HomeMy WebLinkAbout(2009, 08/11) - F-16 - AmendedACKERMAN TRUST
PURPOSE
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To establish City policy for the distribution of the proceeds of the income from the
Ackerman Property.
POLICY
Per the terms of the Carl Ackerman Family Trust, the net sales proceeds of certain
property in McFadden Square were divided between the University of California,
Irvine, and the City of Newport Beach. The proceeds were distributed as follows:
Sixty (60) percent of the proceeds were distributed to the University of California,
Irvine, to be used for scholarship funding for needy qualified students.
Forty (40) percent of the proceeds were to be distributed to the City of Newport Beach
to be used in the following manner:
Seventy -five (75) percent of the City's share to create a permanent
endowment to provide a perpetual annuity that can be used to acquire
high -tech library equipment.
Twenty-five (25) percent of the City's share to create a permanent
endowment to provide a perpetual annuity to fund scholarships for needy
qualified students. This scholarship fund shall be open to any child who
resides in Newport Beach, and to the children of City employees.
The following procedures are established to meet the terms of the Ackerman Trust.
The City shall deposit its share of the proceeds from the sale of Ackerman property into
a Permanent Fund. Within that fund, the City shall create separate permanent
endowment reserves to account for the principal share of both the high -tech library
equipment ($579,586) reserve and the scholarship reserve ($193,195). The City may not
spend any portion of the permanent endowment.
The City shall also create similar reserves to track the restricted and unrestricted
expendable portions of each endowment. To preserve the economic vitality of the
Ackerman annuities, the City shall further restrict a portion of this fund's interest
earnings to the "Inflation Reserve' that will represent a buffer against inflation. The
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remaining balance, if any, shall represent the spendable portion of each endowment.
For each of the endowments, interest shall be allocated between the Spendable and
Inflation reserves in accordance with the tables below based on the reserve totals of the
preceding year.
In the case of the high tech library endowment, the Library Services Director will make
a recommendation to the City Manager to request expenditure appropriations from the
Spendable Reserve balance during the budget process or at any time during the year
when an appropriate high tech equipment need is identified and no other funding
sources are available. The appropriation request shall be subject to the normal Council
approval process as provided by Council Policy F -3.
In the case of the scholarship endowment, the Administrative Services Director will
recommend to the City Manager the amount to be appropriated for the coming budget
year in accordance with the tables below. Unless otherwise recommended by the City
Manager or City Council, budget appropriations will be set to equal the interest credit
to the Spendable Reserve that occurred during the preceding fiscal year unless the
interest credit falls short of the minimum threshold or exceeds the maximum
appropriation threshold in which case the appropriation shall equal the applicable
appropriation threshold. While the appropriation represents the authorized amount,
there shall be no requirement for the program administrators to spend the authorized
funds in any year.
The program administrator for the High Tech Library Equipment endowment shall be
the Library Services Director while the program administrator for the Scholarship
Endowment shall be the Human Resources Director. It shall be at the discretion of the
program administrators to determine the most appropriate means to fulfill the intent of
the endowment consistent with Council Policies or other City practices.
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Table 1. Interest Allocation Schedule for Scholarship Reserves
Table 2. Interest Allocation Schedule for High Tech Library Reserves
Total Balance of High Tech
Jbrary Reserves as of June 30
Interest Allocation
Spendable [ ation
Reserve Reserve
Appropriation Threshold
Annual Annual
Minimum Maximum
Interest Allocation Appropriation Threshold
Total Balance of Scholarship Spendable Inflation Annual Annual
Reserves as of June 30 Reserve Reserve Minimum Maximum
200,000 to 300,000 30% 70% 0 5,000
300,000 to 400,000 40% 60% 2,500 7,500
400,000 to 500,000 50% 50% 5,000 10,000
500,000 to 600,000 50% 50% 6,250 12,500
600,000 to 700,000 50% 50% 7,500 15,000
700,000 to 800,000 50% 50% 8,750 17,500
800,000 to 900,000 50% 50% 10,000 20,000
900,000 to 1,000,000 50% 50% 11,250 22,500
1,000,000 to 1,100,000 50% 50% 12,500 25,000
Table 2. Interest Allocation Schedule for High Tech Library Reserves
Total Balance of High Tech
Jbrary Reserves as of June 30
Interest Allocation
Spendable [ ation
Reserve Reserve
Appropriation Threshold
Annual Annual
Minimum Maximum
600,000 to 700,000 15% 85% 0
700,000 to 800,000 25% 75% 0 For all
800,000 to 900,000 35% 65% 0 Reserve
900,000 to 1,000,000 45% 55% 0
Levels, the
1,000,000 to 1,100,000 50% 50%
Annual
Maximum is
1,100,000 to 1,200,000 50% 50% 0 the balance of
1,200,000 to 1,300,000 50% 50% 0 the Spendable
1,300,000 to 1,400,000 50% 50% 0 Reserves
1,400,000 to 1,500,000 50% 50% 0
Table Notes:
The tables were constructed assuming economic conditions where the City might expect to earn 5% and
the consumer price index (CPI) is expected to increase 2.5 %. Under this assumption, 50% (2.5 % /5 %) of
annual interest earnings are expected to be eroded by inflation. The minimum threshold was established
to provide continuity of the Scholarship program in years where the economic assumptions do not hold
true, and inflation or low interest earnings might otherwise completely preclude scholarship awards in
any one year. However, in no case shall it be allowable to appropriate or expend any portion of the
permanent endowment reserves. The maximum threshold is intended to provide funding in high interest
earning years for those years where the minimum threshold was utilized.
a
Adopted - January 24,1994
Amended - May 8, 2001
Amended - April 13, 2004
Amended - August 11, 2009
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