HomeMy WebLinkAboutFinance Committee - March 11, 2021CITY OF NEWPORT BEACH
FINANCE COMMITTEE MEETING WILL BE HELD VIA
ZOOM. PLEASE SEE SPECIAL NOTICE REGARDING
COVID-19 FOR PUBLIC COMMENT INFORMATION.
AGENDA - FinalThursday, March 11, 2021 - 3:00 PM
Finance Committee Members:
Will O'Neill, Chair
Brad Avery, Mayor
Noah Blom, 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
Scott Catlett, Finance Director/Treasurer
Steve Montano, Deputy Director, Finance
Marlene Burns, Administrative Specialist to the Finance Director
SPECIAL NOTICE REGARDING COVID-19
On March 4, 2020, Governor Newsom proclaimed a State of Emergency in California as a result of the threat of COVID-19.
On March 12, 2020, Governor Newsom issued Executive Order N-25-20, which allows Finance Committee Members to
attend Finance Commission meetings by electronic means. Please be advised that to minimize the spread of COVID-19,
Finance Committee Members may attend this meeting either electronically or telephonically.
Also, please be advised that on March 17, 2020, Governor Newsom issued Executive Order N-29-20, which allows for the
public to participate in any meeting of the Finance Committee telephonically or by other electronic means. Given the
health risks associated with COVID-19, the City of Newport Beach will conduct this meeting via Zoom. As a member of
the public, if you would like to participate in this meeting, you can participate via the following options:
1. You can submit your questions and comments in writing for the Finance Committee’s consideration by sending
them to Scott Catlett Finance Director/Treasurer, at scatlett@newportbeachca.gov. To give the Finance Committee
adequate time to review your questions and comments, please submit your written comments by Wednesday, March
10, 2021, at 5 p.m. All emails will be made part of the record.
2. You can connect with a computer by joining through Zoom. Use the link below to register for the meeting using a
valid email address. You will receive a confirmation email allowing you to join the meeting:
https://zoom.us/webinar/register/WN_xGbynSFHTl6eeF59ir3zBQ
3. Or you may connect by Phone/Audio Only by calling: 669-900-9128. The meeting ID is 921 9575 0527#
4. Attendees must raise their hand in the Zoom module if they would like to speak. If attending by phone, press *9 to
raise hand.
Please know that it is important for the City to allow public participation at this meeting. While the City does not expect
there to be any changes to the above process for participating in this meeting, if there is a change, the City will post the
information as soon as possible to the City’s website.
The City of Newport Beach thanks you in advance for continuing to take precautions to prevent the spread of the COVID
19 virus.
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.
March 11, 2021
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Finance Committee 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
MINUTES OF FEBRUARY 18, 2021A.
Recommended Action:
Approve and file.
DRAFT MINUTES 02182021
V.CURRENT BUSINESS
FINANCIAL STATEMENT AUDIT RESULTS AND RELATED
COMMUNICATION FROM THE AUDITORS
A.
Summary:
The City’s external audit firm will meet with the Finance Committee to discuss the
audit findings for the fiscal year ending 6/30/2020. 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
ATTACHMENT C
March 11, 2021
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Finance Committee Meeting
INTERNAL AUDIT PROGRAM UPDATEB.
Summary:
Staff will provide the Finance Committee with a verbal update on the status of the
Internal Audit Program.
Recommended Action:
Receive and file.
DISCUSS REVENUE ASSUMPTIONSC.
Summary:
Staff will provide an overview of revenue assumptions for the FY 2021-22 Proposed
Budget.
Recommended Action:
Receive and file.
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 18, 2021
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CITY OF NEWPORT BEACH FINANCE COMMITTEE FEBRUARY 18, 2021 MEETING MINUTES
I.CALL MEETING TO ORDER
The meeting was called to order at 3:00 p.m. via teleconference.
II.ROLL CALL
PRESENT:Chair Will O’Neill, Mayor Brad Avery, Council Member Noah Blom, Committee Member William Collopy, Committee Member John Reed, Committee Member Joe Stapleton, and Committee Member Larry Tucker
ABSENT: None
STAFF PRESENT: City Manager Grace K. Leung, Finance Director/Treasurer Scott Catlett, Deputy Director/Finance Steve Montano, Administrative Specialist to the Finance Director Marlene Burns, Senior Accountant Theresa Schweitzer, Public Works Finance/Administrative Manager Angela Crespi, Utilities
Director Mark Vukojevic, Budget Manager Shannon Espinoza, Public Works Administrative Analyst Raymund Reyes, Fire Administrative
Manager Mary Locey, IT Manager Jackie Luengas-Alwafai, Senior Budget Analyst Amy Lewis, Utilities Operations Support Superintendent Casey
Parks, Public Works Administrative Manager Chris Miller, Public Works Senior Civil Engineer David Keely, Utilities Senior Management Analyst
Joshua Rosenbaum, Harbormaster Kurt Borsting, and Lifeguard Operations Fire Assistant Chief Mike Halphide
MEMBERS OF THE
PUBLIC: Charles Klobe, Jim Mosher, Nancy Scarbrough, and Jill Johnson-Tucker
OTHER ENTITY: Erin Payton, MGT of America Consulting, LLC
III.PUBLIC COMMENTS
None
IV.CONSENT CALENDAR
MINUTES OF JANUARY 21, 2021Recommended Action:
Approve and file.
Chair O’Neill called for public comments and hearing none, closed the public comments.
MOTION: Mayor Avery moved to approve the minutes, as amended, seconded by Committee Member Stapleton. The motion carried 6 ayes – 0 noes, 1 abstention: Council Member Blom.
V.CURRENT BUSINESS
A. FISCAL YEAR 2020-21 SECOND QUARTER FINANCIAL REPORTSummary:Staff will present results as of the quarter ending December 31 to the Finance
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Committee, and subsequently will present it to the City Council. Recommended Action: Review and discuss this report and provide any recommendations for consideration by the City Manager and City Council. Finance Director/Treasurer Scott Catlett presented an update on the General Fund budget
status through the conclusion of the second quarter in December. He provided an economic overview, which indicates things are moving in a positive direction but still below levels where they were before the pandemic and does not expect economic activity to get back to pre-pandemic levels this calendar year. He reported Transient Occupancy Tax (TOT) revenue rebounded to 60% of pre-pandemic levels in October before dropping due to the new Stay-At-Home Order but expects it to rebound again. He expects some positive impacts relative to
sales tax as a result of the return to the State’s purple tier. Finance Director/Treasurer Scott Catlett presented the Year-To-Date General Fund Revenue performance and noted the City is seeing $11.5 million of net positive variance, so far, this
fiscal year. He advised the City is seeing a bright spot relative to TOT and Sales Tax in the City’s revenues versus the City’s original budget.
Finance Director/Treasurer Catlett presented an overview of projected General Fund Revenues, which looks forward through June 30, 2021. He reported the City adopted a conservative $200 million revenue budget and expects it to increase to $218 million by the end
of the year, predominately fueled by growth in Sales Tax and TOT. He noted although the numbers are a nice contrast to what was originally budgeted, the City has not recovered to
levels seen before the pandemic. He provided a brief overview of historical General Fund Revenues to show what would have happened hypothetically if revenue had grown on a trend
as though the pandemic had not occurred.
Finance Director/Treasurer Catlett reported Property Tax, is a bright spot in the City’s budget. He advised 50% of the City’s budget comes from Property Tax which has been largely insulated
from the pandemic’s effects and noted the number has grown over the last two fiscal years despite the pandemic challenges. He does not recommend any adjustment to the budget that
was adopted.
Finance Director/Treasurer Catlett reported Sales Tax was sharply impacted by the pandemic-related restrictions and a decline in tourism. He advised that the City is seeing positive trends
as businesses pivoted in creative ways to reach customers and the fact that customers have become more comfortable going back into the business community. He advised there are
strong Sales Tax pool revenues due to online sales. He noted Sales Tax is seeing a $6 million or 20% projected improvement versus the adopted budget.
Finance Director/Treasurer Catlett reported TOT was the most severely impacted revenue in
the City as a result of the pandemic. He reported the City’s hotels have worked hard to adapt to the current environment and while business travelers have largely not returned, leisure
travelers have returned to an extent. He has heard from the hotel community that more visitors are driving versus flying into the area. He reported TOT revenues are projected to go back to
60% of pre-pandemic levels by the end of the year. He advised that the City budgeted conservatively, which resulted in a projection that is $8.8 million higher than the adopted budget.
Finance Director/Treasurer Catlett reported on Other General Fund Revenues that is approximately $1.5 million above budget through December, which is being driven partly by
higher parking revenues. He also advised that the City is seeing growth in Property Transfer Tax, which is higher than expected and is offsetting a reduction in fees primarily from recreation programs.
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Finance Director/Treasurer Catlett reported on projected General Fund Expenditures and expects to achieve at least $0.5 million in expenditure savings and noted it may be slightly reduced this year versus prior years due to some of the cuts made in the budget process. He believes the savings will be larger as the year goes on. He reported all departments are performing as expected. Lastly, he advised, the $5 million additional pension payment was made bringing the total to $40 million.
Finance Director/Treasurer Catlett reported on projected General Fund Expenses and noted that there have been some additional costs related to responses to the pandemic that have been offset entirely by other savings. He expects to recognize some additional Coronavirus Aid, Relief, and Economic Security (CARES) Act reimbursements in the General Fund of approximately $800,000 that would further improve the budget situation. He also expects to
receive approximately $600,000 in Federal Emergency Management Agency (FEMA) reimbursements in the future and with changes from the Biden Administration expects that number to increase.
In response to Chair O’Neill’s inquiries, Finance Director/Treasurer Catlett confirmed most of the reimbursement from the CARES Act fund would return to the General Fund and the majority
of the FEMA reimbursement would also return to the General Fund with a small portion returned to enterprise funds for COVID-19 response costs. He advised the current stimulus package is up in the air but the most recent data he received was that funds would be allocated directly to cities with over 75,000 in population rather than through the State. He advised the money that
could be used for revenue replacement, is more flexible than the CARES Act funds previously received, and anticipates the City to potentially receive $8.5 million under the current proposal
that would be General Fund money available for use at the City Council’s discretion.
In response to Committee Member Collopy’s inquiry, Finance Director/Treasurer Catlett reported the FEMA reimbursement is for several things but mostly has to do with direct
pandemic response costs such as enhanced facility cleaning or supply purchases. He noted there is a list of items that FEMA has deemed eligible.
Finance Director/Treasurer Catlett reported on General Fund Reserves and reported the net
of the expenditure savings and the additional revenue expected would yield a projected net unrestricted fund balance of $27 million at the end of the year. He advised that is dependent
on many factors that could change such as another Stay-At-Home Order, changes in the State’s restrictions, or faster implementation of the vaccine. He advised that the Unrestricted
Fund Balance is, resources in the General Fund in excess of the Contingency Reserve. He reported the true delta between the money coming in and money going out in the current fiscal
year is $3.3 million and not the $27 million from the prior slide. He advised the difference is that $24 million was from FY 2018-19 surplus and $12 million was from FY 2019-20 surplus used
to balance this year’s budget. He also advised it does not take into account the fact that there are $30 million in budget reductions implemented this year that have not yet been restored.
Finance Director/Treasurer Catlett reported on the Tiered Budget Balancing Framework and
reported the City Council approved restoring $3 million in budget cuts in the first quarter that took the $33 million down to $30 million. He believes the Tier 1 and Tier 2 budget cuts will be
achieved in the current year’s budget and will not need to be restored even if the City has the resources to do so at this time. He reported it was mentioned to the City Council during the planning session to evaluate the Tier 4 cuts at the end of the fiscal year and possibly restore some of them with a year-end surplus. He advised the Public Works Department discussed
Deferred Capital Expenses during the planning session, and there is a good portion of the $20 million of Tier 3 cuts being carried forward to the next fiscal year’s budget or being deferred.
He reported recommendations are being presented to the City Council next week. In response to Chair O’Neill’s inquiries, Finance Director/Treasurer Catlett clarified the $3.3 million is a projected surplus. He explained departments are submitting their budgets to the
Budget Division to review the number and expect to have some preliminary numbers to
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determine if there is enough projected revenue to build a balanced budget without needing to use any of the $24 million that was carried forward. He believes once that question is answered on a preliminary basis, there could be a discussion about where it makes sense to use some of the funds for capital improvement projects. In response to Chair O’Neill’s inquiries, Finance Director/Treasurer Catlett clarified the table on
Page 14 assumes the $24 million does not exist and should revenues improve enough in the current fiscal year to cover expenses the $24 million should remain unspent in the current fiscal year. Committee Member Tucker clarified it is a cumulative budget surplus for the prior two years about which the City Council would have normally made a decision at budget time about what
to do and noted that there is a policy that half goes to unfunded pension liabilities and half goes to CIP. Finance Director/Treasurer Catlett explained the reason he believes that caution is prudent for
next year is that if the $30 million of budget cuts were restored the $3 million surplus would turn into a shortfall. He noted next year’s budget will look different but once the pieces are put
together staff will be able to make an informed recommendation to the Finance Committee. In response to Committee Member Tucker’s inquiry, Chair O’Neill confirmed his understanding that it looks like City Council will have some additional surplus funds to allocate.
Mayor Avery commented that City Council would want to take a look at the numbers fairly soon
to reassess essential projects that were deferred. In response to his inquiry, City Manager Leung reported Public Works Director Dave Webb would be providing an overview of priority
projects at the March 9, 2021, City Council meeting.
Chair O’Neill reported that the City will see substantial increases in cost due to the City’s partnership with Costa Mesa on the homeless shelter and trash fees that will be increased
dramatically due to state mandates. He also noted expenditure increases will occur based on labor agreements, which will probably be projected higher than the expanded revenue
projections. He advised those should be taken into consideration when discussing CIP.
Committee Member Stapleton commented that he is glad the City took a conservative position and concurred with Mayor Avery’s comments.
In response to Committee Member Reed’s inquiry, Finance Director/Treasurer Catlett reported
Public Works is recommending deferring some of the CIP projects to be considered in the next budget process. He noted if there is a surplus of $24 million some of that could be returned to
CIP.
Chair O’Neill referenced the Tiered Budget Balancing Framework slide and explained the Contingency Reserves and transfers out to internal service funds have been rolled back but
the $2 million in Insurance and $2.5 million in Equipment Replacement have not been rolled back. In response to his inquiry, Finance Director/Treasurer Catlett explained Tier 4 insurance
transfers may not need to be restored to the budget because those funds were doing very well. He recommended taking a closer look at the Equipment Replacement amounts and determining what needs to be restored if the funds are available. He advised the Tier 1 and Tier 2 cuts have been achieved in the current year’s budget and should be restored in the
upcoming fiscal year's budget if possible but there is no need to restore them in the current fiscal year.
Chair O’Neill suggested a different kind of framework may be needed for discussing the next budget cycle as it seems some of the funds will not need to be rolled back. He feels it is worth working through and determining the approach to present to City Council because the tiered
system worked well this year.
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City Manager Leung agreed the tiered approach has served the City well She noted while it has yet to be determined if there are enough revenues with the known expenditure increases to present a structurally balanced budget, it will depend on the circumstances whether the tier system goes away. She explained the City can now take care of the deferred CIP needed because it held back on using surplus funds from the past two years.
In response to Committee Member Tucker, City Manager Leung confirmed she would like to see the $5 million contribution to CIP and the $8.5 million to the Facilities Financial Plan (FFP) restored but it looks to be on the trajectory to be restored this year or the next year. In response to Committee Member Collopy’s inquiry, City Manager Leung confirmed the City
is under a soft hiring freeze with every job opening is being reviewed to determine if the position is necessary. Chair O’Neill called for public comments.
Charles Klobe referenced Slide 12 and noted that it looks like contract labor has increased
even though there was a reduction in Recreation, which is where most of the contractors were used. He wonders if the City supplemented the hiring freeze by hiring contractors during this period. Mr. Klobe added that if that was not the case, he would like clarification regarding the increase.
Chair O’Neill closed public comments.
In response to Mr. Klobe’s inquiry, City Manager Leung reported there is a healthy use of
contract services across departments and while it is used in the recreation area, it is also used in the Community Development Department. She noted service demands were high throughout
the pandemic for permits so quite a bit of contract services was used there.
Chair O’Neill recommended presenting the Fiscal Year 2020-21 Second Quarter Financial Report to the City Council. Mayor Avery concurred.
Council Member Blom reported that he is not confident in the TOT numbers and believes there
will be a slower climb than the projected 60%. He advised Marriott is looking at 60% improvement by late October with a full recovery coming in 2024 so they are not as optimistic.
Committee Member Collopy highlighted that the City was able to see $5 million in the Unfunded
Pension Liability restored.
Mayor Avery expects there would be some continuing hangover going into the new fiscal year across the board and it is simply a question of targeting what that would look like.
Chair O’Neill reported City Council has directed staff to provide a quarterly update to the
Finance Committee and to the City Council with the thought process of making sure the tiers were being reviewed to determine what could be rolled back and what could be accelerated.
He was encouraged to see two tiers rolled back. He complimented Finance Director/Treasurer Catlett’s ability to show the Finance Committee where the City is financially as opposed to where it should be.
In response to Committee Member Stapleton’s inquiry, Finance Director/Treasurer Catlett confirmed speaking with Newport Beach and Company about the TOT numbers. He also noted
the short-term rental market has not been impacted to the same degree as hotels and that is also included in the TOT numbers. The item was received and filed.
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B. FEE STUDY UPDATE Summary: Staff will present the Master Fee Schedule to the Finance Committee and subsequently will present it to the City Council. Recommended Action: Receive and file.
Senior Accountant Theresa Schweitzer provided a brief overview of the Fee Study Update. She reviewed the difference between a tax and a fee, which is a cost of service or charge for the person using the service and cannot exceed the cost of service. She reported the authority for Cost of Service Fees comes from the Fiscal Sustainability Plan and Council Policy. She advised that the Municipal Code mandates 100% cost recovery. She advised that MGT of
America Consulting performs the cost of service analysis of developing user fees and presented their scope of work. She provided a brief overview of the fee calculation which is reviewed for accuracy and reasonableness.
Senior Accountant Schweitzer provided a brief overview of the Fee Study results and reported the impact is $216,000 in additional revenues for the Water and Sewer Funds and a decrease
in revenues of approximately $65,000 in the General Fund. She noted the Fee Study was calculated based on information that was available and does not include any fees where there were no volume statistics. She advised any kind of change in cost, staffing or time would cause a fee to increase or decrease and noted fees can be combined if there are some efficiencies.
Senior Accountant Schweitzer provided a brief overview of fees including fee changes and new
fees for the Finance, Harbor, Public Works, and the Utilities Departments. She noted a new update that was not included in the staff report which is a proposed Electric Vehicle Surcharge
for EV chargers to charge $0.10 per minute after a 10-minute grace period and is intended to encourage turnover of vehicles charging. She noted an additional update that proposes
removing the subsidy that is currently set for the Junior Lifeguard fee.
In response to Chair O’Neill’s inquiry, Senior Accountant Schweitzer reported the City is currently charging per kilowatt-hour for pass-through costs of EV charging. She advised other
cities charge a surcharge or space charge and she can check with the City Attorney’s Office to see if there is a reason the City should not be charging for this.
Public Works Finance/Administrative Manager Angela Crespi reported the original grant was
for the purchase of the EV charger replacements at the Civic Center and is unaware of any restriction that would prevent the City from charging the fee and noted it is keeping in line with
what other communities are doing with their Air Quality Management District grant funds.
Committee Member Tucker confirmed Tesla is charging an overstay charge at their charging stations. He noted the grant came from a governmental source and should be used efficiently.
Committee Member Reed commented that charging a parking cost seems to be the way to invoke this.
Chair O’Neill explained that if the Junior Guard Program subsidy is rolled back to increase the
cost to generate revenue, he does not want the revenue to just go back into the General Fund. He understands the rollback is tied to trying to make sure the City is set up to defer cots for the future Junior Lifeguard Building but would like to turn that amount into a restricted fund of some kind for that purpose so the public understands where the money is going.
In response to Chair O’Neill’s inquiry, City Manager Leung explained her thought was to budget
an annual appropriation to go toward the project but will need to think it through further if it is a separate fund. Chair O’Neill noted it will need details when it comes to City Council. City Manager Leung advised staff was working on finalizing a potential MOU with the Junior Lifeguard Foundation and felt it was important to consider since it is going before City Council
on March 9. She advised she could have the details finalized before that date.
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Mayor Avery expressed concern regarding the Dredging Permit Fee and noted the City is charging $1,900 but the full charge is $3,200. He explained these are fees for one-time fees for someone who wants to trench their slip and he feels the City should realize full recovery costs.
Senior Accountant Schweitzer advised staff is proposing to charge the full cost of the fee at $3,200. Finance Director/Treasurer Catlett explained the reason for the increase may be that it has been some time since it was reviewed and perhaps the consultant's review indicates there is a difference in what it costs now and the last time it was studied. Senior Accountant Schweitzer reported the last time it was studied the consultants cost for the Regional General Permit (RGP) was divided over 10 years and is now divided over five-years and also included
significantly more staff time than the prior study. Mayor Avery believes the studies require different levels of complexity based on his experience at the Harbor Commission. Chair O’Neill opened public comments.
Jim Mosher inquired about the recent increase in Photocopy Fees and noted Slide 15 of the
agenda packet indicated the current fee, which is three cents per page for black and white copies, including for public records requests is going up from $0.03 to $0.35. He requested clarification if that is correct or if the decimal point was misplaced.
Senior Accountant Schweitzer clarified the per copy pages increases are specific to the Library costs and noted the library copiers have a different cost than the Public Records Request fees.
She reported the library costs currently are $0.25 for black and white and $0.75 for color and are changing to $0.35 and $0.45 respectively.
Chair O’Neill closed public comments.
The item was received and filed.
C. LONG RANGE FISCAL FORECAST (LRFF) Summary: Staff will provide an update to the latest version of the LRFF. Recommended Action: Receive and file.
Deputy Director/Finance Steve Montano provided an update to the latest version of the Long
Range Financial Forecast (LRFF). He advised the report covers Fiscal Years 2022 through 2041 to make sure the City has efficient resources for its existing and emerging commitments
and programs over the long run and to appropriately identify funding strategies to meet those commitments.
Deputy Director/Finance Montano reported this is the fourth year using Synario, which is a
SaaS-based financial modeling platform. He provided a brief overview of model hierarchy and development that includes baseline scenarios based on FY 2020-21 Original Budget, Revenue
and Expenditure Impacts, and Scenarios. Deputy Director/Finance Montano provided an overview of Property Tax Baseline Assumptions and reported average annual growth of 5% but there may be a slowdown over the next few
years as a result of current economic conditions. He advised the City will only receive 1% of Proposition 13 funds and there may be potential for delinquencies that have yet to be seen. He
advised there is an 18-month lag in receiving Property Tax funds. He advised there is the potential of seeing Proposition 8 reductions. Deputy Director/Finance Montano provided an overview of Sales Tax Baseline Assumptions
and reported Sales Tax seems to be on the road to recovery and the City’s Sales Tax consultant
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who reported strong online and auto sales. He advised the City is seeing the effects of the gradual implementation of the Wayfair decision which requires online sellers to remit taxes to the County pool and the City receives a portion of those funds. He projects a more rapid growth coming out of this economic period than the historic average which is 3%. Deputy Director/Finance Montano provided an overview of TOT baseline assumptions and is
predicting a solid recovery due to the rollout of the vaccine and the likelihood of more travel by the end of the year. He reported Gary Sherwin, President, and CEO of Visit Newport Beach, expects leisure travel in the spring and summer and the return of business meetings in the fall. He also reported the Fashion Island Hotel will open in late summer or fall of this year. Deputy Director/Finance Montano provided an overview of Other Revenue baseline
assumptions and reported the future project growth is 2.5% and anticipates a steeper climb out of the decrease in the recent months. Deputy Director/Finance Montano provided an overview of General Fund expenditure baseline
assumptions, which show how much progress the City has made towards increasing its additional discretionary payment funding for pensions. He noted future projected growth of
3.7% is included in the model. Deputy Director/Finance Montano reported the City has and will continue to face significant fiscal impacts associated with providing Permanent Supportive Housing for the homeless. He
expects the City to commit approximately $27 million towards this initiative over the next 20 years. He anticipates significant future financial commitments on the horizon related to refuse
and recycling and noted if the City is not successful in increasing the City’s Recycling Fee it is looking at costs of approximately $70 million over the next 20 years.
Deputy Director/Finance Montano provided the results of Baseline scenario 1 and scenario 2,
which includes the Homeless Strategy and Refuse Option 1. He reported on the impact of continuing to pay the unfunded accrued liability payments through 2035. He noted pension
investments are sensitive to investment earnings and the City should consider anticipatory pre-funding options.
Deputy Director/Finance Montano reported any projected deficit in the model is not reflective
of likely and typical budget performance. He advised the General Fund is projected to be in a financially sound position for the next 20-year period. He noted short term deficits can be
absorbed without long-term reliance on Contingency Reserve. Lastly, he noted the City does have fiscal challenges including near-term revenue impacts related to COVID, the potential for
significant increases to CalPERS pension plans, homelessness funding strategies, refuse/recycling mandates, and the need to ramp-up savings to meet substantial near-term
harbor improvements by the Harbor & Beaches Master Plan.
Mayor Avery commented he does not see Sacramento changing with their mandates and encouraged the City to be as solvent as it can. He expressed concern about the potential
collapse of CalPERS.
Committee Member Collopy noted the extra $5 million payment was in anticipation of CalPERS not achieving their return and echoed Mayor Avery’s comments. In response to Committee Member Collopy’s inquiry, Chair O’Neill reported that through a
Citizen Initiative Process the trash fees are paid for by the City. He advised the City is allowed to pass through the recycling costs, but the trash costs are required to be paid for the Citizen
Initiative Process and are born by the City out of the General Fund. He explained the Recycling Fee is being increased because it has not been increased in 10-years. He explained the City and Newport Coast have two separate trash contracts. He explained for the Proposition 218 notice the costs had to be analyzed differently.
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Committee Member Tucker commented there is a risk because of the size of the City’s fund in CalPERS and it is important that City Council consider having limited if any subsidies for the City to break even and be prepared for the future. He is encouraged by the Property Tax revenue, which is $5 million per year. Chair O’Neill opened public comments.
Nancy Scarbrough inquired how the Citizen Initiatives for trash paid by the City can be unwound if the City wants to completely remove those subsidies outside of the City’s expenditures. Chair O’Neill explained there could be another Citizen Initiative or City Council could put it on a ballot for a vote of the public.
Ms. Scarbrough inquired how the City would start to consider in its budget the increased infrastructure costs associated with the Regional Housing Needs Assessment (RHNA), such as water, trash, sewer, additional police and fire facilities, and additional staff.
Chair O’Neill closed public comments.
In response to Ms. Scarbrough’s inquiry, City Manager Leung expressed her frustration that the State is so focused on the housing units and not taking into consideration the ancillary needs that go along with those units. She advised the City is discussing zoning and looking at impact fees as the Housing Element process continues. She agrees it is a complex and
challenging issue.
Chair O’Neill commented that as the City moves through the Housing Element it needs to also plan for additional infrastructure. Committee Member Tucker expressed his frustration that the
State is fast-planning instead of good-planning and believes the State is going about this backward.
The item was received and filed.
D. DEEP DIVE OF UTILITIES DEPARTMENT BUDGET Summary: Discussion of the budget for the Water and Wastewater Enterprise Funds’ and other Utilities
Department functions. Recommended Action:
Receive and file.
Utilities Director Mark Vukojevic provided a brief overview of the Utilities Department Budget and reported there are 53 employees with the department and three managers. He reported
the City has 300 miles of water pipe and 26,000 service connections and noted everything is foundationally based upon the Master Plan and the CIP for all of our replacements and
planning.
Utilities Director Vukojevic reported there are three main divisions, which are the Water Production Division, the Maintenance and Repair Division, and the Water Meter Division. He
reported on the overall financials for the last few years. He reported that the City is on track to use 15,500-Acre-Footage (AF) of water this last year. Utilities Director Vukojevic reported the target reserve is 50% of operating expenses, which is
approximately $15 million and noted Utilities had drawn down on that fund substantially by the CIP increase last year. He reported they will be dropping below the target level over the next
few years. He explained even though they will be going below the target level the CIP will not be able to spend all of the money this year that will result in inherent savings.
Finance Committee Meeting Minutes February 18, 2021
Page 10 of 11
Utilities Director Vukojevic provided a comparison of groundwater cost versus imported water costs and noted there is an incentive to maximize the City’s groundwater usage because it is less expensive and is higher quality water. Utilities Director Vukojevic reported on the big project is the installation of the new AMI Digital Water Meters which will save $300,000 per year in meter reading costs and early leak
detections. He reported an overview of costs the department incurs including credit card billing feels, fire hydrant replacement, and the lack of development “buy-in” or “impact fees”. Utilities Director Vukojevic reported on the Wastewater (Sewer) Division and noted the primary goal is sewer spill prevention. He reported the average wastewater bill is $13 per month. He provided an overview of the Wastewater (Enterprise Fund) and reported they are well below
their target reserves. He advised there will need to be another rate study completed in FY 2022-23. Utilities Director Vukojevic reported on Storm Drains and advised the key goal is protecting the
Harbor Water Quality. He reported there are 87 miles of storm drains, channels, and ditches and 89 tide valves that require almost daily turning. He reported Street Sweeping occurs weekly
and is a contracted service as of 2020. He reported Graffiti Removal is also a contracted service and added that contract costs have increased especially in Street Sweeping. He reported contracted overtime is less expensive than in-house over time.
Utilities Director Vukojevic reported on Streetlights and indicated they added a staff member to take care of emergency generators and streetlight replacements. He reported expenses in
Street Lights are stable and LED replacement helps decrease costs.
Utilities Director Vukojevic reported on Oil & Gas and advised 16 oil wells have been in operation since 1950 and produce about 17,000 barrels per year. He advised crude oil is sold
and natural gas is sent to Hoag. He reported oil prices have been very low and are not enough for the City to break even financially.
Utilities Director Vukojevic reported on the Old City Landfill which housed the City’s landfill back
in the 1950s and 1960s and that the City shares maintenance costs with the HOA.
Chair O’Neill thanked Utilities Director Vukojevic for his hard work financially.
Mayor Avery thanked Utilities Director Vukojevic for his solid administration of the Utilities Department. He commented that the City should not be paying for credit card processing fees
and will investigate alternatives.
Chair O’Neill opened public comments.
Ms. Scarbrough was unable to be heard and Chair O’Neill requested she submit her inquiry directly to Utilities Director Vukojevic.
Chair O’Neill closed public comments.
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 reported there are no comments. Chair O’Neill called for public comments and hearing none, closed public comments.
Finance Committee Meeting Minutes February 18, 2021
Page 11 of 11
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 5:01 p.m. to the next regular meeting of the Finance Committee. The agenda for the Regular Meeting was posted on February 12, 2021, at 10:42 a.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 11, 2021
TO: HONORABLE CHAIRMAN AND MEMBERS OF THE COMMITTEE
FROM: Finance Department Scott Catlett, Finance Director / Treasurer 949-644-3218, scatlett@newportbeachca.gov
SUBJECT: Financial Statement Audit Results and Related Communication
SUMMARY:
The City is audited annually by an independent auditing firm, presently CliftonLarsonAllen
LLP. The audit process takes several months, beginning after the books are closed (typically in September) and concluding several months later once the financial statements have been prepared. A copy of the city’s Comprehensive Annual Financial Report (CAFR) for the fiscal year ended June 30, 2020, has been provided to the
Committee and is attached to this report. Also attached are the auditors’ required
communications with the Finance Committee in their capacity as the City’s Audit Committee and the auditors’ Report on Internal Control Over Financial Reporting and on Compliance and Other Matters.
RECOMMENDED ACTION:
Receive and file.
DISCUSSION:
The auditors’ opinion letter can be found within the CAFR (Attachment A), which reflects an unmodified or “clean” audit opinion, meaning that the financial statements are presented fairly, in all material respects, and in conformity with generally accepted accounting principles.
Financial Statement Audit Results and Related Communication March 11, 2021 Page 2 The first letter, included as Attachment B, is intended to communicate to the Finance Committee and the City Council matters of particular significance as required by auditing standards. These include:
• Qualitative Aspects of Accounting Practices
• Difficulties Encountered in Performing the Audit
• Corrected and Uncorrected Misstatements
• Disagreements with Management
• Management Representations
• Management Consultations with Other Independent Accountants
• Other Audit Findings or Issues
The auditors reported no significant difficulties encountered in connection with the
performance of the audit, no material corrected and uncorrected misstatements, no disagreements with management, and no other audit findings or issues. The second letter, included as Attachment C, is intended to communicate information
regarding deficiencies in internal control, instances of non-compliance, and other related
matters as required by auditing standards. The auditors did not identify any deficiencies in internal control that would need to be communicated to the Committee, nor did they identify any instances of noncompliance or other matters to report.
The Single Audit, a compliance audit of federally assisted grant programs, is still ongoing.
While no audit findings are anticipated as a result of the Single Audit, staff will communicate any findings, should they occur, to the Finance Committee at a future meeting.
Representatives of CliftonLarsonAllen LLP will be present for the Finance Committee
meeting and will make a presentation regarding the results of their audit of the City’s financial statements. Staff and the auditors will then be available for questions from the Committee and the public. Additionally, should the Committee wish to discuss any matters related to the FY 2019-20 Audit with the auditors without staff present, such an opportunity
can be afforded at the conclusion of the item.
Prepared by: Submitted by:
/s/ Trevor Power
/s/ Scott Catlett
Trevor Power Scott Catlett
Acting Accounting Manager Finance Director/City Treasurer
Attachments: A. Comprehensive Annual Financial Report for the Fiscal Year Ended June 30, 2020
Financial Statement Audit Results and Related Communication March 11, 2021 Page 3 B. Auditor’s Required Communications with the Audit Committee C. Auditor’s Report on Internal Control Over Financial Reporting and on Compliance and Other Matters
ATTACHMENT A
COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2020
C I T Y O F
N E W P O R T B E A C H
COMPREHENSIVE ANNUAL
FINANCIAL REPORT
FISCAL YEAR ENDED JUNE 30, 2020
Comprehensive Annual Financial Report
For the Fiscal Year Ended June 30, 2020
Prepared by the Finance Department
Scott Catlett, Finance Director/Treasurer
The City of Newport Beach was incorporated September 1, 1906
The present City Seal was adopted July 22,1957
INTRODUCTORY SECTIONINTRODUCTORY SECTION
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CITY OF NEWPORT BEACH
Comprehensive Annual Financial Report
Year Ended June 30, 2020
TABLE OF CONTENTS
INTRODUCTORY SECTION
(Unaudited)
Table of Contents ....................................................................................................................... 1
Letter of Transmittal ................................................................................................................... 5
GFOA Certificate of Achievement for Excellence in Financial Reporting ................................ 19
List of City Officials .................................................................................................................. 20
Organization Chart ................................................................................................................... 21
FINANCIAL SECTION
Independent Auditors' Report............................................................................................ 25
Management’s Discussion and Analysis .......................................................................... 31
(Required Supplementary Information)
Basic Financial Statements
Government-wide Financial Statements:
Statement of Net Position ............................................................................................... 53
Statement of Activities ..................................................................................................... 54
Fund Financial Statements:
Governmental Funds:
Balance Sheet .............................................................................................................. 60
Reconciliation of the Balance Sheet of Governmental Funds to the
Statement of Net Position....................................................................................... 63
Statement of Revenues, Expenditures and Changes in Fund Balances ...................... 64
Reconciliation of Statement of Revenues, Expenditures and Changes
in Fund Balances of Governmental Funds to the Statement of Activities .............. 67
Budgetary Comparison Statements:
General Fund ......................................................................................................... 68
Tide and Submerged Land – Operating Fund ........................................................ 70
Tide and Submerged Land – Harbor Capital Fund ................................................ 71
Measure M Fund .................................................................................................... 72
Proprietary Funds:
Statement of Net Position............................................................................................. 76
Statement of Revenues, Expenses and Changes in Net Position ............................... 77
Statement of Cash Flows ............................................................................................. 78
Fiduciary Funds:
Statement of Fiduciary Assets and Liabilities – Agency Funds .................................... 82
Notes to the Financial Statements ..................................................................................... 85
1
Required Supplementary Information
Defined Benefit Plan For Miscellaneous Employees:
Schedule of Changes in the Net Pension Liability and Related Ratios ......................... 150
Schedule of Contributions ............................................................................................. 151
Defined Benefit Plan For Safety Employees:
Schedule of Changes in the Net Pension Liability and Related Ratios ......................... 152
Schedule of Contributions ............................................................................................. 153
Post-Employment Health Care Benefits (OPEB):
Schedule of Changes in the Net OPEB Liability and Related Ratios ............................ 154
Schedule of Contributions ............................................................................................. 155
Supplementary Schedules
Other Governmental Funds:
Combining Balance Sheet ............................................................................................. 162
Combining Statement of Revenues, Expenditures and Changes in
Fund Balances .............................................................................................................. 170
Budgetary Comparison Schedules:
State Gas Tax Fund ...................................................................................................... 178
SB1 Gas Tax RMRA Fund ............................................................................................ 179
Asset Forfeiture Fund ................................................................................................... 180
OTS DUI Grant Fund .................................................................................................... 181
Circulation and Transportation Fund ............................................................................. 182
Building Excise Tax Fund .............................................................................................. 183
Community Development Block Grant Fund ................................................................. 184
Air Quality Management District Fund .......................................................................... 185
Environmental Liability Fund ......................................................................................... 186
Supplemental Law Enforcement Fund .......................................................................... 187
Contributions Fund…………………………………………………………………………… 188
FIIN Fund…………………………………………………………………………… .............. 189
CARES Small Business Grant Fund……………………………………………………… .. 190
Internal Service Funds:
Combining Statement of Net Position ........................................................................... 194
Combining Statement of Revenues, Expenses and Changes in Net Position .............. 195
Combining Statement of Cash Flows ............................................................................ 196
Fiduciary Funds:
Combining Statement of Fiduciary Assets and Liabilities.............................................. 199
Statement of Changes in Fiduciary Assets and Liabilities ............................................ 200
STATISTICAL SECTION (Unaudited)
Financial Trends:
Net Position by Component ................................................................................................ 204
Changes in Net Position ...................................................................................................... 206
Fund Balances of Governmental Funds .............................................................................. 208
Changes in Fund Balance of Governmental Funds ............................................................ 210
Revenue Capacity:
Assessed Value and Estimated Actual Value of Taxable Property ..................................... 213
Property Tax Rates, Direct and Overlapping Governments ................................................ 214
Principal Property Taxpayers .............................................................................................. 215
2
Property Tax Levies & Collections ...................................................................................... 216
Debt Capacity:
Ratios of Outstanding Debt by Type ................................................................................... 218
Ratios of General Bonded Debt .......................................................................................... 220
Schedule of Direct and Overlapping Debt ........................................................................... 221
Computation of Legal Debt Margin ..................................................................................... 222
Demographic and Economic Information:
Demographic and Economic Statistics ................................................................................ 225
Principal Employers ............................................................................................................ 226
Operating Information:
Full-Time City Employees by Function ................................................................................ 229
Operating Indicators by Function ........................................................................................ 230
Capital Asset Statistics by Function .................................................................................... 232
Water Sold by Customer Type ............................................................................................ 234
Utility Rates ......................................................................................................................... 235
Major Water Customers ...................................................................................................... 236
3
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4
Finance Department
CITY OF NEWPORT BEACH
100 Civic Center Drive
Newport Beach, California 92660
949 644‐3127 | 949 644‐3339 FAX
newportbeachca.gov/finance
January 27, 2021
Honorable Mayor, Members of the City Council,
and Residents of the City of Newport Beach, California
The City Charter and California state law require that the City of Newport Beach (“City”)
issue a complete set of financial statements annually and that an independent firm of
certified public accountants audit this report in conformance with generally accepted
auditing standards (GAAS). The Comprehensive Annual Financial Report (CAFR) of the
City of Newport Beach for the year ended June 30, 2020, is hereby submitted.
The CAFR was prepared in conformance with generally accepted accounting principles
(GAAP) as promulgated by the Governmental Accounting Standards Board (GASB). This
report consists of City management’s representations concerning the finances of the City
of Newport Beach. Responsibility for the accuracy and completeness of the data
presented rests with the City. Management of the City is also responsible for establishing
and maintaining an internal control structure designed to ensure that the assets of the
government are protected from loss, theft, or misuse, and to ensure that adequate
accounting data is compiled to allow for the preparation of financial statements in
conformity with generally accepted accounting principles. The internal control structure
is designed to provide reasonable, but not absolute, assurance that these objectives are
met. The concept of reasonable assurance recognizes that: (1) the cost of a control
should not exceed the benefits likely to be derived; and (2) the valuation of costs and
benefits requires estimates and judgments by management. We believe the information
presented in this report is complete and accurate in all material respects, and that it is
reported in a manner designed to fairly present the financial position and results of
operations of the various activities of the City of Newport Beach.
The City of Newport Beach’s financial statements have been audited by
CliftonLarsonAllen LLP, a firm of licensed certified public accountants. The goal of the
audit was to provide reasonable assurance that the financial statements of the City of
Newport Beach for the fiscal year (FY) ended June 30, 2020 are free of material
misstatement. The independent audit involved examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements; assessing the
accounting principles used and significant estimates made by management; and
evaluating the overall financial statement presentation. The independent auditor
concluded, based on the audit, that there was a reasonable basis for rendering an
unmodified opinion that the City of Newport Beach’s financial statements for the year
5
ended June 30, 2020 are fairly presented in conformity with GAAP. The independent
auditor’s report is presented as the first component of the financial section of this report.
A narrative introduction, overview, and analysis accompany the basic financial statements
in the form of the Management’s Discussion and Analysis (MD&A). The letter of
transmittal is designed to complement the MD&A and should be read in conjunction with
it. The City of Newport Beach MD&A can be found immediately following the report of
the independent auditors and will provide further information regarding the format and
content of this report.
PROFILE OF THE CITY
Newport Beach is a community located in the coastal center of Orange County, in the
heart of Southern California, with Los Angeles County to the north and San Diego County
to the south. There are currently 34 cities within the county. In terms of population,
Orange County is the third largest county in California trailing Los Angeles and San Diego.
It is the sixth largest county in the nation.
The general vicinity of Newport Beach and the County of Orange relative to the counties
of Los Angeles, San Bernardino, Riverside, and San Diego is illustrated on the map
below:
6
Newport Beach surrounds Newport Bay, well known for its picturesque islands and one
of the greatest recreational harbors in the world, accommodating about 4,300 recreational
and sports charter boats docked within its 21-square-mile harbor. The bay and the ten
miles of ocean beach offer outstanding fishing, swimming, surfing, and aquatic sports
activities. The city has a permanent population of 85,780, which typically grows to well
over 100,000 during the summer months, including 20,000 to 100,000 or more tourists
daily. There are fine residential areas, modern shopping facilities, and a quality school
system. The University of California, Irvine, is located immediately adjacent to the city,
and several other colleges are within a 30-mile-radius.
The following map illustrates the communities within Newport Beach; the upper bay, the
recreational harbor, and beachfront topography; and the city’s location relative to the
bordering cities of Costa Mesa to the north, Irvine to the east, and Laguna Beach to the
south.
Newport Beach was incorporated September 1, 1906. The City Charter was originally
adopted in 1954 but has been updated and amended over time. The City operates under
a Council-Manager form of government. Council Members are elected by district but
voted on by the population as a whole, and serve four-year staggered terms. The
governing council consists of the Mayor and six other members and is responsible for,
7
among other things, policy-making, passing local ordinances, adopting the budget,
appointing committees, and hiring the City Manager, City Attorney, and City Clerk. The
City Manager is responsible for carrying out the policies and ordinances of the City
Council, for overseeing the day-to-day operations of the City, and for appointing heads of
departments.
The City of Newport Beach is a full service city providing its residents and visitors with the
following functional services: general governance, legal, financial, information
technology, and administrative management; police, fire, paramedic, lifeguard, and
emergency medical transport services; engineering, construction, and maintenance of
public facilities, public streets, beaches, and parks; planning, zoning, and economic
development services; building inspection, plan check and code enforcement services;
libraries and cultural and arts services; recreation and senior services; and water,
wastewater, and street light utility services. The City provides water and wastewater
service to most areas within city limits, but it does not provide gas, cable television,
electrical, or other utility services. Public elementary and secondary education is provided
by the Newport-Mesa Unified School District and the Laguna Beach Unified School
District.
Component Unit: The City’s financial statements present the financial activity of the City
of Newport Beach (the primary government) and the Newport Beach Public Facilities
Corporation (a component unit of the City). The Corporation is blended into the City’s
financial statements because of its operational and financial relationship with the City.
Even though it is a legally separate organization, City of Newport Beach elected officials
are accountable for fiscal matters of the Corporation. Additional information about the
Newport Beach Public Facilities Corporation and the reporting entity in general can be
found in Note (1a) of the notes to the financial statements.
DEMOGRAPHICS
Reflective of a mature community, vacant land has become increasingly scarce and the
city is relatively built-out. Currently at 85,780, the population has been very stable as
indicated by the following chart.
8
The effective buying income and median household income are generally higher in
Newport Beach than in other areas of the State and the U.S. overall. As illustrated by the
table below, Newport Beach median household income is nearly twice that of the U.S.
median household income.
The leading industries here are professional, scientific, health care, finance, insurance,
legal, and travel/tourism. Unemployment in the city stands at 5.6% due to the economic
impacts associated with the COVID-19 but is significantly lower when compared to the
state and the county as illustrated on the following chart.
More detailed information concerning the city’s demographics and statistics are contained
within the Statistical Section of this report.
LOCAL ECONOMY
The City of Newport Beach’s General Fund revenue sources have been adversely
impacted by the health-related and economic impacts of the COVID-19 pandemic. Efforts
to respond to and mitigate the spread of COVID-19 have had a severe impact on the
State and local economy and triggered a recession. There have been many fiscal
challenges attributed to the global COVID-19 pandemic, including a projected gross
domestic product decline, historic increases in unemployment claims in the region, travel
restrictions and a decline in consumer spending resulting from closures of non-essential
goods and services. The COVID-19 pandemic and the efforts to mitigate its spread has
resulted in significant declines in City revenues from recent levels. Additionally,
uncertainty exists with inflation, and state, local, federal and international policies that
City of Newport Beach $128,294
Orange County 95,934
California 80,444
USA 65,712
2019 Median Household Income
9
may result in further declines in the future. The temporary closures caused by COVID-
19 have led to a stark increase in unemployment across the County and the nation.
Depending on the length and the breadth of the impacts of COVID-19, the economic costs
may be very significant for the City and the region’s economy. As more restaurants, retail
stores and other non-essential businesses temporarily or permanently close,
unemployment figures could continue to remain elevated. According to the State
Employment Development Department, the unemployment rate of the City, County and
State in September 2020 was 5.6%, 7.5% and 9.0%, respectively.
TOP THREE REVENUE SOURCES
The swift reaction by consumers and businesses to the outbreak of COVID-19 in Newport
Beach caused a massive decrease in spending on certain goods and services. The
national and state response combined with the uncertainty of how long the presence of
the virus would disrupt the U.S. economy made forecasting revenues particularly
challenging. The City’s revised FY 2019-20 revenue forecast and associated budget
amendment was presented to, and approved by, the City Council on April 28th, 2020.
General Fund revenues were reduced by $13 million and provisions were made to realize
at least $13 million in expenditure savings for the remainder of the fiscal year as a “bridge”
solution to narrow the revenue shortfall chasm. The actual revenue results ended up
being much better than anticipated. General fund revenues ended FY 2019-20 at $229.9
million and were, $10.8 million or 5%, higher than the projected budget in almost all
categories. The top three individual revenue sources, Property Taxes, Sales Taxes and
Sales Tax in Lieu, and Transient Occupancy Taxes (TOT), represent 74 percent of all
General Fund revenues. Tax revenues in total, including business licenses, franchise
fees, and other taxes represent nearly 80 percent of all General Fund revenues while only
21 percent was generated by other revenue sources.
Property Taxes
Unlike many cities, property taxes, not sales taxes, are the number one source of revenue
for the City of Newport Beach, representing almost half (49 percent) of all General Fund
revenues. FY 2019-20 revenue was 0.5% higher than projected. Property tax revenue
10
estimates were decreased for FY 2019-20 in anticipation of economic hardship due to the
pandemic and the Governor’s Executive Order (N-61-20) suspending penalties and
interest of property taxes. Secured property tax revenue, which makes up almost 85% of
all property tax revenue, ended up coming in stronger than expected. Property taxes are
likely to remain among the least affected revenue sources by the pandemic (at least in
the short term). Due to the limited supply of scenic coastal property and the unique
access to the Newport Bay, the Newport Beach community has been developed into
affluent residential neighborhoods and high-end commercial districts. Consistent and
vigorous demand for coastal property has allowed the City to enjoy long-term growth
trends with its number one revenue source. Value changes in Newport Beach show
continued appreciation in property values in FY 2019-20. Over the past 10 years,
assessed valuation increased an average of 4.7 percent per annum and 6.8 percent over
a twenty-year period. Newport Beach’s assessed property values increased 5.3 percent
and with a local assessed value at $60.7 billion for FY 2019-20.
After Californians passed Proposition 13 in 1978, assessed property value is reassessed
to market value only when the property changes ownership. Otherwise, the assessed
value (AV) grows by no more than 2 percent per year. This practice creates a constant
lag and buffer between assessed and market values, effectively insulating the tax base
from more market volatility.
While property tax growth rates fell sharply during the Great Recession, the City has
experienced positive AV growth during each of the past 20 years (see chart below with
the past 15 years of AV growth demonstrated). This positive growth occurred while many
other cities experienced decreases in their AV during 2008 through 2011. Note that while
growth slowed, the assessed value never declined throughout the recession.
Estimated average single-family home values of $2,900,000 in Newport Beach far exceed
the countywide average value of $922,000.
11
Sales Taxes
The second largest funding source for the General Fund is sales tax revenue which
finished the year $1.8 million higher than projected. The City’s sales tax base is largely
generated from three main industry categories including Autos and Transportation,
General Consumer Goods, and Restaurants/Hotels. These industries are also heavily
impacted by tourism. At the onset of the pandemic when businesses were shut down,
sales tax revenue potential appeared drastically diminished. The projections for the year
held the ongoing assumption that the restrictions in place in April 2020 would remain for
the rest of the Fiscal Year. Sales tax revenues were higher than anticipated because
businesses pivoted in creative ways to reach their customers, they were able to open at
some capacity sooner than expected, and consumer spending was relatively strong.
Online car sales increased and sales at local dealerships picked up in May and June.
RVs and boat sales became more popular as families could not travel internationally.
Online sales increased dramatically as the City’s county pool allocation for 2Q2020 went
up 40% (from $1.1 million to $1.6 million) and there appeared to be in an uptick in sales
related to home improvement projects. For these reasons all three main industry
categories performed better than expected. Although FY 2019-20 wasn’t as bad as
budgeted, due to the severe impacts on economic activity we saw across all industry
categories, sales taxes receipts were $2.3 million less than the prior year.
The City’s sales tax base is generated from a relatively diverse business community and
is not dependent on any one merchant or industry. The following chart demonstrates the
diversity of the City sales tax revenue. The largest segment, “Transportation,” accounts
for 40 percent of total sales taxes. The next largest segments, “Food Products” and
“General Retail,” account for 22 and 16 percent of total sales taxes, respectively. The
next largest sales tax segment, “Business to Business” accounts for 21 percent of total
sales. Sales Taxes in total represent 16 percent of all General Fund revenues.
Home %
Year Value Change
2011 1,570,000$ -5.11%
2012 1,620,000$ 3.18%
2013 2,140,000$ 32.10%
2014 2,230,000$ 4.21%
2015 2,350,000$ 5.38%
2016 2,440,000$ 3.83%
2017 2,560,000$ 4.92%
2018 2,760,000$ 7.81%
2019 2,840,000$ 2.90%
2020 2,900,000$ 2.11%
* Source: Zillow
CITY OF NEWPORT BEACH
Single Family Home Values*
12
Transient Occupancy Taxes (TOT)
TOT accrues to the City at a rate of 10 percent of room charges with 18 percent of this
collection going to the local destination marketing organization (Newport Beach & Co.) to
promote Newport Beach as a tourist destination. The City distinguishes its transient
occupancy taxpayers in two broad property type categories, commercial and residential
property. The commercial category is composed of approximately 20 inns, motels, hotels,
and resorts and accounts for 80 percent of TOT revenues. The residential category is
made up of approximately 1,500 vacation rentals representing 20 percent of TOT
revenue; together, they accounted for $20.8 million in TOT revenue during FY 2019-20-
a 15.6% decrease from the prior year.
Transient occupancy tax (TOT) revenue was the most severely impacted revenue source
as most major hotels within the City were temporarily closed at the end of March 2020
and many didn’t start reopening until late May or early June. Also, short term rentals were
not allowed in the City from early April 2020 until May 20, 2020 which further dampened
tax revenues. Revenue projections for FY 2019-20 were calculated with the expectation
that hotels and short-term lodging would remain at severely reduced capacity through the
end of the fiscal year. Because hotels started opening sooner than anticipated, FY 2019-
20 transient occupancy tax receipts were $1.8 million, or 9%, higher than projected. Even
though TOT ended higher than projected, FY 2019-20 revenue was $3.8 million less than
the prior year. Additionally, not all hotels closed during the pandemic. Some of the larger
hotels that remained opened included Pelican Hill, Newport Dunes, Lido House and
Balboa Bay Club. Smaller hotels that remained open include the Balboa Inn, Little Inn by
the Bay, Bay Shores Peninsula Hotel and Extended Stay. The Fashion Island Hotel
closed but moved remaining guests to Pelican Hill. The Marriott kept two of their five
hotels open during the pandemic and some shuttered hotels reopened around Memorial
Day. At the start of the pandemic, some visitors extended their stay due to the uncertain
conditions of their home state. And once restrictions began to lift, the City saw an influx
of regional hotel visitors from Los Angeles, San Diego and Palm Desert. The Newport
Dunes experienced an increase in camping and RVs that further increased the City’s tax
revenue.
13
LONG TERM FINANCIAL PLANNING
The City continues to be in excellent financial health during the global pandemic due to
its strong underlying tax base, disciplined fiscal decisions, and governance. Conservative
budgeting and sound financial policies have resulted in a trend of General Fund operating
surpluses and strong reserve levels for several years. This is still no less the case even
amid the significant economic downturn the City is currently experiencing. Conservative
budgeting practices coupled with better than expected consumer demand have resulted
in higher revenues and lower expenditures than budgeted in FY 2019-20.
The City’s long-term financial planning is guided by its strong financial policies, prudent
budgeting decisions, and proactive planning in such critical areas as facilities replacement
and pensions.
Financial Policies
The City Council has adopted prudent fiscal policies concerning its investments, reserves,
budget administration, revenue initiatives, competitive contracting, facility replacement
planning, and more. The budget surplus utilization policy directs the use of surplus funds
resulting from unrestricted General Fund annual revenues exceeding total actual
expenditures, encumbrances, and commitments for that year. Roughly fifty percent of the
budget surplus is typically used to address long-term obligations such as pension
liabilities, other post-employment benefits, bonded debt, lease obligations, and other
long-term needs. The remaining surplus is typically used to address one-time
infrastructure or neighborhood capital improvements, guided by a philosophy that these
expenditures improve the community’s safety, aesthetics, transportation, or quality of life.
The City’s debt policy establishes criteria for the issuance of debt and assures that the
amount of any debt is affordable and cost effective. The City’s debt policy was recognized
by the California Debt and Investment Advisory Commission as one of only 14 counties
and cities in California whose policies have 20 or more debt management best practice
elements. The City’s debt and other financial policies can be found on the City’s website
in the City Council section under City Government at:
www.newportbeachca.gov/policies
14
Annual Budget
The annual budget serves as the foundation for the City of Newport Beach’s financial
planning and control and allows the City Council to prioritize City expenditures so that
they are aligned with core community values. The City of Newport Beach, along with
other local jurisdictions, states, and the federal government faced an exceptionally
challenging economic environment as a result of the COVID-19 Pandemic. The stock
market plunge, massive unemployment increases, and eroding consumer confidence
from this unprecedented halt in economic activity resulted in deteriorating revenue
streams. As previously mentioned, actual revenue results ended up much better than
anticipated and actual expenditures ended the year lower than budgeted due to the
careful management of operating expenditures (hiring freeze and the curtailment of other
expenditures) and budget adjustments during the last quarter of the fiscal year. The City’s
revised FY 2019-20 revenue forecast and associated budget amendment was presented
to, and approved by, the City Council on April 28, 2020. General Fund revenues were
reduced by $13 million and provisions were made to realize at least $13 million in
expenditure savings for the remainder of the fiscal year as a “bridge” solution to narrow
the revenue shortfall chasm.
Per current policy, appropriations for operating expenditures are balanced in relation to
current revenue sources and do not over-rely on one-time revenue sources or reserves.
When significant uncertainty exists concerning revenue volatility or threatening/pending
obligations, the City Council and City Manager reserve the right to impose any special
fiscal control measures, including personnel hiring freezes, and other spending controls,
as was the case in FY 2019-20 and in the development of the FY 2020-21 budget.
Through a combination of early retirement plans, attrition, outsourcing, and lay-offs over
the last ten years, the full-time work force has been reduced 4.6 percent since FY 2011-
12 as depicted in the chart below:
The City has traditionally taken a conservative approach to forecasting revenues, often
assuming only modest growth. This fiscal conservatism has created a stable financial
base. As a result, even in a downturn, the City of Newport Beach is able to maintain its
15
services at a high level, while reducing expenses to accommodate reduced revenues.
The City’s fiscal discipline has allowed it to prepare balanced budgets and to save, both
during prosperous and difficult economic periods. As the economy continues to improve,
these trends are likely to hold; however, a great deal is unknown as the global pandemic
continues.
The City Council may authorize the use of Contingency reserves during emergency
situations as set forth by the Council Reserve Policy. Current policy requires that the
Contingency Reserve equal 25 percent of the General Fund annual “Operating Budget.”
Credit rating agencies consider a high level of available “fund balance” to be a credit
strength. In 2020, Moody’s rating agency reaffirmed the City’s AAA credit rating noting
the City’s extensive tax base, a very strong wealth and income profile, and a robust
financial position. It also noted the City’s moderate debt burden and an elevated pension
burden in its rationale.
Facilities Financial Plan (FFP) Commitment & Major Construction Initiatives
The City’s FFP is a comprehensive master facilities replacement schedule that projects
the timing of construction of facility projects; projects the schedule of any planned debt
issuance; includes all relevant revenue sources and expenditures on a yearly, project-by-
project basis; and determines the long-term “level funding” annual budget commitment
that is required to support the program. The FFP was the winner of the prestigious “Helen
Putnam Award – Internal Administration category” from the League of California Cities in
2008.
The City continued its financial commitment to the Facilities Financial Plan Reserve
(FFPR) in FY 2019-20 by allocating resources to debt service, fire stations, parks and
community centers, and other projects.
Beginning Balance 7/1/19 14,297,412$
Sources
Licenses, Permits and Fees 208,822
Property Income 258,425
Transfer In from General Fund 9,915,459
Investment Income 357,822
Net increase in fair value of investments 305,897
Total Sources 11,046,425
Uses
2010 Civic Center COPs Debt Service 1 (8,086,599)
Strategic Plan (109,199)
Junior Guard (50,000)
Parks and Community Centers (7,515)
Misc - Other Facilities (43,685)
Total Uses (8,296,998)
Ending Balance 6/30/20 17,046,839$
1 The transfer is net of the Build America Bonds subsidy, which is
recorded in the Debt Service Fund
Facilities Financial Planning Reserve Fund
16
Overall, the FFPR balance is increasing by $2.7 million from the prior fiscal year.
Pensions
As of the actuarial valuation date of June 30, 2019, the City had an Unfunded Accrued
Liability (UAL) of $326 million. The City has taken a number of actions in recent years to
mitigate the impact of rising pension costs including:
Established lower benefit formulas for new hires.
Eliminated the Employer Paid Member Contribution (EPMC).
Employees contributed 62 percent of the Normal Cost of the plan, approaching
$10.6 million annually.
Reduced the number of full-time staff by 100 Full Time Equivalent (FTE) positions
between 2009 and today.
Adopted a fixed and shorter amortization period of the unfunded liability.
Making Additional Discretionary Payments (ADP)
Contributing no less than Actuarial Determined Contribution (ADC) each & every
year.
Analyzed our schedule of amortization bases annually in an effort to avoid negative
amortization.
Amortized all gains/losses no longer than a 20-year closed period.
Avoided asset smoothing or “rate phase-in” schedules if possible. Otherwise, the
City’s goal is to not exceed 5 years for any one smoothing cycle.
Established a General Fund Surplus Utilization Policy F-5 to set aside one-half of
any annual budget surplus to fund debts such as the pension liability.
Maintaining a contingency reserve to protect against economic recessions and to
avoid negative impacts of asset smoothing and rate phased-in schedules.
Local governments with pensions have a total pension liability, which is the obligation to
pay deferred pension benefits in the future. When the total pension liability is greater than
the pension plan’s assets there is a net pension liability, also known as unfunded pension
liability. As required by GASB 68, the City reports the net pension liability in the
government wide financial statements, as well as in the proprietary fund statements, in
the CAFR – see Note (10) of Notes to the Financial Statements.
The City implemented GASB 75 in FY2017-18, which requires local governments offering
other post-employment health care benefits (OPEB) to report net OPEB liability in the
government wide financial statements, as well as in the proprietary fund statements, in
the CAFR – see Note (11) in the Notes to the Financial Statements. When the total OPEB
liability is greater than the OPEB plan’s assets there is a net OPEB liability, also known
as unfunded OPEB liability.
As with past practice, the City will continue to fund our pension and OPEB obligations at
an amount equal to or greater than the minimum employer contribution rate. The City has
not and will never intentionally short-fund its pension and OPEB obligations. Annually the
17
City evaluates the cost and benefits of paying down the unfunded pension and OPEB
liabilities on a faster schedule.
AWARDS AND ACKNOWLEDGMENTS
The City has prepared a comprehensive annual financial report for the past 27 years.
The City has received awards for excellence in financial reporting each of those years.
The Government Finance Officers Association of the United States and Canada (GFOA)
awarded a Certificate of Achievement for Excellence in Financial Reporting to the City of
Newport Beach for its comprehensive annual financial report for the fiscal year ended
June 30, 2019. In order to be awarded a Certificate of Achievement, a government unit
must publish an easily readable and efficiently organized comprehensive annual financial
report. This report must satisfy both generally accepted accounting principles and
applicable legal requirements.
A Certificate of Achievement is valid for a period of one year only. We believe our current
comprehensive annual financial report continues to conform to the Certificate of
Achievement program requirements and we are submitting it to GFOA to determine its
eligibility for another certificate.
Acknowledgments: Preparation of this report was accomplished through the efficient and
dedicated services of everyone in the City’s Financial Reporting Division. In addition,
members of the Finance Department would like to thank the City Manager, and the Mayor,
and the City Council for their interest and support in planning and conducting the financial
operations of the City in a responsible and progressive manner. We would also like to
thank our auditors, CliftonLarsonAllen LLP, for their time and assistance in the
preparation of the report. This report was completely prepared and published by City
employees.
18
Government Finance Officers Association
Certificate of
Achievement
for Excellence
in Financial
Reporting
Presented to
City of Newport Beach
California
For its Comprehensive Annual
Financial Report
For the Fiscal Year Ended
June 30, 2019
Executive Director/CEO
19
Newport Beach City Officials
Kevin Muldoon
Mayor Pro Tem
District 4
Will O’Neill
Council Member
District 7
Joy Brenner
Council Member
District 6
Diane B. Dixon
Council Member
District 1
Brad Avery
Mayor
District 2
Duffy Duffield
Council Member
District 3
Noah Blom
Council Member
District 5
City Council Members
City Executive Staff
Grace K. Leung
City Manager
Aaron Harp
City Attorney
Leilani Brown
City Clerk
Carol Jacobs ............................................................................................................................ Assistant City Manager
Tara Finnigan ............................................................................................................................. Deputy City Manager
Scott Catlett.....................................................................................................................Finance Director/Treasurer
Seimone Jurjis ...................................................................................................... Community Development Director
Jeff Boyles.....................................................................................................................................................Fire Chief
Kurt Borsting ........................................................................................................................................ Harbormaster
Barbara Salvini .................................................................................................................. Human Resources Director
Tim Hetherton ...................................................................................................................... Library Services Director
Jon T. Lewis .............................................................................................................................................. Police Chief
Dave Webb ............................................................................................................................... Public Works Director
Laura Detweiler ............................................................................................... Recreation & Senior Services Director
Mark Vukojevic ..................................................................................................................................Utilities Director
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Board of
Library Trustees
Building & Fire
Code of Appeals
City Arts
Commission
Civil Service Board
Harbor Commission
Parks, Beaches &
Recreation Commission
Planning
Commission
ELECTORATE
CITY
MANAGER
MAYOR &
COUNCIL
CITY
CLERK
CITY
ATTORNEY
Community
Development
Finance
Fire
Human
Resources
Harbor
Library
Services
Public
Works
Utilities
Police
Recreation &
Senior Services
City
Committees
21
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22
FINANCIAL SECTION
FINANCIAL SECTIONFINANCIAL SECTIONINDEPENDENT AUDITORS’ REPORTINDEPENDENT AUDITORS’ REPORT
23
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24
CliftonLarsonAllen LLP
CLAconnect.com
INDEPENDENT AUDITORS’ REPORT
The Honorable Mayor and
Members of the City Council
City of Newport Beach
Newport Beach, California
Report on the Financial Statements
We have audited the accompanying financial statements of the governmental activities, the
business-type activities, each major fund, and the aggregate remaining fund information of the City of
Newport Beach, California (the City), as of and for the year ended June 30, 2020, and the related notes
to the financial statements, which collectively comprise the City’s basic financial statements as listed
in the table of contents.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in
accordance with accounting principles generally accepted in the United States of America; this
includes the design, implementation, and maintenance of internal control relevant to the preparation
and fair presentation of financial statements that are free from material misstatement, whether due to
fraud or error.
Auditors’ Responsibility
Our responsibility is to express opinions on these financial statements based on our audit. We
conducted our audit in accordance with auditing standards generally accepted in the United States of
America and the standards applicable to financial audits contained in Government Auditing Standards,
issued by the Comptroller General of the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial statements are free from
material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in
the financial statements. The procedures selected depend on the auditors’ judgment, including the
assessment of the risks of material misstatement of the financial statements, whether due to fraud or
error. In making those risk assessments, the auditors consider internal control relevant to the City’s
preparation and fair presentation of the financial statements in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness
of the City’s internal control. Accordingly, we express no such opinion. An audit also includes
evaluating the appropriateness of accounting policies used and the reasonableness of significant
accounting estimates made by management, as well as evaluating the overall presentation of the
financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit opinions.
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Opinions
In our opinion, the financial statements referred to above present fairly, in all material respects, the
respective financial position of the governmental activities, the business-type activities, each major
fund, and the aggregate remaining fund information of the City, as of June 30, 2020, and the respective
changes in financial position and, where applicable, cash flows thereof and the respective budgetary
comparison statement for the General Fund, the Tide and Submerged Land-Operating Special Revenue
Fund, the Tide and Submerged Land-Harbor Capital Special Revenue Fund, and the Measure M
Special Revenue Fund for the year then ended in accordance with accounting principles generally
accepted in the United States of America.
Other Matters
Report on Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the
management’s discussion and analysis, the schedules of changes in net pension liability and related
ratios and the schedules of contributions for the City’s defined benefit pension plans, and the schedule
of changes in net OPEB liability and related ratios and the schedule of contributions for the City’s
other post-employment health care benefits plan, identified as Required Supplementary Information
(RSI) in the accompanying table of contents, be presented to supplement the basic financial statements.
Such information, although not a part of the basic financial statements, is required by the
Governmental Accounting Standards Board, who considers it to be an essential part of financial
reporting for placing the basic financial statements in an appropriate operational, economic or
historical context. We have applied certain limited procedures to the RSI in accordance with auditing
standards generally accepted in the United States of America, which consisted of inquiries of
management about the methods of preparing the information and comparing the information for
consistency with management’s responses to our inquiries, the basic financial statements, and other
knowledge we obtained during our audit of the basic financial statements. We do not express an
opinion or provide any assurance on the RSI because the limited procedures do not provide us with
sufficient evidence to express an opinion or provide any assurance.
Other Information
Our audit was conducted for the purpose of forming opinions on the financial statements that
collectively comprise the City’s basic financial statements. The introductory section, combining
statements and individual fund schedules, and statistical section are presented for purposes of
additional analysis and are not a required part of the basic financial statements.
The combining statements and individual fund schedules (supplementary information), as listed in the
table of contents, are the responsibility of management and were derived from and relate directly to the
underlying accounting and other records used to prepare the basic financial statements. Such
information has been subjected to the auditing procedures applied in the audit of the basic financial
statements and certain additional procedures, including comparing and reconciling such information
directly to the underlying accounting and other records used to prepare the basic financial statements
or to the basic financial statements themselves, and other additional procedures in accordance with
auditing standards generally accepted in the United States of America. In our opinion, the
supplementary information is fairly stated in all material respects in relation to the basic financial
statements as a whole.
The introductory and statistical sections have not been subjected to the auditing procedures applied in
the audit of the basic financial statements, and accordingly, we do not express an opinion or provide
any assurance on them.
26
Other Reporting Required by Government Auditing Standards
In accordance with Government Auditing Standards, we have also issued our report dated
January 27, 2021, on our consideration of the City’s internal control over financial reporting and on our
tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and
other matters. The purpose of that report is solely to describe the scope of our testing of internal control
over financial reporting and compliance and the results of that testing, and not to provide an opinion on
the effectiveness of the City’s internal control over financial reporting or on compliance. That report is
an integral part of an audit performed in accordance with Government Auditing Standards in
considering the City’s internal control over financial reporting and compliance.
CliftonLarsonAllen LLP
Irvine, California
January 27, 2021
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28
FINANCIAL SECTION
FINANCIAL SECTIONFINANCIAL SECTIONMANAGEMENT’S DISCUSSION AND ANALYSIS
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MANAGEMENT’S DISCUSSION AND ANALYSIS
This section of the City of Newport Beach’s Comprehensive Annual Financial Report (CAFR)
presents management’s discussion and analysis of the City’s financial performance during the
fiscal year that ended on June 30, 2020. This analysis should be read in conjunction with the
Transmittal Letter at the front of this report and the accompanying Basic Financial Statements.
OVERVIEW OF THE FINANCIAL STATEMENTS
The financial section of the Comprehensive Annual Financial Report contains the following
information: Independent Auditors’ Report, Management’s Discussion and Analysis (this section),
the Basic Financial Statements, the Required Supplementary Information, and the Supplementary
Information section, an optional section that presents combining and budgetary schedules for
individual non-major funds. The Basic Financial Statements are comprised of three components:
1)Government-wide Financial Statements, 2) Fund Financial Statements, and 3) Notes to the
Financial Statements. Management’s Discussion and Analysis is intended to be an introduction
to the Basic Financial Statements.
BASIC FINANCIAL STATEMENTS
Government-wide Financial Statements – The Government-wide Financial Statements use the
economic resources measurement focus and accrual basis of accounting which is similar to the
accounting standard used by private sector companies. The government-wide financial
statements are intended to provide a “Big Picture” view of the City. With the economic resources
measurement focus and accrual basis of accounting, changes in net position are recognized as
soon as the event occurs regardless of the timing of related cash flows.
The Statement of Net Position includes all of the City’s assets (including non-spendable assets
like streets, roads, and land rights), deferred outflows of resources, liabilities (including long-term
liabilities that may be paid over twenty years), and deferred inflows of resources. All of the current
year revenues and expenses are accounted for in the Statement of Activities regardless of when
cash is received or paid.
The Government-wide Financial Statements report the City’s net position and how they have
changed. Net position – the difference between the City’s assets, deferred outflows of resources,
liabilities and deferred inflows of resources – is one way to measure the City’s financial health.
Over time, increases or decreases in the City’s net position are an indicator of whether its financial
health is improving or deteriorating, respectively. To assess the overall health of the City, one
should also consider additional non-financial factors such as changes in the City’s property tax
base and the condition of its facilities and other major infrastructure.
The Government-wide Financial Statements of the City are divided into two categories:
Governmental Activities – This category depicts the extent to which programs are self-
supporting and the net amount provided by property taxes and other general revenues.
Most of the City’s basic services are included in this category such as the public safety,
public works, community development, community services and general administration.
Taxes and other general revenues finance most of these activities.
31
Business-type Activities – The City accounts for its Water and Wastewater utilities as
business enterprises. The City charges fees to customers to recover the cost of providing
Water and Wastewater services.
Fund Financial Statements – A fund is a grouping of related accounts used to maintain control
over resources that have been segregated for specific activities or objectives. The City uses fund
accounting to ensure and demonstrate compliance with finance-related legal requirements such
as State and Federal law or bond covenants. Other funds are utilized simply to control and
manage resources intended for particular purposes. The Fund Financial Statements provide more
detailed information about the City’s most significant funds (major funds) but not the City as a
whole.
Fund Financial Statements have a short-term focus measuring inflows of current spendable
assets. The resulting net difference between current financial assets and deferred outflows of
resources, and current financial liabilities and deferred inflows of resources, otherwise known as
fund balance (or net working capital in the private sector) is a measure of the City’s ability to
finance activities in the near term.
The City utilizes three broad categories of funds:
Governmental Funds – Unlike Government-wide Financial Statements, Governmental
Fund Financial Statements utilize the financial resources measurement focus and thus
concentrate on near-term inflows and outflows of spendable resources, as well as on
balances of spendable resources available at the end of the fiscal year. Consequently, the
Governmental Fund Financial Statements provide a detailed short-term view that helps a
reader determine whether there are more or fewer financial resources that can be spent
in the near future to finance City programs. Also included in the Governmental Funds are
Permanent Funds. These funds are used to report resources that are legally restricted to
the extent that only earnings, not principal, may be used for purposes that support City
programs.
Proprietary Funds – Business-like services for which the City provides goods or services
to the general public are generally reported in Proprietary Funds (Enterprise Funds and
Internal Service Funds). Like the Government-wide Financial Statements, these funds
provide both long and short-term financial information utilizing the economic resources
measurement focus. The City’s Enterprise Funds (Water and Wastewater Funds) are
individual funds represented in the combined presentation of Business-type Activities in
the Government-wide Financial Statements. The individual fund presentation provides
more detailed information about each business segment, its operating statements, and
statements of cash flow. The City also uses Internal Service Funds that are utilized to
report and allocate the cost of certain centrally managed and operated activities (e.g. fleet
maintenance and other equipment, risk management, retiree insurance,
telecommunications systems, information technology services, etc.). Because the Internal
Service Funds primarily serve the government, they are reported with Governmental
Activities rather than the Business-type Activities in the Government-wide Financial
Statements.
Fiduciary Funds – The City utilizes Fiduciary Funds to account for assets held by the City
in a trustee capacity, or as an agent for other governmental entities, private organizations,
or individuals. All of the City’s fiduciary activities are reported in a separate statement of
fiduciary assets and liabilities, and a statement of changes in fiduciary assets and
32
liabilities. We exclude these activities from the City’s Government-wide Financial
Statements because the City cannot use these assets to finance its operations.
Notes to the Financial Statements – The financial statements also include the Notes to the
Financial Statements that provide important narrative details about the information contained in
the financial statements. Information contained in the Notes to the Financial Statements is critical
to a reader’s full understanding of the Government-wide and Fund Financial Statements.
Required Supplementary Information – In addition to the Basic Financial Statements, we have
included a Required Supplementary Information section, which includes the Schedule of Changes
in Net Pension Liability and Related Ratios, Post-employment Health Care Benefits (OPEB)
Liability and Related Ratios, and the Schedule of Plan Contributions.
Supplementary Information – In addition to the required elements of the Basic Financial
Statements, we have also included a Supplementary Information section, which includes
budgetary and combining schedules that provide additional details about the City’s Other
Governmental Funds, Internal Service Funds, and Fiduciary Funds.
ANALYSIS OF GOVERNMENT-WIDE FINANCIAL STATEMENTS
The Government-wide Financial Statements provide long-term and short-term information about
the City’s overall financial condition. This analysis addresses the financial statements of the City
as a whole.
Net Position Discussion
As shown in Figure 1, the City’s combined net position for the year ended June 30, 2020 was $2.3
billion, increasing $23.8 million or 1.0% over the prior year. Net position can serve as an important
indicator of whether the City’s overall financial condition is improving or deteriorating over time.
Current and other assets increased $27.8 million. This increase is primarily due to increases in
cash and investments, and accounts receivable (net of allowance), offset by decreases in
intergovernmental receivables and interest receivable. Capital assets decreased $2.0 million,
mostly due to fewer additions to work in progress as more projects during the fiscal year were
considered maintenance in nature.
Current liabilities increased $138,584 primarily due to increases in accrued payroll and unearned
revenue, offset by decreases in accounts payable, accrued interest payable and deposits
payable.
Long-term liabilities decreased $6.7 million. The decrease is primarily due to decreases in
outstanding certifications of participation, workers’ compensation and net pension liability. See
Note (6), Note (10) and Note (11) of Notes to the Financial Statements for more information.
33
Figure 1
Net Position
(in thousands)
The largest portion of the City’s net position, at $2.3 billion of net position, reflects the net
investment in capital assets (e.g., land, right of way, street trees, buildings, infrastructure, and
equipment) less accumulated depreciation and any related outstanding debt used to acquire
those assets. The City uses these capital assets to provide services to residents. Therefore, they
do not represent a financial resource to the City and consequently are not readily available for
funding current obligations.
Restricted net position totaled only $67.7 million of net position. An increase of $11.3 million from
the prior year was mostly due to the restriction of resources for harbor related capital projects and
the restriction of resources received from the Federal government for small business relief related
to the COVID-19 pandemic.
As of June 30, 2020, unrestricted net position had a deficit of $59.9 million. The deficit decreased
$11.8 million from the prior year primarily due to the receipt of unrestricted revenues such as
property taxes and sales taxes that were not spent or restricted by the end of the fiscal year.
Governmental Activities Business-Type Activities Total
2019 2020 2019 2020 2019 2020
Current and other assets 270,408$ 298,255$ 42,642$ 42,604$ 313,050$ 340,859$
Capital assets 2,322,225 2,318,827 119,346 120,769 2,441,571 2,439,596
Total assets 2,592,633 2,617,082 161,988 163,373 2,754,621 2,780,455
Deferred Outflows of Resources 75,975 66,119 2,406 1,863 78,381 67,982
Current liabilities 25,283 25,177 3,589 3,833 28,872 29,010
Long-term liabilities 463,044 456,589 10,806 10,600 473,850 467,189
Total liabilities 488,327 481,766 14,395 14,433 502,722 496,199
Deferred Inflows of Resources 7,849 6,088 321 234 8,170 6,322
Net Position
Net investment in capital assets 2,218,040 2,217,853 119,346 120,292 2,337,386 2,338,145
Restricted 56,427 67,708 - - 56,427 67,708
Unrestricted (102,035) (90,214) 30,332 30,277 (71,703) (59,937)
Total net position 2,172,432$ 2,195,347$ 149,678$ 150,569$ 2,322,110$ 2,345,916$
34
GOVERNMENTAL ACTIVITIES
Governmental activities are generally financed through taxes, intergovernmental revenues, and
other non-exchange revenues. The Statement of Activities is intended to illustrate how the cost
of governmental activities is financed and determine the annual change in net position.
Figure 2
Changes in Net Position
(in thousands)
Revenues Associated with Governmental Activities Discussion
Figure 2 illustrates in detail how the $269.5 million in Governmental Activities revenue was
derived. Figure 3 summarizes this revenue by major source. As shown on Figures 2 and 3, $57.7
million, or 21.4%, of the revenues were recovered from those who directly benefited from the
programs as a charge for service. Another $22.0 million, or 8.2%, of the revenues were
generated by contributions and grants received from governmental organizations, developers,
and property owners for both capital and operating activities. The remaining $189.8 million, or
70.4%, represented general revenues of the City including taxes, intergovernmental revenues,
and other miscellaneous revenues.
Governmental Activities Business-Type Activities
2019 2020 2019 2020 2019 2020
Revenues:
Program Revenues:
Charges for services 57,104$ 57,670$ 30,913$ 31,211$ 88,017$ 88,881$
Operating grants and capital contributions 14,022 14,659 - - 14,022 14,659
Capital grants and contributions 6,638 7,352 - - 6,638 7,352
Total program revenues 77,764 79,681 30,913 31,211 108,677 110,892
General Revenues:
Taxes:
Property taxes 108,365 113,314 - - 108,365 113,314
Sales tax 37,168 36,233 - - 37,168 36,233
Transient occupancy taxes 24,697 21,097 - - 24,697 21,097
Other taxes 11,349 11,869 - - 11,349 11,869
Investment related income 4,879 5,142 1,326 1,358 6,205 6,500
Other 3,495 2,117 - - 3,495 2,117
Total general revenues 189,953 189,772 1,326 1,358 191,279 191,130
Total revenues 267,717 269,453 32,239 32,569 299,956 302,022
Expenses:
General government 20,549 20,714 - - 20,549 20,714
Public safety 111,556 119,194 - - 111,556 119,194
Public works 53,340 60,055 - - 53,340 60,055
Community development 11,493 12,842 - - 11,493 12,842
Community services 27,758 26,668 - - 27,758 26,668
Interest 7,188 7,065 - - 7,188 7,065
Water - - 26,898 27,387 26,898 27,387
Wastewater - - 4,222 4,292 4,222 4,292
Total expenses 231,884 246,538 31,120 31,679 263,004 278,217
Increases in net position 35,833 22,915 1,119 890 36,952 23,805
Net position at beginning of year 2,138,806 2,172,432 147,808 149,678 2,286,614 2,322,110
Restatement (2,207) 1 - 751 2 - (1,456) 1,2 -
Net position at beginning of year, as restated 2,136,599 2,172,432 148,559 149,678 2,285,158 2,322,110
Net position at end of year 2,172,432$ 2,195,347$ 149,678$ 150,568$ 2,322,110$ 2,345,915$
1Prior year net position was restated to adjust for compensated absences liability in Fiscal Year 2017-18.
2Prior year net position was restated to adjust for capital assets in Fiscal Year 2017-18.
Total
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Figure 3
Governmental Activities Revenue Sources
Year Ended June 30, 2020
As illustrated in Figure 2, program revenues related to Governmental Activities increased $1.9
million from the prior year. This increase was primarily attributable to an increase in capital grants
and contributions due to the issuance of limited obligation improvement bonds for three
assessment districts and an increase in operating grants and contributions due to funding
received from other governmental agencies in response to economic challenges created by the
COVID-19 global pandemic.
The City’s general revenues related to Governmental Activities decreased about $181,000 from
the prior year primarily due to the pandemic as there were decreases in sales taxes, transient
occupancy taxes and other general revenues due to a delay in reimbursement from the federal
government. Property taxes increased, but not enough to offset the decreases in the other
categories.
Property tax is the largest individual revenue source for the City and collections finished the year
$4.9 million higher than the previous year. This increase was mostly due to an increase in secured
taxes as a robust demand for coastal property continued driving property values higher.
At $36.2 million, sales taxes represent the second largest individual revenue source for the City.
Sales taxes decreased $935,094 from the previous year. This was due to a decrease in economic
activity across all industry categories because of the global pandemic.
Transient occupancy taxes (TOT), the City’s third largest revenue source, finished the year at
$21.1 million, which is a decrease of $3.6 million from the previous fiscal year. The net decrease
stems from a decrease in commercial TOT due to falling occupancy rates and closures of hotels
because of the coronavirus global pandemic, offset by an increase in residential TOT.
Investment income, comprised of both interest income and unrealized gains, totaled $5.1 million,
an increase of about $263,000 over the prior fiscal year. Most of the increase is from a net
21%
8%
68%
3%
Charges for Services
Contributions and grants
Taxes
Other
36
increase in the fair value of investments, which is consistent with the fiscal year’s generally
decreasing interest rate environment.
Expenses Associated with Governmental Activities Discussion
The City is a full service city providing residents and visitors with the following functional services:
General Government is comprised of six departments (City Council, City Clerk, City Manager,
City Attorney, Human Resources, and Finance) providing general governance, information
technology services, executive management, legal services, records management, risk
management, finance, and accounting.
Public Safety is comprised of two departments (Police and Fire) providing general law
enforcement, fire suppression and prevention services, paramedic and medical transport
services, disaster preparedness, and ocean lifeguard services.
Public Works is comprised of two departments (Public Works and Utilities) providing engineering,
construction and maintenance of public streets, highways, buildings, beaches, parks, facilities
and related infrastructure; as well as traffic engineering, and street lighting.
Community Development is comprised of one department (Community Development) that
provides planning, building and zoning services, economic development services, and building
plan check and code enforcement services.
Community Services is comprised of three departments (Library Services, Recreation & Senior
Services and Harbor) providing library services, cultural and arts programs, recreation services,
senior social and transportation services and harbor programs and services.
Business Enterprise Operations are overseen by the Utilities Department providing water and
wastewater services. These are considered business-type activities and are discussed further in
the Business-Type Activities section.
Figure 2 illustrates in detail how the $246.5 million of Governmental Activities expense was
derived. The increase of $14.7 million from the prior year is mostly due to an increase in the
government wide adjustment relating to pension expense, and increase in maintenance type
capital improvement projects and increases in salaries and benefits.
37
Figure 4 below summarizes the governmental activities expense shared across function.
Figure 4
Governmental Activities Functional Expenses
Year Ended June 30, 2020
Figures 5 and 6 illustrate the net cost of each service. The net cost represents the amount that
governmental activities are subsidized by taxes and other general revenues of the City.
Figure 5
Governmental Activities
(in thousands)
48%
24%
11%
9%
5%3%
Public Safety
Public Works
Community Services
General Government
Community Development
Interest
Total Cost Net Cost Total Cost Net Cost
of Service of Service of Service of Service
General government 20,549$ (14,658)$ 20,714$ (15,497)$
Public safety 111,556 (86,574) 119,194 (94,767)
Public works 53,340 (31,822) 60,055 (38,463)
Community development 11,493 (1,142) 12,842 (2,860)
Community services 27,758 (12,737) 26,668 (8,204)
Interest 7,188 (7,188) 7,065 (7,065)
231,884$ (154,121)$ 246,538$ (166,856)$
2019 2020
38
Figure 6
Program Expenses and Revenue – Governmental Activities
Year Ended June 30, 2020
(in millions)
BUSINESS-TYPE ACTIVITIES
As noted earlier, the City combines the Water Enterprise Fund and Wastewater Enterprise Fund
into Business-type Activities for the presentation of the Government-wide Financial Statements.
Business-type activities are mainly funded by charging fees to customers to recover the cost of
providing services.
Revenues Associated with Business-Type Activities Discussion
As displayed in Figure 2, total revenues related to Business-type activities totaled $32.6 million,
of which, $31.2 million is related to program revenues. As shown in Figure 7 on the following
page, Water activities represents about $27.1 million (86.9%) of program revenues, while
Wastewater activities represents $4.1 million (13.1%) of program revenues.
$0.0
$10.0
$20.0
$30.0
$40.0
$50.0
$60.0
$70.0
$80.0
$90.0
$100.0
$110.0
$120.0
$130.0
General
Government
Public Safety Public Works Community
Development
Community
Services
Interest
Total Expenses Program Revenues
39
Figure 7
Program Expenses and Revenue – Business-type Activities
Year Ended June 30, 2020
(in millions)
Expenses Associated with Business-Type Activities Discussion
Current year expenses for Business-type activities totaled $31.7 million, an increase of about
$559,000 over prior year as shown in Figure 2. This is attributable to an increase in employee
related costs, utilities, professional services and general and system maintenance.
Major Business-type expenses in the current fiscal year included the following:
Water
Of the $27.4 million in water related expenses, $11.9 million (43.4%) is for the purchase of water,
$5.6 million (20.4%) covers employee related costs, $4.9 million (18.0%) is for maintenance,
supplies, and depreciation of the water system, $2.8 million (10.2%) is for professional services,
and the remaining $2.2 million (8.0%) is collectively attributable to miscellaneous other expenses.
Wastewater
Of the $4.3 million in wastewater related expenses, $1.7 million (40.2%) is for maintenance,
supplies, and depreciation of the wastewater system, $1.8 million (41.4%) is for employee related
costs, and the remaining approximately $789,000 (18.4%) is attributable to professional services
and other miscellaneous expenses.
Figure 7 summarizes Business-type expenses separately for Water and Wastewater activities.
$0.0
$5.0
$10.0
$15.0
$20.0
$25.0
$30.0
Water Wastewater
Total Expenses Program Revenues
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FINANCIAL ANALYSIS OF THE CITY’S FUNDS
As noted earlier, the City uses fund accounting to highlight available financial resources and to
ensure and demonstrate compliance with finance-related legal requirements.
Governmental Funds
Utilizing the financial resources measurement focus, the City’s Governmental Funds provide
information on near-term inflows and outflows, and balances of spendable resources. This
information is useful in assessing the City’s financing requirements and may serve as a useful
measure of a government’s net resources available for spending at the end of the fiscal year.
Fund Balance – As shown in Figure 8, the City’s Governmental Funds reported combined fund
balances of $205.0 million, an increase of $17.0 million from the prior year. The increase is the
net result of increases in fund balances in the General Fund, Facilities Financial Planning Reserve
Fund, Tide and Submerged Land – Harbor Capital Fund, other special revenue funds, other
capital funds and other permanent funds in aggregate; offset by decreases in the Tide and
Submerged Land – Operating Fund, Measure M Fund and Civic Center COP Fund in aggregate.
The General Fund represented $99.1 million or 48.3% of the combined fund balances of the
Governmental Funds.
Figure 8
Governmental Funds Fund Balance
(in thousands)
The following describes the classification of fund balance as of June 30, 2020. Additional
information on the City’s fund balance can be found in Note (16) of the Notes to the Financial
Statements.
Nonspendable Fund Balance – The City has $16.5 million in fund balance classified as
nonspendable to indicate that it cannot be readily converted to cash. Of the $16.5 million
nonspendable fund balance, $945,647 is for prepaid items, $258,557 is for inventories, $10.7
million is for long-term loan receivables, and $4.6 million is for permanent endowments.
Restricted Fund Balance – The City has $59.0 million in fund balance classified as restricted to
indicate that it has an externally imposed restriction on how the money may be spent. Of the
$59.0 million restricted fund balance, $ 5.7 million is restricted in the General Fund, of which $1.3
million is for Affordable Housing, $1.5 million is for Oceanfront Encroachment and $2.9 million is
2019 2020 Change
General Fund 96,586$ 99,083$ 2,497$
Tide and Submerged Land - Operating 6,409 2,872 (3,537)
Tide and Submerged Land - Harbor Capital 7,133 16,399 9,266
Measure M 2,111 1,737 (374)
Facilities Financial Planning Reserve 14,297 17,047 2,750
Civic Center COP 2,362 1,159 (1,203)
Non-major special revenue 20,727 21,319 592
Non-major capital projects 31,927 38,740 6,813
Non-major permanent 6,438 6,667 229
187,990$ 205,023$ 17,033$
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restricted for support of public access channel programming, training, and community benefits;
$2.2 million is restricted in the Tide and Submerged Land – Operating Fund, of which $1.1 million
is restricted for capital projects and maintenance and repairs, and $1.1 million is restricted for the
Upper Newport Bay restoration; $16.4 million is restricted in the Tidelands and Submerged Land
– Harbor Capital Fund for capital projects; $1.7 million is restricted in the Measure M Fund; $1.2
million is restricted for Civic Center COP debt service; and $4.4 million is restricted in the Facilities
Financial Planning Reserve Fund for park improvements. Of the remaining $27.4 million in
restricted fund balance, $21.3 million is restricted for various special revenue funds, $4.1 million
is restricted for the Assessment District Fund, and $2.0 million of fund balance is restricted for
permanent funds.
Committed Fund Balance – The City has $50.2 million in fund balance classified as committed
to indicate that the City Council has committed how the money will be spent. Of the $50.2 million
committed fund balance, $2.2 million is committed to the General Fund, of which $2.2 million is
for encumbrances and miscellaneous projects; $720,000 is committed to the Tide and Submerged
Land – Operating; $12.6 million is committed to the Facilities Financial Planning Reserve Fund;
$11.3 million is committed to the Fire Station Fund, $8.6 million is committed in the Unrestricted
Capital Improvements Fund; $3.8 million is committed in the Parks and Community Center Fund,
$1.8 million is committed to the Civic Center, $2.6 million is committed to the Facilities
Maintenance Fund; $5.0 million is committed to the Neighborhood Enhancement Fund, $1.0
million is committed to Balboa Village Parking Management District and $622,467 is committed
to various capital projects.
Assigned Fund Balance – The City has $2.6 million in fund balance which is not restricted or
committed and is classified as assigned to indicate the City Manager’s intent to be used for
specific purposes.
Unassigned Fund Balance – The remaining $76.7 million in fund balance is classified as
unassigned to indicate that it is the residual balance not otherwise restricted, committed, or
assigned.
Major Governmental Funds results for the year included the following:
Overall General Fund revenues finished $140,422 or 0.1% higher than the prior year, while
expenditures finished $2.8 million or 1.5% higher than the prior year. The net result is that
General Fund income before transfers and other financing sources and uses decreased
by $2.7 million. Actual General Fund revenues were $10.9 million over the estimated
revenues primarily due to many revenue categories recovering sooner, or not
experiencing as large of a negative impact during the fiscal year as originally projected at
the start of the COVID-19 pandemic. Expenditures came in at $4.0 million under budget
primarily because of spending reduction in response to the COVID-19 pandemic,
particularly in labor and contracted services. In total, fund balance in the General Fund
increased $2.5 million ending the year at $99.1 million.
The Tide and Submerged Land - Operating Fund decreased $3.5 million and ended the
current year with $2.9 million in fund balance. The decrease was due to the City reducing
its subsidy of the operations of the Tide and Submerged Land - Operating Fund.
The Tide and Submerged Land – Harbor Capital Fund increased $9.3 million ending with
$16.4 million in fund balance. This was largely due to a transfer from the General Fund for
42
harbor related capital improvements and net results from operations as the fund
accumulates resources for future harbor related uses.
The Measure M Fund decreased $374,974 and ended the current year with $1.7 million
in fund balance due to capital outlay expenditures being more than revenues.
The Facilities Financial Planning Reserve Fund increased $2.7 million to end the current
year at $17.0 million in fund balance. This was mainly due to the net result of transfers.
Proprietary Funds
The City’s Proprietary Funds (Enterprise and Internal Service Funds) presented in the Fund
Financial Statements section basically provide the same type of information in the Government-
wide Financial Statements, but include individual segment information.
Enterprise Fund results for the year included the following:
Net position in the Water Fund increased $670,189 mainly due to the fund’s substantial
share of the City’s pooled cash and investments, which resulted in the fund receiving a
significant amount of investment income during the fiscal year.
Net position in the Wastewater Fund decreased $94,479 mainly due to expenses
exceeding revenues. The implementation of a multi-year rate increase is ongoing.
Major Internal Service Fund activity in the current fiscal year included the following:
Total net position in the Internal Service Funds increased $8.8 million in the current year.
This was mostly due to operating income of $5.8 million, which was a result of an increase
in revenue from charges for services for insurance reserves and information technology.
The remaining $3.0 million was due to non-operating revenues and net transfers.
GENERAL FUND BUDGETARY HIGHLIGHTS
Changes to Original Budget
Final budgeted revenues for the General Fund decreased $10.1 million from the original budget
during the year ended June 30, 2020. Factors contributing to this fluctuation are highlighted as
follows:
Property tax revenue estimates were decreased $877,848 based on anticipation of
economic hardship due to the COVID-19 pandemic and the Governor’s Executive Order
(N-61-20) suspending penalties and interest on property taxes.
Sales tax revenue estimates were decreased $1.3 million based on an expected overall
decrease in economic activity across all industry categories as businesses and
restaurants were closed due to the pandemic.
Transient occupancy tax budget was reduced $5.4 million in total as most major hotels
and short-term lodging were temporarily closed at the onset of the pandemic with the
expectation that those remaining open would operate at severely reduced capacity.
43
Revenue categories, charges for services, property income, other taxes, licenses, permits
and fees, fines and forfeitures were adjusted down $5.0 million based on the trends seen
during the beginning of the pandemic with the anticipation that those trends would
continue throughout the remainder of the fiscal year.
Final budgeted intergovernmental revenue increased $993,332 due to an anticipated
increase in grants from other governmental agencies.
Donations increased $633,465 due to the receipt of donations that were not known at the
beginning of the year.
Final budgeted other revenue increased $783,193 from the original budget, mostly
because of upward revisions to prior estimates of donations to the library and grants for
senior services.
Final budgeted expenditures for the General Fund decreased $20.1 million from the original
budget during the year ended June 30, 2020. The significant factors contributing to the decrease
are as follows:
Planned city-wide expenditure reductions in salaries, contract services and professional
services in response to the COVID-19 pandemic.
The routine reclassification of General Fund expenditures as Tidelands expenditures. This
reclassification occurs at year end once all such eligible expenditures can be properly
attributed to Tidelands activity.
Variance with Final Budget
Actual General Fund revenues came in at $10.9 million above final budgeted revenues for the
year ended June 30, 2020. Significant factors contributing to this favorable variance are
summarized as follows:
A favorable variance of $589,909 in property taxes was mostly due to secured property
taxes coming in above expectations and the actual impact of Governor’s Executive Order
(N-61-20) suspending penalties and interest on property taxes was less severe than
estimated in the short term.
A favorable variance of $1.8 million in sales tax revenue was due to sales beginning to
recover sooner than the initial projections at the onset of the pandemic that the same
restrictions in place in April 2020 would remain for the remainder of the fiscal year, as
consumer spending remained strong.
A favorable $1.8 million variance in transient occupancy tax was due to hotels opening up
sooner than anticipated, with overnight visits in either hotels or short-term rentals from
regional travelers looking for a quick “staycation” close to home.
Other Taxes ended the year $1.0 million higher than projected due to all taxes within this
category performing better than expected at the onset of the pandemic, especially
business license taxes, property transfer taxes, and utility and cable franchise taxes.
44
Intergovernmental revenues came in $1.0 million higher than budgeted due to
unanticipated grants.
A favorable variance of $1.2 million in net investment related revenue, which includes
investment income and net fair value of investments, was due to an unexpected decrease
in interest rates towards the end of the fiscal year which made the City’s portfolio more
valuable as most securities were purchased before the rates decreased.
Charges for services ended the year $2.1 million higher due to a smaller impact on
services than expected as City departments devised electronic and contactless
modifications to services in response to the pandemic.
Property income finished the year $1.2 million higher than expected due to most income
properties making their scheduled payments and parking revenues increasing late in the
fiscal year as the public flocked to the beaches with the loosening of pandemic lockdown
restrictions.
Actual General Fund expenditures of $195.1 million were less than final budgetary estimates of
$199.0 million. The $3.9 million favorable variance was due to the City’s response to the COVID-
19 pandemic including city-wide salary savings due to the hiring freeze, and savings in contract
services and professional services.
CAPITAL ASSET AND DEBT ADMINISTRATION
Capital Assets
The City’s capital assets for governmental and business-type activities as of June 30, 2020,
amounts to $2.4 billion, net of accumulated depreciation. This is comprised of a broad range of
capital assets including land, buildings, machinery and equipment, park facilities, road
improvements, storm drains, piers, oil wells, sound walls, an 800 MHz radio communications
system, parking pay stations and meters, and bridges. The total capital assets decreased $2.0
million over the prior fiscal year.
Figure 9
Capital Assets at Year End
(net of depreciation, in thousands)
2019 2020 2019 2020 2019 2020
Land 1,897,376$ 1,897,520$ 2,219$ 2,219$ 1,899,595$ 1,899,739$
Structures 188,252 190,481 440 424 188,692 190,905
Equipment 19,365 18,774 151 167 19,516 18,941
Infrastructure 206,102 206,039 116,248 115,104 322,350 321,143
Work in progress 11,131 6,013 289 2,855 11,420 8,868
Totals 2,322,226$ 2,318,827$ 119,347$ 120,769$ 2,441,573$ 2,439,596$
Activities Activities
Governmental Business-Type
Total
45
Major capital asset events during the current fiscal year included the following:
Capital asset additions totaled $30.3 million in both the Governmental and Business Type
Activities in the current year. Of the $30.3 million, $10.4 million represents additions of
infrastructure assets mostly related to the road system and water system; and $7.2 million
is related to structure additions. The remaining $12.7 million is comprised of additions of
non-depreciable assets such as work in progress, $8.7 million, and land and rights of way
additions of $144,355, along with depreciable equipment additions of $3.8 million.
Of the $26.3 million of additions in governmental assets in the current year, additions in
infrastructure contributed $9.3 million, which was mostly due to upgrades in the road
system. The remaining $17.0 million added in the current year as governmental assets, is
comprised of $7.2 million of structure additions related to a new fire station and library,
$5.8 million of work in progress, mostly related to upgrades to the road system and the
ongoing design and construction of a fire station, $3.8 million of equipment additions
mostly related to vehicles and $144,355 of land additions.
The $4.0 million of business-type asset additions in the current year is comprised of $1.1
million in water system infrastructure additions and $2.9 million of work in progress
additions related to water system improvements.
Additional information on the City’s capital assets can be found in Note (5) of the Notes to the
Financial Statements.
Long-term Debt
Figure 10
Outstanding Debt at Year End
(in thousands)
The City’s total debt decreased $3.7 million during the current fiscal year. The decrease is the
result of expected debt service payments. Additional information on the City’s long-term debt
obligation can be found in Note (6) of the Notes to the Financial Statements.
2019 2020 2019 2020 2019 2020
Certificates of participation 104,100$ 100,695$ -$ -$ 104,100$ 100,695$
Bond premium 121 - - - 121 -
Pre-annexation agreement - - - - - -
CDBG Loan 756 585 - - 756 585
Totals 104,977$ 101,280$ -$ -$ 104,977$ 101,280$
Activities Activities
Governmental Business-Type Total
46
FACTORS AFFECTING NEXT YEAR’S BUDGET
Economy
The economic outlook remains very uncertain, with a protracted recovery anticipated over the
next several months. After the unprecedented sudden shock in the first half of the year, with global
GDP in the second quarter of 2020 10% lower than at the end of 2019, output picked up sharply
in the third quarter as containment measures became less stringent, businesses reopened and
household spending resumed. Despite the welcome upturn, output remained below pre-pandemic
levels in the third quarter, close to the peak decline in output experienced during the global
financial crisis. Without the prompt and effective policy support introduced by the federal
government to cushion the impact of the shock on household incomes and companies, output
and employment would have been substantially weaker. On a cumulative basis, the labor market
has added about 12.3 million jobs since May, more than half the 22.2 million lost in March and
April. However, the labor market is still a long way from a full recovery as more than 10.7 million
people remain unemployed. Given a resurgence of the virus across the US, the labor market is
likely to remain challenged over the near-term. With pandemic-related unemployment benefits set
to expire at year-end, there is mounting pressure on Congress to negotiate another fiscal relief
bill.
Developments on the vaccine front remain favorable and a limited number of doses are expected
to be available for US healthcare workers and nursing home residents before year-end. While
widespread distribution of a vaccine is not expected until the second or third quarter of next year,
ongoing progress on both vaccines and therapeutics will help fuel the economic recovery in 2021.
In the near-term, economic data may soften as many regions contend with the virus and renewed
lockdown measures.
Local Revenue Trend
The closure of businesses and public facilities has negatively impacted various sources of City
revenues, including sales tax and transient occupancy tax revenues, which are among two of the
City’s largest tax revenue sources. The State has delayed the deadline for the filing and payment
of sales and use taxes by 90 days for all but the largest taxpayers. The Governor has also issued
an Executive Order for waivers of late penalties on property taxes. Such efforts to relieve the
financial impact of the COVID-19 pandemic on taxpayers have resulted in delayed revenue
collection by the City. More significantly, hoteliers suffered a sudden and dramatic decline in
occupancy in the fourth quarter of FY 2019-20. Transient occupancy taxes finished roughly $4
million less and sales tax fell short $2.3 million when compared to the prior year. In all, the
financial impact of COVID-19 in the fourth quarter of FY 2019-20 proved to be less impactful to
the City than was previously feared. At the onset of the pandemic City Management lowered
revenue estimates by $13 million; however, General Fund revenues finished at nearly the original
estimate of $229 million roughly $10 million above the revised revenue estimate of $219 million
by year end.
However, the negative impacts from the COVID-19 pandemic on the City’s revenues in FY 2019-
20 are expected to continue into FY 2020-21 and potentially several fiscal years beyond
depending on the pace of recovery of the local economy and the return of conventions and tourism
activity to the levels which existed prior to the outbreak of the COVID-19 pandemic. While certain
businesses and industries have begun to reopen, social distancing protocols currently remain
intact. These protocols could continue to limit the capacity of businesses, and many other tourism
and sales tax generating activities for the City. A recent UCLA Anderson Forecast suggests
California’s pre-coronavirus economic boom won’t reappear for at least two years. A full recovery
47
to pre-recession levels of economic activity is not expected until after 2022 in the state. Although
a noticeable improvement might begin to emerge by the end of 2020, the Anderson forecast made
it clear that the road to a return to a pre-coronavirus economy statewide is in the 2023 timeframe.
Discretionary Appropriations
The annual budget serves as the foundation for financial planning and control, and allows the City
Council to prioritize expenditures in alignment with core community values. The budget as
adopted is reflective of strong revenues, healthy reserves, and a sound debt position. This budget
reflects a strong local economy that continues to provide stable revenues which support a wide
variety of programs and initiatives. It also includes competitive wages for City employees that will
further our goal of attracting and retaining a well-qualified workforce to meet the high expectations
of our community.
The City Council adopted an FY 2020-21 budget that maintains a deliberate resource balance
between these important municipal expenses:
Addressing long-term obligations such as pension liabilities, post-employment health care
benefits, and debt service;
Keeping a level of operations that reflects the community’s desire for an active, safe, and
attractive community; and
Investing in infrastructure to maintain a high-quality natural and physical environment.
An aspect of the City’s balanced approach to fiscal management is managing resources as
efficiently as possible, responsibly managing debt, and working collaboratively with employees to
recalibrate the compensation structure and share in the costs of pension obligations.
Fiscal Year 2020-21 will mark another year of an accelerated plan to pay down the City’s unfunded
pension liability. Increasing the City’s pension contribution now will result in a lower, level-dollar
payment in the future, so the adopted budget also includes an additional $10.2 million to
discretionary payment towards the City’s unfunded liability.
Overall, the City’s total debt burden is low and remains affordable. The economy benefits from the
City's mature, wealthy tax base and strong employment among a diversity of business sectors, as
well as retail shopping and tourism activity. Residential and commercial property values are among
the highest in the country. Our overall assessed valuation (AV) has been stable despite the
economic downturn of between 2009 and 2012, with growth in the each of the last 25 years.
A strong financial profile is a particularly important factor considered by rating agencies in their
evaluation of the creditworthiness of local government debt. The rating agencies Fitch, Moody's,
and Standard & Poor's which have all assigned the City the highest quality credit rating of AAA.
Moody’s reaffirmed their AAA ratings in 2020. Expenditure controls within the past decade have
included early retirement incentive plans, increased employee contributions to pension plans,
contracting services, and freezing vacant positions when necessary, usually during recessionary
periods. Financial operations produced net surpluses (after transfers) in the last nine years due to
conservative budgeting, successful negotiation of labor concessions, and a stable and growing tax
revenue base. The City has used surpluses for important one-time things, like paying more towards
retirement obligations or investing in IT and communications. Financial management policies are
robust and have continued to improve in recent years.
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CONTACTING THE CITY’S FINANCIAL MANAGEMENT
This financial report is designed to provide our citizens, taxpayers, customers, and investors and
creditors with a general overview of the City’s finances and to demonstrate the City’s
accountability for the money it receives. If you have questions about this report or need additional
financial information, contact the City’s Finance Department, 100 Civic Center Drive, Newport
Beach, CA 92660, (949) 644-3146. The City’s Budgets, Comprehensive Annual Financial
Reports, as well as other City financial information can be found on the City’s website at:
www.newportbeachca.gov/financialinfo
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FINANCIAL SECTION
FINANCIAL SECTIONFINANCIAL SECTIONGOVERNMENT-WIDE FINANCIAL STATEMENTS
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Governmental Business-type
Activities Activities Total
Assets:
Cash and investments (note 4) 266,322,835$ 36,753,712$ 303,076,547$
Receivables:
Accounts (net of allowance) 7,488,670 6,127,558 13,616,228
Interest 1,261,074 -1,261,074
Intergovernmental receivables 11,203,121 101,089 11,304,210
Restricted cash and investments with fiscal agent (note 4)8,752,177 -8,752,177
Internal balances 379,143 (379,143) -
Investment in joint ventures (note 14)246,470 -246,470
Inventory 671,572 -671,572
Prepaid items 1,930,027 -1,930,027
Capital assets (note 5):
Non-depreciable 1,903,533,195 5,074,624 1,908,607,819
Depreciable 672,799,714 187,564,765 860,364,479
Accumulated depreciation (257,505,832) (71,870,042) (329,375,874)
Total assets 2,617,082,166 163,372,563 2,780,454,729
Deferred Outflows of Resources:
Deferred amount from pension plans (note10)58,924,800 1,471,870 60,396,670
Deferred amount from OPEB (note 11)7,193,982 391,342 7,585,324
Total deferred outflows of resources 66,118,782 1,863,212 67,981,994
Liabilities:
Accounts payable 9,099,335 3,630,006 12,729,341
Accrued payroll 4,306,603 171,049 4,477,652
Accrued interest payable 3,491,913 -3,491,913
Deposits payable 2,579,459 31,886 2,611,345
Unearned revenue 5,700,000 -5,700,000
Noncurrent liabilities (note 6):
Due within one year 12,831,412 -12,831,412
Due in more than one year:
Net pension liability (note 10)297,286,830 9,432,600 306,719,430
Net OPEB liability (note 11)21,446,544 1,168,197 22,614,741
Other 125,023,855 -125,023,855
Total liabilities 481,765,951 14,433,738 496,199,689
Deferred Inflows of Resources:
Deferred amount from pension plans (note 10)5,554,961 204,628 5,759,589
Deferred amount from OPEB (note 11)533,237 29,058 562,295
Total deferred inflows of resources 6,088,198 233,686 6,321,884
Net Position:
Net investment in capital assets 2,217,852,660 120,291,689 2,338,144,349
Restricted for:
Public safety 1,111,257 -1,111,257
Public works 30,818,082 -30,818,082
Community services 25,478,920 -25,478,920
Community development 1,325,038 -1,325,038
Debt Service 2,307,625 -2,307,625
Permanent funds:
Nonexpendable 4,629,781 -4,629,781
Expendable 2,037,522 -2,037,522
Unrestricted (90,214,086) 30,276,662 (59,937,424)
Total net position 2,195,346,799$ 150,568,351$ 2,345,915,150$
CITY OF NEWPORT BEACH
Statement of Net Position
June 30, 2020
See accompanying notes to basic financial statements
53
CITY OF NEWPORT BEACH
Statement of Activities
Year Ended June 30, 2020
Operating Capital Total
Charges for Grants and Grants and Program
Expenses Services Contributions Contributions Revenues
Functions/Programs
Primary government:
Governmental activities:
General government 20,714,050$ 3,846,962$ 1,369,758$ -$ 5,216,720$
Public safety 119,194,302 22,232,248 2,195,198 - 24,427,446
Public works 60,054,860 5,054,694 9,454,093 7,082,970 21,591,757
Community development 12,842,020 9,599,848 337,036 44,749 9,981,633
Community services 26,668,079 16,936,285 1,302,931 224,688 18,463,904
Interest on long-term debt 7,064,521 - - - -
Total governmental activities 246,537,832 57,670,037 14,659,016 7,352,407 79,681,460
Business-type activities:
Water 27,387,120 27,100,429 - - 27,100,429
Wastewater 4,291,755 4,110,815 - - 4,110,815
Total business-type activities 31,678,875 31,211,244 - - 31,211,244
Total primary government 278,216,707$ 88,881,281$ 14,659,016$ 7,352,407$ 110,892,704$
General revenues:
Taxes:
Property tax
Sales tax
Transient occupancy tax
Business license tax
Franchise tax
Other taxes
Investment income
Net increase in fair
value of investments
Other
Total general revenues
Change in net position
Net Position at beginning of year
Net Position at end of year
Program Revenues
See accompanying notes to basic financial statements
54
Governmental Business-type
Activities Activities Total
(15,497,330)$ -$ (15,497,330)$
(94,766,856) - (94,766,856)
(38,463,103) - (38,463,103)
(2,860,387) - (2,860,387)
(8,204,175) - (8,204,175)
(7,064,521) - (7,064,521)
(166,856,372) - (166,856,372)
- (286,691) (286,691)
- (180,940) (180,940)
- (467,631) (467,631)
(166,856,372) (467,631) (167,324,003)
113,313,535 - 113,313,535
36,232,969 - 36,232,969
21,097,384 - 21,097,384
4,882,419 - 4,882,419
4,394,156 - 4,394,156
2,592,369 - 2,592,369
2,621,488 732,099 3,353,587
2,520,033 625,864 3,145,897
2,116,884 - 2,116,884
189,771,237 1,357,963 191,129,200
22,914,865 890,332 23,805,197
2,172,431,934 149,678,019 2,322,109,953
2,195,346,799$ 150,568,351$ 2,345,915,150$
Net (Expense) Revenue and Changes in Net Assets
Primary Government
See accompanying notes to basic financial statements
55
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56
FINANCIAL SECTION
FINANCIAL SECTIONFINANCIAL SECTIONFUND FINANCIAL STATEMENTS
GOVERNMENTAL FUNDS
57
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58
GOVERNMENTAL FUNDS
Major Funds
The General Fund is used to account for fiscal resources that are dedicated to
governmental operations of the City, and not required to be accounted for in
another fund.
The Tide and Submerged Land – Operating Fund is a Special Revenue Fund
used to account for revenues related to the operation of the City’s tidelands,
including beaches and marinas, and the related expenditures. Revenue from
tideland operations includes, but is not limited to, rents from moorings, piers, and
leases, as well as income from parking lots, meters, and the sale of oil.
The Tide and Submerged Land – Harbor Capital Fund is a Special Revenue
Fund used to account for incremental increases in revenue from certain property
lease, pier, and mooring rentals that exceed Council designated base year
revenue amounts, as well as other designated revenues and the related
expenditures for capital projects, maintenance, and servicing of loan advances
from the General Fund.
The Measure M Fund is used to account for the revenues and expenditures of
funds received from the Orange County Transportation Authority. Expenditures
from this fund are used exclusively for transportation related purposes.
The Facilities Financial Planning Reserve Fund is used to account for the
receipt and expenditure of funds for the replacement of facilities. In prior years,
this fund was called the Facilities Replacement Fund.
The Civic Center COP Fund is used to account for debt service transactions
related to the Certificates of Participation issued to finance the construction of the
Civic Center.
Other Governmental Funds
Other governmental funds are those governmental funds that do not meet the
criteria of a major fund. For reporting purposes in this section, they are
combined as Other Governmental Funds.
59
Tide and Tide and
Submerged Submerged
General Land - Operating Land - Harbor Capital Measure M
Assets
Cash and investments (note 4)86,746,555$ 3,242,024$ 27,188,090$1,267,254$
Receivables:
Accounts (net of allowance)3,485,105 1,790,646 --
Interest 1,261,074 ---
Intergovernmental receivables 8,034,496 --1,019,031
Restricted cash and investments with fiscal agent (note 4)----
Advance to other funds (note 12)10,676,659 ---
Due from other funds (note 12)377,249 ---
Prepaid items 928,899 ---
Inventory 258,557 ---
Total assets 111,768,594$ 5,032,670$ 27,188,090$2,286,285$
Liabilities, Deferred Inflows of Resources
and Fund Balances
Liabilities:
Accounts payable 4,747,929$ 909,661$ 112,899$ 151,669$
Accrued payroll 4,032,481 20,126 --
Deposits payable 2,394,535 184,924 --
Unearned revenue 1,260,676 757,105 --
Advance from other funds (note 12)--10,676,659 -
Due to other funds (note 12)----
Total liabilities 12,435,621 1,871,816 10,789,558 151,669
Deferred Inflows of Resources:
Unavailable revenue 249,501 289,331 -398,094
Total deferred inflows of resources 249,501 289,331 -398,094
Fund balances (deficits):
Nonspendable:
Prepaid items 928,899 ---
Inventories 258,557 ---
Long-term loan receivable 10,676,659 ---
Permanent endowment ----
Restricted:
Affordable housing 1,321,736 ---
Oceanfront encroachment 1,457,744 ---
Upper Newport Bay restoration - 1,099,953 --
Other 2,930,954 1,051,570 16,398,532 1,736,522
Committed:
Oil and gas - 720,000 --
Other 2,210,811 ---
Assigned 2,598,828 ---
Unassigned 76,699,284 ---
Total fund balances 99,083,472 2,871,523 16,398,532 1,736,522
Total liabilities, deferred inflows of
resources and fund balances 111,768,594$ 5,032,670$ 27,188,090$2,286,285$
(continued)
Special Revenue Funds
CITY OF NEWPORT BEACH
Governmental Funds
Balance Sheet
June 30, 2020
Page 1 of 2
See accompanying notes to basic financial statements
60
Capital Project Fund Debt Service Fund
Facilities Other
Financial Planning Civic Center Governmental
Reserve COP Funds Totals
Assets
Cash and investments (note 4)11,605,682$-$70,091,898$200,141,503$
Receivables:
Accounts (net of allowance)20,739 -396,114 5,692,604
Interest ---1,261,074
Intergovernmental receivables -1,148,239 476,220 10,677,986
Restricted cash and investments with fiscal agent (note 4)-6,551,417 2,200,760 8,752,177
Advance to other funds (note 12)---10,676,659
Due from other funds (note 12)5,442,129 --5,819,378
Prepaid items --16,748 945,647
Inventory ---258,557
Total assets 17,068,550$7,699,656$ 73,181,740$244,225,585$
Liabilities, Deferred Inflows of Resources
and Fund Balances
Liabilities:
Accounts payable -$39$ 2,324,753$ 8,246,950$
Accrued payroll ---4,052,607
Deposits payable ---2,579,459
Unearned revenue 21,711 -3,660,508 5,700,000
Advance from other funds (note 12)---10,676,659
Due to other funds (note 12)-5,391,992 59,674 5,451,666
Total liabilities 21,711 5,392,031 6,044,935 36,707,341
Deferred Inflows of Resources:
Unavailable revenue -1,148,239 410,438 2,495,603
Total deferred inflows of resources -1,148,239 410,438 2,495,603
Fund balances (deficits):
Nonspendable:
Prepaid items --16,748 945,647
Inventories ---258,557
Long-term loan receivable ---10,676,659
Permanent endowment --4,629,781 4,629,781
Restricted:
Affordable housing ---1,321,736
Oceanfront encroachment ---1,457,744
Upper Newport Bay restoration ---1,099,953
Other 4,446,847 1,159,386 27,417,708 55,141,519
Committed:
Oil and gas ---720,000
Other 12,599,992 -34,712,267 49,523,070
Assigned ---2,598,828
Unassigned --(50,137) 76,649,147
Total fund balances 17,046,839 1,159,386 66,726,367 205,022,641
Total liabilities, deferred inflows of
resources and fund balances 17,068,550$7,699,656$ 73,181,740$244,225,585$
CITY OF NEWPORT BEACH
Governmental Funds
Balance Sheet
June 30, 2020
Page 2 of 2
See accompanying notes to basic financial statements
61
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62
Fund balances of governmental funds 205,022,641$
Amounts reported for governmental activities in the statement of net position are
different because:
Capital assets net of accumulated depreciation have not been included
as financial resources in governmental fund activity. Amount excludes
capital assets from internal service funds which are added below.2,302,946,800
Long-term debts have not been reported in the governmental fund activity.
Amounts exclude long-term debt activity from internal service funds
which have been added below:
Certificates of participation payable (100,695,000)
CDBG loan (585,000)
Pension related debt applicable to the governmental activities are not due and payable in
the current period and accordingly are not reported as fund liabilities. Deferred outflows
of resources and deferred inflows of resources related to pension are only reported in
the Statement of Net Position as the changes in these amounts affect only the
government-wide statements for governmental activities. Amounts exclude internal
service fund activity which has been added below:
Deferred outflows of resources 57,956,702
Deferred inflows of resources (5,420,369)
Pension liability (291,082,707)
OPEB related debt applicable to the governmental activities are not due and payable in
the current period and accordingly are not reported as fund liabilities. Deferred outflows
of resources and deferred inflows of resources related to OPEB are only reported in
the Statement of Net Position as the changes in these amounts affect only the
government-wide statements for governmental activities. Amounts exclude internal
service fund activity which has been added below:
Deferred outflows of resources 6,936,584
Deferred inflows of resources (514,125)
OPEB liability (20,678,180)
Accrued interest payable for the current portion of interest due on long-term debt
has not been reported in the governmental funds.(3,491,913)
Some of the revenue will be collected after year-end, but is not available soon
enough to pay for the current period's expenditures, and therefore is reported as
unavailable revenue in the governmental funds.2,495,603
Internal service funds are used by management to charge the costs of certain
activities, such as self-insurance, workers' compensation, compensated absences,
retiree insurance, fleet management and information technology, to individual funds.
The assets (including capital assets) and liabilities of the internal service funds must be
added to the statement of net position.41,830,150
Investment in joint ventures is not a current financial resource and therefore not reported
in the governmental funds.246,470
Internal balance created by the consolidation of internal service fund activities
related to enterprise funds is not reported in the governmental funds.379,143
Net position of governmental activities 2,195,346,799$
CITY OF NEWPORT BEACH
Governmental Funds
Reconciliation of the Balance Sheet of Governmental Funds
to the Statement of Net Position
June 30, 2020
See accompanying notes to basic financial statements
63
Tide and Tide and
Submerged Submerged
General Land - Operating Land - Harbor Capital Measure M
Revenues:
Taxes and assessments:
Property tax 113,313,535$ -$-$-$
Sales tax 36,232,969 ---
Transient occupancy tax 20,847,883 ---
Other taxes 11,868,944 ---
Intergovernmental 3,848,205 --2,381,906
Licenses, permits and fees 4,703,970 56,863 --
Charges for services 21,115,081 10,541 --
Fines and forfeitures 3,487,164 22,719 --
Investment income 1,295,547 337,036 484,209 50,209
Net increase in fair value of investments 1,404,696 288,127 413,945 42,923
Property income 10,392,662 11,227,661 3,772,612 -
Donations 786,111 ---
Other 656,249 ---
Total revenues 229,953,016 11,942,947 4,670,766 2,475,038
Expenditures:
Current:
General government 14,863,427 1,104,658 --
Public safety 105,452,011 12,420,766 --
Public works 39,050,719 2,977,453 --
Community development 12,503,677 2,661 --
Community services 23,044,258 1,384,651 --
Capital outlay -622,606 819,971 2,850,012
Debt service (note 6):
Principal ----
Interest and fiscal charges 195,347 ---
Total expenditures 195,109,439 18,512,795 819,971 2,850,012
Excess (deficiency) of revenues
over expenditures 34,843,577 (6,569,848)3,850,795 (374,974)
Other financing sources (uses):
Transfers in (note 13)-3,042,672 5,414,939 -
Transfers out (note 13)(32,346,243)(10,740)--
Total other financing sources
(uses)(32,346,243)3,031,932 5,414,939 -
Net change in fund balances 2,497,334 (3,537,916)9,265,734 (374,974)
Fund balances, beginning 96,586,138 6,409,439 7,132,798 2,111,496
Fund balances, ending 99,083,472$ 2,871,523$ 16,398,532$ 1,736,522$
(continued)
Special Revenue Funds
CITY OF NEWPORT BEACH
Governmental Funds
Statement of Revenues, Expenditures and Changes in Fund Balances
For the Year Ended June 30, 2020
Page 1 of 2
See accompanying notes to basic financial statements
64
Capital Project Fund Debt Service Fund
Facilities Other
Financial Planning Civic Center Governmental
Reserve COP Funds Totals
Revenues:
Taxes and assessments:
Property tax -$-$-$113,313,535$
Sales tax ---36,232,969
Transient occupancy tax ---20,847,883
Other taxes --719,738 12,588,682
Intergovernmental -1,148,239 5,294,581 12,672,931
Licenses, permits and fees 208,822 -814,207 5,783,862
Charges for services ---21,125,622
Fines and forfeitures ---3,509,883
Investment income 357,822 21,281 1,219,649 3,765,753
Net increase in fair value of investments 305,897 -1,021,711 3,477,299
Property income 258,425 --25,651,360
Donations --9,450 795,561
Other --5,294,030 5,950,279
Total revenues 1,130,966 1,169,520 14,373,366 265,715,619
Expenditures:
Current:
General government ---15,968,085
Public safety --418,070 118,290,847
Public works --3,702,793 45,730,965
Community development --106,413 12,612,751
Community services --45,333 24,474,242
Capital outlay --16,083,517 20,376,106
Debt service (note 6):
Principal -3,405,000 171,000 3,576,000
Interest and fiscal charges -7,053,961 16,395 7,265,703
Total expenditures -10,458,961 20,543,521 248,294,699
Excess (deficiency) of revenues
over expenditures 1,130,966 (9,289,441)(6,170,155)17,420,920
Other financing sources (uses):
Transfers in (note 13)9,915,459 8,086,599 13,914,312 40,373,981
Transfers out (note 13)(8,296,998)-(110,000)(40,763,981)
Total other financing sources
(uses)1,618,461 8,086,599 13,804,312 (390,000)
Net change in fund balances 2,749,427 (1,202,842)7,634,157 17,030,920
Fund balances, beginning 14,297,412 2,362,228 59,092,210 187,991,721
Fund balances, ending 17,046,839$ 1,159,386$ 66,726,367$ 205,022,641$
CITY OF NEWPORT BEACH
Governmental Funds
Statement of Revenues, Expenditures and Changes in Fund Balances
For the Year Ended June 30, 2020
Page 2 of 2
See accompanying notes to basic financial statements
65
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66
17,030,920$
Amounts reported for governmental activities in the statement of activities differ
from the amounts reported in governmental funds because:
Governmental funds report capital outlays as expenditures. However, in the statement
of activities, the costs of those assets is allocated over their estimated useful lives (3,421,830)
as depreciation expense. This is the amount by which depreciation exceeded
capital outlay in the current period.
The issuance of long-term debt provides current financial resources to governmental funds, while
repayment of the principal and issuance costs of long-term debt consumes the current financial
resources of the governmental funds. Issuance of bond principal is an other financing source and
repayment of bond principal is an expenditure in governmental funds, but the issuance increases
long-term liabilities and the repayment reduces long-term liabilities in the Statement of Net Position.
The amounts are the net effect of these differences in the treatment of long-term debt:
Repayment of principal 3,576,000
Premium on bonds is recognized as revenues in the period received; however, in the 120,553
statement of activities, it is amortized over the life of the bond.
Accrued interest for debt service is the net change in accrued interest for the current period. 80,629
Pension expense reported in the governmental funds includes the employer contributions made.
In the Statement of Activities, pension expense includes the change in the net pension liability
and related change in pension amounts for deferred outflows of resources and deferred inflows
of resources.(6,779,351)
OPEB expense reported in the governmental funds includes the employer contributions made.
In the Statement of Activities, OPEB expense includes the change in the net OPEB liability
and related change in OPEB amounts for deferred outflows of resources and deferred inflows
of resources.2,391,781
Some of the revenue will be collected after year-end, but is not available soon
enough to pay for the current period's expenditures, and therefore is reported as
unavailable revenue in the governmental funds. This is the net change in unavailable revenue
for the current period.1,414,177
Internal service funds are used by management to charge the costs of certain
activities, such as self-insurance, workers' compensation, compensated absences,
retiree insurance and fleet management, to individual funds. The net revenue of the internal
service funds is reported in the statement of activities. 8,757,531
Investment in joint ventures creates an explicit, measurable equity interest reported only
in the statement of activities.59,077
Internal balance created by the consolidation of internal service funds activities related
to enterprise funds is reflected as a reduction of revenues in the statement of activities. (314,622)
Change in net position of governmental activities 22,914,865$
Net change in fund balances - total governmental funds
CITY OF NEWPORT BEACH
Reconciliation of the Statement of Revenues, Expenditures,
and Changes in Fund Balances of Governmental Funds
to the Statement of Activities
Year Ended June 30, 2020
See accompanying notes to basic financial statements
67
Variance with
Final Budget
Positive
Original Final Actual (Negative)
Revenues:
Taxes and assessments:
Property 113,601,474$ 112,723,626$ 113,313,535$ 589,909$
Sales 35,697,090 34,411,405 36,232,969 1,821,564
Transient occupancy 24,483,131 19,087,031 20,847,883 1,760,852
Other taxes 11,591,386 10,834,670 11,868,944 1,034,274
Intergovernmental 1,842,767 2,854,873 3,848,205 993,332
Licenses, permits and fees 4,859,712 4,511,573 4,703,970 192,397
Charges for services 21,472,581 18,976,502 21,115,081 2,138,579
Fines and forfeitures 3,362,928 2,974,408 3,487,164 512,756
Investment income 1,505,673 1,505,673 1,295,547 (210,126)
Net increase in fair value of investments - - 1,404,696 1,404,696
Property income 10,153,739 9,166,963 10,392,662 1,225,699
Donations 116,500 749,965 786,111 36,146
Other 484,371 1,267,564 656,249 (611,315)
Total revenues 229,171,352 219,064,253 229,953,016 10,888,763
Expenditures:
General government:
City council 881,199 861,884 678,330 183,554
City clerk 1,065,439 1,043,448 975,626 67,822
City attorney 2,623,784 2,475,079 2,284,088 190,991
City manager 3,344,155 2,563,679 2,174,546 389,133
Finance 7,231,447 6,167,328 5,918,252 249,076
Human resources 3,293,238 2,937,503 2,832,585 104,918
Total General government 18,439,262 16,048,921 14,863,427 1,185,494
Public safety:
Police 66,040,641 61,360,725 61,502,999 (142,274)
Fire 53,193,484 43,731,539 43,949,012 (217,473)
Total Public safety 119,234,125 105,092,264 105,452,011 (359,747)
Public works:
Public works - general services 27,194,832 27,492,650 26,000,625 1,492,025
Public works 10,841,460 7,385,311 8,393,210 (1,007,899)
Utilities 4,758,696 4,634,105 4,656,884 (22,779)
Total Public works 42,794,988 39,512,066 39,050,719 461,347
CITY OF NEWPORT BEACH
General Fund
Budgetary Comparison Statement
For the Year Ended June 30, 2020
Budgeted Amounts
See accompanying notes to basic financial statements
68
Variance with
Final Budget
Positive
Original Final Actual (Negative)
Community development:
Community development 12,048,980 12,027,859 11,453,714 574,145
Code and water quality enforcement 1,123,948 1,122,198 1,049,963 72,235
Total Community development 13,172,928 13,150,057 12,503,677 646,380
Community services:
Parking operations 2,304,921 2,482,663 1,944,820 537,843
Library services 9,265,651 9,741,880 9,078,408 663,472
Recreation and senior services 13,853,165 12,912,149 12,021,030 891,119
Total community services 25,423,737 25,136,692 23,044,258 2,092,434
Debt service:
Interest and fiscal charges 46,896 46,896 195,347 (148,451)
Total expenditures 219,111,936 198,986,896 195,109,439 3,877,457
Excess of revenues
over expenditures 10,059,416 20,077,357 34,843,577 14,766,220
Other financing (uses):
Transfers out (31,680,252) (32,346,243) (32,346,243) -
Total other financing
(uses)(31,680,252) (32,346,243) (32,346,243) -
Net change in fund balance (21,620,836) (12,268,886) 2,497,334 14,766,220
Fund balance, beginning 96,586,138 96,586,138 96,586,138 -
Fund balance, ending 74,965,302$ 84,317,252$ 99,083,472$ 14,766,220$
CITY OF NEWPORT BEACH
Budgetary Comparison Statement
General Fund
(continued)
Budgeted Amounts
For the Year Ended June 30, 2020
See accompanying notes to basic financial statements
69
Variance with
Final Budget
Positive
Original Final Actual (Negative)
Revenues:
Licenses, permits and fees 65,950$ 47,983$ 56,863$ 8,880$
Charges for services 14,000 10,160 10,541 381
Fines and forfeitures 19,032 20,890 22,719 1,829
Investment income 36,611 36,611 337,036 300,425
Net increase in fair value of investments --288,127 288,127
Property income 11,994,982 10,574,032 11,227,661 653,629
Total revenues 12,130,575 10,689,676 11,942,947 1,253,271
Expenditures:
General government -1,104,658 1,104,658 -
Public safety - 12,420,766 12,420,766 -
Public works 745,830 3,188,692 2,977,453 211,239
Community development --2,661 (2,661)
Community services 1,799,159 1,879,282 1,384,651 494,631
Capital outlay - 1,013,205 622,606 390,599
Total expenditures 2,544,989 19,606,603 18,512,795 1,093,808
Excess (deficiency) of revenues
over expenditures 9,585,586 (8,916,927) (6,569,848) 2,347,079
Other financing sources:
Transfers in -3,042,672 3,042,672 -
Transfers out -(10,740)(10,740) -
Total other financing
sources -3,031,932 3,031,932 -
Net change in fund balance 9,585,586 (5,884,995) (3,537,916) 2,347,079
Fund balance, beginning 6,409,439 6,409,439 6,409,439 -
Fund balance, ending 15,995,025$ 524,444$ 2,871,523$ 2,347,079$
CITY OF NEWPORT BEACH
Tide and Submerged Land - Operating
Budgetary Comparison Statement
For the Year Ended June 30, 2020
Budgeted Amounts
See accompanying notes to basic financial statements
70
Variance with
Final Budget
Positive
Original Final Actual (Negative)
Revenues:
Investment income 123,054$ 123,054$ 484,209$ 361,155$
Net increase in fair value of investments - - 413,945 413,945
Property income 3,507,766 3,543,889 3,772,612 228,723
Total revenues 3,630,820 3,666,943 4,670,766 1,003,823
Expenditures:
Capital outlay - 11,200,595 819,971 10,380,624
Excess (deficiency) of revenues
over expenditures 3,630,820 (7,533,652) 3,850,795 11,384,447
Other financing sources:
Transfers in - 5,414,939 5,414,939 -
Net change in fund balance 3,630,820 (2,118,713) 9,265,734 11,384,447
Fund balance (deficit), beginning 7,132,798 7,132,798 7,132,798 -
Fund balance (deficit), ending 10,763,618$ 5,014,085$ 16,398,532$ 11,384,447$
CITY OF NEWPORT BEACH
Tide and Submerged Land - Harbor Capital
Budgetary Comparison Statement
For the Year Ended June 30, 2020
Budgeted Amounts
See accompanying notes to basic financial statements
71
Variance with
Final Budget
Positive
Original Final Actual (Negative)
Revenues:
Intergovernmental 5,465,030$ 5,379,840$ 2,381,906$ (2,997,934)$
Investment income - - 50,209 50,209
Net increase in fair value of investments - - 42,923 42,923
Total revenues 5,465,030 5,379,840 2,475,038 (2,904,802)
Expenditures:
Capital outlay - 7,045,521 2,850,012 4,195,509
Net change in fund balance 5,465,030 (1,665,681) (374,974) 1,290,707
Fund balance, beginning 2,111,496 2,111,496 2,111,496 -
Fund balance, ending 7,576,526$ 445,815$ 1,736,522$ 1,290,707$
Budgeted Amounts
CITY OF NEWPORT BEACH
Measure M
Budgetary Comparison Statement
For the Year Ended June 30, 2020
See accompanying notes to basic financial statements
72
FINANCIAL SECTION
FINANCIAL SECTIONFINANCIAL SECTIONFUND FINANCIAL STATEMENTS
PROPRIETARY FUNDS
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74
PROPRIETARY FUNDS
Business-type Activities
The Water Fund is a Major Fund used to account for the operations of the City’s
water utility, a self-supporting activity which is entirely financed though user
charges.
The Wastewater Fund is a Major Fund used to account for the operations of the
City’s wastewater system, a self-supporting activity which is entirely financed
through user charges.
Governmental Activities
The Internal Service Funds are used to allocate the cost of providing goods and
services by one department to other departments on a cost reimbursement basis.
75
Governmental
Total Activities
Enterprise Internal Service
Assets and Deferred Outflows of Resources Water Wastewater Funds Funds
Current assets:
Cash and investments 33,511,517$ 3,242,195$ 36,753,712$ 66,181,332$
Receivables:
Accounts (net of allowance) 5,263,908 863,650 6,127,558 1,796,066
Intergovernmental receivables 101,089 - 101,089 525,135
Inventories - - - 413,015
Prepaid items - - - 984,380
Total current assets 38,876,514 4,105,845 42,982,359 69,899,928
Noncurrent assets:
Capital assets (note 5):
Land 2,219,450 - 2,219,450 -
Structures 688,396 - 688,396 39,581
Equipment 289,186 35,988 325,174 40,737,329
Software - - - 3,603,419
Infrastructure 139,063,704 47,487,491 186,551,195 -
Work in progress 1,646,283 1,208,891 2,855,174 299,296
Less accumulated depreciation (52,396,085) (19,473,957) (71,870,042) (28,799,348)
Total capital assets (net of accumulated depreciation) 91,510,934 29,258,413 120,769,347 15,880,277
Total assets 130,387,448 33,364,258 163,751,706 85,780,205
Deferred outflows of resources:
Deferred amount from pension plans 1,063,462 408,408 1,471,870 968,098
Deferred amount from OPEB 282,755 108,587 391,342 257,398
Total deferred outflows of resources 1,346,217 516,995 1,863,212 1,225,496
Liabilities and Deferred Inflows of Resources
Current liabilities:
Accounts payable 3,470,522 159,484 3,630,006 852,385
Accrued payroll 130,042 41,007 171,049 253,996
Deposits payable 31,886 - 31,886 -
Due to other funds (note 12)- - - 367,712
Workers' compensation - current - - - 2,867,523
General liability - current - - - 2,694,118
Compensated absences - current - - - 4,022,771
Total current liabilities 3,632,450 200,491 3,832,941 11,058,505
Noncurrent liabilities:
Workers' compensation (note 6)- - - 12,653,477
General liability (note 6)- - - 5,266,830
Compensated absences (note 6)- - - 9,070,548
Net pension liability (note 10)6,815,313 2,617,287 9,432,600 6,204,123
Net OPEB liability 844,054 324,143 1,168,197 768,364
Total noncurrent liabilities 7,659,367 2,941,430 10,600,797 33,963,342
Total liabilities 11,291,817 3,141,921 14,433,738 45,021,847
Deferred inflows of resources:
Deferred amount from pension plans 147,849 56,779 204,628 134,592
Deferred amount from OPEB 20,995 8,063 29,058 19,112
Total deferred inflows of resources 168,844 64,842 233,686 153,704
Net Position
Net investment in capital assets 91,085,924 29,205,765 120,291,689 16,358,855
Unrestricted 29,187,080 1,468,725 30,655,805 25,471,295
Total net position 120,273,004$ 30,674,490$ 150,947,494 41,830,150$
Adjustment to reflect the consolidation of internal
service fund activities related to enterprise funds (379,143)
Net position of business-type activities 150,568,351$
CITY OF NEWPORT BEACH
Proprietary Fund
Statement of Net Position
June 30, 2020
Enterprise Funds
See accompanying notes to basic financial statements
76
Governmental
Total Activities
Enterprise Internal Service
Water Wastewater Funds Funds
Operating revenues:
Charges for sales and services:
Water sales 26,893,650$ -$26,893,650$ -$
Charges for services ---30,587,750
Sewer service and connection fees -4,043,961 4,043,961 -
Intergovernmental ---555,135
Retiree reimbursements ---311,356
Employee contributions ---73,580
Other 206,779 66,854 273,633 2,115,972
Total operating revenues 27,100,429 4,110,815 31,211,244 33,643,793
Operating expenses:
Purchase of water 11,871,043 -11,871,043 -
Salaries and benefits 5,572,554 1,778,730 7,351,284 4,049,878
Depreciation 1,631,573 635,398 2,266,971 3,548,544
Professional services 2,844,875 493,284 3,338,159 302,208
Maintenance and supplies 2,013,721 940,618 2,954,339 2,384,264
System maintenance 1,268,432 147,557 1,415,989 -
Fleet parts and supplies ---353,635
Telecommunication ---169,443
Hardware ---372,386
Software ---94,490
Fire equipment ---525,135
Workers' compensation ---1,646,315
Claims and judgments ---6,559,117
Compensated absences ---2,924,542
OPEB ARC - Cash subsidy ---4,924,751
Other 2,440,162 355,550 2,795,712 -
Total operating expenses 27,642,360 4,351,137 31,993,497 27,854,708
Operating income (loss) (541,931) (240,322) (782,253) 5,789,085
Nonoperating revenues:
Investment income 653,473 78,626 732,099 1,304,659
Net increase in fair value of investments 558,647 67,217 625,864 1,115,338
Gain on sale of capital assets ---158,449
Total nonoperating revenues 1,212,120 145,843 1,357,963 2,578,446
Income (loss) before transfers 670,189 (94,479)575,710 8,367,531
Transfers in (note 13)---1,000,000
Transfers out (note 13)---(610,000)
Total transfers ---390,000
Change in net position 670,189 (94,479)575,710 8,757,531
Net position, beginning of year 119,602,815 30,768,969 33,072,619
Net position, end of year 120,273,004$ 30,674,490$ 41,830,150$
Adjustment to reflect the consolidation of internal
service fund activities related to enterprise funds 314,622
Change in net position of business-type activities 890,332$
CITY OF NEWPORT BEACH
Proprietary Fund
Statement of Revenues,
Expenses and Changes in Net Position
For the Year Ended June 30, 2020
Enterprise Funds
See accompanying notes to basic financial statements
77
CITY OF NEWPORT BEACH
Statement of Cash Flows
For the Year Ended June 30, 2020
Governmental
Total Activities
Enterprise Internal Service
Water Wastewater Funds Funds
Cash flows from operating activities:
Cash received from customers or user departments 26,769,672$ 3,952,082$ 30,721,754$ 29,130,422$
Cash payments to employees for services (5,366,188) (1,701,922) (7,068,110) (8,486,743)
Cash payments to suppliers for goods and services (17,908,066) (1,469,571) (19,377,637) (12,924,158)
Cash received (payments made) for other operating activities (2,233,383) (288,696) (2,522,079) 2,219,552
Net cash provided by operating activities 1,262,035 491,893 1,753,928 9,939,073
Cash flows from noncapital financing activities:
Cash received from other funds - - - 1,000,000
Cash paid to other funds - - - (2,090,965)
Net cash (used) by noncapital financing activities - - - (1,090,965)
Cash flows from capital and related financing activities:
Acquisition of capital assets (2,481,077) (1,208,891) (3,689,968) (3,572,106)
Proceeds from sale of capital assets - - - 158,449
Net cash (used) for capital and related financing activities (2,481,077) (1,208,891) (3,689,968) (3,413,657)
Cash flows from investing activities:
Investment income 1,212,120 145,843 1,357,963 2,419,997
Net cash provided by investing activities 1,212,120 145,843 1,357,963 2,419,997
Net increase (decrease) in cash and cash equivalents (6,922) (571,155) (578,077) 7,854,448
Cash and cash equivalents, beginning 33,518,439 3,813,350 37,331,789 58,326,884
Cash and cash equivalents, ending 33,511,517$ 3,242,195$ 36,753,712$ 66,181,332$
Reconciliation to the statement of net position:
Cash and investments reported on statement of net position 33,511,517$ 3,242,195$ 36,753,712$ 66,181,332$
Cash and cash equivalents 33,511,517$ 3,242,195$ 36,753,712$ 66,181,332$
Reconciliation of operating income to net cash
provided by operating activities:
Operating income (loss)(541,931)$ (240,322)$ (782,253)$ 5,789,085$
Adjustments to reconcile operating income (loss)
to net cash provided by operating activities:
Depreciation 1,631,573 635,398 2,266,971 3,548,544
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable (171,980) (91,879) (263,859) 472,866
(Increase) Decrease in intergovernmental receivables 38,605 - 38,605 (525,135)
Decrease in inventories - - - 26,025
(Increase) in prepaid items - - - (468,328)
Increase in accounts payable and accrued payroll 115,591 119,273 234,864 147,065
Increase in deposits payable 9,397 - 9,397 -
(Decrease) in workers' compensation - - - (749,000)
Increase in general liability - - - 1,009,041
Increase in compensated absences - - - 524,342
Increase in net pension liability and deferred cash flows 278,014 106,764 384,778 253,081
(Decrease) in net OPEB liability and deferred cash flows (97,234) (37,341) (134,575) (88,513)
Total adjustments 1,803,966 732,215 2,536,181 4,149,988
Net cash provided by operating activities 1,262,035$ 491,893$ 1,753,928$ 9,939,073$
Noncash investing, capital and financing activities:
Net increase in fair value of investments 558,647$ 67,217$ 625,864$ 1,115,338$
Total of noncash activities 558,647$ 67,217$ 625,864$ 1,115,338$
Proprietary Fund
Enterprise Funds
See accompanying notes to basic financial statements
78
FINANCIAL SECTION
FINANCIAL SECTIONFINANCIAL SECTIONFUND FINANCIAL STATEMENTS
FIDUCIARY FUNDS
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80
FIDUCIARY FUNDS
Agency Funds, a type of Fiduciary Funds, are used to account for assets
held by the City as an agent for other government entities, private
organizations, or individuals.
81
Assets
Cash and investments (note 4) 613,943$
Restricted cash and investments with fiscal agent (note 4) 1,752,685
Receivable:
Interest 1,124
Total assets 2,367,752$
Liabilities
Due to bondholders 2,053,051$
Due to others 314,701
Total liabilities 2,367,752$
CITY OF NEWPORT BEACH
Agency Funds
Statement of Fiduciary Assets and Liabilities
June 30, 2020
See accompanying notes to basic financial statements
82
FINANCIAL SECTION
FINANCIAL SECTIONFINANCIAL SECTIONNOTES TO THE FINANCIAL STATEMENTS
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84
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2020
(1) Summary of Significant Accounting Policies
The basic financial statements of the City of Newport Beach (the “City”) have been
prepared in conformity with generally accepted accounting principles (“GAAP”) as
applicable to government units. The Governmental Accounting Standards Board (“GASB”)
is the accepted standard-setting body for establishing governmental accounting and
financial reporting principles.
a. Reporting Entity
The City of Newport Beach was incorporated on September 1, 1906. The current
City Charter was adopted in 1954. Since adoption, the Charter has been amended
several times. The most recent Charter amendment was approved by the voters
on November 2, 2010. The City operates under a Council-Manager form of
government and provides the following services: public safety (police, fire, and
marine), highway and streets, cultural and recreation, public improvements,
planning and zoning, utilities, and general administrative services.
The financial statements present the financial activity of the City of Newport Beach
(the primary government) and its component unit. The component unit discussed
below is included in the City's reporting entity because of the significance of its
operational or financial relationship with the City. This entity is legally separate
from the City. However, the City of Newport Beach’s elected officials have
continuing full or partial accountability for fiscal matters of the component unit. The
financial reporting entity consists of: (1) the City, (2) organizations for which the
City is financially accountable, and (3) organizations for which the nature and
significance of their relationship with the City are such that exclusion would cause
the City's financial statements to be misleading or incomplete.
An organization is fiscally dependent on the primary government if it is unable to
adopt its budget, levy taxes or set rates or charges, or issue bonded debt without
approval by the primary government. In a blended presentation, a component
unit’s balances and transactions are reported in a manner similar to the balances
and transactions of the City. Component units are presented on a blended basis
when the component unit's governing body is substantially the same as the City's
or the component unit provides services almost entirely to the City.
Blended Component Unit
The financial statements of the City of Newport Beach include the financial
activities of the Newport Beach Public Facilities Corporation (the "Corporation").
The Corporation was formed on March 9, 1992, for the purpose of assisting the
City of Newport Beach in the financing of public improvements, including a public
library and most recently the new civic center project. The Corporation is governed
by a Board of Directors which is comprised of the seven City Council Members of
the City of Newport Beach. The Corporation's financial data and transactions are
85
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2020
included in the debt service fund. Separate financial statements are not prepared
for the Corporation. The debt service fund is used solely to account for the activities
of the Corporation and contains no other City debt financing activities.
b. Basis of Accounting and Measurement Focus
The basic financial statements of the City are composed of the following:
Government-wide financial statements
Fund financial statements
Notes to the financial statements
Government-wide Financial Statements
Government-wide financial statements display information about the reporting
government as a whole, except for its fiduciary activities. These statements include
separate columns for the governmental and business-type activities of the primary
government (including its blended component units). The City of Newport Beach
has no discretely presented component units. Eliminations have been made in the
Statement of Activities so that certain allocated expenses are recorded only once
(by the function to which they were allocated). However, general government
expenses have not been allocated as indirect expenses to the various functions of
the City.
Government-wide financial statements are presented using the economic
resources measurement focus and the accrual basis of accounting. Under the
economic resources measurement focus, all (both current and long-term)
economic resources and obligations of the reporting government are reported in
the government-wide financial statements. Basis of accounting refers to when
revenues and expenses are recognized in the accounts and reported in the
financial statements. Under the accrual basis of accounting, revenues, expenses,
gains, losses, assets, and liabilities resulting from exchange and exchange-like
transactions are recognized when the exchange takes place.
Program revenues include charges for services, special assessments, and
payments made by parties outside of the reporting government’s citizenry if that
money is restricted to a particular program. Program revenues are netted with
program expenses in the statement of activities to present the net cost of each
program.
Amounts paid to acquire capital assets are capitalized as assets in the
government-wide financial statements, rather than reported as an expenditure.
Proceeds of long-term debt are recorded as a liability in the government-wide
financial statements, rather than as an other financing source. Amounts paid to
reduce long-term indebtedness of the reporting government are reported as a
reduction of the related liability, rather than as an expenditure.
86
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2020
Sometimes the City will fund outlays for a particular purpose from both restricted
(e.g., restricted bond or grant proceeds) and unrestricted resources. In order to
calculate the amounts to report as restricted – net position and unrestricted – net
position in the government-wide and proprietary fund financial statements, a flow
assumption must be made about the order in which the resources are considered
to be applied. It is the City’s practice to consider restricted-net position to have
been depleted before unrestricted – net position is applied.
Fund Financial Statements
The underlying accounting system of the City is organized and operated on the
basis of separate funds, each of which is considered to be a separate accounting
entity. The operations of each fund are accounted for with a separate set of self-
balancing accounts that comprise its assets, liabilities, deferred inflows/outflows of
resources, fund equity, revenues and expenditures or expenses, as appropriate.
Governmental resources are allocated to and accounted for in individual funds
based upon the purposes for which they are to be spent and the means by which
spending activities are controlled.
Fund financial statements for the primary government’s governmental, proprietary,
and fiduciary funds are presented after the government-wide financial statements.
These statements display information about major funds individually and non-
major funds in the aggregate for governmental and enterprise funds. Fiduciary
funds are excluded from government-wide financial statements. Fiduciary
statements include financial information for fiduciary funds. Fiduciary funds of the
City primarily represent assets held by the City in a custodial capacity for other
individuals or organizations.
Governmental Funds
In the fund financial statements, governmental funds are presented using the
modified-accrual basis of accounting. Their revenues are recognized when they
become measurable and available as net current assets. Measurable means that
the amounts can be estimated, or otherwise determined. Available means that the
amounts were collected during the reporting period or soon enough thereafter to
be available to finance the expenditures accrued for the reporting period. The City
uses an availability period of 60 days for all revenues.
Property taxes, sales taxes, franchise taxes, gas taxes, motor vehicle license fees,
transient occupancy taxes, grants, and interest associated with the current fiscal
period are all considered to be subject to accrual and so have been recognized as
revenues of the current fiscal period to the extent normally collected within the
availability period. Other revenue items are considered to be measurable and
available when cash is received by the City.
87
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2020
Revenue recognition is subject to the measurability and availability criteria for the
governmental funds in the fund financial statements. Exchange transactions are
recognized as revenues in the period in which they are earned (i.e., the related
goods or services are provided). Locally imposed derived tax revenues are
recognized as revenues in the period in which the underlying exchange transaction
upon which they are based takes place. Imposed non-exchange transactions are
recognized as revenues in the period for which they were imposed. If the period of
use is not specified, they are recognized as revenues when an enforceable legal
claim to the revenues arises or when they are received, whichever occurs first.
Government-mandated and voluntary non-exchange transactions are recognized
as revenues when all applicable eligibility requirements have been met.
In the fund financial statements, governmental funds are presented using the
current financial resources measurement focus. This means that only current
assets and deferred outflows of resources, and current liabilities and deferred
inflows of resources are generally included on their balance sheets. The reported
fund balance is considered to be a measure of “available spendable resources”.
Governmental fund operating statements present increases (revenues and other
financing sources) and decreases (expenditures and other financing uses) in fund
balance. Accordingly, they are said to present a summary of sources and uses of
“available spendable resources” during a period.
Non-current portions of long-term receivables due to governmental funds are
reported on their balance sheets in spite of their spending measurement focus.
Because of their spending measurement focus, expenditure recognition for
governmental fund types excludes amounts represented by non-current liabilities.
Since they do not affect “available spendable resources”, such long-term amounts
are not recognized as governmental fund type expenditures or fund liabilities.
Amounts expended to acquire capital assets are recorded as expenditures in the
year that resources were expended, rather than as fund assets. The proceeds of
long-term debt are recorded as other financing sources rather than as a fund
liability. Amounts paid to reduce long-term indebtedness are reported as fund
expenditures.
Permanent Funds, also referred to as Endowment Funds, are governmental funds
used to report resources that are legally restricted to the extent that only earnings,
and not principal, may be used for purposes that support City programs. The
amount of net appreciation on investments that is available to support City
programs is $2,037,522. The amount of investment earnings available for
expenditure is reported as Restricted Fund Balance in the fund level financial
statements. The endowment principal is reported as Nonspendable for Permanent
Endowments in the Balance Sheet. The State law governing the spending of
endowment funds investment earnings is California Probate Code Section 18504.
The authority for spending investment earnings for scholarships resides with the
88
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2020
City Manager and for periodic maintenance dredging in the Newport Bay resides
with the City Council.
Proprietary & Fiduciary Funds
The City’s enterprise and internal service funds are proprietary funds. In the fund
financial statements, proprietary and fiduciary funds are presented using the
accrual basis of accounting. Revenues are recognized when they are earned and
expenses are recognized when the related goods or services are delivered. In the
fund financial statements, proprietary funds are presented using the economic
resources measurement focus. This means that all assets, deferred outflows of
resources, all liabilities and deferred inflows of resources (whether current or non-
current) associated with their activity are included on their balance sheets.
Proprietary fund type operating statements present increases (revenues) and
decreases (expenses) in total net position.
Proprietary fund operating revenues, such as charges for services, result from
exchange transactions associated with principal activity of the fund. Exchange
transactions are those in which each party receives and gives up essentially equal
values. Non-operating revenues, such as subsidies, taxes, and investment
earnings result from non-exchange transactions or ancillary activities. Amounts
paid to acquire capital assets are capitalized as assets in the proprietary fund
financial statements, rather than reported as expenditures. Proceeds of long-term
debt are recorded as a liability in the proprietary fund financial statements, rather
than as other financing sources. Amounts paid to reduce long-term indebtedness
of the proprietary funds are reported as reductions of the related liabilities, rather
than as expenditures.
When both restricted and unrestricted resources are combined in a proprietary
fund, expenses are considered to be paid first from restricted resources, and then
from unrestricted resources.
Agency funds are custodial in nature (assets equal liabilities) and do not involve
the recording of City revenues and expenses and have no measurement focus.
c. Fund Classifications
The City utilizes the following broad categories of funds:
Major Funds – Major funds are those funds which are either material or of
particular importance.
Major Governmental Funds – Governmental funds are generally used to account
for tax supported activities. The following governmental funds meet the criteria of
a major fund:
89
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2020
General Fund
The General Fund is the general operating fund of the City. It is used to account
for all activities, except those required to be accounted for in another fund.
Special Revenue Funds
Tide and Submerged Land – Operating
The Tide and Submerged Land – Operating Fund is a special revenue fund used
to account for revenues related to the operation of the City’s tidelands, including
beaches and marinas, and the related expenditures. Revenue from tideland
operations includes, but is not limited to, rents from moorings, piers, and leases,
as well as income from parking lots, meters, and the sale of oil.
Tide and Submerged Land – Harbor Capital
The Tide and Submerged Land - Harbor Capital Fund is used to account for
incremental increases in revenue from certain property lease, pier, and mooring
rentals that exceed Council designated base year revenue amounts, as well as
other designated revenues and the related expenditures for capital projects,
maintenance, and servicing of loan advances from the General Fund.
Measure M Fund
The Measure M Fund is used to account for revenues and expenditures of funds
received from the Orange County Transportation Authority. Expenditures from this
fund are used exclusively for transportation related purposes. In prior years, this
fund was called the Combined Transportation Fund.
Capital Project Funds
Facilities Financial Planning Reserve Fund
The Facilities Financial Planning Reserve Fund is used to account for the receipt
and expenditure of funds for the replacement of facilities. In prior years, this fund
was called the Facilities Replacement Fund.
Debt Service Fund
Civic Center COP
The Civic Center COP Fund is used to account for debt service transactions
related to the Certificates of Participation issued to finance the construction of the
new Civic Center Complex.
Major Proprietary Funds – Proprietary funds are used to report an activity for which
a fee is charged to external users to recover the cost of operation.
Water Fund
The Water Fund is an enterprise fund used to account for the activities associated
with the transmission and distribution of potable water by the City to its users.
90
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2020
Wastewater Fund
The Wastewater Fund is an enterprise fund used to account for the activities
associated with providing sewer services by the City to its users.
Other Governmental Funds – Other Governmental Funds are those funds which
do not meet the criteria of a major fund. Other Governmental Funds used by the
City fall into the following governmental fund types:
Other Special Revenue Funds – Other Special Revenue Funds are used to
account for the proceeds of specific revenue sources which are legally restricted
to expenditures for specified purposes.
Other Capital Projects Funds – Other Capital Projects Funds are used to account
for resources used for the acquisition and construction of capital facilities by the
City, except those financed by Enterprise Funds.
Permanent Funds – Permanent Funds are used to report resources that are legally
restricted for the extent that only earnings, not principal, may be used for purposes
that support the reporting government’s programs.
Internal Service Funds – The Internal Service Funds are used to account for the
City’s self-insured general liability and workers’ compensation, compensated
absences, retiree insurance, the cost of maintaining and replacing the City’s rolling
stock fleet, parking equipment, coordinated communications systems equipment,
certain fire equipment, recreation equipment, as well as the cost of maintaining
and replacing the City’s information technology systems. City departments are the
primary users of these services and are charged a fee on a cost reimbursement
basis.
Fiduciary Funds – The Fiduciary Funds are used to account for assets held by
the City as an agent for property owners with special assessments, local
businesses in business improvements districts, and other individuals who have
made miscellaneous special deposits with the City.
d. New Accounting Pronouncements
Current Year Standards
In fiscal year 2019-2020, the City implemented the following Government
Accounting Standards Board (GASB) Statements:
GASB Statement No. 95 – “Postponement of the Effective Dates of Certain
Authority Guidance”, effective during fiscal year 2019-2020 and resulted in
delaying the implementation requirements for certain Statements and
Implementation Guides to provide temporary relief to governments and other
stakeholders in light of the COVID-19 pandemic.
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CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2020
GASB Statement No. 97 – “Certain Component Unit Criteria, and Accounting
and Financial Reporting for Internal Revenue Code Section 457 Deferred
Compensation Plans – an amendment of GASB Statements No. 14 and No.
84, and a superression of GASB Statement No. 32”, effective for fiscal years
beginning after June 15, 2021, paragraphs 4 and 5. The requirements of these
paragraphs did not impact the City.
Pending Accounting Standards
GASB has issued the following statements, which may impact the City’s financial
reporting requirements in the future:
GASB Statement No. 84 – “ Fiduciary Activities”, effective for periods beginning
after December 15, 2019.
GASB Statement No. 87 –“Leases”, effective for periods beginning after June
15, 2021.
GASB Statement No. 89 – “Accounting for Interest Cost Incurred before the
End of a Construction Period”, effective for periods beginning after December
15, 2020.
GASB Statement No. 90 – “Majority Equity Interests”, effective for periods
beginning after December 15, 2019.
GASB Statement No. 91 – “Conduit Debt Obligations”, effective for periods
beginning after December 15, 2021.
GASB Statement No. 92 – “Omnibus 2020”, primarily effective for periods
beginning after June 15, 2020.
GASB Statement No. 93 – “Replacement of Internbank Offered Rates”,
effective for periods beginning after June 15, 2021
GASB Statement No. 94 – “Public-Private and Public-Public Parnterships and
Availability Payment Arrangements”, effective for periods beginning after June
15, 2022.
GASB Statement No. 96 – “Subscription-Based Information Technology
Arrangements”, effective for fiscal years beginning after June 15, 2022.
GASB Statement No. 97 – “Certain Component Unit Criteria, and Accounting
and Financial Reporting for Internal Revenue Code Section 457 Deferred
Compensation Plans – an amendment of GASB Statements No. 14 and No.
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Notes to Basic Financial Statements
June 30, 2020
84, and a superression of GASB Statement No. 32”, effective for fiscal years
beginning after June 15, 2021, except for the requirements of paragraphs 4
and 5.
e.Accounts Receivables
Accounts receivables represent all service and capital project billings other than
intergovernmental receivables stated below. As of June 30, 2020 accounts
receivable deemed to be uncollectible with an outstanding balance over 120 days
past due were written off the City’s accounting records to ensure that the income
statement and balance sheet are fairly stated at the amount expected to be
collected in receivables. Receivables with governmental organizations are
generally excluded from the write-off as they are more likely to be received due to
the governments’ creditworthiness.
f. Cash and Investments
Cash and Cash Equivalents
Cash and cash equivalents are defined to be cash on hand, demand deposits and
highly liquid investments with a maturity of three months or less from the date of
purchase.
Investments
Investments are generally stated at fair value which is the price that would be
received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date.
Cash and investments are pooled to maximize investment yields. The net change
in fair value and interest earned on the investments is allocated to the respective
funds based on each fund’s average monthly cash and investments balance.
The City’s investment in LAIF is $74,865,641 at June 30, 2020. This investment
value is based on information provided by the State Treasurer’s Office. The
carrying value of the City’s position in the fund is materially consistent with the fair
value of the fund shares. This pool is under the regulatory oversight of the State
Treasurer’s Office. The LAIF Board consists of five members as designated by
Statute. The Chairman is the State Treasurer, or his designated representative.
Two members qualified by training and experience in the field of investment or
finance, and two members who are treasurers, finance or fiscal officers or business
managers employed by any county, city or local district or municipal corporation of
this state, are appointed by the State Treasurer. The term of each appointment is
two years, or at the pleasure of the appointing authority.
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CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2020
g. Intergovernmental Receivables
Intergovernmental receivables represent grant reimbursement requests, capital
project billings, and pending transfers of taxes and fees collected by other
government agencies. As of June 30, 2020, the balance of these accounts totaled
$11,304,210.
h. Inventories and Prepaid Items
Inventories are valued at cost, which approximates market, using the first-in, first-
out method. The City follows the consumption method for inventory control. The
costs of governmental fund and internal service fund inventories are recorded as
expenditures when consumed.
Certain payments to vendors reflect costs applicable to future accounting periods
and are recorded as prepaid items. The City follows the consumption method for
prepaid items.
i. Capital Assets
Capital assets, which include land, structures, equipment, and infrastructure
assets, are reported in the applicable governmental or business-type activities
columns in the Government-wide Financial Statements. Capital assets are
recorded at cost where historical records are available and at an estimated original
cost where no historical records exist. Equipment purchased in excess of $5,000
is capitalized if it has an expected useful life in excess of one year. Building,
infrastructure, and improvements are capitalized if cost is in excess of $30,000 if it
has an expected useful life in excess of one year. The cost of normal maintenance
and repairs that do not add to the value of the asset’s life are not capitalized. The
City chose to value and report on infrastructure assets in their entirety (e.g. prior
to 1980).
Major capital outlay for capital assets and improvements are capitalized as projects
are constructed. Capital assets acquired through lease obligations are valued at
the present value of future lease payments at the date acquired. Contributed
capital assets are valued at their estimated acquisition value at the date of
contribution.
Capital assets used in operations are depreciated over their estimated useful lives
using the straight-line method in the government-wide financial statements and in
the fund financial statements of the proprietary funds. Depreciation is charged as
an expense against operations and accumulated depreciation is reported on the
respective balance sheet. The ranges of useful life for depreciation purposes for
each capital asset class are as follows:
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CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2020
Structures 15-75 years
Equipment 3-15 years
Infrastructure 20-75 years
j. Claims and Judgments
The City accounts for material claims and judgments and associated legal and
administrative costs when it is probable that the liability claim has been incurred
and the amount of the loss can be reasonably estimated. The City records the
estimated loss liabilities in the Internal Service Fund. Included therein are claims
incurred but not reported, which consists of (a) known loss events expected to be
presented as claims later, (b) unknown loss events that are expected to become
claims, and (c) expected future development on claims already reported. This is
based upon historical actual results that have established a reliable pattern
supplemented by specific information about current matters. Small dollar claims
and judgments are recorded as expenditures when paid.
k. Property Taxes
The assessment, levy, and collection of property taxes are the responsibility of the
County of Orange. The City records property taxes as revenue when received from
the County, except at year-end, when property taxes received within 60 days are
accrued as revenue. Property taxes are assessed and collected each fiscal year
according to the following property tax calendar:
Lien date Jan 1
Levy date July 1
Due dates November 1 1st installment
March 1 2nd installment
Collection dates December 10 1st installment
April 10 2nd installment
l. Compensated Absences
It is the City's policy to permit employees to accumulate earned but unused
vacation and limited amounts of earned but unused sick leave benefits, which will
be paid to employees upon separation from City service. Beginning in fiscal year
1990, the City adopted a general leave plan to replace the traditional vacation and
sick leave plan. The City uses a general leave plan which permits a maximum of
three years’ accrual for every employee, above which the excess is paid out as
current compensation. All employees hired prior to January 1,1990, were given the
option of remaining in the traditional vacation and sick leave plan or enrolling in the
general leave plan. All employees hired on or after January 1,1990, are
automatically enrolled in the general leave plan. Compensated absences are
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CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2020
accrued in the Compensated Absence Internal Service Fund when employee
services have been rendered and when it becomes probable that the City will
compensate the employees for benefits through paid time off or cash payments at
termination or retirement. Benefits that have been earned but are not yet available
for use because employees have not met certain conditions are accrued to the
extent it is probable that the employees will meet the conditions for compensation
in the future.
m. Deposits Payable
In the government-wide and fund-level financial statements, deposits payable
represent monies collected for developer deposits, demolition deposits, planning
deposits and others, for services which have not yet been performed. These
unspent portions are reported as liabilities on the financial statements.
n. Unearned Revenue
Unearned revenues are those where asset recognition has been met, but the
revenue recognition criteria have not been met.
o. Deferred Inflows/Outflows of Resources
In addition to assets, the statement of net position and the governmental funds
balance sheet will sometimes report a separate section for deferred outflows of
resources. This separate financial statement element, deferred outflows of
resources, represents a consumption of net position that applies to future periods
and so will not be recognized as an outflow of resources (expense) until that time.
The City has three items that qualify for reporting in this category. The first item is
the deferred outflows related to employer pension and OPEB contributions made
after the measurement date. The second item is a deferred outflows related to
pensions and OPEB resulting from changes in assumptions. This amount is
amortized over a closed period equal to the average of expected remaining service
lives of all employees that are provided pensions and OPEB through the plans.
The third item is a deferred outflows related to pensions and OPEB resulting from
the difference between expected and actual experience. This amount is amortized
over a closed period equal to the average of expected remaining service lives of
all employees that are provided pensions and OPEB through the plans.
In addition to liabilities, the statement of net position and the governmental funds
balance sheet will sometimes report a separate section for deferred inflows of
resources. This separate financial statement element, deferred inflows of
resources, represents an acquisition of net position that applies to future periods
and will not be recognized as an inflow of resources (revenue) until that time. The
City has five items that qualify for reporting in this category. The first item is
unavailable revenues, which is only reported in the governmental funds balance
sheet. The governmental funds report unavailable revenues from two sources:
96
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2020
grants receivable and rent collections. These amounts are deferred and
recognized as an inflow of resources in the period that the amounts become
available. The second item is a deferred inflow related to pensions resulting from
the difference between actual and expected experience. This amount is amortized
over a closed period equal to the average of the expected remaining service lives
of all employees that are provided pensions through the plans. The third item is a
deferred inflow related to pensions resulting from the change in assumptions. This
amount is amortized over a closed period equal to the average of expected
remaining service lives of all employees that are provided pensions through the
plans. The fourth item is a deferred inflows resulting from the net difference in
projected and actual earnings on investments of the OPEB plan fiduciary net
position. This amount is amortized over five years. The fifth item is the net
difference in projected and actual earnings on investments of the pension plan’s
fiduciary net position. This amount is amortized over five years.
p. Fund Balance Classifications
The governmental fund balance is made up of different classifications and the
following provides explanations as to the nature and purpose of each classification:
Nonspendable fund balance
That portion of fund balance that typically includes amounts that are either (a) not
in a spendable form such as inventories and prepaid items, or (b) legally or
contractually required to be maintained intact such as endowments.
Restricted fund balance
The portion of fund balance that reflects constraints placed on the use of resources
(other than nonspendable items) that are either (a) externally imposed by creditors,
grantors, contributors, or laws or regulations of other governments; or (b) imposed
by law through constitutional provisions or enabling legislation.
Committed fund balance
That portion of a fund balance that includes amounts that can only be used for
specific purposes pursuant to constraints imposed by formal action by the
government’s highest level of decision making authority, and remain binding
unless removed in the same manner. The City Council has authority to establish
or modify a fund balance commitment by legislation (Council action) and can only
rescind a fund balance commitment by new legislation requiring the same voting
consensus. The City considers a resolution to constitute a formal action of the City
Council for the purposes of establishing committed fund balance.
Assigned fund balance
That portion of a fund balance that includes amounts that are constrained by the
City’s intent to be used for specific purposes and do not meet the criteria to be
classified as restricted or committed. Constraints imposed on the use of assigned
amounts are more easily removed or modified than those imposed on amounts
97
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2020
classified as committed. The City’s Reserve Policy gives the City Manager the
authority to establish, modify, or rescind a fund balance assignment.
Unassigned fund balance
That residual portion of a fund balance that is not otherwise restricted, committed
or assigned. Positive unassigned fund balance is available to be used for any
purpose. Only the general fund may report a positive unassigned fund balance.
Funds, except the general fund, may report negative unassigned fund balance in
certain circumstances.
In the governmental fund statements, when expenditures are incurred for purposes
for which both restricted and unrestricted (committed, assigned, or unassigned)
fund balances are available, the City uses the most restrictive funds first. The City
uses the appropriate funds in the following order: restricted, committed, assigned,
and finally unassigned amounts.
q. Estimates
The preparation of financial statements in conformity with GAAP requires
management to make estimates and assumptions that affect the reported amounts
of certain assets, deferred outflows of resources, liabilities and deferred inflows of
resources, disclosure of contingent assets and liabilities, and the related amounts
of revenues and expenditures. Actual results could differ from those estimates.
Management believes that the estimates are reasonable.
r. Pensions
For purposes of measuring the net pension liability and deferred outflows/inflows
of resources related to pensions, and pension expense, information about the
fiduciary net position of the City of Newport Beach’s California Public Employees’
Retirement System (CalPERS) plans (Plans) and additions to/deductions from the
Plans’ fiduciary net position have been determined on the same basis as they are
reported by CalPERS. For this purpose, benefit payments (including refunds of
employee contributions) are recognized when due and payable in accordance with
the benefit terms. Investments are reported at fair value.
GASB 68 requires that the reported results must pertain to liability and asset
information within certain defined timeframes. For this report, the following
timeframes are used.
Valuation Date (VD) June 30, 2018
Measurement Date (MD) June 30, 2019
Measurement Period (MP)July 1, 2018 to June 30, 2019
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CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2020
s. Post-Employment Health Care Benefits (OPEB)
For purposes of measuring the net OPEB liability and deferred outflows/inflows of
resources related to OPEB and OPEB expense, information about the fiduciary net
position of the City of Newport Beach’s California Public Employees’ Retirement
System (CalPERS) Health Plan and additions to/deductions from the Plans’
fiduciary net position have been determined on the same basis as they are
reported by CalPERS. For this purpose, benefit payments (including refunds of
employee contributions) are recognized when due and payable in accordance with
the benefit terms. Investments are reported at fair value.
GASB 75 requires that the reported results must pertain to liability and asset
information within certain defined timeframes. For this report, the following
timeframes are used.
Valuation Date (VD) June 30, 2019
Measurement Date (MD) June 30, 2019
Measurement Period (MP)July 1, 2018 to June 30, 2019
(2) Reconciliation of Government-wide and Fund Financial Statements
a. Explanation of Differences Between Governmental Funds Balance Sheet
and the Statement of Net Position
The “total fund balances” of the City’s governmental funds $205,022,641 differs
from “net position” of governmental activities $2,195,346,799 reported in the
statement of net position. This difference primarily results from the long-term
economic focus of the statement of net position versus the current financial
resources focus of the governmental funds balance sheet.
Capital Related Items
When capital assets (property, plant, and equipment) that are to be used in
governmental activities are purchased or constructed, the costs of those assets
are reported as expenditures in governmental funds. However, the statement of
net position includes those capital assets among the assets of the City as a whole.
Cost of capital assets $2,531,653,284
Accumulated depreciation (228,706,484)
Total capital assets, net* $2,302,946,800
*Amount excludes net capital assets of $15,880,277 from
Internal Service funds
99
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2020
Long-term Debt Transactions
Long-term liabilities applicable to the City’s governmental activities are not due and
payable in the current period and accordingly are not reported as fund liabilities.
All liabilities (both current and long-term) are reported in the statement of net
position. Balances at June 30, 2020 were:
Certificates of participation $100,695,000
CDBG loan 585,000
Total $101,280,000
Accrued Interest
Accrued liabilities in the statement of net position differ from the amount reported
in governmental funds due to accrued interest on outstanding debt payable (see
Note 6).
Accrued interest added $3,491,913
Investment in Joint Venture
Investment in joint venture is not a current financial resource and hence reported
only in the statement of net position.
Net equity in joint venture $246,470
Unavailable Revenue
Some of the revenue will be collected after year-end, but is not available soon
enough to pay for the current period’s expenditures, and therefore is reported as
unavailable revenue in the governmental funds.
Unavailable revenue $2,495,603
Internal Service Funds
Internal service funds are used by management to charge the costs of certain
activities (such as equipment management and self-insurance authorities) to
individual funds. The assets (including capital assets) and liabilities of the internal
service funds are included in governmental activities in the statement of net
position because they primarily serve governmental activities of the City.
Internal Service Funds $41,830,150
100
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2020
Deferred Outflows of Resources, Deferred Inflows of Resources and Net Pension
Liability – GASB 68
Pension related debt applicable to the governmental activities are not due and
payable in the current period and accordingly are not reported as fund liabilities.
Deferred outflows of resources and deferred inflows of resources related to
pension are only reported in the Statement of Net Position as the changes in these
amounts effects only the government-wide statements for governmental activities.
Internal service funds amounts are excluded.
Deferred Outflows of Resources $57,956,702
Deferred Inflows of Resources (5,420,369)
Pension Liability (291,082,707)
Deferred Outflows of Resources, Deferred Inflows of Resources and Net Post-
Employment Health Care Benefits Liability – GASB 75
Post-employment health care benefits (OPEB) debt applicable to the
governmental activities are not due and payable in the current period and
accordingly are not reported as fund liabilities. Deferred outflows of resources and
deferred inflows of resources related to OPEB are only reported in the Statement
of Net Position as the changes in these amounts effects only the government-wide
statements for governmental activities. Internal service funds amounts are
excluded.
Deferred Outflows of Resources $6,936,584
Deferred Inflows of Resources (514,125)
OPEB Liability (20,678,180)
Internal Balance
Internal balance created by the consolidation of internal service fund activities
related to enterprise funds is not reported in the governmental funds.
Internal Balance $379,143
Reclassifications and Eliminations
Interfund balances must generally be eliminated in the government-wide
statements, except for net residual amounts due between governmental activities.
Amounts involving fiduciary funds should be reported as external transactions. Any
allocations must reduce the expenses of the function from which the expenses are
being allocated, so that expenses are reported only once in the function in which
they are allocated.
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CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2020
Total Capital Long-term
Governmental Related Accumulated Debt
Funds Items Depreciation Transactions
Assets and Deferred Outflows of Resources
Cash and investments 200,141,503$ -$ -$ -$
Receivables:
Accounts (net of allowance)5,692,604 - - -
Advances to other funds 10,676,659 - - -
Interest 1,261,074 - - -
Intergovernmental receivables 10,677,986 - - -
Restricted cash and investments with fiscal agent 8,752,177 - - -
Interfund balances 5,819,378 - - -
Investment in joint venture - - - -
Inventory 258,557 - - -
Prepaid items 945,647 - - -
Capital assets - 2,531,653,284 - -
Accumulated depreciation - - (228,706,484) -
Total assets 244,225,585$ 2,531,653,284$ (228,706,484)$ -$
Deferred Outflows of Resources:
Deferred amount from pension plans - - - 57,956,702
Deferred amount from OPEB - - - 6,936,584
Total deferred outflows of resources - - - 64,893,286
Total assets and deferred outflows of resources 244,225,585$ 2,531,653,284$ (228,706,484)$ 64,893,286$
Liabilities, Deferred Inflows of Resources
and Fund Balances/Net Position
Liabilities:
Accounts payable 8,246,950$ -$ -$ -$
Accrued payroll 4,052,607 - - -
Accrued interest payable - - - -
Deposits payable 2,579,459 - - -
Claims payable - - - -
Workers' compensation payable - - - -
Compensated absences payable - - - -
Unearned revenue 5,700,000 - - -
Due to other funds 5,451,666 - - -
Advance from other funds 10,676,659 - - -
Long-term liabilities - - - 413,040,887
Total liabilities 36,707,341 - - 413,040,887
Deferred Inflows of Resources:
Unavailable revenue 2,495,603 - - -
Deferred amount from pension plans - - - 5,420,369
Deferred amount from OPEB - - - 514,125
Total deferred inflows of resources 2,495,603 - - 5,934,494
Fund balances / net position 205,022,641 2,531,653,284 (228,706,484) (354,082,095)
Total liabilities, deferred inflows of resources
and fund balances / net position 244,225,585$ 2,531,653,284$ (228,706,484)$ 64,893,286$
Explanation of Differences Between Government Funds
Balance Sheet and the Statement of Net Position
102
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2020
Investment Internal Reclassifications
Interest in Joint Unavailable Service and Statement of
Payable Venture Revenue Funds Eliminations Net Position
-$ -$ -$66,181,332$ -$ 266,322,835$
- - - 1,796,066 -7,488,670
- - - - (10,676,659) -
- - - - - 1,261,074
- - - 525,135 -11,203,121
- - - - -8,752,177
- - - - (5,440,235) 379,143
- 246,470 - - - 246,470
- -- 413,015 -671,572
- -- 984,380 -1,930,027
- -- 44,679,625 -2,576,332,909
- -- (28,799,348) -(257,505,832)
-$ 246,470$ -$ 85,780,205$ (16,116,894)$ 2,617,082,166$
- - - 968,098 -58,924,800
- - - 257,398 -7,193,982
- - - 1,225,496 -66,118,782
-$ 246,470$ -$ 87,005,701$ (16,116,894)$ 2,683,200,948$
-$ -$ -$852,385$ -$ 9,099,335$
- - -253,996 -4,306,603
3,491,913 - - - - 3,491,913
- - - - -2,579,459
- - - 2,694,118 -2,694,118
- - - 2,867,523 -2,867,523
- - - 4,022,771 -4,022,771
- - - - -5,700,000
- - - 367,712 (5,819,378) -
- - - - (10,676,659) -
- - - 33,963,342 -447,004,229
3,491,913 - - 45,021,847 (16,496,037) 481,765,951
- - (2,495,603) - - -
- - - 134,592 -5,554,961
- - - 19,112 -533,237
- - (2,495,603) 153,704 -6,088,198
(3,491,913) 246,470 2,495,603 41,830,150 379,143 2,195,346,799
-$ 246,470$ -$ 87,005,701$ (16,116,894)$ 2,683,200,948$
103
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2020
b. Explanation of Differences Between Enterprise Funds and Government-wide
Statement of Net Position
Net position of the City’s Enterprise Funds of $150,947,494 differs from net
position of the business-type activities of $150,568,351 reported in the
government-wide statement of net position. The difference, $379,143 results from
the consolidation of internal service fund activities related to the enterprise funds.
Total Internal Government-wide
Enterprise Service Statement of
Funds Funds Net Position
Assets and Deferred Outflows of Resources
Cash and investments 36,753,712$ -$ 36,753,712$
Receivables:
Accounts (net of allowance)6,127,558 - 6,127,558
Intergovernmental receivables 101,089 101,089
Interfund balances - (379,143) (379,143)
Capital assets, net 120,769,347 - 120,769,347
Total assets 163,751,706 (379,143) 163,372,563
Deferred outflows of resources:
Deferred amount from pension plans 1,471,870 - 1,471,870
Deferred amount from OPEB 391,342 - 391,342
Total deferred outflows of resources 1,863,212 - 1,863,212
Total assets and deferred outflows of resources 165,614,918$ (379,143)$ 165,235,775$
Liabilities and Deferred Inflows of Resources
Liabilities:
Accounts payable 3,630,006$ -$ 3,630,006$
Accrued payroll 171,049 - 171,049
Deposits payable 31,886 - 31,886
Net pension liability 9,432,600 - 9,432,600
Net OPEB liability 1,168,197 - 1,168,197
Total liabilities 14,433,738 - 14,433,738
Deferred inflows of resources:
Deferred amount from pension plans 204,628 - 204,628
Deferred amount from OPEB 29,058 - 29,058
Total deferred inflows of resources 233,686 - 233,686
Total liabilities and deferred inflows of resources 14,667,424$ -$ 14,667,424$
Net Position
Net investment in capital assets 120,291,689$ -$ 120,291,689$
Unrestricted 30,655,805 (379,143) 30,276,662
Total net position 150,947,494$ (379,143)$ 150,568,351$
Explanation of Differences Between Enterprise Funds
and Government-wide Statement of Net Position
104
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Notes to Basic Financial Statements
June 30, 2020
c. Explanation of Differences Between Governmental Fund Operating
Statements and the Statement of Activities
The “net change in fund balances” for governmental funds $17,030,920 differs
from the “change in net position” for governmental activities $22,914,865 reported
in the statement of activities. The differences arise primarily from the long-term
economic focus of the statement of activities versus the current financial resources
focus of the governmental funds. The effect of the difference is illustrated below.
Capital Related Items
When capital assets that are to be used in governmental activities (excluding those
reported in Intenal Service Funds) are purchased or constructed, the resources
expended for those assets are reported as expenditures in governmental funds.
However, in the statement of activities, the cost of those assets is allocated over
their estimated useful lives and reported as depreciation expense. In governmental
funds, significant maintenance projects are reclassified as functional expenses in
the statement of net assets. Also, contributed capital is not recorded in
governmental funds; therefore, it is added to the statement of net activities.
Capital outlays 22,681,840$
Transfers out of WIP (10,953,051)
Capital outlays, net 11,728,789
Governmental funds - asset deletions (3,008,725)
Net change in capital related items 8,720,064
Depreciation expense (13,357,307)
Deletions in governmental funds accumulated depreciation 1,215,413
Net change in accumulated depreciation (12,141,894)
Total (3,421,830)$
105
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2020
Long-Term Debt Transactions
Payment of debt service is reported as an expenditure in governmental funds and
has the effect of reducing fund balance because current financial resources have
been used. Issuance of debt is reported as an other financing source in
governmental funds and increases fund balance. For the City as a whole, however,
the principal payments reduce the liabilities, and proceeds from long-term debt
increase liabilities in the statement of net position.
Civic Center certificates of participation $3,405,000
CDBG loan 171,000
Amortization of debt premium 120,553
Total debt payments $3,696,553
Accrued Interest
Interest accrued on outstanding debt payable is not recorded as an expenditure in
governmental funds and has been added to the statement of activities.
Net change in accrued interest $80,629
Investment in Joint Venture
Investment in joint venture creates an explicit, measurable equity interest reported
only in the statement of activities.
Net change in investment in joint venture $59,077
Unavailable Revenue
Some of the revenue will be collected after year-end, but is not available soon
enough to pay for current period’s expenditures, and therefore is reported as
unavailable revenue in the governmental funds.
Net change in unavailable revenue $1,414,177
Pension Expense
Pension expense reported in the governmental funds includes the annual required
contribution. In the Statement of Activities, pension expense includes the change
in the net pension liability and related change in the pension amounts for deferred
outflows of resources and deferred inflows of resources.
Pension expense ($6,779,351)
106
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2020
Post-Employment Health Care Benefits Expense
Post-employment health care benefits (OPEB) expense reported in the
governmental funds includes the annual required contribution. In the Statement of
Activities, OPEB expense includes the change in the net OPEB liability and related
change in the OPEB amounts for deferred outflows of resources and deferred
inflows of resources.
OPEB expense $2,391,781
Internal Service Funds
Internal service funds are used by management to charge the costs of certain
activities, such as equipment management and self-insurance activities, to
individual funds. The adjustments for internal service funds “close” those funds by
reimbursing or charging additional amounts to participating departments in
individual funds for costs over or under charged for those activities.
Net change in internal service funds $8,757,531
Reclassification and Eliminations
Interfund balances must generally be eliminated in the government-wide financial
statements, except for net residual amounts due between governmental and
business-type activities. Any allocations must reduce the expenses of the function
from which the expenses are being allocated, so that expenses are reported only
once – in the function in which they are allocated. Amounts involving fiduciary
funds should be reported as external transactions. Reclassifications and
eliminations are used by management to consolidate internal service funds into
the Statement of Activities.
Net change in reclassifications and
eliminations to consolidate
internal service funds $(314,622)
107
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2020
Total Capital Long-term
Governmental Related Accumulated Debt
Funds Items Depreciation Transactions
Revenues:
Taxes and assessments 182,983,069$ -$ -$-$
Intergovernmental 12,672,931 - - -
Licenses and permits 5,783,862 - - -
Charges for services 21,125,622 - - -
Fines and forfeitures 3,509,883 - - -
Investment income 3,765,753 - - -
Net increase in fair value of investments 3,477,299 - - -
Property income 25,651,360 - - -
Share of joint venture net gain - - - -
Donations 795,561 - - -
Gain on sale of capital assets - - - -
Other 5,950,279 - - -
Total revenues 265,715,619 - - -
Expenditures:
Current:
General government 15,968,085 - 2,669,772 526,787
Public safety 118,290,847 52,023 668,368 2,483,810
Public works 45,730,965 2,695,106 6,692,780 633,362
Community development 12,612,751 - 5,082 342,502
Community services 24,474,242 261,596 2,105,892 401,109
Capital outlay 20,376,106 (11,728,789) - -
Debt service:
Principal retirement 3,576,000 - - (3,576,000)
Interest and fiscal charges 7,265,703 - -
Amortization of gain on refunding - - - -
Amortization of debt premium - - - (120,553)
Total expenses 248,294,699 (8,720,064) 12,141,894 691,017
Other financing sources (uses):
Transfers in 40,373,981 - - -
Transfers out (40,763,981) - - -
Total other financing sources
(uses)(390,000) - - -
Net change in fund balances /
net position 17,030,920 8,720,064 (12,141,894) (691,017)
Fund balances / net position, beginning of year 187,991,721 2,522,933,220 (216,564,590) ` (353,391,078)
Fund balances / net position, end of year 205,022,641$ 2,531,653,284$ (228,706,484)$ (354,082,095)$
Operating Statement and the Statement of Activities
Explanation of Differences Betweeen Government Funds
108
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2020
Investment Internal Reclassifications
Interest in Joint Unavailable Service and Statement of
Payable Venture Revenue Funds Eliminations Activities
-$ -$ -$ -$ -$ 182,983,069$
- - 1,414,177 - - 14,087,108
- - - - - 5,783,862
- - - - (314,622) 20,811,000
- - - - - 3,509,883
- - - 1,304,659 - 5,070,412
- - - 1,115,338 - 4,592,637
- - - - - 25,651,360
- 59,077 - - - 59,077
- - - - - 795,561
- - - 158,449 - 158,449
- - - - - 5,950,279
- 59,077 1,414,177 2,578,446 (314,622) 269,452,697
- - - (878,518) 2,427,924 20,714,050
- - - (3,153,295) 852,549 119,194,302
- - - (809,567) 5,112,214 60,054,860
- - - (341,518) 223,203 12,842,020
- - - (606,187) 31,427 26,668,079
- - - - (8,647,317) -
- - - - - -
(80,629) - - - (120,553) 7,064,521
- - - - - -
- - - - 120,553 -
(80,629) - - (5,789,085) - 246,537,832
- - - 1,000,000 (41,373,981) -
- - - (610,000) 41,373,981 -
- - - 390,000 - -
80,629 59,077 1,414,177 8,757,531 (314,622) 22,914,865
(3,572,542) 187,393 1,081,426 33,072,619 693,765 2,172,431,934
(3,491,913)$ 246,470$ 2,495,603$ 41,830,150$ 379,143$ 2,195,346,799$
109
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2020
d. Explanation of Differences Between Enterprise Funds Operating Statement
and the Statement of Activities
The change in net position for the City’s enterprise funds $575,710 differs from the
change in net position of the business-type activities $890,332 reported in the
government-wide statement of activities. The difference, $314,622, results from
the consolidation of internal service fund activities related to the enterprise funds.
Total Internal Business-type activities
Enterprise Service Statement of
Funds Fund Activities
Operating revenues:
Charges for sales and services:
Water sales 26,893,650$ -$ 26,893,650$
Sewer service and connection fees 4,043,961 - 4,043,961
Intergovernmental - - -
Other 273,633 - 273,633
Total operating revenues 31,211,244 - 31,211,244
Operating expenses:
Purchase of water 11,871,043 - 11,871,043
Salaries and wages 7,351,284 - 7,351,284
Depreciation 2,266,971 - 2,266,971
Professional services 3,338,159 - 3,338,159
Maintenance and supplies 2,954,339 (314,622) 2,639,717
System maintenance 1,415,989 - 1,415,989
Other 2,795,712 - 2,795,712
Total operating expenses 31,993,497 (314,622) 31,678,875
Operating income (782,253) 314,622 (467,631)
Nonoperating revenues (expenses):
Investment income 732,099 - 732,099
Net increase in fair valur of investments 625,864 - 625,864
Total nonoperating revenues (expenses)1,357,963 - 1,357,963
Change in net position 575,710 314,622 890,332
Net position, beginning of year 150,371,784 (693,765) 149,678,019
Net position, end of year 150,947,494$ (379,143)$ 150,568,351$
Explanation of Differences Between Enterprise Funds
Operating Statement and the Statement of Activities
110
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2020
(3) Budgetary Control and Compliance
The City adheres to the following general procedures in establishing the budgetary data
reflected in the financial statements:
During April, the City Manager submits to the City Council a proposed operating
budget for the fiscal year commencing the following July 1. The operating budget
includes proposed expenditures and the means of financing them. Public hearings
are conducted at City Council meetings to obtain taxpayer comments. Prior to July
1, the budget is legally adopted through passage of an appropriation resolution.
Budgets are adopted on an annual basis consistent with generally accepted
accounting principles for General and Special Revenue Funds.
The City of Newport Beach does not present budget information on Capital
Projects Funds since the City approved project-length budgets. These project-
length budgets authorize total expenditures over the duration of a construction
project rather than year-by-year budgeting.
The City of Newport Beach does not present budget information on Debt Service
and Permanent Funds since the City is not required to and does not adopt an
annual budget for these funds.
The budget is formally integrated into the accounting system and employed as a
management control device during the year.
The legal level of budgetary control is at the fund level. The City Manager is
authorized to transfer budgeted amounts between departments within any fund;
however, any revisions which alter the total appropriations of any fund must be
approved by City Council.
At fiscal year-end, budget appropriations lapse. Budget appropriations for
incomplete capital projects are re-budgeted in the following fiscal year by Council
action and are included in the revisions noted above. Projects that are not started
during the budget year are re-evaluated in the following year.
Encumbrances represent commitments related to unperformed contracts for
goods and services. The City utilizes an encumbrance system as a management
control technique to assist in controlling expenditures. Under this system,
encumbrance accounting for the expenditure of funds is recorded in order to
indicate outstanding commitments and is employed in the governmental fund
types. Encumbrances outstanding at year-end are reported as committed or
restricted fund balances since they do not constitute expenditures or liabilities.
Encumbrances and their related budgets are honored in the subsequent year to
fulfill these commitments and are presented in the original adopted budget.
111
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2020
Expenditures exceeded appropriations in the following governmental funds:
The following funds reported deficit fund balances:
The City’s intentions are to eliminate deficit fund balances through future grant funding,
other future revenue sources, or interfund transfers.
(4) Cash and Investments
Cash and investments as of June 30, 2020, are classified in the accompanying financial
statements as follows:
Statement of net position:
Cash and investments $ 303,076,547
Restricted cash and investments
with fiscal agent 8,752,177
Fiduciary funds:
Cash and investments 613,943
Restricted cash and investments
with fiscal agent 1,752,685 Total cash and investments $ 314,195,352
Cash and investments as of June 30, 2020, consist of the following:
Cash on hand $ 24,662
Deposits with financial institutions 10,253,704
Cash and receivables in investment accounts 50
Investments 303,916,936
Total cash and investments $ 314,195,352
Appropriations Expenditures Variance
Supplemental Law Enforcement 165,000$ 206,333$ (41,333)$
Other Governmental Funds
Junior Lifeguards 50,137$
Internal Service Funds
Compensated Absences 8,024,141$
112
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2020
Investments Authorized by the California Government Code and the Entity’s Investment
Policy
The table below identifies the investment types that are authorized for the City by the
California Government Code (or the City’s investment policy, where more restrictive). The
table also identifies certain provisions of the California Government Code (or the City’s
investment policy, whichever is more restrictive) that address interest rate risk and
concentration of credit risk. This table does not address investments of debt proceeds held
by bond trustees that are governed by the provisions of debt agreements of the City, rather
than the general provisions of the California Government Code or the City’s investment
policy.
Authorized Investment Type
Maximum
Maturity*
Maximum
Percentage
of Portfolio*
Maximum
Investment
in One Issuer*
Local Agency Bonds 5 years 30% 5%
U.S. Treasury Obligations 5 years No Limit No Limit
U.S. Agency Securities 5 years No Limit No Limit
Banker's Acceptances 180 days 40% 5%
Commercial Paper 270 days 25% 5%
Negotiable Certificates of Deposit 2 years 30% 5%
Repurchase Agreements 30 days No Limit 5%
Reverse Repurchase Agreements 30 days 10% 5%
Medium-Term Notes 5 years 30% 5%
Mutual Funds N/A 20% 10%
Money Market Mutual Funds N/A 20% 20%
Mortgage Pass-Through Securities 5 years 20% 5%
LA County Pooled Investment Funds N/A 5% 5%
Local Agency Investment Fund (LAIF) N/A $75 million $75 million
Supranationals 5 years 20% 10%
* Excluding amounts held by bond trustee that are not subject to California Government Code restrictions.
113
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2020
Investments Authorized by Debt Agreements
Investments of debt proceeds held by bond trustees (i.e., fiscal agents) are governed by
provisions of the debt agreements, rather than the general provisions of the California
Government Code or the City’s investment policy. The table below identifies the
investment types that are authorized for investments held by bond trustees. The table
also identifies certain provisions of these debt agreements that address interest rate risk,
credit risk, and concentration of credit risk.
Authorized Investment Type Maximum Maturity
Maximum
Percentage
Allowed
Maximum
Investment
in One Issuer
U.S. Treasury Obligations 6 months – No Limit No Limit No Limit
U.S. Agency Securities 6 months – No Limit No Limit No Limit
Banker's Acceptances 6 months No Limit No Limit
Commercial Paper 180 days - 6 months No Limit 10%
Money Market Mutual Funds N/A No Limit No Limit
Investment Agreements 6 months – No Limit No Limit No Limit
Certificates of Deposit 6 months – No Limit No Limit No Limit
Demand Deposits 6 months – No Limit No Limit No Limit
Time Deposits 6 months – No Limit No Limit No Limit
Local Agency Bonds 6 months – No Limit No Limit No Limit
Forward Delivery Agreement 6 months No Limit No Limit
Forward Purchase Agreement 6 months No Limit No Limit
Repurchase Agreements 6 months – No Limit No Limit No Limit
Local Agency Investment Fund (LAIF) N/A No Limit No Limit
Municipal Obligations 6 months – No Limit No Limit No Limit
County Pooled Investment Funds N/A No Limit No Limit
Disclosures Relating to Interest Rate Risk
Interest rate risk is the risk that changes in market interest rates will adversely affect the
fair value of an investment. Generally, the longer the maturity of an investment, the greater
the sensitivity of its fair value to changes in market interest rates. One of the ways that
the City manages its exposure to interest rate risk is by purchasing a combination of
shorter term and longer term investments and by timing cash flows from maturities so that
a portion of the portfolio is maturing or coming close to maturity over time as necessary to
provide the cash flow and liquidity needed for operations.
Information about the sensitivity of the fair values of the City’s investments (including
investments held by bond trustees) to market interest rate fluctuations is provided by the
following table that shows the distribution of the City’s investments by maturity:
114
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2020
Some of the City's investments may have call features where the investments' principal
may be paid down before its maturity. Such investments include asset backed securities,
investments with make whole call provisions, and investments with call dates.
The City's asset backed securities pay monthly coupons, at which time principal may be
paid down. As of June 30, 2020, the City held asset backed securities of $12,314,509.
Investments with make whole call provisions generally may be called any time, but the
terms of the call price generally mitigate the financial impact of a call. As of June 30, 2020,
the City held corporate bonds with make whole call provisions as summarized below:
Maturity Value
July 2020 $ 996,788
September 2020 646,729
February 2021 710,227
May 2021 3,079,630
July 2021 2,022,520
December 2021 519,155
January 2023 1,050,500
May 2023 1,057,070
January 2024 1,628,255
February 2024 2,070,640
$ 13,781,513
Investments with call dates may be called anytime on or after the call date. As of June
30, 2020, the City held corporate bonds with call dates as summarized below:
115
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2020
Maturity Value Call Date
October 2020 $ 1,427,242 September 2020
February 2021 453,816 January 2021
April 2021 1,522,875 March 2021
December 2021 1,028,810 November 2021
January 2022 1,032,920 December 2021
February 2022 1,797,408 January 2022
August 2023 1,045,300 June 2023
February 2024 2,186,000 January 2024
$ 10,494,371
Investments may have both a make whole call provision and a regular call date. As of
June 30, 2020, the City held corporate bonds with both a make whole call provision and a
regular call date as summarized below:
Maturity Value Call Date
December 2020 $ 1,006,590 November 2020
May 2021 2,440,070 April 2021
June 2021 1,525,575 May 2021
February 2022 2,050,040 November 2021
May 2022 2,067,960 March 2022
December 2022 1,056,090 October 2022
March 2023 1,059,040 January 2023
June 2023 2,178,740 May 2023
$ 13,384,105
Investments with Fair Values Highly Sensitive to Interest Rate Fluctuations
As of June 30, 2020, the City did not have any investments (including investments held
by fiscal agent) whose fair values were highly sensitive to interest rate fluctuations.
Disclosures Relating to Credit Risk
Generally, credit risk is the risk that an issuer of an investment will not fulfill its obligation
to the holder of the investment. This is measured by the assignment of a rating by a
nationally recognized statistical rating organization. Presented in the following schedule
is the minimum rating (where applicable) required by the California Government Code, the
City’s investment policy, or debt agreements, and the actual rating by Standard & Poor’s
as of the June 30, 2020 for each investment type.
116
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2020
Concentration of Credit Risk
The investment policy of the City and the California Government Code limit the amount
that can be invested in any one issuer as previously discussed. Investments in any one
issuer (excluding U.S. Treasury Bills, U.S. Treasuries, mutual funds, and pooled
investments) that represent 5% or more of total City’s investments are as follows:
Issuer Investment Type Reported Amount
FHLB Federal agency securities $ 52,398,600
FFCB Federal agency securities $ 25,837,964
Custodial Credit Risk
Custodial credit risk for deposits is the risk that, in the event of the failure of a depository
financial institution, a government will not be able to recover its deposits or will not be able
to recover collateral securities that are in the possession of an outside party. The custodial
credit risk for investments is the risk that, in the event of the failure of the counterparty
(e.g., broker-dealer) to a transaction, a government will not be able to recover the value
of its investment or collateral securities that are in the possession of another party. The
California Government Code and the City’s investment policy do not contain legal or policy
requirements that would limit the exposure to custodial credit risk for deposits or
investments, other than the following provision for deposits: The California Government
Code requires that a financial institution secure deposits made by state or local
governmental units by pledging securities in an undivided collateral pool held by a
depository regulated under state law (unless so waived by the governmental unit). The fair
value of the pledged securities in the collateral pool must equal at least 110% of the total
amount deposited by the public agencies. California law also allows financial institutions
to secure City deposits by pledging first trust deed mortgage notes having a value of 150%
of the secured public deposits. As of June 30, 2020, none of the City’s deposits with
financial institutions in excess of federal depository amounts were held in uncollateralized
accounts.
For investments identified herein as restricted cash with fiscal agent, the fiscal agent
selects the investment under the terms of the applicable trust agreement, acquires the
investment, and holds the investment on behalf of the reporting government.
117
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2020
Investment in State Investment Pool
The City is a voluntary participant in the Local Agency Investment Fund (LAIF) that is
regulated by the California Government Code under the oversight of the Treasurer of the
State of California. The fair value of the City’s investment in this pool is reported in the
accompanying financial statements at amounts based upon the City’s pro-rata share of
the fair value provided by LAIF for the entire LAIF portfolio (in relation to the amortized
cost of that portfolio). The balance available for withdrawal is based on the accounting
records maintained by LAIF, which are recorded on an amortized cost basis. LAIF is not
rated.
Limitations and restrictions apply to the City’s investment in LAIF. Up to 15 transactions
with LAIF are permitted each month. Balances in LAIF may not exceed $75 million, with
the exception of bond accounts. LAIF requests one day prior notice for withdrawals of
$10 million or more.
Fair Value Measurements
The City categorizes its fair value measurement within the fair value hierarchy established
by generally accepted accounting principles. The hierarchy is based on the valuation
inputs used to measure the fair value of the assets. Level 1 inputs are quoted prices in
active markets for identical assets. Level 2 inputs are significant other observable inputs.
Level 3 inputs are significant unobservable inputs.
Most of the City’s investments are in Level 2 of the fair value hierarchy. Examples of Level
2 valuation inputs include:
a) Quoted prices for similar assets or liabilities in active markets
b) Quoted prices for identical or similar assets or liabilities in markets that are not active
c) Inputs other than quoted prices that are observable for the asset or liability
d) Inputs that are derived principally from or corroborated by observable market data
by correlation or other means.
118
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2020
Following are the City’s recurring fair value measurements as of June 30, 2020:
Fair Value
Investments
That Are Not
Subject to Fair
Value Hierarchy
Quoted Prices
in Active Markets
for Identical
Assets (Level 1)
Quoted Prices
for Similar
Assets in Active
Markets
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Money Market Funds 305,747$ 305,747$ -$ -$-$
U.S. Treasuries 57,100,252 - - 57,100,252 -
U.S. Agency Bonds 88,867,843 - - 88,867,843 -
Asset Backed Securities 12,314,509 - - 12,314,509 -
Corporate Bonds 47,366,946 - - 47,366,946 -
Commercial Papers 4,798,780 - - 4,798,780 -
Municipal Bonds 2,070,640 - - 2,070,640 -
LAIF 74,865,641 74,865,641 - - -
Supranationals 5,721,765 - - 5,721,765 -
Investments with Fiscal Agent:
Money Market Funds 10,366,067 10,366,067 - - -
U.S. Treasuries 138,746 - - 138,746 -
303,916,936$ 85,537,456$ -$ 218,379,481$ -$
119
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2020
(5) Capital Assets
Capital asset activity for the year ended June 30, 2020, was as follows:
Governmental Activities:
Governmental Activities capital assets net of accumulated depreciation at June 30, 2020
are comprised of the following:
Beginning Balance
Balance Additions Deletions June 30, 2020
Non-depreciable:
Land and rights of way 1,897,376,130$ 144,355$ -$ 1,897,520,485$
Work in progress 11,130,736 5,835,025 (10,953,051) 6,012,710
1,908,506,866 5,979,380 (10,953,051) 1,903,533,195
Depreciable:
Structures 232,851,518 7,229,573 (202,531) 239,878,560
Equipment 52,280,904 3,798,437 (2,241,707) 53,837,634
Infrastructure 372,522,070 9,256,557 (2,695,107) 379,083,520
657,654,492 20,284,567 (5,139,345) 672,799,714
Less accumulated
depreciation for:
Structures (44,600,003) (4,999,754) 202,531 (49,397,226)
Equipment (32,915,937) (4,375,205) 2,227,407 (35,063,735)
Infrastructure (166,420,073) (7,530,892) 906,094 (173,044,871)
(243,936,013) (16,905,851) 3,336,032 (257,505,832)
Net Depreciable 413,718,479 3,378,716 (1,803,313) 415,293,882
Net Capital Assets 2,322,225,345$ 9,358,096$ (12,756,364)$ 2,318,827,077$
General Capital Assets, net $ 2,302,946,800
Internal Service Fund Capital Assets, net 15,880,277
$ 2,318,827,077
120
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2020
Business-type Activities:
Depreciation expense was charged in the following functions in the Statement of Activities:
Beginning Balance
Balance Additions Deletions June 30, 2020
Non-depreciable:
Land and rights of way 2,219,450$ -$ -$ 2,219,450$
Work in progress 288,902 2,855,174 (288,902) 2,855,174
2,508,352 2,855,174 (288,902) 5,074,624
Depreciable:
Structures 688,396 - - 688,396
Equipment 288,376 36,798 - 325,174
Infrastructure 185,497,850 1,104,684 (51,339) 186,551,195
186,474,622 1,141,482 (51,339) 187,564,765
Less accumulated
depreciation for:
Structures (248,784)(15,357) - (264,141)
Equipment (137,951)(20,359) - (158,310)
Infrastructure (69,249,889) (2,231,255) 33,553 (71,447,591)
(69,636,624) (2,266,971) 33,553 (71,870,042)
Net Depreciable 116,837,998 (1,125,489) (17,786) 115,694,723
Net Capital Assets 119,346,350$ 1,729,685$ (306,688)$ 120,769,347$
Governmental Business-type
Activities*Activities
General government 4,963,767$ -$
Public safety 1,667,379 -
Public works 7,714,605 -
Community development 5,082 -
Community service 2,555,018 -
Water - 1,631,573
Wastewater - 635,398
16,905,851$ 2,266,971$
*Internal Service Fund depreciation of $3,548,544 is allocated to
governmental functions above.
121
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2020
(6) Long-Term Liabilities
Changes in Long-Term Liabilities
The long-term liabilities for the year ended June 30, 2020, are as follows:
Internal service funds predominantly serve the governmental funds. Accordingly, long-term
liabilities for them are included as part of the above totals for governmental activities. Also,
liabilities for workers’ compensation, claims and judgments, compensated absences, and net
OPEB obligation are typically liquidated from the internal service funds through resources
collected from individual funds.
Governmental Activities
Certificates of Participation
In Fiscal Year 2010-11, the City issued $20,085,000 of Series 2010A (Tax Exempt)
and $106,575,000 of Series 2010B (Federally Taxable Direct Pay Build America
Bonds) Certificates of Participation. The 2010A Certificates were issued to prepay the
$3,990,000 principal outstanding on the 1998 Library Certificates of Participation.
Accordingly, the 1998 Library Certificates have been defeased and are no longer
outstanding. The remaining proceeds from the Series 2010A Certificates were used
to finance the acquisition, improvement and equipping of the Civic Center Project. The
Series 2010B Certificates were issued to provide additional financing for the Civic
Center Project. The proceeds of the Certificates were applied to pay certain costs of
issuance incurred in connection with the Certificates.
Amounts
Beginning Ending Due Within
Balance Additions Deletions Balance One Year
Governmental activities:
Other debt:
Certificates of participation
payable 104,100,000$ -$ (3,405,000)$ 100,695,000$ 3,065,000$
Bond premium - Series 2010A 120,553 - (120,553) - -
Direct borrowing:
CDBG loan 756,000 - (171,000) 585,000 182,000
Other long-term liabilities:
Workers' compensation
payable 16,270,000 1,646,315 (2,395,315) 15,521,000 2,867,523
Claims and judgments payable 6,951,907 6,559,117 (5,550,076) 7,960,948 2,694,118
Compensated absences 12,568,977 2,924,542 (2,400,200) 13,093,319 4,022,771
Total governmental activities 140,767,437$ 11,129,974$ (14,042,144)$ 137,855,267$ 12,831,412$
122
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2020
The lease payments made by the City are held by a trustee who makes semi-annual
payments on the Certificates of Participation. The lease payments began January 1,
2011, and are in amounts sufficient to cover the payment of principal and interest of
the Certificates. Interest on the Certificates is payable semiannually on January 1 and
July 1 of each year. The 2010A Certificates have been defeased and are no longer
outstanding. The 2010B Certificates interest rates range from 4.45% to 7.17%. The
City has designated the Series 2010B Certificates as “Build America Bonds” (BABs)
under the provisions of the American Recovery and Reinvestment Act of 2009. Thus,
the City receives refundable credits from the United States Treasury on the interest
paid on the 2010B Certificates. As of June 30, 2020 the City has received $21,723,624
of BABs Subsidy from the United States Treasury and expects to receive subsidy
equal to about 33% on future interest payable on the 2010B Certificates. Principal
payments are payable annually on July 1 of each year. The remaining principal
payment the Series 2010B Certificates, which commenced July 1, 2018 and are
payable through July 1, 2040, range from $3,065,000 to $7,245,000. The total
outstanding balance at June 30, 2020 amounted to $100,695,000. The following
assets have been pledged as collateral for the outstanding balance: Central Library,
Civic Center, Fire Station 3, Fire Station 4, Fire Station 7, Mariner’s Library, Newport
Coast Community Center, Oasis Senior Center and the Police Station.
The annual amortization requirements of the outstanding Series 2010B Certificates of
Participation are as follows:
CDBG Loan
In fiscal year 2003, the City received $2,400,000 in Section 108 loan proceeds to assist
with the funding for the Balboa Village Improvement Program. The loan is
collateralized by future Community Development Block Grant allocations. The original
loan was refinanced in fiscal year 2015 lowering the average interest rate from 6.5%
to 1.5%. Future principal payments range from $182,000 to $208,000 through June
30, 2023. The outstanding balance at June 30, 2020, amounts to $585,000.
Year Ending
June 30 Principal Interest Total
2021 3,065,000$ 6,895,351$ 9,960,351$
2022 3,165,000 6,733,265 9,898,265
2023 3,275,000 6,556,869 9,831,869
2024 3,390,000 6,365,978 9,755,978
2025 3,510,000 6,142,971 9,652,971
2026-2030 20,165,000 26,660,418 46,825,418
2031-2035 25,220,000 18,624,173 43,844,173
2036-2040 31,660,000 8,476,518 40,136,518
2041 7,245,000 259,661 7,504,661
100,695,000$ 86,715,204$ 187,410,204$
123
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2020
The annual amortization requirements for the CDBG Loan are as follows:
Claims and Judgments
The City retains the risk of loss for general liability and workers’ compensation claims
as described in Note (8). These amounts represent estimates of amounts to be paid
for reported general liability and workers' compensation claims including incurred-but-
not-reported claims based upon past experience, modified for current trends and
information. While the ultimate amount of losses incurred through
June 30, 2020, is dependent on future developments based upon information from the
City’s attorney, the City's claims administrators and others involved with the
administration of the programs, City management believes the accrual is adequate to
cover such losses. The estimated liability at June 30, 2020, for general liability
amounted to $7,960,948 and for workers’ compensation was $15,521,000.
Compensated Absences
The City's policies relating to compensated absences are described in Note (1). This
liability, to be paid in future years from available and future resources, at June 30,
2020, is $13,093,319. Compensated absences are liquidated from the Compensated
Absences internal service fund.
Unused Credit
The City has a letter of credit in the amount of $317,922.
(7) Limited Obligation Bonds
Special Assessment Districts Bonds
The City has issued certain Assessment District and Community Facilities District Bonds.
Although the City collects and disburses funds for these districts, the City has no obligation
or duty to pay any delinquency out of any available funds of the City. Neither the faith and
credit nor the taxing power of the City is pledged to the payment of the bonds, and
therefore the bonded indebtedness is not shown in the financial statements of the City.
The City holds reserve funds on behalf of bondholders, and the assets are recorded in the
Year Ending
June 30 Principal Interest Total
2021 182,000$ 11,480$ 193,480$
2022 195,000 7,387 202,387
2023 208,000 2,548 210,548
585,000$ 21,415$ 606,415$
124
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2020
Special Assessment Agency Fund. Bonds outstanding at June 30, 2020, for each district
under the Bond Acts of 1911 and 1915, and other special assessments, are as follows:
Assessment District Original Issue
Bonds Outstanding
June 30, 2020
Reassessment District 2012 $13,583,436 $3,215,459
Assessment District No. 117 $ 2,955,000 $2,785,000
Assessment District No. 116 $ 1,575,000 $1,575,000
Assessment District No. 116B $ 665,000 $ 665,000
Assessment District No. 111 $ 2,412,000 $2,412,000
(8) Risk Management – General Liability and Workers’ Compensation
The City is exposed to various risks of loss related to torts, theft of, damage to, and
destruction of assets, errors and omissions, injuries to employees, and natural disasters.
The City carries commercial insurance with independent third parties for loss risks
associated with real and personal property, and automotive liability. The City purchases
fidelity bonds for employees in key positions. Settled claims from these risks have not
exceeded commercial insurance coverage for the past three years.
The City utilizes Public Risk Innovation, Solutions, and Management (PRISM), formerly
called California State Association of Counties – Excess Insurance Authority (CSAC-EIA),
a joint powers authority, to provide excess insurance for the general liability and workers’
compensation programs. PRISM provides coverage under the terms of a joint-powers
agreement with the City as follows:
Type of Coverage Self-Insured Retention (SIR) Coverage Limits
General Liability $500,000 $25,000,000
Workers’ Compensation $500,000 Statutory
PRISM was established for the purpose of creating a risk management pool for all
California public entities. PRISM is governed by a Board of Directors consisting of
representatives of its member public entities.
The Insurance Reserve fund was established to account for costs associated with general
liability and workers’ compensation. The Insurance Reserve fund is accounted for as an
internal service fund where assets are set aside for risk management, administration,
claim settlements and benefit distribution. A premium is charged to each fund that
accounts for part-time or full-time employees. The total charge allocated to each of the
funds is calculated using trends in actual experience after considering unexpected and
unusual claims.
Fund liabilities are reported when it is probable that a loss has occurred and the amount
of the loss can be reasonably estimated. Liabilities include an amount for claims that have
125
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2020
been incurred but not reported (IBNR). Claims liabilities are calculated considering the
effects of inflation, recent claim settlement trends including frequency and amounts of
payouts and other economic and social factors. The total liability claims payable includes
$23,481,948, which represents the discounted present value at June 30, 2020. The claims
are discounted using an interest rate of 3.0 percent.
For the past four years, no payment on any claim or judgment has exceeded the amount
of applicable insurance.
(9) Deferred Compensation Plan
The City offers its employees a deferred compensation plan created in accordance with
Internal Revenue Code Section 457. The plan, available to all City employees, permits
them to defer a portion of their salary until future years.
Section 457 plan assets were placed in trust for the exclusive benefit of all employees and
their beneficiaries. Therefore, all employee assets held in Section 457 plans are not the
property of the City and are not subject to the claims of the City’s general creditors. The
assets under the plan, which are not included in the accompanying financial statements,
totaled $120,659,966 at June 30, 2020.
June 30, 2019 June 30, 2020 June 30, 2019 June 30, 2020
Unpaid claims, beginning of fiscal year 12,944,391$ 6,951,907$ 16,489,000$ 16,270,000$
Incurred claims (including IBNR) 1,296,366 6,559,117 2,351,675 1,646,315
Claim payments (7,288,850) (5,550,076) (2,570,675) (2,395,315)
Unpaid claims, end of fiscal year 6,951,907$ 7,960,948$ 16,270,000$ 15,521,000$
General Liability Workers' Compensation
126
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2020
(10) Pension Plans
a.General Information about the Pension Plans
Plan Descriptions – All qualified permanent and probationary employees are eligible to
participate in the City of Newport Beach’s separate Safety (police and fire) and
Miscellaneous (all other) Employee Pension Plans, agent multiple-employer defined
benefit pension plans administered by the California Public Employees’ Retirement
System (CalPERS), which acts as a common investment and administrative agent for its
participating member employers. Benefit provisions under the Plans are established by
State statute and Local Government resolution. CalPERS issues publicly available reports
that include a full description of the pension plans regarding benefit provisions,
assumptions and membership information that can be found on the CalPERS website.
Benefits Provided – CalPERS provides service retirement and disability benefits, annual
cost of living adjustments and death benefits to plan members, who must be public
employees and beneficiaries. Benefits are based on years of credited service, equal to
one year of full time employment. Members with five years of total service are eligible to
retire at age 50 to 62 with statutorily reduced benefits. PEPRA miscellaneous members
become eligible for service retirement upon attainment of age 52 with at least 5 years of
service. All members are eligible for non-duty disability benefits after 5 years of service.
The death benefit is one of the following: the Basic Death Benefit, the 1959 Survivor
Benefit, the Optional Settlement 2W Death Benefit, or the 1957 Survivor Benefit. Safety
members can receive a special death benefit if the member dies while actively employed
and the death is job-related. Fire members may receive the alternate death benefit in lieu
of the Basic Death Benefit or the 1957 Survivor Benefit if the member dies while actively
employed and has at least 20 years of total CalPERS service. The cost of living
adjustments for each plan are applied as specified by the Public Employees’ Retirement
Law.
127
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2020
The Plans’ provisions and benefits in effect for the measurement period ended
June 30, 2019 are summarized as follows:
Employees Covered – At the measurement date of June 30, 2019, the following
employees were covered by the benefit terms for each Plan:
Contributions – Section 20814(c) of the California Public Employees’ Retirement Law
requires that the employer contribution rates for all public employers are determined on
an annual basis by the actuary and shall be effective on the July 1 following notice of a
change in the rate. The total plan contributions are determined through CalPERS’ annual
actuarial valuation process. The actuarially determined rate is the estimated amount
necessary to finance the costs of benefits earned by employees during the year, with an
additional amount to finance any unfunded accrued liability. The City is required to
contribute the difference between the actuarially determined rate and the contribution rate
of employees. City contribution rates may change if plan contracts are amended.
Prior to On or after On or after
Hire date November 24,2012 November 24,2012 January 1, 2013
Benefit formula 2.5%@55 2.0%@60 2.0%@62
Benefit vesting schedule 5 years service 5 years service 5 years service
Benefit payments monthly for life monthly for life monthly for life
Retirement age 50 - 55 50 - 63 52 - 67
Monthly benefits, as a % of eligible compensation 2.0% to 2.5% 1.092% to 2.418% 1.0% to 2.5%
Required employee contribution rates 12.35% - 13.0% 12.35% - 13.0% 12.35% - 13.0%
Required employer contribution rates 27.40% - 28.05% 23.98% - 24.63% 22.48% - 23.13%
Prior to On or after On or after
Hire date November 24,2012 November 24,2012 January 1, 2013
Benefit formula 3.0%@50 2.0%@50; 3.0%@55 2.7%@57
Benefit vesting schedule 5 years service 5 years service 5 years service
Benefit payments monthly for life monthly for life monthly for life
Retirement age 50 - 55 50 - 55 50 - 57
Monthly benefits, as a % of eligible compensation 3.0% 2.0% - 2.7%; 2.4% - 3.0% 2.0% to 2.7%
Required employee contribution rates 12.0% - 14.6% 12.0% - 14.6% 12.0% - 14.6%
Required employer contribution rates 61.55% - 64.15% 61.55% - 64.15% 63.05% - 65.65%
Miscellaneous
Safety
Miscellaneous Safety
Inactive employees or beneficiaries
currently receiving benefits 664 439
Inactive employees entitled to but not
yet receiving benefits 585 88
Active employees 505 264
Total 1,754 791
128
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2020
Payments made by the employer to satisfy contribution requirements that are identified by
the pension plan terms as plan member contributions requirements are classified as plan
member contributions.
b.Net Pension Liability
The City’s net pension liability for each Plan is measured as the total pension liability, less
the pension plan’s fiduciary net position. The net pension liability of each of the Plans is
measured as of June 30, 2019, using an annual actuarial valuation as of June 30, 2018
rolled forward to June 30, 2019 using standard update procedures. The General fund and
Tidelands funds have typically been used in prior years to liquidate the net pension liability.
A summary of principal assumptions and methods used to determine the net pension
liability is shown below.
Actuarial Assumptions – The total pension liabilities in the June 30, 2018 actuarial
valuations were determined using the following actuarial assumptions:
All other actuarial assumptions used in the June 30, 2018 valuation were based on the
results of an actuarial experience study for the period from 1997 to 2011, including
updates to salary increase, mortality and retirement rates. The Experience Study report
can be obtained at the CalPERS website under Forms and Publications.
Miscellaneous Safety
Valuation Date June 30, 2018 June 30, 2018
Measurement Date June 30, 2019 June 30, 2019
Actuarial Cost Method
Actuarial Assumptions:
Discount Rate 7.15%7.15%
Inflation 2.75%2.75%
Payroll growth 3.00%3.00%
Projected salary Increase
Investment Rate of Return 7.375% (1)7.375% (1)
(1)Net of pension plan investment and administrative expenses, including inflation.
(2)The mortality table was developed based on CalPERS’ specific data. The table includes
15 years of mortality improvements using Society of Actuaries Scale 90% of scale MP
2016. For more details on this table, please refer to the December 2017 experience study
report (based on CalPERS demographic data from 1997 to 2015) that can be found on the
CalPERS website.
Mortality Rate Table (2)
Post Retirement Benefit Increase
Entry-Age Normal Cost Method
Derived using CalPERS’ Membership Date
for all Funds
Contract COLA up to 2.0% until Purchasing
Power Protection Allowance Floor on
Purchasing Power applies, 2.5% thereafter
Varies by Entry Age and Service
129
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2020
Discount Rate – The discount rate used to measure the total pension liability was 7.15%.
The projection of cash flows used to determine the discount rate assumed that
contributions from plan members will be made at the current member contribution rates
and that contributions from employers will be made at statutorily required rates, actuarially
determined. Based on those assumptions, the Plan’s fiduciary net position was projected
to be available to make all projected future benefit payments of current plan members.
Therefore, the long-term expected rate of return on plan investments was applied to all
periods of projected benefit payments to determine the total pension liability.
Long-term Expected Rate of Return – The long-term expected rate of return on pension
plan investments was determined using a building-block method in which expected future
real rates of return (expected returns, net of pension plan investment expense and
inflation) are developed for each major asset class.
In determining the long-term expected rate of return, CalPERS took into account both
short-term and long-term market return expectations as well as the expected pension fund
cash flows. Using historical returns of all of the funds’ asset classes, expected compound
(geometric) returns were calculated over the short-term (first 10 years) and the long-term
(11+ years) using a building-block approach. Using the expected nominal returns for both
short-term and long-term, the present value of benefits was calculated for each fund. The
expected rate of return was set by calculating the rounded single equivalent expected
return that arrived at the same present value for cash flows as the one calculated using
both short-term and long-term returns. The expected rate of return was then set equal to
the single equivalent rate calculated above and adjusted to account for assumed
administrative expenses.
The expected real rates of return by asset class are as followed:
Assumed
asset Real return Real Return
Asset class (1)allocation Years 1-10
(2)Years 11+(3)
Global equity 50.00%4.80%5.98%
Fixed income 28.00%1.00%2.62%
Inflation assets -0.77%1.81%
Private equity 8.00%6.30%7.23%
Real assets 13.00%3.75%4.93%
Liquidity 1.00%- -0.92%
(2)An expected inflation of 2.0% used for this period.
(3)An expected inflation of 2.92% used for this period.
(1)In the CalPERS' CAFR, Fixed Income is included in Global Debt Securities; Liquidity is
included in Short-term Investments; Inflation Assets are included in both Global Equity
Securities and Global Debt Securities.
130
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2020
Subsequent Events
There were no subsequent events that would materially affect the results presented in this
disclosure.
c.Changes in the Net Pension Liability
The changes in the Net Pension Liability for each Plan for the measurement period follow:
Miscellaneous Plan:
Total Pension Plan Fiduciary Net Pension
Liability Net Position Liability/(Asset)
Balance at June 30, 2018 $ 417,442,358 $ 303,385,616 $ 114,056,742
Changes in the year:
Service cost 7,084,444 - 7,084,444
Interest on the total pension liability 29,409,624 - 29,409,624
Changes in benefit terms - - -
Changes of assumptions - - -
Differences between expected and
actual experience 403,676 - 403,676
Net Plan to Plan Resource Movement -1,570 (1,570)
Contribution – employer 15,700,833 (15,700,833)
Contribution – employee - 3,955,144 (3,955,144)
Net investment income - 19,895,019 (19,895,019)
Benefit payments, including refunds of
employee contributions (20,129,701) (20,129,701) -
Administrative Expense - (216,502) 216,502
Other Miscellaneous Income/(Expense)-700 (700)
Net changes 16,768,043 19,207,063 (2,439,020)
Balance at June 30, 2019 $ 434,210,401 $ 322,592,679 $ 111,617,722
Increase (Decrease)
131
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2020
Sensitivity of the Net Pension Liability to Changes in the Discount Rate – The following
presents the net pension liability of the City for each Plan, calculated using the discount rate for
each Plan, as well as what the City’s net pension liability would be if it were calculated using a
discount rate that is 1-percentage point lower or 1-percentage point higher than the current rate:
Safety Plan:
Total Pension Plan Fiduciary Net Pension
Liability Net Position Liability/(Asset)
Balance at June 30, 2018 $ 566,357,864 $ 369,931,799 $ 196,426,065
Changes in the year:
Service cost 9,292,715 - 9,292,715
Interest on the total pension liability 40,081,524 - 40,081,524
Changes in benefit terms - - -
Changes of assumptions - - -
Differences between expected and
actual experience 4,798,077 - 4,798,077
Net Plan to Plan Resource Movement - (1,570) 1,570
Contribution – employer - 28,344,445 (28,344,445)
Contribution – employee - 3,162,044 (3,162,044)
Net investment income - 24,254,890 (24,254,890)
Benefit payments, including refunds of
employee contributions (30,443,097) (30,443,097) -
Administrative Expense - (263,991) 263,991
Other Miscellaneous Income/(Expense)-855 (855)
Net changes 23,729,219 25,053,576 (1,324,357)
Balance at June 30, 2019 $ 590,087,083 $ 394,985,375 $ 195,101,708
Increase (Decrease)
Miscellaneous Safety
1% Decrease 6.15% 6.15%
Net Pension Liability $169,623,775 $272,137,957
Current Discount Rate 7.15% 7.15%
Net Pension Liability $111,617,722 $195,101,708
1% Increase 8.15% 8.15%
Net Pension Liability $63,735,602 $131,423,449
132
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2020
Pension Plan Fiduciary Net Position – Detailed information about each pension plan’s
fiduciary net position is available in the separately issued CalPERS financial reports.
d. Pension Expenses and Deferred Outflows/Inflows of Resources Related to
Pensions
For the year ended June 30, 2020, the City recognized pension expense of $52,285,854
($20,891,673 Miscellaneous Plan and $31,394,181 Safety Plan). At June 30, 2020, the
City reported deferred outflows of resources and deferred inflows of resources related to
pensions from the following sources:
Deferred
Outflows
Deferred
Inflows
of Resources of Resources
Pension contributions subsequent to
measurement date $ 16,351,592 $ -
Differences between expected and
actual experience 1,065,323 -
Changes in assumptions - (894,937)
Net differences between projected and
actual earnings on plan investments - (1,526,471)
Total Miscellaneous Plan $ 17,416,915 $ (2,421,408)
Deferred
Outflows
Deferred
Inflows
of Resources of Resources
Pension contributions subsequent to
measurement date $ 28,531,744 $ -
Differences between expected and
actual experience 5,344,872 (842,231)
Changes in assumptions 9,103,139 (853,833)
Net differences between projected and
actual earnings on plan investments - (1,642,117)
Total Safety Plan $ 42,979,755 $ (3,338,181)
Grand Total $ 60,396,670 $ (5,759,589)
Miscellaneous Plan
Safety Plan
133
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2020
$44,883,336 reported as deferred outflows of resources related to contributions
subsequent to the measurement date will be recognized as a reduction of the net pension
liability in the year ending June 30, 2021. Other amounts reported as deferred outflows of
resources and deferred inflows of resources related to pensions will be recognized as
pension expense as follows:
e. Payable to the Pension Plan
At June 30, 2020, the City had no outstanding amount of contributions to the pension plan
required for the year ended June 30, 2020.
f. Plan Description - Defined Contribution Plan
Pursuant to City Council Resolution No. 91-106, the City entered into a defined
contribution plan administrated by the private administrator known as Public Agency
Retirement System ("PARS") for all of its part-time employees, pursuant to the
requirements of Section 11332 of the Social Security Act. The City Council has the
authority for establishing and amending the plan’s provisions per the Resolution, including
establishing and amending contribution requirements. In a defined contribution plan,
benefits depend solely on amounts contributed to the plan plus investment earnings. All
part-time employees are eligible to participate from the date of employment. Federal
legislation requires contributions of at least 7.5% to a retirement plan, and City Council
resolved to match the employees' contributions of 3.75%. The City's contributions for each
employee (and interest earned by the accounts) are fully vested immediately.
For the year ended June 30, 2020, the City's covered payroll for employees participating
in the plan was $3,506,431. Employees made contributions of $131,492 (3.75% of current
covered payroll), which was matched by the employer in the same amount. Assets of the
plan totaled $2,451,992 at June 30, 2020.
(11) Post-Employment Health Care Benefits (OPEB)
The following description of the City of Newport Beach Retiree Health Savings (“RHS”)
Plan provides only general information. Participants should refer to the Plan agreement
for a more complete description of the Plan’s provisions.
Year Ending Total
June 30 Misc. Safety Amount
2021 1,143,153 9,331,501 10,474,654
2022 (2,395,977) 473,112 (1,922,865)
2023 (446,418) 748,964 302,546
2024 343,157 556,253 899,410
Thereafter - - -
134
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2020
Plan Description
Effective January 2006, the City and employee associations agreed to major changes in
the Post-Employment Health Care Plan. All employees and eligible retirees will participate
in a Retiree Health Savings (“RHS”) sponsored by the City, the single employer of the plan
and held in trust and managed by the International City Management Association
Retirement Corporation (“ICMA-RC”) (Trustee), under IRS Revenue Ruling 2002-41 (June
26, 2002) and IRS Notice 2002-45 (June 26, 2002).
All employees hired after January 1, 2006, and certain employees hired prior to this date,
as well as employees who elected to fully convert (Fully Converted) to a defined
contribution formula, participate in a program that requires mandatory employee and
employer contributions. However, once these contributions have been made to the
employee’s account, the City has no further funding obligation to the Plan on their behalf,
except for the Public Employees’ Medical and Hospital Care Act (“PEMHCA”) minimum
which is the responsibility of the City.
Certain employees hired prior to January 1, 2006, had the option to retain a hybrid of the
former defined benefit Plan, or to fully convert to the new Plan. Employees electing to
retain a hybrid of the former defined benefit formula (Hybrid) participate in a program
requiring mandatory defined contributions by employees and employer, as well as a
defined benefit consisting of an ongoing contribution from the City to the participant’s RHS
account, each month after retirement. Additionally, these employees are eligible to receive
health care benefits under the City’s group health care plans. However, in order to receive
these benefits these employees are required to pay the City $100 per month up until their
retirement to offset the unfunded portion of post-employment health care benefits existing
at the inception of the Plan.
For fully converted employees, the City will make a one-time contribution into their
individual RHS account of $100 per month for every month the employee contributed to
the previous defined benefit plan, for a maximum of 15 years. For employees who elected
to retain a hybrid plan, the City will make a one-time contribution into their individual RHS
account of $75 per month for every month the employee contributed to the previous
defined plan for a maximum of 15 years. In order to receive this, the employee must retire
from the City. At June 30, 2020, the liability for the conversion part of the RHS Plan was
$1,742,890. It is not included in the Net OPEB Liability, but is included in the compensated
absences liability. See Notes (6) and (17).
Employees who retired prior to January 1, 2006, continue to receive an ongoing defined
benefit consisting of a contribution made by the City to the participant’s RHS account each
month. The defined benefit portion of the plan is closed to new participants.
135
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2020
Employees Covered
As of the measurement date June 30, 2019, the following current and former employees
were covered by the benefit terms under the plan:
Contributions
Contribution requirements are established by City policy and may be amended by the City
Council. The annual contribution is based on the actuarially determined contribution. For
the year ended June 30, 2020, the City’s cash contributions were $4,557,236 to the trust
in premium payments, the estimated implicit subsidy was $822,563, resulting in total
payment of $5,379,799.
Net OPEB Liability
The City’s net OPEB liability was measured as of June 30, 2019, and the total OPEB
liability used to calculate the net OPEB liability was determined by an actuarial valuation
dated June 30, 2019. The General fund and Tidelands funds have typically been used in
prior years to liquidate the net OPEB liability. A summary of the principal assumptions
and methods used to determine the total OPEB liability is shown below.
Actuarial Assumptions
The total OPEB liability as of June 30, 2019 actuarial valuation was determined using the
following actuarial assumptions and applied to all periods included in the measurement,
unless otherwise specified:
Inactive employees, spouses, or beneficiaries currently receiving benefits 605
Inactive employees or beneficiaries entitled to but not yet receiving benefits 53
Active employees 790
Total 1,448
Valuation Date June 30, 2019
Measurement Date June 30, 2019
Actuarial Cost Method Entry-Age Normal Cost Method
Actuarial Assumptions:
Discount Rate 6.50%
Inflation 2.50%
Projected Salary Increase 2.75% per annum, in aggregate
Expected long term investment rate of return 6.50%
Healthcare Cost Trend Rates 6.50% HMO/6.50% PPO
Post Retirement Turnover Derived from CalPERS pension plan
Mortality Derived from CALPERS pension plan updated to
reflect most recent experience study
136
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2020
The actuarial assumptions used in the June 30, 2019 valuation were based on a standard
set of assumptions the actuary has used for similar valuations, modified as appropriate for
the City.
The long-term expected rate of return was determined using a building-block method in
which best-estimate ranges of expected future real rates of return (expected returns, net
of OPEB plan investment expense and inflation) are developed for each major asset class.
The asset class percentages are taken from the current composition of the California
Employers’ Retiree Benefit Trust (“CERBT”), and the expected yields are taken from a
recent CalPERS publication for the pension fund:
Discount Rate
The discount rate used to measure the total OPEB liability is 6.50% per annum. This is
the expected long-term rate of return on City assets using investment strategy 1 within
CERBT. The projection of cash flows used to determine the discount rate assumed that
the City contribution will be made at rates equal to the actuarially determined contribution
rates. Based on those assumptions, the OPEB plan’s fiduciary net position is projected
to cover all future OPEB payments. Therefore, the discount rate was set equal to the long-
term expected rate of return.
Asset Class
Target
Allocation
Long-Term
Expected Real
Rate of Return
CERBT
Global Equity 59.00% 5.50%
Global Debt Securities 25.00% 2.35%
Inflation Assets 5.00% 1.50%
Commodities 3.00% 1.75%
REITs 8.00% 3.65%
Total 100.00%
137
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2020
Changes in the Net OPEB Liability
The changes in the net OPEB liability are as follows:
Change of Assumptions
The inflation rate changed from 2.75% to 2.50%. The projected salary increases rate
changed from 3.00% to 2.75%. The HMO healthcare cost trend rate changed from 6.00%
to 6.50%.
Change of Benefit Terms
There was no change of benefit terms.
Subsequent Events
There were no subsequent events that would materially affect the results presented in this
disclosure.
Total OPEB
Liability
Plan Fiduciary
Net Position
Net OPEB
Liability
(a) (b) (a) - (b)
Balance at June 30, 2018 44,296,670$ 21,696,948$ 22,599,722$
Changes in the year:
Service cost 524,717 - 524,717
Interest on the total OPEB liability 2,795,490 - 2,795,490
Changes of benefit terms - - -
Changes of assumptions 114,311 - 114,311
Differences between expected and actual
experience 2,532,319 - 2,532,319
Contributions - employer - 4,460,937 (4,460,937)
Contributions - employees - --
Net investment income - 1,495,861 (1,495,861)
Benefit payments, including refunds of
employee contributions (3,627,695) (3,627,695) -
Administrative expenses - (4,980) 4,980
Other expense - --
Net changes 2,339,142 2,324,123 15,019
Balance at June 30, 2019 46,635,812$ 24,021,071$ 22,614,741$
Increase (Decrease)
138
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2020
Sensitivity of the Total OPEB Liability to Changes in the Discount Rate
The following presents the total OPEB liability of the City, calculated using the discount
rate for the Plan, as well as what the City’s total OPEB liability would be if it were calculated
using a discount rate that is 1-percentage point lower or 1-percentage point higher than
the current rate:
Sensitivity of the Net OPEB Liability to Changes in Health-Care Cost Trend Rates
The following presents the total OPEB liability of the City, as well as what the City’s total
OPEB liability would be if it were calculated using healthcare cost trend rates that are 1-
percentage point lower (5.50% HMO/5.50% PPO) or 1-percentage point higher (7.50%
HMO/7.50% PPO) than current healthcare cost trend rates:
OPEB Expense and Deferred Outflows/Inflows of Resources Related to OPEB
For the year ended June 30, 2020, the City recognized OPEB expense of $2,092,808. At
June 30, 2020, the City reported deferred outflows of resources and deferred inflows of
resources related to OPEB from the following sources:
The differences between expected and actual experience and changes of assumptions
are amortized over a six year period.The net difference between projected and actual
earnings on plan investment is amortized over a five year period.
1% Decrease Current Discount Rate 1% Increase
5.50% 6.50% 7.50%
Net OPEB Liability 27,299,124$ 22,614,741$ 18,639,125$
1% Decrease Current Healthcare 1% Increase
Cost Trend Rates
(5.5%HMO/5.5%PPO (6.5%HMO/6.5%PPO (7.5%HMO/7.5%PPO
decreasing to decreasing to decreasing to
4.0%HMO/4.0%PPO) 5.0%HMO/5.0%PPO) 6.0%HMO/6.0%PPO)
Net OPEB Liability 20,865,882$ 22,614,741$ 25,039,131$
Description
Deferred Outflows of
Resources
Deferred Inflows of
Resources
OPEB contributions subsequent to measurement date 5,379,799$ -$
Differences between expected and actual experience 2,110,266 -
Changes of assumptions 95,259 -
Net difference between projected and actual earnings on
OPEB plan investments -(562,295)
Total 7,585,324$ (562,295)$
139
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2020
An amount of $5,379,799, which is reported as deferred outflows of resources related to
contributions subsequent to the measurement date, will be recognized as a reduction of
the net OPEB liability in the year ending June 30, 2021.
Amounts reported as deferred outflows of resources and deferred inflows of resources
related to OPEB will be recognized in OPEB expense as follows:
Payable to the OPEB Plan
At June 30, 2020, the City had no outstanding amount of contributions to the OPEB plan
required for the year ended June 30, 2020.
(12) Interfund Receivables and Payables
At June 30, 2020, interfund advances receivable and payable were as follows:
.
The General Fund advance to the Tide and Submerged Land – Harbor Capital Fund is
primarily for dredging and other high impact projects within the City’s Tidelands. The
advance will be paid back to the General Fund from incremental revenue increases
generated from certain leases, mooring rents, commercial and residential pier rents and
parking meter revenues.
Year Ending
June 30 Amount
2021 204,841
2022 204,843
2023 363,065
2024 429,376
2025 441,105
Advance from Advance to
General Fund 10,676,659$ -$
Tide and Submerged Land - Harbor Capital Fund - 10,676,659
Total 10,676,659$ 10,676,659$
140
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2020
The annual amortization of the repayment of the advance is as follows:
At June 30, 2020, interfund receivables and payable were as follows:
The above balances are primarily due to reclassification of negative cash balances in the
city-wide cash pool.
Fiscal
Year
Advance #1
Dredging
Projects
Repayment
Advance #2
Marina Park
Project
Repayment
Total
Repayment
2021 750,000 500,000 1,250,000
2022 750,000 500,000 1,250,000
2023 750,000 500,000 1,250,000
2024 750,000 500,000 1,250,000
2025 750,000 500,000 1,250,000
2026 750,000 500,000 1,250,000
2027 750,000 500,000 1,250,000
2028 426,659 500,000 926,659
2029 - 500,000 500,000
2030 - 500,000 500,000
Total 5,676,659$ 5,000,000$ 10,676,659$
Harbor Capital Fund Advance - Repayment Terms
(Zero Interest Advance)
Due from Due to
General Fund 377,249$ -$
Facilities Financial Planning Reserve Fund 5,442,129 -
Civic Center COP - 5,391,992
Internal Service Funds - 367,712
Other Governmental Funds - 59,674
Total 5,819,378$ 5,819,378$
141
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2020
(13) Interfund Transfers
Interfund transfers at June 30, 2020, consisted of the following:
The City typically uses transfers to fund ongoing subsidies. The General Fund transferred
$3,042,672 to subsidize the maintenance and operation of the Tide and Submerged Land
– Operating Fund; $5,414,939 to the Tide and Submerged Land – Harbor Capital Fund to
cash fund Harbor Capital projects; $9,915,459 to the Facilities Financial Planning Reserve
Fund to cash fund construction projects for General Fund supported facilities; $1,000,000
to the Insurance Reserve internal service fund; $12,973,173 to Other Governmental Funds
which includes $5,025,724 to the Neighborhood Enhancement Fund to fund construction
projects and acquire Rule 20A credits, $2,301,391 to the Facilities Maintenance Fund,
$5,557,254 to the Unrestricted Capital Improvements Fund for General Fund capital
improvements, and $88,804 to the Assessment District Fund for assessment district
expenditures.
The Facilities Financial Planning Reserve Fund transferred $8,086,599 to the Civic Center
COP Fund for the debt service payments related to the Civic Center Certificates of
Participation; $210,399 to Other Governmental Funds to cash fund construction projects
which includes $109,199 to the Strategic Planning Fund; $50,000 to the Junior Lifeguards
Fund, $43,685 to the Miscellaneous Facilities Financing Fund, and $7,515 to the Sunset
Ridge Park Fund.
The Information Technology Fund transferred $610,000 to the Unrestricted Capital
Improvements Fund for updates to the General Plan.
Tide and
Submerged
Land -
Operating
Tide and
Submerged
Land - Harbor
Capital
Facilities
Financial
Planning
Reserve
Civic Center
COP
Internal
Service
Funds
Other
Governmental
Funds Total
General Fund 3,042,672$ 5,414,939$ 9,915,459$ -$ 1,000,000$ 12,973,173$ 32,346,243$
Tide and
Submerged Land -
Operating
- - - - - 10,740 10,740
Facilities Financial
Planning Reserve - - - 8,086,599 - 210,399 8,296,998
Internal Service
Funds - - - - 610,000 610,000
Other
Governmental
Funds
- - - - - 110,000 110,000
Total 3,042,672$ 5,414,939$ 9,915,459$ 8,086,599$ 1,000,000$ 13,914,312$ 41,373,981$
Transfers In
Transfers Out142
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2020
The Building Excise Tax Fund transferred $110,000 to the Parks and Community Centers
Fund for the Central Library Lecture Hall project.
The Tide and Submerged Land – Operating Fund transferred $10,740 to the
Environmental Liability Fund.
(14) Joint Venture Agreements
Bonita Canyon Public Facilities Financing Authority
The Bonita Canyon Public Facilities Financing Authority (Authority) is a joint venture
formed by the City of Newport Beach, Irvine Unified School District, and Newport-Mesa
Unified School District. The Authority’s Board is comprised of two members appointed by
each of the member agencies. The Authority created Community Facilities
District 98-1 to finance public facilities that will benefit the properties within their
boundaries. In 1998, the Authority issued $45,000,000 of special tax bonds to be repaid
by special assessments. The Authority paid the City $30,577,712 (81.7%) to pay for the
costs of acquiring and constructing public facilities including parks and road
improvements. In Fiscal Year 2011-12, the Authority issued $38,330,000 of special tax
bonds to refinance the 1998 Series. In Fiscal Year 2017-18, the Authority issued
$28,245,000 of special tax bonds to refinance the 2012 series; the City is not obligated in
any manner to repay the bonds. At June 30, 2020, the contributions from property owners
have been fully spent and no funds are held in trust as cash with fiscal agent. The City
does not make any annual contributions to this joint venture. The City does not include
the Authority as a component unit, as the City is not financially accountable for the
Authority’s activities and the Authority is not fiscally dependent on the City. The City’s
equity interest in this joint venture is not readily determinable. Complete separate financial
statements can be obtained at the Newport Mesa Unified School District, 2985 Bear
Street, Suite 8M, Costa Mesa, California.
Metro Cities Fire Authority
The City of Newport Beach is a member of a joint venture agreement with the cities of
Anaheim, Brea, Fountain Valley, Fullerton, Garden Grove, Huntington Beach, and Orange
for the operation of a communication network to provide fire suppression, emergency
medical assistance, and rescue services. The oversight board consists of one voting
member and one alternate appointed by the governing body of each member agency. The
City of Newport Beach’s costs are based each fiscal year upon the number of recorded
incidents attributable to the City divided by the recorded incidents attributable to all
members during the year, and are recorded in the General Fund as an expenditure for
service. Upon termination of the agreement, the proceeds from the sale of the property
and assets of the joint venture will be paid to each member agency pursuant to their fair
share percentage. Annually, the amounts paid by the City to this joint venture are
approximately $750,086. The City’s 11.23% interest in the net equity of this joint venture
at June 30, 2020, amounts to $246,470. Complete separate financial statements can be
143
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2020
obtained at the Metro Cities Fire Authority offices at 201 S. Anaheim Boulevard, Suite 302,
Anaheim, California.
Integrated Law and Justice Agency of Orange County
The City is a participant in a joint venture agreement with several other public agencies in
Orange County for the operation of the Integrated Law and Justice Agency of Orange
County (ILJAOC). The ILJAOC went into effect in fiscal year 2007, and consists of 25
member agencies, with an oversight board consisting of 16 members from the
participating agencies and 1 alternate. Annually, each member agency pays a percentage
of the operating and replacement costs for the ILJAOC. The City’s annual contribution and
interest in the net equity of this joint venture was immaterial as of June 30, 2020. The City
of Newport Beach acted as the Treasurer/Controller of the ILJAOC from inception through
the end of fiscal year 2011-12. Beginning July 1, 2011, the City of Brea, another member
agency, was appointed to serve as Treasurer/Controller, and assumed responsibility for
all operating activities of the ILJAOC. Complete separate financial statements can be
obtained from the City of Brea, 1 Civic Center Circle, Brea, California 92821.
(15) Commitments and Contingencies
Claims and Judgments
Numerous claims and suits have been filed against the City in the normal course of
business. The estimated liability under such claims, based upon information received from
the City Attorney, contracted attorneys and the Risk Manager, has been estimated and
recorded as accrued claims and judgments payable. (See Notes 6 and 8.)
Operating Agreements
The City of Newport Beach first entered into an agreement with Visit Newport Beach Inc.
(VNB), a legally separate non-profit marketing organization, in 1987. The primary
responsibility of the VNB is to attract additional visitor business by promoting the City as
the premier tourist and business destination in Orange County. The VNB is governed by
an Executive Committee comprised of seven individuals not appointed by the City Council
of the City of Newport Beach. The current agreement was entered into on September 27,
2011 and subsequently amended on January 28, 2014 extending the agreement through
December 31, 2024. The City pays VNB 18% of the Total Transient Occupancy Tax
collected during the fiscal year. For the Fiscal Year ending June 30, 2020, the City paid
VNB $4,529,608.
144
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2020
Contractual Commitments
Construction and contractual commitments for major construction projects are as follows:
At fiscal year end, the City’s encumbrances with contractors were as follows:
Annual Project YTD Unexpended
Budget Expenditures Commitments
Advanced Metering Infrastructure 3,185,362$ 62,529$ 3,136,163$
Cameo Highlands Street Rehab 2,900,000 201,057 2,654,944
Bonita Canyon Rd Pavement Rehab 2,655,088 345,851 2,181,003
General Plan Update 2,110,000 347,431 1,606,880
Newportt Pier Area Water Main Replc 2,526,621 1,153,642 1,373,062
UUD 22 Balboa Blvd 2,418,453 1,133,730 1,012,562
Concrete Street Pavement Reconstruc 1,622,124 619,050 1,003,074
Traffic Signal Rehabilitation 988,860 45,038 909,085
Slurry Seal Program 998,005 142,105 855,900
Lower Sunset View Park Concept 5,768,660 438,108 692,335
Police Station Remodel 750,548 83,114 667,897
Central Library Lecture Hall 639,948 84,662 556,642
Sewer Main Lining / Repairs 1,443,340 930,462 512,878
Tide and Tide and Special Capital
Submerged Submerged Revenue Project Permanent
General Land Operating Land Harbor Capital Measure M Funds Funds Funds Total
Drainage -$ -$ -$ -$-$ 353,648$ -$ 353,648$
Streets 20,446 39,243 - 1,150,989 5,553,789 2,615,498 - 9,379,965
Facilities - - - -- 981,235 - 981,235
Miscellaneous and studies - - - -- 2,078,785 - 2,078,785
Parks 119,354 - - - - 1,437,826 - 1,557,180
Contract services 1,229,057 - - - - - - 1,229,057
Supplies and materials 292,733 - - - - - - 292,733
Maintenance and repairs 268,212 - - - - 604,097 - 872,309
General 145,830 - - - - 3,368 - 149,198
Beaches - 248,244 454,498 - - - - 702,742
Equipment - 330,110 209,969 - 36,338 - - 576,417
Total encumbrances 2,075,632$ 617,597$ 664,467$ 1,150,989$ 5,590,127$ 8,074,457$ -$ 18,173,269$
Major Governmental Funds Other Governmental Funds
145
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2020
(16) Fund Balance
Governmental Fund Balance at June 30, 2020, is classified as follows:
Tide and Tide and Facilities Special Capital
Submerged Submerged Financial Planning Civic Center Revenue Project Permanent
General Land - Operating Land - Harbor Capital Measure M Reserve COP Funds Funds Funds Totals
Nonspendable:
Prepaid items (legally restricted)928,899$ -$ -$ -$ -$ -$ 16,748$ -$ -$ 945,647$
Inventories (legally restricted)258,558 - - - - -- - - 258,558
Long-term loan receivable (form restricted) 10,676,659 - - - - -- - - 10,676,659
Permanent endowment (legally restricted)- - - - - - - - 4,629,781 4,629,781
Restricted:
Affordable housing 1,321,736 - - - - - - - - 1,321,736
Oceanfront encroachment 1,457,744 - - - - - - - - 1,457,744
Upper Newport bay restoration - 1,099,953 - - - - - - - 1,099,953
Cable franchise reserve 2,083,366 - - - - - - - - 2,083,366
Community development 847,590 - - - - - - - - 847,590
Streets and highways - - - - - - 368,745 - - 368,745
Public safety - - - - - - 862,654 - - 862,654
Parks - - - - 4,446,847 - 84,709 - - 4,531,556
Facilities - - - - - - 84,709 - - 84,709
Transportation - - - - - - 2,271,172 - - 2,271,172
Air quality improvement - - - - - - 915,825 - - 915,825
Environmental liability mitigation - - - - - - 8,581,826 - - 8,581,826
Dredging - - 6,771,897 - - - - - 1,593,881 8,365,778
Libraries - - - - - - - - 215,565 215,565
Scholarships - - - - - - - - 228,076 228,076
Fiin - - - - - - 1,332,932 - - 1,332,932
Debt service - - - - - 1,159,386 - - - 1,159,386
Capital re-appropriations -433,973 8,962,168 585,533 - - 1,205,949 4,074,617 - 15,262,240
Coronavirus recovery 3,619 3,619
Encumbrance reserve:
Beaches -248,244 454,498 - - - - - - 702,742
Streets -39,243 - 1,150,989 - - 5,553,789 - - 6,744,021
Equipment -330,110 209,969 - - - 36,338 - - 576,417
Committed:
Strategic planning - - - - - - - 157,239 - 157,239
Facilities replacement - - - - 12,599,992 - - - - 12,599,992
Facilities maintenance - - - - - - - 4,114,749 - 4,114,749
Civic center and park - - - - - - - 1,724,507 - 1,724,507
Sunset ridge park - - - - - - - 96,951 - 96,951
Fire station - - - - - - - 2,190,772 - 2,190,772
Oil and gas liabilities -720,000 - - - - - - - 720,000
Parks and community centers --- - - - - 344,281 - 344,281
Parking management 135,180 - - - - - - 830,895 - 966,075
Neighborhood enhancement - - - - - - - 3,494,934 - 3,494,934
Capital re-appropriations - - - - - - - 13,686,784 - 13,686,784
Encumbrance reserve:
Drainage - - - - - - - 353,648 - 353,648
Streets 20,446 - - - - - - 2,615,498 - 2,635,944
Facilities - - - - - - - 981,235 - 981,235
Miscellaneous and studies - - - - - - - 2,078,785 - 2,078,785
Parks 119,354 - - - - - - 1,437,826 - 1,557,180
Contract services 1,229,057 - - - - - - - - 1,229,057
Supplies and materials 292,733 - - - - - - - - 292,733
Maintenance and repairs 268,212 - - - - - - 604,097 - 872,309
General 145,830 - - - - - - 3,368 - 149,198
Assigned:
Recreation and senior services 593,720 - - - - - - - - 593,720
Fair value adjustment reserve 2,005,108 - - - - - - - - 2,005,108
Unassigned:76,699,280 - - - - - - (50,137) - 76,649,143
Total fund balances 99,083,472$ 2,871,523$ 16,398,532$ 1,736,522$ 17,046,839$ 1,159,386$ 21,319,015$ 38,740,049$ 6,667,303$ 205,022,641$
Other Governmental Funds
146
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2020
(17) COVID-19 Pandemic
On January 30, 2020, the World Health Organization (“WHO”) announced a global health
emergency because of an outbreak of a new strain of coronavirus (“COVID-19 outbreak”)
and the risks that is posed to the international community as the virus spread globally
beyond its point of origin. In March 2020, the WHO classified the COVID-19 outbreak as
a pandemic based on the rapid increase in exposure globally.
The City’s operations are primarily dependent on the ability to collect property taxes,
transient occupancy taxes, sales taxes, franchise taxes and utility user taxes. Additionally,
access to grants and contracts from federal, state, and local governments may decrease
or may not be available depending on appropriations. The COVID-19 outbreak may have
a continued material adverse impact on economic and market conditions, triggering a
period of global economic slowdown. This situation is expected to depress certain tax
bases and other areas in which the City receives revenue during fiscal year 2021.
However, property taxes, which are the number one source of revenue for the City, are
expected to remain among the least affected revenue sources by the pandemic.
The City has continued to provide core services including public safety (police and fire),
and water and sewer services without disruption during the COVID-19 pandemic.
However, the COVID-19 pandemic has impacted certain other services that the City
provides. During periods when the stay at home orders have been in effect, City Hall and
the City’s public libraries and community centers are closed for public use. The City has
implemented an Emergency Telecommuting Policy that specifies the conditions under
which employees are allowed to telecommute and the rules for doing so. The City has
also mandated that City employees work A/ B shifts to ensure continuity of operations,
accommodate social distancing and reduce viral load within City Hall.
The negative impacts from the COVID-19 pandemic on the City’s revenues in fiscal year
2019-20 are expected to continue into fiscal year 2020-21 and potentially several fiscal
years beyond depending on the pace of recovery of the local economy and the return of
conventions and tourism activity to the levels which existed prior to the outbreak of the
COVID-19 pandemic. While certain businesses and industries have begun to reopen,
social distancing protocols currently remain intact. These protocols could continue to limit
the capacity of businesses, and many other tourism and sales tax generating activities for
the City.
(18) Subsequent Events
Certificates of Participation for Fire Station No. 2
On December 8, 2020 the City issued $7,860,000 of City of Newport Beach Certificates
of Participation 2020A (Fire Station No. 2). The bonds are issued in serial maturities over
ten years with all bonds having a 4.0% coupon. The bond proceeds will primarily be used
to provide financing for the acquisition, improvement and equipping of a new Fire Station
No. 2. Bond proceeds will also be used to pay costs of issuance of the bonds.
147
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148
FINANCIAL SECTION
FINANCIAL SECTIONFINANCIAL SECTIONREQUIRED SUPPLEMENTARY INFORMATION
149
2020 2019 2018 2017 2016 2015
Measurement Period June 30, 2019 June 30, 2018 June 30, 2017 June 30, 2016 June 30, 2015 June 30, 2014
Total Pension Liability
Service cost 7,084,444$ 7,334,861$ 7,151,754$ 6,303,642$ 6,087,960$ 6,523,874$
Interest on total pension liability 29,409,624 28,226,598 27,069,673 26,375,073 25,427,094 24,624,559
Differences between expected and actual experience 403,676 2,243,854 (4,912,853) (2,686,814) (4,736,006) -
Changes in assumptions - (2,522,093) 22,616,424 - (6,309,248) -
Changes in benefits - - - - - -
Benefit payments, including refunds of employee contributions (20,129,701) (18,458,539) (17,249,398) (16,714,022) (16,374,370) (15,290,340)
Net Change in Total Pension Liability 16,768,043 16,824,681 34,675,600 13,277,879 4,095,430 15,858,093
Total Pension Liability - beginning 417,442,358 400,617,677 365,942,077 352,664,198 348,568,768 332,710,674
Total Pension Liability - ending (a)434,210,401$ 417,442,358$ 400,617,677$ 365,942,077$ 352,664,198$ 348,568,767$
Plan Fiduciary Net Position
Contributions - employer 15,700,833$ 15,797,595$ 10,509,243$ 9,904,636$ 6,615,920$ 5,793,768$
Contributions - employee 3,955,144 3,979,337 4,134,130 4,206,942 4,321,646 4,319,336
Net investment income 19,895,019 23,855,196 28,349,491 1,241,432 5,687,908 38,237,161
Administrative expense (216,502) (435,499) (375,172) (155,791) (287,862) -
Other miscellaneous income/(expense)700 (827,021) - - - -
Plan to plan resource movement 1,570 (700) - (2,387) 26,981 -
Benefit payments (20,129,701) (18,458,539) (17,249,398) (16,714,022) (16,374,370) (15,290,340)
Net change in Plan Fiduciary Net Position 19,207,063 23,910,369 25,368,294 (1,519,190) (9,777) 33,059,925
Plan Fiduciary Net Position - beginning 303,385,616 279,475,247 254,106,953 255,626,143 255,635,920 222,575,995
Plan Fiduciary Net Position - ending (b)322,592,679$ 303,385,616$ 279,475,247$ 254,106,953$ 255,626,143$ 255,635,920$
Net pension liability - ending (a)-(b)111,617,722$ 114,056,742$ 121,142,430$ 111,835,124$ 97,038,055$ 92,932,847$
Plan fiduciary net position as a percentage of the total pension liability 74.29% 72.68% 69.76% 69.44% 72.48% 73.34%
Covered payroll 42,153,383$ 41,468,634$ 41,727,563$ 40,031,404$ 38,512,011$ 37,775,051$
Net pension liability as percentage of covered payroll 264.79% 275.04% 290.32% 279.37% 251.97% 246.02%
Notes to Schedule:
* Fiscal year 2015 was the first year of implementation, therefore only 6 years are shown.
Benefit Changes:
Change in Assumptions:
City of Newport Beach
an Agent Multiple-Employer Defined Benefit Pension PlanAs of June 30, 2020
Last 10 Years *
Defined Benefit Plan for Miscellaneous Employees
SCHEDULE OF CHANGES IN THE NET PENSION LIABILITY AND RELATED RATIOS
Last Ten Fiscal Years*
None in 2019. In 2018 ,demographic assumptions and inflation rate were changed in accordance to the CalPERS Experience Study and Review of Actuarial Assumptions December 2017. There were no
changes in the discount rate. In 2017, the discount rate was reduced from 7.65 percent to 7.15 percent. In 2016, there were no changes. In 2015, amounts reported reflect an adjustment of the discount rate
from 7.5 percent (net of administrative expense) to 7.65 percent (without a reduction for pension plan administrative expense). In 2014, amounts reported were based on the 7.5 percent discount rate.
The figures above do not include any liability impact that may have resulted from plan changes which occurred after the June 30, 2018 valuation date. This applies for voluntary benefit changes as well as any
offers of Two Years Additional Service Credit (a.k.a Golden Handshakes).
150
2020 2019 2018 2017 2016 2015
Actuarially determined contribution 13,080,630$ 12,374,026$ 11,924,053$ 10,412,963$ 9,943,342$ 7,117,065$
Contributions in relation to the actuarially determined contributions (16,351,592) (15,713,898) (15,742,587) (10,412,963) (9,943,342) (7,117,065)
Contribution deficiency (excess)(3,270,962)$ (3,339,872)$ (3,818,534)$ -$ -$ -$
Covered payroll 43,902,594$ 42,153,383$ 41,468,634$ 41,727,563$ 40,031,404$ 38,512,011$
Contributions as a percentage of covered payroll 37.25%37.28%37.96%24.95%24.84%18.48%
Notes to Schedule:
Valuation date:6/30/2018 6/30/2017 6/30/2015 6/30/2014 6/30/2013 6/30/2012
Methods and assumptions used to determine contribution rates:
Actuarial cost method Entry age Entry age Entry age Entry age Entry age Entry age
Amortization method (1)(1)(1)(1)(1)(1)
Asset valuation method Market Value Market Value Market Value Market Value Market Value Market Value
Inflation 2.75%2.75%2.75%2.75%2.75%2.75%
Salary increases (2)(2)(2)(2)(2)(2)
Investment rate of return 7.375% (3) 7.375% (3) 7.5% (3)7.5% (3)7.5% (3)7.5% (3)
Retirement age (4)(4)(4)(4)(4)(4)
Mortality (5)(5)(5)(5)(5)(5)
(1) Level percentage of payroll, closed
(2) Depending on age, service, and type of employment
(3) Net of pension plan investment expense, including inflation
(4) 50 years (2.5%@55 and 2.0%@60) and 52 years (2.0%@62) **
(5) Mortality assumptions are based on mortality rates resulting from the most recent CalPERS Experience Study adopted by the CalPERS Board
*
SCHEDULE OF CONTRIBUTIONS
Last Ten Fiscal Years*
City of Newport Beach
an Agent Multiple-Employer Defined Benefit Pension Plan
As of June 30, 2020
Last 10 Years *
Defined Benefit Plan for Miscellaneous Employees
Fiscal year 2015 was the first year of implementation, therefore only six years are shown.
151
2020 2019 2018 2017 2016 2015Measurement Period June 30, 2019 June 30, 2018 June 30, 2017 June 30, 2016 June 30, 2015 June 30, 2014
Total Pension Liability
Service cost 9,292,715$ 9,223,465$ 9,015,985$ 8,075,553$ 8,077,826$ 8,091,585$
Interest on total pension liability 40,081,524 38,458,387 37,083,966 36,239,226 35,098,055 33,807,462 Differences between expected and actual experience 4,798,077 3,278,018 (2,192,667) (1,613,985) (316,827) -
Changes in assumptions - (1,630,045) 30,110,384 - (8,359,009) -
Changes in benefits - -- - - -
Benefit payments, including refunds of employee contributions (30,443,097) (29,183,598) (28,074,414) (27,447,982) (25,838,982) (24,529,802)
Net Change in Total Pension Liability 23,729,219 20,146,227 45,943,254 15,252,812 8,661,063 17,369,245
Total Pension Liability - beginning 566,357,864 546,211,637 500,268,383 485,015,571 476,354,508 458,985,263
Total Pension Liability - ending (a)590,087,083$ 566,357,864$ 546,211,637$ 500,268,383$ 485,015,571$ 476,354,508$
Plan Fiduciary Net Position
Contributions - employer 28,344,445$ 26,779,897$ 19,260,537$ 18,496,776$ 21,529,513$ 12,089,637$
Contributions - employee 3,162,044 3,104,318 2,967,318 2,826,831 2,969,503 3,122,237
Net investment income 24,254,890 29,064,749 34,814,011 1,561,480 7,049,577 47,151,493
Administrative expense (263,991) (532,480) (462,427) (193,780) (357,866) -
Plan to plan resource movement (1,570) (855) - 2,387 - -
Benefit payments (30,443,097) (29,183,598) (28,074,414) (27,447,982) (25,838,982) (24,529,802)
Other miscellaneous income/(expense)855 (1,011,188) - - - -
Net change in Plan Fiduciary Net Position 25,053,576 28,220,843 28,505,025 (4,754,288) 5,351,745 37,833,565
Plan Fiduciary Net Position - beginning 369,931,799 341,710,956 313,205,931 317,960,219 312,608,474 274,774,909
Plan Fiduciary Net Position - ending (b)394,985,375$ 369,931,799$ 341,710,956$ 313,205,931$ 317,960,219$ 312,608,474$
Net pension liability - ending (a)-(b)195,101,708$ 196,426,065$ 204,500,681$ 187,062,452$ 167,055,352$ 163,746,034$
Plan fiduciary net position as a percentage of the total pension liability 66.94%65.32%62.56%62.61%65.56%65.63%
Covered payroll 33,935,043$ 32,866,620$ 32,450,020$ 30,816,246$ 30,189,633$ 29,944,665$
Net pension liability as percentage of covered payroll 574.93%597.65%630.20%607.03%553.35%546.83%
Notes to Schedule:
* Fiscal year 2015 was the first year of implementation, therefore only six years are shown.
Benefit Changes:
Change in Assumptions:
None in 2019. In 2018 ,demographic assumptions and inflation rate were changed in accordance to the CalPERS Experience Study and Review of Actuarial Assumptions December 2017. There were no changes in the discount rate. In 2017, the discount rate was reduced from 7.65 percent to 7.15 percent. In 2016, there were no changes. In 2015, amounts reported reflect an adjustment of the discount rate
from 7.5 percent (net of administrative expense) to 7.65 percent (without a reduction for pension plan administrative expense). In 2014, amounts reported were based on the 7.5 percent discount rate.
City of Newport Beach
an Agent Multiple-Employer Defined Benefit Pension Plan
As of June 30, 2020
Last 10 Years *
SCHEDULE OF CHANGES IN THE NET PENSION LIABILITY AND RELATED RATIOS
Last Ten Fiscal Years*
Defined Benefit Plan for Safety Employees
The figures above do not include any liability impact that may have resulted from plan changes which occurred after the June 30, 2018 valuation date. This applies for voluntary benefit changes as well as any
offers of Two Years Additional Service Credit (a.k.a Golden Handshakes).
152
2020 2019 2018 2017 2016 2015
Actuarially determined contribution 22,980,289$ 22,227,698$ 21,524,636$ 19,338,360$ 18,466,207$ 13,393,374$
Contributions in relation to the actuarially determined contributions (28,531,744) (28,346,069) (26,620,697) (19,338,360) (18,466,207) (20,993,374) Contribution deficiency (excess)(5,551,455)$ (6,118,371)$ (5,096,061)$ -$ -$ (7,600,000)$
Covered payroll 34,279,062$ 33,935,043$ 32,866,620$ 32,450,020$ 30,816,246$ 30,189,633$
Contributions as a percentage of covered payroll 83.23%83.53%81.00%59.59%59.92%69.54%
Notes to Schedule:
Valuation date:6/30/2018 6/30/2017 6/30/2015 6/30/2014 6/30/2013 6/30/2012
Methods and assumptions used to determine contribution rates:
Actuarial cost method Entry age Entry age Entry age Entry age Entry age Entry age
Amortization method (1)(1)(1)(1)(1)(1)
Asset valuation method Market Value Market Value Market Value Market Value Market Value Market Value
Inflation 2.75%2.75%2.75%2.75%2.75%2.75%
Salary increases (2)(2)(2)(2)(2)(2)
Investment rate of return 7.375% (3) 7.375% (3) 7.5% (3)7.5% (3)7.5% (3)7.5% (3)
Retirement age (4)(4)(4)(4)(4)(4)
Mortality (5)(5)(5)(5)(5)(5)
(1) Level percentage of payroll, closed
(2) Depending on age, service, and type of employment(3) Net of pension plan investment expense, including inflation
(4) 50 years (2.5%@55 and 2.0%@60) and 52 years (2.0%@62) **
(5) Mortality assumptions are based on mortality rates resulting from the most recent CalPERS Experience Study adopted by the CalPERS Board
*
Defined Benefit Plan for Safety Employees
Last Ten Fiscal Years*
City of Newport Beach
an Agent Multiple-Employer Defined Benefit Pension Plan
As of June 30, 2020
Last 10 Years *
SCHEDULE OF CONTRIBUTIONS
Fiscal year 2015 was the first year of implementation, therefore only six years are shown.
153
2020 2019 2018
Measurement Period June 30, 2019 June 30, 2018 June 30, 2017
Total OPEB Liability
Service cost 524,717$ 509,434$ 478,341$
Interest 2,795,490 2,814,685 2,830,153
Differences between expected and actual experience 2,532,319 --
Changes in assumptions 114,311 --
Changes in benefits terms ---
Benefit payments, including refunds of member contributions (3,627,695) (3,641,715) (3,513,406)
Net change in Total OPEB Liability 2,339,142 (317,596)(204,912)
Total OPEB Liability - beginning 44,296,670 44,614,266 44,819,178
Total OPEB Liability - ending (a)46,635,812$ 44,296,670$ 44,614,266$
Plan fiduciary net Position
Contributions - employer 4,460,937$ 4,675,193$ 4,594,772$
Contributions - member ---
Net investment income 1,495,861 1,605,114 1,875,536
Benefit payments, including refunds of member contributions (3,627,695) (3,641,715) (3,513,406)
Administrative expense (4,980)(11,076)(9,452)
Other expense -(25,258)-
Net change in plan fiduciary net position 2,324,123 2,602,258 2,947,450
Plan fiduciary net position - beginning 21,696,948 19,094,690 16,147,240
Plan fiduciary net position - ending (b)24,021,071$ 21,696,948$ 19,094,690$
City's Net OPEB liability - ending (a)-(b)22,614,741$ 22,599,722$ 25,519,576$
Plan fiduciary net position as a percentage of the total OPEB liability 51.51%48.98%42.80%
Covered- employee payroll 75,814,626$ 73,999,059$ 74,484,613$
City's Net OPEB liability as percentage of covered-employee payroll 29.83%30.54%34.26%
Notes to Schedule:
* Fiscal year 2018 was the first year of implementation, therefore only three years are shown.
Last Ten Fiscal Years*
SCHEDULE OF CHANGES IN THE CITY'S NET OPEB LIABILITY AND RELATED RATIOS
City of Newport Beach
Post-Employment Health Care Benefits (OPEB) Retirement Plan
As of June 30, 2020
Last 10 Years *
154
2020 2019 2018
Actuarially determined contribution 3,834,916$ 3,827,337$ 3,925,087$
Contributions in relation to the actuarially determined contributions (5,379,799) (5,133,062) (5,309,626)
Contribution deficiency (excess)(1,544,883)$ (1,305,725)$ (1,384,539)$
Covered-employee payroll 77,637,171$ 75,814,626$ 73,999,059$
Contributions as a percentage of covered-employee payroll -6.93% -6.77% -7.18%
Notes to Schedule:
Valuation date: June 30, 2019 June 30, 2017 June 30, 2017
* Fiscal year 2018 was the first year of implementation, therefore only three years are shown.
Last Ten Fiscal Years*
SCHEDULE OF CONTRIBUTIONS
City of Newport Beach
Post-Employment Health Care Benefits (OPEB) Retirement Plan
As of June 30, 2020
Last 10 Years *
155
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156
FINANCIAL SECTION
FINANCIAL SECTIONFINANCIAL SECTIONSUPPLEMENTARY INFORMATION
OTHER GOVERNMENTAL FUNDS
157
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158
OTHER GOVERNMENTAL FUNDS
Other Special Revenue Funds
Special Revenue Funds are used to account for the proceeds of specific revenue sources
which are legally restricted to expenditures for specified purposes. The City of Newport
Beach Special Revenue Funds are as follows:
The State Gas Tax Fund accounts for all State Gas Tax related revenues and expenditures,
including street repair, construction, and maintenance. State law requires that these funds be
used exclusively for maintenance of the street and highway system.
The SB1 Gas Tax RMRA Fund accounts for all Road Maintenance and Rehabilitation Account
related revenues and expenditures. State law requires that these funds be used exclusively for
the transportation system. RMRA revenues are from fuel and vehicle registration taxes imposed
by the state’s Road Repair and Accountability Act of 2017.
The Asset Forfeiture Fund was established to account for all revenues resulting from the
seizure of assets in conjunction with criminal cases (primarily drug trafficking). It is the City's
policy that all such funds shall be used for enhancement of law enforcement programs.
The Office of the Traffic Safety (OTS) DUI Grant Fund is used to account for federal funding of
the Selective Traffic Enforcement Program (STEP). These funds are used exclusively for DUI
enforcement.
The Circulation and Transportation Fund is used to account for fair share revenues collected
from developers and restricted for capital improvement projects meeting the circulation element of
the City’s General Plan.
The Building Excise Tax Fund is used to account for revenues received from builders or
developers on building or remodeling projects within the City. Expenditures from this fund are
used exclusively for public safety, libraries, parks, beaches, or recreational activities.
The Community Development Block Grant Fund is used to account for revenues and
expenditures relating to the City's Community Development Block Grant program. These funds
are received from the Federal Department of Housing and Urban Development and must be
expended exclusively on programs for low or moderate income individuals/families.
The Air Quality Management District Fund is used to account for revenues received from the
South Coast Air Quality Management District restricted for the use of reducing air pollution.
The Environmental Liability Fund is used to account for solid waste fees restricted for
mitigation of future environmental liability relating to the handling of solid waste.
The Supplemental Law Enforcement Services Fund (SLESF) is used to account for revenues
received from the county to be used exclusively for front line law enforcement services.
The Contributions Fund is used to account for revenues received from other government
agencies or private developers and expended for specific streets, highway, construction, or water
quality projects.
159
The Fostering Interest in Nature (FIIN) Fund is restricted for recreation and education
programming as a mitigation effort by the California Coastal Commission.
The CARES Small Business Grant Fund is used to account for federal funding passed through
the County of Orange under the Federal Coronavirus Aid, Relief, and Economic Security Act
(CARES). These funds are used exclusively for economic support to small businesses in
connection with the COVID-19 pandemic.
Other Capital Projects Funds
Capital Projects Funds are used to account for resources used for the acquisition and
construction of capital facilities by the City, except those financed by Enterprise Funds.
The City of Newport Beach Capital Projects Funds are as follows:
The Assessment District Fund is used to account for the receipt and expenditure of funds
received from 1911 Act and 1915 Act Assessment Districts for capital improvement projects.
The Fire Station Fund is used to account for the design and construction of new fire stations.
The Facilities Maintenance Fund is used to account for revenues and expenditures associated
with the maintenance of existing facilities.
The Civic Center and Park Fund is used to account for the design and construction of a new
Civic Center Complex. In prior years, this fund was called City Hall Improvements Fund.
The Sunset Ridge Park Fund is used to account for the design and construction of the Sunset
Ridge Park.
The Strategic Planning Fund is used to account for expenditures for study and concept
development needed to further refine the Facilities Financing Planning Program. It includes
developing both interim and long-term use plans for the old City Hall site on Newport Boulevard.
The Newport Uptown Undergrounding Fund is used to account for the receipt and
expenditures related to the development within the Newport Uptown Planned Community
Development Plan.
The Miscellaneous Facilities Financing Fund is used to account for expenditures for small
scale facility rehabilitation, expansion and/or replacement in accordance with the Facilities
Financing Planning Program.
The Parks and Community Centers Fund is used to account for expenditures for park and
community center rehabilitation, expansion and/or replacement in accordance with the Facilities
Financing Planning Program.
The West Newport Community Center Fund is used to account for the design and construction
of the West Newport Community Center.
The Balboa Village Parking Management District Fund is used to account for revenues and
expenditures associated with parking management improvements in Balboa Village.
The Misc. Santa Ana Heights (SAH) Projects Fund is used to account for various grants and
projects associated with providing public works, parks and recreation opportunities within the part
of the City known as Santa Ana Heights.
160
The Neighborhood Enhancement Fund is used to account for projects that will enhance
neighborhood aesthetics and functionality.
The Junior Lifeguards Fund is used to account for capital improvement projects related to the
Junior Lifeguards program.
The Unrestricted Capital Improvements Fund is used to separately account for general fund
capital improvement projects.
Other Permanent Funds
Permanent Funds are used to report resources that are legally restricted for the extent that
only earnings, not principal, may be used for purposes that support the reporting
government’s programs. The City of Newport Beach Permanent Funds are as follows:
The Bay Dredging Fund is used to account for the receipt of permanent endowments intended
to fund the ongoing cost of maintaining and dredging of the Upper Newport Bay.
The Ackerman Fund is used to account for the receipt of permanent endowments intended as
follows: 75% of the fund’s investment proceeds will be used for the purchase of high-tech library
equipment while the remaining 25% will be used for scholarships for needy students.
161
State SB1 Gas Tax Asset OTS
Gas Tax RMRA Forfeiture DUI Grant
Assets
Cash and investments $ 2,837,911 $ 1,596,353 $ 862,654 $-
Receivables:
Accounts (net of allowance)- - - -
Intergovernmental receivables -230,577 - -
Restricted cash and investments with fiscal agent - - - -
Prepaid items - - - -
Total assets $ 2,837,911 $ 1,826,930 $ 862,654 $-
Liabilities, Deferred Inflows of Resources
and Fund Balances
Liabilities:
Accounts payable $ 115,190 $ 218,778 $- $-
Unearned revenue - - - -
Due to other funds - - - -
Total liabilities 115,190 218,778 - -
Deferred inflows of resources:
Unavailable revenue - - - -
Fund balances (deficits):
Nonspendable:
Prepaid items - - - -
Permanent endowment - - - -
Restricted 2,722,721 1,608,152 862,654 -
Committed - - - -
Assigned - - - -
Unassigned - - - -
Total fund balances (deficits)2,722,721 1,608,152 862,654 -
Total liabilities, deferred inflows of resources
and fund balances $ 2,837,911 $ 1,826,930 $ 862,654 $ -
(continued)
CITY OF NEWPORT BEACH
Combining Balance Sheet
Other Governmental Funds
June 30, 2020
Special Revenue
Page 1 of 8
162
Circulation Building Community Air Quality
and Excise Development Management
Transportation Tax Block Grant District
Assets
Cash and investments $ 2,636,962 $ 497,350 $- $ 1,229,487
Receivables:
Accounts (net of allowance)- - - -
Intergovernmental receivables - - 38,544 27,284
Restricted cash and investments with fiscal agent - - - -
Prepaid items - - - -
Total assets $ 2,636,962 $ 497,350 $ 38,544 $ 1,256,771
Liabilities, Deferred Inflows of Resources
and Fund Balances
Liabilities:
Accounts payable $- $145 $ 29,007 $7,002
Unearned revenue - - - -
Due to other funds - - 9,537 -
Total liabilities - 145 38,544 7,002
Deferred inflows of resources:
Unavailable revenue - - - 27,284
Fund balances (deficits):
Nonspendable:
Prepaid items - - - -
Permanent endowment - - - -
Restricted 2,636,962 497,205 -1,222,485
Committed - - - -
Assigned - - - -
Unassigned - - - -
Total fund balances (deficits)2,636,962 497,205 -1,222,485
Total liabilities, deferred inflows of resources
and fund balances $ 2,636,962 $ 497,350 $ 38,544 $ 1,256,771
(continued)
CITY OF NEWPORT BEACH
Special Revenue
Combining Balance Sheet
Other Governmental Funds
June 30, 2020
Page 2 of 8
163
Supplemental
Environmental Law
Liability Enforcement Contributions FIIN
Assets
Cash and investments $ 8,641,288 $- $ 1,833,799 $ 1,334,785
Receivables:
Accounts (net of allowance)9,588 -383,154 -
Intergovernmental receivables - - 179,815 -
Restricted cash and investments with fiscal agent - - - -
Prepaid items 16,748 - - -
Total assets $ 8,667,624 $- $ 2,396,768 $ 1,334,785
Liabilities, Deferred Inflows of Resources
and Fund Balances
Liabilities:
Accounts payable $62,440 $- $ 88,122 $1,853
Unearned revenue - - 98,391 -
Due to other funds - - - -
Total liabilities 62,440 -186,513 1,853
Deferred inflows of resources:
Unavailable revenue - - 383,154 -
Fund balances (deficits):
Nonspendable:
Prepaid items 16,748 - - -
Permanent endowment - - - -
Restricted 8,588,436 -1,827,101 1,332,932
Committed - - - -
Assigned - - - -
Unassigned - - - -
Total fund balances (deficits)8,605,184 -1,827,101 1,332,932
Total liabilities, deferred inflows of resources
and fund balances $ 8,667,624 $- $ 2,396,768 $ 1,334,785
(continued)
CITY OF NEWPORT BEACH
Combining Balance Sheet
Other Governmental Funds
June 30, 2020
Page 3 of 8
Special Revenue
164
Special Revenue
CARES Small
Business Assessment Facilities
Grant District Fire Station Maintenance
Assets
Cash and investments 2,127,046$ $ 2,146,138 $ 11,657,959 $ 2,681,067
Receivables:
Accounts (net of allowance)- - - -
Intergovernmental receivables - - - -
Restricted cash and investments with fiscal agent -2,200,760 - -
Prepaid items - - - -
Total assets $ 2,127,046 $ 4,346,898 $ 11,657,959 $ 2,681,067
Liabilities, Deferred Inflows of Resources
and Fund Balances
Liabilities:
Accounts payable $- $ 272,281 $ 338,507 $ 123,520
Unearned revenue 2,123,427 - - -
Due to other funds - - - -
Total liabilities 2,123,427 272,281 338,507 123,520
Deferred inflows of resources:
Unavailable revenue - - - -
Fund balances (deficits):
Nonspendable:
Prepaid items - - - -
Permanent endowment - - - -
Restricted 3,619 4,074,617 - -
Committed - - 11,319,452 2,557,547
Assigned - - - -
Unassigned - - - -
Total fund balances (deficits)3,619 4,074,617 11,319,452 2,557,547
Total liabilities, deferred inflows of resources
and fund balances $ 2,127,046 $ 4,346,898 $ 11,657,959 $ 2,681,067
(continued)
CITY OF NEWPORT BEACH
Capital Projects
Other Governmental Funds
Combining Balance Sheet
June 30, 2020
Page 4 of 8
165
Newport
Civic Center Sunset Strategic Uptown
and Park Ridge Park Planning Undergrounding
Assets
Cash and investments $ 1,779,462 $ 105,951 $ 157,239 $3,302
Receivables:
Accounts (net of allowance)- - - -
Intergovernmental receivables - - - -
Restricted cash and investments with fiscal agent - - - -
Prepaid items - - - -
Total assets $ 1,779,462 $ 105,951 $ 157,239 $3,302
Liabilities, Deferred Inflows of Resources
and Fund Balances
Liabilities:
Accounts payable $1,950 $- $- $ -
Unearned revenue - - - -
Due to other funds - - - -
Total liabilities 1,950 - - -
Deferred inflows of resources:
Unavailable revenue - - - -
Fund balances (deficits):
Nonspendable:
Prepaid items - - - -
Permanent endowment - - - -
Restricted - - - 3,302
Committed 1,777,512 105,951 157,239 -
Assigned - - - -
Unassigned - - - -
Total fund balances (deficits)1,777,512 105,951 157,239 3,302
Total liabilities, deferred inflows of resources
and fund balances $ 1,779,462 $ 105,951 $ 157,239 $3,302
(continued)
CITY OF NEWPORT BEACH
Combining Balance Sheet
Other Governmental Funds
June 30, 2020
Page 5 of 8
Capital Projects
166
Balboa Village
Parks and West Newport Parking
Misc Facilities Community Community Management
Financing Centers Center District
Assets
Cash and investments $ 14,996 $ 3,964,101 $ 344,281 $ 1,066,848
Receivables:
Accounts (net of allowance)- - - 3,372
Intergovernmental receivables - - - -
Restricted cash and investments with fiscal agent - - - -
Prepaid items - - - -
Total assets $ 14,996 $ 3,964,101 $ 344,281 $ 1,070,220
Liabilities, Deferred Inflows of Resources
and Fund Balances
Liabilities:
Accounts payable $- $ 124,418 $- $25,893
Unearned revenue - - - -
Due to other funds - - - -
Total liabilities -124,418 -25,893
Deferred inflows of resources:
Unavailable revenue - - - -
Fund balances (deficits):
Nonspendable:
Prepaid items - - - -
Permanent endowment - - - -
Restricted - - - -
Committed 14,996 3,839,683 344,281 1,044,327
Assigned - - - -
Unassigned - - - -
Total fund balances (deficits)14,996 3,839,683 344,281 1,044,327
Total liabilities, deferred inflows of resources
and fund balances $ 14,996 $ 3,964,101 $ 344,281 $ 1,070,220
(continued)
CITY OF NEWPORT BEACH
Combining Balance Sheet
Other Governmental Funds
June 30, 2020
Page 6 of 8
Capital Projects
167
Unrestricted
Misc Neighborhood Junior Capital
SAH Projects Enhancement Lifeguards Improvements
Assets
Cash and investments $ 1,438,690 $ 5,433,852 $- $ 9,028,175
Receivables:
Accounts (net of allowance)- - - -
Intergovernmental receivables - - - -
Restricted cash and investments with fiscal agent - - - -
Prepaid items - - - -
Total assets $ 1,438,690 $ 5,433,852 $- $ 9,028,175
Liabilities, Deferred Inflows of Resources
and Fund Balances
Liabilities:
Accounts payable $- $472,579 $- $ 438,169
Unearned revenue 1,438,690 - - -
Due to other funds - - 50,137 -
Total liabilities 1,438,690 472,579 50,137 438,169
Deferred inflows of resources:
Unavailable revenue - - - -
Fund balances (deficits):
Nonspendable:
Prepaid items - - - -
Permanent endowment - - - -
Restricted - - - -
Committed -4,961,273 -8,590,006
Assigned - - - -
Unassigned - - (50,137)-
Total fund balances (deficits)-4,961,273 (50,137) 8,590,006
Total liabilities, deferred inflows of resources
and fund balances $ 1,438,690 $ 5,433,852 $- $ 9,028,175
(continued)
Capital Projects
CITY OF NEWPORT BEACH
Other Governmental Funds
Combining Balance Sheet
June 30, 2020
Page 7 of 8
168
Total
Other
Ackerman Governmental
Bay Dredging Donation Funds
Assets
Cash and investments $ 5,450,881 $ 1,221,321 $ 70,091,898
Receivables:
Accounts (net of allowance)- - 396,114
Intergovernmental receivables - - 476,220
Restricted cash and investments with fiscal agent - - 2,200,760
Prepaid items - - 16,748
Total assets $ 5,450,881 $ 1,221,321 $ 73,181,740
Liabilities, Deferred Inflows of Resources
and Fund Balances
Liabilities:
Accounts payable $- $4,899 $ 2,324,753
Unearned revenue - - 3,660,508
Due to other funds - - 59,674
Total liabilities -4,899 6,044,935
Deferred inflows of resources:
Unavailable revenue - - 410,438
Fund balances (deficits):
Nonspendable:
Prepaid items - - 16,748
Permanent endowment 3,857,000 772,781 4,629,781
Restricted 1,593,881 443,641 27,417,708
Committed - - 34,712,267
Assigned - - -
Unassigned - - (50,137)
Total fund balances (deficits)5,450,881 1,216,422 66,726,367
Total liabilities, deferred inflows of resources
and fund balances $ 5,450,881 $ 1,221,321 $ 73,181,740
CITY OF NEWPORT BEACH
Combining Balance Sheet
Other Governmental Funds
June 30, 2020
Page 8 of 8
Permanent Fund
169
State SB1 Gas Tax Asset OTS
Gas Tax RMRA Forfeiture DUI Grant
Revenues:
Other taxes -$ -$ -$ -$
Intergovernmental 1,992,467 1,509,947 99,712 193,104
Licenses, permits and fees ----
Investment income 64,296 38,853 16,108 -
Net increase in fair value of investments 54,966 33,214 13,770 -
Donations ----
Other ----
Total revenues 2,111,729 1,582,014 129,590 193,104
Expenditures:
Current:
Public safety - - 18,633 193,104
Public works - - - -
Community development - - - -
Community services - - - -
Capital outlay 2,341,070 1,858,283 - -
Debt service:
Principal - - - -
Interest and fiscal charges - - - -
Total expenditures 2,341,070 1,858,283 18,633 193,104
Excess (deficiency) of revenues
over expenditures (229,341) (276,269) 110,957 -
Other financing sources (uses):
Transfers in ----
Transfers out ----
Total other financing sources (uses)----
Net change in fund balances (229,341) (276,269) 110,957 -
Fund balances (deficits), beginning 2,952,062 1,884,421 751,697 -
Fund balances (deficits), ending 2,722,721$ 1,608,152$ 862,654$ -$
(continued)
Combining Statement of Revenues,
Expenditures and Changes in Fund Balances
For the Year Ended June 30, 2020
Special Revenue
Page 1 of 8
CITY OF NEWPORT BEACH
Other Governmental Funds
170
Circulation Building Community Air Quality
and Excise Development Management
Transportation Tax Block Grant District
Revenues:
Other taxes -$ -$ -$ -$
Intergovernmental --287,403 110,630
Licenses, permits and fees 299,380 133,428 --
Investment income 50,023 9,449 -23,152
Net increase in fair value of investments 42,763 8,078 -19,792
Donations ----
Other ----
Total revenues 392,166 150,955 287,403 153,574
Expenditures:
Current:
Public safety - - - -
Public works - - - -
Community development - - 101,513 -
Community services - - - -
Capital outlay - 8,490 - 7,002
Debt service:
Principal - - 171,000 -
Interest and fiscal charges - - 14,890 -
Total expenditures -8,490 287,403 7,002
Excess (deficiency) of revenues
over expenditures 392,166 142,465 -146,572
Other financing sources (uses):
Transfers in ----
Transfers out -(110,000) --
Total other financing sources (uses)-(110,000) --
Net change in fund balances 392,166 32,465 -146,572
Fund balances (deficits), beginning 2,244,796 464,740 -1,075,913
Fund balances (deficits), ending 2,636,962$ 497,205$ -$ 1,222,485$
(continued)
Special Revenue
Expenditures and Changes in Fund Balances
For the Year Ended June 30, 2020
Page 2 of 8
CITY OF NEWPORT BEACH
Other Governmental Funds
Combining Statement of Revenues,
171
Supplemental
Environmental Law
Liability Enforcement Contributions FIIN
Revenues:
Other taxes 719,738$ -$ -$ -$
Intergovernmental -206,333 894,985 -
Licenses, permits and fees ----
Investment income 167,352 -36,829 26,758
Net increase in fair value of investments 143,066 -31,486 22,876
Donations --9,450 -
Other 34,351 -22,200 -
Total revenues 1,064,507 206,333 994,950 49,634
Expenditures:
Current:
Public safety - 206,333 - -
Public works 409,271 - - -
Community development - - - -
Community services - - - 36,026
Capital outlay - - 1,262,849 -
Debt service:
Principal - - - -
Interest and fiscal charges - - - -
Total expenditures 409,271 206,333 1,262,849 36,026
Excess (deficiency) of revenues
over expenditures 655,236 -(267,899) 13,608
Other financing sources (uses):
Transfers in 10,740 ---
Transfers out ----
Total other financing sources (uses)10,740 ---
Net change in fund balances 665,976 -(267,899) 13,608
Fund balances (deficits), beginning 7,939,208 -2,095,000 1,319,324
Fund balances (deficits), ending 8,605,184$ -$ 1,827,101$ 1,332,932$
(continued)
Special Revenue
Page 3 of 8
For the Year Ended June 30, 2020
CITY OF NEWPORT BEACH
Other Governmental Funds
Combining Statement of Revenues,
Expenditures and Changes in Fund Balances
172
Special Revenue
CARES Small
Business Assessment Facilities
Grant District Fire Station Maintenance
Revenues:
Other taxes -$-$ -$ -$
Intergovernmental ----
Licenses, permits and fees ----
Investment income 1,951 70,696 236,956 72,723
Net increase in fair value of investments 1,668 39,488 202,571 62,170
Donations ----
Other -5,237,479 --
Total revenues 3,619 5,347,663 439,527 134,893
Expenditures:
Current:
Public safety - - - -
Public works - 3,293,522 - -
Community development - ---
Community services - -- -
Capital outlay - -1,039,580 1,374,718
Debt service:-
Principal - -- -
Interest and fiscal charges - -- -
Total expenditures -3,293,522 1,039,580 1,374,718
Excess (deficiency) of revenues
over expenditures 3,619 2,054,141 (600,053) (1,239,825)
Other financing sources (uses):
Transfers in -88,804 -2,301,391
Transfers out ----
Total other financing sources (uses)-88,804 -2,301,391
Net change in fund balances 3,619 2,142,945 (600,053) 1,061,566
Fund balances (deficits), beginning -1,931,672 11,919,505 1,495,981
Fund balances (deficits), ending 3,619$4,074,617$ 11,319,452$ 2,557,547$
(continued)
Page 4 of 8
Capital Projects
Combining Statement of Revenues,
Expenditures and Changes in Fund Balances
Other Governmental Funds
For the Year Ended June 30, 2020
CITY OF NEWPORT BEACH
173
Newport
Civic Center Sunset Strategic Uptown
and Park Ridge Park Planning Undergrounding
Revenues:
Other taxes -$ -$ -$ -$
Intergovernmental - - - -
Licenses, permits and fees - - - -
Investment income 34,075 2,126 3,096 65
Net increase in fair value of investments 29,130 1,818 2,646 56
Donations - - - -
Other - - - -
Total revenues 63,205 3,944 5,742 121
Expenditures:
Current:
Public safety - - - -
Public works - - - -
Community development - - - -
Community services - - - -
Capital outlay 4,302 3,995 - -
Debt service:
Principal - - - -
Interest and fiscal charges 1,505 - - -
Total expenditures 5,807 3,995 - -
Excess (deficiency) of revenues
over expenditures 57,398 (51) 5,742 121
Other financing sources (uses):
Transfers in - 7,515 109,199 -
Transfers out - - - -
Total other financing sources (uses)- 7,515 109,199 -
Net change in fund balances 57,398 7,464 114,941 121
Fund balances (deficits), beginning 1,720,114 98,487 42,298 3,181
Fund balances (deficits), ending 1,777,512$ 105,951$ 157,239$ 3,302$
(continued)
Capital Projects
Page 5 of 8
CITY OF NEWPORT BEACH
Other Governmental Funds
Combining Statement of Revenues,
Expenditures and Changes in Fund Balances
For the Year Ended June 30, 2020
174
Balboa Village
Parks and West Newport Parking
Misc Facilities Community Community Management
Financing Centers Center District
Revenues:
Other taxes -$ -$ -$ -$
Intergovernmental ----
Licenses, permits and fees ---381,399
Investment income 384 83,828 6,778 18,765
Net increase in fair value of investments 329 71,663 5,794 16,042
Donations ----
Other ----
Total revenues 713 155,491 12,572 416,206
Expenditures:
Current:
Public safety - - - -
Public works - - - -
Community development ----
Community services - - - -
Capital outlay 29,149 693,290 - 131,594
Debt service:
Principal - - - -
Interest and fiscal charges - - - -
Total expenditures 29,149 693,290 -131,594
Excess (deficiency) of revenues
over expenditures (28,436) (537,799) 12,572 284,612
Other financing sources (uses):
Transfers in 43,685 110,000 --
Transfers out ----
Total other financing sources (uses)43,685 110,000 --
Net change in fund balances 15,249 (427,799) 12,572 284,612
Fund balances (deficits), beginning (253) 4,267,482 331,709 759,715
Fund balances (deficits), ending 14,996$ 3,839,683$ 344,281$ 1,044,327$
(continued)
Capital Projects
CITY OF NEWPORT BEACH
Other Governmental Funds
Combining Statement of Revenues,
Expenditures and Changes in Fund Balances
For the Year Ended June 30, 2020
Page 6 of 8
175
Unrestricted
Misc Neighborhood Junior Capital
SAH Projects Enhancement Lifeguards Improvements
Revenues:
Other taxes -$ -$ -$ -$
Intergovernmental ----
Licenses, permits and fees ----
Investment income -123,749 201 -
Net increase in fair value of investments -105,792 171 -
Donations ----
Other ----
Total revenues -229,541 372 -
Expenditures:
Current:
Public safety - - - -
Public works - - - -
Community development ----
Community services - - - -
Capital outlay - 1,836,798 100,509 5,391,888
Debt service:
Principal - - - -
Interest and fiscal charges - - - -
Total expenditures -1,836,798 100,509 5,391,888
Excess (deficiency) of revenues
over expenditures -(1,607,257) (100,137) (5,391,888)
Other financing sources (uses):
Transfers in -5,025,724 50,000 6,167,254
Transfers out ----
Total other financing sources (uses)-5,025,724 50,000 6,167,254
Net change in fund balances -3,418,467 (50,137) 775,366
Fund balances (deficits), beginning -1,542,806 -7,814,640
Fund balances (deficits), ending -$ 4,961,273$ (50,137)$ 8,590,006$
(continued)
Capital Projects
CITY OF NEWPORT BEACH
Other Governmental Funds
Combining Statement of Revenues,
Expenditures and Changes in Fund Balances
For the Year Ended June 30, 2020
Page 7 of 8
176
Total
Other
Ackerman Governmental
Bay Dredging Donation Funds
Revenues:
Other taxes -$ -$719,738$
Intergovernmental --5,294,581
Licenses, permits and fees --814,207
Investment income 107,311 24,125 1,219,649
Net increase in fair value of investments 91,738 20,624 1,021,711
Donations --9,450
Other --5,294,030
Total revenues 199,049 44,749 14,373,366
Expenditures:
Current:
Public safety - - 418,070
Public works - - 3,702,793
Community development -4,900 106,413
Community services - 9,307 45,333
Capital outlay - -16,083,517
Debt service:
Principal - - 171,000
Interest and fiscal charges - - 16,395
Total expenditures -14,207 20,543,521
Excess (deficiency) of revenues
over expenditures 199,049 30,542 (6,170,155)
Other financing sources (uses):
Transfers in --13,914,312
Transfers out --(110,000)
Total other financing sources (uses)--13,804,312
Net change in fund balances 199,049 30,542 7,634,157
Fund balances (deficits), beginning 5,251,832 1,185,880 59,092,210
Fund balances (deficits), ending 5,450,881$ 1,216,422$ 66,726,367$
Page 8 of 8
Permanent Funds
CITY OF NEWPORT BEACH
Other Governmental Funds
Combining Statement of Revenues,
Expenditures and Changes in Fund Balances
For the Year Ended June 30, 2020
177
Variance with
Final Budget
Positive
Original Final Actual (Negative)
Revenues:
Intergovernmental 2,291,196$ 1,794,699$ 1,992,467$ 197,768$
Investment income 9,133 9,133 64,296 55,163
Net increase in fair value of investments - - 54,966 54,966
Total revenues 2,300,329 1,803,832 2,111,729 307,897
Expenditures:
Capital outlay - 5,120,587 2,341,070 2,779,517
Net change in fund balance 2,300,329 (3,316,755) (229,341) 3,087,414
Fund balance, beginning 2,952,062 2,952,062 2,952,062 -
Fund balance, ending 5,252,391$ (364,693)$ 2,722,721$ 3,087,414$
CITY OF NEWPORT BEACH
Budgetary Comparison Schedule
State Gas Tax Special Revenue Fund
For the Year Ended June 30, 2020
Budgeted Amounts
178
Variance with
Final Budget
Positive
Original Final Actual (Negative)
Revenues:
Intergovernmental 1,443,005$ 1,284,900$ 1,509,947$ 225,047$
Investment income - - 38,853 38,853
Net increase in fair value of investments - - 33,214 33,214
Total revenues 1,443,005 1,284,900 1,582,014 297,114
Expenditures:
Capital outlay - 4,637,397 1,858,283 2,779,114
Net change in fund balance 1,443,005 (3,352,497) (276,269) 3,076,228
Fund balance, beginning 1,884,421 1,884,421 1,884,421 -
Fund balance, ending 3,327,426$ (1,468,076)$ 1,608,152$ 3,076,228$
CITY OF NEWPORT BEACH
Budgetary Comparison Schedule
SB1 Gas Tax RMRA Fund
For the Year Ended June 30, 2020
Budgeted Amounts
179
Variance with
Final Budget
Positive
Original Final Actual (Negative)
Revenues:
Intergovernmental -$ -$ 99,712$ 99,712$
Investment income 6,333 6,333 16,108 9,775
Net increase in fair value of investments - - 13,770 13,770
Total revenues 6,333 6,333 129,590 123,257
Expenditures:
Public safety 40,000 40,000 18,633 21,367
Net change in fund balance (33,667) (33,667) 110,957 144,624
Fund balance, beginning 751,697 751,697 751,697 -
Fund balance, ending 718,030$ 718,030$ 862,654$ 144,624$
Budgeted Amounts
CITY OF NEWPORT BEACH
Budgetary Comparison Schedule
Asset Forfeiture Special Revenue Fund
For the Year Ended June 30, 2020
180
Variance with
Final Budget
Positive
Original Final Actual (Negative)
Revenues:
Intergovernmental -$ 198,423$ 193,104$ (5,319)$
Expenditures:
Public safety - 198,423 193,104 5,319
Net change in fund balance - - - -
Fund balance, beginning - - - -
Fund balance, ending -$ -$ -$ -$
Budgeted Amounts
CITY OF NEWPORT BEACH
Budgetary Comparison Schedule
OTS DUI Grant Special Revenue Fund
For the Year Ended June 30, 2020
181
Variance with
Final Budget
Positive
Original Final Actual (Negative)
Revenues:
Licenses, permits and fees 224,769$ 224,769$ 299,380$ 74,611$
Investment income 25,559 25,559 50,023 24,464
Net increase in fair value of investments - - 42,763 42,763
Total revenues 250,328 250,328 392,166 141,838
Expenditures:
Capital outlay - 365,790 - 365,790
Net change in fund balance 250,328 (115,462) 392,166 507,628
Fund balance, beginning 2,244,796 2,244,796 2,244,796 -
Fund balance, ending 2,495,124$ 2,129,334$ 2,636,962$ 507,628$
CITY OF NEWPORT BEACH
Budgetary Comparison Schedule
Circulation and Transportation Special Revenue Fund
For the Year Ended June 30, 2020
Budgeted Amounts
182
Variance with
Final Budget
Positive
Original Final Actual (Negative)
Revenues:
Licenses, permits and fees 202,950$ 200,000$ 133,428$ (66,572)$
Investment income 3,697 3,697 9,449 5,752
Net increase in fair value of investments - - 8,078 8,078
Total revenues 206,647 203,697 150,955 (52,742)
Expenditures:
Capital outlay - 376,851 8,490 368,361
Excess (deficiency) of revenues
over expenditures 206,647 (173,154) 142,465 315,619
Other financing (uses):
Transfers out - (110,000) (110,000) -
Net change in fund balance 206,647 (283,154) 32,465 315,619
Fund balance, beginning 464,740 464,740 464,740 -
Fund balance, ending 671,387$ 181,586$ 497,205$ 315,619$
Budgeted Amounts
CITY OF NEWPORT BEACH
Budgetary Comparison Schedule
Building Excise Tax Special Revenue Fund
For the Year Ended June 30, 2020
183
Variance with
Final Budget
Positive
Original Final Actual (Negative)
Revenues:
Intergovernmental 359,743$ 367,434$ 287,403$ (80,031)$
Expenditures:
Community development 117,311 128,602 101,513 27,089
Capital outlay - 52,942 - 52,942
Debt service:
Principal 160,000 171,000 171,000 -
Interest and fiscal charges 17,561 14,890 14,890 -
Total expenditures 294,872 367,434 287,403 80,031
Net change in fund balance 64,871 - - -
Fund balance, beginning - - - -
Fund balance, ending 64,871$ -$ -$ -$
CITY OF NEWPORT BEACH
Budgetary Comparison Schedule
Community Development Block Grant Special Revenue Fund
For the Year Ended June 30, 2020
Budgeted Amounts
184
Variance with
Final Budget
Positive
Original Final Actual (Negative)
Revenues:
Intergovernmental 100,000$ 100,000$ 110,630$ 10,630$
Investment income 12,395 12,395 23,152 10,757
Net increase in fair value of investments - - 19,792 19,792
Total revenues 112,395 112,395 153,574 41,179
Expenditures:
Capital outlay - 350,000 7,002 342,998
Net change in fund balance 112,395 (237,605) 146,572 384,177
Fund balance, beginning 1,075,913 1,075,913 1,075,913 -
Fund balance, ending 1,188,308$ 838,308$ 1,222,485$ 384,177$
CITY OF NEWPORT BEACH
Budgetary Comparison Schedule
Air Quality Management District Special Revenue Fund
For the Year Ended June 30, 2020
Budgeted Amounts
185
Variance with
Final Budget
Positive
Original Final Actual (Negative)
Revenues:
Other taxes 655,257$ 655,257$ 719,738$ 64,481$
Investment income 109,130 109,130 167,352 58,222
Net increase in fair value of investments - - 143,066 143,066
Other revenue 40,000 40,000 34,351 (5,649)
Total revenues 804,387 804,387 1,064,507 260,120
Expenditures:
Public works 576,030 576,030 409,271 166,759
Capital outlay - 6,610 - 6,610
Total expenditures 576,030 582,640 409,271 173,369
Excess of revenues
over expenditures 228,357 221,747 655,236 433,489
Other financing sources:
Transfers in - 10,740 10,740 -
Net change in fund balance 228,357 232,487 665,976 433,489
Fund balance, beginning 7,939,208 7,939,208 7,939,208 -
Fund balance, ending 8,167,565$ 8,171,695$ 8,605,184$ 433,489$
Budgeted Amounts
CITY OF NEWPORT BEACH
Budgetary Comparison Schedule
Environmental Liability Special Revenue Fund
For the Year Ended June 30, 2020
186
Variance with
Final Budget
Positive
Original Final Actual (Negative)
Revenues:
Intergovernmental 165,000$ 165,000$ 206,333$ 41,333$
Expenditures:
Public safety 165,000 165,000 206,333 (41,333)
Net change in fund balance - - - -
Fund balance, beginning - - - -
Fund balance, ending -$ -$ -$ -$
Budgeted Amounts
CITY OF NEWPORT BEACH
Budgetary Comparison Schedule
Supplemental Law Enforcement Special Revenue Fund
For the Year Ended June 30, 2020
187
Variance with
Final Budget
Positive
Original Final Actual (Negative)
Revenues:
Intergovernmental 2,265,834$ 5,079,199$ 894,985$ (4,184,214)$
Investment income 27,670 27,670 36,829 9,159
Net increase in fair value of investments - - 31,486 31,486
Donations 500,000 507,500 9,450 (498,050)
Other - 1,710,931 22,200 (1,688,731)
Total revenues 2,793,504 7,325,300 994,950 (4,641,619)
Expenditures:
Capital outlay - 6,806,562 1,262,849 5,543,713
Net change in fund balance 2,793,504 518,738 (267,899) (786,637)
Fund balance, beginning 2,095,000 2,095,000 2,095,000 -
Fund balance, ending 4,888,504$ 2,613,738$ 1,827,101$ (786,637)$
CITY OF NEWPORT BEACH
Budgetary Comparison Schedule
Contributions Fund Special Revenue Fund
For the Year Ended June 30, 2020
Budgeted Amounts
188
Variance with
Final Budget
Positive
Original Final Actual (Negative)
Revenues:
Investment income 11,420$ 11,420$ 26,758$ 15,338$
Net increase in fair value of investments - - 22,876 22,876
Total revenues 11,420 11,420 49,634 38,214
Expenditures:
Community services 147,000 147,000 36,026 110,974
Net change in fund balance (135,580) (135,580) 13,608 149,188
Fund balance, beginning 1,319,324 1,319,324 1,319,324 -
Fund balance, ending 1,183,744$ 1,183,744$ 1,332,932$ 149,188$
CITY OF NEWPORT BEACH
Budgetary Comparison Schedule
FIIN Special Revenue Fund
For the Year Ended June 30, 2020
Budgeted Amounts
189
Variance with
Final Budget
Positive
Original Final Actual (Negative)
Revenues:
Intergovernmental -$ 2,123,427$ -$ (2,123,427)$
Investment income - -1,951 1,951
Net increase in fair value of investments - -1,668 1,668
Total revenues - 2,123,427 3,619 (2,119,808)
Expenditures:
Community services - 2,123,427 - -
Net change in fund balance - - 3,619 3,619
Fund balance, beginning - - - -
Fund balance, ending -$ -$ 3,619$ 3,619$
CITY OF NEWPORT BEACH
Budgetary Comparison Schedule
CARES Small Business Grant Special Revenue Fund
For the Year Ended June 30, 2020
Budgeted Amounts
190
FINANCIAL SECTION
FINANCIAL SECTIONFINANCIAL SECTIONSUPPLEMENTARY INFORMATION
INTERNAL SERVICE FUNDS
191
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192
INTERNAL SERVICE FUNDS
The Internal Service Funds are used to allocate the cost of providing
goods and services by one department to other departments on a cost
reimbursement basis.
The City of Newport Beach Internal Service Funds are listed below:
The Insurance Reserve Fund is used to account for the City's self-
insured general liability and workers' compensation program.
The Compensated Absences Fund is used to account for the City’s
accumulated liability for compensated absences.
The Retiree Insurance Fund is used to account for the cost of providing
post-employment health care benefits.
The Equipment Maintenance Fund is used to account for the cost of
maintaining and replacing the City’s rolling stock fleet, parking equipment,
coordinated communications system equipment, fire equipment and recreation
equipment.
The Information Technology Fund is used to account for the cost of
maintaining and replacing the City’s computers, printers, copiers and
telecommunication services to other departments.
193
Total
Insurance Compensated Retiree Equipment Information Internal
Assets Reserve Absences Insurance Maintenance Technology Service Funds
Current assets:
Cash and investments $ 35,082,745 $ 5,376,909 $ 791,893 $ 15,196,621 $ 9,733,164 $ 66,181,332
Receivables:
Accounts (net of allowance)1,750,877 -35,763 9,426 - 1,796,066
Intergovernmental receivables ---525,135 -525,135
Inventories ---413,015 -413,015
Prepaid items 43,270 -254,924 509,902 176,284 984,380
Total current assets 36,876,892 5,376,909 1,082,580 16,654,099 9,909,448 69,899,928
Noncurrent assets:
Capital assets:
Equipment --- 37,331,192 3,406,137 40,737,329
Structures ---39,581 -39,581
Software ----3,603,419 3,603,419
Work in progress ----299,296 299,296
Less accumulated depreciation --- (23,562,564) (5,236,784) (28,799,348)
Total capital assets (net of
accumulated depreciation)--- 13,808,209 2,072,068 15,880,277
Total assets 36,876,892 5,376,909 1,082,580 30,462,308 11,981,516 85,780,205
Deferred outflows of resources:
Deferred amount from pension plans ---322,229 645,869 968,098
Deferred amount from OPEB ---85,674 171,724 257,398
Total deferred outflows of resources ---407,903 817,593 1,225,496
Liabilities
Current liabilities:
Accounts payable 48,219 307,731 5,380 193,010 298,045 852,385
Accrued payroll 8,628 -150,384 25,580 69,404 253,996
Due to other funds --367,712 --367,712
Workers' compensation - current 2,867,523 ----2,867,523
General liability - current 2,694,118 ----2,694,118
Compensated absences - current - 4,022,771 --- 4,022,771
Total current liabilities 5,618,488 4,330,502 523,476 218,590 367,449 11,058,505
Noncurrent liabilities:
Workers' compensation 12,653,477 ----12,653,477
General liability 5,266,830 ----5,266,830
Compensated absences - 9,070,548 --- 9,070,548
Net pension liability --- 2,065,010 4,139,113 6,204,123
Net OPEB liability ---255,745 512,619 768,364
Total noncurrent liabilities 17,920,307 9,070,548 - 2,320,755 4,651,732 33,963,342
Total liabilities 23,538,795 13,401,050 523,476 2,539,345 5,019,181 45,021,847
Deferred inflows of resources:
Deferred amount from pension plans ---44,799 89,793 134,592
Deferred amount from OPEB ---6,361 12,751 19,112
Total deferred inflows of resources ---51,160 102,544 153,704
Net Position
Invested in capital assets --- 14,286,787 2,072,068 16,358,855
Unrestricted 13,338,097 (8,024,141)559,104 13,992,919 5,605,316 25,471,295
Total net position $ 13,338,097 $ (8,024,141) $ 559,104 $ 28,279,706 $ 7,677,384 $ 41,830,150
CITY OF NEWPORT BEACH
Internal Service Funds
Combining Statement of Net Position
June 30, 2020
194
Total
Insurance Compensated Retiree Equipment Information Internal
Reserve Absences Insurance Maintenance Technology Service Funds
Operating revenues:
Charges for services $ 11,224,997 $ 2,625,002 $ 3,852,251 $ 5,736,361 $ 7,149,139 $ 30,587,750
Intergovernmental ---555,135 -555,135
Retiree reimbursements --311,356 --311,356
Employee contributions --73,580 --73,580
Other 1,348,022 -709,149 58,579 222 2,115,972
Total operating revenues 12,573,019 2,625,002 4,946,336 6,350,075 7,149,361 33,643,793
Operating expenses:
Salaries and wages --5,378 1,205,281 2,839,219 4,049,878
Depreciation --- 2,837,462 711,082 3,548,544
Professional services ---12,079 290,129 302,208
Maintenance and supplies ---936,980 1,447,284 2,384,264
Fleet parts and supplies ---353,635 -353,635
Telecommunication ----169,443 169,443
Hardware ----372,386 372,386
Software ----94,490 94,490
Fire equipment ---525,135 -525,135
Workers' compensation 1,646,315 ---- 1,646,315
Claims and judgments 6,559,117 ---- 6,559,117
Compensated absences - 2,924,542 --- 2,924,542
OPEB -- 4,924,751 -- 4,924,751
Total operating expenses 8,205,432 2,924,542 4,930,129 5,870,572 5,924,033 27,854,708
Operating income (loss)4,367,587 (299,540)16,207 479,503 1,225,328 5,789,085
Nonoperating revenues:
Investment income 681,135 97,528 12,292 331,502 182,202 1,304,659
Net Increase in fair value of investments 582,294 83,375 10,509 283,397 155,763 1,115,338
Gain on sale of capital assets ---158,449 -158,449
Total nonoperating revenues 1,263,429 180,903 22,801 773,348 337,965 2,578,446
Income (loss) before transfers 5,631,016 (118,637)39,008 1,252,851 1,563,293 8,367,531
Transfers in 1,000,000 ---- 1,000,000
Transfer out ----(610,000) (610,000)
Total transfers 1,000,000 --- (610,000)390,000
Change in net position 6,631,016 (118,637)39,008 1,252,851 953,293 8,757,531
Net position, beginning 6,707,081 (7,905,504)520,096 27,026,855 6,724,091 33,072,619
Net position, ending $ 13,338,097 $ (8,024,141) $ 559,104 $ 28,279,706 $ 7,677,384 $ 41,830,150
CITY OF NEWPORT BEACH
Internal Service Funds
Combining Statement of Revenues, Expenses
and Changes in Net Position
For the Year Ended June 30, 2020
195
Total
Insurance Compensated Retiree Equipment Information Internal
Reserve Absences Insurance Maintenance Technology Service Funds
Cash flows from operating activities
Receipts from user departments $ 9,474,120 2,625,002$ $ 4,154,051 $ 5,728,110 $ 7,149,139 $ 29,130,422
Payments to employees (2,391,534) (2,233,656)- (1,147,489) (2,714,064) (8,486,743)
Payments to suppliers (5,635,249)- (2,686,723) (2,407,011) (2,195,175) (12,924,158)
Other operating cash receipts 1,348,022 -782,729 88,579 222 2,219,552
Net cash provided by operating activities 2,795,359 391,346 2,250,057 2,262,189 2,240,122 9,939,073
Cash flows from noncapital financing activities:
Cash received from other funds 1,000,000 ----1,000,000
Cash paid to other funds -- (1,480,965)- (610,000) (2,090,965)
Net cash provided (used) by noncapital financing activities 1,000,000 -(1,480,965)-(610,000)(1,090,965)
Cash flows from capital and related financing activities:
Acquisition of capital assets - - - (3,220,726) (351,380) (3,572,106)
Proceeds from sale of capital assets - - - 158,449 - 158,449
Net cash (used) for capital and related financing activities - - - (3,062,277) (351,380) (3,413,657)
Cash flows from investing activities:
Investment income 1,263,429 180,903 22,801 614,899 337,965 2,419,997
Net cash provided by investing activities 1,263,429 180,903 22,801 614,899 337,965 2,419,997
Net increase (decrease) in cash and cash equivalents 5,058,788 572,249 791,893 (185,189) 1,616,707 7,854,448
Cash and cash equivalents, beginning 30,023,957 4,804,660 - 15,381,810 8,116,457 58,326,884
Cash and cash equivalents, ending $ 35,082,745 $ 5,376,909 791,893$ 15,196,621$ 9,733,164$ 66,181,332$
Reconciliation to the statement of net position:
Cash and investments reported on statement of net position 35,082,745$ 5,376,909$ 791,893$ 15,196,621$ 9,733,164$ 66,181,332$
Cash and cash equivalents 35,082,745$ 5,376,909$ 791,893$ 15,196,621$ 9,733,164$ 66,181,332$
Reconciliation of operating income (loss) to net cash
provided by operating activities:
Operating income (loss) $ 4,367,587 $ (299,540) $ 16,207 $ 479,503 $ 1,225,328 $ 5,789,085
Adjustments to reconcile operating income (loss)
to net cash provided by operating activities:
Depreciation - - - 2,837,462 711,082 3,548,544
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable (1,750,877)- 2,231,994 (8,251)-472,866
(Increase) decrease in intergovernmental receivable ---(525,135)-(525,135)
Decrease in inventories ---26,025 -26,025
(Increase) decrease in prepaid items (43,270)-(10,763)(509,902)95,607 (468,328)
Increase (decrease) in accounts payable and accrued payroll (38,122)166,544 12,619 (92,287)98,311 147,065
(Decrease) in workers' compensation (749,000)----(749,000)
Increase in general liability 1,009,041 ----1,009,041
Increase in compensated absences -524,342 ---524,342
Increase in net pension liability and deferred cash flows ---84,236 168,845 253,081
(Decrease) in net OPEB liability and deferred cash flows --(29,462)(59,051)(88,513)
Total adjustments (1,572,228)690,886 2,233,850 1,782,686 1,014,794 4,149,988
Net cash provided by operating activities $ 2,795,359 $ 391,346 $ 2,250,057 $ 2,262,189 $ 2,240,122 $ 9,939,073
Noncash investing, capital, and financing activities:
Net increase in fair value of investments $ 582,294 $ 83,375 $ 10,509 $ 283,397 $ 155,763 $ 1,115,338
Total of noncash activities $ 582,294 $ 83,375 $ 10,509 $ 283,397 $ 155,763 $ 1,115,338
CITY OF NEWPORT BEACH
Combining Statement of Cash Flows
For the Year Ended June 30, 2020
Internal Service Funds
196
FINANCIAL SECTION
FINANCIAL SECTIONFINANCIAL SECTIONSUPPLEMENTARY INFORMATION
FIDUCIARY FUNDS
197
FIDUCIARY FUNDS
Fiduciary Funds are used to account for assets held by the City in a trustee
capacity, or as an agent for other government entities, private
organizations, or individuals.
The City of Newport Beach Fiduciary Funds are listed below:
The Special Assessment District Fund is used to account for funds received
from affected property owners and payable to holders of 1911 Act, 1915 Act and
other special assessment bonds.
The Business Improvement District Fund is used to account for monies
collected from local business districts for district property improvements and
business enhancement.
198
Special
Assessment Business
Assets District Improvement Totals
Cash and investments 299,283$ 314,660$ 613,943$
Restricted cash and investments with fiscal agent 1,752,685 - 1,752,685
Receivable:
Interest 1,124 - 1,124
Total assets 2,053,092$ 314,660$ 2,367,752$
Liabilities
Due to bondholders 2,053,051$ -$ 2,053,051$
Due to others 41 314,660 314,701
Total liabilities 2,053,092$ 314,660$ 2,367,752$
CITY OF NEWPORT BEACH
Agency Funds
Combining Statement of Fiduciary Assets and Liabilities
June 30, 2020
199
Balance Balance
June 30, 2019 Additions Deductions June 30, 2020
Special Assessment District:
Assets
Cash and investments 405,087$ 1,219,856$ (1,325,660)$ 299,283$
Restricted cash and investments with fiscal agent 2,016,952 1,401,713 (1,665,980) 1,752,685
Receivable:
Interest 463 1,124 (463) 1,124
Total assets 2,422,502$ 2,622,693$ (2,992,103)$ 2,053,092$
Liabilities
Due to bondholders 2,422,448$ 4,497,576$ (4,866,973)$ 2,053,051$
Due to others 54 1,314,532 (1,314,545) 41
Total Liabilities 2,422,502$ 5,812,108$ (6,181,518)$ 2,053,092$
Business Improvement District:
Assets
Cash and investments 613,526$ 4,173,606$ (4,472,472)$ 314,660$
Liabilities
Due to others 613,526$ 4,173,606$ (4,472,472)$ 314,660$
Totals - All Agency Funds:
Assets
Cash and investments 1,018,613$ 5,393,462$ (5,798,132)$ 613,943$
Restricted cash and investments with fiscal agent 2,016,952 1,401,713 (1,665,980) 1,752,685
Receivable 463 1,124 (463) 1,124
Total assets 3,036,028$ 6,796,299$ (7,464,575)$ 2,367,752$
Liabilities
Due to bondholders 2,422,448$ 4,497,576$ (4,866,973)$ 2,053,051$
Due to others 613,580 5,488,138 (5,787,017) 314,701
Total liabilities 3,036,028$ 9,985,714$ (10,653,990)$ 2,367,752$
CITY OF NEWPORT BEACH
Statement of Changes in Fiduciary Net Position
Agency Funds
For the Year Ended June 30, 2020
200
STATISTICAL SECTIONSTATISTICAL SECTION
201
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202
FINANCIAL TRENDS
This section of the City of Newport Beach’s Comprehensive Annual Financial
Report (CAFR) presents detailed information as a context for understanding what
the information in the financial statements, note disclosures, and required
supplementary information says about the City’s overall financial health. The
statistical information presented herein is un-audited.
The following schedules contain trend information illustrating how the City’s
financial performance and well-being has changed over time:
Net Position by Component
Changes in Net Position
Fund Balances of Governmental Funds
Changes in Fund Balance of Governmental Funds
Sources: Unless otherwise noted, the information in these schedules is derived from the
Comprehensive Annual Financial Reports and underlying accounting records for the relevant
years.
203
2011 20121 2013 20142
Net investment in capital assets 2,087,403,003$ 2,098,349,998$ 2,124,797,794$ 2,148,942,928$
Restricted 63,940,282 61,923,719 72,119,674 59,998,344
Unrestricted 67,500,916 82,515,232 77,966,414 (184,990,765)
2,218,844,201$ 2,242,788,949$ 2,274,883,882$ 2,023,950,507$
Business-type activities:
Net investment in capital assets 108,976,459$ 108,981,237$ 111,177,135$ 115,948,522$
Restricted - - - -
Unrestricted 9,442,988 15,089,798 19,172,398 13,160,611
118,419,447$ 124,071,035$ 130,349,533$ 129,109,133$
Primary government:
Net investment in capital assets 2,196,379,462$ 2,207,331,235$ 2,235,974,929$ 2,264,891,450$
Restricted 63,940,282 61,923,719 72,119,674 59,998,344
Unrestricted 76,943,904 97,605,030 97,138,812 (171,830,154)
2,337,263,648$ 2,366,859,984$ 2,405,233,415$ 2,153,059,640$
1
2
3
4
5
6
Governmental activities:
Total governmental activities
Total business-type activities
Total primary government
Reflects restatement of net position due to deferred outflow adjustments related to fiscal year ended June 30, 2017.
Reflects restatement of net position due to implementation of GASB 75 in fiscal year ended June 30, 2018.
Reflects restatement of net position due to adjustments for capital assets and compensated absences liability in fiscal
year ended June 30, 2019.
The City of Newport Beach implemented GASB 63 and GASB 65 for the fiscal year ended June 30, 2013.
The City of Newport Beach implemented GASB 68 for the fiscal year ended June 30, 2015.
The City of Newport Beach implemented GASB 75 for the fiscal year ended June 30, 2018.
CITY OF NEWPORT BEACH
Net Position by Component
Last Ten Fiscal Years
(accrual basis of accounting)
Fiscal Year
Reflects restatement of net position due to the implementation of GASB 68 in fiscal year ended June 30, 2015 and an
adjustment to record deferred amount from gain on refunding.
Reflects restatement of net position due to compensated absences and deferred outflow adjustments related to fiscal
year ended June 30, 2016.
Reflects restatement of net position due to the implementation of GASB 65 in fiscal year ended June 30, 2013.
204
20153 20164 20175 20186 2019 2020
2,176,644,408$ 2,193,773,102$ 2,201,552,683$ 2,208,832,391$ 2,218,040,304$ 2,217,852,660$
45,689,702 44,033,677 45,753,736 49,791,908 56,426,811 67,708,225
(150,532,773) (130,468,268) (133,461,197) (122,024,754) (102,035,181) (90,214,086)
2,071,801,337$ 2,107,338,511$ 2,113,845,222$ 2,136,599,545$ 2,172,431,934$ 2,195,346,799$
113,914,514$ 117,055,576$ 116,238,944$ 119,375,596$ 119,346,350$ 120,291,689$
- - - - - -
21,756,124 23,430,189 28,890,311 29,183,382 30,331,669 30,276,662
135,670,638$ 140,485,765$ 145,129,255$ 148,558,978$ 149,678,019$ 150,568,351$
2,290,558,922$ 2,310,828,678$ 2,317,791,627$ 2,328,207,987$ 2,337,386,654$ 2,338,144,349$
45,689,702 44,033,677 45,753,736 49,791,908 56,426,811 67,708,225
(128,776,649) (107,038,079) (104,570,886) (92,841,372) (71,703,512) (59,937,424)
2,207,471,975$ 2,247,824,276$ 2,258,974,477$ 2,285,158,523$ 2,322,109,953$ 2,345,915,150$
CITY OF NEWPORT BEACH
Net Position by Component
Last Ten Fiscal Years
(accrual basis of accounting)
Fiscal Year
205
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
15,857,397$ 14,325,966$ 15,830,575$ 18,834,165$ 24,558,041$ 19,335,275$ 20,443,569$ 19,011,099$ 20,549,224$ 20,714,050$
78,128,006 75,696,570 83,235,188 87,676,062 96,945,872 91,046,455 102,494,314 107,647,562 111,556,065 119,194,302
40,341,323 48,913,412 47,794,631 42,953,118 45,774,939 45,443,988 54,039,601 47,615,000 53,339,878 60,054,860
8,637,525 9,365,676 9,223,098 10,283,481 10,073,248 9,943,868 12,056,086 12,377,394 11,493,204 12,842,020
17,272,374 21,554,696 22,244,661 21,357,271 22,418,287 22,700,052 26,583,440 27,307,115 27,758,097 26,668,079
5,078,881 8,204,928 7,989,339 7,888,192 7,711,334 7,615,094 7,472,188 7,381,743 7,187,971 7,064,521
Total governmental activities
expenses 165,315,506 178,061,248 186,317,492 188,992,289 207,481,721 196,084,732 223,089,198 221,339,913 231,884,439 246,537,832
19,824,996 18,358,646 20,208,300 22,037,284 21,175,954 21,605,197 22,004,013 23,724,918 26,898,075 27,387,120
3,936,949 3,360,418 3,462,165 3,368,656 3,452,398 3,818,165 4,218,926 4,158,155 4,222,228 4,291,755
Total business-type activities
expenses 23,761,945 21,719,064 23,670,465 25,405,940 24,628,352 25,423,362 26,222,939 27,883,073 31,120,303 31,678,875
Total primary government
expenses 189,077,451 199,780,312 209,987,957 214,398,229 232,110,073 221,508,094 249,312,137 249,222,986 263,004,742 278,216,707
General government 2,722,527 2,593,741 2,759,306 3,046,232 3,647,210 3,722,557 5,089,123 5,355,887 5,887,265 3,846,962
Public safety 15,686,314 16,240,135 16,008,421 19,124,113 19,386,017 19,108,222 19,899,242 20,733,883 21,979,376 22,232,248
Public works 2,938,315 4,576,208 5,019,835 5,517,103 5,276,991 5,319,510 5,214,426 5,789,579 5,778,441 5,054,694
Community development 5,599,737 6,202,080 7,057,010 8,043,390 8,608,645 8,419,588 10,838,114 9,956,226 9,902,445 9,599,848
Community services 8,962,818 14,119,869 13,176,050 13,270,316 13,667,775 13,964,018 13,653,466 13,974,329 13,556,360 16,936,285
Operating Grants and
Contributions: 10,710,266 11,418,147 11,290,989 15,196,696 10,673,286 17,826,914 11,632,188 11,943,941 14,021,506 14,659,016
Capital Grants and
Contributions: 11,101,239 14,838,783 25,613,846 1 563,786 38,157,665 2 2,717,504 27,993,317 2 1,815,464 6,638,356 7,352,407
57,721,216 69,988,962 80,925,457 64,761,636 99,417,589 71,078,313 94,319,876 69,569,309 77,763,749 79,681,460
Water 20,097,227 23,877,685 26,795,767 29,397,882 27,705,129 24,499,952 25,371,307 26,931,193 26,843,751 27,100,429
Wastewater 3,348,433 3,382,905 3,450,638 3,438,670 3,326,362 3,065,762 3,161,114 3,445,772 4,069,265 4,110,815
23,445,660 27,260,590 30,246,405 32,836,552 31,031,491 27,565,714 28,532,421 30,376,965 30,913,016 31,211,244
81,166,876 97,249,552 111,171,862 97,598,188 130,449,080 98,644,027 122,852,297 99,946,274 108,676,765 110,892,704
(107,594,290) (108,072,286) (105,392,035) (124,230,653) (108,064,132) (125,006,419) (128,769,322) (151,770,604) (154,120,690) (166,856,372)
(316,285) 5,541,526 6,575,940 7,430,612 6,403,139 2,142,352 2,309,482 2,493,892 (207,287) (467,631)
(107,910,575)$ (102,530,760)$ (98,816,095)$ (116,800,041)$ (101,660,993)$ (122,864,067)$ (126,459,840)$ (149,276,712)$ (154,327,977)$ (167,324,003)$
1 2013 data varies from trend because of increased capital assets related to contribution from State of California.
2 Data varies from trend because of one-time receipt of developer contributions.
The City of Newport Beach implemented GASB 63 and GASB 65 for the fiscal year ended June 30, 2013.The City of Newport Beach implemented GASB 68 for the fiscal year ended June 30, 2015.
The City of Newport Beach implemented GASB 75 for the fiscal year ended June 30, 2018.
Expenses:
CITY OF NEWPORT BEACH
Changes in Net Position
Last Ten Fiscal Years
(accrual basis of accounting)
Fiscal Year
Governmental activities:
Governmental activities:
General government
Public safety
Public works
Community development
Community services
Interest on long-term debt
Business-type activities:
Water
Wastewater
Program revenues:
Business-type activities
Charges for services:
Total governmental activities
program revenues
Business-type activities:
Charges for services:
Total business-type activities
program revenues
Total primary government
program revenues
Net revenues (expenses):
Governmental activities
Total net revenues (expenses)
206
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
CITY OF NEWPORT BEACH
Changes in Net Position
Last Ten Fiscal Years
(accrual basis of accounting)
Fiscal Year
General revenues and other changes in net position:
Property tax 71,630,345$ 71,546,249$ 81,603,194$ 79,889,346$ 84,121,461$ 91,516,611$ 96,964,060$ 101,593,290$ 108,365,261$ 113,313,535$
Sales tax 18,455,181 20,107,597 20,764,204 23,142,065 24,832,412 33,937,986 33,702,895 36,373,253 37,168,063 36,232,969
Sales tax in-lieu 6,284,266 6,523,492 7,078,517 7,727,876 8,046,424 2,870,474 - - - -
Transient occupancy tax 13,082,451 14,798,191 16,500,285 18,176,369 20,369,158 21,083,199 22,382,361 22,857,737 24,697,446 21,097,384
Business license tax 4,090,634 4,073,725 4,145,666 4,156,130 4,141,282 4,024,386 4,149,016 4,282,935 4,428,440 4,882,419
Franchise tax 3,730,819 3,845,901 3,820,723 3,998,943 4,189,130 4,047,584 4,026,005 4,228,469 4,286,496 4,394,156 Motor vehicle license fees 403,042 42,911 - - - - - - - -
Other taxes 226,257 278,521 286,880 216,604 354,919 327,009 358,209 3,346,987 2,633,720 2,592,369
Investment income 366,081 405,674 219,091 542,915 437,272 584,259 589,001 632,808 2,644,319 2,621,488
Net increase in fair value of investments 369,235 246,119 - 53,783 61,337 376,311 - - 2,234,249 2,520,033
Other 2,601,538 2,789,471 2,748,524 3,803,728 3,161,567 4,001,486 2,290,482 3,416,348 3,495,085 2,116,884
Change in accounting estimates - 8,484,000 - - - - - - - - Capital contributions - 7,352 319,884 - - - - - - - Transfers - -- - - - (3,500,000) - - -
121,239,849 133,149,203 137,486,968 141,707,759 149,714,962 162,769,305 160,962,029 176,731,827 189,953,079 189,771,237
Investment income 52,996 49,718 22,442 128,439 123,445 216,576 77,752 184,906 713,970 732,099
Net increase in fair value of
investments 58,977 67,696 - 18,199 34,921 148,527 - - 612,358 625,864
Other - - - -- 2,375,000 - - - -
Capital contributions - (7,352)(319,884) - - 22,516 - - - - Transfers - - - - - - 3,500,000 - - -
111,973 110,062 (297,442) 146,638 158,366 2,762,619 3,577,752 184,906 1,326,328 1,357,963
121,351,822 133,259,265 137,189,526 141,854,397 149,873,328 165,531,924 164,539,781 176,916,733 191,279,407 191,129,200
13,645,559 25,076,917 32,094,933 17,477,106 41,650,830 37,762,886 32,192,707 24,961,223 35,832,389 22,914,865
(204,312) 5,651,588 6,278,498 7,577,250 6,561,505 4,904,971 5,887,234 2,678,798 1,119,041 890,332
13,441,247$ 30,728,505$ 38,373,431$ 25,054,356$ 48,212,335$ 42,667,857$ 38,079,941$ 27,640,021$ 36,951,430$ 23,805,197$ Total primary government
Governmental activities:
Taxes:
Total governmental activities
Business-type activities:
Total business-type activities
Total primary government
Changes in net position
Governmental activities
Business-type activities
$-
$20,000,000
$40,000,000
$60,000,000
$80,000,000
$100,000,000
$120,000,000
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Primary Revenue Sources
Property Taxes
Sales Tax
Transient Occupancy Taxes
Sales Tax - In Lieu
207
2011 2012 2013 2014
General fund:
Nonspendable 1,031,742$ 7,854,478$ 9,919,486$ 16,316,499$
Restricted 1,681,333 2,263,049 2,410,373 3,939,751
Committed 27,619,902 29,673,333 29,371,507 12,782,235 4
Assigned 11,865,835 19,431,475 6,843,417 1,326,170
Unassigned 20,570,033 20,570,023 32,585,375 51,015,820 4
Total general fund 62,768,845$ 2 79,792,358$ 81,130,158$ 85,380,475$
All other governmental funds:
Nonspendable 5,898,234$ 5,396,436$ 4,697,220$ 4,629,781$
Restricted 36,445,842 30,957,184 27,433,342 33,243,790
Committed 115,923,344 70,500,156 33,961,163 19,513,389
Assigned 5,633,558 - - -
Unassigned (2,988,102) (11,339,671) (15,723,261) (14,291,969)
Total all other governmental funds 160,912,876$ 3 95,514,105$ 50,368,464$ 43,094,991$
Total all governmental funds 223,681,721$ 175,306,463$ 131,498,622$ 128,475,466$
1
2
3
4
5
6
Data varies from trend due to the reclassification of the contingency reserve from committed fund balance to
unassigned fund balance per council approval.
Data varies from trend due to the moving of general fund capital projects to a separate capital project fund.
Data varies from trend due to additional funds set aside for seawall construction and pension related items.
The City of Newport Beach implemented GASB 54 for the fiscal year ending June 30, 2011.
2011 general fund data varies from trend due to $31.3 million transfer from General Fund to Facilities
Financial Planning Reserve Fund.
2011 other governmental funds data varies from trend due to issuance of Civic Center COPs.
Fiscal Year
CITY OF NEWPORT BEACH
Fund Balances of Governmental Funds1
Last Ten Fiscal Years
(modified accrual basis of accounting)
208
2015 2016 2017 2018 2019 2020
15,784,396$ 15,210,896$ 14,434,017$ 14,050,930$ 13,147,221$ 11,864,115$
5,389,810 3,083,133 3,797,009 4,412,302 4,757,437 5,710,434
11,847,852 2,726,020 5 10,570,638 6 13,444,487 13,335,675 2,210,811
1,421,225 4,201,311 567,132 590,368 1,199,682 2,598,828
55,509,258 56,618,041 60,009,244 61,415,049 64,146,123 76,699,284
89,952,541$ 81,839,401$ 5 89,378,040$ 6 93,913,136$ 96,586,138$ 99,083,472$
4,669,269$ 4,629,781$ 4,666,256$ 4,787,243$ 4,715,545$ 4,646,529$
29,842,384 33,662,859 31,950,139 38,629,419 45,958,167 53,310,518
26,159,261 40,248,977 49,510,047 41,731,742 40,732,124 48,032,259
- - - - - -
(12,495,729) (15,422,984) (6,308,331) (376,162) (253) (50,137)
48,175,185$ 63,118,633$ 79,818,111$ 84,772,242$ 91,405,583$ 105,939,169$
138,127,726$ 144,958,034$ 169,196,151$ 178,685,378$ 187,991,721$ 205,022,641$
Fiscal Year
CITY OF NEWPORT BEACH
Fund Balances of Governmental Funds1
Last Ten Fiscal Years
(modified accrual basis of accounting)
$‐
$20,000,000
$40,000,000
$60,000,000
$80,000,000
$100,000,000
$120,000,000
$140,000,000
$160,000,000
$180,000,000
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Fund Balances
Total General Fund
Total all other Governmental Funds
209
2011 2012 2013 2014
Revenues:
Taxes 117,983,765$ 121,710,955$ 134,733,550$ 137,910,879$
Intergovernmental 11,467,471 12,122,963 11,393,589 16,825,839
Licenses, permits and fees 5,198,986 6,691,125 7,682,555 6,659,203
Charges for services 15,285,813 16,020,825 16,254,399 16,864,092
Fines and forfeitures 3,545,229 3,795,787 3,649,532 3,272,951
Investment income 1,045,592 1,142,935 372,514 1,136,062
Net increase in fair value of investments 882,317 704,656 - 124,439
Property income 15,538,387 17,458,143 19,847,371 22,214,256
Donations 1,790,073 13,977,850 587,445 1,170,171
Other 5,091,527 691,125 3,543,894 1,400,048
Total revenues 177,829,160 194,316,364 198,064,849 207,577,940
Expenditures:
Current:
General government 15,424,734 12,896,492 13,671,480 14,471,167
Public safety 74,947,173 75,377,871 80,546,969 82,642,988
Public works 31,442,076 32,399,178 32,451,624 32,414,457
Community development 8,430,813 8,939,825 8,994,710 9,768,928
Community services 15,662,011 19,296,505 18,872,022 19,047,813
Capital outlay 37,645,882 80,617,948 72,133,582 33,572,193
Debt service:
Principal 6,230,080 4,529,854 3,998,000 4,091,000
Interest and fiscal charges 1,179,612 8,320,500 8,152,488 8,052,927
Issuance of debt costs 1,219,071 ---
Total expenditures 192,181,452 242,378,173 238,820,875 204,061,473
(14,352,292) (48,061,809) (40,756,026) 3,516,467
Other financing sources (uses):
Transfers in 58,763,620 24,640,318 47,875,107 41,223,727
Transfers out (58,763,620) (24,953,767) (50,926,922) (47,245,283)
Proceeds from issuance of debt 126,660,000 ---
Proceeds from sale ----
Issuance of debt premium 1,155,300 ---
Proceeds from loan issuance ----
Payment to refunded loan escrow agent ----
127,815,300 (313,449) (3,051,815) (6,021,556)
Net change in fund balances 113,463,008$ (48,375,258)$ (43,807,841)$ (2,505,089)$
Debt service as a percentage of
4.8%8.3%15.8%6.9% noncapital expenditures
Excess (deficiency) of revenues over
(under) expenditures
Total other financing sources (uses)
Fiscal Year
CITY OF NEWPORT BEACH
Changes in Fund Balances of Governmental Funds
Last Ten Fiscal Years
(modified accrual basis of accounting)
210
2015 2016 2017 2018 2019 2020
146,664,903$ 158,386,385$ 162,184,218$ 171,982,240$ 183,455,182$ 182,983,069$
11,813,208 17,262,147 17,073,653 16,148,754 15,818,543 12,672,931
14,676,754 6,571,123 9,844,908 6,405,668 6,302,603 5,783,862
16,914,210 18,827,991 19,197,065 19,828,786 19,472,866 21,125,622
3,732,405 3,684,602 3,590,700 3,181,823 3,347,714 3,509,883
928,729 1,157,539 772,546 1,143,210 3,490,992 3,765,753
177,485 769,460 --2,938,136 3,477,299
21,406,667 22,259,425 23,553,188 25,430,217 26,674,107 25,651,360
22,249,427 4,190,822 16,827,889 414,123 402,709 795,561
6,984,418 2,982,924 2,277,322 2,893,770 5,173,716 5,950,279
245,548,206 236,092,418 255,321,489 247,428,591 267,076,568 265,715,619
14,060,512 14,629,672 15,086,397 16,099,310 16,769,920 15,968,085
94,568,122 96,225,784 98,750,981 109,760,129 116,054,531 118,290,847
33,694,578 36,000,905 35,961,024 38,012,230 44,132,877 45,730,965
9,876,706 10,913,205 11,696,779 12,979,656 12,310,621 12,612,751
20,235,546 21,784,680 23,607,284 25,538,966 26,372,495 24,474,242
47,169,671 31,934,463 30,822,972 24,054,866 26,347,312 20,376,106
4,183,000 4,272,000 4,401,000 3,335,000 3,470,000 3,576,000
7,957,811 7,839,341 7,704,957 7,617,107 7,428,469 7,265,703
------
231,745,946 223,600,050 228,031,394 237,397,264 252,886,225 248,294,699
13,802,260 12,492,368 27,290,095 10,031,327 14,190,343 17,420,920
53,281,956 48,523,132 45,342,446 45,308,862 54,664,532 40,373,981
(57,431,956) (54,185,192) (49,390,226) (45,850,962) (59,548,532) (40,763,981)
------
--995,802 ---
------
1,339,000 -----
(1,339,000) -----
(4,150,000) (5,662,060) (3,051,978) (542,100) (4,884,000) (390,000)
9,652,260$ 6,830,308$ 24,238,117$ 9,489,227$ 9,306,343$ 17,030,920$
6.6%7.2%6.0%5.3%4.8%4.8%
Fiscal Year
CITY OF NEWPORT BEACH
Changes in Fund Balances of Governmental Funds
Last Ten Fiscal Years
(modified accrual basis of accounting)
211
REVENUE CAPACITY
This section of the City of Newport Beach’s Comprehensive Annual Financial
Report (CAFR) presents detailed information as a context for understanding what
the information in the financial statements, note disclosures, and required
supplementary information says about the City’s overall financial health. The
statistical information presented herein is un-audited.
The following schedules present factors affecting the City’s ability to generate its
own revenue and its most significant local revenue source, the property tax:
Assessed Value and Estimated Actual Value of Taxable Property
Direct and Overlapping Property Tax Rates
Principal Property Tax Payers
Property Tax Levies and Collections
Sources: Unless otherwise noted, the information in these schedules is derived from the
Comprehensive Annual Financial Reports and underlying accounting records for the relevant
years.
212
Fiscal Year
Ended June
30 Residential Commercial Other Unsecured
Total Taxable
Assessed Value Change
Total Direct
Tax Rate
2011 30,853,053,683 4,711,084,222 1,516,055,361 1,671,177,215 38,751,370,481 0.24% 1.000%
2012 31,603,505,416 4,504,291,343 1,442,600,505 1,565,104,496 39,115,501,760 0.94% 1.000%
2013 32,522,843,119 4,627,463,458 1,435,546,888 1,597,277,039 40,183,130,504 2.73% 1.000%
2014 34,678,952,381 4,688,189,694 1,489,111,147 1,484,909,241 42,341,162,463 5.37% 1.000%
2015 36,814,891,583 5,007,508,388 1,348,136,131 1,581,520,801 44,752,056,903 5.69% 1.000%
2016 39,263,791,190 5,264,898,550 1,394,764,145 1,465,016,213 47,388,470,098 5.89% 1.000%
2017 41,834,060,284 5,539,551,197 1,398,481,252 1,569,593,832 50,341,686,565 6.23% 1.000%
2018 44,862,969,434 5,953,148,011 1,499,414,812 1,464,683,763 53,780,216,020 6.83% 1.000%
2019 48,246,937,786 6,466,645,074 1,474,416,367 1,513,162,553 57,701,161,781 7.29% 1.000%
2020 50,791,887,238 6,807,750,346 1,552,189,492 1,592,979,478 60,744,806,554 5.27% 1.000%
NOTE:
Source: HdL, Coren & Cone; Avenu Insights & Analytics
CITY OF NEWPORT BEACH
Assessed Value and Estimated Actual Value of Taxable Property
Last Ten Fiscal Years
In 1978, the voters of the State of California passed Proposition 13 which limited property taxes to a total maximum rate of 1% based upon the assessed
value of the property being taxed. Each year, the assessed value of property may be increased by an "inflation factor" (limited to a maximum increase of
2%). With few exceptions, property is only re-assessed as a result of new construction activity or at the time it is sold to a new owner. At that point, the
property is reassessed based upon the added value of the construction or at the purchase price or economic value of the property sold. The assessed
valuation data shown above represents the only data currently available with respect to the actual market value of taxable property and is subject to the
limitations described above.
Secured
213
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
1.000$ 1.000$ 1.000$ 1.000$ 1.000$ 1.000$ 1.000$ 1.000$ 1.000$ 1.000$
Total City Direct Rate 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000
Overlapping Rates:
Water Districts 0.081 0.081 0.081 0.081 0.047 0.047 0.047 0.047 0.047 0.032
0.1548 0.1546 0.1646 0.1702 0.1819 0.1826 0.1730 0.1764 0.1612 0.1726
Total Overlapping Rate 0.236 0.236 0.245 0.251 0.228 0.229 0.219 0.223 0.208 0.205
Total Direct & Overlapping Rate 1.236$ 1.236$ 1.245$ 1.251$ 1.228$ 1.229$ 1.219$ 1.223$ 1.208$ 1.205$
NOTE:
Source: HdL, Coren & Cone; Avenu Insights & Analytics
CITY OF NEWPORT BEACH
Direct and Overlapping Property Tax Rates
(Rate per $100 of assessed value)
Last Ten Fiscal Years
In 1978, California voters passed Proposition 13 which sets the property tax rate at a 1.00% fixed amount. This 1.00% is shared by all
taxing agencies for which the subject property resides within. In addition to the 1.00% fixed amount, property owners are charged taxes as
a percentage of assessed property values for the payment of other debt obligations.
School Districts
City Direct Rates:
City basic rate
Fiscal Year
214
Taxpayer
Taxable Assessed
Value Rank
Percent of Total
City Taxable
Assessed Value
Taxable Assessed
Value Rank
Percent of Total
City Taxable
Assessed Value
The Irvine Company 1,308,633,624$ 1 2.15% 1,943,855,195$ 1 5.02%
PH Finance LLC 301,250,758 2 0.50% N/A - 0.00%
Villas at Fashion Island 262,841,532 3 0.43% N/A - 0.00%
HG Newport Owner LLC 180,030,000 4 0.30% N/A - 0.00%
520 Newport Center Drive LLC 177,543,021 5 0.29% N/A - 0.00%
650 Newport Center Drive LLC 160,971,896 6 0.26% N/A - 0.00%
Newport Bluffs LLC 159,552,819 7 0.26% 137,816,296 3 0.36%
WJ Newport LLC 141,159,898 8 0.23% N/A - 0.00%
UDR Newport Beach North LP 138,091,341 9 0.23% 117,510,707 5 0.30%
Balboa Bay Club Ventures LLC 134,362,404 10 0.22% 126,251,407 4 0.33%
2,964,437,293$ 4.88% 2,325,433,605$ 6.01%
Source: HdL, Coren & Cone; Avenu Insights & Analytics
CITY OF NEWPORT BEACH
Principal Property Taxpayers
Current Year and Nine Years Ago
2020 2011
215
CITY OF NEWPORT BEACH
Property Tax Levies and Collections
Last Ten Fiscal Years
Fiscal Year
Ended June
30
Taxes Levied for
the Fiscal Year Amount
1 Percent of
Levy
Collections in
Subsequent
Years 2 Amount
Percent of
Levy
2011 70,476,893 68,577,472 97.30% 1,069,122 69,646,594 98.82%
2012 71,157,295 69,435,794 97.58% 985,344 70,421,138 98.97%
2013 74,165,333 72,532,734 97.80% 736,983 73,269,717 98.79%
2014 79,195,727 77,758,504 98.19% 650,273 78,408,777 99.01%
2015 83,843,488 82,191,604 98.03% 642,292 82,833,896 98.80%
2016 84,166,940 81,762,526 97.14% 612,863 82,375,389 97.87%
2017 86,264,321 84,019,053 97.40% 574,124 84,593,177 98.06%
2018 92,139,181 90,279,099 97.98% 581,969 90,861,068 98.61%
2019 98,471,700 96,356,203 97.85% 646,203 97,002,406 98.51%
2020 102,636,451 100,701,002 98.11%-3 100,701,002 98.11%
1
2
3
Source: Orange County Auditor Controller's Office
The total amount of Fiscal Year 2020 delinquent taxes collected in subsequent years was not available as of the
date the information was collected for the City's Comprehensive Annual Financial Report.
Collected within the Fiscal
Year of Levy Total Collections to Date
Exclusive of penalty charges
Net collections reflect deductions for refunds and impoundments.
216
DEBT CAPACITY
This section of the City of Newport Beach’s Comprehensive Annual Financial
Report (CAFR) presents detailed information as a context for understanding what
the information in the financial statements, note disclosures, and required
supplementary information says about the City’s overall financial health. The
statistical information presented herein is un-audited.
The following schedules exhibit the City’s levels of outstanding debt over time, to
help readers assess the affordability of the current level of outstanding debt, and
the City’s ability to issue additional debt:
Ratios of Outstanding Debt by Type
Ratios of General Bonded Debt Outstanding
Direct and Overlapping Debt
Legal Debt Margin Information
Sources: Unless otherwise noted, the information in these schedules is derived from the
Comprehensive Annual Financial Reports and underlying accounting records for the relevant
years.
217
Fiscal
Year
Ended
June 30
Certificates of
Participation 1 Note Payable
Pre-Annexation
Agreement CDBG Loan Capital Leases
Purchase
Agreement
Payable
2011 127,744,977 737,854 7,200,000 1,788,000 - 750,000
2012 125,884,424 - 6,000,000 1,686,000 - -
2013 123,073,871 - 4,800,000 1,578,000 - -
2014 120,178,318 - 3,600,000 1,462,000 - -
2015 117,197,765 - 2,400,000 1,339,000 - -
2016 114,137,212 - 1,200,000 1,207,000 - -
2017 110,956,659 - - 1,066,000 - -
2018 107,651,106 - - 916,000 - -
2019 104,220,553 - - 756,000 - -
2020 100,695,000 - - 585,000 - -
1
2 These ratios are calculated using personal income and population for the prior calendar year.
Amounts include any applicable bond premium.
Governmental Activities
Note: This schedule excludes claims and judgments, employee compensated absence, OPEB and Early
Retirement Incentive Plan Liabilities. Details regarding the City's outstanding debt can be found in the notes to
the financial statements.
CITY OF NEWPORT BEACH
Ratios of Outstanding Debt by Type
Last Ten Fiscal Years
218
Total
Governmental
Activities
Water Revenue
Bonds
Total Business-
type Activities
Total Primary
Government
Percentage of
Personal
Income 2
Debt Per
Capita 2
138,220,831 - - 138,220,831 2.34% 1,619
133,570,424 - - 133,570,424 2.30% 1,553
129,451,871 - - 129,451,871 1.85% 1,498
125,240,318 - - 125,240,318 1.81% 1,442
120,936,765 - - 120,936,765 1.77% 1,386
116,544,212 - - 116,544,212 1.77% 1,383
112,022,659 - - 112,022,659 1.66% 1,319
108,567,106 - - 108,567,106 1.48% 1,245
104,976,553 - - 104,976,553 1.36% 1,204
101,280,000 - - 101,280,000 1.24% 1,181
Business-type Activities
CITY OF NEWPORT BEACH
Ratios of Outstanding Debt by Type
Last Ten Fiscal Years
219
Fiscal Year
Ended June 30
Certificates of
Participation1
Amounts
restricted for
debt service Total
Percent of
Assessed
Value2
General
Bonded Debt
Per Capita
2011 127,744,977 (1,488,670) 126,256,307 0.33% 1,479
2012 125,884,424 (2,532,561) 123,351,863 0.32% 1,434
2013 123,073,871 (1,157,250) 121,916,621 0.30% 1,410
2014 120,178,318 (2,352,746) 117,825,572 0.28% 1,356
2015 117,197,765 (2,350,210) 114,847,555 0.26% 1,316
2016 114,137,212 (2,362,904) 111,774,308 0.24% 1,326
2017 110,956,659 (2,364,034) 108,592,625 0.22% 1,279
2018 107,651,106 (2,384,338) 105,266,768 0.20% 1,207
2019 104,220,553 (2,362,228) 101,858,325 0.18% 1,168
2020 100,695,000 (1,159,389) 99,535,611 0.16% 1,160
1
2 Assessed value was used because the actual value of taxable property is not readily available in the
State of California.
CITY OF NEWPORT BEACH
Ratios of General Bonded Debt
Last Ten Fiscal Years
Amounts include any applicable bond premium.
220
City Net Assessed Valuation:60,744,806,554$
Percentage
Applicable (1)Outstanding Debt
6/30/20
Estimated Share of
Overlapping Debt
OVERLAPPING DEBT:
Metropolitan Water District 1.964% 37,300,000$ 732,572$
Coast Community College District 34.373%908,050,757 312,124,287
Rancho Santiago Community College District 2.911%220,164,038 6,408,975
Rancho Santiago Community College District School Facilities Improvement District No. 1 5.495%166,020,000 9,122,799
Laguna Beach Unified School District 15.195%20,005,000 3,039,760
Laguna Beach Unified School District Community Facilities District No. 98-1 100.000%7,760,000 7,760,000
Newport Mesa Unified School District 73.167%248,378,251 181,730,915
Newport Mesa Unified School District Community Facilities District No. 90-1 100.000%2,445,000 2,445,000
Santa Ana Unified School District 6.780%285,682,392 19,369,266
Irvine Ranch Water District Improvement Districts 2.847% -
100.000%448,318,900 53,036,701
100.000%23,525,000 23,525,000
100.000%8,300,000 8,300,000
City of Newport Beach 1915 Act Bonds 100.000%10,652,458 10,652,458
Orange County Newport Coast Assessment District No. 01-1 100.000%4,019,000 4,019,000
Orange County Newport Coast Reassessment District No. 17-1R 100.000%24,855,000 24,855,000
Orange County General Fund Obligations 9.707%386,745,000 37,541,337
Orange County Pension Obligation Bonds 9.707%466,863,754 45,318,465
Orange County Board of Education Certificates of Participation 9.707%12,930,000 1,255,115
Coast Community College District Certificates of Participation 34.373%2,600,000 893,698
Santa Ana Unified School District Certificates of Participation 6.780%62,467,085 4,235,268
Overlapping Tax Increment Debt (Successor Agencies):3.749% -
66.569%13,070,000 5,898,796
TOTAL OVERLAPPING DEBT 3,360,151,635$ 762,264,412$
DIRECT DEBT:
City of Newport Beach Certificates of Participation 100.000%100,695,000$ 100,695,000$
Community Development Block Grant Loan 100.000%585,000 585,000
TOTAL DIRECT DEBT 101,280,000$ 101,280,000$
TOTAL DIRECT AND OVERLAPPING DEBT 863,544,412$
GROSS COMBINED TOTAL DEBT (2)863,544,412$
1
2
Ratios to 2019-20 Net Assessed Valuation:
Total Overlapping Debt 1.25%
Total Direct Debt ($101,280,000)0.17%
Gross Combined Total Debt 1.42%
Ratios to Redevelopment Incremental Valuation ($1,275,334,904)
Total Overlapping Tax Increment Debt 0.46%
Source: California Municipal Statistics, Inc.
The percentage of overlapping debt applicable to the city is estimated using taxable assessed property value. Applicable percentages were estimated by
determining the portion of the overlapping district's assessed value that is within the boundaries of the city divided by the district's total taxable assessed value.
Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue and tax allocation bonds and non-bonded capital lease obligations.
CITY OF NEWPORT BEACH
Direct and Overlapping Debt
June 30, 2020
Bonita Canyon Public Facilities Financing Authority Community Facilities District No. 98-1
California Statewide Communities Development Authority Community Facilities District No.
2018-3
221
2011 2012 2013 2014
38,751,370,481$ 39,115,501,760$ 40,183,130,504$ 42,341,162,463$
25%25%25%25%
9,687,842,620 9,778,875,440 10,045,782,626 10,585,290,616
15%15%15%15%
1,453,176,393 1,466,831,316 1,506,867,394 1,587,793,592
General obligation bonds - - - -
1,453,176,393$ 1,466,831,316$ 1,506,867,394$ 1,587,793,592$
as a percentage of debt limit 0.0%0.0%0.0%0.0%
NOTE:
Source: City Finance Department
Total net debt applicable to limit:
Legal debt margin
Total debt applicable to the limit
The State of California Government Code Section 43605 provides for a legal debt limit of 15% of gross assessed
valuation. However, this provision was enacted when assessed valuation was based upon 25% of market value. Effective
with the 1981-82 fiscal year, each parcel is now assessed at 100% of market value (as of the most recent change in
ownership for that parcel). The computations shown above reflect a conversion of assessed valuation data for each fiscal
year from the current full valuation perspective to the 25% level that was in effect at the time that the legal debt margin
was enacted by the State of California for local governments located within the state.
Debt limit percentage
Assessed valuation
Conversion percentage
Adjusted assessed valuation
Debt limit
Fiscal Year
CITY OF NEWPORT BEACH
Legal Debt Margin Information
Last Ten Fiscal Years
222
2015 2016 2017 2018 2019 2020
44,752,056,903$ 47,388,470,098$ 50,341,686,565$ 53,780,216,020$ 57,701,161,781$ 60,744,806,554$
25%25%25%25%25%25%
11,188,014,226 11,847,117,525 12,585,421,641 13,445,054,005 14,425,290,445 15,186,201,639
15%15%15%15%15%15%
1,678,202,134 1,777,067,629 1,887,813,246 2,016,758,101 2,163,793,567 2,277,930,246
- - - - - -
1,678,202,134$ 1,777,067,629$ 1,887,813,246$ 2,016,758,101$ 2,163,793,567$ 2,277,930,246$
0.0%0.0%0.0%0.0%0.0%0.0%
Fiscal Year
CITY OF NEWPORT BEACH
Legal Debt Margin Information
Last Ten Fiscal Years
223
DEMOGRAPHIC AND ECONOMIC INFORMATION
This section of the City of Newport Beach’s Comprehensive Annual Financial
Report (CAFR) presents detailed information as a context for understanding what
the information in the financial statements, note disclosures, and required
supplementary information says about the City’s overall financial health. The
statistical information presented herein is un-audited.
The following schedules depict demographic and economic indicators to assist
the reader in understanding the socio-economic, environment in which the City’s
financial activities take place:
Demographic and Economic Statistics
Principal Employers
Sources: Unless otherwise noted, the information in these schedules is derived from the
Comprehensive Annual Financial Reports and underlying accounting records for the relevant
years.
224
Fiscal Year Population1 Personal Income
(in thousands)
Per Capita
Income(2)
Unemployment
Rate(3)
2011 85,376 5,916,215 69,296 5.8%
2012 85,990 5,809,828 67,564 5.1%
2013 86,436 6,995,784 80,936 4.2%
2014 86,874 6,926,725 79,733 3.6%
2015 87,249 6,848,523 78,494 4.0%
2016 84,270 6,574,071 78,012 3.4%
2017 84,915 6,736,392 79,331 3.1%
2018 87,182 7,334,970 84,134 2.9%
2019 87,180 7,704,445 88,374 2.6%
2020 85,780 8,183,755 95,404 4.6%
1
Sources:
(2)U.S. Census Bureau - American Community Survey 1-Year Estimates
(3)State of California, Employment Development Department
(1)California State Department of Finance, E-4 Population Estimates for Cities, Counties
and State 2008-2010; and, E-1 Population Estimates for Cities, Counties and State
January 1, 2015 - 2020.
Population estimates are as of January 1 of the year shown and do not reflect revised
estimates made available after the date the information was collected for the City's
Comprehensive Annual Financial Report.
CITY OF NEWPORT BEACH
Demographic and Economic Statistics
Last Ten Fiscal Years
225
Employer
Number of
Employees Rank
Percent of Total
Employment
Number of
Employees Rank
Percent of Total
Employment
Hoag Memorial Hospital 5,200 1 6.32%5,000 1 6.22%
Irvine Management Company 1,809 2 2.20%N/A 2 - N/A
Pacific Life Insurance 1,293 3 1.57%1,119 2 1.39%
PIMCO Advisors 1,250 4 1.52%1,005 4 1.25%
Glidewell Dental 967 5 1.18%1,100 3 1.37%
Resort at Pelican Hill 955 6 1.16%750 7 0.93%
Newport-Mesa Unified School District 800 7 0.97%895 5 1.11%
Jazz Semi-Conductor 779 8 0.95%554 8 0.69%
City of Newport Beach 727 9 0.88%807 6 1.00%
Hyundai Capital America 590 10 0.72%N/A 2 - N/A
Fletcher Jones Motor Cars Inc. 510 11 0.62%450 11 0.56%
Hyatt Regency Newport Beach 400 12 0.49%N/A 2 - N/A
1
2
Source: Data obtained from companies listed and compiled by City Finance Department.
Figures reflect number of employees of employer at the time the information was collected.
Company listed was unable to provide employee data for 2011.
CITY OF NEWPORT BEACH
Principal Employers1
Current Year and 9 years ago
2020 2011
226
OPERATING INFORMATION
This section of the City of Newport Beach’s Comprehensive Annual Financial
Report (CAFR) presents detailed information as a context for understanding what
the information in the financial statements, note disclosures, and required
supplementary information says about the City’s overall financial health. The
statistical information presented herein is un-audited.
The following schedules present information on the City’s operations and
resources including service and infrastructure data to facilitate the readers’
understanding of how financial statement information relates to the services the
City provides and the activities it performs:
Full Time City Employees by Functions
Operating Indicators by Function
Capital Asset Statistics by Function
Water Sold by Customer Type
Utility Rates
Major Water Customers
Sources: Unless otherwise noted, the information in these schedules is derived from the
Comprehensive Annual Financial Reports and underlying accounting records for the relevant
years.
227
This page left blank intentionally.
228
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
94 95 94 79 78 77 77 79 80 78
381 359 357 366 370 374 371 372 375 375
51 58 56 53 52 52 52 53 53 53
144 130 128 119 109 104 99 98 96 100
70 68 70 74 75 79 81 79 78 78
37 38 32 32 31 32 31 33 34 33
15 15 15 13 13 12 13 11 11 11
Total 792 763 752 736 728 730 724 725 726 727
Source: City Finance Department
CITY OF NEWPORT BEACH
Full-time City Employees by Function
Last Ten Fiscal Years
Wastewater
Public safety
Community development
Public works
Community services
Water
General government
Function
Full-Time Employees as of June 30
229
2011 2012 2013 2014
Police:
3,093 2,982 3,161 2,794
67,459 55,418 58,823 51,609
Fire:
165 201 342 356
7,100 4,315 4,338 3,352
General Services:
2,580 2,246 1,708 2,408
39,972 34,000 37,607 37,607
Recreation & Senior Services:
322,000 257,322 293,938 294,000
15,063 15,264 13,112 13,956
Water:
28 35 54 72
17.25 15.15 14.02 15.96
Sewer:
6 15 14 22
235 248 215 245
Library Services:
1,770,683 1,582,953 1,582,914 1,689,870
1
Source: City of Newport Beach
Data varies with trend due to inclusion of responses to fires, hazardous materials, medical and other emergencies
Fire Inspections
Adult Arrests
Parking Citations Issued
Fire Responses
New Connections
Miles of Pipe Cleaned
Library Circulation of Materials
Street Patching (tons of mix)
Sidewalk Repair (square feet)
Co-Sponsored Youth Organization Attendance
Senior Transportation Services
New Connections
Average Daily Consumption (hundred cubic feet)
CITY OF NEWPORT BEACH
Operating Indicators by Function
Last Ten Fiscal Years
Fiscal Year
230
2015 2016 2017 2018 2019 2020
3,472 3,158 3,178 3,266 3,520 3,093
59,753 64,762 69,246 56,685 67,048 73,372
305 300 247 248 209 11,913 1
1,281 1,201 1,216 1,307 1,033 2,842
2,711 1,890 1,439 1,403 1,402 913
27,175 27,000 20,490 22,925 14,840 11,729
303,152 305,000 425,000 437,751 469,959 439,954
13,740 14,000 13,500 13,071 13,386 9,300
187 194 229 210 210 256
16.39 11.66 13.80 14.07 13.75 13.44
20 17 41 137 46 10
260 250 202 211 196 221
1,610,818 1,575,000 1,464,640 1,424,594 1,376,041 1,084,206
Fiscal Year
CITY OF NEWPORT BEACH
Operating Indicators by Function
Last Ten Fiscal Years
231
2011 2012 2013 2014
Police:
Stations 1111
Fire:
Fire Stations 8888
Lifeguard Headquarters 1111
Public works:
Streets (miles) 395 395 395 395
Streetlights 5,978 5,977 5,977 5,977
Traffic Signals 803 808 808 808
Recreation & Senior Services:
Parks 63 63 64 64
Community Centers (includes leased property)14 14 14 14
Aquatic Center 1 1 1 1
Water:
Water Mains (miles)303.25 303.25 303.25 298.37
Maximum Daily Capacity (thousands of gallons)28,540 27,508 26,916 27,704
Wastewater:
Sanitary Sewers (miles)202.40 202.40 202.40 202.62
Storm Sewers (miles)95.40 95.40 95.40 70.62
Library Services:
Libraries 4 4 4 4
Source: City of Newport Beach
Fiscal Year
CITY OF NEWPORT BEACH
Capital Asset Statistics by Function
Last Ten Fiscal Years
232
2015 2016 2017 2018 2019 2020
111111
888888
111111
395 399 400 400 400 400
5,977 5,978 5,978 5,978 5,971 5,972
808 808 808 808 808 808
64 64 64 64 65 65
14 15 15 15 15 15
1 1 1 1 1 1
299.58 299.77 300.64 300.30 300.88 300.82
27,800 27,800 27,800 27,800 27,800 27,800
202.64 202.75 202.72 203.56 203.99 204.10
94.14 92.08 94.74 95.12 95.35 95.89
4 4 4 4 4 4
Fiscal Year
CITY OF NEWPORT BEACH
Capital Asset Statistics by Function
Last Ten Fiscal Years
233
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Type of Customer:
Residential 3,656,705 4,001,344 3,890,973 3,902,007 3,853,566 3,072,589 3,564,203 3,603,927 3,439,655 3,747,408
Commercial 1,145,843 2,369,492 2,389,822 2,525,169 2,560,620 1,847,372 2,142,952 2,201,254 2,075,812 2,081,860
Government 320,821 374,091 394,787 455,251 396,605 263,116 305,214 289,738 256,398 270,638
Total 5,123,369 6,744,927 6,675,582 6,882,427 6,810,791 5,183,077 6,012,369 6,094,919 5,771,865 6,099,907
Total direct rate
per 100 cubic ft.2.46$ 2.73$ 2.96$ 3.08$ 3.08$ 3.08$ 3.08$ 3.08$ 3.08$ 3.08$
Source: City Utilities Department
Fiscal Year
CITY OF NEWPORT BEACH
Water Sold by Type of Customer
Last Ten Fiscal Years
(in hundred cubic feet)
234
Fiscal Year
Ended June
30
Monthly
Base Rate
Rate per
100 cubic ft
2010 12.77 2.55
2011 17.59 2.81
2012 19.61 3.08
2013 21.13 3.31
2014 21.77 3.43
2015 21.77 3.43
2016 21.77 3.43
2017 21.77 3.43
2018 23.73 3.46
2019 24.34 3.50
2020 28.09 3.57
1
Source: City Revenue Division
CITY OF NEWPORT BEACH
Utility Rates1
Last Ten Fiscal Years
Rates are based on 5/8" or 3/4" meter,
which are the standard household meter
sizes. Rates include sewer service. The
City charges an excess-use rate above
normal demand.
235
Water Customer Water Charges Rank
Percent of Total
Water Revenues Water Charges Rank
Percent of Total
Water Revenues
Irvine Company Apartment 182,793$ 1 0.65%309,815$ 2 1.54%
Irvine Company Office 173,422 2 0.61%239,028 3 1.19%
Bluffs Homeowners Association 135,518 3 0.48%228,745 5 1.13%
Big Canyon Country Club 128,868 4 0.46%174,812 8 0.87%
Newport Beach Country Club 116,742 5 0.41%212,512 6 1.05%
Hoag Memorial Hospital 94,657 6 0.33%312,130 1 1.55%
Newport-Mesa Unified School District 82,727 7 0.29%152,443 9 0.76%
Park Newport Ltd 66,555 8 0.24%198,953 7 0.99%
UDR Newport Beach 62,512 9 0.22%231,063 4 1.15%
Irvine Company Retail 62,076 10 0.22%121,663 11 0.60%
Pacific View - Pierce Bros.58,885 11 0.21%144,035 10 0.71%
Jasmine Creek Community Association 55,154 12 0.19%76,235 19 0.00%
North Bluff Bay View 52,044 13 0.18%66,085 22 0.00%
Harbor Ridge Master Association 43,900 14 0.16%72,647 20 0.00%
One Ford Road Community Association 42,877 15 0.15%55,464 25 0.00%
1,358,730$ 4.80%2,595,630$ 11.54%
Source: City Revenue Division
CITY OF NEWPORT BEACH
Major Water Customers
Current Year and Nine Years Ago
2020 2011
236
City of Newport Beach
100 Civic Center Drive Newport Beach, CA 92660
(949) 644-3123
www.newportbeachca.gov/cafr
ATTACHMENT B
AUDITOR’S REQUIRED COMMUNICATIONS WITH THE AUDIT COMMITTEE
CliftonLarsonAllen LLP
CLAconnect.com
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, 2020. 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 7, 2020. 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 were adopted. Other than the policy for writing off uncollectible receivables, the
application of existing policies was not changed during 2020. In prior years, management would
establish an allowance for uncollectible accounts on receivables older than 90 days with a low
expected collectability and then, after 3 years, write off any remaining uncollected balance. The current
year policy is to write off receivables that are over 120 days with a low expected collectability and not
establish any allowance. This change in existing po
statements. 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
nd 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 ial statements are as follows:
a. The annual required contributions, pension expense, net pension liability and
corresponding deferred outflows of resources and deferred inflows of resources for
e based on actuarial valuations provided by
CalPERS.
2
Significant Audit Findings (Continued)
Qualitative Aspects of Accounting Practices (Continued)
b. The actuarially determined contribution, OPEB expense, net OPEB liability, and
corresponding deferred outflows of resources and deferred inflows of resources for
ial valuations provided by a third party.
c. e liabilities related to general liability
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
Benefit Plan. 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. Management has corrected all such misstatements. The significant misstatements noted
related to grant revenue recognition. However, none of the misstatements detected as a result of our
audit procedures and corrected by management were material, either individually or in the aggregate,
statements taken as a whole.
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
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 January 27, 2021.
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 ob n situations. If a consultation
involves application of an accounting principle to the
at 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
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 manageme ysis, the schedules of
changes in net pension liability and related ratios and the schedules of contributions related to the
changes in net OPEB liability and related ratios and
the schedule of contributions related to the City
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
nquiries, 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.
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.
CliftonLarsonAllen LLP
Irvine, California
January 27, 2021
ATTACHMENT C
AUDITOR’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS
CliftonLarsonAllen LLP
CLAconnect.com
INDEPENDENT
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, 2020, and the
related notes to the financial statements, which co
statements and have issued our report thereon dated January 27, 2021.
Internal Control over Financial Reporting
In planning and performing our audit of the financ
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 C
we do not express an opinion
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
ill 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 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 a nancial 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
t is an integral part of an audit performed in
accordance with Government Auditing Standards in considering the City
compliance. Accordingly, this communication is not suitable for any other purpose.
CliftonLarsonAllen LLP
Irvine, California
January 27, 2021
City of Newport Beach Internal
Audit Program Update
Finance
Committee
Meeting
March 11, 2021
City of Newport Beach –Finance Department 2
City of Newport Beach Internal Audit Program
The purpose of the City’s internal audit program is
to assist the City in achieving its objectives by
enhancing operational performance and
improving the effectiveness of risk management,
internal controls, and the governance processes.
City of Newport Beach –Finance Department 3
Internal Audit Program Status
Status Tasks
(Done)
Enterprise Risk Assessment -assessment of risks related to 18 categories
such as strategy, governance, staffing, finance and systems, and operations
(Done)
Internal Controls Review –review of fiscal internal controls, policies and
procedures, and recommendations for improvement
(Done)
Develop an annual internal audit program to guide future internal audit activities
Pending Execute first year internal audit program (expected to commence April 2021)
City of Newport Beach –Finance Department 4
Planned Internal Audit Program Areas
•Procurement Operational Review and Internal Controls Testing
•IT Operational Review and Internal Controls Testing
•Cash Handling Internal Controls Testing
•Fiscal Policy Inventory and Implementation Plan
•Accounts Payable Internal Controls Testing
•Police Property and Evidence Internal Controls Testing
•Policy Inventory and Implementation Plan
•Finance Customer Service Operational Review
•Key Performance Indicator Development
•Business Continuity and Disaster Planning Assessment
•Resource Sharing and Cross-Training Assessment
First Year
Internal Audit
Program
Subsequent
Years Internal
Audit Program
City of Newport Beach –Finance Department 5
Questions?
FY2021-22 Revenue Outlook
Finance
Committee
Meeting
March 11, 2021
City of Newport Beach –Finance Department 2
Presentation Overview
•General Fund Revenues
•Tidelands and Tidelands Capital Funds
•Water and Water Capital Funds
•Wastewater and Wastewater Capital Funds
City of Newport Beach –Finance Department 3
General Fund Revenues (Fund 010)
$113,313,535
$36,232,969
$20,847,883
$20,913,897
$13,096,823
$11,846,082
$4,752,252
$3,910,305 $3,659,011
$1,380,260 FY20 Actuals
$229,953,017
Property Taxes 49.3%Sales Tax 15.7%TOT 9.1%
Charges for Services 9.1%Use of Money and Property 5.7%Other Taxes 5.1%
Licenses and Permits 2.1%Intergovernmental 1.7%Fines, Forfeitures & Penalties 1.6%
Other Revenues 0.6%
City of Newport Beach –Finance Department 4
General Fund Overview
General Fund Revenue FY19
Actual
FY20
Actual
YOY
%
Change
FY21
Mid-Year
Estimate
YOY
%
Change
FY22
Projection
YOY
%
Change
Property Taxes $108,365,261 $113,313,535 4.57%$117,508,227 3.70%$122,229,980 4.02%
Sales Tax $38,502,470 $36,232,969 -5.89%$34,540,800 -4.67%$40,275,670 16.60%
TOT $24,697,446 $20,847,883 -15.59%$15,209,156 -27.05%$19,027,493 25.11%
Other General Fund
Revenue $58,247,418 $59,558,629 2.25%$51,347,333 -13.79%$51,339,849 -0.01%
Totals $229,812,594 $229,953,017 $218,605,516 $232,872,992
Year over Year (YOY) Increase $140,423 -$11,347,501 $14,267,476
YOY % Increase 0.06%-4.93%6.53%
City of Newport Beach –Finance Department 5
Historical General Fund Revenues
$204
$217
$230 $230
$219
$233
$170
$180
$190
$200
$210
$220
$230
$240
$250
$260
$270
2016-17 Actual 2017-18 Actual 2018-19 Actual 2019-20 Actual 2020-21 Projected 2021-22 ProjectedMillions
Trend Line Pre-Covid Projection Post-Covid Projection Actual and Projection
City of Newport Beach –Finance Department 6
Property Taxes
•City gets about 17.15% of the 1%
•For every $1 property tax collected, Newport Beach gets $0.1715
•49.3% of General Fund Revenues (FY20)
•Includes different categories such as secured, unsecured,
supplemental
•Secured makes up almost 85% of total revenues within property tax
•Assessed Valuation for FY 2020-21 was $63.7 billion, second largest
in OC
City of Newport Beach –Finance Department 7
Title
City of Newport Beach –Finance Department 8
Property Taxes
•FY21 no change to projection
•FY22 estimating 4% growth over FY21 estimate
•Only 1.036% CPI for FY22
•Takes $637,000,000 in assessed valuation change for 1% growth
General Fund
Revenue
FY18
Actual
FY19
Actual YOY
%
Change
FY20
Actual YOY
%
Change
FY21
Mid-Year
Estimate
YOY
%
Change
FY22
Projection YOY
%
Change
Property Taxes $101,593,290 $108,365,261 6.67%$113,313,535 4.57%$117,508,227 3.70%$122,229,980 4.02%
Year over Year (YOY) Increase $6,771,971 $4,948,275 $4,194,692 $8,916,445
City of Newport Beach –Finance Department 9
Property Tax Revenues
$97
$102
$108
$113
$118
$122
$95
$100
$105
$110
$115
$120
$125
$130
2016-17 Actual 2017-18 Actual 2018-19 Actual 2019-20 Actual 2020-21 Projected 2021-22 ProjectedMillions
Trend Line Pre-Covid Projection Post-Covid Projection Actual and Projection
City of Newport Beach –Finance Department 10
Sales Tax
•City receives 1% of 7.75% sales tax
•15.7% of General Fund revenues (FY20)
•Historically most sales tax revenues come from:
•Autos & Transportation
•Restaurants & Hotels
•General Consumer Goods
City of Newport Beach –Finance Department 11
Components of California Sales and Use Tax
1.00%
0.50%
State General Fund
City/County General Fund (Bradley-Burns)
County Public Safety (Prop 172)
Counties for Health and Welfare
Counties for Corrections
County Transportation Fund
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%
City of Newport Beach –Finance Department 12
Sales Tax by Category
City of Newport Beach –Finance Department 13
The Wayfair Decision and AB147
June 21, 2018, The United States Supreme Court ruled states can mandate that
businesses without a physical presence in a state collect and remit sales taxes
AB147 –requires retailers located outside of CA to register with CDTFA and
collect CA use tax
•applied 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
City of Newport Beach –Finance Department 14
Impact from AB147 to County Pools
City of Newport Beach –Finance Department 15
Sales Tax
•FY21 conservative estimate, 4Q2020 payment less than expected
•FY22 estimate provided by our sales tax consultant (HdL)
•Slowing growth in Autos & Transportation and Building & Construction
•Restaurants back at approx. 93% of peak
•Consumer Goods recovering, but shopping habits have changed
General Fund
Revenue FY18 Actual FY19 Actual YOY
%
Change
FY20
Actual
YOY
%
Change
FY21
Mid-Year
Estimate
YOY
%
Change
FY22
Projection
YOY
%
Change
Sales Tax $35,038,846 $38,502,470 9.89%$36,232,969 -5.89%$34,540,800 -4.67%$40,275,670 16.60%
Year over Year (YOY) Increase $3,463,624 -$2,269,500 -$1,692,169 $5,734,870
City of Newport Beach –Finance Department 16
Sales Tax Revenues
$34
$35
$39
$36
$35
$40
$25
$27
$29
$31
$33
$35
$37
$39
$41
$43
$45
2016-17 Actual 2017-18 Actual 2018-19 Actual 2019-20 Actual 2020-21 Projected 2021-22 ProjectedMillions
Trend Line Pre-Covid Projection Post-Covid Projection Actual and Projection
City of Newport Beach –Finance Department 17
Transient Occupancy Tax (TOT)
•10% of rent
•9.1% of General Fund revenues (FY20)
•Includes hotel and residential, less payments to Visit Newport Beach
Inc.
City of Newport Beach –Finance Department 18
TOT
Hotel TOT
•FY21 estimate -by year end will be at 60% of pre-COVID actuals
•FY22 projection -by year end will be at 80% of pre-COVID actuals
Residential TOT –projecting flat
General Fund
Revenue
FY18
Actual
FY19
Actual YOY
%
Change
FY20
Actual YOY
%
Change
FY21
Mid-Year
Estimate
YOY
%
Change
FY22
Projection YOY
%
Change
TOT $22,833,614 $24,697,446 8.16%$20,847,883 -15.59%$15,209,156 -27.05%$19,027,493 25.11%
Year over Year (YOY) Increase $1,863,832 -$3,849,562 -$5,638,727 $3,818,337
City of Newport Beach –Finance Department 19
Transient Occupancy Tax Revenues
$22 $23
$25
$21
$15
$19
$5
$10
$15
$20
$25
$30
2016-17 Actual 2017-18 Actual 2018-19 Actual 2019-20 Actual 2020-21 Projected 2021-22 ProjectedMillions
Trend Line Pre-Covid Projection Post-Covid Projection Actual and Projection
City of Newport Beach –Finance Department 20
Other Taxes and Revenues
General Fund Revenue FY18
Actual
FY19
Actual YOY %
Change
FY20
Actual YOY %
Change
FY21 Mid-Year
Estimate YOY %
Change
FY22
Projection YOY %
Change
Other Taxes $11,865,168 $11,327,777 -4.53%$11,846,082 4.58%$11,081,175 -6.46%$11,310,117 2.07%
Licenses and Permits $4,888,630 $5,071,609 3.74%$4,752,252 -6.30%$5,042,454 6.11%$5,106,646 1.27%
Intergovernmental $3,680,743 $3,922,453 6.57%$3,910,305 -0.31%$5,031,400 28.7%$1,760,934 -65.0%
Charges for Services $20,622,382 $20,300,379 -1.56%$20,913,897 3.02%$14,508,830 -30.63%$17,693,179 21.95%
Fines, Forfeitures & Penalties $3,325,931 $3,454,660 3.9%$3,659,011 5.92%$3,263,257 -10.82%$3,292,102 0.88%
Use of Money and Property $10,527,764 $12,609,169 19.77%$13,096,823 3.87%$11,225,936 -14.29%$11,442,723 1.93%
Other Revenues $2,140,097 $1,561,371 -27.0%$1,380,260 -11.60%$1,194,282 -13.5%$734,148 -38.5%
Totals $57,050,715 $58,247,418 $59,558,629 $51,347,333 $51,339,849
Year over Year (YOY) Change $1,196,703 $1,311,211 -$8,211,296 -$7,484
YOY % Change 2.10%2.25%-13.79%-0.01%
City of Newport Beach –Finance Department 21
Tidelands Fund and Tidelands Capital Fund
Revenues (Funds 100 and 101)
•Main Revenue Type –Use of Money and Property (99% of total)
•Parking –dropped at end of FY20, bounced back quickly
•Leases –minor impacts from COVID, still up year over year
•Investment Income –down
•Sale of Oil –down in FY21 estimate, but improving
Tidelands Fund Revenue FY18 Actual FY19 Actual FY20 Actual FY21 Mid-Year
Estimate FY22 Projection
Totals $11,990,997 $12,089,962 $11,654,819 $11,539,726 $11,839,725
Year over Year (YOY) Change $98,965 -$435,142 -$115,094 $299,999
YOY % Change 0.83%-3.60%-0.99%2.60%
Tidelands Capital Fund Revenue FY18 Actual FY19 Actual FY20 Actual FY21 Mid-Year
Estimate FY22 Projection
Totals $2,729,380 $4,443,831 $4,670,389 $3,701,148 $4,068,509
Year over Year (YOY) Change $1,714,451 $226,558 -$6,384,180 $367,361
YOY % Change 62.81%5.10%-63.30%9.93%
Transfers In from General Fund Not Included in Totals
City of Newport Beach –Finance Department 22
Water Fund and Water Capital Fund Revenues
(Funds 701 and 702)
•Water Fund Main Revenue Type –Charges for Services (97% of total)
•Water Rate Adjustment effective 1/1/2020 with annual increases until 1/1/2024
•Sale of Water –based on consumption
•Water Capital Fund Revenues
•Investment Income –down
Water Fund Revenues FY18 Actual FY19 Actual FY20 Actual FY21 Mid-Year
Estimate FY22 Projection
Totals $27,041,677 $27,629,157 $27,865,722 $28,420,303 $30,286,712
Year over Year (YOY) Change $587,480 $236,566 $554,581 $1,866,409
YOY % Change 2.17%0.86%1.99%6.57%
Water Capital Fund Revenues FY18 Actual FY19 Actual FY20 Actual FY21 Mid-Year
Estimate FY22 Projection
Totals $55,772 $55,772 $446,826 $120,669 $120,669
Year over Year (YOY) Change $0 $391,053 -$326,157 $0
YOY % Change 0.00%701.16%-72.99%0.00%
Transfers In from Water Operating Fund Not Included in Water Capital Fund Totals
City of Newport Beach –Finance Department 23
Wastewater Fund and Wastewater Capital Fund
Revenues (Funds 711 and 712)
•Wastewater Fund Main Revenue Type –Charges for Services (98% of total)
•Wastewater Rate Adjustment effective 1/1/2018 with annual increases until 1/1/2022
•Sewer Use based on water consumption
•Wastewater Capital Fund Revenues
•Investment Income –down
Wastewater Fund Revenues FY18 Actual FY19 Actual FY20 Actual FY21 Mid-Year Estimate FY22 Projection
Totals $3,479,393 $4,149,791 $4,182,857 $4,325,605 $4,503,105
Year over Year (YOY) Change $670,398 $33,066 $142,749 $177,500
YOY % Change 19.27%0.80%3.41%4.10%
Wastewater Capital Fund Revenues FY18 Actual FY19 Actual FY20 Actual FY21 Mid-Year
Estimate FY22 Projection
Totals $5,733 $54,740 $74,122 $13,421 $13,421
Year over Year (YOY) Change $49,007 $19,382 -$60,701 $0
YOY % Change 854.84%35.41%-81.89%0.00%
Transfers In from Wastewater Operating Fund Not Included in Wastewater Capital Fund Totals
City of Newport Beach –Finance Department 24
Questions?
City of Newport Beach –Finance Department 25
Title
•X
3/4/21
Scheduled Date Agenda Title Agenda Description
Thursday, March 11, 2021 Financial Statement Audit Results and Related Communication from the Auditors The City’s external audit firm will meet with the Finance Committee to discuss
the audit findings for the fiscal year ending 6/30/2020. 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.
Internal Audit Program Update Staff will provide the Finance Committee with a verbal update on the status of
the Internal Audit Program.Discuss Revenue Assumptions Staff will provide an overview of revenue assumptions for the FY 2021-22
Proposed Budget.Work Plan Review Staff and Finance Committee to review the proposed work plan and adjust as
necessary.
Thursday, April 15, 2021 Audit Services Recommendation Staff will propose the selection of a new external financial reporting and disclosure auditor.
Proposed FY 2021-22 Budget Overview Staff will provide an overview of the Proposed FY 2021-22 Operating Budget.
Budget Amendments for Quarter Ending March 31, 2021 Staff will report on the budget amendments from the prior quarter.
Thursday, April 29, 2021 Proposed FY 2021-22 Budget Overview (optional - if needed)Staff will provide an overview of the Proposed FY 2021-22 Operating Budget.
Thursday, May 13, 2021 Quarterly Budget Update Present results of quarter ending March 31.
Proposed FY 2021-22 Follow-Up Meeting Staff will be available to answer follow-up questions on the proposed Fiscal
Year 2021-22 budget. Finance Committee may discuss their impending recommendation(s) to Council.
Internal Audit Program Update Staff will provide a progress to date report of the internal control and
performance audit program.
Tuesday, May 25, 2021 Joint City Council/Finance Committee Budget Study Session FY 2021-22 Proposed budget review.
April
May
Newport Beach Finance Committee Work Plan Calendar Year 2021
January
February
March
I:\Users\FIN\Shared\Admin\Finance Committee\WORK PLAN\2021\CY21 FC Workplan 1
3/4/21
Scheduled Date Agenda Title Agenda Description
Newport Beach Finance Committee Work Plan Calendar Year 2021
Thursday, June 10, 2021 Audit Entrance Conference (Optional)Auditors will contact members of the Finance Committee individually to
discuss the work plan for the fiscal year ending 6/30/2021 CAFR audit. Alternatively, the auditor may request an audience with the Finance
Committee as a whole, in which case a meeting may be convened during this
month. The committee will have an opportunity to discuss any potential areas of concern they wish the auditors to review and the auditors can discuss any
changes in accounting standards or disclosures that may be relevant for the audit year.
Committee Recess
Committee Recess
Thursday, September 16, 2021 Investment Performance Review Staff and/or one or more investment advisors will describe the performance of
the City's investment portfolio.
Annual Investment Policy Review and Update In furtherance of Section K-2 of Council Policy F-1, Statement of Investment Policy (the Policy), the Finance Department has completed an annual review
of the Policy to ensure its consistency with the overall objectives of preservation of principal, liquidity and return, and its relevance to current law
and financial and economic trends. Staff is proposing no modifications to the Policy at this time as recommended by Chandler Asset Management and
supported by the City’s Finance Director/Treasurer.
Quarterly Budget Update Present results of quarter ending June 30.
Budget Amendments for Quarter Ending June 30, 2021 Staff will report on the budget amendments from the prior quarter.
Internal Audit Program Update Staff will provide a progress to date report of the internal control and
performance audit program.
Thursday, October 14, 2021 Financial Statement Audit Results and Related Communication The City’s external audit firm, will meet with the Finance Committee to discuss the audit findings for the fiscal year ending 6/30/2020. 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.
External Audit Update External audit update for transient occupancy tax (hotels, agents and
residential owners), charter boat companies, waste haulers and vendor agreements.
Budget Amendments for Quarter Ending September 30, 2021 Staff will report on the budget amendments from the prior quarter.
Thursday, November 4, 2021 CalPERS Update Staff will present the latest actuarial valuation changes to actuarial
assumptions, a review of investment returns, the potential impact of future rates, and the results of employee cost sharing.
Fiscal Year 2019-20 and Fiscal Year 2020-21 Financial Updates Staff will provide a fiscal year ending June 30, 2020, and first quarter FY 2020-21 budget performance update.
Budget Amendments for the Previous Quarter Staff will report on the budget amendments for the prior quarter.
Quarterly Budget Update Present results of quarter ending September 30.
Internal Audit Program Update Staff will provide a progress to date report of the internal control and
performance audit program.
Thursday, December 16, 2021 Committee Recess
June
October
November
September
July
August
December
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