HomeMy WebLinkAboutFinance Committee - March 12, 2020CITY OF NEWPORT BEACH
FINANCE COMMITTEE AGENDA - Final
100 Civic Center Drive - Crystal Cove Conference Room, Bay 2D
Thursday, March 12, 2020 - 3:00 PM
Finance Committee Members:
Will O'Neill, Chair / Mayor
Joy Brenner, Council Member
Diane Dixon, Council Member
William Collopy, Committee Member
John Reed, Committee Member
Joe Stapleton, Committee Member
Larry Tucker, Committee Member
Staff Members:
Grace K. Leung, City Manager
Dan Matusiewicz, Finance Director / Treasurer
Steve Montano, Deputy Director, Finance
Marlene Burns, Administrative Specialist to the Finance Director
The Finance Committee meeting is subject to the Ralph M. Brown Act. Among other things, the Brown Act requires that
the Finance Committee agenda be posted at least seventy-two (72) hours in advance of each regular meeting and that
the public be allowed to comment on agenda items before the Committee and items not on the agenda but are within
the subject matter jurisdiction of the Finance Committee. The Chair may limit public comments to a reasonable amount
of time, generally three (3) minutes per person.
The City of Newport Beach’s goal is to comply with the Americans with Disabilities Act (ADA) in all respects. If, as an
attendee or a participant at this meeting, you will need special assistance beyond what is normally provided, we will
attempt to accommodate you in every reasonable manner. Please contact Dan Matusiewicz, Finance Director, at least
forty-eight (48) hours prior to the meeting to inform us of your particular needs and to determine if accommodation is
feasible at (949) 644-3123 or dmatusiewicz@newportbeachca.gov.
NOTICE REGARDING PRESENTATIONS REQUIRING USE OF CITY EQUIPMENT
Any presentation requiring the use of the City of Newport Beach’s equipment must be submitted to the Finance
Department 24 hours prior to the scheduled meeting.
I.CALL MEETING TO ORDER
II.ROLL CALL
III.PUBLIC COMMENTS
Public comments are invited on agenda and non-agenda items generally considered to be
within the subject matter jurisdiction of the Finance Committee. Speakers must limit comments
to three (3) minutes. Before speaking, we invite, but do not require, you to state your name for
the record. The Finance Committee has the discretion to extend or shorten the speakers’ time
limit on agenda or non-agenda items, provided the time limit adjustment is applied equally to all
speakers. As a courtesy, please turn cell phones off or set them in the silent mode.
IV.CONSENT CALENDAR
March 12, 2020
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Finance Committee Meeting
MINUTES OF FEBRUARY 13, 2020A.
Recommended Action:
Approve and file.
DRAFT MINUTES 02132020
V.CURRENT BUSINESS
FINANCIAL STATEMENT AUDIT RESULTS AND RELATED
COMMUNICATION
A.
Summary:
The City’s external audit firm, White Nelson Diehl Evans LLP will meet with the
Finance Committee to discuss the audit findings for the fiscal year ending
6/30/2019. The Committee will have an opportunity to discuss any potential areas of
concern and the auditors can discuss any changes in accounting standards or
disclosures that were relevant for the audit year.
Recommended Action:
Receive and file.
STAFF REPORT
ATTACHMENT A
ATTACHMENT B
HARBOR AND BEACHES MASTER PLANB.
Summary:
Staff will present a draft of Harbors and Beaches financial plans reviewing the timing,
means of financing, and fiscal impacts associated with funding Council prioritized
capital projects.
Recommended Action:
Review the Harbor and Beaches financial plans and recommend the information go
to the City Council in the future for their consideration.
STAFF REPORT
ATTACHMENT A
DISCUSS REVENUE ASSUMPTIONSC.
Summary:
Staff will provide of an overview of revenue assumptions for the FY 2020-21
Proposed Budget.
Recommended Action:
Receive and file.
March 12, 2020
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Finance Committee Meeting
WORK PLAN REVIEWD.
Summary:
Staff and Finance Committee to review the proposed work plan and adjust as
necessary.
Recommended Action:
Receive and file.
ATTACHMENT A
VI.FINANCE COMMITTEE ANNOUNCEMENTS ON MATTERS WHICH MEMBERS
WOULD LIKE PLACED ON A FUTURE AGENDA FOR DISCUSSION, ACTION OR
REPORT (NON-DISCUSSION ITEM)
VII.ADJOURNMENT
Finance Committee Meeting Minutes February 13, 2020
Page 1 of 10
CITY OF NEWPORT BEACH FINANCE COMMITTEE
FEBRUARY 13, 2020 MEETING MINUTES I. CALL MEETING TO ORDER
The meeting was called to order at 3:00 p.m. in the Crystal Cove Conference Room, Bay 2D, 100 Civic Center Drive, Newport Beach, California 92660.
II. ROLL CALL
PRESENT: Mayor/Chair Will O’Neill, Council Member Joy Brenner, Council Member
Diane Dixon, Committee Member William Collopy, Committee Member John Reed (arrived at 3:18 p.m.), Committee Member Joe Stapleton, and
Committee Member Larry Tucker
ABSENT: None
STAFF PRESENT: City Manager Grace K. Leung, Finance Director/Treasurer Dan Matusiewicz, Deputy Director/Finance Steve Montano, Administrative &
Finance Manager/Public Works Angela Crespi, Administrative Specialist to the Finance Director Marlene Burns, Recreation and Senior Services
Director Laura Detweiler, Budget Analyst/Recreation Matt Chong, Deputy Director/Police Support Services Division Commander Jonathan Stafford,
Management Assistant/Public Works Raymund Reyes, Deputy Community Development Director Jim Campbell, Systems and
Administration Manager Dan Campagnolo, Deputy Community Development Director Samir Ghosn, Administrative Manager/Fire Mary
Locey, Budget and Payroll Supervisor/Finance Shannon Espinoza, Deputy Director Municipal Operations/Public Works Micah Martin, and
Public Works Director Dave Webb
OTHER ENTITIES: None
MEMBERS OF THE
PUBLIC: Jim Mosher, Nancy Scarbrough, and Charles Klobe
III. PUBLIC COMMENTS
Jim Mosher inquired regarding the City’s requirements for procuring “on-call” contractual services.
Finance Director/Treasurer Matusiewicz stated the City receives a letter agreement regarding rates for services for “on-call” vendors for services and noted it is rare the City would have several “on-
call” agreements with vendors providing the same type of service.
IV. CONSENT CALENDAR
MINUTES OF JANUARY 16, 2019 Recommended Action:
Approve and file.
MOTION: Committee Member Stapleton moved to approve the minutes, as amended, Committee Member Collopy seconded. The motion carried with 6 ayes, 0 noes, and 1 absent
(Reed).
Finance Committee Meeting Minutes February 13, 2020
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V. CURRENT BUSINESS
Chair O’Neill re-ordered the Agenda items to discuss Item 5C, Fee Study Update, first. C. FEE STUDY UPDATE Summary:
Staff will present the Master Fee Schedule to the Finance Committee and subsequently will present to the City Council.
Recommended Action: Receive and file.
Chair O’Neill stated the staff report was very comprehensive and called for any questions, if
any, from the Committee.
Committee Member Tucker requested clarification regarding the $760 preliminary application for residential development, and noted it appears the preliminary application may actually result
in additional work for staff. Deputy Community Development Director Campbell responded that review of the fee estimated staff time at approximately 3 hours; however, staff would continue
to evaluate appropriateness of the fee as compared to staff work required to complete application. The $760 represents the first, best estimate as to what the fee should be.
Chair O’Neill commented that staff might need to benchmark this fee in light of the upcoming
Housing Element update.
Council Member Dixon requested clarification regarding appeals of Planning Commission decisions to the City Council. Deputy Community Development Director Campbell noted the
opportunity to vet out decisions at the Zoning Administrator level prior to items going to the Coastal Commission. The item would remove obstacles for appealing decisions at the local
level.
Council Member Dixon noted the City decided to hold the fee related to Junior Lifeguards and stated that there are scholarships available for youth to participate in the program.
Council Member Dixon inquired as to whether there was a tabulation of the fees that are
subsidized by the General Fund. Discussion ensued regarding this matter, including the subsidy for the Junior Lifeguard Program.
Chair O’Neill called for public comments.
Jim Mosher inquired as to whether some fees have been determined, specifically the lobbyist
registration fee, and if it will be announced along with the other fees or handled separately. He referred to Attachment C, which lists the proposed cost recovery schedule, and noted that there
were a number of problems, including the appeals related to coastal development to the Planning Commission from the Zoning Administrator as well as should include the appeal to
the City Council from the Planning Commission. In addition, the Appeal of Lease/Permit under Section 17.60.080, in a recent City Council meeting, Council deleted that section; however,
there is an existing section the includes the $100.00, specialized fee for resolving disputes as related to renting dock space. How the costs are determined is not addressed. Furthermore,
Mr. Mosher requested clarification regarding how the fee was established for the Building/Fire Board of Appeals to the Planning Division. Finally, he expressed curiosity in finding out as to
how the fees were determined. He concluded by stating a heading indicating Library Fees, would be preferred for the passport fees.
Chair O’Neill commented that the intent is to resolve disputes locally before having it go to the
Coastal Commission. Additionally, the City does not want to give an incentive to appeal three
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different times, from Zoning Administrator to the Planning Commission to the City Council. The
goal is to resolve the dispute at the Planning Commission level, if possible. If that is not
possible, then the appellant could go the Coastal Commission directly if they want to go that
route.
There was no further action taken on this item.
A. REVIEW OF PUBLIC WORKS DEPARTMENT BUDGET Summary:
Public Works will present the contours of its FY 2019-20 budget to inform the Committee's understanding of its operation in advance of the FY 2020-21 budget preparation.
Recommended Action: Receive and file.
A staff report was given by Public Works Director Dave Webb. A PowerPoint presentation was
displayed entitled, “FY 2019-20 Operating Budget Overview.” Director Webb provided an overview of the Department’s role in the City’s organization. He provided infrastructure
statistics including the number of Public Works assets including traffic signals, storm drain lines, and City building and structures.
Director Webb noted the Public Work’s Capital Improvement Program and Operating Budget
represents approximately 35% of the overall City budget.
Committee Member Collopy inquired as to whether the City has a dedicated or specialized point person to manage grants in order to search state/federal opportunities for outside funding.
Director Webb responded the grant opportunities process is decentralized throughout the department and, on occasion, will hire a specialized contractor to assist with obtaining grants.
There is no specific position within the department structure with grant seeking responsibility. Council Member Dixon requested an “external funding” component list for future presentations to illustrate how much money is coming to the City from its grant-seeking actions. Director
Webb noted thatthere is always a cost-benefit analysis conducted when considering which grants to seek.
Committee Member Brenner inquired as to grants for addressing impacts of the homeless population. City Manager Leung noted that all City departments are working to address the impacts of homelessness within the City of Newport Beach, and consequently, are reviewing
any grant opportunities available. In response to Committee Member Collopy’s inquiry regarding seeking grant opportunities, City
Manager Leung responded that internal staff are well-networked and well-versed with the grant process. There are occasions where outsourcing grant seeking or grant-writing is fiscally prudent. It was also stated that the City’s Homeless Coordinator, Natalie Basmaciyan, is heavily
involved with grant opportunities to address homelessness within the community.
Administrative & Finance Manager Crespi continued with the Public Works Budget PowerPoint
presentation. She noted that the overall department budget represents 35% of the City’s overall City operating budget. This includes 9.7% for the Public Works Department and 23.5% for the Capital Improvement Program. Public Works is the third largest department behind Police and Fire, and noted, as referenced on Page 4 of the PowerPoint presentation, the Department
contracts out several functions. Administrative & Finance Manager Crespi continued by stating the largest part of the
department’s $38,707,344 budget are salaries and benefits, representing approximately 41%
of the overall amount. Contracted services are at $10,459,340 with approximately 150 contracts active at any given time. Non Capital Improvement Program Department revenues
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are $2,964,500, which represent funds received in the Engineering & Transportation Services
and Municipal Operations Divisions. The largest sources of revenue funds to the Department are permit and inspection fees at $525,000 and recycling fees at $970,000.
Chair O’Neill requested clarification regarding the County of Orange Contribution Fees of
$250,000 as listed on the revenue budget slide. Administrative & Finance Manager Crespi stated that the funds are received through the waste disposal agreement with the County. The
City receives a portion of the funds.
Council Member Dixon requested clarification regarding the State Highway Maintenance Fees of $32,500 as listed on the revenue budget slide. Public Works Director Webb responded the
City splits signals with Irvine and other jurisdictions and noted the potential rate of return could be more advantageous to the City. He will further review the item.
Administrative & Finance Manager Crespi continued with the Capital Improvement Program
(CIP) portion of the presentation noting that there are 52 active projects and 25 active large contracts representing a total FY 2019-20 CIP budget $93,249,523.
Chair O’Neill also stated the total CIP budget number includes projects that are carried over
from year to year for planning purposes.
Council Member Dixon inquired as to how much of the CIP budgeted amount is externally sourced funding projects. Finance Director/Treasurer Matusiewicz responded that the amount
is approximately $8.5 million to the Facilities Financial Plan (FFP) and $5 million for other General Fund CIPs.
Administrative & Finance Manager Crespi continued with the review of the Administration and
Finance Division, noting maintenance and operation costs, the types of projects for which the Division has oversight, and noted the total budgeted personnel at 8 full time equivalents (FTE).
The significant tasks and accomplishments for the Division were displayed.
Committee Member Collopy inquired as to the methodology that was presented to confirm the department’s metrics that represents reasonable numbers of personnel to complete the
department’s tasks and responsibilities, as well as the efficiency of work conducted. Director Webb responded that much of the metrics involve looking at past data, such as past
processing, design work, industry standards, and other regular types of department activities. He noted the data going back to 1990 shows Department workload increasing and FTE
personnel not increasing.
Committee Member Collopy requested comparative metrics in order to properly provide a budget recommendation. Discussion ensued regarding the conduct of the upcoming
comprehensive internal audit program, which should return both quantitative and qualitative data. City Manager Leung stated that each of the service areas would be reviewed, such as,
business processes including contract and requisition management, to provide baseline measurements for business process improvements and requests to increase the number of
personnel. She also noted that the measurement of processes needs to be balanced against the regular operations work that staff must conduct. City Manager Leung concluded she
requested a 3-year history on any request for budget or personnel augmentations she receives from the departments.
Public Works Director Webb also responded that the Newport Beach Public Works activities
are different as compared to other municipalities given its coastal city regulatory requirements. He stated that the overall budget has been reformatted and includes efficiencies that have been
created. It will take another year or two to receive the results of these new processes and systems.
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Administrative & Finance Manager Crespi continued with the review of the Engineering and
Transportation Division which handles the majority of the Capital Improvement Program work. She highlighted $600,000 of the Division budget is related to traffic signal maintenance. She
reviewed significant tasks and accomplishments including the completion of 24 CIP projects and noted the Division handles over 75 CIP projects annually.
Committee Member Collopy inquired as to the number of projects that are procured via an
Invitation for Bid (IFB) process versus a Request for Proposals (RFP) process. Public Works Director Webb responded that most CIP projects must be competitively bid.
Committee Member Collopy noted 88% of the projects are completed with fixed-price contracts
and inquired as to where the other 12% came from. Public Works Director Webb responded by stating that when a contract is awarded, 88% of the time, the City stays within the projected
amount. There are occasions staff must return to the City Council to request an increase to the contingency amount, although all scope changes must be mutually agreed-upon between the
contractor and the City prior to change approval.
Administrative & Finance Manager Crespi continued with the review of the Municipal Operations Division noting a large portion of the salaries and benefits, $4,146,200, is related
to field maintenance services. She reviewed the significant tasks and accomplishments of the Division.
Administrative & Finance Manager Crespi continued with the review of the Internal Service
Fund (ISF), which represents the Department’s Equipment Maintenance and Replacement process. She noted the adjustments that were included in the FY 2019-20 department budget
including the significant re-allocation of Municipal Operations Division funds to appropriate sections/accounts for improved expense tracking and the upgrade to Fleet Focus Management
Software. There were adjustments made to service levels due to demand including increased beach restroom service levels and portering, increased sidewalk and public plaza pressure
washing, increased 2-year trim cycle on 35,200 public trees (Urban Forest), and increased fuel modification clearing and vegetation weed abatement for hazard reduction. In conclusion, she
noted that staff is monitoring all invoices to ensure that they are correctly applied to the appropriate Divisions and projects.
Committee Member Collopy requested clarification regarding the increase to the tree trimming
cycle. Public Works Director Webb responded that the current tree trimming cycle is 2 years and that additional tree clearance was completed at the Fire Department’s request.
Public Works Director Webb noted that staff is monitoring AB 5 and its potential impacts to the
City in regard to contracting for services. He stated new regulations are impacting the City’s ability to contract for services as many of the “mom and pop” type of operators cannot meet
the new requirements for bonding and insurance.
In response to Committee Member Collopy’s inquiry, Public Works Director Webb reported the Department of Labor an enforcement authority as related to labor requirements for contractors.
The department also receives a large number of public records requests related to public contracting. Adding that, bonding requirements are set by the State of California.
In conclusion, Public Works Director Webb reviewed legislative, level and financial
considerations that may impact the department in the future. These items included changing trends in contracting for services, legislative mandates on organics, green waste, and mixed
recycling, AQMD requirements related to the City’s fleet, and financial/legislative items related to dredging. He also noted the Department will continue with realignment of Personnel and
Duties in Municipal Operations, improvements to inventory and asset tracking, the consolidation of contracts for continued efficiency and standardization of project management,
and reinvestment in relationships with external agency partners.
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Chair O’Neill opened public comments.
Charles Klobe inquired regarding refuse facility rental fees and requested clarification regarding the benefit of renting. Public Works Director Webb stated the department is currently
negotiating contracts that should result in cost reduction. Mr. Klobe requested clarification regarding the requirements of AB 5 and temporary staffing services. Public Works Director
Webb indicated that the department does utilize temporary labor and City Manager Leung concurred that the City must review temporary labor services carefully in light of the CalPERS
requirements.
Mr. Klobe requested clarification regarding the non-resident fees for Beach Bay.
Chair O’Neill affirmed that there are significant expense impacts of non-residents using City services, particularly the bay-related services, and that this matter will have to be addressed.
Discussion ensued regarding the impacts of 11 million annual visitors to the City of Newport Beach and the impacts to the City’s General Fund.
Jim Mosher requested clarification regarding the recycling fee revenues. Administrative &
Finance Manager Crespi affirmed that the revenues are the $3 per residential unit for recycling. Discussion ensued regarding how to offset costs and impacts of visitors while concurrently
acknowledging the revenues they also bring to the City.
There was no further action taken on this item.
B. FACILITIES FINANCIAL PLAN (FFP) Summary:
Staff will present a draft of Facilities Financial Plans reviewing the timing, means of financing, and fiscal impacts associated with funding Council prioritized capital projects.
Recommended Action: Review the Facilities Financial Plan and recommend the City Manager consider the changes
as needed for submittal to the City Council for final approval.
Staff provided an overview of the Facilities Financial Plan (FFP) noting that the City is saving cash for future facility replacements as opposed to solely relying upon future development
agreements or other such non-predictable funding.
In response to a Committee Member Collopy’s inquiry, Chair O’Neill noted that there is not much return on investment on most of these facility replacement projects, such as Marina Park.
Every year there are costs related to maintenance and operations and the City is looking more along the lines to save enough money now to cover the expenses so future City Councils do
not have to go out to issue debt for these items.
Council Member Dixon congratulated staff on the preparation of the FFP document and noted the evolution of this process, as many of the projects listed did not have funding sources seven
or eight years ago.
Committee Member Collopy noted that many of the advances in properly planning for facilities has to come from enhancing the General Fund, remaining tightfisted with outflows and
concluded by stating that real estate values continue to be good. The Finance Committee’s charter, as stated, is to review methods to maximize revenues and reduce expenses. At this
point, there is no guarantee regarding the amount of development related fees in the future.
Chair O’Neill noted the significant work that the City Council and staff has done to pay down pension liabilities and commence the financial planning for facility replacement.
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Committee Member Collopy restated that the City’s policy of allocating the City’s total year-end
surplus (50% to pension/long-term liabilities and 50% to CIP/neighborhood enhancement projects). He noted that this is a Council policy and Council determines each year how the
surplus should be utilized.
Council Member Dixon noted that these are one-time capital expenditures that are pending on a list, and it is like paying through the use of surplus.
Chair O’Neill stated that a Council-restricted fund has been created in the FFP, it is a separate
reserve. The Council can draw it down for long-term project and/or accumulate cash to pay down Civic Center debt and eventually, the other projects. Ultimately, if the Council uses the
second 50% of the surplus for projects, it is a balance sheet difference. It allows the City Council to potentially accelerate funding for projects that are already in the queue.
Finance Director/Treasurer Matusiewicz stated that this year’s surplus recommendation to the
City Manager will be $5 million to CalPERS, $3.3 million to neighborhood enhancement projects, and $2.7 million to the FFP.
In response to Committee Member Collopy, Chair O’Neill noted that the projects are a mixture
of CIP and FFP projects.
Discussion ensued regarding the chronological order of near-term projects, which was provided on page 6 of the handouts. These are projects that are planned through 2030. Finance
Director/Treasurer Matusiewicz requested the Finance Committee review the list as related to projected costs and scheduling. If the projects are recommended, augmentation of the normal
funding schedule will occur including an additional contribution of $2.7 million from the FY 2018-19 surplus. In addition, the annual $8.5 million contribution would need to be augmented
by $1 million per year for 5 years starting FY 2021-22.
Discussion ensued regarding the planning and costs related to that Balboa Yacht Basin apartments and garages. Committee Member Collopy stated that the number seemed
substantial for the low number of apartments and garages. Committee Member Tucker suggested the item would be a Council decision. Chair O’Neill affirmed the proposed number
seemed disproportionate as compared to potential return on investment. Deputy Director/Finance Montano stated the item was a placeholder and staff can further review and
potentially revise the projected number.
Committee Member Tucker and Council Member Dixon suggested a ground lease as a solution to the apartment/garage renovation matter. Chair O’Neill noted that the item would require
further analysis and evaluation before taking on the liability.
In response to Committee Member Collopy’s inquiry, Finance Director/Treasurer Matusiewicz noted that the project is not technically on tidelands property; however, the area is treated as
a percentage of tidelands and a percentage of non-tidelands.
Discussion ensued regarding Marina Park, Balboa Yacht Basin, and the Police Headquarters projects. Public Works Director Webb noted the higher costs involved in the construction of
public buildings, including requirements related to prevailing wage.
Committee Member Tucker stated that it may be more prudent for the City to consider ground leases as the return on investments may be better.
Chair O’Neill opened public comments.
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Jim Mosher stated the phrase “private contribution” should be revised on cover page 3, as it
may confuse readers to think a private organization is providing funding and should indicate that it is a state grant.
Chair O’Neill stated this FFP information should go to the City Council in the future for their
consideration.
There was no further action taken on this item.
D. LONG RANGE FINANCIAL FORECAST (LRFF) Summary:
Staff will provide an update to the latest version of the LRFF. Recommended Action:
Receive and file.
A staff report was given by Deputy Director/Finance Steve Montano. A PowerPoint presentation was displayed. He noted the department utilized the Synario tool, which is owned
by PFM with an annual subscription fee of $12,500. Development of the Long Range Financial Forecast (LRFF) consisted of three steps. First, establishing the baseline (growth projections
based on historical averages, and adjustments based on known, one-time events). Second, establishing impacts and alternative growth assumptions for any potential deviations from the
baseline. The third step consisted of the construction of “what-if” scenarios using any combination of alternate baselines and impacts.
Deputy Director/Finance Montano reviewed the various baselines, historical average growth
and future projected growth for City revenues, sales tax, transient occupancy tax, the General Fund, salaries and benefits, pension costs, and professional and contract services. He noted
several factors which have impacted the numbers including the positive increase in property tax revenues, slower growth in “brick and mortar” stores, consultant’s recommending a more
conservative approach to future sales tax revenues, positive impacts of recent City Council decision-making on pension liabilities.
In response to an inquiry from Committee Member Collopy, Deputy Director/Finance Montano
noted that the Dunes project was not included in the LRFF; however, the Lido House project was included.
Finance Director/Treasurer Matusiewicz reported there is double-digit growth in the residential
transient occupancy tax (TOT) sector. Discussion ensued regarding difference between residential and standard TOT. Deputy Director/Finance Montano reported TOT for short-term
lodging is 25.4 and residential is 4.4.
Deputy Director/Finance Montano reviewed various forecast scenarios based upon the recent
GFOA review of the City’s General Fund Reserve requirements conducted in 2018. He noted that the study found the average length of recession for Newport Beach was 4 and 1/3 quarters,
the “Great Recession” from March 2008 to January 2010 showed the moving average of City revenues declined 14.7%. The “Dot-Bomb” recession from February 2001 to May 2002,
showed the moving average for revenues only declined 4.4%, and for a hypothetical 4-quarter recession, there was only a 1% chance of a decline in revenue of 14.95% or more and a 10%
chance of a decline of 10.53% or more.
Deputy Director/Finance Montano reported that the City will continue to have mild recessions, and that they are built into the model. Over the past 5 years, the City has had very generous
General Fund surpluses; half from revenues and the other half from spending less than
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budgeted. The City has been consistent in its planning and has also benefitted from a strong
economy.
Council Member Dixon inquired as to whether the information presented included in the latest surplus number, to which Deputy Director/Finance Montano responded affirmatively.
Deputy Director/Finance Montano reviewed the three scenarios reviewed as part of the LRFF
planning process. Scenario 1 includes additional pension UAL contribution of $5million in FY 2020-21 (discussed with Finance Committee on November 29, 2018). Scenario 3 includes no
additional pension contributions and assumes no surplus (worst case scenario). Assuming there is no annual surplus, the City will spend expenditures/revenue, per baseline growth
assumptions. All projections are based on the FY 2019-20 original budget with some adjustment for one-time items. The baseline growth assumptions are used with mild recessions
occurring in fiscal years 2023, 2030, and 2037, which will impact the City’s Top 3 revenue sources. Surplus trends are forecasted based on traditional positive and negative revenue and
expenditure variances from budget.
Deputy Director/Finance Montano reviewed the various annual General Fund transfers including those in support of the FFP ($8.5 million up to $12 million in out years and add $1
million each year between fiscal years 2022 through 2026 to cover projects) , CIP ($5 million), Facilities Maintenance ($1.5 million), 800 MHz radio ($.5 million), Tidelands (ranging from $4.5
million to $6 million, fixed at $4.5 million starting in 2028) and the Contingency Reserve (25% of expenditures, less discretionary pension funding).
Committee Member Reed requested clarification regarding the quantification of mild
recessions. Deputy Director/Finance Montano explained the lags in property tax valuations and transient occupancy tax, and how the City tracks and incorporates the impacts of
recessions on those types of revenues.
Deputy Director/Finance Montano reviewed the graphical and text-based information for each scenario utilizing the handout material provided.
In response to an inquiry from Committee Member Tucker, Finance Director/Treasurer
Matusiewicz reported that $35 million per year is necessary to amortize the current liability and $5 million represents a buffer against future anticipated underperformance of investments.
City Manager Leung reported based on her review of the scenarios, the City is financially
healthy. Deputy Director/Finance Montano reported the City can cut from 2 to 4% temporarily out of the budget and not experience any structural deficits. The City still has a contingency
reserve in the base of an extreme event. The budget austerity measures were reviewed and he noted it provides tools and flexibility if the City does need to make cuts.
Committee Member Collopy inquired as to whether the cuts can be made without touching the
contingency reserve, to which Deputy Director/Finance Montano responded affirmatively.
Council Member Dixon inquired whether contingency reserves were utilized from 2008 through 2010, to which staff reported they were not.
In conclusion, Deputy Director/Finance Montano stated that the General Fund is projected to
be in a financially sound position over the next 20-year period and any projected deficit in the model is not reflective of likely and typical budget performance (actual revenues higher than
budgeted, expenditures less than budgeted). Short term deficits can be absorbed without long-term reliance on Contingency Reserve and no structural deficit is apparent. The City is not
without its fiscal challenges and is confronting financially impactful events in the near term. These include the potential for significant increases to CalPERS pension plans, the need to
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ramp-up savings to meet substantial near-term harbor improvements in accordance with the
Harbor and Beaches Master Plan, homeless strategies, and AB5.
In response to Committee Member Collopy’s inquiry, Chair O’Neill noted the discretionary UAL payment is not a Council policy.
Chair O’Neill opened public comments.
Charles Klobe inquired as to the reason the City is not paying more toward pension liability with
its annual surplus. Chair O’Neill noted that it is a matter of balancing between short-term expectations of the community and long-term financial planning for pay down of pension
obligations. The City Council, Finance Committee, and staff spend much time contemplating and discussing various options for balancing these two important priorities. He mentioned many
other cities have not addressed the long-term unfunded pension liabilities. Discussion ensued regarding the various mechanisms the City of Newport Beach has deployed to address this
matter, including fresh starts.
There was no further action taken on this item.
E. WORK PLAN REVIEW Summary:
Staff and Finance Committee to review the proposed work plan and adjust as necessary. Recommended Action:
Receive and file.
Chair O’Neill announced several items that will appear on the March agenda including the Harbor and Beaches Master Plan, audit results, and Police Department budget review.
VI. FINANCE COMMITTEE ANNOUNCEMENTS ON MATTERS WHICH MEMBERS WOULD LIKE
PLACED ON A FUTURE AGENDA FOR DISCUSSION, ACTION OR REPORT (NON-DISCUSSION ITEM)
None.
VII. ADJOURNMENT
The Finance Committee adjourned at 5:08 p.m. to the next regular meeting of the Finance
Committee.
Filed with these minutes are copies of all materials distributed at the meeting.
The agenda for the Regular Meeting was posted on February 6, 2020, at 5:12 p.m., in the binder and on the City Hall Electronic Board located in the entrance of the Council Chambers at 100 Civic
Center Drive.
Attest:
___________________________________ _____________________
Will O’Neill, Chair Date Finance Committee
CITY OF NEWPORT BEACH
FINANCE COMMITTEE STAFF REPORT
Agenda Item No. 5A March 12, 2020
TO: HONORABLE CHAIRMAN AND MEMBERS OF THE COMMITTEE
FROM: Finance Department Dan Matusiewicz, Finance Director 949-644-3123, danm@newportbeachca.gov
SUBJECT: FINANCIAL STATEMENT AUDIT RESULTS AND RELATED COMMUNICATION
SUMMARY:
In connection with the City’s financial statement audit, the auditors have expressed an
“unmodified” opinion of the City’s FY 2018-19 financial statements, meaning they are presented fairly without reservation, in all material respects. In connection with the Single Audit, a compliance audit of federally assisted grant programs, the auditors did not note
any findings of non-compliance or questioned costs. The attached letters from the City’s
auditors, White Nelson Diehl Evans, fulfill those obligations for the required
communication. RECOMMENDED ACTION:
Receive and file. DISCUSSION:
The first audit letter, included as Attachment A, is intended to communicate matters of
particular significance that City Council should be aware of including:
• Qualitative Aspects of Accounting Practices
• Difficulties Encountered in Performing the Audit
• Corrected and Uncorrected Adjustments
• Disagreements with Management
• Management Representations
• Management Consultations with Other Independent Accountants
Financial Statement Audit Results and Related Communication March 12, 2020
Page 2
• Other Audit Findings or Issues The auditors reported no significant difficulties encountered in connection with the
performance of the audit, disagreements with management or other audit findings or
issues. They did report one audit adjustment that was waived because it was immaterial
both individually and in the aggregate, to the financial statements taken as a whole. The second letter, included as Attachment B, entitled “Independent Auditors’ Report on
Internal Control Over Financial Reporting and on Compliance and Other Matters” is
intended to communicate deficiencies, significant deficiencies or material weaknesses in
internal control and instances of non-compliance or other matters. We are pleased to report that the auditors did not identify any deficiencies in internal control considered to be a material weakness that would result in more than a remote likelihood of a material
misstatement of the financial statements or would not otherwise be prevented by the
City’s internal controls. They also did not identify any instances of noncompliance or
other matters that require specific communication to the governing body as promulgated by Government Auditing Standards.
You will have the opportunity to speak to the auditors, without staff present, to answer any
questions that you might have concerning the FY 2018-19 Audit.
Prepared by: Submitted by:
/s/ Rukshana Virany /s/ Dan Matusiewicz
Rukshana Virany Dan Matusiewicz
Accounting Manager Finance Director
Attachments:
A. Auditor’s “Audit Committee Letter” B. Auditor’s “Report on Internal Control Over Financial Reporting and on Compliance
and Other Matters”
ATTACHMENT A
AUDITOR’S “AUDIT COMMITTEE LETTER”
2875 Michelle Drive, Suite 300 | Irvine, California 92606 | WNDECPA.com | 714.978.1300
1
To the Honorable Mayor and
Members of the City Council
of the City of Newport Beach
Newport Beach, California
We have audited the 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 (the City), as of and for the year ended June 30, 2019. Professional standards require that we
provide you with information about our responsibilities under generally accepted auditing standards, as
well as certain information related to the planned scope and timing of our audit. We have
communicated such information in our letter on planning matters dated May 16, 2019. Professional
standards also require that we communicate to you the following information related to our audit.
Significant Audit Findings
Qualitative Aspects of Accounting Practices
Management is responsible for the selection and use of appropriate accounting policies. The significant
accounting policies used by the City are described in Note 1 to the financial statements. No new
accounting policies having a significant impact were adopted and the application of existing policies
was not changed during 2019. We noted no transactions entered into by the City during the year for
which there is a lack of authoritative guidance or consensus. All significant transactions have been
recognized in the financial statements in the proper period.
Accounting estimates are an integral part of the financial statements prepared by management and are
based on management’s knowledge and experience about past and current events and assumptions
about future events. Certain accounting estimates are particularly sensitive because of their
significance to the financial statements and because of the possibility that future events affecting them
may differ significantly from those expected.
The most sensitive estimates affecting the City’s financial statements are as follows:
a.Management’s estimate of the fair value, the price that would be received to sell an
asset in an orderly transaction between market participants, of investments is based
on market values provided by outside sources.
b.Management’s estimate of the value of capital assets (infrastructure assets) is based
on industry standards.
c.The estimated useful lives of capital assets for depreciation purposes are based on
industry standards.
2
Significant Audit Findings (Continued)
Qualitative Aspects of Accounting Practices (Continued)
d.The annual required contributions, pension expense, net pension liability and
corresponding deferred outflows of resources and deferred inflows of resources for
the City’s public defined benefit plans are based on actuarial valuations provided by
CalPERS.
e.The actuarially determined contribution, OPEB expense, net OPEB liability, and
corresponding deferred outflows of resources and deferred inflows of resources for
the City’s OPEB plan are based on actuarial valuations provided by a third party.
f.Management’s estimate of the claims payable liabilities related to general liability
and worker’s compensation claims are based on actuarial valuations provided by a
third party.
We evaluated the key factors and assumptions used to develop these estimates in determining that they
were reasonable in relation to the financial statements taken as a whole.
Certain financial statement disclosures are particularly sensitive because of their significance to
financial statement users. The most sensitive disclosures affecting the financial statements were
reported in Note 8 regarding claims payable, Note 10 regarding the City’s defined benefit plans,
Note 11 regarding the City’s Other Post-Employment Benefit Plan, and Note 17 regarding restatement
of net position. The financial statement disclosures are neutral, consistent, and clear.
Difficulties Encountered in Performing the Audit
We encountered no significant difficulties in dealing with management in performing and completing
our audit.
Corrected and Uncorrected Misstatements
Professional standards require us to accumulate all known and likely misstatements identified during
the audit, other than those that are clearly trivial, and communicate them to the appropriate level of
management. As a result of our audit-related test work, we proposed one correction to the financial
statements in the amount of $350,000 in the General Liabilities Internal Service Fund to account for
the total estimated liability of a probable loss lawsuit pending with the City.
Disagreements with Management
For purposes of this letter, a disagreement with management is a financial accounting, reporting, or
auditing matter, whether or not resolved to our satisfaction, that could be significant to the financial
statements or the auditors’ report. We are pleased to report that no such disagreements arose during the
course of our audit.
Management Representations
We have requested certain representations from management that are included in the management
representation letter dated December 18, 2019.
3
Significant Audit Findings (Continued)
Management Consultations with Other Independent Accountants
In some cases, management may decide to consult with other accountants about auditing and
accounting matters, similar to obtaining a “second opinion” on certain situations. If a consultation
involves application of an accounting principle to the City’s financial statements or a determination of
the type of auditor’s opinion that may be expressed on those statements, our professional standards
require the consulting accountant to check with us to determine that the consultant has all the relevant
facts. To our knowledge, there were no such consultations with other accountants.
Other Audit Findings or Issues
We generally discuss a variety of matters, including the application of accounting principles and
auditing standards, with management each year prior to retention as the City’s auditors. However,
these discussions occurred in the normal course of our professional relationship and our responses
were not a condition to our retention.
Other Matters
We applied certain limited procedures to management’s discussion and analysis, and the schedules of
changes in net pension liability and related ratios, and the schedules of contributions related to the
City’s defined benefit plans, and the schedule of changes in net OPEB liability and related ratios and
the schedule of contributions related to the City’s OPEB plan, which are required supplementary
information (RSI) that supplements the financial statements. Our procedures consisted of inquiries of
management regarding 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 our audit of the basic financial statements. We did not audit the RSI
and do not express an opinion or provide any assurance on the RSI.
We were engaged to report on the combining and individual fund financial statements and schedules
(supplementary schedules), which accompany the financial statements but are not RSI. With respect to
this supplementary information, we made certain inquiries of management and evaluated the form,
content, and methods of preparing the information to determine that the information complies with
accounting principles generally accepted in the United States of America, the method of preparing it
has not changed from the prior period, and the information is appropriate and complete in relation to
our audit of the financial statements. We compared and reconciled the supplementary information to
the underlying accounting records used to prepare the basic financial statements or to the basic
financial statements themselves.
We were not engaged to report on the introductory and statistical sections, which accompany the
financial statements but are not RSI. We did not audit or perform other procedures on this other
information and we do not express an opinion or provide any assurance on them.
4
Upcoming Changes in Accounting Standards
The Governmental Accounting Standards Board (GASB) issued Statement No. 84, Fiduciary Activities
(Statement), which is effective for the City’s fiscal year ended June 30, 2020. Due to the significant
nature of this Statement, GASB has also issued Implementation Guide No. 2019-2, Fiduciary Activities,
to clarify, explain, and elaborate the requirements of this Statement. The objective of the Statement is
to improve guidance regarding the identification of fiduciary activities for accounting and financial
reporting purposes and how those activities should be reported. Implementation of this Statement could
require significant time from staff to identify the City’s fiduciary activities, to analyze current activity
in the City’s agency funds and recharacterize those activities into a custodial fund or another City fund
depending upon whether the activity is custodial in nature or related to a City’s own-source revenue
activity, and, to potentially modify the chart of accounts structure in the City’s general ledger for
fiduciary activities to accommodate the newly-required statement of changes in fiduciary net position
for all fiduciary activities.
Restriction on Use
This information is intended solely for the use of the City Council and management of the City of
Newport Beach and is not intended to be, and should not be, used by anyone other than these specified
parties.
Irvine, California
December 18, 2019
ATTACHMENT B
AUDITOR’S "REPORT ON INTERNAL CONTROL OVER FINANCIAL
REPORTING AND ON COMPLIANCE AND OTHER MATTERS"
2875 Michelle Drive, Suite 300 | Irvine, California 92606 | WNDECPA.com | 714.978.1300
INDEPENDENT AUDITORS’ REPORT ON INTERNAL CONTROL OVER
FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS
BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED
IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS
The Honorable Mayor and
Members of City Council
City of Newport Beach
Newport Beach, California
We have audited, in accordance with the auditing standards generally accepted in the United States of
America and the standards applicable to financial audits contained in Government Auditing Standards
issued by the Comptroller General of the United States, the 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 (the City), as of and for the year ended June 30, 2019, and the
related notes to the financial statements, which collectively comprise the City’s basic financial
statements and have issued our report thereon dated December 18, 2019.
Internal Control over Financial Reporting
In planning and performing our audit of the financial statements, we considered the City’s internal
control over financial reporting (internal control) to determine the audit procedures that are appropriate
in the circumstances for the purpose of expressing our opinions on the financial statements, but not for
the purpose of expressing an opinion on the effectiveness of the City’s internal control. Accordingly,
we do not express an opinion on the effectiveness of the City’s internal control.
A deficiency in internal control exists when the design or operation of a control does not allow
management or employees, in the normal course of performing their assigned functions, to prevent, or
detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a
combination of deficiencies, in internal control, such that there is a reasonable possibility that a
material misstatement of the City’s financial statements will not be prevented, or detected and
corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies,
in internal control that is less severe than a material weakness, yet important enough to merit attention
by those charged with governance.
Our consideration of internal control was for the limited purpose described in the first paragraph of this
section and was not designed to identify all deficiencies in internal control that might be material
weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify
any deficiencies in internal control that we consider to be material weaknesses. However, material
weaknesses may exist that have not been identified.
Compliance and Other Matters
As part of obtaining reasonable assurance about whether the City’s financial statements are free from
material misstatement, we performed tests of its compliance with certain provisions of laws,
regulations, contracts, and grant agreements, noncompliance with which could have a direct and
material effect on the determination of financial statement amounts. However, providing an opinion on
compliance with those provisions was not an objective of our audit, and accordingly, we do not express
such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that
are required to be reported under Government Auditing Standards.
Purpose of this Report
The purpose of this report is solely to describe the scope of our testing of internal control and
compliance and the results of that testing, and not to provide an opinion on the effectiveness of the
City’s internal control or on compliance. This report is an integral part of an audit performed in
accordance with Government Auditing Standards in considering the City’s internal control and
compliance. Accordingly, this communication is not suitable for any other purpose.
Irvine, California
December 18, 2019
CITY OF NEWPORT BEACH
FINANCE COMMITTEE STAFF REPORT
Agenda Item No. 5B March 12, 2020
TO: HONORABLE CHAIRMAN AND MEMBERS OF THE COMMITTEE
FROM: Finance Department Dan Matusiewicz, Finance Director 949-644-3123, danm@newportbeachca.gov
SUBJECT: HARBOR AND BEACHES MASTER PLAN UPDATE
SUMMARY:
The Finance Committee is charged with a variety of tasks including, but not limited to,
reviewing with staff on an annual basis the timing, means of financing, and fiscal impacts
associated with funding the high-priority projects designated in the Facilities Financing
Plan (FFP) and the Harbor and Beaches Master Plan (HBMP). Staff welcomes input and recommends that the Committee receive and file the attached HBMP update and provide
staff with any input regarding its financial solvency.
RECOMMENDED ACTION:
Staff welcomes input and recommends that the Committee receive and file the attached HBMP update and provide staff any input regarding its financial solvency.
DISCUSSION: Each year, as part of the budget process, staff prepares an update to the long-term HBMP.
Staff has projected the timing, means of financing, and fiscal impacts associated with
funding the high-priority projects in the HBMP as recommended by the Harbor
Commission. The Harbor Commission reviewed and approved the HBMP on March 11,
2020.
As indicated on the “Sources and Uses Proforma” (page 2 of Attachment A), revenue
sources derive from increment revenue projections, interest earnings, and General Fund
contributions. All sources and uses are shown net of the $49 million in anticipated grants
through 2030.
Harbor and Beaches Master Plan Update March 12, 2020
Page 2 With the adoption of new permit and the adjustment of lease templates and adjusted
commercial and noncommercial tidelands rent to fair market value in the years immediately subsequent to 2010, the City Council directed staff to deposit incremental rent increases
from certain harbor revenue sources to a Tidelands Capital Fund. The intent was to
sequester the incremental increases from tidelands rent adjustments solely to finance
critical in-Harbor capital improvements, like sea walls repair, dredging, piers, and important
amenities. Over the next ten years, increment revenue will range between $3.5 to $4.2 million annually.
Historically, the Tidelands Operating Fund does not generate sufficient revenue to cover
the full cost of operations – in large part because of the public safety costs (lifeguarding,
EMS response, and police services) associated with the ocean beaches and other Tidelands property. Similarly, the incremental rents dedicated to the Tidelands Capital fund
are not sufficient to fund the capital improvement projects contemplated in the HBMP. Due
to the ongoing gap between revenues and expenditures, the City’s General Fund transfers
approximately $8 million annually to subsidize the Tideland operations. Over the duration
of the HBMP forecast, the General Fund is anticipated to contribute $4.5 million annually to support the HBMP.
Beginning in FY 2008-09, the City had an opportunity to complete a long-awaited
maintenance dredging project within Lower Newport Bay, and a similar opportunity arose
to remove sediments not suitable for ocean disposal that sat at the bottom of the Rhine Channel. The timing was critical, as much of the sediment within the Harbor and the Rhine
needed a special repository – and that repository was in fill areas at the Port of Long Beach
as the Port embarked on a major terminal expansion. To take advantage of the Port’s space
for sediment not suitable for ocean disposal (where the sediment would be buried and
encased in a support structure and secured), the City Council advanced a loan from the General Fund to the Tidelands Harbor Capital Fund of $9.7 million. In addition, City Council
approved another $6.1 million in loan advances to the Harbor Capital Fund to cover the
cost of development of the Marina Park, marina and slips. These advances are non-interest
bearing, and are to be paid back to the General Fund from incremental revenue increases
generated from certain leases, mooring rents, and commercial and residential pier rents. The balance of advance due to the General Fund as of June 30, 2019, is $11.9 million and
the remaining annual debt service payments to the General Fund through 2030 is reflected
on Attachment A, page 2.
Staff welcomes and looks forward to any recommendations from Finance Committee.
Prepared and Submitted by:
/s/ Steve Montano
_____________________________
Steve Montano
Deputy Finance Director
Harbor and Beaches Master Plan Update March 12, 2020
Page 3 Attachment:
A. Harbor and Beaches Master Plan
ATTACHMENT A
HARBOR AND BEACHES MASTER PLAN
I:\Users\FIN\Shared\Accounting\Funds\240_Tidelands Capital_101\Harbor Capital Project Financing Plan\Harbor and Beaches Capital Planning 2020 02.24.20 1 of 4
HARBOR & BEACHES MASTER PLAN DASHBOARD TRUE Updated:3/2/2020
1 2
3 4
5 6
$0
$20,000,000
$40,000,000
$60,000,000
$80,000,000
$100,000,000
$120,000,000
$140,000,000
20202021202220232024202520262027202820292030203120322033203420352036203720382039204020412042204320442045Harbor and Beaches Master Plan Funding Balance
$0
$5,000,000
$10,000,000
$15,000,000
$20,000,000
$25,000,000
20202021202220232024202520262027202820292030203120322033203420352036203720382039204020412042204320442045Project Expenditures
City Exp Grant Covered Exp
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
35.00%
40.00%2020202220242026202820302032203420362038204020422044Debt Service as % of Dedicated Revenues
Debt Service - as % of Revenues
$0
$5,000,000
$10,000,000
$15,000,000
$20,000,000
$25,000,000
$30,000,000
20202022202420262028203020322034203620382040204220442046All Estimated Revenue Sources
Grants
Periodic GF or One-time Transfers
General Fund Contributions
Interest Earnings
Incremental Revenue Projection
Bay, $0.1, 0%
Bulkhead, $154.6,
81%
Dredging, $13.1, 7%
Gate Valves, $4.2, 2%
Other, $5.6, 3%
Piers, $4.1, 2%
Sand, $0.3, 0%
Slips, $9.5, 5%
Water Quality, $0.5, 0%
Expenditures by Type (millions)
With external contributions (grants) as indicated on project list
Increment Revenue,
$229 , 47%
General Fund
Contributions, $204 , 42%
Periodic General Fund Contributions or
One-Time Transfers, $2 , 1%
Grants, $49 , 10%
Revenues by Type (millions)
I:\Users\FIN\Shared\Accounting\Funds\240_Tidelands Capital_101\Harbor Capital Project Financing Plan\Harbor and Beaches Capital Planning 2020 02.24.20 2 of 4
Last Updated: 3/2/2020 2020
Ref #ProjGL Project Category YR Built Last Refurb.
Units
Measurement Total Units
Today's Unit
Cost Current Age: Useful Life Years to Start Project Estimate
FY Design Start
Year
FY Const Start
Year
FV Cost Est @2.5%
Growth
External
Contributions Net Proposed Cost
1 Arches Drain: Dry Weather Diversion Drain 2017 0 LS 1 $860,000 3 80 1 $860,000 2017 2019 $881,500 $820,000 $61,500
2 16H12 Grand Canal Dredging Dredging 0 2019 CY 1 $1,500,000 **20 19 $1,500,000 2037 2039 $2,397,975 $2,397,975
3 18H12 Bilge Pumpout Dock/Oil Collection Center Water Quality 0 0 LS 2 $100,000 **15 1 $200,000 2018 2020 $205,000 $205,000
4 Navigation Markers: Convert Federal Stationary Markers to
Floats
Other 0 0 LS 1 $60,000 **0 1 $60,000 2018 2020 $61,500 $61,500 $0
5 19H11 Public Swim Float (10th St)Other 0 0 EA 1 $30,000 **20 1 $30,000 2018 2020 $30,750 $30,750
6 19H11 Public Swim Float (Ruby Ave. N Bay Font)Other 0 EA 1 $30,000 **20 1 $30,000 2018 2020 $30,750 $30,750
7 18H12 Bilge Pumpout Dock/Oil Collection Center Water Quality 0 0 EA 1 20,000 0 1 $20,000 2018 2020 $20,500 $20,500
8 16H11 Bulkhead (American Legion): Repair Bulkhead 1957 0 LF 1 $1,500,000 63 40 1 $1,500,000 2019 2021 $1,537,500 $1,537,500
9 18H07 Dredging: Lower Bay (Channels - Ongoing Maintenance)Dredging 0 0 CY 1,200,000 $19 **30 1 $22,800,000 2019 2021 $23,370,000 $18,000,000 $5,370,000
10 Entrance Jetty: Maintenance (Federal)Other 1936 0 LF 700 $1,300 84 50 1 $910,000 2019 2020 $932,750 $932,750 $0
11 19H02 Public Pier (15th St): Float only Piers 0 0 EA 1 $50,000 **20 1 $50,000 2020 2021 $51,250 $51,250
12 19H02 Public Pier (19th St): Gangway & Float Piers 0 0 EA 1 $75,000 **20 1 $75,000 2020 2021 $76,875 $76,875
13 19H02 Public Pier (Coral Ave): Gangway & Float Piers 1985 1985 EA 1 $75,000 35 20 1 $75,000 2020 2021 $76,875 $76,875
14 19H02 Public Pier (Fernando St): Gangway & Float Piers 0 0 EA 1 $75,000 **20 2 $75,000 2020 2022 $78,797 $78,797
15 19H02 Public Pier (M St): Gangway & Float Piers 0 0 EA 1 $100,000 **20 1 $100,000 2020 2021 $102,500 $102,500
16 19H02 Public Pier (Opal Ave): Gangway & Float Piers 0 0 EA 1 $75,000 **20 1 $75,000 2020 2021 $76,875 $76,875
17 19H02 Public Pier (Park Ave): Gangway & Float Piers 0 0 EA 1 $75,000 **20 1 $75,000 2020 2021 $76,875 $76,875
18 19H02 Public Pier (Washington St): Gangway & Float Piers 0 0 EA 1 $75,000 **20 1 $75,000 2020 2021 $76,875 $76,875
19 Tide Gate Valves (Balboa Island): Replace Gate Valves 0 0 EA 34 $50,000 **25 5 $1,700,000 2020 2025 $1,923,394 $1,923,394
20 Water Quality: TMDL Compliance:Water Quality 0 0 LS 1 $200,000 **Ongoing 8 $200,000 2019 2028 $243,681 $243,681
21 20H12 Balboa Yacht Basin Major Dock Maintenance Slips 1985 0 EA 1 150,000 35 40 1 $150,000 2020 2021 $153,750 $153,750
22 Central Peninsula Sand Nourishment (Ocean Beach)Sand 2017 CY 1,000,000 3 20 10 $0 2020 2030 $0 $0
23 Coastal Commission/Public Works Plan Other 0 0 LS 1 $500,000 **50 6 $500,000 2025 2026 $579,847 $579,847
24 Dredging Equipment (needs further review)Dredging 0 0 EA - $0 **0 6 $0 2025 2026 $0 $0
25 Dredging: Newport Island Area (Channels)Dredging 0 0 CY 20,000 $150 **50 3 $3,000,000 2020 2023 $3,230,672 $3,230,672
26 Land Acquisition for Potential Launch Ramp Other 0 EA 1 $0 **80 4 $0 2021 2024 $0 $0
27 Mooring Field Enhancements Moorings 0 0 EA 1 - 0 0 4 $0 2020 2024 $0 $0
28 16H14; 17H03 Ocean Piers Maintenance (Balboa and Newport)Piers 0 2017 EA 1 500,000 **0 1 $500,000 2020 2021 $512,500 $512,500
29 19H02 Public Pier (29th St): Gangway & Float Piers 0 0 EA 1 $100,000 **20 2 $100,000 2020 2022 $105,063 $105,063
30 19H02 Public Pier (Emerald Ave): Gangway & Float Piers 1986 1986 EA 1 $75,000 34 20 2 $75,000 2020 2022 $78,797 $78,797
31 19H02 Public Pier (Sapphire Ave): Gangway & Float Piers 0 0 EA 1 $75,000 **20 2 $75,000 2020 2022 $78,797 $78,797
32 Tide Gate Valves (Peninsula): Replace Gate Valves 0 0 EA 39 $50,000 **25 6 $1,950,000 2020 2026 $2,261,402 $2,261,402
33 20H13 Vessel Sewage Pumpouts Replacements Water Quality 0 0 EA 5 $21,255 **10 1 $106,275 2017 2020 $108,932 $79,706 $29,226
34 Entrance Jetty - Navigation Aid Replace Other 0 0 EA 1 400,000 0 30 3 $400,000 2021 2023 $430,756 $430,756
35 Ferry Landing - Agate Avenue Bulkhead 1930 0 EA 1 - 90 60 3 $0 2021 2023 $0 $0
36 Ferry Landing - Palm Street Bulkhead 1930 0 EA 1 - 90 60 3 $0 2021 2023 $0 $0
37 Public Beaches (Lido Isle Bridge) Potential Handrail Other 0 0 EA 1 50,000 **3 $50,000 2021 2023 $53,845 $53,845
38 Public Beaches (Lido Isle Bridge): Install Walkway to Beach Bay 0 0 EA 1 $75,000 **40 3 $75,000 2021 2023 $80,767 $80,767
39 Lower Castaways: Bulkhead Only Bulkhead 0 0 LF 265 $3,800 **80 4 $1,007,000 2022 2024 $1,111,540 $1,111,540
40 Water Quality: Circulation (Newport Island Area):Water Quality 0 0 EA - **0 5 $0 2022 2025 $0 $0
41 Balboa Island, N, S, E & GC: Boardwalk & Perimeter
Drainage System only (Little Island not include ~42k SF)
Other 0 0 SF 92,000 $25 **80 6 $2,300,000 2024 2026 $2,667,295 $2,667,295
42 Balboa Yacht Basin Marina (Slips): Replace Slips 1985 0 Slips 172 $35,000 35 40 7 $6,020,000 2024 2027 $7,155,888 $7,155,888
43 Dredging (Balboa Yacht Basin):Dredging 1985 0 CY 25,600 $70 35 40 7 $1,792,000 2024 2027 $2,130,125 $2,130,125
44 Surfside/Sunset Beach Sand Nourishment Stage 14 Sand 2017 LS 1 $300,000 3 7 2 $300,000 2021 2022 $315,188 $315,188
45 Balboa Island, N, S, E & GC: Replace Seawall EBF Bulkhead 1930 LF 4,386 $3,800 90 81 11 $16,667,666 2026 2031 $21,869,423 $21,869,423
46 Balboa Island, N, S, E & GC: Replace Seawall GC and EBF Bulkhead 1930 LF 4,386 $3,800 90 80 6 $16,667,666 2026 2026 $19,329,383 $19,329,383
47 Balboa Island, N, S, E & GC: Replace Seawall NBF Bulkhead 1930 LF 4,386 $3,800 90 82 17 $16,667,666 2026 2037 $25,361,826 $25,361,826
48 Dredging: Upper Bay Catch Basins Dredging 2009 0 CY 500,000 $30 11 21 10 $15,000,000 2027 2030 $19,201,268 $19,201,268 $0
49 Dredging: Upper Bay Channels Dredging 2009 CY 250,000 $30 11 21 10 $7,500,000 2027 2030 $9,600,634 $9,600,634 $0
50 Rhine Wharf Boardwalk: Major Repair Other 0 0 EA 1 $150,000 **20 2 $150,000 2021 2022 $157,594 $157,594
51 Public Bay Beaches: Sand Nourishment (25k yards)Other 2016 0 CY 25,000 $50 4 25 11 $1,250,000 2028 2031 $1,640,108 $1,640,108
52 Public Pier (15th St): Pier & Gangway Piers 0 0 EA 1 $115,000 **20 14 $115,000 2031 2034 $162,492 $162,492
53 Public Pier (Coral Ave): Pier only Piers 1985 1985 EA 1 $75,000 35 20 14 $75,000 2031 2034 $105,973 $105,973
54 Public Pier (Emerald Ave): Pier only Piers 1986 1986 EA 1 $75,000 34 20 14 $75,000 2031 2034 $105,973 $105,973
55 Public Pier (Fernando St): Pier only Piers 0 0 EA 1 $75,000 **20 14 $75,000 2031 2034 $105,973 $105,973
56 Public Pier (M St): Pier only Piers 1985 1985 EA 1 $100,000 35 20 14 $100,000 2031 2034 $141,297 $141,297
57 Public Pier (Opal Ave): Pier only Piers 0 0 EA 1 $75,000 **20 14 $75,000 2031 2034 $105,973 $105,973
58 Public Pier (Park Ave): Pier only Piers 0 0 EA 1 $75,000 **20 14 $75,000 2031 2034 $105,973 $105,973
59 Public Pier (Sapphire Ave): Pier only Piers 0 0 EA 1 $75,000 **20 14 $75,000 2031 2034 $105,973 $105,973
60 Public Pier (Washington St): Pier only Piers 0 0 EA 1 $75,000 **20 14 $75,000 2031 2034 $105,973 $105,973
61 Bulkhead (American Legion): Replace Bulkhead 1957 0 LF 336 $3,800 63 80 34 $1,276,800 2051 2054 $2,956,203 $2,956,203
62 Public Pier (Rhine Channel): Float only Piers 2007 2007 EA 1 $175,000 13 30 17 $175,000 2034 2037 $266,283 $266,283
63 Bulkhead (Rhine Channel): Replace Bulkhead 1960 0 LF 375 $3,800 60 80 20 $1,425,000 2037 2040 $2,335,028 $2,335,028
64 Public Pier (Grand Canal, Balboa Ave): Pier Platform Piers 2017 2012 EA 1 $15,000 3 20 18 $15,000 2037 2038 $23,395 $23,395
HARBOR & BEACHES MASTER PLAN PROJECTS
I:\Users\FIN\Shared\Accounting\Funds\240_Tidelands Capital_101\Harbor Capital Project Financing Plan\Harbor and Beaches Capital Planning 2020 02.24.20 3 of 4
Ref #ProjGL Project Category YR Built Last Refurb.
Units
Measurement Total Units
Today's Unit
Cost Current Age: Useful Life Years to Start Project Estimate
FY Design Start
Year
FY Const Start
Year
FV Cost Est @2.5%
Growth
External
Contributions Net Proposed Cost
65 Bulkhead (West Newport): Replace Bulkhead 0 0 LF 1,722 $3,800 **80 21 $6,543,600 2038 2041 $10,990,512 $10,990,512
66 Bulkhead (Corona Del Mar): Replace Bulkhead 0 0 LF 175 $3,800 **80 25 $665,000 2042 2045 $1,232,873 $1,232,873
67 Bulkhead (Promontory Bay): Replace Bulkhead 1965 0 LF 1,158 $3,800 55 80 25 $4,400,400 2042 2045 $8,158,096 $8,158,096
68 Public Pier (Rhine Channel): Gangway only Piers 0 0 EA 1 $60,000 **40 27 $60,000 2044 2047 $116,868 $116,868
69 Bulkhead (Rhine Wharf): Replace Bulkhead 0 0 LF 343 $3,800 **80 29 $1,303,400 2046 2049 $2,667,287 $2,667,287
70 Marina Park Slips: Replace Slips 2015 0 EA 23 $40,000 5 40 35 $920,000 2052 2055 $2,183,349 $2,183,349
71 Bulkhead (Street Ends - Peninsula): Replace Bulkhead 0 0 LF 2,217 $3,800 **80 36 $8,424,600 2053 2056 $20,493,137 $20,493,137
72 Public Pier (Balboa Marina West): Float only Piers 2017 0 EA 1 $200,000 3 40 37 $200,000 2054 2057 $498,670 $498,670
73 Public Pier (Balboa Marina West): Gangway Piers 2017 0 EA 1 $50,000 3 41 38 $50,000 2055 2058 $127,784 $127,784
74 Public Pier (Central Ave): Gangway and Float Piers 2017 0 EA 1 $250,000 3 40 37 $250,000 2055 2057 $623,337 $623,337
75 Bulkhead (Balboa Yacht Basin): Replace Bulkhead 1985 0 LF 1,370 $3,800 35 80 45 $5,206,000 2063 2065 $15,815,324 $15,815,324
76 Bulkhead (Marina Park): Replace Bulkhead 2015 0 LF 857 $3,800 5 80 75 $3,256,600 2093 2095 $20,751,731 $20,751,731
TOTAL $157,624,674 $240,753,097 $48,695,858 $192,057,239
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HARBOR & BEACHES MASTER PLAN SOURCES AND USES PROFORMA
2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
AFFORDABILITY ASSUMPTIONS
Tidelands Capital Fund Revenues 3,630,820 3,685,282 3,740,562 3,796,670 3,853,620 3,911,424 3,970,096 4,029,647 4,090,092 4,151,443 4,213,715
Growth Assumption 1.50%1.50%1.50%1.50%1.50%1.50%1.50%1.50%1.50%1.50%1.50%
Debt Service as % of Revenues 34.43%33.92%33.42%32.92%32.44%31.96%31.49%31.02%22.66%12.04%11.87%
FFP Balance as % of Debt Service 1625.51%2125.61%2672.92%3243.70%3735.48%4217.81%4560.96%4002.32%4733.94%9726.95%11352.64%
HARBOR CAPITAL SOURCES BUDGETED
Beginning Harbor Capital Balance 19,029,798 20,318,861 26,570,144 33,411,445 40,546,208 46,693,449 52,722,574 57,011,971 50,028,969 43,867,453 48,634,767
Sources
Increment Revenue Projections 3,507,766 3,685,282 3,740,562 3,796,670 3,853,620 3,911,424 3,970,096 4,029,647 4,090,092 4,151,443 4,213,715
Interest Earnings 123,054
General Fund Contributions 3,500,000 4,500,000 5,500,000 6,000,000 6,000,000 5,500,000 5,500,000 5,500,000 4,500,000 4,500,000 4,500,000
Periodic GF or One-time Transfers 2,000,000
Total Sources (does not include grants):9,130,820 8,185,282 9,240,562 9,796,670 9,853,620 9,411,424 9,470,096 9,529,647 8,590,092 8,651,443 8,713,715
Uses
Debt Service (1,250,000) (1,250,000) (1,250,000) (1,250,000) (1,250,000) (1,250,000) (1,250,000) (1,250,000) (926,659) (500,000) (500,000)
Other Fiscal Charges - - - - - - - - - - -
Project Uses (6,591,757) (683,999) (1,149,260) (1,411,907) (2,456,379) (2,132,300) (3,930,698) (15,262,649) (13,824,950) (3,384,129) (85,288)
Transfers Out - - - - - - - - - - -
Less: Cash Proj Funding
Total Uses:(7,841,757) (1,933,999) (2,399,260) (2,661,907) (3,706,379) (3,382,300) (5,180,698) (16,512,649) (14,751,609) (3,884,129) (585,288)
Projected Harbor Capital Balance 20,318,861 26,570,144 33,411,445 40,546,208 46,693,449 52,722,574 57,011,971 50,028,969 43,867,453 48,634,767 56,763,193
I:\Users\FIN\Shared\Admin\Finance Committee\WORK PLAN\2020\2020 FC Workplan.xlsx 1
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Scheduled Date Agenda Title Agenda Description
Tuesday, January 14, 2020 Council Study Session - Economic Update by Beacon Economics CANCELLED Dr. Chris Thornberg to provide Council a brief regional economic update.
Thursday, January 16, 2020 OPEB Actuarial Valuation Review OPEB Actuarial Valuation
Internal Audit Program Update Staff will provide an oral update of plans to implement a robust internal audit
and performance audit program.
TOT, Charter Tax and Other Audits Update Staff will update the committee on the TOT, charter tax and other audit findings
performed to date.
Budget Amendments for Quarter Ending December 31, 2019 Staff will report on the budget amendments from the prior quarter.
Work Plan Review Staff and Finance Committee to review the proposed work plan and adjust as necessary.
Saturday, January 25, 2020 Special Council Meeting - Council Planning Session (Tentative)Staff will present status and funding of major programs planned for the
calendar year.
Finance Committee Attendance Optional
Thursday, February 13, 2020 Review of Public Works Department Budget Public Works will present the contours of its FY19-20 budget to inform the
Committee's understanding of its operation in advance of the FY20-21 budget
preparation.
Facilities Financial Plan (FFP)Staff will present a draft of Facilities Financial Plans reviewing the timing,
means of financing, and fiscal impacts associated with funding Council
prioritized capital projects.
Fee Study Update Staff will present the Master Fee Schedule to the Finance Committee and
subsequently will present to the City Council.
Long Range Fiscal Forecast (LRFF)Staff will provide an update to the latest version of the LRFF.
Tuesday, March 10, 2020 Council Study Session - Capital Improvement Plan Early Look
Finance Committee Attendance Optional
Thursday, March 12, 2020 Financial Statement Audit Results and Related Communication The City’s external audit firm, White Nelson Diehl Evans LLP will meet with the
Finance Committee to discuss the audit findings for the fiscal year ending
6/30/2019. The Committee will have an opportunity to discuss any potential
areas of concern and the auditors can discuss any changes in accounting
standards or disclosures that were relevant for the audit year.
Harbor and Beaches Master Plan Staff will present a draft of Harbor and Beaches financial plans reviewing the
timing, means of financing, and fiscal impacts associated with funding Council
prioritized capital projects.
Discuss Revenue Assumptions Staff will provide of an overview of revenue assumptions for the FY 2020-21
Proposed Budget.
Thursday, April 16, 2020 Proposed FY 2020-21 Budget Overview Staff will provide an overview of the Proposed FY 2020-21 Operating Budget.
Budget Amendments for Quarter Ending March 31, 2020 Staff will report on the budget amendments for the prior quarter.
Thursday, April 30, 2020 Proposed FY 2020-21 Budget Overview (Tentative - If Needed)Tentative meeting (if needed) to answer follow-up questions concerning the FY 2020-21 budget.
April
January
February
March
City of Newport Beach Finance Committee Work Plan 2020
I:\Users\FIN\Shared\Admin\Finance Committee\WORK PLAN\2020\2020 FC Workplan.xlsx 2
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Scheduled Date Agenda Title Agenda Description
City of Newport Beach Finance Committee Work Plan 2020
Tuesday, May 12, 2020 Joint Council/Finance Committee Study Session - 1st Council Review of Proposed
Budget
Review Proposed Budget.
Thursday, May 14, 2020 Internal Audit Program Update
Finance Committee to develop written comment on City Manager's Proposed
Budget.
Pursuant to Budget Policy F-3.
Tuesday, May 26, 2020 Council Study Session - 2nd Council Review of Proposed Budget if necessary Review Proposed Budget
Finance Committee Attendance Optional
Thursday, May 28, 2020 Reserved if Necessary
Tuesday, June 09, 2020 City Council Budget Adoption
Finance Committee Attendance Optional
Thursday, June 11, 2020 Internal Audit Program Update Auditors to provide an overview of enterprise risk assessments and discuss
next steps
Thursday, June 25, 2020 Reserved if Necessary
May
June
3/12/2020
1
FY21 Revenue Outlook
Finance Committee Presentation
March 12, 2020
Presentation Overview
• General Fund Revenues
• Potential Impacts of Covid-19
• Tidelands and Tidelands Capital Funds
• Water and Water Capital Funds
• Wastewater and Wastewater Capital Funds
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2
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2
General Fund Revenues (Fund 010)
$108,365,261
$38,502,470
$24,697,445
$20,300,379
$12,609,169
$11,327,777
$5,071,609
$3,922,453 $3,454,660
$1,561,371 FY19 Actuals
$229,812,594
Property Taxes 47.2%Sales Tax 16.8%TOT 10.8%
Charges for Services 8.8%Use of Money and Property 5.5%Other Taxes 4.9%
Licenses and Permits 2.2%Intergovernmental 1.7%Fines, Forfeitures & Penalties 1.5%
Other Revenues 0.6%
Property Taxes
• City gets about 17.15% of the 1%
• For every $1 property tax collected, Newport
Beach gets $0.1715
• 47.2% of General Fund revenues (FY19)
• Includes different categories such as
secured, unsecured, supplemental
•Secured makes up 85% of total
revenues within property tax
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4
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3
Sales Tax
• City receives 1% of 7.75% sales tax
• 16.8% of General Fund revenues
(FY19)
• 30% of sales tax revenues come
from Autos & Transportation
5
6
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Components of California Sales and Use Tax
State General Fund 3.94%
City/County General Fund (Bradley-Burns) 1.00%
County Public Safety (Prop 172) 0.50%
Counties for Health and Welfare 0.50%
Counties for Corrections 1.06%
County Transportation Fund 0.25%
Orange County Local Transportation Authority (OCTA) 0.50%
Total Rate 7.75%
State General Fund
City/County General Fund (Bradley-
Burns)
County Public Safety (Prop 172)
Counties for Health and Welfare
Sales Tax by Category
31%
29%
23%
17%1%
2019Q3 $8,497,767
Transportation Food Products General Retail Business to Business Construction
7
8
3/12/2020
5
The Wayfair Decision and AB147
June 21, 2018, The United States Supreme Court ruled 5-4 in South Dakota v. Wayfair that states can mandate that businesses without a physical presence in a state with more than 200
transactions or $100,000 in-state sales collect and remit sales taxes on transactions in the state.
AB147 – requires retailers located outside of CA to register with CDTFA and collect CA use tax, if sales for delivery in CA exceed $500,000, during the preceding or current calendar year
• applies to taxable sales on and after April 1, 2019
• marketplace facilitators (contract with sellers to sell goods and services on their on-line platform, ex. Amazon)
• required to collect effective October 1, 2019
As a result, we anticipate higher sales tax revenue but it is to soon to predict how much.
Transient Occupancy Tax (TOT)
•10% of rent
•10.8% of General Fund revenues (FY19)
•Includes hotel and residential, less
payments to Visit Newport Beach Inc.
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10
3/12/2020
6
Potential Financial Impact
of COVID-19
Source: The Economic Impact of
Tourism in Newport Beach, CAPrepared by Tourism Economics for Visit Newport Beach
September 2018
11
12
3/12/2020
7
Source: The Economic Impact of Tourism in Newport Beach, CA
Prepared by Tourism Economics for
Visit Newport Beach
September 2018
Recent Reports of the COVID-19 Impact
Recent VNB Reports
• One hotel has lost $750k in recent days from canceled group event.
• A second hotel lost a group of 300 event.
• A third hotel has lost 2 group events and over 250 leisure room nights.
• Anaheim received word a few days ago that the Natural Products Expo, their largest citywide convention, was cancelling.
Recent News Reports
• A survey of 1,200 US adults by the Kaiser Family Foundation found that one in eight have already changed their leisure travel plans due to concerns about the virus (CNN).
• The Global Business Travel Association says the coronavirus could cost the industry some $47 billion per month. Airlines and package tour operators have painted an equally gloomy picture, with the International Air Transport Association predicting almost $30 billion in lost flight sales (Bloomberg).
• Travel demand through 2020 is expected to decrease by 5 percent in North America, 10 percent in Europe, and 25 percent in the rest of the world compared to last year, according to Dan Wasiolek, a senior equity analyst for Morningstar.
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14
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Travel and Tourism Facts
• Newport Beach is the 11th largest city in the County with a
population just over 87,000. The City offers a stock of 3,200 hotel
rooms on 20 properties. Newport Beach accounts for 2.7% of the
County population and 5.6% of the hotel room inventory.
• Approximately 12.0% (nearly 1 in 8) of all jobs in Newport Beach
were sustained by tourism in 2017.
• International visitor volume in Orange County grew 2.2% in 2017.
China is an increasingly important source market and ranked
second in terms of volume and first in terms of spending in 2017.
Source: The Economic Impact of
Tourism in Newport Beach, CA
Prepared by Tourism Economics for
Visit Newport BeachSeptember 2018
Fiscal Impact of Historical Events on Property Tax
16
15
16
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9
Fiscal Impact of Historical Events on Sales Tax
17
Fiscal Impact of Historical Events on Transient Occup Tax
18
17
18
3/12/2020
10
Fiscal Impact of Historical Events on Other GF Revenues
19
Fiscal Impact of Historical Events on Total GF Revenues
19
20
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11
Property Taxes
• No change to FY21 Projection – Majority of revenue received in FY21 is based off roll values January 1, 2020
General Fund Revenue FY17 Actual FY18 Actual YOY %
Change FY19 Actual YOY %
Change FY20 Estimate YOY %
Change
FY21 ORIGINAL
Projection
YOY %
Change
FY21 REVISED
Projection
YOY %
Change
Variance FY21 Revised &
FY21 Original
Property Taxes $94,350,181 $101,593,290 7.68% $108,365,261 6.67%$113,175,939 4.44% $118,567,018 4.76% $118,567,018 4.76% $0
Year over Year (YOY) Increase $7,243,109 $6,771,971 $4,810,678 $10,201,757 $5,391,079
FY20 Projected Sales Tax Impact of COVID-19
• Based on an analysis of previous outbreaks (bird flu, sine flu, SARS), our sales tax
consultant “Avenu” is forecasting a 60 day window of impact on Sales Tax for the City
of Newport Beach.
• A total loss of sales tax returns over a 60 day reduction of foot traffic sensitive
business categories (General Retail and Food Products) amounts to $2.8 million.
• Avenu projects that only 20%, or $279,000, of this amount may potentially be lost or
deferred as consumers alternatively shop online and eat at home.
• If subsequent information substantiates treating COVID-19 as a pandemic that is
drastically different from past pandemics, alternative assumptions and calculations
will be considered.
22
21
22
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12
Sales Tax
• FY21
• Anticipate spending to slow – Economic uncertainty, Covid-19
• Adjustments due to CDTFA timing issues and one time revenue increase from Tesla model 3 release
• FY20
• Revenue decrease due to Covid-19, reduced tourism (retail and restaurants)
• Avenu projects 60 day impact resulting in $588,000 in lost revenue
• FY20, FY19 & FY18 California Department of Tax and Fee Administration (CDTFA) implemented new software
– caused timing issues
• FY18 One time audit correction of almost $1 million
General Fund Revenue FY17 Actual FY18 Actual YOY %
Change FY19 Actual YOY %
Change
FY20 UPDATED
Estimate
YOY %
Change
FY21 ORIGINAL
Projection
YOY %
Change
FY21 REVISED
Projection
YOY %
Change
Change between FY21
Revised and FY21 Original
Sales Tax $33,702,895 $35,038,846 3.96% $38,502,470 9.89% $37,418,497 ‐2.82% $38,760,900 3.59% $36,857,220 ‐1.50%‐$1,903,680
Year over Year (YOY) Increase $1,335,951 $3,463,624 ‐$1,083,973 $1,342,403 ‐$561,277
Transient Occupancy Tax
• FY21 estimating 12% drop in Commercial TOT and 5% increase in Residential TOT
• FY20 (remaining months February-June 2020) estimating 6% decrease in Commercial TOT with Residential
TOT remaining flat
General Fund Revenue FY17 Actual FY18 Actual YOY %
Change FY19 Actual YOY %
Change
FY20 UPDATED
Estimate
YOY %
Change
FY21 ORIGINAL
Projection
YOY %
Change
FY21 REVISED
Projection
YOY %
Change
Variance FY21 Revised &
FY21 Original
TOT $22,303,303 $22,833,614 2.38% $24,697,446 8.16% $25,355,799 2.67% $27,599,739 8.85% $23,037,913 ‐9.14%‐$4,561,826
Year over Year (YOY) Increase $530,311 $1,863,832 $658,353 $2,243,940 ‐$2,317,886
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13
Other Taxes and Revenues
General Fund Revenue FY17 Actual FY18 Actual YOY %
Change FY19 Actual YOY %
Change FY20 Estimate YOY %
Change FY21 Projection YOY %
Change
Other Taxes $11,205,467 $11,865,168 5.89% $11,327,777 ‐4.53% $11,645,439 2.80% $11,418,429 ‐1.95%
Licenses and Permits $5,272,400 $4,888,630 ‐7.28% $5,071,609 3.74% $5,090,824 0.38% $5,138,647 0.94%
Intergovernmental $2,284,775 $3,680,743 61.10% $3,922,453 6.57% $2,477,960 ‐36.8% $1,995,374 ‐19.5%
Charges for Services $19,881,314 $20,622,382 3.73% $20,300,304 ‐1.56% $21,429,173 5.56% $21,276,330 ‐0.71%
Fines, Forfeitures & Penalties $3,712,296 $3,325,931 ‐10.4% $3,452,543 3.81% $3,588,850 3.95% $3,545,250 ‐1.21%
Use of Money and Property $9,743,290 $10,527,764 8.05% $12,609,169 19.8% $11,835,406 ‐6.14% $12,141,243 2.58%
Other Revenues $2,381,215 $2,140,097 ‐10.1% $1,561,275 ‐27.0% $1,066,425 ‐31.7% $627,782 ‐41.1%
Totals $54,480,757 $57,050,715 $58,245,130 $57,134,076 $56,143,055
Year over Year (YOY) Change $2,569,958 $1,194,415 ‐$1,111,054 ‐$991,021
YOY % Change 4.72% 2.09%‐1.91%‐1.73%
General Fund Overview
General Fund Revenue FY18 Actual FY19 Actual YOY %
Change
FY20 Updated
Estimate
YOY %
Change
FY21 ORIGINAL
Projection
YOY %
Change
FY21 REVISED
Projection
YOY %
Change
Variance FY21 Revised &
FY21 Original
Property Taxes $101,593,290 $108,365,261 6.67% $113,175,939 4.44% $118,567,018 4.76% $118,567,018 4.76% $0
Sales Tax $35,038,846 $38,502,470 9.89% $37,418,497 ‐2.82% $38,760,900 3.59% $36,857,220 ‐1.50%‐$1,903,680
TOT $22,833,614 $24,697,446 8.16% $25,355,799 2.67% $27,599,739 8.85% $23,037,913 ‐9.14%‐$4,561,826
Other General Fund Revenue $57,050,715 $58,247,418 2.10% $57,134,076 ‐1.91% $56,143,052 ‐1.73% $56,143,052 ‐1.73% $0
Totals $216,516,465 $229,812,594 $233,084,311 $241,070,709 $234,605,203 ‐$6,465,506
Year over Year (YOY) Increase $13,296,129 $3,271,718 $7,986,398 $1,520,892
YOY % Increase 6.14% 1.42% 3.43% 0.65%
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Revenue Impact Calendar
Property Tax Sales Tax TOT
March February
April March
May 1Q April
June FY21 AV May
July June
Hotels ‐
Monthly
Agents ‐
Quarterly
Property Tax:
Assessed Valuation (AV) change for FY21 will be
known by the end of June 2020
Sales Tax:
May 2020 will receive the clean-up payment for
1Q2020 (Jan – March)
Transient Occupancy Tax (TOT):
Payments are due by the end of the following month
Hotels – monthly
Agents – quarterly
Owners - annually
Tidelands Fund and Tidelands Capital Fund Revenues
(Funds 100 and 101)
Tidelands Fund Revenue FY17 Actual FY18 Actual YOY %
Change FY19 Actual YOY %
Change FY20 Estimate YOY %
Change FY21 Projection YOY %
Change
Use of Money and Property $11,220,233 $11,899,226 6.05% $11,855,777 ‐0.37% $11,786,628 ‐0.58% $12,039,880 2.15%
Licenses and Permits $105,387 $57,303 ‐45.63% $61,885 8.00% $49,025 ‐20.78% $49,306 0.57%
Fines, Forfeitures & Penalties $3,549 $16,896 376.08% $43,380 156.74% $19,767 ‐54.43% $18,930 ‐4.24%
Charges for Services $5,856 $11,772 101.02% $16,197 37.59% $12,000 ‐25.91% $10,760 ‐10.33%
Other Revenues $28,933 $5,800 ‐79.96% $112,722 1843.64%‐$590 ‐100.52%‐$590 0.00%
Transfers In General Fund $6,762,805 $8,229,388 21.69% $8,236,646 0.09% * $8,236,646 N/A * $8,236,646 N/A
Totals $18,126,763 $20,220,385 $20,326,608 $20,103,476 $20,354,932
Year over Year (YOY) Change $2,093,622 $106,223 ‐$223,131 $251,456
YOY % Change 11.55% 0.53%‐1.10% 1.25%
Tidelands Capital Fund Revenue FY17 Actual FY18 Actual YOY %
Change FY19 Actual YOY %
Change FY20 Estimate YOY %
Change FY21 Projection YOY %
Change
Use of Money and Property $2,346,097 $2,729,380 16.34% $4,443,831 62.81% $4,037,122 ‐9.15% $4,269,478 5.76%
Transfers In General Fund $0 $6,000,000 N/A $4,000,000 N/A $5,500,000 37.50% $4,500,000 ‐18.18%
Other Revenues $350,000 $0 ‐100.00% $0 N/A $0 N/A $0 N/A
Totals $2,696,097 $8,729,380 $8,443,831 $9,537,122 $8,769,478
Year over Year (YOY) Change $6,033,283 ‐$285,549 $1,093,291 ‐$767,644
YOY % Change 223.78%‐3.27% 12.95%‐8.05%
* Actuals To Be Determined
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15
Water Fund and Water Capital Fund Revenues
(Funds 701 and 702)
Water Fund Revenues FY17 Actual FY18 Actual YOY %
Change FY19 Actual YOY %
Change FY20 Estimate YOY %
Change
FY21 Projection YOY %
Change
Charges for Services $25,223,228 $26,665,731 5.72% $26,321,814 ‐1.29% $28,066,000 6.63% $30,050,000 7.07%
Use of Money and Property $47,308 $110,484 133.54% $785,405 610.87% $216,903 ‐72.38% $216,903 0.00%
Fines, Forfeitures & Penalties $16,355 $117,247 N/A $145,249 23.88% $98,653 ‐32.08% $125,000 26.71%
Intergovernmental $59,521 $225,432 N/A $226,768 0.59% $100,000 ‐55.90% $100,000 0.00%
Other Revenues $72,203 ‐$77,218 ‐206.95% $149,921 ‐294.15% $89,000 ‐40.64% $89,000 0.00%
Totals $25,418,614 $27,041,677 $27,629,157 $28,570,556 $30,580,903
Year over Year (YOY) Change $1,623,062 $587,480 $941,399 $2,010,347
YOY % Change 6.39% 2.17% 3.41% 7.04%
Water Capital Fund Revenues FY17 Actual FY18 Actual YOY %
Change FY19 Actual YOY %
Change FY20 Estimate YOY %
Change
FY21 Projection YOY %
Change
Use of Money and Property $22,599 $55,772 146.79% $405,657 627.34% $49,854 ‐87.71% $49,854 0.00%
Transfers In $4,452,977 $4,608,832 3.50% $4,770,141 3.50% $4,937,096 3.50% * $4,937,096 N/A
Totals $4,475,576 $4,664,604 $5,175,798 $4,986,950 $4,986,950
Year over Year (YOY) Change $189,028 $511,193 ‐$188,848 $0
YOY % Change 4.22% 10.96%‐3.65% 0.00%
* Actuals To Be Determined
Wastewater Fund and Wastewater Capital Fund Revenues
(Funds 711 and 712)
Wastewater Fund Revenues FY17 Actual FY18 Actual YOY %
Change FY19 Actual YOY %
Change FY20 Estimate YOY %
Change FY21 Projection YOY %
Change
Charges for Services $3,163,091 $3,439,278 8.73% $3,729,957 8.45% $4,015,500 7.66% $4,280,000 6.59%
Use of Money and Property $9,414 $12,916 37.20% $80,526 523.45% $24,962 ‐69.00% $25,000 0.15%
Fines, Forfeitures & Penalties $0 $16,847 N/A $23,189 N/A $20,100 ‐13.32% $20,000 ‐0.50%
Other Revenues ‐$1,977 $10,352 ‐623.75% $16,119 55.71% $15,000 ‐6.94% $15,000 0.00%
Intergovernmental $0 $0 N/A $300,000 N/A $0 N/A $0 N/A
Transfers In General Fund $3,500,000 $0 N/A $0 N/A $0 N/A $0 N/A
Totals $6,670,528 $3,479,393 $4,149,791 $4,075,562 $4,340,000
Year over Year (YOY) Change ‐$3,191,135 $670,398 ‐$74,229 $264,438
YOY % Change ‐47.84% 19.27%‐1.79% 6.49%
Wastewater Capital Fund Revenues FY17 Actual FY18 Actual YOY %
Change FY19 Actual YOY %
Change FY20 Estimate YOY %
Change FY21 Projection YOY %
Change
Use of Money and Property ‐$1,569 $5,733 ‐465.40% $54,740 854.84% $15,000 ‐72.60% $15,000 0.00%
Transfers In Sewer Enterprise Fund $750,000 $500,000 ‐33.33% $1,033,000 106.60% $1,000,000 ‐3.19% * $1,000,000 N/A
Totals $748,431 $505,733 $1,087,740 $1,015,000 $1,015,000
Year over Year (YOY) Change ‐$242,698 $582,007 ‐$72,740 $0
YOY % Change ‐32.43% 115.08%‐6.69% 0.00%
* Actuals To Be Determined
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3/12/2020
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Questions?
Finance Committee Presentation
March 12, 2020
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