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<,FORNP Newport Beach Public Facilities Corporation Staff Report
August 25, 2020
NBPFC Agenda Item No. 2
TO: HONORABLE MAYOR AND MEMBERS OF THE PUBLIC
FACILITIES CORPORATION
FROM: Dan Matusiewicz, Finance Director - 949-644-3123,
dmatusiewicz@newportbeachca.gov
PREPARED BY: Trevor Power, Senior Accountant,
tpower@newportbeachca.gov
PHONE: 949-644-3125
TITLE: Review of Annual Financial Statements
ABSTRACT:
The Bylaws of the Newport Beach Public Facilities Corporation call for an annual meeting
of the Board of Directors. The Bylaws also specify that the Chief Financial Officer shall
maintain adequate financial records concerning the receipts and disbursements of the
Corporation and the Board of Directors are entitled to inspect the associated financial
records upon request. The attached financial statements represent the financial position
and financial activities of the corporation for the year ended June 30, 2020.
RECOMMENDATION:
a) Determine this action is exempt from the California Environmental Quality Act (CEQA)
pursuant to Sections 15060(c)(2) and 15060(c)(3) of the CEQA Guidelines because
this action will not result in a physical change to the environment, directly or indirectly;
and
b) Receive and file the attached financial report.
FUNDING REQUIREMENTS:
There are no funding requirements associated with this action.
DISCUSSION:
The Newport Beach Public Facilities Corporation ("Corporation") was created on March
9, 1992, by the City of Newport Beach ("City") under the authority of California law. The
purpose of the Corporation is to assist the City in the financing of public improvements,
including a public library and most recently the new Civic Center project. This type of
non-profit corporation is required by the Federal IRS code in order to issue a public
financing instrument called a Certificate of Participation ("COP"). A COP is a typical
California public financing instrument for public facilities or equipment.
NBPFC 2-1
Review of Annual Financial Statements
August 25, 2020
Page 2
It is a type of lease purchase that requires a third party, the Corporation, for the lease
transaction. The Corporation assigns all of the rights, obligations and financial
transactions to the Trustee for the COP.
The Corporation is governed by a Board of Directors that is comprised of the seven City
Council Members of the City. Normally, the Mayor serves as Chairperson of the Board,
with the Mayor Pro Tem serving as Vice -Chairperson. The City Manager serves the
Corporation as President, the City Clerk serves as Secretary, and the City Treasurer
serves as Chief Financial Officer.
In 1992, the City issued $7.5 million of COPs to finance the construction of the Central
Library and subsequently refinanced this obligation in 1998. In 2010, the City issued
approximately $126.7 million of new COPs. Of this financing, $122.8 million was used
for the Civic Center project and $3.9 million was used to refinance the remaining balance
of the Central Library COPs. The Corporation's financial data and transactions are
included in the debt service fund in the City's financial statements. The City's debt service
fund is used solely to account for the activities of the Corporation and contains no other
City debt financing activities. Even though the Corporation is a separate legal entity, it is
considered a component unit of the City and is included in the audit of the Comprehensive
Annual Financial Report.
The main sources of revenues of the Corporation are lease payments from the City and
Federal Build America Bond (BAB) Interest Subsidy payments; both of which are pledged
for the sole use of paying interest and principal on the COPs. The Corporation has
assigned its rights to receive and collect these payments to a trustee who makes the
semi-annual debt service payments to the bondholders. Therefore, the lease and BAB
subsidy payments are received directly by the Trustee. The debt is an obligation of the
City, not the Corporation. The City owns the financed properties.
During the year, the Trustee received lease payments from the City totaling $7.7 million
and Federal Build America Bond (BAB) Interest Subsidy of $2.3 million. Together with
investment earnings and restricted funds already with the Trustee, there were sufficient
resources available to satisfy the annual debt service requirement of $10.5 million. The
table below illustrates the remaining debt service payment and principal balance on the
COPs..
Year Ending 2010 COP Debt Service
June 30 Principal Interest Total Balance
2021 3,065,000 6,895,351 9,960,351 97,630,000
2022 3,165,000 6,733,265 9,898,265 94,465,000
2023 3,275,000 6,556,869 9,831,869 91,190,000
2024 3,390,000 6,365,978 9,755,978 87,800,000
2025 3,510,000 6,142,971 9,652,971 84,290,000
2026-2030 20,165,000 26,660,418 46,825,418 64,125,000
2031-2035 25,220,000 18,624,173 43,844,173 38,905,000
2036-2040 31,660,000 8,476,518 40,136,518 7,245,000
2041 7,245,000 259,661 7,504,661 -
$ 100,695,000 $ 86,715,204 $ 187,410,204
NBPFC 2-2
Review of Annual Financial Statements
August 25, 2020
Page 3
The outstanding principal of the obligation was $100.7 million as of June 30, 2020. The
remaining interest of $86.7 million does not yet reflect the remaining expected BAB
subsidy of $28.6 million so the remaining interest net of the BAB subsidy totals
$58.1 million.
ENVIRONMENTAL REVIEW:
Staff recommends the Board of Directors of the Public Facilities Corporation find this
action is not subject to the California Environmental Quality Act ("CEQA") pursuant to
Sections 15060(c)(2) (the activity will not result in a direct or reasonably foreseeable
indirect physical change in the environment) and 15060(c)(3) (the activity is not a project
as defined in Section 15378) of the CEQA Guidelines, California Code of Regulations,
Title 14, Chapter 3, because it has no potential for resulting in physical change to the
environment, directly or indirectly.
NOTICING:
The agenda item has been noticed according to the Brown Act (72 hours in advance of
the meeting at which the Board of Directors considers the item).
ATTACHMENT:
Attachment A — Financial Statements
NBPFC 2-3
Attachment A
Financial Statements
NBPFC 2-4
NEWPORT BEACH PUBLIC FACILITIES CORPORATION
Comparative Balance Sheet
June 30, 2020 and 2019
Assets
Cash with fiscal agent
Intergovernmental receivable
Total Assets
Liabilities and Fund Balances
Liabilities:
Accounts payable
Total Liabilities
Fund balances:
Nonspendable
Restricted for:
Debt Service
Committed
Assigned
Unassigned
Total fund balance
Total liabilities and fund balance
2020
2019
$ 6,551,417
$ 6,977,065
1,148,239
1,171,872
$ 7,699,656
$ 8,148,937
7,699,656
8,148,937
7,699,656
8,148,937
$ 7,699,656 $ 8,148,937
NBPFC 2-5
NEWPORT BEACH PUBLIC FACILITIES CORPORATION
Comparative Statement of Revenues,
Expenditures and Changes in Fund Balances
June 30, 2020 and 2019
NBPFC 2-6
2020
2019
Revenues:
Lease revenues
$ 7,691,920
$ 8,154,464
Investment income
21,282
39,324
Federal interest subsidy
2,296,478
2,335,637
Total revenues
10,009,680
10,529,425
Expenditures:
Debt service:
Principal
3,405,000
3,310,000
Interest and fiscal charges
7,053,961
7,209,239
Total expenditures
10,458,961
10,519,239
Excess (deficiency) of revenues
over expenditures
(449,281)
10,186
Fund balance, beginning
8,148,937
8,138,751
Fund balance, ending
$ 7,699,656
$ 8,148,937
NBPFC 2-6