,085 Fund balance, beginning 539,365 539,365 539,365 - Fund balance, ending $ 503,994 $ 503,994 $ 873,079 $ 369,085 152 CITY OF NEWPORT BEACH Budgetary Comparison Schedule OTS DUI Grant Special Revenue Fund For the Year Ended June 30, 2011 Variance with Final Budget Budget Amounts Positive Original Final Actual (Negative) Revenues: Intergovernmental $ 112,604 $ 334,959 $ 227,507 $ (107,452) Total revenues 112,604 334,959 227,507 (107,452) Expenditures Public safety $ 72,325 $ 294,680 $ 187,935 106,745 Net change in fund balance 40,279 40,279 39,572 (707) Fund balance (deficit), beginning (39,952) (39,952) (39,952) - Fund balance (deficit), ending $ 327 $ 327 _L ___L3801 $ (707) 153 CITY OF NEWPORT BEACH Budgetary Comparison Schedule JAG Special Revenue Fund For the Year Ended June 30, 2011 154 Variance with Final Budget Budget Amounts Positive Original Final Actual (Negative) Revenues: Intergovernmental $ - $ 13,322 $ 13,322 $ - Total revenues - 13,322 13,322 Expenditures Public safety - 13,322 13,322 - Net change in fund balance - - - Fund balance, beginning - - - - Fund balance, ending $ - $ - $ 154 CITY OF NEWPORT BEACH Budgetary Comparison Schedule Circulation and Transportation Special Revenue Fund For the Year Ended June 30, 2011 155 Variance with Final Budget Budgeted Amounts Positive Original Final Actual (Negative) Revenues: Licenses, permits and fees $ 250,000 $ 250,000 $ 378,481 $ 128,481 Investment income 63,328 63,328 31,198 (32,130) Net increase in fair value of investments - - 32,956 32,956 Total revenues 313,328 313,328 442,635 129,307 Expenditures: Capital outlay 4,910,665 4,910,665 2,130,922 2,779,743 Excess (deficiency) of revenues over expenditures (4,597,337) (4,597,337) (1,688,287) 2,909,050 Other financing uses: Transfers out (80,000) (80,000) (189,241) (109,241) Net change in fund balance (4,677,337) (4,677,337) (1,877,528) 2,799,809 Fund balance, beginning 5,204,651 5,204,651 5,204,651 - Fund balance, ending $ 527,314 $ 527,314 $ 3,327,123 $ 2,799,809 155 CITY OF NEWPORT BEACH Budgetary Comparison Schedule Building Excise Tax Special Revenue Fund For the Year Ended June 30, 2011 156 Variance with Final Budget Budgeted Amounts Positive Original Final Actual (Negative) Revenues: Licenses, permits and fees $ - $ - $ 100,134 $ 100,134 Investment income 4,013 4,013 2,300 (1,713) Net increase in fair value of investments - - 2,561 2,561 Total revenues 4,013 4,013 104,995 100,982 Expenditures: Capital outlay 54,600 54,600 58,137 (3,537) Net change in fund balance (50,587) (50,587) 46,858 97,445 Fund balance, beginning 287,899 287,899 287,899 - Fund balance, ending $ 237,312 $ 237,312 $ 334,757 $ 97,445 156 CITY OF NEWPORT BEACH Budgetary Comparison Schedule Combined Transportation Special Revenue Fund For the Year Ended June 30, 2011 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 157 Variance with Final Budget Budgeted Amounts Positive Original Final Actual (Negative) $ 5,059,457 5,059,457 $ 1,687,374 $ (3,372,083) 45,942 45,942 28,474 (17,468) - - 31,687 31,687 5,105,399 5,105,399 1,747,535 (3,357,864) 3,253,989 3,253,989 1,126564 2,127,425 1,851,410 1,851,410 620,971 (1,230,439) 3,605,622 3,605,622 3,605,622 $ 5,457,032 $ 5,457,032 $ 4,226,593 $ (1,230,439) 157 CITY OF NEWPORT BEACH Budgetary Comparison Schedule Community Development Block Grant Special Revenue Fund For the Year Ended June 30, 2011 Revenues: Intergovernmental Total revenues Expenditures: Community development Debt service: Principal Interest and fiscal charges Total expenditures Net change in fund balance Fund balance (deficit), beginning Fund balance (deficit), ending 158 Variance with Final Budget Budgeted Amounts Positive Original Final Actual (Negative) $ 391,089 $ 391,089 $ 284,615 $ (106,474) 391,089 391,089 284,615 (106,474) 178,367 178,367 123,181 55,186 95,000 95,000 95,000 - 104,345 104,345 104,345 - 377,712 377,712 322,526 55,186 13,377 13,377 (37,911) (51,288) (3,458) (3,458) (3,458) - $ 9,919 $ 9,919 $ (41,369) $ (51,288) 158 CITY OF NEWPORT BEACH Budgetary Comparison Schedule Air Quality Management District Special Revenue Fund For the Year Ended June 30, 2011 Expenditures Public works 14,235 14,235 5,036 Variance Capital outlay - 203,976 168,665 with Final Total expenditures 14,235 218,211 173,701 Budget Net change in fund balance Budgeted Amounts (67,391) Positive Fund balance, beginning Original Final Actual (Negative) Revenues: $ 440,821 $ 236,845 $335,135 $ 98,290 Intergovernmental $ 48,830 $ 48,830 $100,655 $ 51,825 Investment income 3,700 3,700 2,676 (1,024) Net increase in fair value of investments - - 2,979 2,979 Total revenues 52,530 52,530 106,310 53,780 Expenditures Public works 14,235 14,235 5,036 9,199 Capital outlay - 203,976 168,665 35,311 Total expenditures 14,235 218,211 173,701 44,510 Net change in fund balance 38,295 (165,681) (67,391) 98,290 Fund balance, beginning 402,526 402,526 402,526 - Fund balance, ending $ 440,821 $ 236,845 $335,135 $ 98,290 159 CITY OF NEWPORT BEACH Budgetary Comparison Schedule Environmental Liability Special Revenue Fund For the Year Ended June 30, 2011 Expenditures Public works $ 169,880 $ 184,708 $ 110,958 Variance Net change in fund balance 549,554 534,726 426,711 with Final Fund balance, beginning 3,508,167 3,508,167 3,508,167 Budget Fund balance, ending Budgeted Amounts $ 3,934,878 Positive Original Final Actual (Negative) Revenues: Taxes $ 661,127 $ 661,127 $ 455,229 $ (205,898) Investment income 58,307 58,307 26,370 (31,937) Net increase in fair value of investments - - 29,347 29,347 Other Revenue - - 26,723 26,723 Total revenues 719,434 719,434 537,669 (181,765) Expenditures Public works $ 169,880 $ 184,708 $ 110,958 $ 73,750 Net change in fund balance 549,554 534,726 426,711 (108,015) Fund balance, beginning 3,508,167 3,508,167 3,508,167 - Fund balance, ending $ 4,057,721 $ 4,042,893 $ 3,934,878 $ (108,015) 160 CITY OF NEWPORT BEACH Budgetary Comparison Schedule Supplemental Law Enforcement Special Revenue Fund For the Year Ended June 30, 2011 Revenues: Intergovernmental Investment income Net decrease in fair value of investments 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) $ 80,000 $ 80,000 $ 100,016 $ 20,016 150 150 377 227 80,150 80,150 100,719 20,569 80,150 80,150 100,719 (20,569) 161 CITY OF NEWPORT BEACH Budgetary Comparison Schedule Traffic Congestion Special Revenue Fund For the Year Ended June 30, 2011 162 Variance with Final Budget Budgeted Amounts Positive Original Final Actual (Negative) Revenues: Intergovernmental $ 842,019 $ 842,019 $ 197,344 $ (644,675) Investment income 2,000 2,000 1,600 (400) Net increase in fair value of investments - - 1,780 1,780 Total revenues 844,019 844,019 200,724 (643,295) Expenditures: Capital outlay 814,613 814,613 739,873 74,740 Net change in fund balance 29,406 29,406 (539,149) (568,555) Fund balance, beginning 539,149 539,149 539,149 - Fund balance, ending $ 568,555 $ 568,555 $ - $ (568,555) 162 Revenues Investment income Net increase in fair value of investments Total revenues Expenditures Debt service: Principal Total expenditures Excess (deficiency) of revenues over expenditures Other financing uses Transfers out Net change in fund balance Fund balance, beginning Fund balance, ending CITY OF NEWPORT BEACH Newport Coast Annexation Budgetary Comparison Statement For the Year Ended June 30, 2011 163 Variance with Final Budget Budgeted Amounts Positive Original Final Actual (Negative) $ - $ - $ 53,931 $ 53,931 - - 63,670 63,670 - - 117,601 117,601 1,200,000 1,200,000 1,200,000 - 1,200,000 1,200,000 1,200,000 - (1,200,000) (1,200,000) (1,082,399) 117,601 (1,400,000) (1,400,000) (117,601) 1,282,399 (2,600,000) (2,600,000) (1,200,000) 1,400,000 8,400,000 8,400,000 8,400,000 - $ 5,800,000 $ 5,800,000 $ 7,200,000 $ 1,400,000 163 CITY OF NEWPORT BEACH Budgetary Comparison Schedule Proposition 1 B Transportation Special Revenue Fund For the Year Ended June 30, 2011 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 $ 93,953 $ 93,953 $ 164 $ (93,953) Variance with Final Budget Budgeted Amounts Positive Original Final Actual (Negative) $ 19,846 S 19,846 $ 1,533 $ (18,313) - - 1,706 1,706 19,846 19,846 3,239 (16,607) 308,169 308,169 385,515 (77,346) (288,323) (288,323) (382,276) (93,953) 382,276 382,276 382,276 - $ 93,953 $ 93,953 $ 164 $ (93,953) CITY OF NEWPORT BEACH Contributions Fund Budgetary Comparison Statement For the Year Ended June 30, 2011 Expenditures: Capital outlay 4,127,942 5,664,562 2,949,158 2,715,404 Excess (deficiency) of revenues over expenditures 1,706,676 (2,332,972) (540,014) 1,792,958 Other financing sources (uses): Transfers in - - 4,218 4,218 Variance 1,706,676 (2,332,972) (535,796) 1,797,176 Fund balance, beginning 2,983,438 2,983,438 2,983,438 - Fund balance, ending with Final Budget Budgeted Amounts Positive Original Final Actual (Negative) Revenues: Intergovernmental $ 4,271,290 $ 1,771,290 $2,324,567 $ 553,277 Investment income 63,328 - 32,490 32,490 Net increase in fair value of investments - - 36,157 36,157 Donations 1,500,000 1,560,300 15,930 (1,544,370) Total revenues 5,834,618 3,331,590 2,409,144 (922,446) Expenditures: Capital outlay 4,127,942 5,664,562 2,949,158 2,715,404 Excess (deficiency) of revenues over expenditures 1,706,676 (2,332,972) (540,014) 1,792,958 Other financing sources (uses): Transfers in - - 4,218 4,218 Net change in fund balance 1,706,676 (2,332,972) (535,796) 1,797,176 Fund balance, beginning 2,983,438 2,983,438 2,983,438 - Fund balance, ending $ 4,690,114 $ 650,466 $ 2,447,642 $ 1,797,176 165 This page left blank intentionally. 166 ANCI 167 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. I[-7 Assets Current assets: Cash and investments Receivables: Accounts Inventories Prepaid items Total current assets Non - current assets: Capital assets: Equipment Less accumulated depreciation Total capital assets (net of accumulated depreciation) Total assets Liabilities Current liabilities: Accounts payable and accrued liabilities Accrued payroll Due to general fund Workers' compensation - current General liability - current Compensated absences - current Early retirement incentive program - current Total current liabilities Non - current liabilities: 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 CITY OF NEWPORT BEACH All Internal Service Funds Combining Statement of Net Assets June 30, 2011 Total Insurance Compensated Retiree Equipment Internal Reserve Absence Insurance Maintenance Service Funds $ 21,562,899 $ 2,286,093 $ - $ 18,582,415 $ 42,431,407 46,568 - 1,285,532 75,554 1,407,654 - - - 304,986 304,986 991,565 266,173 1,257,738 22,601,032 2,286,093 1,551,705 18,962,955 45,401,785 23,482,455 23,482,455 (16,545,410) (16,545,410) 6,937,045 6,937,045 22,601,032 2,286,093 1,551,705 25,900,000 52,338,830 $ 248,264 $ 2,998 $ - $ 196,556 - - 43,604 1,421,498 3,284,036 - - - 1,079,277 - - - - 1,969,425 - - - 960,396 - - A.1n677 Oo40 o10 1A01 ADO OAn 1cn $ 447,818 43,604 1,421,498 3,284,036 1,079,277 1,969,425 960,396 OD. A.A 11,335,964 - - - 11,335,964 2,878,854 - - - 2,878,854 - 6,936,171 - - 6,936,171 - 1,920,792 - - 1,920,792 8,484,000 8,484,000 14,214,818 8,856,963 8,484,000 - 31,555,781 18,826,395 11,789,782 9,905,498 240,160 40,761,835 - - - 6,937,045 6,937,045 3,774,637 (9,503,689) (8,353,793) 18,722,795 4,639,950 $ 3,774,637 $ (9,503,689) $ (8,353,793) $ 25,659,840 $ 11,576,995 169 CITY OF NEWPORT BEACH Internal Service Funds Combining Statement of Revenues, Expenses and Changes in Fund Net Assets For the Year Ended June 30, 2011 Operating income (loss) Nonoperating revenues (expenses): Investment income Net Increase in fair value of investments Gain on sale of capital assets Total nonoperating revenues Income (loss) before transfers Transfers in Transfer out Change in net assets Net assets (accumulated deficit), beginning Net assets, (accumulated deficit), ending (1,001,606) (227,579) (2,104,544) 1,831,344 (1,502,385) 162,047 9,046 - 128,073 180,337 10,068 - Total - Insurance Compensated Retiree Equipment Internal (659,222) Reserve Absence Insurance Maintenance Service Funds Operating revenues: (1,957,627) 1,089,940 (2,104,544) 2,143,601 Charges for services $ 5,909,786 $ 2,320,306 $ 2,128,000 $ 5,819,437 $ 16,177,529 Retiree reimbursements - - 1,298,064 - 1,298,064 Employee contributions - - 272,746 - 272,746 Other 191,076 46,907 47,254 285,237 Total operating revenues 6,100,862 2,320,306 3,745,717 5,866,691 18,033,576 Operating expenses: Salaries and wages - - - 1,366,397 1,366,397 Depreciation - - - 1,820,267 1,820,267 Professional services - - - 22,749 22,749 Maintenance and supplies - - - 358,010 358,010 Fleet parts and supplies - - - 467,924 467,924 Workers' compensation 5,229,876 - - - 5,229,876 Claims and judgments 1,872,592 - - - 1,872,592 Compensated absences - 2,155,738 - - 2,155,738 Early Retirement Incentive Program - 392,147 - - 392,147 OPEB ARC -Cash subsidy - - 2,128,000 - 2,128,000 OPEB ARC- Implied subsidy - - 2,502,000 - 2,502,000 Other - - 1,220,261 - 1,220,261 Total operating expenses 7,102,468 2,547,885 5,850,261 4,035,347 19,535,961 Operating income (loss) Nonoperating revenues (expenses): Investment income Net Increase in fair value of investments Gain on sale of capital assets Total nonoperating revenues Income (loss) before transfers Transfers in Transfer out Change in net assets Net assets (accumulated deficit), beginning Net assets, (accumulated deficit), ending (1,001,606) (227,579) (2,104,544) 1,831,344 (1,502,385) 162,047 9,046 - 128,073 180,337 10,068 - 142,530 - - 41,654 342,384 19,114 - 312,257 (659,222) (208,465) (2,104,544) 2,143,601 - 1,298,405 - - (1,298,405) (1,957,627) 1,089,940 (2,104,544) 2,143,601 5,732,264 (10,593,629) (6,249,249) 23,516,239 $ 3,774,637 $ (9,503,689) $ (8,353,793) $ 25,659,840 170 299,166 332,935 41,654 673,755 (828,630) 1,298,405 (1,298,405) (828,630) 12,405,625 $ 11,576,995 CITY OF NEWPORT BEACH Combining Statement of Cash Flows - Internal Service Funds For the Year Ended June 30, 2011 Total Insurance Compensated Retiree Equipment Internal Reserve Absences Insurance Maintenance Service Funds Cash flows from operating activities Receipts from user departments $ 6,184,353 2,332,422 $ 3,426,064 $ 5,747,298 $ 17,690,137 Payments to employees (2,931,876) (3,204,882) - (1,366,701) (7,503,459) Payments to suppliers (2,568,154) - (4,346,820) (818,948) (7,733,922) Other operating cash receipts 319,653 47,254 366,907 Net cash provided (used) for operating activities 684,323 (872,460) (601,103) 3,608,903 2,819,663 (increase) in inventories - - - (49,556) Cash flows from noncapital financing activities: (Increase) decrease in prepaid items (913,565) - 27,157 - Cash received from other funds - 1,298,405 601,103 - 1,899,508 Cash paid to other funds (1,298,405) - - - (1,298,405) Net cash provided (used)by noncapital financing (1.298.405) 1.298.405 601,103 - 601.103 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 342,384 19,114 342,384 19,114 (2,564,020) (2,564,020) 198,466 198,466 (2,365,554) (2,365,554) 270,603 632,101 270,603 632,101 (271,698) 445,059 - 1,513,952 1,687,313 21,834,597 1,841,034 17,068,463 40,744,094 $ 21,562,899 $ 2,286,093 $ $ 18,582,415 $ 42,431,407 Operating income (loss) $ (1,001,606) $ (227,579) $ (2,104,544) $ 1,831,344 $ (1,502,385) Adjustments to reconcile operating income (loss) to net cash provided by operating activities: Depreciation - - - 1,820,267 1,820,267 Changes in operating assets and liabilities: (Increase) decrease in accounts receivable 83,491 12,116 (535,716) (72,139) (512,248) (increase) in inventories - - - (49,556) (49,556) (Increase) decrease in prepaid items (913,565) - 27,157 - (886,408) Increase in accounts payable and accrued payroll 80,263 1,535 - 78,987 160,785 Increase in workers' compensation 2,298,000 - - - 2,298,000 Increase in general liability 137,740 - - - 137,740 (Decrease) in compensated absences - (90,283) - - (90,283) (Decrease) in early retirement incentive program - (568,249) - - (568,249) Increase in net OPEB obligation 2,012,000 2,012,000 Total adjustments 1,685,929 (644,881) 1,503,441 1,777,559 4,322,048 Net cash provided (used) by operating activities $ 684.323 _L _&72_460i $ (601.1031 $ 3.608.903 $ 2.819.663 Non -cash investing, capital, and financing activities: Net increase in fair value of investments 180,337 10,068 - 142,530 332,935 Gain on sale of capital assets 41,654 41,654 Total of non -cash activities $ 180,337 $ 10,068 $ $ 184,184 $ 374,589 171 This page left blank intentionally. 172 FINANCIAL SECTION 5L LEMENTARY INFORMATION FIDUCIARN FU NIDS 173 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, 2011 Liabilities Due to bondholders $ 7,406,633 $ - $ - $ 7,406,633 Due to others - 251,437 180,995 432,432 Due to ILJAOC - - 2,018,517 2,018,517 Total liabilities $ 7,406,633 $ 251,437 $ 2,199,512 $ 9,857,582 175 Special Business Assessment District Improvement ILJAOC Assets Fund Fund Fund Totals Cash and investments $ 3,009,278 $ 251,437 $ 2,129,166 $ 5,389,881 Cash with fiscal agent 4,397,355 - - 4,397,355 Prepaid items - 950 950 Intergovernmental receivable - - 69,396 69,396 Total assets $ 7,406,633 $ 251,437 $ 2,199,512 $ 9,857,582 Liabilities Due to bondholders $ 7,406,633 $ - $ - $ 7,406,633 Due to others - 251,437 180,995 432,432 Due to ILJAOC - - 2,018,517 2,018,517 Total liabilities $ 7,406,633 $ 251,437 $ 2,199,512 $ 9,857,582 175 CITY OF NEWPORT BEACH Statement of Changes in Fiduciary Net Assets All Agency Funds For the Year Ended June 30, 2011 Business Improvement District: Assets Cash and investments $ 198,047 $ 1,797,813 $ (1,744,423) $ 251,437 Liabilities Due to others $ 198,047 $ 1,797,813 $ (1,744,423) $ 251,437 ILJAOC: Balance $ 6,188,000 $ (6,082,614) Balance Due to others June 30, 2010 Additions Deductions June 30, 2011 Special Assessment: 1,546,707 1,011,411 (539,601) 2,018,517 Assets Cash and investments $ 1,489,262 $ Cash and investments $ 2,682,766 $ 4,071,591 $ (3,745,079) $ 3,009,278 Cash with fiscal agent 4,618,481 2,116,409 (2,337,535) 4,397,355 Total Assets $ 7,301,247 $ 6,188,000 _L ±,082,614i $ 7,406,633 Liabilities 69,396 (88,344) 69,396 Due to bondholders $ 7,301,247 $ 6,188,000 $ (6,082,614) $ 7,406,633 Business Improvement District: Assets Cash and investments $ 198,047 $ 1,797,813 $ (1,744,423) $ 251,437 Liabilities Due to others $ 198,047 $ 1,797,813 $ (1,744,423) $ 251,437 ILJAOC: $ 7,301,247 $ 6,188,000 $ (6,082,614) $ 7,406,633 Due to others 304,031 1,978,808 Assets 432,432 Due to ILJAOC 1,546,707 1,011,411 (539,601) 2,018,517 Total Liabilities Cash and investments $ 1,489,262 $ 922,763 $ (282,859) $ 2,129,166 Prepaid items 75,085 950 (75,085) 950 Intergovernmental receivable 88,344 69,396 (88,344) 69,396 Total Assets $ 1,652,691 $ 993,109 $ (446,288) $ 2,199,512 Liabilities Due to others $ 105,984 $ 180,995 $ (105,984) $ 180,995 Due to ILJAOC 1,546,707 1,011,411 (539,601) 2,018,517 Total Liabilitites $ 1,652,691 $ 1,192,406 $ (645,585) $ 2,199,512 Totals - All Agency Funds: Assets Cash and investments $ 4,370,075 $ 6,792,167 $ (5,772,361) $ 5,389,881 Cash with fiscal agent 4,618,481 2,116,409 (2,337,535) 4,397,355 Prepaid items 75,085 950 (75,085) 950 Intergovernmental receivable 88,344 69,396 (88,344) 69,396 Total Assets $ 9,151,985 $ 8,978,922 $ (8,273,325) $ 9,857,582 Liabilities Due to bondholders $ 7,301,247 $ 6,188,000 $ (6,082,614) $ 7,406,633 Due to others 304,031 1,978,808 (1,850,407) 432,432 Due to ILJAOC 1,546,707 1,011,411 (539,601) 2,018,517 Total Liabilities $ 9,151,985 $ 9,178,219 $ (8,472,622) $ 9,857,582 176 �4La40�4�C� 177 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 Ass &e by Componem Last Ten Fiscal Years (seCNDI basis Dt accpunfin) Fiscal Year 2002 2003 2004 2005' 2006 2007 2008 2009 2010 2011 Governmental aMvOea: Invested in capllel a¢aem, Investetl In capital assets, net Of relsled debt $1,391,677,813 $ 1,412,372,465 $1512,651,096 $ 1,915,348;803 $ 2,005543851 $ 2,027,026,053 $ 2.050,925,370 $ 2061,635,642 5 2, OW, 912,221 $ 2,087.403,003. Rsibeed 30689,056 37,650,692 45,494,082 54,285,743 51,901,103 35,017.831 40,988,923 40.212)47 34,236,929 63,940,282 Unraetrlged 47.095.788 49.322,203. 46,772,913 61,89,9513 %562,229 75.989,189 87.602.996 98,276381 88049,492 67,500,916 TotalgwernmemalaN0tle, $1.471.463555 $ 1.499.M.440 S 1506918091 $ 2.031.529.582 $ 2114.206.9833 $ 2.138033.053 $ 2.b9.ib.289 $ 2202124.P0 $ 2205.199.642 $ 2.218.644.201 Business -1,1 actNtlies: Invested in capital asses, net of related debt $ 87470,314 $ 91,912205 3 94.206,704 5 99641,411 S 10,602,266 S 107,231.308 $ 107.313.603 $ 108,510,361 5 108,449,847 $ 108,976,459 Reso-lcted - - - - - - - - - - Unrestricted 26123,500 24,227,579 21,493,528 19,665,535 16,907,367 15,808,357 13,639,027 11435,306 10.172912 9442,988 TMal businesstpe advhles S 113,593,814 3 116139784 $ 115700232 $ 119306946 $ 121509633 3 123039685 $ 120952630 $ 119945667 $ 118623759 5 116419447 Pnmarygovemment. Investetl In capital assets, net of related dell $t d79,146,127 $ 1506,284,670 $1606857,800 $ 2.014,990,294 $ 2110245,917 $ 2,134,257,361 $ 2,158,236.973 $ 2,170,146003 $ 2193,362,Ofi8 5 2,196379,462 RaNicled 39669,956 37,606,692 65,494,092 56,285,743 51,901,103 35.017.831 40,988.923 6,212)47 36.236.929 63,960,282 Unresdlcled 67$19,266 73,569,862 66,266,441 01,560,491 73,5695% 91)97.526 101,442,023 107,711,687 96,222404 76,943,906 Taal primary 9overnmart $1,56505],369 $ 1615.465,226 $1 ]2)618323 $ 2.150,636,526 $ 2235.716616 $ 2 2 81 47 2 716 $ 2,300,669919 $ 2322,070437 $ 2323622401 6 2337,263646. r 2005 data vadesimm trend because 0f ina as tl r pitel assets related W PCH RNlrquuhnrent tae Cl(ya /Newport 6eacrt lmplemenled GA$B 34 /o /fAe fiazal yeas ended June 30, 2002 179 CITY OF NEWPORT BEACH Changes in Net Means IeR Ten Flaul .- tactual balls or accounting) Pmgram banal Year Ga,.rn. , .[boll. 4002 2003 2004 8006 2006 2007 2008 2009 2010 1011 Expenses: Gosmmenel .divan. 2,270,082 3,000,162 2,109,141 2.412,789 2.623,272 2944100 31051 2543.880 2909,603 2,722.527 .... gsacrmenl $ 12,992,860 $ 10,]99630 5 11,]283]9 $ 11,378.609 $ 14,609.821 $ 14,166,160 $ 15,559.661 $ 16,4305d $ 7/.482705 $ 15,857.307 Public salary 41,168,918 56521,811 58,118,533 63,214.291 61,189,121 89]95,386 75,821,083 79301," 79.402500 78,1.i0W Public woMa 30,320518 32,069038 3912]032 40359.911 331370,359 39,119844 42631,401 -038004. 55.445321 4..1,33 C rnmunlly development 4.471,397 5.182,215 6,229185 6431.086 0,151,925 9,020868 10052071 10,203528 101088.454 8631.525 Community services 11,014,006 10.404,205 14,741504 13073,215 13803 )55 233$,0.53 19/46588 20,589094 11.282.351 17272.374 Interest - longterm Eabt 511102 813944 .21. 500,009 4795. 523401 5325- 4g7 237 312502 5,010981 T.. g-- m.n.1...b. ],991,059 0750,585 10,891,329 17,489934 12,712593 18,172,823 15,779,951 13,404298 15,81],81] 10710,207 expenses 106,314.019 116.270.983 129.248259 140971.881 138.610516 155.989.720 163741.168 172.642,387 1]9.611.945 165,315.506 Bueinees ".activities: 1,582458 4.070720 674815 20,205,940 69473,891 s 6,904,716 31037.915 24,633,716 12,350,100 11,101.239 Water 14.1706.514 14.540036 11,105034 14467.233 16228213 17,399,900 20,148,517 18,210789 18.]32351 19,824.9% Writes. 21586833 3:115,136 3,363,954 2740.988 3,143,829 3.259,637 3; tn.592 3,153,012 3.5%034 3936949 Tolsl buainesa -type nice. . expenses 17,396347 17.656172 211,548.988 17 M141 19,371842 .,659,737 23,572.109 21,963831 22.331,306 23,761.945 Total primary govenment 16665.724 16.489,284 18,I3001U 17 fun.196 11,923523 17.918,968 17,270.511 16,966621 17Al2,SM 20,097327 .pave. 12$110,220 133,9.,155 149,]9],247 158.1.302 151982350 178,849,457 107,313.2]] 194000,210 .1 soot 0 189,071451 Pmgram Ga,.rn. , .[boll. Charges br ismaises'. Gain.[ government 2,270,082 3,000,162 2,109,141 2.412,789 2.623,272 2944100 31051 2543.880 2909,603 2,722.527 Public aetety 10,549,410 11803,594 15,739912 162$,499 13,669,509 15.]56,32] 16$9.400 14,157.266 15.006,601 15,636314 Public socks 5,436.948 5.00Q$8 5,401494 6.031.248 5,133728 EAU 167 11,016,118 5,6321871 0,392,8]] 21938,315 Community 0e.chopmanl 3,236A83 4.4229$ 5,196276 5129,658 S,BS],.9 Falls 38 5591.9 4,952,534 4,006]45 5599]3] Community a-- 2 ,533,099 8,039,229 31346588 3952,982 9,433218 9.054.504 9,.3,513 CC523b 8.673,K5 8,952,810 Interest on long -term Debt Opa'a0ng Gretna anal Con4lbWOna: ],991,059 0750,585 10,891,329 17,489934 12,712593 18,172,823 15,779,951 13,404298 15,81],81] 10710,207 Capital Grants anal Conlubs ions: 1,582458 4.070720 674815 20,205,940 69473,891 s 6,904,716 31037.915 24,633,716 12,350,100 11,101.239 10.1 gmarnmentel atll,teea pmgmm revenues 33,480.339 42.58Q217 43,]29.503 71,418,012 110,]]3565 61.906,473 86,939 ON 74,776083 BE 617,008 57.721116 Burin - typeaccatiss Water 16665.724 16.489,284 18,I3001U 17 fun.196 11,923523 17.918,968 17,270.511 16,966621 17Al2,SM 20,097327 Waelenater 2,9411 2.768,941 2,802.]93 2,907.672 3,311,089 3.535050 354,780 3,479565 3.3643,327 3348.433 .1 hancie ut', e.vbeat pmgmm revenues 19,611,528 19.24,225 21,312,70 20,4M&M 21,234.612 21 46i,018 20,823291 .,446,185 A W,961 23445,660 Tooll pmnay govenmet pmgmm .,mule 53,991987 01839,442 ft5,.2FB 91951 B08 140,9001]9 93450,491 19],]82,3]9 95,.3,079 98,.7.969 81,188,976 Nei never- hoceneee): GOVemmamal atlielass (72,934,540) (73,090]08) (93519,756) (89493,049) (19,839950) (93,99324]) (18,.20.) (91075.584) (113900,93]) (107,5942.) Business -type acirvi0es 2.216.181 1,603853 763,W5 3.265727 1,072770 794,281 (2740,018) 0,517.60.5) (1,550424) (316,285) Total na mvenues leapensss) $ (70,618.34) 3 (72087,713) 5 (84)54,961) $ (66,22813F) 5 (1],974,180) 5 (93190.969) $ (79,550,098) 5 (99.307,149) S (115.351,361) $ 1101910,5751 1 2005 data varies from hand bxause of Incressetl metal assets neatest to PCH Relinquishment s2.0 dale ulna. Iron trend has'.. of I ncreased capital...... too ma., to bra l 51. Heinousness ,Nauporr Coaal CummuMry Cantor, and Flre Stalon Y7 2W0 data variss from trend because of Increased capital saeala related to Santa Ana Heights Assassins lne CRy of sass. (Beach mpbmantetl GAS934 I., ee (scely.a/ on. June 30, 2.2 180 CITY OF NEWPORT BEACH Changes in Net Asseas tart Ten Raul .- laccmal Wsls of accounting) Primary Revenue Sour 556x9,4. s"W" qm"v Swcco.0 $580380. 940.4..400] _ 530.400,.0 W5 520A.o oP..p kVk .1 ID03 IOm 1005 ]0M ]M] LNS 3010 i 181 FIUAI Year 2102 MI 2004 8006 2006 2007 8008 2009 2010 1011 General revenues and other change In nel .eels: Gmernmental actMfe: Tams: Ftpaty laxas $ 33,583,659 $ 39,474664 $ 43831029 $ 46303388 $ 57,888545 $ 8300.405] $ 8],388838 $ 70.126.. 1; 719898. $ 71830,345 Sales tax 18.996.571 20.133,598 21,843884 189".828 2146555] 21.008118 2185.242 17,9259% 17.440,736 18,45.181 Bales term -1le - - - 5339.027 5,720020 7.3x8253 8017539 7,503113 a,539,9411 6211.268 Tranaenl...,a -, lo. 7,898655 8,05286 8,045132 9215.882 9632729 121059608 12,]51518 11176956 1101.4,710 13082,451 Busmgs BCeee 2,470,857 2.038845 2,830127 3tgN165 3.848361 3.770,172 4,119,100 4,]]3642 4.0266H 4MAU Fneact tams 2736641 2.486504 2,786519 3,029,476 3,16255 4,613,932 3853,119 3,9611134 3,715,946 3,]30.819 Molar vchle.11cenae lea 0"CM 3,970,103 3824917 8395860 300,]51 391559 3Mh. 358,23] 314957 4.,042 Molar vats. ca.e 711 Y. 742 957 O.laze 311,020 314,]25 266642 248534 508331 515,128 373,350 230115 201,893 226,257 Im®tmsnj Iowan. 2,171474 2Ht451 584,415 1.209,074 1,939,941 3.175,502 3655,314 1.7648" 765,055 368,081 NtlIn- -In lair value W vestinents 1083913 310,606 (360596) (250,125) (715,645) (545,533) 506.485 1,096,848 707,200 369135 Can an .1. 0 assts 160236 130.954 Other 12.570 1,294,628 214,534 761.111 ]]6907 2.232,370 1,858883 1.862,9" 1.020,272 2.61 Property income 3. "1.556 - - - - - - - - - BhamIXjointr.ntur.ael 2191.582 3MI18 140,819 100:325 (513,791) 253,207 Cap'nsl wntn.-. 036;200.102 17.038792 102,713421 213]]79.060 Sale Ma —,-111 250.,0. - - - - - - Tanshrs 33,2]7 57783 40000 Total ge— nnente1 isciviti.s 94124],399 893.,148 104384439 308,52,then 104254,52 11],904553 124.688.316 120,272,985 116,874,809 121299,049 Beencent activities: InvesOnenl Income 838,]]9 505,619 203 Cat 424.157 &9012 70,936 Call 374.80 120399 52.096 N.I roves. In lair value of Inver . 428.199 "W'697 (07,078) (87.921) (1691095) (67,185) 72913 135]89 184117 hCh, Property income 27.100 29,800 29,20 261970 G..l wntribNlons - - 215,331 - - - - Inalers - (332]]) E7,7.) (480.) Total lusinesslype actil 1,344.0]0 942,919 302.791 363206 339917 735.751 061.783 610682 2201516 111,9]3 Total primary gpvernment 942, On 477 1.,246,.7 186.66].229 308.915,569 104.594,269 118.640,304 126.348..9 1M783.667 117.103326 121,351813 Changan m rid.eats GoVPa., ectivgle 888,412,59 25 Yin Inc 108845,892 239.8514 84417,402 23,911,300 4754238 22,4074B1 3,0736]2 1384 A. Businessrype activities 3,550159 2,545,972 1,066696 3618.933 2(102,57 1530,032 (2067.036) (1,006963) (1321,908) (204.312) Total an, 9ovanment is 13]19]3,110 $. 28 J.5 54 $ 1019122]. $ 242887447 $ .5,828.9 $ 25441,35 $ 45,]9],201 $ 21,400,518 $ 1,751.54 $ 13,441247 Primary Revenue Sour 556x9,4. s"W" qm"v Swcco.0 $580380. 940.4..400] _ 530.400,.0 W5 520A.o oP..p kVk .1 ID03 IOm 1005 ]0M ]M] LNS 3010 i 181 CITY OF NEITPORT BEACH Fund Balances of Governmental Funds Last Ten Fiscal Years (modified accrual basis of accounting) 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 General fund: Nonspandabse $ 1,031,742 Reslncur] 1,681,333 Committed 27,619,802 Assigned 11,065,835 llnassignea 20,570,033 Total general fund 62 obwas ° Ad other governmental funds: 6,W7,0g4 Nanepandable $ 5,098,234 Restnula] 36,4451842 CommXted 115,923344 Assigned 5,633,558 Unassigned (? 980,032) Total all other governmental bonds S 160 ° Tote[ all governsta lfunds $ 223.601.721 Fiscal Year 11 44.444.380 2002 2033 2004 3005 2036 2007 2008 2(109 2010 General fund. Reserved $ 3,165,787 4,3913,418 6,678,579 4,573,195 9,374,722 7 ,233,703 6,W7,0g4 5,907.205 5,472481 unreserved 25,171,551 31,929,366 37,765,801 49.814,197 45,212,339 62,679,499 72,252,035 73,703,759 76,685,385 Tcil aerial fund 28.337.338 $ 36.322.784 11 44.444.380 $ 54.487,395 $ 54:507.061 $ 69.913.202 $ 79,05 &139 $ 79,610.964 5 82,157,866 All Other governmental fund. Reserved $ 11,964,833 $ 5,174,296 $ 4,889,031 $13,000,882 $ 36,134,686 $11,168,955 $12080.3&5 $ 8,831,229 $ 9,363,673 unreserved, rePOrtad In Financial revenue funds 19,302,039 33.042,712 34,191,332 28,391,109 7,533654 18.917,308 21670,956 23,849191 27,973,528 CapXal projects foods 7,120,032 - 6,076,969 2,077,124 (3,258,201) 3,271,954 7,671,450 (10,571,278) Permanent funds 15 205,506 404,771 660029 934,648 1.170609 1,294,924 Total ell other govsrnmantel funds $ 30.386,919 $ 30.217,008 $ 39.003363 $ 45.754,466 $ 46.150,235 S 27,48801 $ 3].93),923 $ 41,521,079 $ 28.06404] Toil all governmental funds $66724257 74539792 83527743 100241031 100737 298 97401283 116997462 121132843 110218713 The City of Neopod Beach implemented Governmental Accounting Standards Boom Statement No 54(GASB My for the Faces year ending June 30, 2011 Information poor as me Imdementaten of GA58541a not available. 2011 gereral fund date varies from trend due to $31.3 million transfer From Ganerel Fund to Facilities Replacement Fund. ° 2011 older governmental funds data vanes bond trend due to issuance of Civic Center COPS. 4laapoo,wo Stw,mmm,mmm $14ommm,wo Saommm,mmm $100oo0,Wo $BO,mmm,mW $60,mm0,OM $4o,mmm,aW $2o,mm,mW 5- IlTstal all itnevecoonmental Funds ffiyl CITY OF NEWPORT BEACH Changes In Fund Balances of Governmental Funds Last Ten Fiscal Years (modified accrual basis of accounting) Rdjusled in Indude Proper, Tax -in lieu pf VLF wM1ich was previously re W. as'mlergovernno -tal revenue 183 Fall Year 2002 2003 2004 2005 20M 2007 2008 2009 2010 2011 Revenues: Taw $ 65,878,471 $ 72,866039 $ 79,874,751 $ 91,606,863 ' $102,737,810 $112;230,054 $118,758,201 $115,711,574 $113009443 $ 117,983]65 Infor9wemmenlal 26,227,740 10,399,792 16108023 19,513,589 14,042,994 18868929 21,005,429 11.434,885 15,379,698 11,467,471 Licensee ark parmhe 3,350,958 4,397,520 5,429,632 4.968,234 5,708,965 4.574,659 8474.789 51883,515 3.950,967 5,198,986 C6aryes for sarvlms 10,338569 11,156,294 11,518,782 13,104,478 13.135,366 14,452,723 15,073,178 14,490,120 15,293;362 152&5,813 Flnee and fooce. s 3,384,164 3,448,826 3,605,963 3,422735 3,841,843 4,126,351 4,68$442 4,572,811 4,105,632 31545229 Invlsomeni lnwme 2,758.557 1941,048 967,513 2,358,747 3847,982 5,431137 5,463 ,056 3;245,677 1289,690 1,045,592 Nelmoeasa(c.00 alln as, value of invesbnems 1,268,972 1.468,682 (360,586) (493,879) (1,325,211) (62608¶ 720,488 1,472,335 1,155,363 882,317 Proper, lnwme 10,130,185 10947,021 11,957871 12,337,339 13,825,142 13,965915 15217,903 14,032,342 14,624923 15,539367 Ganetkna 746]74 1,819,159 2,7M367 1,087,825 883,405 1,379,461 2,159,63] 6,760,140 5497,640 1,790,073 CommbNlene (ram proper, or - - 14,79,013 - - Grner1.782,696 2,590,504 478,200 980.446 1,042,882 1967465 4,205;0.95 8501914 7,648274 5 ,091527 Tobl revenues 125,867,066 121913.680 -032,102,316 163,663,391 158.341,178 176,367713 193,740,128 166,112,213 182,753.192 177,829,160 ExpeodXUres Cumnl: General government 12,292,008 9,689,275 11,024,258 10,926667 12,531;200 13 ,706,081 14508103 15,567,654 15,169546 15,424,734 Pumicsafety 47,041,176 53,035,377 56849,718 59.482,134 65,262.069 68843947 73,486,413 78554344 7,202445 74,94793 PuWkwmFS 19.419,067 21259.792 22,760,896 24365,996 25.430 ,751 28,352,293 30,108941 3,0,619,405 39,922406 31,442,078 Community development 4,588,192 5457,498 5,723,031 6,14499 7,900,503 7,753,035 8,703,841 9,971,536 9,558 ,066 8,430,813 Cammunfty services 9,418.041 9,382,608 10,821346 10.351,414 12.730,727 13,988,589 14,478,146 17.485,605 14.916 ,230 15,662,011 Cause l coal 38,613,906 14,684897 15,180550 33-086,048 24,811237 45,615,169 20524,638 26,072338 36,798653 37,645882 Dem samrs_ Principal euremeni 1,291.099 1,822,913 1,660,350 1,688,801 1,715,542 3,736,507 3,263,948 3,292,641 1.820,679 6,230,089 Intense and fecal v.,as 466974 529,008 520228 499,077 480909 458,035 577299 482908 383,297 1,179,612 Iuuaarenrdem cor. 1,219,071 Tons expenditures 133,927,463 115,862,158 124502375 145,939,054 151,662,938 182,453,716 165,651.329 181,976,431 195,787,322 192,101,452 Exces, ful lenq)of revenues aver (under) a YendWres (6060397) 5,151522 7,519,941 15,724337 8476240 (8,088 ,003) 28,088799 4,135,782 (13,014130) (14,352292) ONer finanung wurws (uses): T -r.nin 10,927,460 14,378167 16,553,395 20.601,957 25,194,920 20271,396 2$5133922 23,354,368 2$390,521 58,753,620 Traosfere out (11,669.089) (14,342,890) (18,495,612) (20,612,176) (31.177,725) (22,521,396) (36,076,952) (23,354,366) (21,780521) (58,763,620) Prmeede fiomissuance of debt 18,000,000 2,630,736 - - - 5,000,0,00 - - 1500000 126860,000 Issuance of de a pramlum 1,155,300 Total oMrt financng sources (uses) 17,258371 2,664,013 (11942217) (10,219) (5992805) 2,750070 (8,493,030) 2,100,000 127,815,300 Net change in Noel balances $ 9.197,974 $ 7,815,535 $ 557,724 $ 18,714,118 $ 495,435 $ (3,338,003) $ 19,595,769 $ 4,135,782 $(10914,130) $113,483,008 Debt service as a percentage of -pifal evgendltures 1B% 22% 18% 17% 1]% 28% 25% 23% 13% 48% Rdjusled in Indude Proper, Tax -in lieu pf VLF wM1ich was previously re W. as'mlergovernno -tal revenue 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 Eleven Fiscal Years Fiscal Year Ended June 30 Public Utility Secured City Unsecured Taxable Assessed Value Change Total Direct Tax Rate 2002 2,000 16,515,797,641 913,075,074 17,428,874,715 N/A 1.000% 2003 16,531,505 21,339,270,499 1,085,951,066 22,425,221,565 28.67% 1.000% 2004 16,531,505 23,219,166,299 1,372,432,950 24,591,599,249 9.66% 1.000% 2005 53,310 25,193,662,254 1,484,019,033 26,677,681,287 8.48% 1.000% 2006 53,310 28,136,607,566 1,914,106,993 30,050,714,559 12.64% 1.000% 2007 53,310 31,423,473,042 1,569,867,249 32,993,340,291 9.79% 1.000% 2008 53,310 34,188,568,583 1,668,015,342 35,856,583,925 8.68% 1.000% 2009 699,230 36,436,106,070 1,538,539,482 37,974,645,552 5.91% 1.000% 2010 699,230 37,078,595,810 1,564,808,312 38,643,404,122 1.76% 1.000% 2011 699,230 37,080,217,275 1,626,947,910 38,707,165,185 0.16% 1.000% 2012 699,230 37,550,413,836 1,556,752,313 39,107,166,149 1.03% 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 maybe 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. The City of Newport Beach has elected to show eleven years of data for this schedule as Fiscal year 2012 data was readily available when compiling this schedule. Source: County of Orange Auditor - Controller's Office CITY OF NEWPORT BEACH Direct and Overlapping Property Tax Rates (Rate per $100 of assessed value) Last Ten Fiscal Years Fiscal Year 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 City Direct Rates: 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 0.008 0.007 0.006 0.006 0.069 0.078 0.096 0.096 0.110 0.110 School Districts 0.0242 0.0682 0.1019 0.1439 0.1137 0.1103 0.1092 0.1009 0.1521 0.1548 Total Overlapping Rate 0.032 0.075 0.108 0.150 0.182 0.189 0.205 0.197 0.262 0.265 Total Direct & Overlapping Rate $1.032 $1.075 $1.108 $1.150 $1.182 $1.189 $.1.205 $1.197 $1.262 $1.265 NOTE: In 1978, Califomia 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: HdL, Coren & Cone CITY OF NEWPORT BEACH Principal Property Taxpayers Current Year and Nine Years Ago Taxpayer Taxable Assessed Value 2011 Rank Percent of Total City Taxable Assessed Value The Irvine Company $ 1,943,855,195 1 5.02% Bay Island Club 146,530,665 2 0.38% Newport Bluffs LLC 137,816,296 3 0.36% Balboa Bay Club Inc. 126,251,407 4 0.33% UDR Newport Beach North LP 117,510,707 5 0.30% Coronado South Apartments LP 114,393,193 6 0.30% Jazz Semiconductor Inc 106,434,577 7 0.27% EO MacArthur LLC 102,733,580 8 0.27% Newport Healthcare Center 101,818,515 9 0.26% 100 Bayview LLC 94,303,543 10 0.24% Source: HdL, Coren and Cone Co. 187 2002 Percent of Total Taxable Assessed City Taxable Value Rank Assessed Value $ 926,646,311 1 4.41% N/A 0.00% N/A 0.00% N/A 0.00% 127,762,327 4 0.61% N/A 0.00% N/A 0.00% N/A 0.00% N/A 0.00% nun n nnw. CITY OF NEWPORT BEACH Property Tax Levies and Collections Last Ten Fiscal Years 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. 3 In Fiscal Year 2009 -10 the State borrowed approximately $6.2 million of property tax revenue in accordance with Proposition 1A (2004). Collections include the full amount of the borrowing as the City recovered the $6.2 million in Fiscal Year 2009 -10 by participating in a securitization program through the California Statewide Communities Development Authority. 4 Negative numbers reflect property tax refunds allocated to the referenced year Source: Orange County Auditor Controller's Office Collected within the Fiscal Year of Levy Total Collections to Date Fiscal Year Collections in Ended June Taxes Levied for Percent of Subsequent Percent of 30 the Fiscal Year Amount Levy Years Amount Levy 2002 31,298,541 1 30,651,143 97.93% 102,001 30,753,144 98.26% 2003 37,092,528 36,351,026 98.00% 529,986 36,881,012 99.43% 2004 42,469,238 41,420,410 97.53% 670,685 42,091,095 99.11% 2005 45,111,328 54,063,951 119.85 %2 483,804 54,547,7552 120.92% 2006 47,286,816 45,558,039 96.34% 728,365 46,286,404 97.88% 2007 70,194,492 68,820,402 98.04% 808,765 69,629,167 99.19% 2008 69,315,117 68,242,326 98.45% 846,904 69,089,231 99.67% 2009 71,006,357 70,879,909 99.82% (294,366)4 70,585,543 99.41% 2010 68,412,731 69,022,2703 100.89% (1,227,109)4 67,795,161 99.10% 2011 70,476,893 70,477,221 100.00% (796,322)4 69,680,899 98.87% 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. 3 In Fiscal Year 2009 -10 the State borrowed approximately $6.2 million of property tax revenue in accordance with Proposition 1A (2004). Collections include the full amount of the borrowing as the City recovered the $6.2 million in Fiscal Year 2009 -10 by participating in a securitization program through the California Statewide Communities Development Authority. 4 Negative numbers reflect property tax refunds allocated to the referenced year Source: Orange County Auditor Controller's Office 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 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 CITY OF NEWPORT BEACH Ratios of Outstanding Debt by Type Last Ten Fiscal Years Note: This schedule excludes claims and judgements, employee compensated absence, OPEB and Early Retirement Incentive Plan Liabilities. Details regarding the City's outstanding debt can be found in the notes to the financial statements. 1 Amount does not include bond premium. 2 These ratios are calculated using personal income and population for the prior calendar year. 190 Governmental Activities Fiscal Year Pre- Purchase Ended Certificates of Annexation Agreement June 30 Participation 1 Note Payable Agreement CDBG Loan Capital Leases Payable 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 2011 126,660,000 737,854 7,200,000 1,788,000 - 750,000 Note: This schedule excludes claims and judgements, employee compensated absence, OPEB and Early Retirement Incentive Plan Liabilities. Details regarding the City's outstanding debt can be found in the notes to the financial statements. 1 Amount does not include bond premium. 2 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 191 Business -type Activities Total Percentage of Governmental Water Revenue Total Business- Total Primary Personal Debt Per Activities Bonds type Activities Government Income 2 Capita 2 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% 193 137,135,854 - - 137,135,854 2.32% 1,606 191 CITY OF NEWPORT BEACH Outstanding Debt Serviced by the General Fund Last Ten Fiscal Years 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 I Per Capita 2002 6,610,000 N/A 6,610,000 0.04% 94 2003 6,365,000 N/A 6,365,000 0.04% 84 2004 6,110,000 N/A 6,110,000 0.03% 77 2005 5,845,000 N/A 5,845,000 0.02% 72 2006 5,570,000 N/A 5,570,000 0.02% 67 2007 5,280,000 3,000,000 8,280,000 0.03% 99 2008 4,980,000 1,500,000 6,480,000 0.02% 77 2009 4,335,000 N/A 4,335,000 0.01% 50 2010 3,990,000 1,500,000 5,490,000 0.01% 63 2011 126,660,000 750,000 127,410,000 0.33% 1,492 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, 2011 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.D. 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 Distinct 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: DIRECT GENERAL FUND DEBT: City of Newport Beach Certificates of Participation TOTAL DIRECT 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 TOTAL GROSS OVERLAPPING GENERAL FUND DEBT TOTAL GROSS DIRECT AND 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 $ 38,707,165,185 811,396,291 $ 37,895,768,894 Percentage Outstanding Debt Estimated Share of Applicable ' 6130111 Overlapping Debt 2.124% 227,670,000 4,835,711 35.323% 326,768,867 115,424,567 3.585% 309,908,025 11,110,203 14.711% 31,365,000 4,614;105 100.000% 9,600,000 9,600,000 72.559% 253,714,150 184,092,450 100.000% 12,540,000 12,540,000 8.567% 310,984,745 26,642,063 11.134%- 81,400,000 100.000% 79,959,310 49,534,192 100.000% 40,465,000 40,465,000 100.000% 6,140,000 6,140,000 100.000% 18,855,000 18,855,000 100.000% 33,438,296 33,438,296 100.000% 12,600,000 12,600,000 100.000% 51,560,000 51,560,000 100.000% 5,870,000 5,870,000 767,763,959 1,731,438,393 587,321,587 100.000% 126,660,000 126,660,000 126,660,000 126,660,000 10.144% $ 316,898,000 $ 32,146,133 10.144% 54,682,497 Combined Direct Debt ($126,660,000) 5,546,992 10.144% 19,000,000 Net Combined Tolal Debt 1,927,360 11.990% 14,120,000 1,692,988 3.084% 17,375,000 535,845 8.567% 52,212,863 4,473,076 11.269% 81,400,000 9,172,966 555,688,360 55,495,360 682, 348, 360 182,155, 360 (1,692,988) $ 180,462,372 $ 769,476,947 $ 767,763,959 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 announced capital lease obligations. Ratios to 2010 -11 Assessed Valuation: Total Overlapping Tax and Assessment Debt 1.52% Ratios to Adjusted Assessed Valuation: Combined Direct Debt ($126,660,000) 0.33% Gross Combined Total Debt 2.03% Net Combined Tolal Debt 2.03% STATE SCHOOL BUILDING AID REPAYABLE AS OF 6/30/11: $0 Source: California Municipal Statistics, Inc. 193 CITY OF NEWPORT BEACH Legal Debt Margin Information Last Ten Fiscal Years Legal debt margin $ 653,582,802 $ 840,945,809 $ 922,184,972 $ 1,000,413,048 Total debt applicable to the limit as a percentage of debt limit 0.0% 0.0% 0.0% 0.0% NOTE: The State of California Government Code Section 43605 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 Stale of California for local governments located within the state. Source: City Finance Department 194 Fiscal Year 2002 2003 2004 2005 Assessed valuation $ 17,428,874,715 $ 22,425,221,565 $ 24,591,599,249 $ 26,677,681,287 Conversion percentage 25% 25% 25% 25% Adjusted assessed valuation 4,357,218,679 5,606,305,391 6,147,899,812 6,669,420,322 Debt limit percentage 15% 15% 15% 15% Debt limit 653,582,802 840,945,809 922,184,972 1,000,413,048 Total net debt applicable to limit: General obligation bonds - - - - Legal debt margin $ 653,582,802 $ 840,945,809 $ 922,184,972 $ 1,000,413,048 Total debt applicable to the limit as a percentage of debt limit 0.0% 0.0% 0.0% 0.0% NOTE: The State of California Government Code Section 43605 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 Stale of California for local governments located within the state. Source: City Finance Department 194 CITY OF NEWPORT BEACH Legal Debt Margin Information Last Ten Fiscal Years Fiscal Year 2006 2007 2008 2009 2010 2011 $ 30,050,714,559 $ 32,993,340,291 $ 35,856,583,925 $ 37,974,645,552 $ 38,643,404,122 $ 38,707,165,185 25% 25% 25% 25% 25% 25% 7,512,678,640 8,248,335,073 8,964,145,981 9,493,661,388 9,660,851,031 9,676,791,296 15% 15% 15% 15% 15% 15/ 1,126,901,796 1,237,250,261 1,344,621,897 1,424,049,208 1,449,127,655 1,451,518,694 $ 1,126,901,796 $ 1,237,250,261 $ 1,344,621,897 $ 1,424,049,208 $ 1,449,127,655 $ 1,451,518,694 0.0% 0.0% 0.0% O.D% 195 0.0% 0.0% This page left blank intentionally. 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 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; and, E -1 Population Estimates for Cities, Counties and State January 1, 2010 and 2011 1 �1 U.S. Census Bureau - American Community Survey 1 -Year Estimates 1'I State of California, Employment Development Department M Personal Income Per Capita Unemployment Fiscal Year Population (in thousands) Incomez Rate' 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% 2011 85,376 5,916,215 69,296 5.8% 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; and, E -1 Population Estimates for Cities, Counties and State January 1, 2010 and 2011 1 �1 U.S. Census Bureau - American Community Survey 1 -Year Estimates 1'I State of California, Employment Development Department M CITY OF NEWPORT BEACH Principal Employers' Current Year and 6 years ago ' Figures reflect number of employees of employer at the time the information was collected. 2 Information for nine years ago is not available. 3 Company listed was unable to provide reliable employee data for 2005. 4 The Island Hotel was formerly the Four Seasons Hotel. Source: Data obtained from companies listed and compiled by City Finance Department. 199 2011 20052 Number of Percent of Total Number of Percent of Total Employer Employees Rank Employment Employees Rank Employment Hoag Memorial Hospital 5,000 1 6.22% 3,640 1 4.37% Pacific Life Insurance 1,119 2 1.39% 2,788 2 3.35% Glidewell Dental 1,100 3 1.37% N/A 3 - N/A PIMCO Advisors 1,005 4 1.25% 530 7 0.64% Newport-Mesa Unified School District 895 5 1.11% N/A 3 - N/A City of Newport Beach 807 6 1.00% 788 4 0.95% Resort at Pelican Hill 750 7 0.93% - - N/A Jazz Semi - Conductor 554 8 0.69 % 730 5 0.88% Balboa Bay Club and Resort 500 9 0.62% N/A 3 - N/A The Island Hotel 480 10 0.60% 525 4 8 0.63% Fletcher Jones Motor Cars Inc. 450 11 0.56% N/A 3 - N/A Marriott- Newport Beach 334 12 0.42% 475 9 0.57% ' Figures reflect number of employees of employer at the time the information was collected. 2 Information for nine years ago is not available. 3 Company listed was unable to provide reliable employee data for 2005. 4 The Island Hotel was formerly the Four Seasons Hotel. Source: Data obtained from companies listed and compiled by City Finance Department. 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. 200 CITY OF NEWPORT BEACH Full -time City Employees by Function Last Ten Fiscal Years Source: City Finance Department 201 Full -Time Employees as of June 30, 2011 Function 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 General government 77 77 84 86 90 93 93 99 100 94 Public safety 384 384 385 385 388 393 397 397 397 381 Community development 44 46 46 47 48 52 56 57 57 51 Public works 163 164 162 162 163 163 165 160 160 144 Community services 57 58 57 60 65 66 68 71 71 70 Balboa yacht basin 1 1 1 1 - - - - - - Water 33 33 33 34 34 34 35 35 35 37 Wastewater 12 12 13 13 13 13 13 13 13 15 Total 771 775 781 788 801 814 827 832 833 792 Source: City Finance 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 2002 2003 2004 2005 3,684 3,485 3,201 3,079 73,191 68,907 71,076 72,665 359 442 423 228 6,400 4,460 4,500 4,550 5,500 5,500 5,000 4,500 50,000 55,000 50,000 50,000 188,689 200,077 185,627 194,749 10,917 12,094 12,041 11,936 118 99 53 55 17 17 17 17 N/A 50 25 24 202 262 293 205 1,263,200 1,347,583 1,392,346 1,475,025 202 CITY OF NEWPORT BEACH Operating Indicators by Function Last Ten Fiscal Years Fiscal Year 2006 2007 2008 2009 2010 2011 2,999 3,289 3,196 3,245 3,307 3,332 74,780 67,170 70,150 65,176 66,310 67,459 214 175 393 371 338 350 6,470 7,136 7,250 6,912 7,000 7,000 4,600 4,980 4,644 3,882 3,467 2,580 55,000 59,459 58,000 49,644 49,540 39,972 194,722 201,258 318,779 318,000 320,000 320,000 12,628 14,728 15,279 16,035 15,458 15,063 52 95 60 26 19 28 17 17 17 17 17.25 17.25 24 45 45 12 9 6 335 226 212 209 200 235 1,443,078 1,622,573 1,701,476 1,575,518 1,694,145 1,738,027 CITY OF NEWPORT BEACH Capital Asset Statistics by Function Last Ten Fiscal Years Fiscal Year 2002 2003 2004 2005 Police: Stations 1 1 1 1 Fire: Fire stations 7 7 7 8 Lifeguard Headquarters 1 1 1 1 Public works: Streets (miles) 325 333 333 333 Streetlights 7,277 7,277 7,277 7,277 Traffic signals 130 131 131 144 Recreation & Senior Services: Parks 47 47 47 47 Community centers 11 11 11 11 Aquatic Center 1 1 1 1 Water: Water mains (miles) 294.81 294.81 294.81 298.42 Maximum daily capacity (thousands of gallons) 20,796 21,291 20,092 20,633 Wastewater: Sanitary sewers (miles) 176.90 178.40 179.15 179.15 Storm sewers (miles) 51.40 53.50 57.60 57.60 Library Services: Libraries 4 4 4 4 Source: City of Newport Beach 204 CITY OF NEWPORT BEACH Capital Asset Statistics by Function Last Ten Fiscal Years Fiscal Year 2006 2007 2008 2009 2010 2011 1 1 1 1 1 1 8 8 8 8 8 8 1 1 1 1 1 1 333 395 395 395 395 395 7,277 7,278 7,278 7,278 7,278 7,278 147 147 148 148 148 148 47 47 48 49 49 49 11 12 13 13 13 13 1 1 1 1 1 1 299.88 300.35 300.17 300.31 303.27 303.25 19,369 20,392 20,365 19,707 19,341 28,540 179.15 202.80 202.80 202.80 202.80 202.40 57.60 95.50 95.50 95.50 95.50 95.40 4 4 4 4 4 4 205 CITY OF NEWPORT BEACH Water Sold by Type of Customer Last Ten Fiscal Years (in hundred cubic feet) Fiscal Year 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Type of Customer: Residential 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 3,656,705 Commercial 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 1,144,975 Government 480,809 597,395 486,051 487,189 607,650 601,659 361,457 420,697 349,334 320,821 Total 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 5,122,501 Total direct rate per 100 cubic R. 2.00 2.00 2.00 2.00 2.08 2.08 2.08 2.08 2.20 2.46 Source: City Utilities Department 0 CITY OF NEWPORT BEACH Water Rates Last Ten Fiscal Years Fiscal Year Ended June Monthly Rate per 30 Base Rate 100 cubic ft 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 2011 21.03 2.81 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 Water Customer Water Charges 2011 Rank Percent of Total Water Revenues Water Charges 2002 Rank Percent of Total Water Revenues The Irvine Company $ 254,273 1 1.26% $ 241,387 1 1.36% Hoag Memorial Hospital 197,381 2 0.98% 60,355 15 0.34% Big Canyon Country Club 154,772 3 0.77% 172,751 3 0.97% Newport Beach Country Club 110,751 4 0.55% 132,881 5 0.75% Park Newport Ltd 86,255 5 0.43% 107,807 7 0.61% UDR Newport Beach 80,457 6 0.40% N/A 0.00% Bluffs Homeowners Association 75,192 7 0.37% N/A 0.00% Irvine Company Retail Property 67,238 8 0.33% 174,111 2 0.98% Newport-Mesa USD 62,979 9 0.31% 73,970 11 0.42% Newport Dunes Resort 53,302 10 0.26% 65,575 17 0.37% Pacific View - Pierce Bros. 49,057 11 0.24% 41,224 19 0.23% IOIC /PMS Engineerting Department 42,799 12 0.21% N/A 0.00% Balboa Village Community Association 33,830 13 0.17% 107,022 8 0.60% Jasmine Creek Community Association 33,174 14 0.16% 108,956 6 0.61% Bayside Village 32,466 15 0.16% 37,169 21 0.21% $ 1,333,926 6.61% $ 1,081,821 6.07% Source: City Revenue Division KIM City of Newport Beach 3300 Newport Blvd. Newport Beach, CA 92663 (949) 644 -3123 www.newportbeachca.gov /financial info