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Home My WebLink About16 - Financial Statement Audit Results and Related Communication for the Fiscal Year Ended June 30, 2023Q SEW Pp�T CITY OF z NEWPORT BEACH c�<,FORN'P City Council Staff Report January 23, 2024 Agenda Item No. 16 TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL FROM: Jason AI -Imam, Finance Director/Treasurer - 949-644-3126, jalimam@newportbeachca.gov PREPARED BY: Trevor Power, Accounting Manager - 949-644-3125, tpower@newportbeachca.gov TITLE: Financial Statement Audit Results and Related Communication for the Fiscal Year Ended June 30, 2023 ABSTRACT: The City of Newport Beach is audited annually by an independent auditing firm, presently Davis Farr 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. On January 11, 2024, the Finance Committee met with representatives of Davis Farr LLP and reviewed the results of the audit in detail. A copy of the City's Annual Comprehensive Financial Report (ACFR) for the fiscal year ended June 30, 2023, is attached to this report. Also attached are the auditors' required communications with the Finance Committee in its capacity as the City's Audit Committee and the auditors' Report on Internal Control Over Financial Reporting and on Compliance and Other Matters. RECOMMENDATIONS: a) Determine this action is exempt from the California Environmental Quality Act (CEQA) pursuant to Sections 15060(c)(2) and 15060(c)(3) of the CEQA Guidelines because this action will not result in a physical change to the environment, directly or indirectly; and b) Receive and file. DISCUSSION: The auditors' opinion letter can be found within the ACFR (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. 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. 16-1 Financial Statement Audit Results and Related Communication for the Fiscal Year Ended June 30, 2023 January 23, 2024 Page 2 These include: • Planned Scope and Timing of the Audit • Compliance with All Ethics Requirements Regarding Independence • Significant Risks Identified • Qualitative Aspects of the City's Significant Accounting Practices • Significant Unusual Transactions • Significant Difficulties Encountered During the Audit • Uncorrected and Corrected Misstatements • Disagreements with Management • Representations Requested from Management • Management Consultations with Other Accountants • Other Significant Matters Findings, or Issues • Other Information Included in the Annual Comprehensive Financial Report The auditors reported no significant unusual transactions, 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. FISCAL IMPACT: There is no fiscal impact related to this item. ENVIRONMENTAL REVIEW: Staff recommends the City Council find this action is not subject to the California Environmental Quality Act (CEQA) pursuant to Sections 15060(c)(2) (the activity will not result in a direct or reasonably foreseeable indirect physical change in the environment) and 15060(c)(3) (the activity is not a project as defined in Section 15378) of the CEQA Guidelines, California Code of Regulations, Title 14, Chapter 3, because it has no potential for resulting in physical change to the environment, directly or indirectly. 16-2 Financial Statement Audit Results and Related Communication for the Fiscal Year Ended June 30, 2023 January 23, 2024 Page 3 NOTICING: The agenda item has been noticed according to the Brown Act (72 hours in advance of the meeting at which the City Council considers the item). ATTACHMENTS: Attachment A — Annual Comprehensive Financial Report for the Fiscal Year Ended June 30, 2023 Attachment B — Auditor's Required Communications with the Audit Committee Attachment C — Auditor's Report on Internal Control Over Financial Reporting and on Compliance and Other Matters 16-3 Attachment A Annual Comprehensive Financial Report for the Fiscal Year Ended June 30, 2023 16-4 CITY OF NEWPORT BEACH CALIFORNIA A -A NNUT L COMPRE FINANCIAL REP6 F� L-A-1 FISCAL YEAR ENDED a J U N E 30,2023 t/F Annual Comprehensive Financial Report For the Fiscal Year Ended June 30, 2023 Prepared by the Finance Department Jason AI -Imam, Finance Director/Treasurer 16-6 7v-.W PO\ The City of Newport Beach was incorporated September 1, 1906 The present City Seal was adopted July 22,1957 16-7 INTRODUCTORY SECTION Z 0 This page left blank intentionally. 16-9 CITY OF NEWPORT BEACH Annual Comprehensive Financial Report Year Ended June 30, 2023 TABLE OF CONTENTS INTRODUCTORY SECTION (Unaudited) Tableof Contents.......................................................................................................................1 Letterof Transmittal................................................................................................................... 5 GFOA Certificate of Achievement for Excellence in Financial Reporting ................................ 19 Listof City Officials..................................................................................................................20 OrganizationChart...................................................................................................................21 FINANCIAL SECTION Independent Auditors' Report............................................................................................25 Management's Discussion and Analysis..........................................................................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: BalanceSheet..............................................................................................................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 .............. 66 Proprietary Funds: Statement of Net Position............................................................................................. 70 Statement of Revenues, Expenses and Changes in Net Position...............................71 Statement of Cash Flows............................................................................................. 72 Fiduciary Funds: Statement of Fiduciary Net Position............................................................................. 76 Statement of Changes in Fiduciary Net Position.......................................................... 77 Notes to the Financial Statements..................................................................................... 81 Required Supplementary Information Defined Benefit Plan For Miscellaneous Employees: Schedule of Changes in the Net Pension Liability and Related Ratios .........................142 Schedule of Contributions.............................................................................................144 Defined Benefit Plan For Safety Employees: Schedule of Changes in the Net Pension Liability and Related Ratios .........................146 1 16-10 Schedule of Contributions.............................................................................................148 Post -Employment Health Care Benefits (OPEB): Schedule of Changes in the Net OPEB Liability and Related Ratios ............................ 150 Schedule of Contributions.............................................................................................152 Budgetary Comparison Statements: GeneralFund...............................................................................................................153 Tide and Submerged Land — Operating Fund...............................................................155 Tide and Submerged Land — Harbor Capital Fund.......................................................156 Notes to Required Supplementary Information................................................................157 Supplementary Schedules Other Governmental Funds: Combining Balance Sheet.............................................................................................164 Combining Statement of Revenues, Expenditures and Changes in FundBalances..............................................................................................................171 Budgetary Comparison Schedules: StateGas Tax Fund......................................................................................................178 SB1 Gas Tax RMRA Fund............................................................................................ 179 AssetForfeiture 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 Services Fund...........................................................187 Opioid Remediation Fund.............................................................................................188 ContributionsFund........................................................................................................189 FIINFund......................................................................................................................190 Restricted Programs Fund............................................................................................191 MeasureM Fund...........................................................................................................192 Oceanfront Encroachment Fund...................................................................................193 American Rescue Plan Act Fund.................................................................................. 194 PEGFees Fund............................................................................................................195 Internal Service Funds: Combining Statement of Net Position...........................................................................200 Combining Statement of Revenues, Expenses and Changes in Net Position .............. 201 Combining Statement of Cash Flows............................................................................202 Fiduciary Funds: Combining Statement of Fiduciary Net Position............................................................206 Combining Statement of Changes in Fiduciary Net Position.........................................207 STATISTICAL SECTION (Unaudited) Financial Trends: Net Position by Component................................................................................................ 212 Changesin Net Position......................................................................................................214 2 16-11 Fund Balances of Governmental Funds..............................................................................216 Changes in Fund Balance of Governmental Funds............................................................ 218 Revenue Capacity: Assessed Value and Estimated Actual Value of Taxable Property ..................................... 222 Property Tax Rates, Direct and Overlapping Governments................................................223 Principal Property Taxpayers.............................................................................................. 224 Property Tax Levies & Collections...................................................................................... 225 Debt Capacity: Ratios of Outstanding Debt by Type................................................................................... 229 Ratios of General Bonded Debt.......................................................................................... 230 Schedule of Direct and Overlapping Debt........................................................................... 231 Computation of Legal Debt Margin.....................................................................................232 Demographic and Economic Information: Demographic and Economic Statistics................................................................................ 236 PrincipalEmployers............................................................................................................ 237 Operating Information: Full -Time City Employees by Function................................................................................241 Operating Indicators by Function........................................................................................ 242 Capital Asset Statistics by Function.................................................................................... 244 Water Sold by Customer Type............................................................................................ 246 UtilityRates......................................................................................................................... 247 Major Water Customers...................................................................................................... 248 3 16-12 This page left blank intentionally. 16-13 CITY OF NEWpnRT BEACH 100 Civic Center Drive Newport Beach, California 92660 949 644-3127 1 949 644-3339 FAX newportbeachca.gov/finance �. R -IFOO4 December 27, 2023 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 Annual Comprehensive Financial Report (ACFR) of the City of Newport Beach for the year ended June 30, 2023 is hereby submitted. The ACFR 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 DavisFarr 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, 2023 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 ended June 30, 2023 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 Orange County relative to the counties of Los Angeles, San Bernardino, Riverside, and San Diego is illustrated on the map below: Las Angeles County San Bernardino County ® Riverside Orange County County NEWPORT BEACH 1p San Diego County 16-15 Newport Beach surrounds Newport Bay, well known for its picturesque islands and one of the greatest recreational harbors in the world, accommodating about 9,000 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 83,411, 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. Airport Area Costa Mesa Fi -- \ 4► Irvine Eastbluff- Mariners / West,Newport \• ti Harbor View i Fashion island Lido Isle City Ha!! Spyglass Newport Pier Balboa island l Balboa Pier New ort Coast Corona.DeIMar l p y� The Wedge � 1 or Crystal Cove� ove Grystark State Park f J Laguna Beach Newport Beach was incorporated on September 1, 1906. The City Charter was originally adopted in 1954 but has been updated and amended over time. The City is governed by seven Council Members, and 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 Mayor is selected by the City Council from among its membership and serves a one-year term. The City Council is responsible for, among 16-16 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 the 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 83,411, the population has been very stable as indicated by the following chart. 100,000 •� Ili Population 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Fiscal Year 8 16-17 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's median household income is nearly twice that of the U.S. median household income. edlan Household- City of Newport Beach Orange County California USA $127,353 106,209 91,551 74,755 The leading industries here are professional, scientific, health care, finance, insurance, legal, and travel/tourism. Unemployment in the City increased to 3.4% as of October 2023 which is consistent with the statewide economy as jobs grew at a slower rate than the previous year due to post -pandemic hiring cooling; however, the City's unemployment rate is still lower compared to the state's 4.8%, and the county's 3.7%, as illustrated in the following chart. Historical Unemployment Rates (Kates are not seasanadly adjusted +Newport Beach +Orange County +California Calendar Year * through October 31, 2023 More detailed information concerning the City's demographics and statistics are contained within the Statistical Section of this report. LOCAL ECONOMY Despite the Federal Reserve raising the federal funds rate by over five percentage points over the past two years to combat high inflation, the underlying local economy continues to remain strong in Newport Beach. Sales tax revenue was up 6.8% in Newport Beach from July 2022 through December 2022. However, sales tax revenue was down 5.4% from January 2023 through June 2023, which is consistent with sales tax results across the State of California. The decrease in sales tax revenue is largely due to a shift in consumer spending from taxable goods, such as new car sales, to nontaxable items, such as travel, leisure, and entertainment. For example, sales from autos and transportation were down 5.5% over the prior year whereas sales from restaurants and hotels were up 16-18 6.2% over the same period. Overall, sales tax revenue was up 0.8% for Fiscal Year 2022- 23 and is projected to dip slightly in Fiscal Year 2023-24. Nonetheless, the fiscal outlook remains bright largely due to property tax revenue, representing approximately 50% of all General Fund revenues, which continues to remain strong due to continued demand for coastal property. TOP THREE REVENUE SOURCES Most General Fund revenue categories performed at or higher than their budgeted levels for the fiscal year due to more favorable economic conditions than anticipated when the budget was developed in April 2022. Actual revenues were $14.1 million or 5.2% higher than final anticipated estimates. As discussed in more detail below, the primary positive variances were in property tax and transient occupancy taxes. The top three individual revenue sources, Property Taxes, Sales Taxes and Transient Occupancy Taxes (TOT), represent 75.5% of all General Fund revenues. Tax revenues in total, including business licenses, franchise fees, and other taxes represent 79.1 % of all General Fund revenues, while only 20.9% is generated from other revenue sources. General Fund Revenues 21 % ■ Property Taxes 1111k ■ Sales Taxes Sales Tax In Lieu 3% 49% Transient Occupancy Taxes 11 % Other Taxes ■ All Other Sources 16% 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 (48.6%) of all General Fund revenues. Due to the limited supply of scenic coastal property and the unique access to Newport Bay, the Newport Beach community has 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. Property tax revenues for Fiscal Year 2022-23 came in $9.9 million or 7.7% higher than the prior year due to an increase in assessed property values related to the annual inflation adjustment that is allowed under Proposition 13 and due to changes 10 16-19 in ownership and new construction, which was partially offset by a $1.9 million decrease in property transfer tax revenue as home sales slowed during the fiscal year due to higher interest rates. Detached single-family residential property values decreased 1.9% in 2023 as home sales slowed due to higher interest rates, as illustrated in the following table. Nonetheless, Newport Beach's estimated median price for a detached single-family residence is currently $3.6 million, which far exceeds the countywide estimated median value of $1.2 million. Higher assessed values are projected to continue due to strong demand, which is expected to support continued growth in future property tax revenues. OF NEWPORT BEACH Detached Single MedianCITY Family Residential Full - Value Sales Calendar Median Median % Year Sales Price Change 2014 962 $ 1,894,500 5.25% 2015 1,023 $ 1,975,000 4.25% 2016 1,064 $ 2,150,000 8.86% 2017 1,114 $ 2,400,000 1 1.63 % 2018 952 $ 2,517,000 4.88% 2019 949 $ 2,435,000 -3.26% 2020 1,142 $ 2,587,500 6.26% 2021 1,405 $ 3,200,000 23.67% 2022 827 $ 3,715,000 16.09% 2023* 508 $ 3,645,000 -1.88% Source: HdL Coren & Cone *Data through September 2023 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 two 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 29 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. 11 16-20 Total Assessed Property Value Growth $80,000,000,000 6.4 7.1 $70,000,000,000 4.5 4.8 % $60,000,000,000 6.6% 5.9% 6.5% $50,000,000,000 5.7 1.8% 0.2% 1.0% 2.9% 5.2% $40,000,000,000 $30,000,000,000 $20,000,000,000 $10,000,000,000 0 o v o 0 0 0 0 0 0 0 0 0 0 0 0 0 Value changes in Newport Beach show continued appreciation in property values in Fiscal Year 2022-23. Over the past 10 years, assessed valuation increased an average of 6.0% per year and 5.8% over a twenty-year period. Newport Beach's assessed property values increased 7.1 %, with a local assessed value of $71.3 billion for Fiscal Year 2022-23. Sales Tax The second largest funding source for the General Fund is sales tax revenue, making up about 16.3% of General Fund revenues. The City's sales tax base is largely generated from three industry categories — autos and transportation, general consumer goods, and restaurants/hotels. Most of these industries are also heavily impacted by tourism. As previously discussed, sales tax revenue was up 6.8% from July 2022 through December 2022. However, sales tax revenue was down 5.4% from January 2023 through June 2023, which is consistent with sales tax results across the State of California. The decrease in sales tax revenue is largely due to a shift in consumer spending from taxable goods, such as new car sales, to nontaxable items, such as travel, leisure, and entertainment. For example, sales from autos and transportation (the City's largest source of sales tax revenue) were down 5.5% over the prior year and is projected to remain down next year due to a softening of demand for new vehicles, which is largely related to higher interest rates. Conversely, sales from restaurants and hotels were up 6.2% over the prior year and is projected to be higher next year as patrons continue to allocate a significant portion of their household food budget to dining out. Sales tax revenue was up 0.8% for Fiscal Year 2022-23 and is projected to dip slightly in Fiscal Year 2023-24. Transient Occupancy Tax (TOT) TOT accrues to the City at a rate of 10% of room charges with 18% of this collection going to the local destination marketing organization (Visit Newport Beach) to promote Newport Beach as a tourist destination. The City distinguishes its transient occupancy taxpayers 12 16-21 in two broad property type categories, commercial and residential property. The commercial category is composed of approximately 21 hotels and resorts and accounts for approximately 73% of TOT revenues. The residential category is made up of approximately 1,550 vacation rentals representing 27% of TOT revenue. TOT revenue from short-term residential stays has nearly doubled since 2019-20, whereas hotel TOT revenue increased 32% over the same period as reflected in the following chart. Hotel vs Residential TOT $23 $20.0 $21-9 $16.6 o $16 $11-8 $8.3 $s $s-7 $4.2 $5.1 $2 FY 19.20 FY 20-21 FY 21-22 FY 22-23 ■ HoW • Residential In calendar year 2019, hotel occupancy rates remained in the eighties during the summer and was generally in the seventies throughout the remainder of the year. The following chart shows that while hotel occupancy rates have not yet fully recovered from pre - pandemic highs there has been significant improvement in hotel occupancy. In addition, increases in average daily room rates have augmented hotel TOT revenues. =...asp 651% x 66.2v! 63.8% 67.6% 69'3%,64.2% 73.5yo� 7D_1% 68.4% �52.7% fi1.096��*62.99662.7% �660.2%--�71.6°J~fi7.9i6 61.7% 58.1% 59.8% 37,5% 38.6% % 53.5% z a a u JAR FEB MAR APR MAY !UN JUL AUG SEP OCT NOV DEC -0-- 2021 t 2022 —4-- 2023 LONG TERM FINANCIAL PLANNING The City continues to be in excellent financial health due to its strong underlying tax base, disciplined fiscal decisions, and stable governance. Conservative budgeting and sound financial policies have resulted in a trend of General Fund operating surpluses and strong reserve levels. The City annually completes a Long -Range Financial Forecast covering the next 20 years pursuant to City Council Policy F-3 — Budget Adoption and Administration. That forecast shows positive General Fund results in each of the next 20 13 16-22 years and does not indicate any long-term financial trends of concern. The City's long- term financial planning has been guided by its strong financial policies, prudent budgeting decisions, and proactive planning in such critical areas as facilities replacement and pensions. These policies are regularly evaluated and updated as conditions and needs change. 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 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 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 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. Per current policy, appropriations for operating expenditures are balanced in relation to current revenue sources and do not 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. As a result of early retirement plans, attrition, outsourcing, and lay-offs implemented in the years following the onset of the Great Recession, the full-time work force was reduced by approximately 4% between FY 2012-13 and FY 2016-17 as depicted in the chart below. In the years since, thoughtful additions to the City's workforce have been implemented with a continued focus on fiscal discipline and maintaining balanced budgets. 14 16-23 Full Time Positions Trend 770 763 765 752 750 741 736 .n 730 730 0 730 728 724 725 72b 727 728 0 4 710 0 690 670 650 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Fiscal Year 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 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 continue. 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 2023, 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 well -controlled expenditure framework coupled with a very solid level of budget management. Additionally, FitchRatings rating agency also reaffirmed the City's AAA credit rating noting the City's consistent tax base and well - controlled expenditure framework coupled with conservative financial management would enable the City to maintain financial stability and solid reserves in a potential moderate economic downturn. The City has also employed an aggressive strategy to paydown its unfunded pension liability. The City has committed to a pension paydown plan that requires $45 million in annual contributions towards its unfunded pension liability, which is $15 million more than the amount required to be paid, as further described in the Pension section below. This paydown strategy is anticipated to result in eliminating the City's pension liability in 2032. 15 16-24 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 Planning Reserve (FFPR) in FY 2022-23 by allocating resources to debt service, parks and community centers, the purchase of land and building for a future police station and other small scale facility rehabilitation projects. Beginning Balance 7/1/22 $ 34,171,635 Sources Licenses, Permits and Fees 34,309 Transfer In from General Fund 12,924,919 Transfer in Misc FFP Projects 41,272 Investment Income 371,710 Net increase in fair value of investments (161,745) Total Sources 13,210,465 Uses Debt Service' (8,562,344) Parks and Community Centers (2,894,345) Police Facility (3,324,919) Fire Stations (900,000) Misc FFP Projects (6,900,000) Total Uses (22,581,608) Ending Balance 6/30/23 $ 24,800,492 The transfer is net of the Build America Bonds subsidy, which is recorded in the Debt Service Fund Overall, the FFPR balance is decreasing by $9.4 million from the prior fiscal year. 16 16-25 Pensions As of the actuarial valuation date of June 30, 2022, the City had an Unfunded Accrued Liability (UAL) of $348 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). • Through negotiated cost sharing, saw employees contribute 57.5% of the Normal Cost of the plan, or $10.5 million in Fiscal Year 2022-23. • Adopted a fixed and shorter amortization period for the unfunded liability. • Made Additional Discretionary Payments (ADPs) • Contributed no less than Actuarial Determined Contribution (ADC) each and every year. • Analyzed the 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. • Maintained 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 ACFR — see Note (10) of Notes to the Financial Statements. The City implemented GASB 75 in fiscal year 2017-18, 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 ACFR — 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 its 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 City evaluates the cost and benefits of paying down the unfunded pension and OPEB liabilities on a faster schedule. Currently, the City Council has committed to a fixed $45 million per year contribution toward the unfunded pension liability, which is approximately $15 million more than is required by CalPERS. Fiscal year 2022-23 represented four years in a row the City Council appropriated additional funding towards an accelerated 17 16-26 payment of the unfunded liability from year-end budget surplus funds. The $45 million paydown strategy is anticipated to result in eliminating the City's pension liability in 2032. AWARDS AND ACKNOWLEDGMENTS The City has prepared an Annual Comprehensive Financial Report for the past 30 years. The City has received awards for excellence in financial reporting in 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 Annual Comprehensive Financial Report for the fiscal year ended June 30, 2022. In order to be awarded a Certificate of Achievement, a government unit must publish an easily readable and efficiently organized Annual Comprehensive 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 Annual Comprehensive 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 Accounting Division. In addition, the Finance Department staff would like to thank the City Manager, the Mayor, and the City Council for their interest in and support of planning and conducting the financial operations of the City in a responsible and progressive manner. We would also like to thank our auditors, DavisFarr LLP, for their time and assistance in the preparation of the report. l "A*aw Grace K. Leung Jason AI -Imam City Manager Finance Director/Treasurer 18 16-27 Government Finance Officers Association Certificate of Achievement for Excellence in Financial Reporting Presented to City of Newport Beach California For its Annual Comprehensive Financial Report For the Fiscal Year Ended June 30, 2022 Executive Director/CEO 19 16-28 City Council Members District 7 City Executive Staff Aaron Harp Grace K. Leung Leilani Brown City Attorney City Manager City Clerk Tara Finnigan..........................................................................................................................Assistant City Manager Seimone Jurjis................................................................Assistant City Manager/Community Development Director Jason AI-Imam..................................................................................................................Finance Director/Treasurer JeffBoyles.....................................................................................................................................................Fire Chief PaulBlank............................................................................................................................................. Harbormaster Barbara Salvini.................................................................................................................. Human Resources Director Melissa Hartson.................................................................................................................... Library Services Director JosephL. Cartwright.................................................................................................................................Police Chief DaveWebb............................................................................................................................... Public Works Director Sean Levin........................................................................................................ Recreation & Senior Services Director Mark Vukojevic..................................................................................................................................Utilities Director r IKE 16-29 LECTORATE Board of Harbor Commission Library Trustees 11L Building & Fire Parks, Beaches & Code of Appeals ecreation Commission MAYOR City Arts COUNCIL Planning Commission Commission city Civil Service Boar Committees CITY CITY CITY CLERK MANAGER ATTORNEY Community Library Development Services Finance Police Public Fire Works Harbor Recreation & Senior Services Human Resources Utilities This page left blank intentionally. 22 16-31 FINANCIAL SECTION Z 23 16-32 This page left blank intentionally. 24 16-33 *I DavisFarr CERTIFIED PUBLIC ACCOUNTANTS Davis Farr LLP 18201 Von Karman Avenue I Suite 1100 1 Irvine, CA 92612 Main: 949.474.2020 1 Fax: 949.263.5520 INDEPENDENT AUDITOR'S REPORT The Honorable Mayor and Members of the City Council City of Newport Beach Newport Beach, California Report on the Audit of the Financial Statements Opinions 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 (the "City"), as of and for the year June 30, 2023, and the related notes to the financial statements, which collectively comprise the City of Newport Beach's basic financial statements as listed in the table of contents. In our opinion, the accompanying financial statements present fairly, in all material respects, the respective financial position of the governmental activities, the business -type activities, each major fund, and the aggregate remaining fund information of the City of Newport Beach, as of June 30, 2023, and the respective changes in financial position and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. Emphasis of Matter As described further in note 1 to the financial statements, during the year ended June 30, 2023, the City implemented Governmental Accounting Standards Board (GASB) Statement No. 96 and Governmental Accounting Standards Board (GASB) Statement No. 94. Our opinion is not modified with respect to these matters. Basis for Opinions We conducted our audit in accordance with auditing standards generally accepted in the United States of America (GAAS) and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States (Government Auditing Standards). Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the City and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. 25 16-34 The Honorable Mayor and Members of the City Council City of Newport Beach Newport Beach, California Responsibilities of Management for the Financial Statements The City's management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for 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. In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the City's ability to continue as a going concern for twelve months beyond the financial statement date, including any currently known information that may raise substantial doubt shortly thereafter. Auditor's Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinions. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS and Government Auditing Standards will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements. In performing an audit in accordance with GAAS and Government Auditing Standards, we: • Exercise professional judgment and maintain professional skepticism throughout the audit. • Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. • Obtain an understanding of internal control relevant to the audit 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, no such opinion is expressed. • Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements. • Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the City's ability to continue as a going concern for a reasonable period of time. 26 16-35 The Honorable Mayor and Members of the City Council City of Newport Beach Newport Beach, California We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control -related matters that we identified during the audit. Required Supplementary Information Accounting principles generally accepted in the United States of America require that the Management's Discussion and Analysis, Budgetary Comparison Schedules for the General Fund and each major special revenue fund, Schedules of Changes in the Net Pension Liability and Related Ratios, Schedules of Contributions, Schedule of Changes in the Net OPEB Liability and Related Ratios and Schedule of OPEB Contributions be presented to supplement the basic financial statements. Such information is the responsibility of management and, 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 required supplementary information in accordance with GAAS, 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 information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Supplementary 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 Combining and Individual Nonmajor Fund Financial Statements and Budgetary Comparison Schedules are presented for the purpose of additional analysis and are not a required part of the basic financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. The information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with GAAS. In our opinion, the Combining and Individual Nonmajor Fund Financial Statements and Budgetary Comparison Schedules are fairly stated, in all material respects, in relation to the basic financial statements as a whole. Other Information Management is responsible for the other information included in the Annual Comprehensive Financial Report. The other information comprises the Introductory Section and Statistical Section but does not include the financial statements and our auditor's report thereon. Our opinions on the financial statements do not cover the other information, and we do not express an opinion or any form of assurance thereon. In connection with our audit of the basic financial statements, our responsibility is to read the other information and consider whether a material inconsistency exists between the other information and the financial statements, or the other information otherwise appears to be materially misstated. If, based on the work performed, we conclude that an uncorrected 27 16-36 The Honorable Mayor and Members of the City Council City of Newport Beach Newport Beach, California material misstatement of the other information exists, we are required to describe it in our report. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated December 27, 2023, 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 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. Irvine, California December 27, 2023 28 16-37 FINANCIAL SECTION Z 29 16-38 This page left blank intentionally. 30 16-39 MANAGEMENT'S DISCUSSION AND ANALYSIS This section of the City of Newport Beach's Annual Comprehensive Financial Report (ACFR) presents management's discussion and analysis of the City's financial performance during the fiscal year that ended on June 30, 2023. 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 Annual Comprehensive Financial Report contains the following information: IndependentAuditors' 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 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 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 net position has 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 public safety, public works, community development, community services, and general administration. Taxes and other general revenues finance most of these activities. 31 16-40 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 that receive significant financial support from user fees and charges 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) provide goods or services mostly to non -government users and are the 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 and other equipment maintenance, risk management, retiree insurance, telecommunications systems, information technology services, etc.). Because the Internal Service Funds primarily serve government users, 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 the City's fiduciary activities are reported in a separate statement of 32 16-41 fiduciary net position, and a statement of changes in fiduciary net position. 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 Budgetary Comparison Schedules for the General Fund and two other major funds, the Schedule of Changes in Net Pension Liability and Related Ratios, the Schedule of Changes in Net Post -Employment Health Care Benefits (OPEB) Liability and Related Ratios, and the related Schedules of Contributions for the Pension and OPEB plans. 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 fiscal year ended June 30, 2023 was $2.5 billion, increasing $62.8 million or 2.6% 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 $27.2 million. This increase is primarily due to a $24.2 million increase in the City's lease receivable from Governmental Accounting Standards Board Statement 87 (GASB 87). The remaining $3.0 million increase is attributable to increases in cash and investments, interest receivables, intergovernmental receivables, and a public -private partnership receivable from the implementation of Governmental Standards Board Statement 94 (GASB 94); offset by decreases in accounts receivable, restricted cash and investments with fiscal agents, and prepaid items. Capital assets increased $38.2 million, mostly due to additions to land and rights of way, and structures. Current liabilities decreased $2.7 million primarily due to decreases in accounts payable. Long-term liabilities increased $146.8 million. The increase is primarily due to increases in the City's net pension liability and net OPEB liability as investment returns in both plans underperformed. See Note (11), and Note (12) of the Notes to the Financial Statements for more information. 33 16-42 Current and other assets Capital assets Total assets Deferred outflows of resources Current liabilities Long-term liabilities Total liabilities Deferred inflows of resources Net position Net investment in capital assets Restricted Unrestricted Total net position Figure 1 Net Position June 30 (in thousands) Governmental Activities Business -Type Activities 2022 2023 2022 2023 Total 2022 2023 $ 603,672 $ 633,179 $ 38,970 $ 36,647 $ 642,642 $ 669,826 2,339,355 2,372,769 130,464 135,267 2,469,819 2,508,036 2,943,027 3,005,948 169,434 171,914 3,112,461 3,177,862 63,987 141,903 2,296 5,319 66,283 147,222 43,924 41,327 4,383 4,245 48,307 45,572 340,714 479,521 7,134 15,170 347,848 494,691 384,638 520,848 11,517 19,415 396,155 540,263 328,685 271,428 3,408 101 332,093 271,529 2,223,774 2,256,306 128,245 131,016 2,352,019 2,387,322 78,100 79,152 - - 78,100 79,152 (8,183) 20,117 28,560 26,701 20,377 46,818 $ 2,293,691 $ 2,355,575 $ 156,805 $ 157,717 $ 2,450,496 $ 2,513,292 The largest portion of the City's net position, at $2.4 billion of net position, reflects the net investment in capital assets (e.g., land, right of way, street trees, buildings, infrastructure, equipment, and intangibles) less accumulated depreciation, accumulated amortization, 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 $79.2 million of net position, an increase of $1.1 million from the prior fiscal year, primarily due to increased restricted net position related to public works and community services. Public works' increase is mainly from State Gas Tax revenues not being completely spent during the fiscal year. Community services' increase is mainly from cable franchise fees for public, education, and government programming not being completely spent during the fiscal year. As of June 30, 2023, unrestricted net position was $46.8 million, an increase of $26.4 million from the prior fiscal 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. 34 16-43 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 determines the annual change in net position. Revenues: Program revenues: Charges for services Operating grants and contributions Capital grants and contributions Total program revenues General revenues: Taxes: Property taxes Sales tax Transient occupancy taxes Othertaxes Investment related income Other Total general revenues Total revenues Expenses: General government Public safety Public works Community development Community services Interest Water Wastewater Total expenses Increases in net position Net position at beginning of year Net position at end of year Figure 2 Changes in Net Position For the Years Ended June 30 (in thousands) Governmental Activities Business -Type Activities 2022 2023 2022 2023 Total 2022 2023 $ 67,743 $ 74,454 $ 36,929 $ 36,700 $ 104,672 $ 111,154 16,800 20,132 117 - 16,917 20,132 8,693 5,810 - - 8,693 5,810 93,236 100,396 37,046 36,700 130,282 137,096 128,484 138,359 - - 128,484 138,359 46,165 46,552 46,165 46,552 26,677 30,202 26,677 30,202 9,110 10,080 - - 9,110 10,080 (4,861) 2,520 (845) 258 (5,706) 2,778 2,644 5,552 - - 2,644 5,552 208,219 233,265 (845) 258 207,374 233,523 301,455 333,661 36,201 36,958 337,656 370,619 19,374 26,912 - - 19,374 26,912 104,767 121,310 104,767 121,310 65,031 75,904 65,031 75,904 9,665 13,048 9,665 13,048 24,509 27,937 24,509 27,937 6,878 6,666 - - 6,878 6,666 - - 27,117 30,702 27,117 30,702 - 4,094 5,344 4,094 5,344 230,224 271,777 31,211 36,046 261,435 307,823 71,231 61,884 4,990 912 76,221 62,796 2,222,460 2,293,691 151,815 156,805 2,374,275 2,450,496 $ 2,293,691 $ 2,355,575 $ 156,805 $ 157,717 $ 2,450,496 $ 2,513,292 Revenues Associated with Governmental Activities Discussion Figure 2 illustrates in detail how the $333.7 million in Governmental Activities revenue was derived. Figure 3 summarizes this revenue by major source. As shown on Figures 2 and 3, $74.5 million, or 22.3%, of the revenues were recovered from those who directly benefited from the programs as a charge for service. Another $25.9 million, or 7.8%, 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 $233.3 million, or 69.9%, represented general revenues of the City including taxes, intergovernmental revenues, and other miscellaneous revenues. 35 16-44 Figure 3 Governmental Activities Revenue Sources For the Year Ended June 30, 2023 68% 8% ■ Charges for Services ■Contributions and Grants ■ Taxes 22% Other 2% As illustrated in Figure 2, program revenues related to Governmental Activities increased $7.2 million from the prior year. This increase was primarily attributable to increases in charges for services for paramedics, tidelands, the Junior Lifeguard program, rentals, and fewer unrealized investment losses. Additionally, operating grants and contributions increased mainly due to earning American Rescue Plan Act grant revenue by spending part of the grant money on the City's Junior Lifeguard building. These increases were offset by a decrease in capital grants and contributions mostly due to a decrease in assessment district financings. The City's general revenues related to Governmental Activities increased about $25.0 million from the prior year primarily due to increases in property taxes, sales taxes, transient occupancy taxes, other taxes, investment income, and other general revenues. Revenue increases across various categories illustrates that Newport Beach's underlying local economy continues to remain strong. Property tax is the largest revenue source for the City and collections finished the year $9.9 million higher than the previous fiscal 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 $46.6 million, sales taxes represent the second largest individual revenue source for the City. Sales taxes increased about $387,599 from the previous fiscal year. This moderate increase in sales tax revenue was due to consumer spending shifting from taxable sales, such as automobiles and transportation, to nontaxable sales, such as entertainment. Transient occupancy taxes (TOT), the City's third largest revenue source, finished the year at $30.2 million, which is an increase of $3.5 million from the previous fiscal year. Both residential TOT and hotel TOT increased. Short term lodging businesses had strong demand. Hotel occupancy rates continue to improve from the 2020 coronavirus pandemic lockdowns, and average daily hotel room rates have increased. 36 16-45 Investment income, comprised of both interest income and unrealized gains/losses, increased about $7.4 million from the prior fiscal year. The increase is from interest income from higher interest rates finally exceeding the increases to unrealized losses caused by higher interest rates. 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 one department (Public Works) 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 $271.8 million of Governmental Activities expense was derived. The increase of $41.6 million from the prior year is mostly due to increasing pension liabilities. See Note (11) of the Notes to the Financial Statements for more information. 37 16-46 Figure 4 below summarizes the Governmental Activities expenses shared across function. Figure 4 Governmental Activities Functional Expenses For the Year Ended June 30, 2023 2% 5% 10% 10% 45% iq16V 28% ■ Public Safety ■ Public Works I Community Services General Government Community Development Interest 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. General government Public safety Public works Community development Community services Interest Figure 5 Governmental Activities For the Years Ended June 30 (in thousands) 2022 Total Cost Net (Cost) of Service of Service $ 19,374 $ (14,833) 104,767 (79,083) 65,031 (36,627) 9,665 1,844 24,509 (1,410) 6,878 (6,878) $ 230,224 $ (136,987) 2023 Total Cost Net (Cost) of Service of Service $ 26,912 $ (10,988) 121,310 (92,434) 75,904 (49,373) 13,048 (765) 27,937 (11,155) 6,666 (6,666) $ 271,777 $ (171,381) 38 16-47 Figure 6 Program Expenses and Revenues — Governmental Activities For the Year Ended June 30, 2023 (in millions) $130.0 $120.0 $110.0 $100.0 $90.0 $80.0 $70.0 $60.0 $50.0 $40.0 $30.0 $20.0 $10.0 $0.0 General Public Safety Public Works Community Community Interest Government Development Services Total Expenses ■Program Revenues 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 $37.0 million. Program revenues totaled $36.7 million and were supplemented by about $258,000 of general revenues related to investment income. As shown in Figure 7 on the following page, Water activities represents about $32.0 million (87.3%) of program revenues, while Wastewater activities represents $4.7 million (12.7%) of program revenues. 39 16-48 Figure 7 Program Expenses and Revenue — Business -type Activities For the Year Ended June 30, 2023 (in millions) $35.0 $30.0 $25.0 — $20.0 $15.0 $10.0 $5.0 $0.0 Water Wastewater "Total Expenses ■ Program Revenues Expenses Associated with Business -Type Activities Discussion Current year expenses for Business -type Activities totaled $36.0 million, an increase of about $4.8 million over prior year as shown in Figure 2. This is attributable to increases in salaries and benefits, maintenance, utilities, and miscellaneous expenses. Major Business -type expenses in the current fiscal year included the following: Water Of the $30.7 million in water related expenses, $11.4 million (37.0%) is for the purchase of water, $5.4 million (17.4%) covers employee related costs, $7.5 million (24.4%) is for maintenance, supplies, and depreciation of the water system, $2.2 million (7.3%) is for professional services, $2.1 million (7.0%) is for utility payments and the remaining $2.1 million (6.9%) is collectively attributable to other miscellaneous expenses. Wastewater Of the $5.3 million in wastewater related expenses, $2.1 million (38.9%) is for maintenance, supplies, and depreciation of the wastewater system, $1.7 million (31.3%) is for employee related costs, and the remaining approximately $1.5 million (29.8%) is attributable to professional services, utility payments and other miscellaneous expenses. Figure 7 summarizes Business -type expenses separately for Water and Wastewater activities. 40 16-49 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, 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 $248.0 million, which is almost unchanged from the prior fiscal year. Increases in fund balances in the Tide and Submerged Land — Operating Fund, other capital projects funds, and other permanent funds in aggregate were almost completely offset by decreases in the General Fund, Tide and Submerged Land — Harbor Capital Fund, Facilities Financial Planning Reserve Fund, Debt Service Fund, and other special revenue funds in aggregate. The General Fund represented $91.4 million or 36.9% of the combined fund balances of the Governmental Funds. Figure 8 Governmental Funds Fund Balance June 30 (in thousands) General Fund Tide and Submerged Land - Operating Tide and Submerged Land - Harbor Capital Facilities Financial Planning Reserve Debt Service Fund Non -major special revenue Non -major capital projects Non -major permanent 2022 2023 Change $ 97,139 $ 91,443 $ (5,696) 4,548 6,107 1,559 31,534 30,215 (1,319) 34,172 24,800 (9,372) 2,199 2,184 (15) 27,844 26,518 (1,326) 44,044 60,148 16,104 6,487 6,543 56 $ 247,967 $ 247,958 $ (9) The following describes the classification of fund balance as of June 30, 2023. Additional information on the City's fund balance can be found in Note (15) of the Notes to the Financial Statements. Nonspendable Fund Balance — The City has $12.9 million in fund balance classified as nonspendable to indicate that it cannot be readily converted to cash. Of the $12.9 million nonspendable fund balance, $1.1 million is for prepaid items, $188,828 is for inventories, $7.0 million is for long-term loan receivables, and $4.6 million is for permanent endowments. Restricted Fund Balance — The City has $73.7 million in fund balance classified as restricted to indicate that it has externally imposed restrictions on how the money may be spent. Of the $73.7 million restricted fund balance, $5.3 million is restricted in the Tide and Submerged Land — Operating Fund, of which $3.8 million is restricted for capital projects and maintenance and repairs, and $1.5 million is restricted for the Upper Newport Bay restoration; $30.2 million is 41 16-50 restricted in the Tidelands and Submerged Land — Harbor Capital Fund for capital projects related to the harbor; and $2.2 million is restricted for debt service. Of the remaining $36.0 million in restricted fund balance, $26.5 million is restricted for various special revenue funds, $7.3 million is restricted for the Assessment District Fund, $282,123 is restricted for the Fire Station Fund, and $1.9 million of fund balance is restricted for permanent funds. Committed Fund Balance — The City has $83.7 million in fund balance classified as committed to indicate that the City Council has committed how the money will be spent. Of the $83.7 million committed fund balance, $5.5 million is committed in the General Fund mostly for contract services; $840,000 is committed in the Tide and Submerged Land — Operating Fund; $24.8 million is committed in the Facilities Financial Planning Reserve Fund; $3.0 million is committed in the Fire Station Fund; $485,365 is committed in the Civic Center and Park Fund; $14.7 million is committed in the Parks and Community Center Fund; $379,245 is committed in Balboa Village Parking Management District Fund; $4.1 million is committed to the Facilities Maintenance Fund; $15.9 million is committed in the Neighborhood Enhancement Fund; $1,083 is committed in the Junior Lifeguards Fund; $11.5 million is committed in the Unrestricted Capital Improvements Fund; $1.9 million is committed to the Miscellaneous Facilities Financing Fund; and $658,756 is committed to the Police Facility Fund. Assigned Fund Balance — The City does not have any fund balance classified as assigned. Assigned fund balance is 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 $77.7 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: General Fund revenues finished $23.0 million or 8.8% higher than the prior year mostly due to a combined $17.9 million increase in the City's top three revenues sources — property taxes, sales taxes and transient occupancy taxes — with a $14.0 million increase in property taxes as the City's assessed valuation continued to increase due primarily to the appreciation of property values; a $387,599 increase in sales taxes as consumer spending shifted from taxable sales to nontaxable sales; and a $3.5 million increase in transient occupancy taxes due strong short term lodging businesses and hotel occupancy rates continuing to recover from the 2020 coronavirus pandemic lockdowns and increased average daily hotel room rates. General Fund expenditures finished $33.6 million or 16.0% higher than the prior fiscal year mostly due to changing the presentation of the General Fund's cost allocation expenditures on behalf of the Tide and Submerged Land — Operating Fund. Previously these cost allocation expenditures were a net reduction to General Fund expenditures. In an effort to reduce complexity and improve transparency, Fiscal Year 2022-23 presents the full amount of these cost allocation expenditures in the General Fund which get offset by a corresponding transfer into the General Fund from the Tide and Submerged Land — Operating Fund. Other increases to General Fund expenditures included internal service fund insurance, maintenance and repairs, and residential solid waste disposal. Though revenues exceeded expenditures by about $40.8 million, there were substantial transfers out of the General Fund totaling $65.5 million mostly for capital improvement projects, including purchasing a building and land for a future police station. In total, fund balance in the General Fund decreased $5.7 million and ended the year at $91.4 million. 42 16-51 • Fund balance for the Tide and Submerged Land — Operating Fund increased $1.6 million and ended the current year with $6.1 million in fund balance. The increase was due to the City's General Fund subsidizing the operations of the Tide and Submerged Land — Operating Fund. • Fund balance for the Tide and Submerged Land — Harbor Capital Fund decreased $1.3 million ending at $30.2 million. This was largely due to the commencement of two major harbor dredging capital improvement projects. • Fund balance for the Facilities Financial Planning Reserve Fund decreased $9.4 million to end the current year at $24.8 million in fund balance. This was mainly due to transfers to other funds for debt service and to ultimately cash fund construction projects related to parks and facilities, and the acquisition of land and a building for a future police station. • Fund balance for the Debt Service Fund decreased $15,384 ending at $2.2 million. The decrease was due to administrative charges and debt service related to servicing certificates of participation. 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 also include information for individual funds. Enterprise Fund results for the year included the following: • Net position in the Water Fund increased $1.9 million mostly due to reduced expenses from imported water purchases. Fiscal Year 2022-23's quantity of water purchased decreased mildly compared to the prior fiscal year. However, almost all the decrease occurred with imported water, which cost significantly more per unit than other sources of water. As a result, the expense of imported water purchases decreased significantly. • Net position in the Wastewater Fund decreased $445,725 mainly due to increased professional services and miscellaneous expenditures. During November 2023, the City Council adopted a resolution to increase sewer rates each January 1st during calendar years 2024 through 2028. Increasing sewer rates should improve the Wastewater Fund's net position in future years. Major Internal Service Fund activity in the current fiscal year included the following: Total net position in the Internal Service Funds increased $7.5 million in the current fiscal year. This was mostly due to operating income of $5.9 million, which included increases in revenue from charges for services for the City's self -insured general liability and workers' compensation programs. Operating income's contribution to net position was supplemented by positive non -operating revenue and transfers in, which increased net position by approximately $1.6 million. 43 16-52 GENERAL FUND BUDGETARY HIGHLIGHTS Changes to Original Budget Final budgeted revenues for the General Fund increased $5.7 million from the original budget during the year ended June 30, 2023. Factors contributing to this fluctuation are highlighted as follows: • Final budgeted intergovernmental revenue increased $1.3 million primarily due to adjustments related to the Newport Beach Fire Department's mutual aid reimbursements, revenue sharing with the County under a Waste Disposal Agreement, and a correction to the budget for the Permanent Local Housing Allocation program grant. • Charges for services increased from the adopted budget by $1.2 million. This adjustment is related to increased revenue received for recreation classes. This was offset slightly by a reduction to the budget for plan check fees for grading that was double budgeted in two accounts. • Property income revenues increased by $412,400 due to estimates of rental income from the acquisition and operation of the Dove Street property, which was acquired during the fiscal year with the intention of being made into a police station in the future. • Other revenues were adjusted upward from the adopted budget by a total of $2.7 million, primarily due to a settlement that the City received regarding polychlorinated biphenyls (PCBs) contamination, as well as the sale of a City owned property, and a donation received from the Friends of the Library. • Donations were adjusted upward by $103,260 related to donations to both the Library Services Department and the Recreation & Senior Services Department. Final budgeted expenditures for the General Fund increased $14.0 million from the original budget during the year ended June 30, 2023. The significant factors contributing to the increase are as follows: • The addition of $6.2 million to the benefits and salary budget associated with an additional discretionary payment of $5.0 million toward the City's unfunded pension liability and $1.2 million from approved contracts with the majority of the City's employee associations. • Budgeted carryovers from Fiscal Year 2021-22 totaling $4.4 million were added to the adopted budget. Variance with Final Budget Actual General Fund revenues came in at $14.1 million above final budgeted revenues for the year ended June 30, 2023. Significant factors contributing to this favorable variance are summarized as follows: • Property tax revenues came in $3.6 million higher than the final budget, largely due to supplemental taxes. 44 16-53 • Transient occupancy tax revenues were $2.4 million higher due to increased revenue from short-term lodging businesses and many hotel properties reporting record high transient occupancy tax receipts. • Other taxes ended the year $1.3 million higher than projected due primarily to business license taxes, utility franchise fees, and solid waste franchise fees. • Charges for services came in $2.0 million higher due primarily to receipts for paramedic service fees, plan check fees, as well as revenue received from recreation fee -based classes, and the Junior Lifeguard program. • Property income ended the year $2.9 million higher mainly due to overages in Beacon Bay, Balboa Yacht Basin, and WNCC Pacifica, as well as parking revenue, and GASB 87. • Intergovernmental revenues came in $1.3 million higher than the final budget largely due to payments from the Newport Beach Fire Department to the IGT-GEMT program resulting in additional revenue to the City, as well as reimbursements for mutual aid. • Other revenues exceeded the budgeted amount by $814,813 and were made up largely of the net of bad debt and damage to city property revenues. Actual General Fund expenditures of $244.0 million were less than final budgetary estimates of $256.5 million. The $12.5 million favorable variance was due largely in part to routine savings in salaries as well as contract services. Salary and benefit savings are spread across multiple departments, with savings in the larger departments (such as the Police Department, the Public Works Department, and the Fire Department) totaling $3.5 million. CAPITAL ASSET AND DEBT ADMINISTRATION Capital Assets The City's capital assets for Governmental and Business -type Activities as of June 30, 2023 amount to $2.5 billion, net of accumulated depreciation/amortization. This is comprised of a broad range of tangible 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; and intangible capital assets including the rights to use land and rights of way, structures and equipment. Total capital assets increased $38.2 million over the prior fiscal year. 45 16-54 Land Intangible right to use land and rights of way Structures Intangible right to use structures Equipment Intangible right to use equipment Intangible right to use subscriptions Infrastructure Work in progress Totals Figure 9 Capital Assets June 30 (net of depreciation/amortization, in thousands) Governmental Business -Type Activities Activities Total 2022 2023 2022 2023 2022 2023 $ 1,899,966 $ 1,918,486 $ 2,219 $ 2,219 $ 1,902,185 $ 1,920,705 - - 1,509 3,809 1,509 3,809 183,197 196,235 394 378 183,591 196,613 13,021 12,007 - - 13,021 12,007 19,017 19,346 126 101 19,143 19,447 310 236 - - 310 236 - 2,231 - - - 2,231 211,008 210,389 122,484 121,062 333,492 331,451 12,836 13,839 3,731 7,697 16,567 21,536 $ 2, 339, 355 $ 2, 372, 769 $ 130,463 $ 135,266 $ 2,469, 818 $ 2, 508, 035 Major capital asset events during the current fiscal year included the following: • Capital asset additions totaled $74.2 million in both the Governmental and Business -type Activities in the current year. Of the $74.2 million, $18.4 million is related to structure additions of a fire station and the purchase of a building for a future police station; $13.7 million represents additions of infrastructure assets mostly related to the road system and water system; $4.8 million is related to equipment and intangible right to use equipment additions; $2.4 million is related to intangible rights to use land and rights of way. The remaining $34.9 million is comprised of additions of non-depreciable/non-amortizable assets such as work in progress of $16.4 million, and land and rights of way of $18.5 million. • Of the $65.2 million of additions in governmental assets in the current year, additions in infrastructure contributed $11.1 million, which was mostly due to upgrades in the road system. The remaining $54.1 million added in the current year as governmental assets is comprised of $18.5 million of land additions and $18.4 million of structure additions, both related to the completion of a new fire station and the purchase of land and a building for a future police station; $12.4 million of work in progress, mostly related to upgrades to Sunset View park, upgrades to the road system, and a building for the City's junior lifeguard program; and $4.8 million of equipment additions, mostly related to vehicle purchases and information technology related purchases. • The $9.0 million of business -type asset additions in the current year is comprised of $2.6 million in water system infrastructure additions, $2.4 million in intangible rights to use land and right of way related to the water system, and $4.0 million of work in progress additions related to water system improvements. Additional information on the City's capital assets can be found in Note (6) of the Notes to the Financial Statements. 46 16-55 Long-term Debt Certificates of participation Bond premium CDBG Loan Figure 10 Outstanding Debt June 30 (in thousands) Governmental Business -Type Activities Activities 2022 2023 2022 2023 2022 $101,550 $ 97,610 1,149 1,007 208 - - $ $101,550 1,149 - - 208 Total 2023 $ 97,610 1,007 Totals $102,907 $ 98,617 $ - $ - $102,907 $ 98,617 The City's total debt decreased $4.3 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 (7) of the Notes to the Financial Statements. FACTORS AFFECTING NEXT YEAR'S BUDGET Economy Recent trends in inflation and inverted Treasury yield curves have caused concern in the broader economy and financial markets. Economic growth has slowed compared to the robust improvement experienced the previous year after emerging from the global pandemic, and a slower rate of growth in the upcoming fiscal year is generally anticipated for revenues. However, the local economy in Newport Beach remains strong with a positive economic outlook for the foreseeable future. The City is well positioned to withstand the impacts of a potential recession and is expected to maintain long-term fiscal sustainability. Local Revenue Trends Property tax revenue, the City's largest source of revenue, is projected to increase approximately 3.1 % next fiscal year, which is largely related to the Proposition 13 inflationary adjustment and due to changes in ownership and new construction. Although higher interest rates and rising mortgage rates have slowed sales and slightly decreased market values, the taxable value of properties reacts slower than the market value, so decreases in market value do not immediately reduce the City's property tax revenue, which is based on the assessed values. Property tax revenues are expected to continue growing for the foreseeable future. Sales tax revenue is the second largest source of General Fund revenue. Approximately 84% of sales tax revenue is generated from autos and transportation, restaurants and hotels, general consumer goods, and the State and County pools. Sales tax revenue is projected to decrease approximately 2.8% next fiscal year due to decreases in sales from most industry groups except for restaurants and hotels. Consumer spending trends have continued shift from taxable goods, such as new car sales, to nontaxable items, such as travel, leisure, and entertainment. For example, sales from autos and transportation (the City's largest source of sales tax revenue) are projected to be lower due to a softening of demand for new vehicles, which is largely related to 47 16-56 higher interest rates. Sales from restaurants and hotels are expected to remain strong which will offset some of the decrease in revenues related to autos and transportation. Transient occupancy tax (TOT) revenue, which is the third largest source of revenue in the General Fund, continues to remain strong. This trend is expected to continue with TOT revenues projected to increase approximately 5% next fiscal year, which is largely due to hotels reporting record high TOT receipts and also due to the opening of the Pendry hotel in September 2023. 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 that support a wide variety of programs and initiatives. The City Council adopted a Fiscal Year 2023-24 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. During the adoption of the budget for Fiscal Year 2023-24, the City Council approved funding for the continuation of an aggressive pension paydown strategy, which includes $45 million being paid to CalPERS next fiscal year towards the unfunded pension liability, which is approximately $15 million more than the amount required to be paid. This ongoing aggressive paydown strategy of making $45 million payments to CalPERS each year is expected to eliminate the City's pension liability by 2032. In October 2023, the City Council approved allocating an additional $5.8 million towards paying down the City's OPEB liability. This additional payment combined with the annual required contributions, is projected to eliminate the OPEB liability within the next year or two (excluding amounts related to the implied rate subsidy), which will provide for $1.5 million in annual budgetary savings. Overall, the City's total debt burden is low and remains affordable. The economy benefits from the City's mature, robust 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 between 2009 and 2012, with growth in the each of the last 29 years. 48 16-57 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 have all assigned the City the highest quality credit rating of AAA. Both Moody's and Fitch reaffirmed their AAA ratings in 2023. 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 ten years due to conservative budgeting and a stable and growing tax revenue base. The City has used surpluses for important one-time purposes, like paying more towards retirement obligations and investing in IT and communications infrastructure. Financial management policies are robust and have continued to improve in recent years. 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, Annual Comprehensive Financial Reports, as well as other City financial information can be found on the City's website at: www.newportbeachca.gov/financialinfo. 49 16-58 This page left blank intentionally. 50 16-59 FINANCIAL SECTION _ Z 51 16-60 This page left blank intentionally. 52 16-61 CITY OF NEWPORT BEACH Statement of Net Position June 30, 2023 Assets: Cash and investments (note 2) Receivables: Accounts (net of allowance) Interest Intergovernmental receivables Lease receivables (note 3) Public -private partnership receivable Restricted cash and investments with fiscal agent (note 2) Internal balances Due from agency funds Investment in joint ventures (note 13) Inventory Prepaid items Capital assets (note 6): Non-depreciable/non-amortizable Depreciable/amortizable Accumulated depreciation/amortization Total assets Deferred Outflows of Resources: Deferred amount from pension plans (note 11) Deferred amount from OPEB (note 12) Total deferred outflows of resources Liabilities: Accounts payable Accrued payroll Accrued interest payable Deposits payable Unearned revenue Noncurrent liabilities: Due within one year: Lease liability (note 7) Subscription liability (note 7) Other (note 7) Due in more than one year: Net pension liability (note 11) Net OPEB liability (note 12) Lease liability (note 7) Subscription liability (note 7) Other (note 7) Total liabilities Deferred Inflows of Resources: Deferred amount from pension plans (note 11) Deferred amount from OPEB (note 12) Deferred amount from leases Deferred amount from public -private partnerships Total deferred inflows of resources Net Position: Net investment in capital assets Restricted for: Public safety Public works Community services Community development Debt service Permanent funds: Nonexpendable Expendable Unrestricted Total net position Governmental Business -type Activities Activities Total $ 329,278,781 $ 30,437,051 $ 359,715,832 6,602,052 7,084,871 13,686,923 1,157, 360 107,837 1,265,197 13,851,769 1,481 13,853,250 268,671,212 - 268,671,212 853,723 853,723 8,815,605 8,815,605 984,632 (984,632) - 100,000 100,000 214,631 214,631 627,401 627,401 2,021,785 - 2,021,785 1,932,325,202 9,916,858 1,942,242,060 738,562,975 203,763,392 942,326,367 (298,118,856) (78,413,441) (376,532,297) 3,005,948,272 171,913,417 3,177,861,689 124,129,251 4,341,481 128,470, 732 17,773,307 978,016 18,751,323 141,902,558 5,319,497 147,222,055 14,053,167 3,980,130 18,033,297 6,272,460 233,697 6,506,157 3,360,976 - 3,360,976 3,171,682 31,459 3,203,141 14,468,527 - 14,468,527 1,004,482 44,120 1,048,602 520,085 - 520,085 14,318,929 14,318,929 307,125,662 10,176,747 317,302,409 21,492,688 1,172,264 22,664,952 11,269,667 3,776,654 15,046,321 1,715,047 - 1,715,047 122,074,089 122,074,089 520, 847,461 19,415,071 540,262, 532 3,487,631 81,010 3,568,641 361,988 19,815 381,803 266,652,645 - 266,652,645 925,723 925,723 271,427,987 100,825 271,528,812 2,256,305,577 131,015,969 2,387,321,546 624,358 624,358 27,879,060 27,879,060 41, 065, 756 41,065, 756 856,713 856,713 2,183, 979 2,183,979 4,629,781 4,629,781 1,912,781 - 1,912,781 20,117,377 26,701,049 46,818,426 $ 2,355,575,382 $ 157,717,018 $ 2,513,292,400 See accompanying notes to basic financial statements 53 16-62 CITY OF NEWPORT BEACH Statement of Activities For the Year Ended June 30, 2023 Program Revenues Operating Capital Total Charges for Grants and Grants and Program Expenses Services Contributions Contributions Revenues Functions/Programs Primary government: Governmental activities: General government 26,911,510 12,386,628 3,536,523 15,923,151 Public safety 121,309,057 26,273,944 2,600,981 - 28,874,925 Public works 75,904,138 8,770,525 12,167,252 5,593,573 26,531,350 Community development 13,048,442 11,269,905 993,875 20,261 12,284,041 Community services 27,937,349 15,753,446 832,882 195,728 16,782,056 Interest on long-term debt 6,666,044 - - - - Total governmental activities 271,776,540 74,454,448 20,131,513 5,809,562 100,395,523 Business -type activities: Water 30,701,834 32,033,631 32,033,631 Wastewater 5,343,891 4,666,685 4,666,685 Total business -type activities 36,045,725 36,700,316 - 36,700,316 Total primary government 307,822,265 111,154,764 20,131,513 5,809,562 137,095,839 Taxes: Property tax Sales tax Transient occupancy tax Business license tax Franchise tax Othertaxes Investment income Net decrease 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 See accompanying notes to basic financial statements 54 16-63 Net (Expense) Revenue and Changes in Net Assets Primary Government Governmental Business -type Activities Activities Total (10,988,359) (10,988,359) (92,434,132) (92,434,132) (49,372,788) (49,372,788) (764,401) (764,401) (11,155,293) (11,155,293) (6,666,044) (6,666,044) (171,381,017) (171,381,017) 1,331,797 (677,206) 1,331,797 (677,206) 654,591 654,591 (171,381,017) 654,591 (170,726,426) 138,358,730 138,358,730 46,552,459 46,552,459 30,201,649 30,201,649 4,901,385 4,901,385 4,996,526 4,996,526 181,800 - 181,800 3,208,250 520,736 3,728,986 (687,766) (262,867) (950,633) 5,552,372 - 5,552,372 233,265,405 257,869 233,523,274 61,884,388 912,460 62,796,848 2,293,690,994 156,804,558 2,450,495,552 $ 2,355,575,382 $ 157,717,018 $ 2,513,292,400 See accompanying notes to basic financial statements 55 16-64 This page left blank intentionally. 56 16-65 FINANCIAL SECTION Z 57 16-66 This page left blank intentionally. 58 16-67 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 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 Debt Service Fund is used to account for debt service transactions related to the Certificates of Participation issued to finance the construction of the Civic Center Complex and the construction of Fire Station No. 2. 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 16-68 CITY OF NEWPORT BEACH Governmental Funds Balance Sheet June 30, 2023 Page 1 of 2 Assets Cash and investments (note 2) Receivables: Accounts (net of allowance) Interest Intergovernmental receivables Lease receivables (note 3) Public -private partnership receivable Restricted cash and investments with fiscal agent (note 2) Due from other funds (note 4) Advance to other funds (note 4) Prepaid items Inventory Total assets Liabilities, Deferred Inflows of Resources and Fund Balances Liabilities: Accounts payable Accrued payroll Deposits payable Unearned revenue Advance from other funds (note 4) Due to other funds (note 4) Total liabilities Deferred Inflows of Resources: Unavailable revenue Deferred amount from leases Deferred amount from public -private partnerships Total deferred inflows of resources Fund balances (deficits): Nonspendable: Prepaid items Inventories Long-term loan receivable Permanent endowment Restricted: Upper Newport Bay restoration Other Committed: Capital Re -appropriations Oil and gas Other Unassigned Total fund balances Total liabilities, deferred inflows of resources and fund balances Revenue Funds Tide and Tide and Submerged Submerged General Land - Operating Land - Harbor Capital $ 83,820,043 $ 5,907,076 $ 37,536,116 4,776,670 1,181,864 - 357,342 37,474 114,936 11,015,449 - - 84, 877, 331 183, 793, 881 - 853,723 551,076 7,026,659 1,024,080 188,828 - - $ 193,637,478 $ 191,774,018 $ 37,651,052 $ 6,872,639 $ 1,187,543 $ 509,582 5,507,736 53,305 - 2,955,915 215,767 2,805,276 757,105 - - - 6,926,659 18,141,566 2,213,720 7,436,241 84, 053, 387 182, 599, 258 - 853,723 84, 053, 387 183,452, 981 1,024,080 - 188,828 7,026,659 - 1,479,188 - - 3,788,129 30,214,811 350,000 - - - 840,000 5,115,426 - 77,737,532 91,442,525 6,107,317 30,214,811 $193,637,478 $ 191,774,018 $ 37,651,052 See accompanying notes to basic financial statements 60 16-69 Assets Cash and investments (note 2) Receivables: Accounts (net of allowance) Interest Intergovernmental receivables Lease receivables (note 3) Public -private partnership receivable Restricted cash and investments with fiscal agent (note 2) Due from other funds (note 4) Advance to other funds (note 4) Prepaid items Inventory Total assets Liabilities, Deferred Inflows of Resources and Fund Balances Liabilities: Accounts payable Accrued payroll Deposits payable Unearned revenue Advance from other funds (note 4) Due to other funds (note 4) Total liabilities Deferred Inflows of Resources: Unavailable revenue Deferred amount from leases Deferred amount from public -private partnerships Total deferred inflows of resources Fund balances (deficits): Nonspendable: Prepaid items Inventories Long-term loan receivable Permanent endowment Restricted: Upper Newport Bay restoration Other Committed: Capital Re -appropriations Oil and gas Other Unassigned Total fund balances Total liabilities, deferred inflows of resources and fund balances CITY OF NEWPORT BEACH Governmental Funds Balance Sheet June 30, 2023 Page 2 of 2 Capital Project Fund Debt Service Fund Facilities Financial Planning Debt Service Reserve Fund Other Governmental Funds Totals $ 18,382,442 - $ 106,144,752 $251,790,429 - 641,039 6,599,573 68,590 304,617 882,959 - 2,836,320 13,851,769 - 268,671,212 - - 853,723 - 8,533,482 282,123 8,815,605 6,349,460 - - 6,900,536 - - 7,026,659 21,150 1,045,230 - - - 188,828 $ 24,800,492 $ 8,533,482 $ 110,230,001 $ 566,626,523 $ - $ 43 $ 4,755,180 $ 13,324,987 - 2,669 5,563,710 - 3,171,682 10,906,146 14,468,527 - - 6,926,659 6,349,460 198,075 6,547,535 6,349,503 15,862,070 50,003,100 1,158,981 1,158,981 - 266,652,645 853,723 1,158,981 268,665,349 21,150 1,045,230 - 188,828 - 7,026,659 4,629,781 4,629,781 - - 1,479,188 2,183,979 35,991,302 72,178,221 350,000 - - 840,000 24,800,492 52,578,342 82,494,260 - (11,625) 77,725,907 24,800,492 2,183,979 93,208,950 247,958,074 $ 24,800,492 $ 8,533,482 $ 110,230,001 $ 566,626,523 See accompanying notes to basic financial statements 61 16-70 This page left blank intentionally. 62 16-71 CITY OF NEWPORT BEACH Governmental Funds Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Position June 30, 2023 Fund balances of governmental funds $ 247,958,074 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. 2,353,177,480 All liabilities (both current and long-term) are reported in the Statement of Net Position. Amounts exclude long-term debt activity from internal service funds which have been added below: Certificates of participation payable - Series 2010B (91,190,000) Certificates of participation payable - Series 2020A (6,420,000) Bond premium - Series 2020A (1,006,764) Lease liability (12,071,977) Subscription liability (366,952) Deferred inflows for improvements by the operator to the underlying asset of a public -private partnership are recognized only in the government -wide statements for governmental activities. (72,000) 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 121,273,720 Deferred inflows of resources (3,434,348) Pension liability (300,432,089) 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 17,130,034 Deferred inflows of resources (348,955) OPEB liability (20,721,648) Accrued interest payable for the current portion of interest due on long-term debt has not been reported in the governmental funds. (3,360,976) 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. 1,158,981 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. 53,103,539 Investment in joint ventures is not a current financial resource and therefore not reported in the governmental funds. 214,631 Internal balance created by the consolidation of internal service fund activities related to enterprise funds is not reported in the governmental funds. 984,632 Net position of governmental activities $ 2,355,575,382 See accompanying notes to basic financial statements 63 16-72 CITY OF NEWPORT BEACH Governmental Funds Statement of Revenues, Expenditures and Changes in Fund Balances For the Year Ended June 30, 2023 Page 1 of 2 Revenues: Taxes and assessments: Property tax Sales tax Transient occupancy tax Other taxes Intergovernmental Licenses, permits and fees Charges for services Fines and forfeitures Investment income Net decrease in fair value of investments Property income Donations Special assessments Other Total revenues Expenditures: Current: General government Public safety Public works Community development Community services Capital outlay Debt service: Principal Interest and fiscal charges Total expenditures Excess (deficiency) of revenues over expenditures Other financing sources (uses): Transfers in (note 5) Transfers out (note 5) Inception of subscription -based IT arrangements Total other financing sources (uses) Net change in fund balances Fund balances, beginning Fund balances, ending ial Revenue Funds Tide and Tide and Submerged Submerged General Land - Operating Land - Harbor Capital $ 138,358,730 $ $ 46,552,459 30,201,649 - 10,079,711 - - 4,369,009 - - 5,676,642 85,244 - 25,187,127 27,057 - 3,840,774 52,101 - 1,905,894 108,738 617,424 (215,495) (78,768) (249,668) 15,459,206 14,166,264 5,919,115 142,031 - 12,415 3,263,578 1,200 - 284,821,315 14,361,836 6,299,286 20,223,962 432,505 - 131,900,751 - - 50,927,167 1,889,771 - 14,048,305 12,784 - 25,148,509 2,198,993 - 529,489 1,434,064 12,218,947 1,148,166 - - 70,683 - 243,997,032 5,968,117 12,218,947 40,824,283 8,393,719 (5,919,661) 18,428,263 11,546,069 4,600,000 (65,478,891) (18,380,271) - 529,489 - (46,521,139) (6,834,202) 4,600,000 (5,696,856) 1,559,517 (1,319,661) 97,139,381 4,547,800 31,534,472 $ 91,442,525 $ 6,107,317 $ 30,214,811 See accompanying notes to basic financial statements 64 16-73 CITY OF NEWPORT BEACH Governmental Funds Statement of Revenues, Expenditures and Changes in Fund Balances For the Year Ended June 30, 2023 Page 2 of 2 Capital Project Fund Debt Service Fund Facilities Other Financial Planning Debt Service Governmental Reserve Fund Funds Revenues: Taxes and assessments: Property tax $ Sales tax Transient occupancy tax Other taxes Intergovernmental Licenses, permits and fees Charges for services Fines and forfeitures Investment income Net decrease in fair value of investments Property income Donations Special assessments Other Total revenues Expenditures: Current: General government Public safety Public works Community development Community services Capital outlay Debt service: Principal Interest and fiscal charges Total expenditures Excess (deficiency) of revenues over expenditures Other financing sources (uses): Transfers in (note 5) Transfers out (note 5) Inception of subscription -based IT arrangements Total other financing sources (uses) Net change in fund balances Fund balances, beginning Fund balances, ending Totals $ - $ - $ 138,358,730 - - 46,552,459 - - 30,201,649 - - 874,747 10,954,458 - 2,133,824 14,577,452 21,080,285 34,309 - 923,774 6,719,969 - - - 25,214,184 - - - 3,892,875 371,710 61,136 1,460,438 4,525,340 (161,745) - 239,803 (465,873) - - 285,777 35,830,362 - - 562,711 717,157 - - 4,948,430 4,948,430 - - 147,524 3,412,302 244,274 2,194,960 24,020,656 331,942,327 - 24,411 20,680,878 - 540,281 132,441,032 - 3,229,296 56,046,234 - 674,493 14,735,582 - 211,258 27,558,760 - 54,251,627 68,434,127 3,940,000 208,000 5,296,166 6,832,688 5,322 6,908,693 10,772,688 59,144,688 332,101,472 244,274 (8,577,728) (35,124,032) (159,145) 12,966,191 8,562,344 72,396,724 128,499,591 (22,581,608) - (22,438,273) (128,879,043) - - - 529,489 (9,615,417) 8,562,344 49,958,451 150,037 (9,371,143) (15,384) 14,834,419 (9,108) 34,171,635 2,199,363 78,374,531 247,967,182 $ 24,800,492 $ 2,183,979 $ 93,208,950 $ 247,958,074 See accompanying notes to basic financial statements 65 16-74 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, 2023 Net change in fund balances - total governmental funds $ (9,108) 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 as depreciation expense. This is the amount by which depreciation exceeded capital outlay in the current period. 31,531,145 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 on bonds 4,148,000 Amortization of principal on leases 985,629 Amortization of principal on subscriptions 162,537 Inception of subscription -based IT arrangements (529,489) Amortization of deferred inflows for improvements by the operator to the underlying asset of a public -private partnership are recognized only in the government -wide statements for governmental activities. 8,000 Premium on bonds is recognized as revenues in the period received; however, in the statement of activities, it is amortized over the life of the bond. Amortization of bond premium - Series 2020A 142,131 Accrued interest for debt service is the net change in accrued interest for the current period. 107,140 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. 13,213,430 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. 4,132,483 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. (29,472) 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. 7,487,482 Investment in joint ventures creates an explicit, measurable equity interest reported only in the statement of activities. (27,336) 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. 561,816 Change in net position of governmental activities $ 61,884,388 See accompanying notes to basic financial statements 66 16-75 FINANCIAL SECTION Z 67 16-76 This page left blank intentionally. 68 16-77 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. 69 16-78 CITY OF NEWPORT BEACH Proprietary Funds Statement of Net Position June 30, 2023 Assets and Deferred Outflows of Resources Current assets: Cash and investments (note 2) Receivables: Accounts (net of allowance) Interest Intergovernmental receivables Inventories Prepaid items Total current assets Noncurrent assets: Capital assets (note 6): Land Intangible right to use land Structures Equipment Intangible right to use equipment Software Intangible right to use subscriptions Infrastructure Work in progress Less accumulated depreciation/amortization Total capital assets (net of accumulated depreciation/amortization ) Total assets Deferred outflows of resources: Deferred amount from pension plans (note 11) Deferred amount from OPEB (note 12) Total deferred outflows of resources Liabilities and Deferred Inflows of Resources Current liabilities: Accounts payable Accrued payroll Deposits payable Due to other funds (note 4) Workers' compensation - current General liability - current Compensated absences - current Lease liability - current Subscription liability - current Total current liabilities Noncurrent liabilities: Workers' compensation (note 7) General liability (note 7) Compensated absences (note 7) Lease liability (note 7) Subscription liability (note 7) Net pension liability (note 11) Net OPEB liability (note 12) Total noncurrent liabilities Total liabilities Deferred inflows of resources: Deferred amount from pension plans (note 11) Deferred amount from OPEB (note 12) Total deferred inflows of resources Net Position Net investment in capital assets Unrestricted Total net position Adjustment to reflect the consolidation of internal service fund activities related to enterprise funds Net position of business -type activities Enterprise Funds Governmental Total Activities Enterprise Internal Service Water Wastewater Funds Funds $ 26,591,421 $ 3,845,630 $ 30,437,051 $ 77,488,352 6,185,726 899,145 7,084,871 2,479 94,237 13,600 107,837 274,401 - 1,481 1,481 - - - 438,573 - - - 976,555 32,871,384 4,759,856 37,631,240 79,180,360 2,219,450 - 2,219,450 - 3,883,062 - 3,883,062 - 688,396 - 688,396 39,581 301,192 35,989 337,181 46,273,432 - - - 353,888 - 4,360,625 - - - 2,104,945 150,028,159 48,826,594 198,854,753 - 7,697,408 - 7,697,408 - (57,145,498) (21,267,943) (78,413,441) (33,540,630) 107,672,169 27,594,640 135,266,809 19,591,841 140,543,553 32,354,496 172,898,049 98,772,201 3,136,833 1,204,648 4,341,481 2,855,531 706,643 271,373 978,016 643,273 3,843,476 1,476,021 5,319,497 3,498,804 3,688,240 291,890 3,980,130 728,180 180,040 53,657 233,697 708,750 31,459 - 31,459 - - - 353,001 3,072,704 2,938,129 - - 4,223,096 44,120 - 44,120 68,951 320,052 3,943,859 345,547 4,289,406 12,412,863 13,323,449 - 5,750,932 - 8,467,944 3,776,654 - 3,776,654 133,221 - - - 1,548,128 7,352,979 2,823,768 10,176,747 6,693,573 846,992 325,272 1,172,264 771,040 11,976,625 3,149,040 15,125,665 36,688,287 15,920,484 3,494,587 19,415,071 49,101,150 58,532 22,478 81,010 53,283 14,318 5,497 19,815 13,033 72,850 27,975 100,825 66,316 103,421,329 27,594,640 131,015,969 17,441,583 24,972,366 2,713,315 27,685,681 35,661,956 $ 128,393,695 $ 30,307,955 158,701,650 $ 53,103,539 (984,632) $ 157,717,018 See accompanying notes to basic financial statements 70 16-79 CITY OF NEWPORT BEACH Proprietary Funds Statement of Revenues, Expenses and Changes in Net Position For the Year Ended June 30, 2023 Operating revenues: Charges for sales and services: Water sales Charges for services Sewer service and connection fees Employee contributions Other Total operating revenues Operating expenses: Purchase of water Salaries and benefits Depreciation/amortization Professional services Maintenance and supplies System maintenance Utilities Fleet parts and supplies Telecommunication Hardware Software Workers' compensation Claims and judgments Compensated absences OPEB ARC - cash subsidy Other Total operating expenses Operating income (loss) Nonoperating revenues (expenses): Investment income Net decrease in fair value of investments Gain on sale of capital assets Interest expense Total nonoperating revenues (expenses) Income (loss) before transfers Transfers in (note 5) Total transfers Change in net position Net position, beginning of year Net position, end of year Adjustment to reflect the consolidation of internal service fund activities related to enterprise funds Change in net position of business -type activities Enterprise Funds Governmental Total Activities Enterprise Internal Service Water Wastewater Funds Funds $ 31,657,910 $ $ 31,657,910 $ - - - 36,134,126 4,624,572 4,624,572 - - - - 25,880 375,721 42,113 417,834 3,854,933 32,033,631 4,666,685 36,700,316 40,014,939 11,374,586 - 11,374,586 - 5,355,470 1,673,490 7,028,960 3,458,730 1,837,144 640,804 2,477,948 4,091,842 2,232,734 622,190 2,854,924 1,011,004 2,737,524 1,213,165 3,950,689 3,274,429 2,905,362 225,762 3,131,124 - 2,144,331 84,409 2,228,740 - - - - 517,579 204,977 220,378 322,030 4,903,042 5,618,183 2,007,182 - - - 6,187,129 1,710,295 706,576 2,416,871 2,289,379 30,297,446 5,166,396 35,463,842 34,105,884 1,736,185 (499,711) 1,236,474 5,909,055 456,336 64,400 520,736 1,226,922 (252,453) (10,414) (262,867) (376,595) - - 355,270 (20,067) - (20,067) (6,622) 183,816 53,986 237,802 1,198,975 1,920,001 (445,725) 1,474,276 7,108,030 379,452 379,452 1,920,001 (445,725) 1,474,276 7,487,482 126,473,694 30,753,680 45,616,057 $ 128,393,695 $ 30,307,955 $ 53,103,539 (561,816) $ 912,460 See accompanying notes to basic financial statements 71 16-80 Cash flows from operating activities: Cash received from customers or user departments Cash payments to employees for services Cash payments to suppliers for goods and services Cash payments for other operating activities Cash received for other operating activities Net cash provided by operating activities Cash flows from noncapital financing activities: Cash received from other funds CITY OF NEWPORT BEACH Proprietary Funds Statement of Cash Flows For the Year Ended June 30, 2023 Enterprise Funds Governmental Total Activities Enterprise Internal Service Water Wastewater Funds Funds $ 31,643,661 $ 4,676,773 $ 36,320,434 $ 36,148,886 (5,774,078) (1,835,327) (7,609,405) (10,316,828) (21,732,950) (1,963,484) (23,696,434) (18,843,868) (1,334,574) (664,463) (1,999,037) - - - - 3,880,813 2,802,059 213,499 3,015,558 10,869,003 Net cash provided by noncapital financing activities Cash flows from capital and related financing activities: Acquisition of capital assets (4,928,039) Lease liabilities and related (65,023) Subscription liabilities and related Proceeds from sale of capital assets Net cash provided (used) for capital and related financing activities (4,993,062) Cash flows from investing activities: Investment income (loss) Net cash provided by investing activities Net increase (decrease) in cash and cash equivalents Cash and cash equivalents, beginning Cash and cash equivalents, ending Reconciliation to the statement of net position: Cash and investments reported on statement of net position Cash and cash equivalents Reconciliation of operating income to net cash provided by operating activities: Operating income (loss) Adjustments to reconcile operating income to net cash provided by operating activities: Depreciation Changes in operating assets and liabilities: (Increase) decrease in accounts receivable Decrease in intergovernmental receivables (Increase) in inventories Decrease in prepaid items Increase (decrease) in accounts payable and accrued payroll (Decrease) in deposits payable Increase in workers' compensation (Decrease) in general liability (Decrease) in compensated absences (Decrease) in net pension liability and deferred cash flows (Decrease) in net OPEB liability and deferred cash flows Total adjustments Net cash provided by operating activities Noncash investing, capital and financing activities: 379,449 379,449 (4,928,039) (3,784,710) (65,023) (67,960) (242,105) 355,270 (4,993,062) (3,739,505) 193,677 50,903 244,580 779,452 193,677 50,903 244,580 779,452 (1,997,326) 264,402 (1,732,924) 8,288,399 28,588,747 3,584,193 32,172,940 69,199,953 $ 26,591,421 $ 3,848,595 $ 30,440,016 $ 77,488,352 $ 26,591,421 $ 3,845,630 $ 30,437,051 $ 77,488,352 $ 26,591,421 $ 3,845,630 $ 30,437,051 $ 77,488,352 $ 1,736,185 $ (499,711) $ 1,236,474 $ 5,909,055 1,837,144 640,804 2,477,948 4,091,842 (10,455) 50,720 40,265 14,760 1,481 1,481 - - - (57,187) - 1,588,166 (321,765) 187,357 (134,408) (829,789) (3,794) - (3,794) - 641,565 (6,819) (86,368) (264,575) (101,605) (366,180) (240,847) (170,681) (65,547) (236,228) (155,375) 1,065,874 713,210 1,779,084 4,959,948 $ 2,802,059 $ 213,499 $ 3,015,558 $ 10,869,003 Net (decrease) in fair value of investments $ (252,453) $ (10,414) $ (262,867) $ (376,595) Obtaining an intangible right to use lease asset 2,353,156 2,353,156 5,616 Obtaining an intangible right to use subscription asset - - 2,104,945 Total of noncash activities $ 2,100,703 $ (10,414) $ 2,090,289 $ 1,733,966 See accompanying notes to basic financial statements 72 16-81 FINANCIAL SECTION _ Z 73 16-82 This page left blank intentionally. 74 16-83 FIDUCIARY FUNDS Custodial 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. 75 16-84 CITY OF NEWPORT BEACH Fiduciary Funds Statement of Fiduciary Net Position June 30, 2023 Custodial Funds Assets Cash and investments (note 2) $ 1,401,778 Restricted cash and investments with fiscal agent (note 2) 1,318,999 Receivable: Interest 2,018 Intergovernmental receivable 29,936 Total assets 2.752.731 Liabilities Advances from other funds (note 4) 100,000 Due to others 425.758 Total liabilities 525,758 Net Position Restricted for: Individuals, organizations, and other governments 2,226,973 Total net position $ 2,226,973 See accompanying notes to basic financial statements 76 16-85 CITY OF NEWPORT BEACH Fiduciary Funds Statement of Changes in Fiduciary Net Position For the Year Ended June 30, 2023 Custodial Funds Additions Special assessments $ 1,289,499 Investment earnings 47,553 Other 323,353 Total additions 1,660,405 Deductions Debt service 1,653,677 Administrative 112,756 Other 268,907 Total deductions 2,035,340 Net increase (decrease) in fiduciary net position (374,935) Net position, beginning of year 2,601,908 Net position, end of year $ 2,226,973 See accompanying notes to basic financial statements 77 16-86 This page left blank intentionally. 78 16-87 FINANCIAL SECTION __Z 79 16-88 This page left blank intentionally. 80 16-89 CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30, 2023 (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, 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 the City's Central Library, Civic Center, and most recently the new Fire Station No. 2. 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 included in the debt service fund. Separate financial statements are not prepared for the Corporation. The debt service 81 16-90 CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30, 2023 (1) Summary of Significant Accounting Policies (Continued) 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. 82 16-91 CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30, 2023 (1) Summary of Significant Accounting Policies (Continued) 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. 83 16-92 CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30, 2023 (1) Summary of Significant Accounting Policies (Continued) 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 $1,912,779. 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 City Manager, and the authority for periodic maintenance dredging in the Newport Bay resides with the City Council. 84 16-93 CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30, 2023 (1) Summary of Significant Accounting Policies (Continued) 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 the 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. Fiduciary funds are also reported using the economic resources measurement focus and the accrual basis of accounting. 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: 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. 85 16-94 CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30, 2023 (1) Summary of Significant Accounting Policies (Continued) 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. Capital Protect 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 The Debt Service Fund is used to account for debt service transactions related to the Certificates of Participation issued to finance the construction of the City's Civic Center Complex and the construction of Fire Station No. 2. Major Proprietary Funds — Proprietary funds are used to report an activity for which a fee is charged to external users to recover the cost of operation. Water Fund The Water Fund is an enterprise fund used to account for the activities associated with the transmission and distribution of potable water by the City to its users. Wastewater Fund The Wastewater Fund is an enterprise fund used to account for the activities associated with providing sewer services by the City to its users. 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: 86 16-95 CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30, 2023 (1) Summary of Significant Accounting Policies (Continued) 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, and retiree insurance liabilities; the cost of maintaining and replacing the City's rolling stock fleet, parking equipment, coordinated communications systems equipment, certain fire equipment, and recreation equipment; and 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 Custodial Funds, a type of Fiduciary Fund, 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 monies held on behalf of employees for flexible spending accounts. d. New Accounting Pronouncements Current Year Standards In fiscal year 2022-23, the City implemented the following Government Accounting Standards Board (GASB) Statements: GASB Statement No. 91 — "Conduit Debt Obligations", effective for periods beginning after December 15, 2021. The primary objective of this statement is to provide a single method of reporting conduit debt obligations by issuers and eliminate diversity in practice. GASB Statement No. 94 — "Public -Private and Public -Public Partnerships and Availability Payment Arrangements", effective for periods beginning after June 15, 2022. The primary objective of this statement is to improve financial reporting by addressing issues related to public -private and public -public partnership arrangements. 87 16-96 (1) CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30, 2023 Summary of Significant Accounting Policies (Continued) GASB Statement No. 96 — Arrangements", effective for fisca statement provides guidance on subscription -based information governments. Pending Accounting Standards "Subscription -Based Information Technology I years beginning after June 15, 2022. This the accounting and financial reporting for technology arrangements (SBITAs) for GASB has issued the following statements, which may impact the City's financial reporting requirements in the future: GASB Statement No. 100 — "Accounting Changes and Error Corrections", effective for periods beginning after June 15, 2023. The objective of this statement is to amend GASB Statement No. 62 and clarify the existing definition of accounting changes, and requires enhancements to accounting and financial reporting for accounting changes and error corrections to provide more understandable, reliable, relevant, consistent and comparable information. GASB Statement No. 101 — "Compensated Absences", effective for periods beginning after June 15, 2023. The objective of this Statement requires that liabilities for compensated absences be recognized for (1) leave that has not been used and (2) leave that has been used but not yet paid in cash or settled through noncash means. A liability should be recognized for leave that has not been used if (a) the leave is attributable to services already rendered, (b) the leave accumulates, and (c) the leave is more likely than not to be used for time off or otherwise paid in cash or settled through noncash means. Leave is attributable to services already rendered when an employee has performed the services required to earn the leave. Leave that accumulates is carried forward from the reporting period in which it is earned to a future reporting period during which it may be used for time off or otherwise paid or settled. e. Cash and Investments Cash and Cash Eauivalents 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. 16-97 CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30, 2023 (1) Summary of Significant Accounting Policies (Continued) 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 $20,381,638 at June 30, 2023. 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 Chairperson is the State Treasurer, or her 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. f. Accounts Receivable Accounts receivable represent all service and capital project billings other than intergovernmental receivables stated below. As of June 30, 2023, 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. 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, 2023, the balance of these accounts totaled $13,853,250. 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. 89 16-98 CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30, 2023 (1) Summary of Significant Accounting Policies (Continued) Capital Assets Capital assets are tangible and intangible assets, which include land, structures, equipment, and infrastructure assets, and are reported in the applicable governmental or business -type activities columns in the Government -wide Financial Statements. Tangible 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. Buildings, infrastructure, and improvements are capitalized if cost is in excess of $30,000 and the expected useful life is 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 outlays for tangible capital assets and improvements are capitalized as projects are constructed. Tangible capital assets acquired through lease obligations are valued at the present value of future lease payments at the date acquired. Contributed tangible capital assets are valued at their estimated acquisition value at the date of contribution. Intangible capitals assets are generally an estimated present value of certain future lease or software subscription payments for the leases or subscriptions in which the City is the lessee or subscriber. Capital assets used in operations are depreciated/amortized using the straight-line method in the government -wide financial statements and in the fund financial statements of the proprietary funds. Tangible capital assets are depreciated over their estimated useful lives. Intangible assets are amortized over the shorter of the estimated useful life of the underlying asset or the period of time included in the estimated present value. Depreciation/ amortization is charged as an expense against operations and accumulated depreciation/ amortization is reported on the respective balance sheet. The ranges of useful life for depreciation purposes for each capital asset class are as follows: 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. 90 16-99 (1) CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30, 2023 Summary of Significant Accounting Policies (Continued) 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 fiscal 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 January 1 Levy date July 1 Due dates November 1 15t installment March 1 2nd installment Collection dates December 10 15t installment April 10 2nd installment I. 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 that permits a maximum of three years' accrual for every employee, above which the excess either stops accruing or 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 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 represents 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 criteria have been met, but the revenue recognition criteria have not been met. a 16-100 CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30, 2023 (1) Summary of Significant Accounting Policies (Continued) 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 assets 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 outflow 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 outflow 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 assets 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: 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 and OPEB 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 and OPEB 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 inflow for certain leases for which the City is lessor, and relates to a present value estimate of certain future lease payments. This amount generally is amortized over the same time period associated with the related present value estimate. The fifth item is a deferred inflow from a certain public -private partnership arrangement where the City is the transferor, and represents the sum of certain improvements by the operator to the underlying public -private partnership asset and a present -value estimate of certain future payments from the operator to the City. This amount is generally amortized over the same time period associated with the related present value estimate. 92 16-101 CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30, 2023 (1) Summary of Significant Accounting Policies (Continued) 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 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 The 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. 93 16-102 (1) CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30, 2023 Summary of Significant Accounting Policies (Continued) am r. S. 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. 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 (CaIPERS) plans (Plans) and additions to/deductions from the Plans' fiduciary net position have been determined on the same basis as they are reported by CaIPERS. 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) Measurement Date (MD) Measurement Period (MP) June 30, 2021 June 30, 2022 July 1, 2021 to June 30, 2022 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 (CaIPERS) Health Plan and additions to/deductions from the Plans' fiduciary net position have been determined on the same basis as they are reported by CaIPERS. 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) Measurement Date (MD) Measurement Period (MP) June 30, 2021 June 30, 2022 July 1, 2021 to June 30, 2022 94 16-103 CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30, 2023 (1) Summary of Significant Accounting Policies (Continued) t. Lease Liabilities and Receivables Lease liabilities and receivables are estimated present values of future lease payments. Estimating present values involves various related estimates, including lease terms and interest rates. The estimated lease term is the time period that the lease is noncancelable, plus extension and termination time periods if based on the lease agreement it is reasonable that the extensions will be exercised, and the terminations will not be exercised. When a lease's implicit interest rate is not known, estimates are made of either the City's incremental borrowing rate or the rate the City may charge a lessee. Non -lease components of lease agreements have been treated as separate non -lease agreements when practicable, and are excluded from the City's estimated lease liabilities and receivables. Leases that do not meet the Governmental Accounting Standards Board's definition of a lease liability or receivable (e.g., short-term leases, etc.) are also excluded from the City's estimated lease liabilities and receivables. U. Subscription -Based Information Technology (IT) Arrangements The City is a participant in subscription -based IT arrangements as detailed in note 8. The City recognizes a subscription liability and intangible right to use subscription assets in the financial statements. At the commencement of the arrangement, the City initially measures the liability at the present value of payments expected to be paid during the arrangement term. Subsequently, the liability is reduced by the principal portion of payments made. The intangible right to use subscription assets are initially measured at the initial amount of the subscription liability. Subsequently, the intangible right to use subscription assets are amortized over the life of the arrangement term. V. Public -Private Partnerships (PPP) The City's public -private partnership receivable is an estimated present -value of future payments from the operator to the City. The estimated public -private partnership term is the time period that the operator's right to use the underlying public -private partnership asset is noncancelable, plus extension and termination time periods if based on the public -private partnership arrangement it is reasonable that the extensions will be exercised, and the terminations will not be exercised. When the public -private partnership arrangement's implicit interest rate is not known an estimate is made of the rate the City may charge an operator. Non -public -private partnership components of public -private partnership arrangements have been treated as separate arrangements when practicable and are excluded from the City's estimated receivable. Arrangements that do not meet the Governmental Accounting Standards Board's definition of a public private partnership (e.g., leases that do not require the operator to improve the City's existing assets, etc.) are also excluded from the City's estimated receivable. 95 16-104 CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30, 2023 (2) Cash and Investments Cash and investments as of June 30, 2023, are classified in the accompanying financial statements as follows: Statement of net position: Cash and investments $359,715,832 Restricted cash and investments with fiscal agent 8,815,605 Fiduciary funds: Cash and investments 1,401,778 Restricted cash and investments with fiscal agent 1,318,999 Total cash and investments $371,252,214 Cash and investments as of June 30, 2023, consist of the following: Cash on hand $ 27,069 Deposits with financial institutions 23,070,618 Cash and receivables in investment accounts 141,822 Investments 348,012,705 Total cash and investments $371,252,214 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. 96 16-105 (2) CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30, 2023 Cash and Investments (Continued) Maximum Maximum Maximum Percentage Investment Authorized Investment Type Maturity* of Portfolio* 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 30% Federal Home Loan Mortgage Corp 5 years No Limit 30% Banker's Acceptances 180 days 40% 5% Commercial Paper 270 days 40% 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. 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. 97 16-106 (2) CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30, 2023 Cash and Investments (Continued) Maximum Maximum Percentage Investment Authorized Investment Type Maximum Maturity Allowed 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 — 1 Year 0% - 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 0% - No Limit No Limit Forward Purchase Agreement 6 months — No Limit 0% - 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 0% - 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: 16-107 (2) CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30, 2023 Cash and Investments (Continued) Investment Maturities (In Years) Investment Type Fair Value Less than 1 1 to 3 3 to 5 More than 5 Total Money Market Funds $ 14,838,878 $ 14,838,878 $ $ $ $ 14,838,878 U.S. Treasury Bills 43,562,123 43,562,123 43,562,123 U.S. Treasuries 90,154,286 13,812,949 46,723,612 29,617,725 90,154,286 Certificates of Deposit 3,797,773 3,797,773 - - 3,797,773 U.S. Agency Securities 56,305,926 41,342,711 10,977,215 3,986,000 56,305,926 FHLMC 13,941,758 1,471,452 7,415,724 5,054,582 13,941,758 Asset Backed Securities 18,141,982 611,044 11,970,649 5,560,289 18,141,982 Corporate Bonds 61,022,923 19,117,288 28,215,555 13,690,080 - 61,022,923 Municipal Bonds 1,955,920 1,955,920 - - 1,955,920 LAIF 20,381,638 20,381,638 - 20,381,638 Yankee Bonds 1,899,500 - 1,899,500 1,899,500 Supranationals 11,898,698 5,795,284 6,103,414 11,898,698 Investments with Fiscal Agent: Money Market Funds 9,775,881 9,775,881 - 9,775,881 U.S. Treasuries 54,287 54,287 54,287 LAIF 281,132 281,132 281,132 Totals $ 348,012,705 $176,798,360 $ 113,305,669 $ 57,908,676 $ - $ 348,012,705 Assuming callable securities (if any) will not be called. 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, FHLMCs, 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, 2023, the City held asset backed securities of $18,141,982. The City's FHLMCs may pay down principal prior to maturity. As of June 30, 2023, the City held FHLMCs of $13,941,758. 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, 2023, the City held corporate, municipal, and Yankee bonds with make whole call provisions as summarized below: Maturity Value January 2024 $ 1,482,780 February 2024 1,955,920 May 2024 4,544,561 July 2024 1,899,500 February 2025 944,010 March 2027 1,892,940 September 2027 1,037,178 Total $13,756,889 16-108 (2) CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30, 2023 Cash and Investments (Continued) Investments with call dates may be called anytime on or after the call date. As of June 30, 2023, the City held corporate bonds with call dates as summarized below: Maturity Value Call Date August 2023 $ 995,920 July 2023 February 2024 1,970,940 January 2024 April 2025 1,418,227 March 2025 February 2026 843,129 February 2025 May 2027 2,889,570 April 2027 Total $ 8,117,786 Investments may have both a make whole call provision and a regular call date. As of June 30, 2023, the City held corporate bonds with both a make whole call provision and a regular call date as summarized below: Maturity Value Call Date February 2024 $ 1,295,204 December 2023 March 2024 2,151,326 February 2024 May 2024 1,087,659 July 2023 June 2024 998,500 July 2023 July 2024 447,384 July 2023 September 2024 961,770 August 2024 March 2025 1,960,340 March 2024 March 2025 2,851,050 February 2025 April 2025 2,857,170 March 2025 June 2025 950,560 June 2024 August 2025 2,322,868 May 2025 July 2026 1,962,260 July 2025 September 2027 980,580 August 2027 Total $20,826,671 Approximately $9.6 million of the investments that are FHLMC's or have either a regular call date or both a make whole call provision and a regular call date, also have interest rate reset dates. If $5.7 million of the securities with interest rate reset dates are not called by their call date, then these securities will convert to floating rate securities tied to a benchmark index. Prior to their call date, these securities pay a fixed rate of interest. An additional $2.9 million of the securities with interest rate reset dates are FHLMC's with a potential variable coupon rate. m 16-109 (2) CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30, 2023 Cash and Investments (Continued) The remaining $998,500 of the securities with interest rate reset dates converted to floating rate securities before the end of the financial statements' fiscal year. Investments with Fair Values Highly Sensitive to Interest Rate Fluctuations As of June 30, 2023, 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, 2023 for each investment type. Investment Type Money Market Funds U.S. Treasury Bills U.S. Treasuries Certificates of Deposit U.S. Agency Securities FHLMC Asset Backed Securities Corporate Bonds Municipal Bonds LAIF Yankee Bonds Supranationals Investments with Fiscal Agent: Money Market Funds U.S. Treasuries LAIF Minimum Legal Fair Value Rating AAA m AAAAA+ AA AA- A-1+ A+ A A- Not Rated 14,838,878 AAAm $ - $ 14,838,878 $ - $ - $ - $ - $ - $ - $ - $ - 43,562,123 None - - - - - 43,562,123 - - - - 90,154,286 None - - 90,154,286 - - - - - - - 3,797,773 A-1 - - - - - 3,797,773 - - - - 56,305,926 None - - 56,305,926 - - - - - - - 13,941,758 None 1,471,452 - 12,470,306 - - - - - - - 18,141,982 AAA 12,126,060 - - - - - - - - 6,015,922 61,022,923 A- - - 8,947,361 2,739,776 5,818,607 - 11,765,039 20,995,461 10,756,679 - 1,955,920 A- - - 1,955,920 - - - - - - - 20,381,638 NIA - - - - - - - - - 20,381,638 1,899,500 A- - - - - - - - - 1,899,500 - 11,898,698 AA- 11,898,698 - - - - - - - - - 9,775,881 AAm - 9,775,881 - - - - - - - - 54,287 None - - 54,287 - - - - - - - 281,132 NIA 281, 132 Totals $348,012,705 $25,496,210 $24,614,759 $169,888,086 $2,739,776 $5,818,607 $47,359,896 $11,765,039 $20,995,461 $12,656, 179 $26,678,692 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 Amount FHLMC U.S. Agency Securities $16,257,299 FHLMC FHLMC 13,941,758 101 16-110 CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30, 2023 (2) Cash and Investments (Continued) 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, 2023, none of the City's deposits with financial institutions in excess of federal depository amounts were held in uncollateral ized accounts. For investments identified herein as restricted cash with fiscal agent, the fiscal agent selects the investment under the terms of the applicable trust agreement, acquires the investment, and holds the investment on behalf of the reporting government. Investment in State Investment Pool The City is a voluntary participant in the Local Agency Investment Fund (LAIF) that is regulated by the California Government Code under the oversight of the Treasurer of the State of California. The fair value of the City's investment in this pool is reported in the accompanying financial statements at amounts based upon the City's pro -rats 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. 102 16-111 (2) CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30, 2023 Cash and Investments (Continued) Most of the City's investments are in Level 2 of the fair value hierarchy. Examples of Level 2 valuation inputs include: • Quoted prices for similar assets or liabilities in active markets • Quoted prices for identical or similar assets or liabilities in markets that are not active • Inputs other than quoted prices that are observable for the asset or liability • Inputs that are derived principally from or corroborated by observable market data by correlation or other means. Following are the City's recurring fair value measurements as of June 30, 2023: Money Market Funds U.S. Treasury Bills U.S. Treasuries Certificates of Deposit U.S. Agency Bonds FHLMC Asset Backed Securities Corporate Bonds Municipal Bonds LAIF Yankee Bonds Supranationals Investments with Fiscal Agent: Money Market Funds U.S. Treasuries LAIF Totals (3) Lease Receivables City as Lessor Investments Quoted Prices in Quoted Prices Fair Value That Are Not Subject to Fair Value Hierarchy Active Markets for Similar Significant for Identical Assets in Active Unobservable Assets (Level 1) Markets (Level 2) Inputs (Level 3) $ 14,838,878 $ 14,838,878 $ - $ - $ - 43,562,123 - - 43,562,123 - 90,154,286 - - 90,154,286 - 3,797,773 - - 3,797,773 - 56,305,926 - - 56,305,926 - 13,941,758 - - 13,941,758 - 18,141,982 - - 18,141,982 - 61,022,923 - - 61,022,923 - 1,955,920 - - 1,955,920 - 20,381,638 20,381,638 - - - 1,899,500 - - 1,899,500 - 11,898,698 - - 11,898,698 - 9,775,881 9,775,881 - - - 54,287 - - 54,287 - 281,132 281,132 - - - $348,012,705 $ 45,277,529 $ - $ 302,735,176 $ - Lease agreements that meet the requirements of GASB 87 for which the City is lessor are disclosed as lease receivables on the City's financial statements. Included in the City's lease receivables are over 900 agreements related to land and structures. GASB 87 excludes certain inflows (e.g., certain variable payments, etc.) from the measurement of lease receivables. For the fiscal year ending June 30, 2023, the City recognized $4,701,780 of variable payments related 103 16-112 CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30, 2023 (3) Lease Receivables (Continued) to the lease receivables that were excluded from the measurement of the lease receivables. Lease inflows, including inflows excluded from GASB 87, are included on the City's financial statements as property income. Lease inflows for interest revenue from amortization of the GASB 87 lease receivables totaled $2,622,004. Lease inflows for lease revenue from amortization of the related GASB 87 deferred inflows of resources from leases was $8,042,290. Lease receivables at June 30, 2023 were $268,671,212. Regulated Lease While not technically a lease, the City licenses streetlight space for cellphone antennas and related equipment to a cellphone company. Restrictions to the license cause the license to be a GASB 87 regulated lease that is excluded from GASB 87's present value calculations and notes. Generally, these licensed streetlight spaces are licensed nonexclusively, but some of these licensed spaces may be licensed exclusively. The total revenue recognized during the fiscal year for this license was $8,596. Below are the expected future minimum payments to the City from this license. License payments by the cellphone company to the City do not secure debt issued by the City. Year Ending License June 30, Payments 2024 $ 4,843 2025 1,500 2026 1,500 2027 1,500 2028 1,500 2029-2033 7,500 2034-2038 7,500 2039 1,000 Total $ 26,843 104 16-113 CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30, 2023 (4) Interfund Receivables and Payables At June 30, 2023, interfund receivables and payable were as follows: Due from Due to General Fund $ 551,076 $ - Facilities Financial Planning Reserve Fund 6,349,460 - Debt Service Fund - 6,349,460 Internal Service Fund - 353,001 Other Governmental Funds - 198,075 Totals $ 6,900,536 $ 6,900,536 The above balances are primarily due to reclassification of negative cash balances in the city- wide cash pool. At June 30, 2023, interfund advances receivable and payable were as follows: Advance to Advance from General Fund $ 7,026,659 $ - Tide and Submerged Land - Harbor Capital Fund - 6,926,659 Flexible Spending Account Custodial Fund - 100,000 Totals $ 7,026,659 $ 7,026,659 The General Fund advance to the Tide and Submerged Land — Harbor Capital Fund was utilized for dredging within the City's Tidelands. Repayment of the advance to the General Fund is funded from incremental revenue increases generated from certain leases, mooring rents, commercial and residential pier rents, and parking meter revenues. 105 16-114 CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30, 2023 (4) Interfund Receivables and Payables (Continued) The annual amortization of the repayment of the advance is as follows: Harbor Capital Fund Advance - Repayment Terms (Zero -Interest Advance) Advance #1 Advance #2 Dredging Marina Park Fiscal Projects Project Total Year Repayment Repayment Repayment 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 Totals $ 3,426,659 $ 3,500,000 $ 6,926,659 The General Fund advance to the Flexible Spending Account Fund was to fund the new plan year beginning January 1, 2023, as employees can spend their total elected contribution amount before any employee contributions have been made. Repayment of the advance to the General Fund will be funded from forfeited employee balances. (5) Interfund Transfers Interfund transfers at June 30, 2023, consisted of the following: Transfers In Tide and Tide and Facilities Submerged Submerged Financial Internal Other Land - Land - Harbor Planning Service Governmental General Fund Operating Capital Reserve Debt Service Funds Funds Total General Fund $ - $ 11,546,069 $ 4,600,000 $ 12,924,919 $ $ 379,452 $ 36,028,451 $ 65,478,891 O Tide and Submerged Land - Operating 18,380,271 - - - - - 18,380,271 Facilities Financial Planning m Reserve - - 8,562,344 14,019,264 22,581,608 Other Governmental Funds 47,992 41,272 22,349,009 22,438,273 Totals $ 18,428,263 $ 11,546,069 $ 4,600,000 $ 12,966,191 $ 8,562,344 $ 379,452 $ 72,396,724 $ 128,879,043 The City typically uses transfers to fund ongoing subsidies and to set aside resources for long- term needs such as capital facilities replacement and major maintenance. The General Fund transferred: 106 16-115 CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30, 2023 (5) Interfund Transfers (Continued) • $11,546,069 to subsidize the maintenance and operation of the Tide and Submerged Land — Operating Fund; • $4,600,000 to the Tide and Submerged Land — Harbor Capital Fund to cash fund Harbor Capital projects; • $12,924,919 to the Facilities Financial Planning Reserve Fund to cash fund construction projects for General Fund supported facilities; • $379,452 to the Equipment Maintenance Internal Service Fund to fund ongoing Plymovent exhaust extraction system updates; and • $36,028,451 to Other Governmental Funds, which includes $8,430,000 to the Unrestricted Capital Improvements Fund to cash fund General Fund capital improvements, $5,010 to close Measure M project, $24,093,440 to Police Facility Fund to purchase property for a future police station site, $1,000,000 to the Neighborhood Enhancement Fund for capital improvement projects, $2,500,000 to the Facilities Maintenance Fund for maintenance of facilities. The Tide and Submerged Land — Operating Fund transferred $18,380,271 to the General Fund to reimburse for tidelands related expenditures. The Facilities Financial Planning Reserve Fund transferred $8,562,344 to the Debt Service Fund for the debt service payments related to the Civic Center Certificates of Participation and the Fire Station No. 2 Certificates of Participation. The Facilities Financial Planning Reserve Fund also transferred to Other Governmental Funds as follows: • $6,900,000 to the Miscellaneous FFP Projects Fund for CNG fueling support facility and transfer station rehabilitation; • $3,324,919 to the Police Facility Fund to purchase property for a future police station; • $900,000 to the Fire Station Fund for design costs related to the replacement of Fire Station No. 1 and Balboa Library; and • $2,894,345 to the Parks and Community Centers Fund for construction costs related to a pedestrian and bicycle bridge, and a public restroom. Other Governmental Funds, transferred $22,349,009 to other funds as follows: The Unrestricted Capital Improvements Fund transferred $1,450,000 and $15,500,000 to the Police Facility Fund and the Neighborhood Enhancement Fund respectively to purchase property for a future police station and for construction costs related to neighborhood enhancement projects; The Oceanfront Encroachment Fund transferred $500,000 to the Unrestricted Capital Improvements Fund to fund construction costs to beach access; and The Miscellaneous FFP Projects Fund transferred $4,899,009 to the Parks and Community Centers Fund to fund the construction of a new library lecture hall. 107 16-116 CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30, 2023 (6) Capital Assets Capital asset activity for the year ended June 30, 2023, was as follows: Governmental Activities: Non-depreciable/non-amortizable: Land and rights of way Work in progress Depreciable/amortizable: Structures Intangible right to use structures Equipment Intangible right to use equipment Intangible right to use subscriptions Infrastructure Less accumulated depreciation/amortization for: Structures Intangible right to use structures Equipment Intangible right to use equipment Intangible right to use subscriptions Infrastructure Net depreciable/amortizable Net capital assets Beginning Balance, As Restated* Additions Deletions Balance June 30, 2023 $1,899,966,292 $18,519,934 $ - $1,918,486,226 12,835,533 12,360,637 (11,357,194) 13,838,976 1,912,801,825 30,880,571 (11,357,194) 1,932,325,202 242,645,417 18,405,432 (342,470) 260,708,379 14,060,855 - (133,170) 13,927,685 58,990,143 4,814,699 (2,999,011) 60,805,831 348,272 5,616 - 353,888 2,634,434 - - 2,634,434 396,452,687 11,060,030 (7,379,959) 400,132,758 715,131,808 34,285,777 (10,854,610) 738,562,975 (59,448,334) (5,343,834) 319,236 (64,472,932) (1,040,019) (1,014,212) 133,171 (1,921,060) (39,972,804) (4,412,477) 2,925,134 (41,460,147) (38,584) (79,225) - (117,809) (403,595) - (403,595) (185,444,512) (7,608,262) 3,309,461 (189,743,313) (285,944,253) (18,861,605) 6,687,002 (298,118,856) 429,187,555 15,424,172 (4,167,608) 440,444,119 $2,341,989,380 $46,304,743 $(15,524,802) $2,372,769,321 * The beginning balance amount for intangible right to use subscriptions includes prior adjustment of $2,634,434 from implementing GASB 96, which requires a capital asset to be reported for certain subscriptions where the City is the subscriber based on a present value estimate of certain subscription payments. See Note (7) for additional details. Governmental Activities capital assets net of accumulated depreciation/amortization at June 30, 2023 are comprised of the following: 108 16-117 CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30, 2023 (6) Capital Assets (Continued) General Capital Assets, net Internal Service Fund Capital Assets, net Total Business -type Activities: Non-depreciable/non-amortizable: Land Work in progress Depreciable/amortizable: Intangible right to use land and right of way Structures Equipment Infrastructure Total Capital Assets Less accumulated depreciation/amortization for: Intangible right to use land and right of way Structures Equipment Infrastructure Net depreciable/amortizable Net capital assets Beginning Balance $ 2,353,177,480 19,591,841 $ 2,372,769,321 Additions Deletions Balance June 30, 2023 $ 2,219,450 $ - $ - $ 2,219,450 3,730,587 4,042,274 (75,453) 7,697,408 5,950,037 4,042,274 (75,453) 9,916,858 1,529,906 2,353,156 - 3,883,062 688,396 - - 688,396 337,181 - - 337,181 198,141,357 2,600,848 (1,887,452) 198,854,753 200,696,840 4,954,004 (1,887,452) 203,763,392 (20,513) (53,656) - (74,169) (294,855) (15,357) - (310,212) (210,838) (25,291) - (236,129) (75,657,112) (2,383,644) 247,825 (77,792,931) (76,183,318) (2,477,948) 247,825 (78,413,441) 124,513,522 2,476,056 (1,639,627) 125,349,951 $ 130,463,559 $ 6,518,330 $ (1,715,080) $ 135,266,809 Depreciation/amortization expense was charged in the following functions in the Statement of Activities: 109 16-118 CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30, 2023 (6) Capital Assets (Continued) Governmental Business -type Activities Activities General Government $ 6,671,560 $ - Public Safety 1,650,615 - Public Works 178,131 - Community Development 508,964 - Community Service 9,852,335 - Water - 1,837,144 Wastewater - 640,804 Totals $ 18,861,605 $ 2,477,948 Internal Service Fund depreciation/amortization of $4,091,842 is allocated to governmental functions above. (7) Long -Term Liabilities Changes in Long -Term Liabilities The long-term liabilities for governmental activities for the year ended June 30, 2023, are as follows: Beginning Amounts Balance, Ending Due Within As Restated* Additions Deletions Balance One Year Governmental activities: Other debt: Certificates of participation -Series 2010B $ 94,465,000 $ $ (3,275,000) $ 91,190,000 $ 3,390,000 Certificates of participation - Series 2020A 7,085,000 (665,000) 6,420,000 695,000 Bond premium - Series 2020A 1,148,895 (142,131) 1,006,764 - Direct borrowing: CDBG loan 208,000 (208,000) - - Other long-term liabilities: Workers' compensation payable 15,754,588 4,903,042 (4,261,477) 16,396,153 3,072,704 Claims and judgments payable 8,695,880 5,618,185 (5,625,004) 8,689,061 2,938,129 Compensated absences 12,777,408 2,007,182 (2,093,550) 12,691,040 4,223,096 Lease liability 13,321,041 5,616 (1,052,508) 12,274,149 1,004,482 Subscription liability 2,634,434 - (399,301) 2,235,133 520,085 Total governmental activities $ 156,090,246 $ 12,534,025 $ (17,721,971) $ 150,902,300 $ 15,843,496 " The beginning balance amount for subscription liability includes a prior adjustment of $2,634,434 from implementing GASB 96, which requires a liability to be reported for certain subscriptions where the City is the subscriber based on a present value estimate of certain subscription payments. See Note (7) for additional details. 110 16-119 (7) CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30, 2023 Long -Term Liabilities (Continued) 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. The long-term liabilities for business -type activities for the year ended June 30, 2023, are as follows: Lease liability Total business -type activities 2010 Certificates of Participation Beginning Ending Due Within Balance Additions Deletions Balance One Year $1,512,574 $2,353,156 $ (44,956) $3,820,774 $ 44,120 $1,512,574 $2,353,156 $ (44,956) $3,820,774 $ 44,120 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 also were applied to pay certain costs of issuance incurred in connection with the Certificates. The lease payments made by the City are held by a trustee who makes semi-annual payments on the Certificates of Participation. The lease payments began January 1, 2011, and are in amounts sufficient to cover the payment of principal and interest of the Certificates. Interest on the Certificates is payable semiannually on January 1 and July 1 of each year. The 2010A Certificates 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, 2023, the City has received $29,455,774 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 payments for the Series 2010B Certificates, which are payable through July 1, 2040, range from $3,390,000 to $7,245,000. The total outstanding balance at June 30, 2023 amounted to $91,190,000. The use of the following 111 16-120 (7) CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30, 2023 Long -Term Liabilities (Continued) assets has been pledged as security for the outstanding balance: the Central Library and the Civic Center. The annual amortization requirements of the outstanding Series 2010B Certificates of Participation are as follows: Year Ending June 30 Principal Interest Total 2024 $ 3,390,000 $ 6,365,978 $ 9,755,978 2025 3,510,000 6,142,971 9,652,971 2026 3,675,000 5,889,360 9,564,360 2027 3,850,000 5,623,515 9,473,515 2028 4,025,000 5,345,089 9,370,089 2029-2033 23,060,000 22,068,073 45,128,073 2034-2038 28,900,000 12,815,308 41,715,308 2039-2041 20,780,000 2,279,425 23,059,425 Totals $ 91,190,000 $ 66,529,719 $157,719,719 2020 Certificates of Participation In Fiscal Year 2020-21, the City issued $7,860,000 of Series 2020A Certificates of Participation. The 2020A Certificates were issued to finance the acquisition, improvement, and equipping of Fire Station No. 2. The proceeds of the Certificates also were applied to pay certain costs of issuance incurred in connection with the Certificates. The lease payments made by the City are held by a trustee who makes semi-annual payments on the Certificates of Participation. The lease payments began June 15, 2021, 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 1st and July 1st of each year. The 2020A Certificates' interest rate is 4.00%. Principal payments are payable annually on July 1 st of each year. The remaining principal payments of the Series 2020A Certificates, which are payable through July 1, 2030, range from $695,000 to $915,000. The total outstanding balance at June 30, 2023 amounted to $6,420,000. The use of the following assets has been pledged as security for the outstanding balance: Fire Station 5 and Fire Station 7. The annual amortization requirements of the outstanding Series 2020A Certificates of Participation are as follows: 112 16-121 (7) CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30, 2023 Long -Term Liabilities (Continued) Year Ending June 30 Principal Interest 2024 2025 2026 2027 2028 2029-2031 Totals CDBG Loan $ 695,000 $ 242,900 $ 725,000 214,500 755,000 184,900 785,000 154,100 815,000 122,100 Total 937,900 939,500 939,900 939,100 937,100 2,645,000 161,300 2,806,300 $ 6,420,000 $ 1,079,800 $ 7,499,800 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%. As of June 30, 2023, the outstanding balance on the loan is $0. Claims and Judaments 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, 2023, 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, 2023, for general liability amounted to $8,689,061 and for workers' compensation was $16,396,153. Compensated Absences The City's policies relating to compensated absences are described in Note (1). This liability at June 30, 2023, is $12,691,040. Compensated absences are liquidated from the Compensated Absences internal service fund. JnI1SPr1 Crt-dit The City has a letter of credit in the amount of $300,938. 113 16-122 (7) CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30, 2023 Long -Term Liabilities (Continued) Leases Lease agreements that meet the requirements of GASB 87 for which the City is lessee are disclosed as lease liabilities on the City's financial statements that are presented on the accrual basis of accounting and with an economic resources measurement focus. Included in the City's lease liabilities are agreements related to an animal shelter, water well easements, storage, lifeguard communication equipment, and part of a homeless shelter. During the fiscal year there were no variable lease payments that were not previously included in the City's lease liabilities. Estimates of the future lease payments for the City's lease liability for governmental activities are as follows: Year Ending June 30 Principal Interest Total 2024 $ 1,004,483 $ 65,407 $ 1,069,890 2025 1,010,019 59,871 1,069,890 2026 1,009,760 54,304 1,064,064 2027 951,085 48,915 1,000,000 2028 956,327 43,673 1,000,000 2029-2033 4,861,277 138,723 5,000,000 2034-2038 2,481,198 18,802 2,500,000 Totals $ 12,274,149 $ 429,695 $ 12,703,844 Estimates of the future lease payments for the City's lease liability for business -type activities are as follows: Year Ending June 30 Principal Interest Total 2024 $ 44,120 $ 20,903 $ 65,023 2025 44,364 20,659 65,023 2026 44,608 20,415 65,023 2027 44,854 20,169 65,023 2028 45,101 19,922 65,023 2029-2033 229,266 95,852 325,118 2034-2038 235,656 89,462 325,118 Thereafter 3,132,805 508,067 3,640,872 Totals $ 3,820,774 $ 795,449 $ 4,616,223 114 16-123 (7) CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30, 2023 Long -Term Liabilities (Continued) Subscription -Based Information Technology Arrangements Subscription -based information technology arrangements (SBITAs) that meet the requirements of GASB 96 for which the City is a subscriber are disclosed as SBITA liabilities on the City's financial statements that are presented on the accrual basis of accounting with an economic resources measurement focus. Included in the City's SBITA liabilities are subscriptions related to computer security, training, library operations, public communications, recreation classes registrations, website hosting, word processing, spreadsheets, information backups, performance evaluations, telephone calls, public safety, etc. GASB 96 excludes certain outflows (e.g., certain variable payments, etc.) from the measurement of SBITA liabilities. During the fiscal year, outflows of resources from the City to one SBITA vendor included variable payments that were not previously included in the City's SBITA liabilities. The city's recreation class registration software vendor charges fees for every class registration. These fees cover both credit card processing and the registration software subscription. The amount of fees paid to the software vendor varies with the number of registrations. However, the fees will not decrease below the vendor's annual minimum fee. Only the estimated annual minimum software subscription fee has been included in the City's GASB 96 subscription liabilities. For the fiscal year ending June 30, 2023, there were approximately $80,203 of software subscription fees in excess of the annual minimum. Estimates of the future subscription payments for the City's SBITA liabilities are as follows: Year Ending June 30 Principal Interest Total 2024 $ 520,085 $ 10,880 $ 530,965 2025 335,606 8,515 344,121 2026 248,869 6,941 255,810 2027 171,315 5,787 177,102 2028 172,259 4,842 177,101 2029-2033 786,998 9,960 796,958 Totals $ 2,235,132 $ 46,925 $ 2,282,057 (8) Limited Obligation 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 115 16-124 (8) (9) CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30, 2023 Limited Obligation Bonds (Continued) 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 Special Assessment District Custodial Fund. Bonds outstanding at June 30, 2023, for each district under the Bond Acts of 1911 and 1915 areas follows: Bonds Outstanding Assessment District Original Issue June 30, 2023 Reassessment District 2012 $13,583,436 $ 1,159,546 Assessment District No. 117 2,955,000 2,375,000 Assessment District No. 116 1,575,000 1,365,000 Assessment District No. 116B 665,000 580,000 Assessment District No. 111 2,412,000 2,196,000 Assessment District No. 113 4,565,000 4,330,000 Totals $25,7 55,436 $12,0 55,546 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 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 116 16-125 CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30, 2023 (9) Risk Management — General Liability and Workers' Compensation (Continued) fund where assets are set aside for risk management, administration, claim settlements and benefit distribution. A premium is charged to each fund that accounts for part-time or full-time employees. The total charge allocated to each of the funds is calculated using trends in actual experience after considering unexpected and unusual claims. Fund liabilities are reported when it is probable that a loss has occurred and the amount of the loss can be reasonably estimated. Liabilities include an amount for claims that have been incurred but not reported (IBNR). Claims liabilities are calculated considering the effects of inflation, recent claim settlement trends including frequency and amounts of payouts and other economic and social factors. The total claims payable was $25,085,214 at June 30, 2023, which represents the discounted present value of all outstanding claims. The claims are discounted using an interest rate of 3%. General Liability Workers' Compensation June 30, 2022 June 30, 2023 June 30, 2022 June 30, 2023 Unpaid claims, beginning of fiscal year $ 8,265,635 $ 8,695,880 $ 14,753,000 $ 15,754,588 Insured claims (including IBNR) 5,957,756 5,618,185 4,213,387 4,903,042 Claim payments (5,527,511) (5,625,004) (3,211,799) (4,261,477) Unpaid claims, end of fiscal year $ 8,695,880 $ 8,689,061 $ 15,754,588 $ 16,396,153 (10) 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 set aside a portion of their salary and defer taxation on the contributions and any investment earnings 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 $142,015,238 at June 30, 2023. 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 117 16-126 CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30, 2023 (11) Pension Plans (Continued) (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. The Plans' provisions and benefits in effect for the measurement period ended June 30, 2022 are summarized as follows: Hire date Benefit formula Benefit vesting schedule Benefit payments Retirement age Monthly benefits, as a % of eligible compensation Required employee contribution rates Required employer contribution rates Prior to November 24,2012 2.5%@55 5 years of service monthly for life 50-55 2.0% to 2.5% 12.35% - 13.0% 30.83% - 31.48% Miscellaneous On or after November 24, 2012 2.0%@60 5 years of service monthly for life 50-63 1.092% to 2.418% 12.35% - 13.0% 27.41 % - 28.06% On or after January 1, 2013 2.0%@62 5 years of service monthly for life 52-67 1.0% to 2.5% 12.35% - 13.0% 26.91 % - 27.56% 118 16-127 CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30, 2023 (11) Pension Plans (Continued) Hire date Benefit formula Benefit vesting schedule Benefit payments Retirement age Monthly benefits, as a % of eligible compensation Required employee contribution rates Required employer contribution rates Prior to On or after On or after November 24,2012 November 24, 2012 January 1, 2013 3.0%@50 2.0%@50; 3.0%@55 2.7%@57 5 years of service 5 years of service 5 years of service monthly for life monthly for life monthly for life 50-55 50-55 50-57 3.0% 2.0% - 2.7%; 2.4% - 3.0% 2.0% to 2.7% 13.5% - 14.6% 13.5% - 14.6% 13.5% - 14.6% 65.04% - 66.14% 65.04% - 66.14% 67.54% - 68.64% Employees Covered — At the measurement date of June 30, 2022, the following employees were covered by the benefit terms for each Plan: Miscellaneous Safety Inactive employees or beneficiaries currently receiving benefits 748 466 Inactive employees entitled to but not yet receiving benefits 627 95 Active employees 534 279 Totals 1,909 840 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 CaIPERS' 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. 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. 119 16-128 CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30, 2023 (11) Pension Plans (Continued) 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, 2022, using an annual actuarial valuation as of June 30, 2021 rolled forward to June 30, 2022 using standard update procedures. The General Fund, Tidelands Funds, Water Fund, and Wastewater Fund 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, 2021 actuarial valuations were determined using the following actuarial assumptions: Miscellaneous Safety Valuation Date June 30, 2021 June 30, 2021 Measurement Date June 30, 2022 June 30, 2022 Actuarial Cost Method Entry -Age Normal Cost Method Actuarial Assumptions: Discount Rate 6.90% 6.90% Inflation 2.30% 2.30% Payroll growth 2.75% 2.75% Projected salary increases Varies by Entry Age and Services Investment Rate of Return 7.00%(' ) 7.00%(' Mortality Rate Table(2) Derived using CaIPERS' Membership Data for all Funds Post Retirement Benefit Increase The lesser of contract COLA or 2.50% until Purchasing Power Protection Allowance Floor on Purchasing Power applies, 2.5% thereafter (1) Net of pension plan investment and administrative expenses; includes inflation. (2) The mortality table used was developed based on CalPERS-specific data. The probabilities of mortality are based on the 2021 Ca1PERS Experience Study for the period from 2001 to 2019. Pre -retirement and Post -retirement mortality rates include generational mortality improvement using 80% of Scale MP-2020 published by the Society of Actuaries. For more details on this table, please refer to the Ca/PERS Experience Study and Reviewof Actuarial Assumptions report from November 2021 that can be found on the Ca1PERS mbsite. 120 16-129 CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30, 2023 (11) Pension Plans (Continued) All other actuarial assumptions used in the June 30, 2021 valuation were based on the results of an actuarial experience study for the period from 1997 to 2015, including updates to salary increase, mortality and retirement rates. The Experience Study report can be obtained at the CaIPERS website under Forms and Publications. Discount Rate — The discount rate used to measure the total pension liability was 6.90%. 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, CaIPERS took into account both short-term and long-term market return expectations. Using historical returns of all of the funds' asset classes, expected compound (geometric) returns were calculated over the next 20 years using a building-block approach. The expected rate of return was then adjusted to account for assumed administrative expenses of 10 Basis points. The expected real rates of return by asset class are as follows: Asset Class(') Assumed Asset Allocation Real Return Years 1-10(2) Global equity - Cap -weighted 30.00% 4.54% Global equity - Non -Cap -weighted 12.00% 3.84% Private Equity 13.00% 7.28% Treasury 5.00% 0.27% Mortgage -backed Securities 5.00% 0.50% Investment Grade Corporates 10.00% 1.56% High Yield 5.00% 2.27% Emerging Market Debt 5.00% 2.48% Private Debt 5.00% 3.57% Real Assets 15.00% 3.21 % Leverage -5.00% -0.59% (1) An expected inflation of 2.30% used for this period. (2) Figures are based on the 2021 Asset Liability Management study. 121 16-130 CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30, 2023 (11) Pension Plans (Continued) Subsequent Events On July 12, 2021, CalPERS reported a preliminary 21.3% net return on investments for fiscal year 2020-21. Based on the thresholds specified in CalPERS Funding Risk Mitigation policy, the excess return of 14.3% prescribes a reduction in investment volatility that corresponds to a reduction in the discount rate used for funding purposes of 0.20%, from 7.00% to 6.80%. Since CalPERS was in the final stages of the four-year Asset Liability Management (ALM) cycle, the board elected to defer any changes to the asset allocation until the ALM process concluded, and the board could make its final decision on the asset allocation in November 2021. On November 17, 2021, the board adopted a new strategic asset allocation. The new asset allocation along with the new capital market assumptions, economic assumptions and administrative expense assumption support a discount rate of 6.90% (net of investment expense but without a reduction for administrative expense) for financial reporting purposes. This includes a reduction in the price inflation assumption from 2.50% to 2.30% as recommended in the November 2021 CalPERS Experience Study and Review of Actuarial Assumptions. This study also recommended modifications to retirement rates, termination rates, mortality rates and rates of salary increases that were adopted by the board. These new assumptions will be reflected in the GASB 68 accounting valuation reports for the June 30, 2022, measurement date. c. Changes in the Net Pension Liability The changes in the Net Pension Liability for each Plan for the measurement period follow: 122 16-131 CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30, 2023 (11) Pension Plans (Continued) Miscellaneous Plan: Balance at June 30, 2021 Changes in the Year: Service cost Interest on the total pension liability Changes in benefit terms Changes in assumptions Differences between expected and actual experience Net plan to plan resource movement Contribution - employer Contribution - employee Net investment income Benefit payments, including refunds of employee contributions Administrative Expense Other Miscellaneous (Income)/Expen Net Changes Increase (Decrease) Total Pension Plan Fiduciary Net Pension Liability Net Position Liability/(Asset) $468,868,928 $412,498,374 $ 56,370,554 8,261,032 - 8,261,032 32,759,522 - 32,759,522 15,640,771 - 15,640,771 (1,394,332) - (1,394,332) - 18,352,430 (18,352,430) 3,974,974 (3,974,974) - (30,856,252) 30,856,252 (24,940,419) (24,940,419) - - (256,962) 256,962 30,326,574 (33,726,229) 64,052,803 Balance at June 30, 2022 $499,195,502 $378,772,145 $120,423,357 123 16-132 CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30, 2023 (11) Pension Plans (Continued) Safety Plan: Balance at June 30, 2021 Changes in the Year: Service cost Interest on the total pension liability Changes in benefit terms Changes in assumptions Differences between expected and actual experience Net plan to plan resource movement Contribution - employer Contribution - employee Net investment income Benefit payments, including refunds of employee contributions Administrative Expense Other Miscellaneous (Income)/Expen Net Changes Balance at June 30, 2022 Increase (Decrease) Total Pension Plan Fiduciary Net Pension Liability Net Position Liability/(Asset) $628,841,903 $508,966,420 $119,875,483 10,918,046 - 10,918,046 43,860,290 - 43,860,290 22,634,816 - 22,634,816 (3,451,985) - (3,451,985) - 32,394,203 (32,394,203) 3,417,660 (3,417,660) - (38,537,209) 38,537,209 (35,654,758) (35,654,758) - - (317,056) 317,056 38,306,409 (38,697,160) 77,003,569 $667,148,312 $470,269,260 $196,879,052 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: Miscellaneous Safety 1 % Decrease 5.90% 5.90% Net Pension Liability $ 187,537,650 $ 284,130,749 Current Discount Rate 6.90% 6.90% Net Pension Liability $ 120,423,357 $ 196,879,052 1% Increase 7.90% 7.90% Net Pension Liability $ 65,154,579 $ 124,839,803 124 16-133 CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30, 2023 (11) Pension Plans (Continued) 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, 2023, the City recognized pension expense of $42,313,796 ($16,441,280 Miscellaneous Plan and $25,872,516 Safety Plan). At June 30, 2023, the City reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Deferred Deferred Outflows Inflows of Resources of Resources Miscellaneous plan: Pension contributions subsequent to measurement date $ 20,794,397 $ - Differences between expected and 576,605 (958,603) actual experience Change in assumptions 10,753,030 Net differences between projected and actual and actual earnings on plan investments 19,249,525 - Total miscellaneous plan 51,373,557 (958,603) Safety plan: Pension contributions subsequent to measurement date 35,283,235 - Differences between expected and actual experience 476,993 (2,610,038) Change in assumptions 17,114,129 Net differences between projected and actual and actual earnings on plan investments 24,222,818 - Total safety plan 77,097,175 (2,610,038) Total all plans $ 128,470,732 $ (3,568,641) 125 16-134 CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30, 2023 (11) Pension Plans (Continued) $56,077,632 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 fiscal year ending June 30, 2024. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized as pension expense as follows: Fiscal Year Ending June 30, Miscellaneous Safety Total 2024 $ 8,134,817 $ 9,100,470 $ 17,235,287 2025 7,319,893 8,333,995 15,653,888 2026 2,328,674 6,574,441 8,903,115 2027 11,837,173 15,194,997 27,032,170 Thereafter - - - e. Payable to the Pension Plan At June 30, 2023, the City had no outstanding contributions to the pension plan required for the year ended June 30, 2023. 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, 2023, the City's covered payroll for employees participating in the plan was $3,984,887. Employees made contributions of $149,667 (3.75% of current covered payroll), which was matched by the employer in the same amount. Assets of the plan totaled $2,345,796 at June 30, 2023. 126 16-135 CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30, 2023 (12) 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. Plan Description The Retiree Health Savings Plan consists of the following post -retirement medical benefits: PEMHCA The CaIPERS Public Employees' Medical and Hospital Care Act (PEMHCA) plan under the authority of section 22750 to 22948 of the state of California's government code, is an agent multiple employer plan. The City pays the required PEMHCA minimum contribution for all miscellaneous and safety employees retiring directly from the City who enroll in a CalPERS medical plan. The 2023 PEMHCA minimum contribution amount is $151 per month. Implicit Subsidy The City provides healthcare benefits to retirees in the form of an implied rate subsidy, which results from the pooling of non -Medicare retirees and active employees for premium purposes. Therefore, retirees receive the benefit of a lower premium, which would be higher if the premium for retirees was based on age, health status or claims history. The difference between these amounts is the implicit rate subsidy. Other Retiree Medical Benefits The City provides other retiree medical benefits in the form a single -employer defined contribution plan, a single -employer defined benefit plan, and a hybrid of the two. In January 2006, the City and employee associations agreed to major changes in the Post -Employment Health Care Plan. All employees hired after January 1, 2006, and certain employees hired prior to this date, as well as employees who elected to fully convert to a defined contribution formula (hereafter fully converted employees), 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. These employees and eligible retirees participate in a Retiree Health Savings ("RHS") Plan sponsored by the City, the single employer of the plan. Plan assets are held in trust and managed by MissionSquare Retirement (Trustee), under IRS Revenue Ruling 2002-41 (June 26, 2002) and IRS Notice 2002-45 (June 26, 2002). 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 participate in a program requiring mandatory defined 127 16-136 CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30, 2023 (12) Post -Employment Health Care Benefits (OPEB) (Continued) contributions by employees and the City, 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. 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 made 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 up to a maximum of 15 years. For employees who elected to retain a hybrid plan, the City made a one-time contribution into their individual RHS account of $75 per month for every month the employee contributed to the previous defined plan up to a maximum of 15 years. In order to receive these contributions, the employee must retire from the City. At June 30, 2023, the liability for the conversion part of the RHS Plan was $994,475. This amount is not included in the net OPEB liability, but is included in the compensated absences liability. See Note (6). 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. The City has elected to participate in the California Employers' Retiree Benefit Trust ("CERBT") Fund to prefund its OPEB liability. CERBT is managed by CalPERS and invests in global equity, global debt securities, inflation assets, commodities, and REITs. By placing funds in trust to fund future City contributions before those future contributions are due, the City earns investment income that will help pay those future contributions and thereby reduce the City's long-term OPEB budgetary requirements. CERBT is an agent multiple -employer trust. The CERBT Trust is not reported in the financial statements since the CERBT Trust does not qualify as a fiduciary fund under the accounting standards. Copies of CalPERS annual financial report may be obtained from their executive office: 400 "P" Street, Sacramento, California 95814. Employees Covered As of the measurement date June 30, 2022, the following current and former employees were covered by the benefit terms under the plan: Inactive employees, spouses, or beneficiaries currently receiving benefits 450 Inactive employees or beneficiaries entitled to but not receiving benefits 327 Active employees 821 Total 1,598 128 16-137 CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30, 2023 (12) Post -Employment Health Care Benefits (OPEB) (Continued) 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, 2023, the City's cash contributions were $6,187,129 to the trust in premium payments and $967,136 for the estimated implicit subsidy, resulting in a total payment of $7,154,265. Net OPEB Liability The City's net OPEB liability was measured as of June 30, 2022, and the total OPEB liability used to calculate the net OPEB liability was determined by an actuarial valuation dated June 30, 2021. The General Fund, Tidelands Funds, Water Fund, and Wastewater Fund 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, 2021 actuarial valuation was determined using the following actuarial assumptions and applied to all periods included in the measurement, unless otherwise specified: Valuation Date Measurement Date Actuarial Cost Method Actuarial Assumptions: Discount Rate Inflation Projected Salary Increase Expected long term investment rate of return Healthcare Cost Trend Rates Post -Retirement Turnover Mortality June 30, 2021 June 30, 2022 Entry -Age Normal Cost Method 6.00% 2.75% 3.00% per annum, in aggregate 6.00% 6.25% HMO/6.25% PPO Derived from CalPERS pension plan From Society of Actuaries Pub-2010 Public Retirement Plans Mortality Table Report The actuarial assumptions used in the June 30, 2021, 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 on OPEB plan investment is assumed to be 6.00%. This was determined using a building-block method in which expected future real rates of return (expected returns, net of OPEB plan investment expense and inflation) are developed for each major asset class. These expected future real rates of return are then combined to produce the 129 16-138 CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30, 2023 (12) Post -Employment Health Care Benefits (OPEB) (Continued) long-term expected rate of return by weighting them based on the target asset allocation percentage and adding in expected inflation (2.75%). The asset class percentages are taken from the current composition of the CERBT Fund, and the expected yields by asset class were not available to the actuary: Asset Expected Real Asset Class Allocation Rate of Return Global Equities 49.00% N/A Fixed Income 23.00% N/A TIPS 5.00% N/A REITs 20.00% N/A Commodities 3.00% N/A Totals 100.00% 6.00% Discount Rate The discount rate used to measure the total OPEB liability is 6.00% 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. Changes in the Net OPEB Liability The changes in the net OPEB liability are as follows: 130 16-139 CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30, 2023 (12) Post -Employment Health Care Benefits (OPEB) (Continued) Balance at June 30, 2021 Changes in the Year: Service cost Interest on the total OPEB liability Changes of benefit terms Changes of assumptions Differences between actual and expected experience Contribution - employer Contribution - employees Net investment income Benefit payments, including refunds of employee contributions Administrative expenses Net Changes Balance at June 30, 2022 Change of Assumptions Increase (Decrease Total Plan Net OPEB Fiduciary OPEB Liability Net Position Liability (z R1 Rnq 5244 O� Qd QRQ 71 R 1� 1 R RQd 11 R 530,843 - 530,843 3,237,390 - 3,237,390 2,473,450 - 2,473,450 1,120,534 - 1,120,534 - 6,185,537 (6,185,537) - (4,845,154) 4,845,154 (4,731,846) (4,731,846) - - (9,000) 9,000 2,630,371 (3,400,463) 6,030,834 $ 54,234,204 $ 31,569,252 $ 22,664,952 The mortality table has been updated from the 2017 CalPERS Public Agency Misc. Mortality to the following tables from the Society of Actuaries (SOA) Pub-2010: • Employees and retirees: General Headcount Weighted Mortality Table fully generational using Scale MP-2021. • Surviving Spouses: Continuing Survivor Headcount Weighted Mortality Table Fully generational using Scale MP-2021. • Disabled retirees: Safety Headcount Weighted Mortality Table fully generational using Scale MP-2021. 131 16-140 CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30, 2023 (12) Post -Employment Health Care Benefits (OPEB) (Continued) • Future health care cost trend rates have been reset to an initial rate of 6.50% beginning in fiscal year end 2023 and decreasing by 0.50% annually to an ultimate rate of 4.50%. Chanae 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. 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: 1 % Decrease Discount Rate 1 % Increase (5.00%) (6.00%) (7.00%) Net OPEB Liability $ 28,302,507 $ 22,664,952 $ 17,915,213 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 (5.25% HMO/5.25% PPO) or 1-percentage point higher (7.25% HMO/7.25% PPO) than current healthcare cost trend rates: Net OPEB Liability 1 % Decrease (5.25%HMO/5.25%PPO decreasing to 3.5%HM0/3.5%PP0) $ 19,939,264 Current Healthcare Cost Trend Rates (6.25%HM0/6.25%PP0 decreasing to 4.5%HM0/4.5%PP0) $ 22,664,952 1 % Increase (7.25%HM0/7.25%PP0 decreasing to 5.5%HM0/5.5%PP0) $ 26,487,570 OPEB Expense and Deferred Outflows/Inflows of Resources Related to OPEB For the year ended June 30, 2023, the City recognized OPEB expense of $3,328,748. At June 30, 2023, the City reported deferred outflows of resources and deferred inflows of resources related to OPEB from the following sources: 132 16-141 CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30, 2023 (12) Post -Employment Health Care Benefits (OPEB) (Continued) Deferred Outflows Deferred Inflows Description of Resources of Resources OPEB contriutions subsequent to measurement date $ 7,154,265 $ - Differences between projected and actual experience 6,631,144 (146,515) Change of assumptions 2,236,725 (235,288) Net difference between projected and actual earnings on OPEB plan investments 2,729,189 - Totals $ 18,751,323 $ (381,803) The differences between expected and actual experience, and changes of assumptions are amortized over a six -year period or a nine-year period, depending on the fiscal year the difference occurred. The net difference between projected and actual earnings on plan investment is amortized over a five-year period. An amount of $7,154,265, 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 fiscal year ending June 30, 2024. Amounts reported as deferred outflows of resources and deferred inflows of resources related to OPEB will be recognized in OPEB expense as follows: Fiscal Year Ending June 30, Amount 2024 $ 1,937,071 2025 1,948,801 2026 1,369,838 2027 2,458,609 2028 1,025,730 Thereafter 2,475,206 Payable to the OPEB Plan At June 30, 2023, the City had no outstanding amount of contributions to the OPEB plan required for the year ended June 30, 2023. 133 16-142 CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30, 2023 (13) Joint Venture Agreements Bonita Canyon Public Facilities Financing Authority The Bonita Canyon Public Facilities Financing Authority (Authority) is a joint powers authority comprised of the City of Newport Beach and the 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 the District's boundaries. In 1998, the Authority issued $45,000,000 of special tax bonds to be repaid by special assessments. $30,577,712 (81.7%) of the proceeds were used to pay for the costs of the City acquiring and constructing public facilities including parks and road improvements. In Fiscal Year 2011-12, the Authority issued $38,330,000 of special tax refunding bonds to refinance the 1998 Series. In Fiscal Year 2017-18, the Authority issued $28,245,000 of special tax refunding bonds to refinance the 2012 series; the City is not obligated in any manner to repay the bonds. As of June 30, 2023, the contributions from property owners have been fully spent and no funds are held in trust by the fiscal agent. The City does not make any annual contributions to the Authority and 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 the Authority 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 participant in a joint venture consisting of the cities of Anaheim, Brea, Fountain Valley, Fullerton, Huntington Beach, and Orange for the operation of a communication network utilized by 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 $781,180. The City's 11.03% interest in the net equity of this joint venture at June 30, 2023, amounts to $214,631. Complete separate financial statements can be obtained at the Metro Cities Fire Authority offices at 201 S. Anaheim Boulevard, Suite 302, Anaheim, California. Integrated Law and Justice Agency of Orange County The City is a participant in a joint venture with several other public agencies in Orange County for the operation of the Integrated Law and Justice Agency of Orange County (ILJAOC). The ILJAOC was established in fiscal year 2006-07 and consists of 23 member agencies, with an oversight board consisting of 12 members from the participating agencies. Annually, each member agency pays a percentage of the operating and replacement costs for the ILJAOC. The City's annual 134 16-143 CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30, 2023 (13) Joint Venture Agreements (Continued) contribution and interest in the net equity of this joint venture was immaterial as of June 30, 2023. The City of Newport Beach acted as the Treasurer/Controller of the ILJAOC from inception through the end of fiscal year 2010-11. 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. (14) Commitments and Contingencies Claims and Judgments Numerous claims and suits have been filed against the City in the normal course of business. The estimated liability under such claims, based upon information received from the City Attorney, contracted attorneys, and the Risk Manager, has been estimated and recorded as accrued claims and judgments payable. (See Note 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 VNB is to attract additional visitor business by promoting the City as the premier tourist and business destination in Orange County. 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, 2023, the City paid VNB $6,532,660. Contractual Commitments Construction and contractual commitments for major construction projects are as follows: 135 16-144 CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30, 2023 (14) Commitments and Contingencies (Continued) Annual Project YTD Budget Expenditures Lower Sunset View Park Concept $13,197,709 $ 3,522,811 Newport Coast Dr Pavement Rehab 6,350,032 3,476,754 Junior Lifeguards Building 6,895,130 3,722,321 West Irvine Terrace Water Main Repl 4,360,100 1,365,308 WCH Hwy Intersection Imp Ped Bridge 1,128,521 35,694 Advanced Metering Infrastructure 3,672,267 2,661,139 Bay Crossing Water Main Replc 1,150,343 170,611 Traffic Signal Rehabilitation 1,695,000 625 Facilities Maintenance Master Plan 1,418,481 684,923 Concrete Replacement Program 1,352,850 698,584 Central Library Lecture Hall 11,623,210 194,608 CNG Fueling System 7,014,403 87,911 Library/Fire Station No. 1 Repl 900,000 102,229 Balboa Island Drainage Master Plan 7,013,139 128,950 At fiscal year end, the City's encumbrances with contractors were as follows: Streets and highways Parks and community centers Facilities Public arts and culture Libraries Fiin Capital re -appropriations Beaches Marinas Dredging Equipment Facilities Replacement Drainage Miscellaneous and studies Contract services Supplies and materials Maintenance and repairs General Total encumbrances Major Governmental Funds Tide and Tide and Submerged Submerged Land - General Land - Operating Harbor Capital 352,335 363,577 3,599 - - 23,356 295,122 253,689 2,897,741 159,078 1,445,082 301,567 Unexpended C:nmmitmPntc 9,674,898 2,873,277 3,172,810 2,994,792 1,091,410 1,011,128 817,799 748,122 689,126 654,266 661,499 618,793 595,019 591,010 Other Governmental Funds Special Capital Revenue Project Permanent Funds Funds Funds Total $3,794,413 $ 3,740,105 $ $ 7,534,518 8,600,276 8,600,276 317,054 317,054 36,350 - 36,350 - 11,620 11,620 9,910 - - 9,910 - 3,375,771 3,375,771 - 715,912 3,599 23,356 - 548,811 100 100 637,274 637,274 540,048 540,048 - 2,897,741 - 159,078 1,642,666 3,087,748 301,567 $4,803,468 $ 651,056 $ 640,622 $3,840,673 $18,853,294 $ 11,620 $28,800,733 136 16-145 CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30, 2023 (15) Fund Balance Governmental Fund Balance at June 30, 2023, is classified as follows: Nonspendable: Prepaid items (legally restricted) Inventories (legally restricted) Long-term loan receivable (form restricted) Permanent endowment (legally restricted) Restricted: Affordable housing Oceanfront encroachment Upper Newport bay restoration Cable franchise reserve Community development Streets and highways Public safety Parks Facilities Transportation Air quality improvement Environmental liability mitigation Public arts and culture Parking Training Libraries Scholarships Fiin Debt service Capital re -appropriations Beaches Marinas Dredging Equipment Committed: Facilities replacement Facilities maintenance Civic center and park Oil and gas liabilities Parking management Neighborhood enhancement Capital re -appropriations Drainage Streets Facilities Miscellaneous and studies Parks and community centers Contract services Supplies and materials Maintenance and repairs General Unassigned Total fund balances (16) Deficit Fund Equity Governmental Fund Balance Other Governmental Funds Tide and Tide and Facilities Special Capital Submerged Submerged Financial Planning Debt Service Re anus Project Permanent General Land - Operating Land -Harbor Capital Reserve Fund Fuvnds Funds Funds Totals $ 1,024,080 $ - $ - $ - $ - $ 21,150 $ - $ - $ 1,045,230 188,828 - - - - - - - 188,828 7,026,659 - - - - - - - 7,026,659 - - - - - - - 4,629,781 4,629,781 - - - - - 352,412 - - 352,412 - - - - - 945,623 - - 945,623 - 1,479,188 - - - - - - 1,479,188 - - - - - 3,152,537 - - 3,152,537 - - - - - - 3,248 - 3,248 - - - - - 6,741,011 - - 6,741,011 - - - - - 530,365 - - 530,365 - - - - - 82,673 - - 82,673 - - - - - 82,673 282,123 - 364,796 - - - - - 308,134 - - 308,134 - - - - - 1,536,417 - - 1,536,417 - - - - - 9,235,547 - - 9,235,547 - - - - - 966,702 - - 966,702 - - - - - 216,689 - - 216,689 - - - - - 464,704 - - 464,704 - - - - - - - 205,358 205,358 - - - - - - - 203,390 203,390 - - - - - 1,190,056 - - 1,190,056 - - - - 2,183,979 - - - 2,183,979 - 3,137,075 - - - 703,496 7,284,113 - 11,124,684 - 352,335 363,577 - - - - - 715,912 - 3,599 - - - - - - 3,599 - - 29,597,545 - - - - 1,504,031 31,101,576 - 295,120 253,689 - - - - - 548,809 - - - 24,800,492 - - 658,756 - 25,459,248 - - - - - - 3,748,658 - 3,748,658 - - - - - - 485,365 - 485,365 - 840,000 - - - - - - 840,000 - - - - - - 97,537 - 97537 - - - - - - 2,901,378 - 2,901:378 350,000 - - - - - 26,012,420 - 26,362,420 - - - - - - 637,274 - 637,274 - - - - - - 3,740,105 - 3,740,105 - - - - - - 3,062,759 - 3,062,759 - - - - - - 540,048 - 540,048 - - - - - - 9,051,376 - 9,051,376 2,897,741 - - - - - - - 2,897,741 471,036 - - - - - - - 471,036 1,445,082 - - - - - 1,642,666 - 3,087,748 301,567 - - - - - - - 301,567 77,737,532 (11,625) 77,725,907 $91,442,525 $ 6,107,317 $ 30,214,811 $ 24,800,492 $ 2,183,979 $26,518,564 $60,147,826 $ 6,542,560 $247,958,074 The following funds reported deficit equity balances: Special Revenue Fund Contributions Internal Service Fund Compensated Absences $ 11,625 $ 6,859,223 137 16-146 CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30, 2023 (16) Deficit Fund Equity (Continued) The Contributions Fund accounts for revenues received from other government agencies and developers as reimbursement for projects. The City will receive reimbursement in the following fiscal year which will eliminate the deficit fund balance. For the Compensated Absences Fund, the City's Reserve Policy sets the maximum cash reserve at 50% of the long-term compensated absences liability and targets a lesser amount that is the median between that amount and a three-year average of the actual payments made for the cash - out of accumulated leave balances. Accordingly, this deficit fund balance is intentional and in compliance with the City Council -approved Reserve Policy. (17) Tax Abatements The City may enter into sales tax abatement agreements with automobile dealerships under City Council Resolution 99-64. Under that Resolution, the City may rebate sales taxes "for the sole purpose of reimbursing [automobile dealerships] for costs incurred for a project necessary to make the project financially feasible." Automobile dealerships must covenant "to complete the project, to remain and operate the project for a specified period of time... [, and] to maximize the City as the point -of -sale...". Automobile dealership sales tax rebates are based on negotiations that require City Council approval. On an accrual basis, for the fiscal year ended June 30, 2023, the City rebated sales taxes to automobile dealerships totaling $541,290 under this program. (18) Public -Private Partnerships Agreements that meet the requirements of GASB 94 for which the city is transferor are disclosed as public -private partnerships (PPP) receivables on the City's financial statements. The City's PPP receivable is related to the facilities for the Balboa Island Ferry, Inc. (operator). GASB 94 excludes certain inflows (e.g., certain variable payments, etc.) from the measurement of PPP receivables. Payments from the operator to the City include variable payments, because the operator pays the City the greater of a minimum base amount or a specified percentage of the operator's gross receipts. For the fiscal year ending June 30, 2023, the City recognized $1,815 of payments related to PPP receivables that were excluded from the measurement of the PPP receivables. A discount rate of 1.50% was applied to the measurement of the PPP receivable. The PPP agreement leases facilities to the operator for the continued operation of a ferry between Balboa Island and Balboa Peninsula. The City retains the right to inspect the property anytime without notice to the operator. Please see the Statement of Net Position for additional information about the nature and amounts of the PPP receivable and PPP deferred inflow. 138 16-147 CITY OF NEWPORT BEACH Notes to Basic Financial Statements June 30, 2023 (19) Subsequent Events Limited Obligation Bond Issue for Assessment District No. 120-2 On August 10, 2023, the City issued $2,505,000 of Assessment District No. 120-2 Limited Obligation Improvement Bonds pursuant to the provisions of the Improvement Bond Act of 1915. The bonds are issued in serial and term maturities over twenty years ranging from 4.0% to 5.0%. The bond proceeds will primarily be used to provide financing to underground power, telephone, and cable facilities in the Improvement Area. Bond proceeds will also be used to establish a debt service reserve fund and pay costs of issuance and capitalized interest on the bonds. Although the City will be collecting and disbursing funds for this district, 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. Limited Obliaation Bond Issue for Assessment District No. 124 On August 10, 2023, the City issued $23,625,000 of Assessment District No. 124 Limited Obligation Improvement Bonds pursuant to the provisions of the Improvement Bond Act of 1915. The bonds are issued in serial and term maturities over twenty years ranging from 4.0% to 5.0%. The bond proceeds will primarily be used to provide financing to underground power, telephone, and cable facilities in the Improvement Area. Bond proceeds will also be used to establish a debt service reserve fund and pay costs of issuance and capitalized interest on the bonds. Although the City will be collecting and disbursing funds for this district, 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. 139 16-148 This page left blank intentionally. 140 16-149 FINANCIAL SECTION __ Z 141 16-150 CITY OF NEWPORT BEACH an Agent Multiple -Employer Defined Benefit Pension Plan As of June 30, 2023 Last 10 Years* Defined Benefit Plan for Miscellaneous Employees Page 1 of 2 SCHEDULE OF CHANGES IN THE NET PENSION LIABILITY AND RELATED RATIOS Last Ten Fiscal Years* 2023 2022 2021 2020 2019 Measurement period June 30, 2022 June 30, 2021 June 30, 2020 June 30, 2019 June 30, 2018 Total Pension Liability Service cost $ 8,261,032 $ 7,438,050 $ 7,347,708 $ 7,084,444 $ 7,334,861 Interest on total pension liability 32,759,522 31,805,532 30,565,919 29,409,624 28,226,598 Differences between expected and actual experience 15,640,771 1,624,975 369,351 403,676 2,243,854 Changes in assumption (1,394,332) - - - (2,522,093) Changes in benefits - - - - - Benefit payments, including refunds of employee contributions (24,940,419) (22,976,493) (21,516,515) (20,129,701) (18,458,539) Net Change in Total Pension Liability 30,326,574 17,892,064 16,766,463 16,768,043 16,824,681 Total Pension Liability - beginning 468,868,928 450,976,864 434,210,401 417,442,358 400,617,677 Total Pension Liability - ending (a) 499,195,502 468,868,928 450,976,864 434,210,401 417,442,358 Plan Fiduciary Net Position Contributions - employer 18,352,430 18,612,457 16,346,284 15,700,833 15,797,595 Contributions -employee 3,974,974 4,057,107 4,067,751 3,955,144 3,979,337 Net investment income (30,856,252) 76,031,841 16,074,793 19,895,019 23,855,196 Administrative expense (256,962) (336,753) (454,777) (216,502) (435,499) Other miscellaneous income/(expense) 700 (827,021) Plan to plan resource movement 1,570 (700) Benefit payments (24,940,419) (22,976,493) (21,516,515) (20,129,701) (18,458,539) Net change in Plan Fiduciary Net Position Plan Fiduciary Net Position - beginning Plan Fiduciary Net Position - ending (b) Net pension liability - ending (a)-(b) Plan fiduciary net position as a percentage of the total pension liability Covered payroll Net pension liability as percentage of covered payroll Notes to Schedule: (33,726,229) 75,388,159 14,517,536 19,207,063 23,910,369 412,498,374 337,110,215 322,592,679 303,385,616 279,475,247 378,772,145 412,498,374 337,110,215 322,592,679 303,385,616 $ 120,423,357 $ 56,370,554 $ 113,866,649 $ 111,617,722 $ 114,056,742 75.88% 87.98% 74.75% 74.29% 72.68% $ 45,210,057 $ 44,809,856 $ 43,902,594 $ 42,153,383 $ 41,468,634 266.36% 125.80% 259.36% 264.79% 275.04% * Fiscal year 2015 was the first year of implementation, therefore only nine years are shown. Benefit Changes: The figures above generally include any liability impact that may have resulted from voluntary benefit changes that occurred on or before the Measurement Date. However, Offers of Two Years Additional Service Credit (a.k.a. Golden Handshakes) that occurred after the Valuation Date are not included in the figures above, unless the liability impact is deemed to be material by the plan actuary. Change in Assumption: Effective with the 2022 measurement date, the discount rate was reduced from 7.15% to 6.90%.. None in 2019 through 2021. In 2018, demographic assumptions and inflation rate were changed in accordance to the CalPERS Experience Study and Review Assumptions December 2017. There were no changes in the discount rate. In 2017, the discount rate was reduced from 7.65% to 7.15%. In 2016, there were no changes. In 2015, amounts reported reflect an adjustment of the discount rate from 7.50% percent (net of administrative expense) to 7.65% (without a reduction for pension plan administrative expense). In 2014, amounts reported were based on the 7.50% discount rate. 142 16-151 CITY OF NEWPORT BEACH an Agent Multiple -Employer Defined Benefit Pension Plan As of June 30, 2023 Last 10 Years* Defined Benefit Plan for Miscellaneous Employees Page 2 of 2 Measurement period Total Pension Liability Service cost Interest on total pension liability Differences between expected and actual experience Changes in assumption Changes in benefits Benefit payments, including refunds of employee contributions Net Change in Total Pension Liability Total Pension Liability - beginning Total Pension Liability - ending (a) Plan Fiduciary Net Position Contributions - employer Contributions - employee Net investment income Administrative expense Other miscellaneous income/(expense) Plan to plan resource movement Benefit payments Net change in Plan Fiduciary Net Position Plan Fiduciary Net Position - beginning Plan Fiduciary Net Position - ending (b) Net pension liability - ending (a)-(b) Plan fiduciary net position as a percentage of the total pension liability Covered payroll Net pension liability as percentage of covered payroll 2018 2017 2016 2015 June 30, 2017 June 30, 2016 June 30, 2015 June 30, 2014 $ 7,151,754 $ 6,303,642 $ 6,087,960 $ 6,523,874 27,069,673 26,375,073 25,427,094 24,624,559 (4,912,853) (2,686,814) (4,736,006) - 22,616,424 (6,309,248) (17,249,398) (16,714,022) (16,374,370) (15,290,340) 34,675,600 13,277,879 4,095,430 15,858,093 365,942,077 352,664,198 348,568,768 332,710,675 400,617,677 365,942,077 352,664,198 348,568,768 10,509,243 9,904,636 6,615,920 5,793,768 4,134,130 4,206,942 4,321,646 4,319,336 28,349,491 1,241,432 5,687,908 38,237,161 (375,172) (155,791) (287,862) - (2,387) 26,981 (17,249,398) (16,714,022) (16,374,370) (15,290,340) 25,368,294 (1,519,190) (9,777) 33,059,925 254,106,953 255,626,143 255,635,920 222,575,995 279,475,247 254,106,953 255,626,143 255,635,920 $ 121,142,430 $ 111,835,124 $ 97,038,055 $ 92,932,848 69.76% 69.44% 72.48% 73.34% $ 41,727,563 $ 40,031,404 $ 38,512,011 $ 37,775,051 290.32% 279.37% 251.97% 246.02% 143 16-152 CITY OF NEWPORT BEACH an Agent Multiple -Employer Defined Benefit Pension Plan As of June 30, 2023 Defined Benefit Plan for Miscellaneous Employees Page 1 of 2 Actuarially determined contribution Contributions in relation to the actuarially determined contributions Contribution deficiency (excess) Covered Payroll Contributions as a percentage of covered payroll Notes to Schedule: Valuation Date Methods and Assumptions Used to Determine Contribution Rates: Actuarial cost method Amortization method Asset valuation method Inflation Salary increases Investment rate of return Retirement age Mortality Schedule of Contributions Last Ten Fiscal Years* 2023 2022 2021 2020 2019 $ 15,250,219 $ 14,432,250 $ 14,600,178 $ 13,080,630 $ 12,374,026 (20,794,397) (18,372,473) (18,730,840) (16,351,592) (15,713,898) $ (5,544,178) $ (3,940,223) $ (4,130,662) $ (3,270,962) $ (3,339,872) $ 48,099,822 $ 45,210,057 $ 44,809,856 $ 43,902,594 $ 42,153,383 43.23% 40.64% 41.80% 37.25% 37.28% 6/30/2020 6/30/2019 6/30/2018 6/30/2017 6/30/2016 Entry age Entry age Entry age Entry age Entry age (1) (1) (1) (1) (1) Market Value Market Value Market Value Market Value Market Value 2.50% 2.50% 2.50% 2.63% 2.75% (2) (2) (2) (2) (2) 7.00% (3) 7.00% (3) 7.00% (3) 7.25% (3) 7.375% (3) (4) (4) (4) (4) (4) (5) (5) (5) (5) (5) (1) Level percentage of payroll for bases established prior to June 30, 2019 and level dollar amount for bases established after June 30, 2019. (2) Depending on age, service, and type of employment (3) Net of pension plan investment and administrative expense; includes inflation (4) Retirement assumptions are based on retirement rates resulting from the most recent CalPERS Experience Study adopted by the CalPERS Board (5) Mortality assumptions are based on mortality rates resulting from the most recent CalPERS Experience Study adopted by the CalPERS Board * Fiscal year 2015 was the first year of implementation, therefore only nine years are shown. 144 16-153 CITY OF NEWPORT BEACH an Agent Multiple -Employer Defined Benefit Pension Plan As of June 30, 2023 Defined Benefit Plan for Miscellaneous Employees Page 2 of 2 Schedule of Contributions Last Ten Fiscal Years* Actuarially determined contribution Contributions in relation to the actuarially determined contributions Contribution deficiency (excess) Covered Payroll Contributions as a percentage of covered payroll Notes to Schedule: Valuation Date Methods and Assumptions Used to Determine Contribution Rates: Actuarial cost method Amortization method Asset valuation method Inflation Salary increases Investment rate of return Retirement age Mortality 2018 2017 2016 2015 $ 11,924,053 $ 10,412,963 $ 9,943,342 $ 7,117,065 (15,742,587) (10,412,963) (9,943,342) (7,117,065) $ (3,818,534) $ - $ - $ $ 41,468,634 $41,727,563 $40,031,404 $38,512,011 37.96% 24.95% 24.84% 18.48% 6/30/2015 6/30/2014 6/30/2013 6/30/2012 Entry age Entry age Entry age Entry age (1) (1) (1) (1) Market Value Market Value Market Value 15 Year 2.75% 2.75% 2.75% 2.75% (2) (2) (2) (2) 7.5% (3) 7.5% (3) 7.5% (3) 7.5% (3) (4) (4) (4) (4) (5) (5) (5) (5) 145 16-154 CITY OF NEWPORT BEACH an Agent Multiple -Employer Defined Benefit Pension Plan As of June 30, 2023 Last 10 Years * Defined Benefit Plan for Safety Employees Page 1 of 2 SCHEDULE OF CHANGES IN THE NET PENSION LIABILITY AND RELATED RATIOS Last Ten Fiscal Years* 2023 2022 2021 2020 2019 Measurement period June 30, 2022 June 30, 2021 June 30, 2020 June 30, 2019 June 30, 2018 Total Pension Liability: Service cost $ 10,918,046 $ 9,817,913 $ 9,622,985 $ 9,292,715 $ 9,223,465 Interest on total pension liability 43,860,290 42,760,906 41,449,511 40,081,524 38,458,387 Differences between expected and actual experience (3,451,985) 196,690 957,686 4,798,077 3,278,018 Changes in assumptions 22,634,816 - - - (1,630,045) Changes in benefits Benefit payments, including refunds of employee contributions (35,654,758) (33,765,218) (32,285,653) (30,443,097) (29,183,598) Net Change in Total Pension Liability 38,306,409 19,010,291 19,744,529 23,729,219 20,146,227 Total Pension Liability - Beginning 628,841,903 609,831,612 590,087,083 566,357,864 546,211,637 Total Pension Liability - Ending (a) 667,148,312 628,841,903 609,831,612 590,087,083 566,357,864 Plan Fiduciary Net Position: Contributions - employer 32,394,203 32,367,091 28,539,301 28,344,445 26,779,897 Contributions -employee 3,417,660 3,347,740 3,249,005 3,162,044 3,104,318 Net investment income (38,537,209) 93,813,435 19,685,354 24,254,890 29,064,749 Administrative expense (317,056) (413,178) (556,832) (263,991) (532,480) Plan to plan resource movement (1,570) (855) Benefit payments (35,654,758) (33,765,218) (32,285,653) (30,443,097) (29,183,598) Other miscellaneousincomel(expense) - - 855 (1,011,188) Net Change in Plan Fiduciary Net Position (38,697,160) 95,349,870 18,631,175 25,053,576 28,220,843 Plan Fiduciary Net Position - Beginning 508,966,420 413,616,550 394,985,375 369,931,799 341,710,956 Plan Fiduciary Net Position - Ending (b) 470,269,260 508,966,420 413,616,550 394,985,375 369,931,799 Net Pension Liability- Ending (a)-(b) $ 196,879,052 $ 119,875,483 $196,215,062 $195,101,708 $196,426,065 Plan fiduciary net position as a percentage of the total pension liability 70.49% 80.94% 67.82% 66.94% 65.32% Covered payroll $ 35,231,003 $ 34,863,204 $ 34,279,062 $ 33,935,043 $ 32,866,620 Net pension liability as percentage of covered payroll 558.82% 343.85% 572.40% 574.93% 597.65% Notes to Schedule: * Fiscal year 2015 was the first year of implementation, therefore only nine years are shown. Benefit Changes: The figures above generally include any liability impact that may have resulted from voluntary benefit changes that occurred on or before the Measurement Date. However, Offers of Two Years Additional Service Credit (a.k.a. Golden Handshakes) that occurred after the Valuation Date are not included in the figures above, unless the liability impact is deemed to be material by the plan actuary. Changes in Assumptions: Effective with the 2022 measurement date, the discount rate was reduced from 7.15% to 6.90%.. None in 2019 through 2021. In 2018, demographic assumptions and inflation rate were changed in accordance to the CaIPERS Experience Study and Review Assumptions December 2017. There were no changes in the discount rate. In 2017, the discount rate was reduced from 7.65% to 7.15%. In 2016, there were no changes. In 2015, amounts reported reflect an adjustment of the discount rate from 7.50% percent (net of administrative expense) to 7.65% (without a reduction for pension plan administrative expense). In 2014, amounts reported were based on the 7.50% discount rate. 146 16-155 CITY OF NEWPORT BEACH an Agent Multiple -Employer Defined Benefit Pension Plan As of June 30, 2023 Last 10 Years * Defined Benefit Plan for Safety Employees Page 2 of 2 SCHEDULE OF CHANGES IN THE NET PENSION LIABILITY AND RELATED RATIOS Last Ten Fiscal Years* 2018 2017 2016 2015 Measurement period Total Pension Liability: Service cost Interest on total pension liability Differences between expected and actual experience Changes in assumptions Changes in benefits Benefit payments, including refunds of employee contributions Net Change in Total Pension Liability Total Pension Liability - Beginning Total Pension Liability - Ending (a) Plan Fiduciary Net Position: Contributions - employer Contributions - employee Net investment income Benefit payments Net plan to plan resource movement Other miscellaneous expense Administrative expense Net Change in Plan Fiduciary Net Position Plan Fiduciary Net Position - Beginning Plan Fiduciary Net Position - Ending (b) Net Pension Liability - Ending (a)-(b) Plan fiduciary net position as a percentage of the total pension liability Covered payroll Net pension liability as percentage of covered payroll June 30, 2017 June 30, 2016 June 30, 2015 June 30, 2014 $ 9,015,985 $ 8,075,553 $ 8,077,826 $ 8,091,585 37,083,966 36,239,226 35,098,055 33,807,462 (2,192,667) (1,613,985) (316,827) - 30,110,384 (8,359,009) (28,074,414) (27,447,982) (25,838,982) (24,529,802) 45,943,254 15,252,812 8,661,063 17,369,245 500,268,383 485,015,571 476,354,508 458,985,263 546,211,637 500,268,383 485,015,571 476,354,508 19,260,537 18,496,776 21,529,513 12,089,637 2,967,318 2,826,831 2,969,503 3,122,237 34,814,011 1,561,480 7,049,577 47,151,493 (462,427) (193,780) (357,866) - 2,387 (28,074,414) (27,447,982) (25,838,982) (24,529,802) 28,505,025 (4,754,288) 5,351,745 37,833,565 313,205,931 317,960,219 312,608,474 274,774,909 341,710,956 313,205,931 317,960,219 312,608,474 $ 204,500,681 $ 187,062,452 $ 167,055,352 $ 163,746,034 62.56% 62.61% 65.56% 65.63% $ 32,450,020 $ 30,816,246 $ 30,189,633 $ 29,944,665 630.20% 607.03% 553.35% 546.83% 147 16-156 CITY OF NEWPORT BEACH an Agent Multiple -Employer Defined Benefit Pension Plan As of June 30, 2023 Last 10 Years * Defined Benefit Plan for Safety Employees Page 1 of 2 SCHEDULE OF CONTRIBUTIONS Last Ten Fiscal Years* 2023 2022 2021 2020 2019 Actuarially determined contribution $ 25,952,201 $25,115,878 $25,341,788 $22,980,289 $22,227,698 Contributions in relation to the actuarially determined contributions (35,283,235) (32,317,538) (32,251,903) (28,531,744) (28,346,069) Contribution deficiency (excess) Covered payroll Contributions as a percentage of covered payroll Notes to Schedule: Valuation Date Methods and Assumptions Used to Determine Contribution Rates: Actuarial cost method Amortization method Asset valuation method Inflation Salary increases Investment rate of return Retirement age Mortality $ (9,331,034) $ (7,201,660) $ (6,910,115) $ (5,551,455) $ (6,118,371) $ 36,538,774 $ 35,231,003 $ 34,863,204 $ 34,279,062 $ 33,935,043 96.56% 91.73% 92.51 % 83.23% 83.53% 6/30/2020 6/30/2019 6/30/2018 6/30/2017 6/30/2016 Entry age Entry age Entry age Entry age Entry age (1) (1) (1) (1) (1) Market Value Market Value Market Value Market Value Market Value 2.50% 2.50% 2.50% 2.63% 2.75% (2) (2) (2) (2) (2) 7.00% (3) 7.00% (3) 7.00% (3) 7.25% (3) 7.375% (3) (4) (4) (4) (4) (4) (5) (5) (5) (5) (5) (1) Level percentage of payroll for bases established prior to June 30, 2019 and level dollar amount for bases established after June 30, 2019 (2) Depending on age, service, and type of employment (3) Net of pension plan investment and administrative expense; includes inflation (4) Retirement assumptions are based on retirement rates resulting from the most recent CalPERS Experience Study adopted by the CalPERS Board (5) Mortality assumptions are based on mortality rates resulting from the most recent CalPERS Experience Study adopted by the CalPERS Board * Fiscal year 2015 was the first year of implementation, therefore only nine years are shown. 148 16-157 CITY OF NEWPORT BEACH an Agent Multiple -Employer Defined Benefit Pension Plan As of June 30, 2023 Last 10 Years * Defined Benefit Plan for Safety Employees Page 2 of 2 SCHEDULE OF CONTRIBUTIONS Last Ten Fiscal Years* 2018 2017 2016 2015 Actuarially determined contribution Contributions in relation to the actuarially determined contributions Contribution deficiency (excess) Covered payroll Contributions as a percentage of covered payroll Notes to Schedule: Valuation Date Methods and Assumptions Used to Determine Contribution Rates: Actuarial cost method Amortization method Asset valuation method Inflation Salary increases Investment rate of return Retirement age Mortality $21,524,636 $19,338,360 $18,466,207 $13,393,374 (26,620,697) (19,338,360) (18,466,207) (20,993,374) $ (5,096,061) $ - $ - $ (7,600,000) 32,866,620 32,450,020 30,816,246 30,189,633 81.00% 59.59% 59.92% 69.54% 6/30/2015 6/30/2014 6/30/2013 6/30/2012 Entry age Entry age Entry age Entry age (1) (1) (1) (1) Market Value Market Value Market Value 15 Year 2.75% 2.75% 2.75% 2.75% (2) (2) (2) (2) 7.5% (3) 7.5% (3) 7.5% (3) 7.5% (3) (4) (4) (4) (4) (5) (5) (5) (5) 149 16-158 CITY OF NEWPORT BEACH Post -Employment Health Care Benefits (OPEB) Retirement Plan As of June 30, 2023 Last 10 Years Page 1 of 2 SCHEDULE OF CHANGES IN THE CITY'S NET OPEB LIABILITY AND RELATED RATIOS Last Ten Fiscal Years * Measurement date Total OPEB Liability: Service cost Interest Differences between expected and actual experience Changes of assumptions Changes in benefits terms Benefit payments, including refunds of member contributions Net Change in Total OPEB Liability Total OPEB Liability - Beginning Total OPEB Liability - Ending (a) Plan Fiduciary Net Position: Contributions - employer Contributions - member Net investment income Benefit payments, including refunds of member contributions Administrative expense Other expense June 30, 2022 June 30, 2021 June 30, 2020 $ 530,843 $ 529,600 $ 521,285 3,237,390 2,909,400 2,944,050 1,120,534 6,159,865 (219,772) 2,473,450 (302,512) (4,731,846) (3,786,232) (3,787,663) 2,630,371 5,510,121 (542,100) 51,603,833 46,093,712 46,635,812 54,234,204 51,603,833 46,093,712 6,185,537 5,785,342 4,674,814 (4,845,154) 7,184,241 900,087 (4,731,846) (3,786,232) (3,787,663) (9,000) (9,908) (12,037) Net Change in Plan Fiduciary Net Position (3,400,463) 9,173,443 1,775,201 Plan Fiduciary Net Position - Beginning 34,969,715 25,796,272 24,021,071 Plan Fiduciary Net Position - Ending (b) 31,569,252 34,969,715 25,796,272 City's Net OPEB Liability - Ending (a)-(b) $ 22,664,952 $ 16,634,118 $ 20,297,440 Plan fiduciary net position as a percentage of the total OPEB liability 58.21 % 67.77% 55.96% Covered - employee payroll(') $ 79,636,594 $ 78,621,426 $ 77,637,171 City's Net OPEB liability as percentage of covered -employee payroll 28.46% 21.16% 26.14% Notes to Schedule: (1) Covered -employee payroll is used because contributions are not entirely based on a measure of pay * Fiscal year 2018 was the first year of implementation, therefore only six years are shown. 150 16-159 CITY OF NEWPORT BEACH Post -Employment Health Care Benefits (OPEB) Retirement Plan As of June 30, 2023 Last 10 Years Page 2 of 2 SCHEDULE OF CHANGES IN THE CITY'S NET OPEB LIABILITY AND RELATED RATIOS Last Ten Fiscal Years " Measurement date Total OPEB Liability: Service cost Interest Differences between expected and actual experience Changes of assumptions Changes in benefits terms Benefit payments, including refunds of member contributions Net Change in Total OPEB Liability Total OPEB Liability - Beginning Total OPEB Liability - Ending (a) Plan Fiduciary Net Position: Contributions - employer Contributions - member Net investment income Benefit payments, including refunds of member contributions Administrative expense Other Expense Net Change in Plan Fiduciary Net Position Plan Fiduciary Net Position - Beginning Plan Fiduciary Net Position - Ending (b) City's Net OPEB Liability - Ending (a)-(b) Plan fiduciary net position as a percentage of the total OPEB liability Covered - employee payroll(') City's Net OPEB liability as percentage of covered -employee payroll June 30, 2019 June 30, 2018 June 30, 2017 $ 524,717 $ 509,434 $ 478,341 2,795,490 2,814,685 2,830,153 2,532,319 - - 114,311 (3,627,695) (3,641,715) (3,513,406) 2,339,142 (317,596) (204,912) 44,296,670 44,614,266 44,819,178 46,635,812 44,296,670 44,614,266 4,460,937 4,675,193 4,594,772 1,495,861 1,605,114 1,875,536 (3,627,695) (3,641,715) (3,513,406: (4,980) (11,076) (9,452: - (25,258) - 2,324,123 2,602,258 2,947,450 21, 696, 948 19, 094, 690 16,147, 240 24,021,071 21,696,948 19,094,690 $ 22,614,741 $ 22,599,722 $ 25,519,576 51.51 % 48.98% 42.80% $ 75,814,626 $ 73,999,059 $ 74,484,613 29.83% 30.54% 34.26% 151 16-160 CITY OF NEWPORT BEACH Post -Employment Health Care Benefits (OPEB) Retirement Plan As of June 30, 2023 Last 10 Years` SCHEDULE OF CONTRIBUTIONS Last Ten Fiscal Years* Actuarially determined contribution Contributions in relation to the actuarially determined contributions Contribution deficiency (excess) Covered - employee payroll Contributions as a percentage of covered -employee payroll Notes to Schedule: Valuation Date 2023 2022 2021 2020 2019 2018 $ 4,359,593 $ 4,124,923 $ 4,108,719 $ 3,834,916 $ 3,827,337 $ 3,925,087 (7,154,265) (4,950,445) (6,511,545) (5,379,799) (5,133,062) (5,309,626) $ (2,794,672) $ (825,522) $ (2,402,826) $ (1,544,883) $ (1,305,725) $ (1,384,539) $ 81,451,477 $ 79,636,594 $ 78,621,426 $ 77,637,171 $ 75,814,626 $ 73,999,059 -8.78% -6.22% -8.28% -6.93% -6.77% -7.18% June 30, 2021 June 30, 2019 June 30, 2019 June 30, 2017 June 30, 2017 June 30, 2015 (1) Covered -employee payroll is used because contributions are not entirely based on a measure of pay. * Fiscal year 2018 was the first year of implementation; therefore, only six years are shown. 152 16-161 Revenues: Taxes and assessments: Property Sales Transient occupancy Other taxes Intergovernmental Licenses, permits and fees Charges for services Fines and forfeitures Investment income Net decrease in fair value of investments Property income Donations Other Total revenues Expenditures: General government: City council City clerk City attorney City manager Finance Human resources Total general government Public safety: Police Fire Total public safety Public works: Public works - general services Public works Utilities Total public works CITY OF NEWPORT BEACH Budgetary Comparison Schedule General Fund For the Year Ended June 30, 2023 Page 1 of 2 Budgeted Amounts Original Final $ 134,803,082 $ 134,803,082 46,526,493 46,526,493 27,788,729 27,788,729 8,774,567 8,774,567 1,823,903 3,108,014 5,870,373 5,870,373 22,005,341 23,228,088 3,870,567 3,870,567 1,300,000 1,300,000 12,098,168 12,510,568 412,300 515,560 (243,020) 2,448,765 265,030,503 270,744,806 857,463 863,284 1,130,823 1,379,662 2,050,156 2,136,800 5,717,017 6,767,974 8,632,505 8,895,028 3,111,641 3,270,147 21,499,605 23,312,895 Actual Variance with Final Budget Positive (Negative) $ 138,358,730 $ 3,555,648 46,552,459 25,966 30,201,649 2,412,920 10,079,711 1,305,144 4,369,009 1,260,995 5,676,642 (193,731) 25,187,127 1,959,039 3,840,774 (29,793) 1,905,894 605,894 (215,495) (215,495) 15,459,206 2,948,638 142,031 (373,529) 3,263,578 814,813 284,821,315 14,076,509 688,972 174,312 1,175,423 204,239 2,323,016 (186,216) 3,965,256 2,802,718 8,923,557 (28,529) 3,147,738 122,409 20,223,962 3,088,933 71,622,531 74,565,618 70,728,319 3,837,299 60,255,549 63,255,373 61,172,432 2,082,941 131,878,080 137,820,991 32,490,987 34,897,868 11,906,935 12,686,077 5,649,416 5,797,297 50,047,338 53,381,242 131,900,751 5,920,240 33,330,511 1,567,357 11,780,556 905,521 5,816,100 (18,803) 50,927,167 2,454,075 See accompanying notes to required supplementary information 153 16-162 CITY OF NEWPORT BEACH Budgetary Comparison Schedule General Fund For the Year Ended June 30, 2023 Page 2 of 2 Community development: Community development Code and water quality enforcement Total community development Community services: Parking operations Library services Recreation and senior services Total community services Capital outlay Debt service: Principal Interest and fiscal charges Total debt service Total expenditures Excess of revenues over expenditures Other financing sources (uses): Transfers in Transfers out Inception of subscription -based IT arrangements Total other financing sources (uses) Net change in fund balance Fund balance, beginning Fund balance, ending Budgeted Amounts Original Final Actual Variance with Final Budget Positive (Negative) 12,933,976 13,396,827 13,193,708 203,119 864,723 884,817 854,597 30,220 13,798,699 14,281,644 14,048,305 233,339 2,236,701 2,884,799 2,099,521 785,278 9,432,008 10,292,150 9,204,395 1,087,755 13,627,977 14,564,352 13,844,593 719,759 25,296,686 27,741,301 25,148,509 2,592,792 529,489 (529,489) 1,148,166 (1,148,166) 70,683 (70,683) - - 1,218,849 (1,218,849) 242,520,408 256,538,073 243,997,032 12,541,041 22,510,095 14,206,733 40,824,283 26,617,550 17,300,724 18,428,263 18,428,263 - (31,597,269) (65,478,891) (65,478,891) - - - 529,489 529,489 (14,296,545) (47,050,628) (46,521,139) 529,489 8,213,550 (32,843,895) (5,696,856) 27,147,039 97,139,381 97,139,381 97,139,381 - $ 105,352,931 $ 64,295,486 $ 91,442,525 $ 27,147,039 See accompanying notes to required supplementary information 154 16-163 CITY OF NEWPORT BEACH Budgetary Comparison Schedule Tide and Submerged Land - Operating For the Year Ended June 30, 2023 Revenues: Intergovernmental Licenses, permits and fees Charges for services Fines and forfeitures Investment income Net decrease in fair value of investments Property income Other Budgeted Amounts Original Final 70,690 10,481 29,500 192,208 12,645,321 Actual Variance with Final Budget Positive (Negative) 5,000 $ - $ (5,000) 70,690 85,244 14,554 10,481 27,057 16,576 29,500 52,101 22,601 192,208 108,738 (83,470) - (78,768) (78,768) 13,145,321 14,166,264 1,020,943 - 1,200 1,200 Total revenues 12,948,200 13,453,200 14,361,836 908,636 Expenditures: General government 432,505 432,505 432,505 - Public works 1,311,056 1,927,388 1,889,771 37,617 Community development 2,050 9,550 12,784 (3,234) Community services 1,932,382 2,358,399 2,198,993 159,406 Capital outlay 1,975,000 4,687,023 1,434,064 3,252,959 Total expenditures 5,652,993 9,414,865 5,968,117 3,446,748 Excess (deficiency) of revenues over expenditures 7,295,207 4,038,335 8,393,719 4,355,384 Other financing sources: Transfers in Transfers out Total other financing sources Net change in fund balance Fund balance, beginning Fund balance, ending 9,987,817 11,546,069 11,546,069 - (17,300,724) (18,380,271) (18,380,271) - (7,312,907) (6,834,202) (6,834,202) - (17,700) (2,795,867) 1,559,517 4,355,384 4,547,800 4,547,800 4,547,800 - $ 4,530,100 $ 1,751,933 $ 6,107,317 $ 4,355,384 See accompanying notes to required supplementary information 155 16-164 CITY OF NEWPORT BEACH Budgetary Comparison Schedule Tide and Submerged Land - Harbor Capital For the Year Ended June 30, 2023 Revenues: Investment income Net decrease in fair value of investments Property income Donations Total revenues Expenditures: Capital outlay Excess (deficiency) of revenues over expenditures Other financing sources: Transfers in Net change in fund balance Fund balance, beginning Fund balance, ending Variance with Final Budget Budgeted Amounts Positive Original Final Actual (Negative) $ 436,141 $ 436,141 $ 617,424 $ 181,283 - - (249,668) (249,668) 3,945,664 3,945,664 5,919,115 1,973,451 - 12,000 12,415 415 4,381,805 4,393,805 6,299,286 1,905,481 3,471,406 16,713,995 12,218,947 4,495,048 910,399 (12,320,190) (5,919,661) 6,400,529 4,600,000 4,600,000 4,600,000 - 5,510,399 (7,720,190) (1,319,661) 6,400,529 31,534,472 31,534,472 31,534,472 - $ 37,044,871 $ 23,814,282 $ 30,214,811 $ 6,400,529 See accompanying notes to required supplementary information 156 16-165 CITY OF NEWPORT BEACH Notes to Required Supplementary Information June 30, 2023 (1) Budgetary Control and Compliance The City adheres to the following general procedures in establishing the budgetary data reflected in the financial statements: • During May, 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 citizen 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, except for the Opioid Remediation Fund, for which no budget was adopted. • The City does not present budget information on Capital Projects Funds since the City approves project -length budgets. These project -length budgets authorize total expenditures over the duration of a construction project rather than through year -by -year budgeting. • The City 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 the City Council. • At fiscal year-end, budget appropriations lapse. Budget appropriations for incomplete capital projects are re -budgeted in the following fiscal year by City 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. 157 16-166 (1) CITY OF NEWPORT BEACH Notes to Required Supplementary Information June 30, 2023 Budgetary Control and Compliance (Continued) Expenditures exceeded appropriations in the following governmental funds: Appropriations Expenditures Variance Supplemental Law Enforcement $ 200,000 $ 215,174 $ (15,174) 158 16-167 FINANCIAL SECTION ___Z 159 16-168 This page left blank intentionally. 160 16-169 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) in which judicial proceedings have been completed. All such funds are property of the City, and it is the City's policy that these 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 Opioid Remediation Fund is used to account for revenues received from various settlements related to opioid manufacturing and distribution to be used exclusively for opioid remediation activities. 161 16-170 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. The Fostering Interest in Nature (FIIN) Fund is restricted for recreation and education programming as a mitigation effort by the California Coastal Commission. The Restricted Programs Fund is used to account for revenues received that are restricted for affordable housing, public arts and culture, parking improvements, and disability access training. 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 Oceanfront Encroachment Fund is restricted for ocean front restoration and improvement and maintenance to enhance public access and use of ocean beaches as restricted by the Local Coastal Program. The American Rescue Plan Act Fund is used to account for federal funding received through Coronavirus State and Local Fiscal Recovery Funds under the American Rescue Plan Act. The PEG Fees Fund is used to account for cable franchise fees received from cable providers for support of Public, Education, and Government access programming only. 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 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 Police Facility Fund is used to account for the purchase, design and construction of a new police station. 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 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 Balboa Village Parking Management District Fund is used to account for revenues and expenditures associated with parking management improvements in Balboa Village. The Facilities Maintenance Fund is used to account for revenues and expenditures associated with the maintenance of existing facilities. The Neighborhood Enhancement Fund is used to account for projects that will enhance neighborhood aesthetics and functionality. 162 16-171 The Miscellaneous FFP Projects 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 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 Donation 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. 163 16-172 CITY OF NEWPORT BEACH Other Governmental Funds Combining Balance Sheet June 30, 2023 Page 1 of 7 Special Revenue State SB1 Gas Tax Asset OTS Gas Tax RMRA Forfeiture DUI Grant Assets Cash and investments $ 3,506,082 $ 420,495 $ 529,236 $ Receivables: Accounts (net of allowance) - - - Interest 12,583 1,509 1,129 - Intergovernmental receivables 189,264 333,019 - 89,202 Restricted cash and investments with fiscal agent - - - Prepaid items - - - - Total assets $ 3,707,929 $ 755,023 $ 530,365 $ 89,202 Liabilities, Deferred Inflows of Resources and Fund Balances Liabilities: Accounts payable $ 350 $ 338,972 $ $ Accrued payroll - - Unearned revenue - Due to other funds - - 89,202 Total liabilities 350 338,972 89,202 Deferred inflows of resources: Unavailable revenue - - - Fund balances (deficits): Nonspendable: Prepaid items Permanent endowment - - Restricted 3,707,579 416,051 530,365 Committed - - - Unassigned - - - Total fund balances (deficits) 3,707,579 416,051 530,365 - Total liabilities, deferred inflows of resources and fund balances $ 3,707,929 $ 755,023 $ 530,365 $ 89,202 (continued) 164 16-173 CITY OF NEWPORT BEACH Other Governmental Funds Combining Balance Sheet June 30, 2023 Page 2 of 7 Assets Cash and investments Receivables: Accounts (net of allowance) Interest Intergovernmental receivables Restricted cash and investments with fiscal agent Prepaid items Total assets Liabilities, Deferred Inflows of Resources and Fund Balances Liabilities: Accounts payable Accrued payroll Unearned revenue Due to other funds Total liabilities Deferred inflows of resources: Unavailable revenue Fund balances (deficits): Nonspendable: Prepaid items Permanent endowment Restricted Committed Unassigned Total fund balances (deficits) Total liabilities, deferred inflows of resources and fund balances Special Revenue Circulation Building Community Air Quality and Excise Development Management Transportation Tax Block Grant District $ 1,964,320 $ 199,767 $ $ 1,547,183 7,050 716 5,552 - - 328,762 27,924 $ 1,971,370 $ 200,483 $ 328,762 $ 1,580,659 $ 317,611 $ 12,500 $ 219,889 $ - - 108,873 317,611 12,500 328,762 27,924 1,653,759 187,983 1,552,735 1,653, 759 187,983 1,552,735 $ 1,971,370 $ 200,483 $ 328,762 $ 1,580,659 (continued) 165 16-174 CITY OF NEWPORT BEACH Other Governmental Funds Combining Balance Sheet June 30, 2023 Page 3 of 7 Special Revenue Supplemental Law Opioid Environmental Enforcement Remediation Liability Services Fund Contributions FIIN Assets Cash and investments $ 9,220,852 $ $ 334,260 $ 2,541,179 $ 1,185,800 Receivables: Accounts (net of allowance) - - 527,313 - Interest 33,084 254 4,256 Intergovernmental receivables - 745,047 - Restricted cash and investments with fiscal agent - - Prepaid items 21,150 - - - Total assets $ 9,275,086 $ $ 334,260 $ 3,813,793 $ 1,190,056 Liabilities, Deferred Inflows of Resources and Fund Balances Liabilities: Accounts payable $ 15,720 $ $ $ 298,945 $ Accrued payroll 2,669 - Unearned revenue - 334,260 3,104,430 Due to other funds - - - Total liabilities 18,389 334,260 3,403,375 Deferred inflows of resources: Unavailable revenue - - 422,043 Fund balances (deficits): Nonspendable: Prepaid items 21,150 - Permanent endowment - - Restricted 9,235, 547 1,190,056 Committed - - - Unassigned - (11,625) - Total fund balances (deficits) 9,256,697 (11,625) 1,190,056 Total liabilities, deferred inflows of resources and fund balances $ 9,275,086 $ $ 334,260 $ 3,813,793 $ 1,190,056 (continued) 166 16-175 CITY OF NEWPORT BEACH Other Governmental Funds Combining Balance Sheet June 30, 2023 Page 4 of 7 Special Revenue Restricted Oceanfront American PEG Programs Measure M Encroachment Rescue Plan Act Fees Assets Cash and investments $ 1,995,021 $ 3,566,148 $ 910,052 $ 7,112,115 $ 3,060,132 Receivables: Accounts (net of allowance) - - 32,304 - 81,422 Interest 7,160 13,450 3,267 10,983 Intergovernmental receivables - 1,123,102 - - Restricted cash and investments with fiscal agent - Prepaid items - - - - Total assets $ 2,002,181 $ 4,702,700 $ 945,623 $ 7,112,115 $ 3,152,537 Liabilities, Deferred Inflows of Resources and Fund Balances Liabilities: Accounts payable $ 1,674 $ 1,542,618 $ $ 159,430 $ Accrued payroll - - - Unearned revenue 514,771 6,952,685 Due to other funds - - - Total liabilities 1,674 2,057,389 7,112,115 Deferred inflows of resources: Unavailable revenue - 709,014 - Fund balances (deficits): Nonspendable: Prepaid items - Permanent endowment - - - Restricted 2,000,507 1,936,297 945,623 3,152,537 Committed - - - - Unassigned - - - - Total fund balances (deficits) 2,000,507 1,936,297 945,623 - 3,152,537 Total liabilities, deferred inflows of resources and fund balances $ 2,002,181 $ 4,702,700 $ 945,623 $ 7,112,115 $ 3,152,537 (continued) 167 16-176 CITY OF NEWPORT BEACH Other Governmental Funds Combining Balance Sheet June 30, 2023 Page 5 of 7 Capital Projects Newport Assessment Civic Center Uptown District Fire Station and Park Police Facility Undergrounding Assets Cash and investments $ 7,672,742 $ 3,099,911 $ 484,892 $ 647,395 $ 3,236 Receivables: Accounts (net of allowance) - - - - - Interest 27,809 11,126 1,561 11,361 12 Intergovernmental receivables - - - - Restricted cash and investments with fiscal agent 282,123 Prepaid items - - - - - Total assets $ 7,700,551 $ 3,393,160 $ 486,453 $ 658,756 $ 3,248 Liabilities, Deferred Inflows of Resources and Fund Balances Liabilities: Accounts payable $ 416,438 $ 83,209 $ 1,088 $ $ Accrued payroll - - - Unearned revenue Due to other funds - - - Total liabilities 416,438 83,209 1,088 Deferred inflows of resources: Unavailable revenue - - - Fund balances (deficits): Nonspendable: Prepaid items Permanent endowment - - - Restricted 7,284,113 282,123 - 3,248 Committed - 3,027,828 485,365 658,756 - Unassigned - - - - - Total fund balances (deficits) 7,284,113 3,309,951 485,365 658,756 3,248 Total liabilities, deferred inflows of resources and fund balances $ 7,700,551 $ 3,393,160 $ 486,453 $ 658,756 $ 3,248 (continued) 168 16-177 CITY OF NEWPORT BEACH Other Governmental Funds Combining Balance Sheet June 30, 2023 Page 6 of 7 Capital Projects Balboa Village Parks and Parking Community Management Facilities Neighborhood Miscellaneous Centers District Maintenance Enhancement FFP Projects Assets Cash and investments $ 14,808,700 $ 378,492 $ 4,200,568 $ 16,366,547 $ 1,950,592 Receivables: Accounts (net of allowance) - - - - - Interest 53,164 1,355 15,076 58,741 Intergovernmental receivables - - - - Restricted cash and investments with fiscal agent Prepaid items - - - - - Total assets $ 14,861,864 $ 379,847 $ 4,215,644 $ 16,425,288 $ 1,950,592 Liabilities, Deferred Inflows of Resources and Fund Balances Liabilities: Accounts payable $ 180,383 $ 602 $ 160,271 $ 553,688 $ 78,783 Accrued payroll - - - - - Unearned revenue Due to other funds - - - - - Total liabilities 180,383 602 160,271 553,688 78,783 Deferred inflows of resources: Unavailable revenue - - - - - Fund balances (deficits): Nonspendable: Prepaid items Permanent endowment Restricted - - - - - Committed 14,681,481 379,245 4,055,373 15,871,600 1,871,809 Unassigned - - - - - Total fund balances (deficits) 14,681,481 379,245 4,055,373 15,871,600 1,871,809 Total liabilities, deferred inflows of resources and fund balances $ 14,861,864 $ 379,847 $ 4,215,644 $ 16,425,288 $ 1,950,592 (continued) 169 16-178 Assets Cash and investments Receivables: Accounts (net of allowance) Interest Intergovernmental receivables Restricted cash and investments with fiscal agent Prepaid items Total assets Liabilities, Deferred Inflows of Resources and Fund Balances Liabilities: Accounts payable Accrued payroll Unearned revenue Due to other funds Total liabilities Deferred inflows of resources: Unavailable revenue Fund balances (deficits): Nonspendable: Prepaid items Permanent endowment Restricted Committed Unassigned Total fund balances (deficits) Total liabilities, deferred inflows of resources and fund balances CITY OF NEWPORT BEACH Other Governmental Funds Combining Balance Sheet June 30, 2023 Page 7 of 7 Capital Projects Permanent Fund Unrestricted Junior Capital Lifeguards Improvements Bay Dredging Total Other Ackerman Governmental Donation Funds $ 1,079 $ 11,913,811 $ 5,341,859 $ 1,182,286 $ 106,144,752 - - 641,039 4 19,172 4,243 304,617 - - 2,836,320 282,123 21,150 $ 1,083 $ 11,913,811 $ 5,361,031 $ 1,186,529 $ 110,230,001 $ $ 368,009 $ 368,009 $ 5,000 $ 4,755,180 - 2,669 10, 906,146 198,075 5,000 15,862,070 1,158,981 - - 21,150 3,857,000 772,781 4,629,781 - - 1,504,031 408,748 35,991,302 1,083 11,545,802 - - 52,578,342 - - (11,625) 1,083 11,545,802 5,361,031 1,181,529 93,208,950 $ 1,083 $ 11,913,811 $ 5,361,031 $ 1,186,529 $ 110,230,001 170 16-179 CITY OF NEWPORT BEACH Other Governmental Funds Combining Statement of Revenues, Expenditures and Changes in Fund Balances For the Year Ended June 30, 2023 Page 1 of 7 Revenues: Othertaxes Intergovernmental Licenses, permits and fees Property income Investment income Net increase (decrease) in fair value of investments Donations Special assessments Other Total revenues Expenditures: Current: General government Public safety Public works Community development Community services Capital outlay Debt service: Principal Interest and fiscal charges Total expenditures Excess (deficiency) of revenues over expenditures Other financing sources (uses): Transfers in Transfers out Total other financing sources (uses) Net change in fund balances Fund balances (deficits), beginning Fund balances (deficits), ending Special Revenue State SB1 Gas Tax Asset OTS Gas Tax RMRA Forfeiture DUI Grant 2,155,859 1,900,470 13,458 299,968 53,607 21,281 9,050 (32,267) 17,008 (799) 2,177,199 1,938,759 21,709 299,968 25,139 299,968 919,833 3,655,720 919,833 3,655,720 25,139 299,968 1,257,366 (1,716,961) (3,430) 1,257,366 (1,716,961) (3,430) 2,450,213 2,133,012 533,795 $ 3,707,579 $ 416,051 $ 530,365 $ (continued) 171 16-180 CITY OF NEWPORT BEACH Other Governmental Funds Combining Statement of Revenues, Expenditures and Changes in Fund Balances For the Year Ended June 30, 2023 Page 2 of 7 Special Revenue Circulation Building Community Air Quality and Excise Development Management Transportation Tax Block Grant District Revenues: Othertaxes $ $ $ - $ - Intergovernmental 997,666 110,841 Licenses, permits and fees 289,075 144,392 - - Property income - - - Investment income 50,418 5,325 25,183 Net increase (decrease) in fair value of investments (16,025) (4,595) (7,107) Donations Special assessments Other - - - - Total revenues 323,468 145,122 997,666 128,917 Expenditures: Current: General government - - - - Public safety Public works - Community development 667,747 Community services - - - Capital outlay 1,849,971 250,975 - Debt service: Principal - - 208,000 Interest and fiscal charges - - 2,548 Total expenditures 1,849,971 250,975 878,295 - Excess (deficiency) of revenues over expenditures (1,526,503) (105,853) 119,371 128,917 Other financing sources (uses): Transfers in - - Transfers out Total other financing sources (uses) - - Net change in fund balances (1,526,503) (105,853) 119,371 128,917 Fund balances (deficits), beginning 3,180,262 293,836 (119,371) 1,423,818 Fund balances (deficits), ending $ 1,653,759 $ 187,983 $ - $ 1,552,735 (continued) 172 16-181 CITY OF NEWPORT BEACH Other Governmental Funds Combining Statement of Revenues, Expenditures and Changes in Fund Balances For the Year Ended June 30, 2023 Page 3 of 7 Revenues: Othertaxes Intergovernmental Licenses, permits and fees Property income Investment income Net increase (decrease) in fair value of investments Donations Special assessments Other Total revenues Expenditures: Current: General government Public safety Public works Community development Community services Capital outlay Debt service: Principal Interest and fiscal charges Total expenditures Excess (deficiency) of revenues over expenditures Other financing sources (uses): Transfers in Transfers out Total other financing sources (uses) Net change in fund balances Fund balances (deficits), beginning Fund balances (deficits), ending Special Revenue Supplemental Law Opioid Environmental Enforcement Remediation Liability Services Fund Contributions FUN $ 874,747 $ - $ $ - $ - - 215,174 2,973,366 153,229 4,672 21,038 (59,583) (27,592) (10,997: 492,038 70,058 - 8,428 1,038,451 215,174 3,450,912 10,041 - 215,174 380,823 - - 118,830 3,635,163 - 380,823 215,174 657,628 657,628 8,599,069 $ 9,256,697 $ 3,635,163 118,830 (184,251) (108,789) (184,251) (108,789) 172,626 1,298,845 $ (11,625) $ 1,190,056 (continued) 173 16-182 CITY OF NEWPORT BEACH Other Governmental Funds Combining Statement of Revenues, Expenditures and Changes in Fund Balances For the Year Ended June 30, 2023 Page 4 of 7 Revenues: Other taxes Intergovernmental Licenses, permits and fees Property income Investment income Net increase (decrease) in fair value of investments Donations Special assessments Other Total revenues Expenditures: Current: General government Public safety Public works Community development Community services Capital outlay Debt service: Principal Interest and fiscal charges Total expenditures Excess (deficiency) of revenues over expenditures Other financing sources (uses): Transfers in Transfers out Total other financing sources (uses) Net change in fund balances Fund balances (deficits), beginning Fund balances (deficits), ending ial Revenue Restricted Oceanfront American PEG Programs Measure M Encroachment Rescue Plan Act Fees - 2,697,652 3,212,998 150,000 - - - 340,307 24,300 - 261,477 - 28,364 57,163 12,457 44,888 20,329 (28,118) 8,898 33,763 64,829 - - 69,038 - - - - 356,860 2,726,697 282,832 3,212,998 418,958 24,411 1,746 92,428 - - - 2,990,672 3,188,587 94,174 2,990,672 - 3,212,998 - 262,686 (263,975) 282,832 - 418,958 5,010 - - (500,000) (47,992) - 5,010 (500,000) (47,992) 262,686 (258,965) (217,168) 370,966 1,737,821 2,195,262 1,162,791 2,781,571 $ 2,000,507 $ 1,936,297 $ 945,623 $ $ 3,152,537 (continued) 174 16-183 CITY OF NEWPORT BEACH Other Governmental Funds Combining Statement of Revenues, Expenditures and Changes in Fund Balances For the Year Ended June 30, 2023 Page 5 of 7 Revenues: Othertaxes Intergovernmental Licenses, permits and fees Property income Investment income Net increase (decrease) in fair value of investments Donations Special assessments Other Total revenues Expenditures: Current: General government Public safety Public works Community development Community services Capital outlay Debt service: Principal Interest and fiscal charges Total expenditures Excess (deficiency) of revenues over expenditures Other financing sources (uses): Transfers in Transfers out Total other financing sources (uses) Net change in fund balances Fund balances (deficits), beginning Fund balances (deficits), ending Newport Assessment Civic Center Uptown District Fire Station and Park Police Facility Undergrounding 119,878 55,655 7,460 216,587 55 17,100 29,340 (3,484) 437,569 (24) 4,948,430 5,085,408 84,995 3,976 654,156 31 2,848,473 288,132 28, 863, 760 - - 2,774 2,848,473 288,132 2,774 28,863,760 2,236,935 (203,137) 1,202 (28,209,604) 31 - 900,000 - 28,868,360 - 900,000 - 28,868,360 2,236,935 696,863 1,202 658,756 31 5,047,178 2,613,088 484,163 - 3,217 $ 7,284,113 $ 3,309,951 $ 485,365 $ 658,756 $ 3,248 (continued) 175 16-184 CITY OF NEWPORT BEACH Other Governmental Funds Combining Statement of Revenues, Expenditures and Changes in Fund Balances For the Year Ended June 30, 2023 Page 6 of 7 Balboa Village Parks and Parking Community Management Facilities Neighborhood Miscellaneous Centers District Maintenance Enhancement FFP Projects Revenues: Othertaxes $ $ $ $ $ Intergovernmental Licenses, permits and fees Property income Investment income 183,778 8,950 77,501 190,960 Net increase (decrease) in fair value of investments (63,957) (22,321) (11,671) 21,689 Donations - Special assessments Other - - - - Total revenues 119,821 (13,371) 65,830 212,649 Expenditures: Current: General government - - - - Public safety Public works Community development Community services - - - - - Capital outlay 916,327 36,448 1,227,860 2,323,440 87,910 Debt service: Principal - - - - - Interest and fiscal charges - - - - - Total expenditures 916,327 36,448 1,227,860 2,323,440 87,910 Excess (deficiency) of revenues over expenditures (796,506) (49,819) (1,162,030) (2,110,791) (87,910) Other financing sources (uses): Transfers in 7,793,354 - 2,500,000 16,500,000 6,900,000 Transfers out - - - (4,940,281) Total other financing sources (uses) 7,793,354 2,500,000 16,500,000 1,959,719 Net change in fund balances 6,996,848 (49,819) 1,337,970 14,389,209 1,871,809 Fund balances (deficits), beginning 7,684,633 429,064 2,717,403 1,482,391 - Fund balances (deficits), ending $ 14,681,481 $ 379,245 $ 4,055,373 $ 15,871,600 $ 1,871,809 (continued) 176 16-185 CITY OF NEWPORT BEACH Other Governmental Funds Combining Statement of Revenues, Expenditures and Changes in Fund Balances For the Year Ended June 30, 2023 Page 7 of 7 Revenues: Other taxes Intergovernmental Licenses, permits and fees Property income Investment income Net increase (decrease) in fair value of investments Donations Special assessments Other Total revenues Expenditures: Current: General government Public safety Public works Community development Community services Capital outlay Debt service: Principal Interest and fiscal charges Total expenditures Excess (deficiency) of revenues over expenditures Other financing sources (uses): Transfers in Transfers out Total other financing sources (uses) Net change in fund balances Fund balances (deficits), beginning Fund balances (deficits), ending Capital Projects Permanent Funds Total Unrestricted Other Junior Capital Ackerman Governmental Lifeguards Improvements Bay Dredging Donation Funds $ $ $ $ 874,747 - 14,577,452 923,774 - 285,777 1,194 91,484 20,261 1,460,438 (5,894) (42,061) (9,398) 239,803 5,844 562,711 - 4,948,430 - - - 147,524 1,144 49,423 10,863 24,020,656 24,411 - 540,281 - 3,229,296 5,000 674,493 - - - 211,258 87,795 3,929,034 54,251,627 - 208,000 - - - 5,322 87,795 3,929,034 5,000 59,144,688 (86,651) (3,929,034) 49,423 5,863 (35,124,032) 8,930,000 72,396,724 (16,950,000) (22,438,273) (8,020,000) - - 49,958,451 (86,651) (11,949,034) 49,423 5,863 14,834,419 87,734 23,494,836 5,311,608 1,175,666 78,374,531 $ 1,083 $ 11,545,802 $ 5,361,031 $ 1,181,529 $ 93,208,950 177 16-186 CITY OF NEWPORT BEACH Budgetary Comparison Schedule State Gas Tax Special Revenue Fund For the Year Ended June 30, 2023 Variance with Final Budget Budgeted Amounts Positive Original Final Actual (Negative) Revenues: Intergovernmental $ 2,503,731 $ 2,503,731 $ 2,155,859 $ (347,872) Investment income 21,669 21,669 53,607 31,938 Net decrease in fair value of investments - - (32,267) (32,267) Total revenues 2,525,400 2,525,400 2,177,199 (348,201) Expenditures: Capital outlay 2,075,000 3,642,243 919,833 2,722,410 Net change in fund balance 450,400 (1,116,843) 1,257,366 2,374,209 Fund balance, beginning 2,450,213 2,450,213 2,450,213 - Fund balance, ending $ 2,900,613 $ 1,333,370 $ 3,707,579 $ 2,374,209 178 16-187 CITY OF NEWPORT BEACH Budgetary Comparison Schedule SB1 Gas Tax RMRA Special Revenue Fund For the Year Ended June 30, 2023 Variance with Final Budget Budgeted Amounts Positive Original Final Actual (Negative) Revenues: Intergovernmental $ 1,957,264 $ 1,957,264 $ 1,900,470 $ (56,794) Investment income 3,321 3,321 21,281 17,960 Net increase in fair value of investments - - 17,008 17,008 Total revenues 1,960,585 1,960,585 1,938,759 (21,826) Expenditures: Capital outlay 2,000,000 3,990,028 3,655,720 334,308 Net change in fund balance (39,415) (2,029,443) (1,716,961) 312,482 Fund balance, beginning 2,133,012 2,133,012 2,133,012 - Fund balance, ending $ 2,093,597 $ 103,569 $ 416,051 $ 312,482 179 16-188 CITY OF NEWPORT BEACH Budgetary Comparison Schedule Asset Forfeiture Special Revenue Fund For the Year Ended June 30, 2023 Revenues: Intergovernmental Investment income Net decrease in fair value of investments Total revenues Expenditures: Public safety Net change in fund balance Fund balance, beginning Fund balance, ending Budgeted Amounts Original Final Variance with Final Budget Positive Actual (Negative) $ 13,458 $ 13,458 9,050 9,050 (799) (799) 21,709 21,709 65,000 65,000 25,139 39,861 (65,000) (65,000) (3,430) 61,570 $ 468,795 $ 468,795 $ 530,365 $ 61,570 180 16-189 CITY OF NEWPORT BEACH Budgetary Comparison Schedule OTS DUI Grant Special Revenue Fund For the Year Ended June 30, 2023 Revenues: Intergovernmental Expenditures: Public safety Net change in fund balance Fund balance, beginning Fund balance, ending Variance with Final Budget Budgeted Amounts Positive Original Final Actual (Negative) $ 67,500 $ 417,500 $ 299,968 $ (117,532: (273) (273) - 273 $ (273) $ (273) $ - $ 273 181 16-190 CITY OF NEWPORT BEACH Budgetary Comparison Schedule Circulation and Transportation Special Revenue Fund For the Year Ended June 30, 2023 Revenues: Licenses, permits and fees Investment income Net decrease in fair value of investments Total revenues Expenditures: Capital outlay Net change in fund balance Fund balance, beginning Fund balance, ending Budgeted Amounts Original Final Variance with Final Budget Positive Actual (Negative) $ 289,075 $ 289,075 50,418 50,418 (16,025) (16,025: 323,468 323,468 3,103, 098 1,849,971 1,253,127 (3,103,098) (1,526,503) 1,576,595 $ 3,180,262 $ 77,164 $ 1,653,759 $ 1,576,595 182 16-191 CITY OF NEWPORT BEACH Budgetary Comparison Schedule Building Excise Tax Special Revenue Fund For the Year Ended June 30, 2023 Variance with Final Budget Budgeted Amounts Positive Original Final Actual (Negative) Revenues: Licenses, permits and fees $ 202,950 $ 202,950 $ 144,392 $ (58,558) Investment income 3,006 3,006 5,325 2,319 Net decrease in fair value of investments - - (4,595) (4,595) Total revenues 205,956 205,956 145,122 (60,834) Expenditures: Capital outlay - 273,613 250,975 22,638 Net change in fund balance 205,956 (67,657) (105,853) (38,196) Fund balance, beginning 293,836 293,836 293,836 - Fund balance, ending $ 499,792 $ 226,179 $ 187,983 $ (38,196) 183 16-192 CITY OF NEWPORT BEACH Budgetary Comparison Schedule Community Development Block Grant Special Revenue Fund For the Year Ended June 30, 2023 Revenues: Intergovernmental Expenditures: Community development Debt service: Principal Interest and fiscal charges Total expenditures Net change in fund balance Fund balance, beginning Fund balance (deficit), ending Variance with Final Budget Budgeted Amounts Positive Original Final Actual (Negative) $ 385,974 $ 1,202,150 $ 997,666 $ (204,484) 183,586 925,899 667,747 258,152 208,000 208,000 208,000 - 2,548 2,548 2,548 - 394,134 1,136,447 878,295 258,152 (8,160) 65,703 119,371 53,668 (119,371) (119,371) (119,371) - $ (127,531) $ (53,668) $ - $ 53,668 184 16-193 CITY OF NEWPORT BEACH Budgetary Comparison Schedule Air Quality Management District Special Revenue Fund For the Year Ended June 30, 2023 Revenues: Intergovernmental Investment income Net decrease in fair value of investments Total revenues Expenditures: Capital outlay Net change in fund balance Fund balance, beginning Fund balance, ending Variance with Final Budget Budgeted Amounts Positive Original Final Actual (Negative) $ 100,000 $ 100,000 $ 110,841 $ 10,841 16,734 16,734 25,183 8,449 - - (7,107) (7,107; 116,734 116,734 128,917 12,183 - 16,319 116,734 100,415 - 16,319 128,917 28,502 1,423,818 1,423,818 1,423,818 - $ 1,540,552 $ 1,524,233 $ 1,552,735 $ 28,502 185 16-194 CITY OF NEWPORT BEACH Budgetary Comparison Schedule Environmental Liability Special Revenue Fund For the Year Ended June 30, 2023 Variance with Final Budget Budgeted Amounts Positive Original Final Actual (Negative) Revenues: Other taxes $ 670,563 $ 670,563 $ 874,747 $ 204,184 Investment income 153,829 153,829 153,229 (600) Net decrease in fair value of investments - - (59,583) (59,583) Other revenue 40,000 40,000 70,058 30,058 Total revenues 864,392 864,392 1,038,451 174,059 Expenditures: Public works 684,737 685,566 380,823 304,743 Net change in fund balance 179,655 178,826 657,628 478,802 Fund balance, beginning 8,599,069 8,599,069 8,599,069 - Fund balance, ending $ 8,778,724 $ 8,777,895 $ 9,256,697 $ 478,802 186 16-195 CITY OF NEWPORT BEACH Budgetary Comparison Schedule Supplemental Law Enforcement Services Special Revenue Fund For the Year Ended June 30, 2023 Variance with Final Budget Budgeted Amounts Positive Original Final Actual (Negative) Revenues: Intergovernmental $ 200,000 $ 200,000 $ 215,174 $ 15,174 Expenditures: Public safety 200,000 200,000 215,174 (15,174) Net change in fund balance - - - - Fund balance, beginning - - - - Fund balance, ending 187 16-196 CITY OF NEWPORT BEACH Budgetary Comparison Schedule Opioid Remediation Special Revenue Fund For the Year Ended June 30, 2023 Revenues: Other Expenditures: Public safety Net change in fund balance Fund balance, beginning Fund balance, ending Budgeted Amounts Original Final - $ 395,766 Variance with Final Budget Positive Actual (Negative) - $ (395,766) 395,766 - 395,766 188 16-197 CITY OF NEWPORT BEACH Budgetary Comparison Schedule Contributions Special Revenue Fund For the Year Ended June 30, 2023 Variance with Final Budget Budgeted Amounts Positive Original Final Actual (Negative) Revenues: Intergovernmental $ 5,147,691 $ 8,585,269 $ 2,973,366 $ (5,611,903) Investment income 36,533 36,533 4,672 (31,861) Net decrease in fair value of investments - - (27,592) (27,592) Donations 8,371,043 8,963,927 492,038 (8,471,889) Other - 42,650 8,428 (34,222) Total revenues 13,555,267 17,628,379 3,450,912 (14,177,467) Expenditures: Capital outlay 8,502,000 17,157,115 3,635,163 13,521,952 Net change in fund balance 5,053,267 471,264 (184,251) (655,515) Fund balance, beginning 172,626 172,626 172,626 - Fund balance, ending $ 5,225,893 $ 643,890 $ (11,625) $ (655,515) 189 16-198 CITY OF NEWPORT BEACH Budgetary Comparison Schedule FUN Special Revenue Fund For the Year Ended June 30, 2023 Revenues: Investment income Net decrease in fair value of investments Total revenues Expenditures: Community services Net change in fund balance Fund balance, beginning Fund balance, ending Variance with Final Budget Budgeted Amounts Positive Original Final Actual (Negative) $ 23,910 $ 23,910 $ 21,038 $ (2,872) (10,997) (10,997) 23,910 23,910 10,041 (13,869) 147,000 147,000 118,830 28,170 (123,090) (123,090) (108,789) 1,298,845 1,298,845 1,298,845 $ 1,175,755 $ 1,175,755 $ 1,190,056 $ 14,301 14,301 190 16-199 CITY OF NEWPORT BEACH Budgetary Comparison Schedule Restricted Programs Special Revenue Fund For the Year Ended June 30, 2023 Variance with Final Budget Budgeted Amounts Positive Original Final Actual (Negative) Revenues: Licenses, permits and fees $ 150,000 $ 150,000 $ 150,000 $ - Property income 32,118 32,118 24,300 (7,818) Investment income - - 28,364 28,364 Net increase in fair value of investments - - 20,329 20,329 Donations 35,000 35,000 64,829 29,829 Other 16,672 16,672 69,038 52,366 Total revenues 233,790 233,790 356,860 123,070 Expenditures: Community development - 20,000 1,746 18,254 Community services - 128,881 92,428 36,453 Total Expenditures - 148,881 94,174 54,707 Net change in fund balance 233,790 84,909 262,686 177,777 Fund balance, beginning 1,737,821 1,737,821 1,737,821 - Fund balance, ending $ 1,971,611 $ 1,822,730 $ 2,000,507 $ 177,777 191 16-200 CITY OF NEWPORT BEACH Budgetary Comparison Schedule Measure M Special Revenue Fund For the Year Ended June 30, 2023 Variance with Final Budget Budgeted Amounts Positive Original Final Actual (Negative) Revenues: Intergovernmental $ 3,293,536 $ 3,831,508 $ 2,697,652 $ (1,133,856) Investment income 7,123 7,123 57,163 50,040 Net decrease in fair value of investments - - (28,118) (28,118) Total revenues 3,300,659 3,838,631 2,726,697 (1,111,934) Expenditures: Capital outlay 1,857,000 5,675,923 2,990,672 2,685,251 Excess (deficiency) of revenues over expenditures 1,443,659 (1,837,292) (263,975) 1,573,317 Other financing sources: Transfers in - 5,010 5,010 - Net change in fund balance 1,443,659 (1,832,282) (258,965) 1,573,317 Fund balance, beginning 2,195,262 2,195,262 2,195,262 - Fund balance, ending $ 3,638,921 $ 362,980 $ 1,936,297 $ 1,573,317 192 16-201 CITY OF NEWPORT BEACH Budgetary Comparison Schedule Oceanfront Encroachment Special Revenue Fund For the Year Ended June 30, 2023 Variance with Final Budget Budgeted Amounts Positive Original Final Actual (Negative) Revenues: Property income $ 254,640 $ 254,640 $ 261,477 $ 6,837 Investment income - - 12,457 12,457 Net increase in fair value of investments - - 8,898 8,898 Total revenues 254,640 254,640 282,832 28,192 Other financing sources: Transfers in 500,000 - - - Transfers out (500,000) (500,000) (500,000) - Total other financing sources (uses) - (500,000) (500,000) - Net change in fund balance 254,640 (245,360) (217,168) 28,192 Fund balance, beginning 1,162,791 1,162,791 1,162,791 - Fund balance, ending $ 1,417,431 $ 917,431 $ 945,623 $ 28,192 193 16-202 CITY OF NEWPORT BEACH Budgetary Comparison Statement American Rescue Plan Act For the Year Ended June 30, 2023 Variance with Final Budget Budgeted Amounts Positive Original Final Actual (Negative) Revenues: Intergovernmental $ 10,141,272 $ 3,238,596 $ 3,212,998 $ (25,598) Expenditures: General government - 50,009 24,411 25,598 Capital outlay 10,100,000 10,141,272 3,188,587 6,952,685 Total expenditures 10,100,000 10,191,281 3,212,998 6,978,283 Net change in fund balance 41,272 (6,952,685) - (6,952,685) Fund balance, beginning - - - - Fund balance, ending $ 41,272 $ (6,952,685) $ - $ (6,952,685) 194 16-203 CITY OF NEWPORT BEACH Budgetary Comparison Schedule PEG Fees Special Revenue Fund For the Year Ended June 30, 2023 Revenues: Licenses, permits and fees Investment income Net increase in fair value of investments Total revenues Other financing (uses): Transfers out Net change in fund balance Fund balance, beginning Fund balance, ending Variance with Final Budget Budgeted Amounts Positive Original Final Actual (Negative) $ 360,000 $ 360,000 $ 340,307 $ (19,693) - - 44,888 44,888 - - 33,763 33,763 360,000 360,000 418,958 58,958 - (47,992) (47,992) 360,000 312,008 370,966 2,781,571 2,781,571 2,781,571 $ 3,141,571 $ 3,093,579 $ 3,152,537 $ 58,958 58,958 195 16-204 This page left blank intentionally. 196 16-205 FINANCIAL SECTION ___Z 197 16-206 This page left blank intentionally. 198 16-207 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. 199 16-208 CITY OF NEWPORT BEACH Internal Service Funds Combining Statement of Net Position June 30, 2023 Total Insurance Compensated Retiree Equipment Information Internal Assets Reserve Absences Insurance Maintenance Technology Service Funds Current assets: Cash and investments $ 41,908,438 $ 6,208,195 $ 742,138 $ 17,972,583 $ 10,656,998 $ 77,488,352 Receivables: Accounts (net of allowance) - - 905 1,574 - 2,479 Interest 148,622 20,856 2,241 64,718 37,964 274,401 Inventories - - - 438,573 - 438,573 Prepaid items 49,178 259,241 - 668,136 976,555 Total current assets 42,106,238 6,229,051 1,004,525 18,477,448 11,363,098 79,180,360 Noncurrent assets: Capital assets: Equipment 42,794,283 3,479,149 46,273,432 Intangible right to use equipment - 353,888 353,888 Structures 39,581 - 39,581 Software - 4,360,625 4,360,625 Intangible right to use subscriptions 1,723,597 381,348 2,104,945 Work in progress - - - Less accumulated depreciation/amortization (27,019,639) (6,520,991) (33,540,630) Total capital assets (net of accumulated depreciation/amortization) 17,537,822 2,054,019 19,591,841 Total assets 42,106,238 6,229,051 1,004,525 36,015,270 13,417,117 98,772,201 Deferred outflows of resources: Deferred amount from pension plans - - - 950,453 1,905,078 2,855,531 Deferred amount from OPEB 214,109 429,164 643,273 Total deferred outflows of resources 1,164,562 2,334,242 3,498,804 Liabilities Current liabilities: Accounts payable 89,324 - - 540,108 98,748 728,180 Accrued payroll - 397,234 188,324 37,816 85,376 708,750 Due to other funds - - 353,001 - - 353,001 Workers' compensation - current 3,072,704 - 3,072,704 General liability - current 2,938,129 - 2,938,129 Compensated absences - current - 4,223,096 - 4,223,096 Lease liability - current - - 68,951 68,951 Subscription liability - current 168,512 151,540 320,052 Total current liabilities 6,100,157 4,620,330 541,325 746,436 404,615 12,412,863 Noncurrent liabilities: Workers' compensation 13,323,449 - - - - 13,323,449 General liability 5,750,932 - 5,750,932 Compensated absences - 8,467,944 - 8,467,944 Lease liability - - 133,221 133,221 Subscription liability 1,470,387 77,741 1,548,128 Net pension liability 2,227,921 4,465,652 6,693,573 Net OPEB liability 256,634 514,406 771,040 Total noncurrent liabilities 19,074,381 8,467,944 3,954,942 5,191,020 36,688,287 Total liabilities 25,174,538 13,088,274 541,325 4,701,378 5,595,635 49,101,150 Deferred inflows of resources: Deferred amount from pension plans - - - 17,736 35,547 53,283 Deferred amount from OPEB 4,338 8,695 13,033 Total deferred inflows of resources 22,074 44,242 66,316 Net Position Invested in capital assets - - 15,830,374 1,611,209 17,441,583 Unrestricted 16,931,700 (6,859,223) 463,200 16,626,006 8,500,273 35,661,956 Total net position $ 16,931,700 $ (6,859,223) $ 463,200 $ 32,456,380 $ 10,111,482 $ 53,103,539 200 16-209 Operating revenues: Charges for services Employee contributions Other Total operating revenues Operating expenses: Salaries and wages Depreciation/amortization Professional services Maintenance and supplies Fleet parts and supplies Telecommunication Hardware Software Workers' compensation Claims and judgments Compensated absences OPEB Other Total operating expenses Operating income (loss) Nonoperating revenues: Investment income Net decrease in fair value of investments Gain on sale of capital assets Interest expense Total nonoperating revenues Income (loss) before transfers Transfers in Total transfers Change in net position Net position, beginning Net position, ending CITY OF NEWPORT BEACH Internal Service Funds Combining Statement of Revenues, Expenses and Changes in Net Position For the Year Ended June 30, 2023 Insurance Compensated Retiree Reserve Absences Insurance Total Equipment Information Internal Maintenance Technology Service Funds $ 13,356,646 $ 2,796,453 $ 4,124,923 $ 8,205,587 $ 7,650,517 $ 36,134,126 - - 25,880 - - 25,880 11,872 - 3,838,788 3,918 355 3,854,933 13,368,518 2,796,453 7,989,591 8,209,505 7,650,872 40,014,939 - - - 986,886 2,471,844 3,458,730 3,534,588 557,254 4,091,842 301,283 709,721 1,011,004 1,670,153 1,584,709 3,254,862 517,579 - 517,579 - 204,977 204,977 211,872 211,872 349,977 349,977 4,903,042 - 4,903,042 5,618,183 - 5,618,183 - 2,007,182 - 2,007,182 - 6,187,129 - 6,187,129 - 2,289,379 126 2,289,505 10,521,225 2,007,182 8,476,508 7,010,489 6,090,480 34,105,884 2,847,293 789,271 (486,917) 1,199,016 1,560,392 5,909,055 659,427 96,233 14,710 281,867 174,685 1,226,922 (205,646) (40,899) (12,582) (70,700) (46,768) (376,595) 355,270 - 355,270 - (3,852) (2,770) (6,622) 453,781 55,334 2,128 562,585 125,147 1,198,975 3,301,074 844,605 (484,789) 1,761,601 1,685,539 7,108,030 - - 379,452 379,452 379,452 379,452 3,301,074 844,605 (484,789) 2,141,053 1,685,539 7,487,482 13,630,626 (7,703,828) 947,989 30,315,327 8,425,943 45,616,057 $ 16,931,700 $ (6,859,223) $ 463,200 $ 32,456,380 $ 10,111,482 $ 53,103,539 201 16-210 CITY OF NEWPORT BEACH Internal Service Funds Combining Statement of Cash Flows For the Year Ended June 30, 2023 Total Insurance Compensated Retiree Equipment Information Internal Reserve Absences Insurance Maintenance Technology Service Funds Cash flows from operating activities: Receipts from user departments $ 13,356,646 $ 2,796,453 $ 4,130,243 $ 8,215,027 $ 7,650,517 $ 36,148,886 Payments to employees (4,270,715) (2,202,671) - (1,112,839) (2,730,603) (10,316,828) Payments to suppliers (6,131,165) (8,466,370) (510,052) (3,736,281) (18,843,868) Other operating cash receipts 11,872 3,864,668 3,918 355 3,880,813 Net cash provided (used) by operating activities 2,966,638 593,782 (471,459) 6,596,054 1,183,988 10,869,003 Cash flows from noncapital financing activities: Cash received from other funds - - - 379,449 379,449 Net cash provided by noncapital financing activities 379,449 379,449 Cash flows from capital and related financing activities: Acquisition of capital assets (3,550,221) (234,489) (3,784,710) Lease liabilities and related (67,960) (67,960) Subscription liabilities and related (88,550) (153,555) (242,105) Proceeds from sale of capital assets 355,270 355,270 Net cash provided (used) for capital and related financing activities (3,283,501) (456,004) (3,739,505) Cash flows from investing activities: Investment income 419,706 49,492 2,958 188,393 118,903 779,452 Net cash provided by investing activities 419,706 49,492 2,958 188,393 118,903 779,452 Net increase (decrease) in cash and cash equivalents 3,386,344 643,274 (468,501) 3,880,395 846,887 8,288,399 Cash and cash equivalents, beginning 38,522,094 5,564,921 1,210,639 14,092,188 9,810,111 69,199,953 Cash and cash equivalents, ending $ 41,908,438 $ 6,208,195 $ 742,138 $ 17,972,583 $ 10,656,998 $ 77,488,352 Reconciliation to the statement of net position: Cash and investments reported on statement of net position $ 41,908,438 $ 6,208,195 $ 742,138 $ 17,972,583 $ 10,656,998 $ 77,488,352 Cash and cash equivalents $ 41,908,438 $ 6,208,195 $ 742,138 $ 17,972,583 $ 10,656,998 $ 77,488,352 Reconciliation of operating income (loss) to net cash provided by operating activities: Operating income (loss) $ 2,847,293 $ 789,271 $ (486,917) $ 1,199,016 $ 1,560,392 $ 5,909,055 Adjustments to reconcile operating income (loss) to net cash provided by operating activities: Depreciation - - - 3,534,588 557,254 4,091,842 Changes in operating assets and liabilities: Decrease in accounts receivable 5,320 9,440 - 14,760 Decrease in inventories - (57,187) (57,187) (Increase) decrease in prepaid items (37,377) (59) 1,964,440 (338,838) 1,588,166 Increase (decrease) in accounts payable and accrued payroll (478,024) (109,121) 10,197 77,637 (330,478) (829,789) Increase in workers' compensation 641,565 - - 641,565 Increase in general liability (6,819) (6,819) (Decrease)in compensated absences (86,368) (86,368) (Decrease) in net pension liability and deferred cash flows (80,165) (160,682) (240,847) (Decrease) in net OPEB liability and deferred cash flows - (51,715) (103,660) (155,375) Total adjustments 119,345 (195,489) 15,458 5,397,038 (376,404) 4,959,948 Net cash provided (used) by operating activities $ 2,966,638 $ 593,782 $ (471,459) $ 6,596,054 $ 1,183,988 $ 10,869,003 Noncash investing, capital, and financing activities: Residual Equity transfer Net (decrease) in fair value of investments $ (205,646) $ (40,899) $ (12,582) $ (70,700) $ (46,768) $ (376,595) Obtaining an intangible right to use lease asset 5,616 5,616 Obtaining an intangible right to use subscription asset 1,723,597 381,348 2,104,945 Total of noncash activities $ (205,646) $ (40,89J9 $ (12,582) $ 1,652,897 $ 340,196 $ 1,733,966 202 16-211 FINANCIAL SECTION Z 203 16-212 This page left blank intentionally. 204 16-213 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 and 1915 Act special assessment bonds. The Tourism Business Improvement Fund is used to account for the Newport Beach Tourism Business Improvement District's special assessment on short term room rental revenue collected by the City for Visit Newport Beach Inc. The Other Business Improvement Fund is used to account for monies collected from local business districts for district property improvements and business enhancement. The Police Custodial Fund is used to account for monies received by the City's police department in a custodial capacity, such as warrants and items pending adjudication. The Flexible Spending Account Fund is used to account for monies withheld by the City from employees' wages based on their voluntary enrollment in flexible spending accounts. 205 16-214 CITY OF NEWPORT BEACH Fiduciary Funds Combining Statement of Fiduciary Net Position June 30, 2023 Custodial Funds Special Tourism Other Flexible Total Assessment Business Business Police Spending Custodial District Improvement Improvement Custodial Account Funds Assets Cash and investments $ 561,421 $ 418,250 $ 6,823 $ 289,556 $ 125,728 $ 1,401,778 Restricted cash and investments with fiscal agent 1,318,999 - - - - 1,318,999 Receivable: Interest 2,018 2,018 Intergovernmental receivable 29,936 - - - - 29,936 Total assets 1,912,374 418,250 6,823 289,556 125,728 2,752,731 Liabilities Advances from other funds - - - 100,000 100,000 Due to others 39 418,250 6,823 646 - 425,758 Total liabilities 39 418,250 6,823 646 100,000 525,758 Net Position Restricted for: Individuals, organizations, and other governments 1,912,335 - - 288,910 25,728 2,226,973 Total net position $ 1,912,335 $ - $ - $ 288,910 $ 25,728 $ 2,226,973 206 16-215 CITY OF NEWPORT BEACH Fiduciary Funds Combining Statement of Changes in Fiduciary Net Position For the Year Ended June 30, 2023 Custodial Funds Special Tourism Other Flexible Total Assessment Business Business Police Spending Custodial District Improvement Improvement Custodial Account Funds Additions Special assessments $ 1,289,499 $ $ $ - $ $ 1,289,499 Investment earnings 47,328 225 47,553 Other - 101,673 221,680 323,353 Total additions 1,336,827 101,898 221,680 1,660,405 Deductions Debt service 1,653,677 - - 1,653,677 Administrative 112,756 - - 112,756 Other - 72,955 195,952 268,907 Total deductions 1,766,433 72,955 195,952 2,035,340 Net increase (decrease) in fiduciary net position (429,606) 28,943 25,728 (374,935) Net position, beginning of year 2,341,941 259,967 - 2,601,908 Net position, end of year $ 1,912,335 $ $ $ 288,910 $ 25,728 $ 2,226,973 207 16-216 This page left blank intentionally. 208 16-217 STATISTICAL SECTION This page left blank intentionally. 210 16-219 FINANCIAL TRENDS This section of the City of Newport Beach's Annual Comprehensive Financial Report (ACFR) 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 have 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 Annual Comprehensive Financial Reports and underlying accounting records for the relevant years. 211 16-220 CITY OF NEWPORT BEACH Net Position by Component Last Ten Fiscal Years (accrual basis of accounting) Fiscal Year 20141 20152 20163 20174 Governmental activities: Net investment in capital assets $ 2,148,942,928 $ 2,176,644,408 $ 2,193,773,102 $ 2,201,552,683 Restricted 59,998,344 45,689,702 44,033,677 45,753,736 Unrestricted (184,990,765) (150,532,773) (130,468,268) (133,461,197) Total governmental activities $ 2,023,950,507 $ 2,071,801,337 $ 2,107,338,511 $2,113,845,222 Business -type activities Net investment in capital assets $ 115,948,522 $ 113,914,514 $ 117,055,576 $ 116,238,944 Unrestricted 13,160,611 21,756,124 23,430,189 28,890,311 Total business -type activities $ 129,109,133 $ 135,670,638 $ 140,485,765 $ 145,129,255 Primary government: Net investment in capital assets $ 2,264,891,450 $ 2,290,558,922 $ 2,310,828,678 $ 2,317,791,627 Restricted 59,998,344 45,689,702 44,033,677 45,753,736 Unrestricted (171,830,154) (128,776,649) (107,038,079) (104,570,886) Total primary government $ 2,153,059,640 $ 2,207,471,975 $ 2,247,824,276 $2,258,974,477 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. 2 Reflects restatement of net position due to compensated absences and deferred outflow adjustments related to fiscal year ended June 30, 2016. 3 Reflects restatement of net position due to deferred outflow adjustments related to fiscal year ended June 30, 2017. 4 Reflects restatement of net position due to implementation of GASB 75 in fiscal year ended June 30, 2018. 5 Reflects restatement of net position due to adjustments for capital assets and compensated absences liability in fiscal year ended June 30, 2019. 6 2022 data varies from trend due to receipt of revenues such as property taxes and sales taxes that were not spent or restricted by the end of the fiscal year. 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. The City of Newport Beach implemented GASB 87 for the fiscal year ended June 30, 2022. The City of Newport Beach implemented GASB 96 for the fiscal year ended June 30, 2023. 212 16-221 CITY OF NEWPORT BEACH Net Position by Component Last Ten Fiscal Years (accrual basis of accounting) Fiscal Year 2018' 2019 2020 2021 2022 2023 $ 2,208,832,391 $ 2,218,040,304 $ 2,217,852,660 $ 2,227,572,605 $ 2,223,773,786 $ 2,256,305,577 49,791,908 56,426,811 67,708,225 67,189,020 78,100,496 79,152,428 (122,024,754) (102,035,181) (90,214,086) (72,301,558) (8,183,288) 20,117,377 $ 2,136,599,545 $ 2,172,431,934 $ 2,195,346,799 $ 2,222,460,067 $ 2,293,690,994 $ 2,355,575,382 $ 119,375,596 $ 119,346,350 $ 120,291,689 $ 124,775,772 $ 128,244,924 $ 131,015,969 29,183,382 30,331,669 30,276,662 27,039,499 28,559,633 26,701,049 $ 148,558,978 $ 149,678,019 $ 150,568,351 $ 151,815,271 $ 156,804,557 $ 157,717,018 $ 2,328,207,987 $ 2,337,386,654 $ 2,338,144,349 $ 2,352,348,377 $ 2,352,018,710 $ 2,387,321,546 49,791,908 56,426,811 67,708,225 67,189,020 78,100,496 79,152,428 (92,841,372) (71,703,512) (59,937,424) (45,262,059) 20,376,345 6 46,818,426 $ 2,285,158,523 $ 2,322,109,953 $ 2,345,915,150 $ 2,374,275,338 $ 2,450,495,551 $ 2,513,292,400 213 16-222 CITY OF NEWPORT BEACH Changes in Net Position Last Ten Fiscal Years (accrual basis of accounting) Fiscal Year 2014 2015 2016 2017 Expenses: Governmental activities: General government $ 18,834,165 $ 24,558,041 $ 19,335,275 $ 20,443,569 Public safety 87,676,062 96,945,872 91,046,455 102,494,314 Public works 42,953,118 45,774,939 45,443,988 54,039,601 Community development 10,283,481 10,073,248 9,943,868 12,056,086 Community services 21,357,271 22,418,287 22,700,052 26,583,440 Interest on long-term debt 7,888,192 7,711,334 7,615,094 7,472,188 Total governmental activities expenses 188,992,289 207,481,721 196,084,732 223,089,198 Business -type activities: Water 22,037,284 21,175,954 21,605,197 22,004,013 Wastewater 3,368,656 3,452,398 3,818,165 4,218,926 Total business -type activities expenses 25,405,940 24,628,352 25,423,362 26,222,939 Total primary government expenses 214,398,229 232,110,073 221,508,094 249,312,137 Program revenues: Governmental activities: Charges for services: General government 3,046,232 3,647,210 3,722,557 5,089,123 Public safety 19,124,113 19,386,017 19,108,222 19,899,242 Public works 5,517,103 5,276,991 5,319,510 5,214,426 Community development 8,043,390 8,608,645 8,419,588 10,838,114 Community services 13,270,316 13,667,775 13,964,018 13,653,466 Operating grants and contributions: 15,196,696 10,673,286 17,826,914 11,632,188 Capital grants and contributions: 563,786 38,157,665 1 2,717,504 27,993,317 1 Total governmental activities program revenues 64,761,636 99,417,589 71,078,313 94,319,876 Business -type activities: Charges for services: Water 29,397,882 27,705,129 24,499,952 25,371,307 Wastewater 3,438,670 3,326,362 3,065,762 3,161,114 Operating grants and contributions: - - - - Total business -type activities program revenues 32,836,552 31,031,491 27,565,714 28,532,421 Total primary government program revenues 97,598,188 130,449,080 98,644,027 122,852,297 Net revenues (expenses): Governmental activities (124,230,653) (108,064,132) (125,006,419) (128,769,322) Business -type activities 7,430,612 6,403,139 2,142,352 2,309,482 Total net revenues (expenses) $ (116,800,041) $ (101,660,993) $ (122,864,067) $ (126,459,840) General revenues and other changes in net position: Governmental activities: Taxes: Property tax $ 79,889,346 $ 84,121,461 $ 91,516,611 $ 96,964,060 Sales tax 23,142,065 24,832,412 33,937,986 33,702,895 Sales tax in -lieu 7,727,876 8,046,424 2,870,474 - Transient occupancy tax 18,176,369 20,369,158 21,083,199 22,382,361 Business license tax 4,156,130 4,141,282 4,024,386 4,149,016 Franchise tax 3,998,943 4,189,130 4,047,584 4,026,005 Othertaxes 216,604 354,919 327,009 358,209 Investment income 542,915 437,272 584,259 589,001 Net increase (decrease) in fair value of investments 53,783 61,337 376,311 - Other 3,803,728 3,161,567 4,001,486 2,290,482 Transfers - - - (3,500,000) Total governmental activities 141,707,759 149,714,962 162,769,305 160,962,029 Business -type activities: Investment income 128,439 123,445 216,576 77,752 Net increase (decrease) in fair value of investments 18,199 34,921 148,527 - Other - - 2,375,000 Capital contributions 22,516 - Transfers - - - 3,500,000 Total business -type activities 146,638 158,366 2,762,619 3,577,752 Total primary government 141,854,397 149,873,328 165,531,924 164,539,781 Changes in net position Governmental activities 17,477,106 41,650,830 37,762,886 32,192,707 Business -type activities 7,577,250 6,561,505 4,904,971 5,887,234 Total primary government $ 25,054,356 $ 48,212,335 $ 42,667,857 $ 38,079,941 1 Data varies from trend because of one-time receipt of developer contributions. 214 16-223 CITY OF NEWPORT BEACH Changes in Net Position Last Ten Fiscal Years (accrual basis of accounting) Fiscal Year 2018 2019 2020 2021 2022 2023 $ 19,011,099 $ 20,549,224 $ 20,714,050 $ 20,177,482 $ 19,374,179 $ 26,911,510 107,647,562 111,556,065 119,194,302 119,184,958 104,767,466 121,309,057 47,615,000 53,339,878 60,054,860 63,689,155 65,031,715 75,904,138 12,377,394 11,493,204 12,842,020 12,157,226 9,664,500 13,048,442 27,307,115 27,758,097 26,668,079 28,214,205 24,508,702 27,937,349 7,381,743 7,187,971 7,064,521 7,321,612 6,877,577 6,666,044 221,339,913 231,884,439 246,537,832 250,744,638 230,224,139 271,776,540 23,724,918 26,898,075 27,387,120 28,943,243 27,117,471 30,701,834 4,158,155 4,222,228 4,291,755 5,223,245 4,094,448 5,343,891 27,883,073 31,120,303 31,678,875 34,166,488 31,211,919 36,045,725 5,355,887 5,887,265 3,846,962 2,914,007 3,625,809 12,386,628 20,733,883 21,979,376 22,232,248 22,038,904 23,156,703 26,273,944 5,789,579 5,778,441 5,054,694 5,067,478 7,538,103 8,770,525 9,956,226 9,902,445 9,599,848 10,491,970 11,119,757 11,269,905 13,974,329 13,556,360 16,936,285 17,601,288 22,302,788 15,753,446 11,943,941 14,021,506 14,659,016 20,361,620 16,800,039 20,131,513 1,815,464 6,638,356 7,352,407 7,658,387 8,693,429 5,809,562 69,569,309 77,763,749 79,681,460 86,133,654 93,236,628 100,395,523 26,931,193 26,843,751 27,100,429 30,739,726 32,104,202 32,033,631 3,445,772 4,069,265 4,110,815 4,618,186 4,825,249 4,666,685 - - - - 116,629 - 30,376,965 30,913,016 31,211,244 35,357,912 37,046,080 36,700,316 99,946,274 108,676,765 110,892,704 121,491,566 130,282,708 137,095,839 (151,770,604) (154,120,690) (166,856,372) (164,610,984) (136,987,511) (171,381,017) 2,493,892 (207,287) (467,631) 1,191,424 5,834,161 654,591 $ (149,276,712) $ (154,327,977) $ (167,324,003) $ (163,419,560) $ (131,153,350) $ (170,726,426) $ 101,593,290 $ 108,365,261 $ 113,313,535 $ 119,157,057 $ 124,335,985 $ 138,358,730 36,373,253 37,168,063 36,232,969 38,956,275 46,164,860 46,552,459 22,857,737 24,697,446 21,097,384 16,886,197 26,677,331 30,201,649 4,282,935 4,428,440 4,882,419 4,481,349 4,363,145 4,901,385 4,228,469 4,286,496 4,394,156 4,204,224 4,561,278 4,996,526 3,346,987 2,633,720 2,592,369 4,166,549 4,333,071 181,800 632,808 2,644,319 2,621,488 2,603,982 1,995,214 3,208,250 - 2,234,249 2,520,033 (2,086,189) (6,856,640) (687,766) 3,416,348 3,495,085 2,116,884 3,354,808 2,644,194 5,552,372 176,731,827 189,953,079 189,771,237 191,724,252 208,218,438 233,265,405 184,906 713,970 732,099 525,295 345,218 520,736 - 612,358 625,864 (469,799) (1,190,093) (262,867) 24,961,223 35,832,389 22,914,865 27,113,268 71,230,927 61,884,388 215 16-224 CITY OF NEWPORT BEACH Fund Balances of Governmental Funds Last Ten Fiscal Years (modified accrual basis of accounting) Fiscal Year 2014 2015 2016 2017 General fund: Nonspendable $ 16,316,499 $ 15,784,396 $ 15,210,896 $ 14,434,017 Restricted 3,939,751 5,389,810 3,083,133 3,797,009 Committed 12,782,235 1 11,847,852 2,726,020 2 10,570,638 3 Assigned 1,326,170 1,421,225 4,201,311 567,132 Unassigned 51,015,820 ' 55,509,258 56,618,041 60,009,244 Total general fund $ 85,380,475 $ 89,952,541 $ 81,839,401 2 $ 89,378,040 3 All other governmental funds Nonspendable $ 4,629,781 $ 4,669,269 $ 4,629,781 $ 4,666,256 Restricted 33,243,790 29,842,384 33,662,859 31,950,139 Committed 19,513,389 26,159,261 40,248,977 49,510,047 Unassigned (14,291,969) (12,495,729) (15,422,984) (6,308,331) Total all other governmental funds $ 43,094,991 $ 48,175,185 $ 63,118,633 $ 79,818,111 Total all governmental funds $ 128,475,466 7138,127,726 $ 144,958,034 $ 169,196,151 Data varies from trend due to the reclassification of the contingency reserve from committed fund balance to unassigned fund balance per council approval. 2 Data varies from trend due to the moving of general fund capital projects to a separate capital project fund. 3 Data varies from trend due to additional funds set aside for seawall construction and pension -related items. 4 Data varies from trend due to the relocation of restricted funds to special revenue funds. 5 Data varies from trend due to the City's absence of fund balance not restricted or committed to be used for specific purposes in fiscal year ended June 30, 2022. 6 Data varies from trend due to additional funds set aside mainly in the Facilities Financial Planning Reserve Fund and Unrestricted Capital Improvements Fund. 216 16-225 CITY OF NEWPORT BEACH Fund Balances of Governmental Funds Last Ten Fiscal Years (modified accrual basis of accounting) Fiscal Year 2018 2019 2020 2021 2022 2023 $ 14,050,930 $ 13,147,221 $ 11,864,115 $ 10,637,097 $ 9,407,143 $ 8,239,567 4,412,302 4,757,437 5,710,434 4,876,025 - 4 - 13,444,487 13,335,675 2,210,811 3,235,746 4,429,573 5,465,426 590,368 1,199,682 2,598,828 1,489,350 - 5 - 61,415,049 64,146,123 76,699,284 85,715,180 83,302,665 77,737,532 $ 93,913,136 $ 96,586,138 $ 99,083,472 $ 105,953,398 $ 97,139,381 $ 91,442,525 $ 4,787,243 $ 4,715,545 $ 4,646,529 $ 4,707,330 $ 4,690,430 $ 4,650,931 38,629,419 45,958,167 53,310,518 63,914,627 73,013,208 73,657,409 41,731,742 40,732,124 48,032,259 47,863,154 73,243,534 6 78,218,834 (376,162) (253) (50,137) (136,299) (119,371) (11,625) $ 84,772,242 $ 91,405,583 $ 105,939,169 $ 116,348,812 $ 150,827,801 $ 156,515,549 $ 178,685,378 $ 187,991,721 $ 205,022,641 $ 222,302,210 $ 247,967,182 $ 247,958,074 $180,000,000 $160,000,000 $140,000,000 $120,000,000 $100,000,000 $80,000,000 $60,000,000 $40,000,000 $20,000,000 Fund Balances 2022 2023 217 16-226 CITY OF NEWPORT BEACH Changes in Fund Balances of Governmental Funds Last Ten Fiscal Years (modified accrual basis of accounting) Fiscal Year 2014 2015 2016 2017 Revenues: Taxes $ 137,910,879 $ 146,664,903 $ 158,386,385 $ 162,184,218 Intergovernmental 16,825,839 11,813,208 17,262,147 17,073,653 Licenses, permits and fees 6,659,203 14,676,754 6,571,123 9,844,908 Charges for services 16,864,092 16,914,210 18,827,991 19,197,065 Fines and forfeitures 3,272,951 3,732,405 3,684,602 3,590,700 Investment income 1,136,062 928,729 1,157,539 772,546 Net increase (decrease) in fair value of investments 124,439 177,485 769,460 - Property income 22,214,256 21,406,667 22,259,425 23,553,188 Donations 1,170,171 22,249,427 4,190,822 16,827,889 Special assessments - - - - Other 1,400,048 6,984,418 2,982,924 2,277,322 Total revenues 207,577,940 245,548,206 236,092,418 255,321,489 Expenditures: Current: General government 14,471,167 14,060,512 14,629,672 15,086,397 Public safety 82,642,988 94,568,122 96,225,784 98,750,981 Public works 32,414,457 33,694,578 36,000,905 35,961,024 Community development 9,768,928 9,876,706 10,913,205 11,696,779 Community services 19,047,813 20,235,546 21,784,680 23,607,284 Capital outlay 33,572,193 47,169,671 31,934,463 30,822,972 Debt service: Principal 4,091,000 4,183,000 4,272,000 4,401,000 Interest and fiscal charges 8,052,927 7,957,811 7,839,341 7,704,957 Total expenditures 204,061,473 231,745,946 223,600,050 228,031,394 Excess (deficiency) of revenues over (under) expenditures 3,516,467 13,802,260 12,492,368 27,290,095 Other financing sources (uses): Transfersin 41,223,727 53,281,956 48,523,132 45,342,446 Transfers out (47,245,283) (57,431,956) (54,185,192) (49,390,226) Proceeds from sale 995,802 Certificates of participation issued - - - - Premium on certificates of participation issued - - - - Proceeds from loan issuance 1,339,000 Payment to refunded loan escrow agent (1,339,000) Inception of subscription -based IT arrangements - - - - Totalotherfinancingsources(uses) (6,021,556) (4,150,000) (5,662,060) (3,051,978) Net change in fund balances $ (2,505,089) $ 9,652,260 $ 6,830,308 $ 24,238,117 Debt service as a percentage of noncapital expenditures 6.9% 6.6% 7.2% 6.0% 1 Data varies from trend due to implementation of GASB 96 for the fiscal year ended June 30, 2023. 218 16-227 CITY OF NEWPORT BEACH Changes in Fund Balances of Governmental Funds Last Ten Fiscal Years (modified accrual basis of accounting) Fiscal Year 2018 2019 2020 2021 2022 2023 $ 171,982,240 $ 183,455,182 $ 182,983,069 $ 188,351,057 $ 211,259,402 $ 226,067,296 16,148,754 15,818,543 12,672,931 22,233,872 19,683,307 21,080,285 6,405,668 6,302,603 5,783,862 6,566,555 6,995,700 6,719,969 19,828,786 19,472,866 21,125,622 18,434,439 22,897,475 25,214,184 3,181,823 3,347,714 3,509,883 3,923,726 4,191,518 3,892,875 1,143,210 3,490,992 3,765,753 3,201,376 2,756,712 4,525,340 - 2,938,136 3,477,299 (2,634,682) (8,900,762) (465,873) 25,430,217 26,674,107 25,651,360 28,842,374 33,770,750 35,830,362 414,123 402,709 795,561 5,491,871 1,805,249 717,157 - - - - 8,086,594 4,948,430 2,893,770 5,173,716 5,950,279 3,504,103 1,441,813 3,412,302 247,428,591 267,076,568 265,715,619 277,914,691 303,987,758 331,942,327 16,099,310 16,769,920 15,968,085 17,154,507 17,397,786 20,680,878 109,760,129 116,054,531 118,290,847 126,006,313 127,590,486 132,441,032 38,012,230 44,132,877 45,730,965 46,817,293 54,293,534 56,046,234 12,979,656 12,310,621 12,612,751 12,996,840 13,021,562 14,735,582 25,538,966 26,372,495 24,474,242 26,745,189 26,421,141 27,558,760 24,054,866 26,347,312 20,376,106 33,728,085 28,603,393 68,434,127 3,335,000 3,470,000 3,576,000 3,247,000 5,138,250 5,296,166 7,617,107 7,428,469 7,265,703 7,306,143 7,141,264 6,908,693 237,397,264 252,886,225 248,294,699 274,001,370 279,607,416 332,101,472 10,031,327 14,190,343 17,420,920 3,913,321 24,380,342 (159,145) 45,308,862 54,664,532 40,373,981 70,379,824 76,061,564 128,499,591 (45,850,962) (59,548,532) (40,763,981) (65,965,012) (74,776,934) (128,879,043) 7,860,000 1,373,936 529,489 ' 5.3% 4.8% 4.8% 4.2% 4.8% 4.5% 219 16-228 This page left blank intentionally. 220 16-229 REVENUE CAPACITY This section of the City of Newport Beach's Annual Comprehensive Financial Report (ACFR) 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 Annual Comprehensive Financial Reports and underlying accounting records for the relevant years. 221 16-230 CITY OF NEWPORT BEACH Assessed Value and Estimated Actual Value of Taxable Property Last Ten Fiscal Years Secured Fiscal Year Ended Total Taxable Total Direct June 30 Residential Commercial Other Unsecured Assessed Value Change Tax Rate 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% 2021 53,636,707,086 6,979,031,018 1,428,005,141 1,645,923,436 63,689,666,681 4.85% 1.000% 2022 56,171,689,696 7,152,717,180 1,745,857,017 1,509,466,705 66,579,730,598 4.54% 1.000% 2023 60,461,442,254 7,647,078,297 1,489,884,026 1,731,351,434 71,329,756,011 7.13% 1.000% NOTE In 1978, the voters of the State of California passed Proposition 13 which limited property taxes to a total maximum rate of 1% based upon the assessed value of the property being taxed. Each year, the assessed value of property 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. Source: HdL, Coren & Cone 222 16-231 CITY OF NEWPORT BEACH Direct and Overlapping Property Tax Rates (Rate per $100 of assessed value) Last Ten Fiscal Years Fiscal Year 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 City Direct Rates: City basic rate $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 Total City Direct Rate 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 Overlapping Rates: Water districts 0.081 0.047 0.047 0.047 0.047 0.047 0.032 0.047 0.047 0.047 School districts 0.170 0.182 0.183 0.173 0.176 0.161 0.173 0.186 0.170 0.175 Total Overlapping Rate 0.251 0.229 0.230 0.220 0.223 0.208 0.205 0.233 0.218 0.222 Total Direct & Overlapping Rate $ 1.251 $ 1.229 $ 1.230 $ 1.220 $ 1.223 $ 1.208 $ 1.205 $ 1.233 $ 1.218 $ 1.222 NOTE: 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. Source: HdL, Coren & Cone 223 16-232 CITY OF NEWPORT BEACH Principal Property Taxpayers Current Year and Nine Years Ago 2023 2014 Percent of Total Percent of Total Taxable Assessed City Taxable Taxable Assessed City Taxable Taxpayer Value Rank Assessed Value Value Rank Assessed Value The Irvine Company $ 809,325,938 1 1.22% $ 1,690,011,263 1 3.99% PH Finance LLC 331,194,718 2 0.50% N/A - 0.00% Fashion Island Retail LLC 295,013,622 3 0.44% N/A 0.00% Villas at Fashion Island LLC 281,699,380 4 0.42% N/A 0.00% Newport Center Residences LLC 196,027,123 5 0.29% N/A 0.00% HG Newport Owner LLC 189,243,673 6 0.28% N/A 0.00% 520 Newport Center Drive LLC 186,829,357 7 0.28% N/A 0.00% Newport Bluffs LLC 171,078,970 8 0.26% 144,534,708 2 0.34% 650 Newport Center Drive LLC 169,210,202 9 0.25% N/A - 0.00% Balboa Bay Club Ventures LLC 154,941,702 10 0.23% 106,618,895 6 0.25% $ 2,784,564,685 4.17% $ 1,941,164,866 4.58% Source: HdL, Coren & Cone 224 16-233 CITY OF NEWPORT BEACH Property Tax Levies and Collections Last Ten Fiscal Years Collected within the Fiscal Year of Levy Total Collections to Date Fiscal Year Collections in Ended Taxes Levied for Percent of Subsequent Percent of June 30 the Fiscal Year Amount' Levy Years 2 Amount Levy 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% 886,688 101,587,690 98.98% 2021 107,647,017 105,781,072 98.27% 862,772 106,643,844 99.07% 2022 113,318,692 110,354,271 97.38% 789,969 111,144,240 98.08% 2023 123,844,578 121,011,910 97.71% - 3 121,011,910 97.71% Net collections reflect deductions for refunds and impoundments. 2 Exclusive of penalty charges. 3 The total amount of Fiscal Year 2023 delinquent taxes collected in subsequent years was not available as of the date the information was collected for the City's Annual Comprehensive Financial Report. Source: Orange County Auditor Controller's Office 225 16-234 This page left blank intentionally. 226 16-235 DEBT CAPACITY This section of the City of Newport Beach's Annual Comprehensive Financial Report (ACFR) 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 Annual Comprehensive Financial Reports and underlying accounting records for the relevant years. 227 16-236 This page left blank intentionally. 228 16-237 CITY OF NEWPORT BEACH Ratios of Outstanding Debt by Type Last Ten Fiscal Years Governmental Activities Subscdption- Fiscal based Year Infonnation Total Ended Certificates of pre -Annexation Technology Governmental June 30 Participation t Agreement CDBG Loan Leases s Arrangements 3 Activities 2014 120,178,318 3,600,000 1,462,000 - - 125,240,318 2015 117,197,765 2,400,000 1,339,000 - - 120,936,765 2016 114,137,212 1,200,000 1,207,000 - - 116,544,212 2017 110,956,659 - 1,066,000 - - 112,022,659 2018 107,651,106 - 916,000 - - 108,567,106 2019 104,220,553 - 756,000 - - 104,976,553 2020 100,695,000 - 585,000 - - 101,280,000 2021 106,781,026 - 403,000 - - 107,184,026 2022 102,698,895 - 208,000 13,321,040 - 116,227,935 2023 98,616,764 - - 12,274,149 2,235,132 113,126,045 Business -type Activities Percentage of Total Business -type Total Primary Personal Debt Per Leases 3 Activities Government Income Capita z - - 125,240,318 1.81% 1,442 - - 120,936,765 1.77% 1,386 - - 116,544,212 1.77% 1,383 - - 112,022,659 1.66% 1,319 - - 108,567,106 1.48% 1,245 - - 104,976,553 1.36% 1,204 - - 101,280,000 1.24% 1,181 - - 107,184,026 1.31% 1,248 1,512,574 1,512,574 117,740,509 1.34% 1,406 3,820,774 3,820,774 116,946,819 1.27% 1,402 Note: This schedule excludes claims and judgments, employee compensated absence, pension, OPEB, and Early Retirement Incentive Plan liabilities. Details regarding the City's outstanding debt can be found in the notes to the financial statements. Amounts include any applicable bond premium. 2 These ratios are calculated using personal income and population for the prior calendar year. 3 The GASB 87 and GASB 96 debts on this schedule are not money borrowed by the City, but are present -value calculations of estimated future payments by the City based on assumptions specified in GASB 87 and GASB 96. The City of Newport Beach implemented GASB 87 for the fiscal year ended June 30, 2022. The City of Newport Beach implemented GASB 96 for the fiscal year ended June 30, 2023. 229 16-238 Fiscal Year Ended June 30 Certificates of Participation' 2014 120,178,318 2015 117,197,765 2016 114,137,212 2017 110,956,659 2018 107, 651,106 2019 104,220,553 2020 100,695,000 2021 106,781,026 2022 102,698,895 2023 98,616,764 CITY OF NEWPORT BEACH Ratios of General Bonded Debt Last Ten Fiscal Years Amounts Percent of General Restricted for Assessed Bonded Debt Debt Service Total Value Per Capita (2,352,746) 117,825,572 0.28% 1,356 (2,350,210) 114,847,555 0.26% 1,316 (2,362,904) 111,774,308 0.24% 1,326 (2,364,034) 108,592,625 0.22% 1,279 (2,384,338) 105,266,768 0.20% 1,207 (2,362,228) 101,858,325 0.18% 1,168 (1,159,389) 99,535,611 0.16% 1,160 (2,255,795) 104,525,231 0.16% 1,217 (2,199,363) 100,499,532 0.15% 1,200 (2,183,979) 96,432,785 0.14% 1,156 ' Amounts include any applicable bond premium. 2 Assessed value was used because the actual value of taxable property is not readily available in the State of California. 230 16-239 CITY OF NEWPORT BEACH Direct and Overlapping Debt June 30, 2023 City Net Assessed Valuation: OVERLAPPING DEBT: Metropolitan Water District Coast Community College District Rancho Santiago Community College District Rancho Santiago Community College District School Facilities Improvement District No. 1 Laguna Beach Unified School District Laguna Beach Unified School District Community Facilities District No. 98-1 Newport Mesa Unified School District Santa Ana Unified School District Irvine Ranch Water District Improvement Districts Bonita Canyon Public Facilities Financing Authority Community Facilities District No. 98-1 California Statewide Community Development Authority Community Facilities District No. 2018-3 City of Newport Beach 1915 Act Bonds Orange County Newport Coast Assessment District No. 01-1 Orange County Newport Coast Reassessment District No. 17-1 R Orange County General Fund Obligations Orange County Board of Education General Fund Obligations Coast Community College District General Fund Obligations Coast Community College District Pension Obligation Bonds Santa Ana Unified School District General Fund Obligations Overlapping Tax Increment Debt (Successor Agency): TOTAL OVERLAPPING DEBT DIRECT DEBT: City of Newport Beach Certificates of Participation Community Development Block Grant Loan Leases (3) Subscription -based Information Technology Arrangements (3) TOTAL DIRECT DEBT TOTAL DIRECT AND OVERLAPPING DEBT GROSS COMBINED TOTAL DEBT (z) Percentage Applicable (') $ 71,66,329,7 011 Outstanding Debt 6/30/23 Estimated Share of Overlapping Debt 1.961 % $ 19,215,000 $ 376,806 34.941% 920,781,084 321,730,119 2.693% 176,539,286 4,754,203 5.082% 149,820,000 7,613,852 14.964% 12,050,000 1,803,162 100.000% 6,785,000 6,785,000 73.345% 224,754,326 164,846,060 6.247% 418,970,373 26,173,079 2.757% 412,017,630 46,028,267 100.000% 100.000% 16,055,000 16,055,000 100.000% 8,230,000 8,230,000 100.000% 12,005,546 12,005,546 100.000% 3,410,000 3,410,000 100.000% 20,750,000 20,750,000 9.841% 451,165,000 44,399,148 9.841% 10,860,000 1,068,733 34.941% 1,480,000 517,127 34.941% 1,380,000 482,186 6.247% 46,436,043 2,900,860 70.918% 1,320,000 936,118 $ 2,914,024,288 $ 690,865,266 100.000% $ 102,698,895 $ 102,698,895 100.000% 208,000 208,000 100.000% 16,094,923 16,094,923 100.000% 2,235,132 2,235,132 $ 121,236,950 $ 121,236,950 $ 812,102,216 812,102,216 (1) 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 districts assessed value that is within the boundaries of the city divided by the districts total taxable assessed value. (2) Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue and tax allocation bonds and non -bonded capital lease obligations. (3) The GASB 87 and GASB 96 debts on this schedule are not money borrowed by the City, but are present -value calculations of estimated future payments by the City based on assumptions specified in GASB 87 and GASB 96. The City of Newport Beach implemented GASB 87 for the fiscal year ended June 30, 2022. The City of Newport Beach implemented GASB 96 for the fiscal year ended June 30, 2023. Ratios to 2022-23 Net Assessed Valuation: Total Overlapping Debt 0.97% Total Direct Debt ($121,236,950) 0.17% Gross Combined Total Debt 1.14% Ratios to Redevelopment Incremental Valuation ($1,549,279,228): Total Overlapping Tax Increment Debt 0.06% Source: California Municipal Statistics, Inc. 231 16-240 CITY OF NEWPORT BEACH Legal Debt Margin Information Last Ten Fiscal Years Fiscal Year 2014 2015 2016 2017 Assessed valuation $ 42,341,162,463 $ 44,752,056,903 $ 47,388,470,098 $ 50,341,686,565 Conversion percentage 25% 25% 25% 25% Adjusted assessed valuation 10,585,290,616 11,188,014,226 11,847,117,525 12,585,421,641 Debt limit percentage 15% 15% 15% 15% Debt limit 1,587,793,592 1,678,202,134 1,777,067,629 1,887,813,246 Total net debt applicable to limit: General obligation bonds Legal debt margin $ 1,587,793,592 $ 1,678,202,134 $ 1,777,067,629 $ 1,887,813,246 Total debt applicable to the limit as a percentage of debt limit 0.0% 0.0% 0.0% 0.0% NOTE: The State of California Government Code Section 43605 provides for a legal debt limit of 15% of gross assessed valuation. However, this provision was enacted when assessed valuation was based upon 25% of market value. Effective with the 1981-82 fiscal year, each parcel is now assessed at 100% of market value (as of the most recent change in ownership for that parcel). The computations shown above reflect a conversion of assessed valuation data for each fiscal year from the current full valuation perspective to the 25% level that was in effect at the time that the legal debt margin was enacted by the State of California for local governments located within the state. Source: City Finance Department 232 16-241 CITY OF NEWPORT BEACH Legal Debt Margin Information Last Ten Fiscal Years Fiscal Year 2018 2019 2020 2021 2022 2023 25% 25% 25% 25% 25% 25% 13,445,054, 005 14,425,290,445 15,186,201,639 15,922,416,670 16, 644, 932, 650 17,832,439,003 15% 15% 15% 15% 15% 15% 2,016,758,101 2,163,793,567 2,277,930,246 2,388,362,501 2,496,739,897 2,674,865,850 $ 2,016,758,101 $ 2,163,793,567 $ 2,277,930,246 $ 2,388,362,501 $ 2,496,739,897 $ 2,674,865,850 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 233 16-242 This page left blank intentionally. 234 16-243 DEMOGRAPHIC AND ECONOMIC INFORMATION This section of the City of Newport Beach's Annual Comprehensive Financial Report (ACFR) 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 Annual Comprehensive Financial Reports and underlying accounting records for the relevant years. 235 16-244 CITY OF NEWPORT BEACH Demographic and Economic Statistics Last Ten Fiscal Years Personal Income Per Capita Unemployment Fiscal Year Population (in thousands) Income (2) Rate2(3) 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% 2021 85,865 8,175,464 95,213 (4) 6.0% 2022 83,727 8,791,502 105,002 3.0% 2023 83,411 9,219,835 110,535 3.0% 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 Annual Comprehensive Financial Report. 2 Unemployment rate represents an average of all monthly unemployment rates within a fiscal year. Sources: (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 - 2021. (2) U.S. Census Bureau - American Community Survey 1-Year Estimates (3) State of California, Employment Development Department (4) HdL, Coren & Cone 236 16-245 CITY OF NEWPORT BEACH Principal Employers' Current Year and 9 years ago 2023 2014 Number of Percent of Total Number of Percent of Total Employer Employees Rank Employment Employees Rank Employment Hoag Memorial Hospital 5,437 1 6.72% 5,001 1 5.97% Pacific Life Insurance 1,672 2 2.07% 1,074 4 1.32% PIMCO 1,275 3 1.58% 1,179 2 1.41% Irvine Management Company 1,015 4 1.25% N/A 2 - N/A Glidewell Dental 881 5 1.09% 1,086 3 1.30% City of Newport Beach 741 6 0.92% 736 7 0.90% Balboa Bay Club and Resort 729 7 0.90% 480 9 0.59% Tower Semiconductor 722 8 0.89% 671 8 0.82% Newport -Mesa Unified School District 720 9 0.89% 845 6 1.04% Resort at Pelican Hill 618 10 0.76% 900 5 1.10% Marriott Newport Coast Villas 435 11 0.54% N/A 2 - N/A CBRE Inc. 420 12 0.52% N/A 2 - N/A ' Figures reflect number of employees of employer at the time the information was collected. 2 Company listed was unable to provide employee data for 2014. Source: Data obtained from companies listed and compiled by City Finance Department. 237 16-246 This page left blank intentionally. 238 16-247 OPERATING INFORMATION This section of the City of Newport Beach's Annual Comprehensive Financial Report (ACFR) 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 Annual Comprehensive Financial Reports and underlying accounting records for the relevant years. 239 16-248 This page left blank intentionally. 240 16-249 CITY OF NEWPORT BEACH Full-time City Employees by Function Last Ten Fiscal Years Fiscal Year Function 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 General government 79 78 77 77 79 80 78 80 81 85 Public safety 366 370 374 371 372 375 375 376 376 377 Community development 53 52 52 52 53 53 53 52 53 56 Public works 119 109 104 99 98 96 99 98 98 102 Community services 74 75 79 81 79 78 78 78 78 79 Water 32 31 32 31 33 33 33 33 33 32 Wastewater 13 13 12 13 11 11 11 11 11 11 Total 736 728 730 724 725 726 727 728 730 741 Source: City Finance Department 241 16-250 CITY OF NEWPORT BEACH Operating Indicators by Function Last Ten Fiscal Years Police: Adult Arrests Parking Citations Issued Fire: Fire Responses Fire Inspections General Services: Street Patching (tons of mix) Sidewalk Repair (square feet) Recreation & Senior Services: Co -Sponsored Youth Organization Attendance Senior Transportation Services Water: New Connections Average Daily Consumption (hundred cubic feet) Sewer: New Connections Miles of Pipe Cleaned Library Services: Library Circulation of Materials Fiscal Year 2014 2015 2016 2017 2,794 3,472 3,158 3,178 51,609 59,753 64,762 69,246 356 305 300 247 3,352 1,281 1,201 1,216 2,408 2,711 1,890 1,439 37,607 27,175 27,000 20,490 294,000 303,152 305,000 425,000 13,956 13,740 14,000 13,500 72 187 194 229 15.96 16.39 11.66 13.80 22 20 17 41 245 260 250 202 1,689,870 1,610,818 1,575,000 1,464,640 1 Data varies with trend due to inclusion of responses to fires, hazardous materials, medical and other e 2 Data varies with trend due to COVID-19 restrictions in 2021. 3 Data varies with trend due to COVID-19 restrictions being lifted in 2022. Source: City of Newport Beach 242 16-251 CITY OF NEWPORT BEACH Operating Indicators by Function Last Ten Fiscal Years Fiscal Year 2018 2019 2020 2021 2022 2023 3,266 3,520 3,093 2,872 2,650 2,800 56,685 67,048 73,372 86,439 83,307 85,003 248 209 11,913 12,204 13,251 13,486 1,307 1,033 2,842 475 2 3,015 s 2,807 1,403 1,402 913 920 901 903 22,925 14,840 11,729 7,805 13,590 12,885 437,751 469,959 439,954 455,442 392,605 454,418 13,071 13,386 9,300 6,287 8,805 10,048 210 210 256 160 252 184 14.07 13.75 13.44 14.87 14.28 11.06 137 46 10 25 3 12 211 196 221 240 209 178 1,424,594 1,376,041 1,084,206 1,043,629 1,195,151 1,172,951 243 16-252 CITY OF NEWPORT BEACH Capital Asset Statistics by Function Last Ten Fiscal Years Fiscal Year 2014 2015 2016 2017 Police: Stations 1 1 1 1 Fire: Fire Stations 8 8 8 8 Lifeguard Headquarters 1 1 1 1 Public works: Streets (miles) 395 395 399 400 Streetlights 5,977 5,977 5,978 5,978 Traffic Signals 808 808 808 808 Recreation & Senior Services: Parks 64 64 64 64 Community Centers (includes leased property) 14 14 15 15 Aquatic Center 1 1 1 1 Water: Water Mains (miles) 298.37 299.58 299.77 300.64 Maximum Daily Capacity (thousands of gallons) 27,704 27,800 27,800 27,800 Wastewater: Sanitary Sewers (miles) 202.62 202.64 202.75 202.72 Storm Sewers (miles) 70.62 94.14 92.08 94.74 Library Services: Libraries 4 4 4 4 Source: City of Newport Beach 244 16-253 CITY OF NEWPORT BEACH Capital Asset Statistics by Function Last Ten Fiscal Years Fiscal Year 2018 2019 2020 2021 2022 2023 1 1 1 1 1 1 8 8 8 8 8 8 1 1 1 1 1 1 400 400 400 400 400 401 5,978 5,971 5,972 5,973 5,974 5,974 808 808 808 808 808 808 64 65 65 65 66 66 15 15 15 15 14 14 1 1 1 1 1 1 300.30 300.88 300.82 301.23 301.13 301.48 27,800 27,800 27,800 27,800 27,800 27,800 203.56 203.99 204.10 204.13 204.30 204.72 95.12 95.35 95.89 96.18 97.37 97.81 4 4 4 4 4 4 245 16-254 CITY OF NEWPORT BEACH Water Sold by Type of Customer Last Ten Fiscal Years (in hundred cubic feet) Fiscal Year 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Type of Customer: Residential 3,902,007 3,853,566 3,072,589 3,564,203 3,603,927 3,439,655 3,747,408 3,811,231 3,714,134 3,242,477 Commercial 2,525,169 2,560,620 1,847,372 2,142,952 2,201,254 2,075,812 2,081,860 2,231,809 2,078,199 1,728,975 Government 455,251 396,605 263,116 305,214 289,738 256,398 270,638 299,442 314,128 256,850 Total 6,882,427 6, 110,791 5, 883,077 6, 112,369 6, 994,919 5, 771,865 6, 999,906 6, 442,482 6, 006,461 5, 228,302 Total direct rate per 100 cubic ft. $ 3.08 $ 3.08 $ 3.08 $ 3.08 $ 3.08 $ 3.08 $ 3.11 ' $ 3.35 2 $ 3.60 3 $ 3.87 4 Reflects increase in commodity rate effective January 1, 2020 2 Reflects increase in commodity rate effective January 1, 2021 3 Reflects increase in commodity rate effective January 1, 2022 4 Reflects increase in commodity rate effective January 1, 2023 Source: City Utilities Department 246 16-255 CITY OF NEWPORT BEACH Utility Rates' Last Ten Fiscal Years Fiscal Year Ended June Monthly Rate per 30 Base Rate 100 cubic ft 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 2021 30.25 3.85 2022 32.03 4.14 2023 33.77 4.41 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. Source: City Revenue Division 247 16-256 Water Customer CITY OF NEWPORT BEACH Major Water Customers Current Year and Nine Years Ago 2023 2014 Percent of Total Percent of Total Water Charges Rank Water Revenues Water Charges Rank Water Revenues Irvine Company Apartment $ 1,658,396 1 5.15% 174,110 1 0.59% Irvine Company Office 1,467,007 2 4.55% 162,074 2 0.55% Irvine Company Retail 969,032 3 3.01% 61,656 10 0.21% Hoag Memorial Hospital 825,308 4 2.56% 116,000 4 0.39% Big Canyon Country Club 762,625 5 2.37% 189,865 8 0.65% Newport Beach Country Club 608,127 6 1.89% 143,220 3 0.49% Bluffs Homeowners Association 601,795 7 1.87% 97,532 5 0.33% Pacific View - Pierce Bros. 576,369 8 1.79% 60,863 13 0.21 % Newport -Mesa Unified School District 546,769 9 1.70% 96,685 6 0.33% UDR Newport Beach 542,831 10 1.68% 84,187 9 0.29% Park Newport Ltd 418,429 11 1.30% 91,178 7 0.31 % Villa Balboa Community Association 361,111 12 1.12% 38,440 14 0.13% Lido Peninsula Resort 326,136 13 1.01% 18,628 30 0.06% Newport Dunes Resort 265,230 14 0.82% 43,708 16 0.15% Jasmine Creek Community Association 262,668 15 0.82% 48,169 11 0.16% $ 10,191,833 31.63% $ 1,426,315 4.85% Source: City Revenue Division 248 16-257 16-258 `, H rrl IV \LtFORN City of Newport Beach 100 Civic Center Drive Newport Beach, CA 92660 (949) 644-3123 www.newportbeachca.gov/acfr 16-259 Attachment B Auditor's Required Communications with the Audit Committee 16-260 *I DavisFarr CERTIFIED PUBLIC ACCOUNTANTS Davis Farr LLP 18201 Von Karman Avenue I Suite 1100 1 Irvine, CA 92612 Main: 949.474.2020 1 Fax: 949.263.5520 REQUIRED AUDIT COMMUNICATIONS The Honorable Mayor and Members of the City Council City of Newport Beach Newport Beach, California We have audited the financial statements of the City of Newport Beach (City) as of and for the year ended June 30, 2023, and have issued our report thereon dated December 27, 2023. Professional standards require that we advise you of the following matters during our audit. Our Responsibility in Relation to the Financial Statement Audit As communicated in our engagement letter dated June 27, 2023, our responsibility, as described by professional standards, is to form and express an opinion(s) about whether the financial statements that have been prepared by management with your oversight are presented fairly, in all material respects, in accordance with accounting principles generally accepted in the United States of America. Our audit of the financial statements does not relieve you or management of your respective responsibilities. Our responsibility, as prescribed by professional standards, is to plan and perform our audit to obtain reasonable, rather than absolute, assurance about whether the financial statements are free of material misstatement. An audit of financial statements includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control over financial reporting. Accordingly, as part of our audit, we considered the internal control of the City solely for the purpose of determining our audit procedures and not to provide any assurance concerning such internal control. We are also responsible for communicating significant matters related to the audit that are, in our professional judgment, relevant to your responsibilities in overseeing the financial reporting process. However, we are not required to design procedures for the purpose of identifying other matters to communicate to you. Planned Scope and Timing of the Audit We conducted our audit consistent with the planned scope and timing we previously communicated to you. Compliance with All Ethics Requirements Regarding Independence The engagement team, others in our firm, as appropriate, our firm, and our network firms have complied with all relevant ethical requirements regarding independence. We identified self -review threats to independence as a result of non -attest services provided. Those non -attest services included assisting in preparation of the financial statements, recording journal entries detected during the audit process, assisting in updating 16-261 The Honorable Mayor and Members of the City Council City of Newport Beach Newport Beach, California infrastructure records and assisting in preparation of the State Controller's Report. To mitigate the risk, management has reviewed the financial statements and compared amounts to the accounting records, reviewed proposed journal entries to supporting documentation and posted the journal entries to the accounting records. Additionally, management has reviewed the updates to infrastructure records and compared amounts to underlying supporting documentation. Furthermore, management has reviewed the State Controller's Report and agreed the amounts to its accounting records. Significant Risks Identified We have identified the following significant risks: • Implementation of the Governmental Accounting Standards Board (GASB) Statement No. 96, Subscription -Based Information Technology Arrangements. We reviewed City's inventory of subscriptions, reviewed a sample of subscription agreements, tested the calculations of the subscription transactions, and ensured the City's subscription disclosure footnotes are accurate and complete in accordance with the new standard. Capital asset additions related to construction in progress. We reviewed the City's detailed additions to construction in progress and selected a sample of additions for propriety and proper classification. Compliance with federal grant requirements. We reviewed the City's schedule of federal expenses and selected major programs to test for compliance with federal grant requirements. This work is ongoing as the Single Audit Report will be issued at a later date. Qualitative Aspects of the City's Significant Accounting Practices Significant Accounting Policies Management has the responsibility to select and use appropriate accounting policies. A summary of the significant accounting policies adopted by the City is included in Note 1 to the financial statements. As described in Notes 1 and 7 to the financial statements, the City changed accounting policies related to leases by adopting GASB Statement No. 96, Subscription -Based Information Technology Arrangements. No matters have come to our attention that would require us, under professional standards, to inform you about (1) the methods used to account for significant unusual transactions and (2) the effect of significant accounting policies in controversial or emerging areas for which there is a lack of authoritative guidance or consensus. Significant Accounting Estimates Accounting estimates are an integral part of the financial statements prepared by management and are based on management's current judgments. Those judgments are normally based on knowledge and experience about past and current events and assumptions about future events. Certain accounting estimates are particularly sensitive because of their significance to the financial statements and because of the possibility that future events affecting them may differ markedly from management's current judgments. The most sensitive accounting estimates affecting the financial statements are: 2 16-262 The Honorable Mayor and Members of the City Council City of Newport Beach Newport Beach, California • Management's estimate involving the calculation of the pension liability. • Management's estimate involving the calculation of the other post -employment benefit (OPEB) liability. • Management's estimates of the claims payable liabilities related to general liability and workers' compensation claims. Management's estimate of the pension liability, OPEB liability and claims payable liabilities are based on actuarial valuation reports. We evaluated the key factors and assumptions used to develop the pension liability, OPEB liability and claims payable liabilities and determined they are reasonable in relation to the basic financial statements taken as a whole and in relation to the applicable opinion units. Financial Statement Disclosures Certain financial statement disclosures involve significant judgment and are particularly sensitive because of their significance to financial statement users. The most sensitive disclosures affecting the City's financial statements relate to pensions in Note 11 and other post -employment benefits in Note 12. The financial statement disclosures are neutral, consistent, and clear. Significant Unusual Transactions For purposes of this communication, professional standards require us to communicate to you significant unusual transactions identified during our audit. There were no significant unusual transactions identified as a result of our audit procedures. Significant Difficulties Encountered During the Audit We encountered no significant difficulties in dealing with management relating to the performance of the audit. Uncorrected and Corrected Misstatements For purposes of this communication, professional standards also require us to accumulate all known and likely misstatements identified during the audit, other than those that we believe are trivial, and communicate them to the appropriate level of management. Further, professional standards require us to also communicate the effect of uncorrected misstatements related to prior periods on the relevant classes of transactions, account balances or disclosures, and the financial statements as a whole and each applicable opinion unit. We did not identify any uncorrected financial statement misstatements. In addition, professional standards require us to communicate to you all material, corrected misstatements that were brought to the attention of management as a result of our audit procedures. We did not identify any misstatements as a result of our audit procedures. Disagreements with Management For purposes of this letter, professional standards define a disagreement with management as a matter, whether or not resolved to our satisfaction, concerning a financial accounting, reporting, or auditing matter, which could be significant to the City's financial statements or the auditor's report. No such disagreements arose during the course of the audit. 3 16-263 The Honorable Mayor and Members of the City Council City of Newport Beach Newport Beach, California Representations Requested from Management We have requested and received certain written representations from management in a letter dated December 27, 2023. Management Consultations with Other Accountants In some cases, management may decide to consult with other accountants about auditing and accounting matters. Management informed us that, and to our knowledge, there were no consultations with other accountants regarding auditing and accounting matters. Other Significant Matters Findings, or Issues In the normal course of our professional association with the City, we generally discuss a variety of matters, including the application of accounting principles and auditing standards, significant events or transactions that occurred during the year, operating and regulatory conditions affecting the entity, and operational plans and strategies that may affect the risks of material misstatement. None of the matters discussed resulted in a condition to our retention as the City's auditors. Other Information Included in the Annual Comprehensive Financial Report Pursuant to professional standards, our responsibility as auditors for other information, whether financial or nonfinancial, included in the City's annual report, does not extend beyond the information identified in the audit report, and we are not required to perform any procedures to corroborate such other information. However, in accordance with such standards, we have read the information and considered whether such information, or the manner of its presentation, was materially inconsistent with its presentation in the financial statements. Our responsibility also includes communicating to you any information which we believe is a material misstatement of fact. Nothing came to our attention that caused us to believe that such information, or its manner of presentation, is materially inconsistent with the information, or manner of its presentation, appearing in the financial statements. This report is intended solely for the information and use of City Council and management of the City and is not intended to be, and should not be, used by anyone other than these specified parties. Irvine, California December 27, 2023 4 16-264 Attachment C Auditor's Report on Internal Control Over Financial Reporting and on Compliance and Other Matters 16-265 *I DavisFarr CERTIFIED PUBLIC ACCOUNTANTS Davis Farr LLP 18201 Von Karman Avenue I Suite 1100 1 Irvine, CA 92612 Main: 949.474.2020 1 Fax: 949.263.5520 Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards The Honorable Mayor and Members of the 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 (Government Auditing Standards), 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 ("City"), as of and for the year ended June 30, 2023, and the related notes to the financial statements, which collectively comprise the City's basic financial statements, and have issued our report thereon dated December 27, 2023. Report on Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered the City's internal control over financial reporting (internal control) as a basis for designing audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the City's internal control. Accordingly, we do not express an opinion on the effectiveness of the City's internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses or significant deficiencies may exist that were not identified. 16-266 The Honorable Mayor and Members of the City Council City of Newport Beach Newport Beach, California Report on Compliance and Other Matters As part of obtaining reasonable assurance about whether the City's financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity's internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity's internal control and compliance. Accordingly, this communication is not suitable for any other purpose. Irvine, California December 27, 2023 2 16-267