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Comprehensive Annual Financial Report
YEAR ENDED JUNE 30, 2005
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Comprehensive Annual Financial Report
For the Year Ended June 30, 2005
Prepared by the Administrative Services Department
Dennis Danner, Director
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THE CITY OF NEWPORT BEACH WAS INCORPORATED SEPTEMBER 19 1906
THE PRESENT CITY SEAL WAS ADOPTED JUNE 22, 1957
Introductory Section
CITY OF NEWPORT BEACH
Comprehensive Annual Financial Report
Year Ended June 30, 2005
TABLE OF CONTENTS
INTRODUCTORY SECTION
(Unaudited)
Tableof Contents ............................................................ ...............................
Letter of Transmittal ........................................................ ...............................
GFOA Certificate of Achievement for Excellence in Financial Reporting ......
CSMFO Certificate of Award for Outstanding Financial Reporting ................
List of City Officials ......................................................... ...............................
OrganizationChart .......................................................... ...............................
FINANCIAL SECTION
Independent Auditors' Report ............................................................... .............................23
Management's Discussion and Analysis ............................................. .............................25
(Required Supplementary Information)
Basic Financial Statements
Government -wide Financial Statements:
Statement of Net Assets .................................................................... .............................41
Statement of Activities ........................................................................ .............................42
Fund Financial Statements:
Governmental Funds:
BalanceSheet ................................................................................. .............................48
Reconciliation of the Balance Sheet of Governmental Funds to the
Statement of Net Assets ............................................................ .............................49
Statement of Revenues, Expenditures and Changes in Fund Balances ......................
50
Reconciliation of Statement of Revenues, Expenditures and Changes
In Fund Balances of Governmental Funds to the Statement of Activities ..............51
Budgetary Comparison Statements:
GeneralFund ............................................................................ .............................52
Tide and Submerged Land Fund ............................................... .............................54
Newport Coast Annexation ........................................................ .............................55
Proprietary Funds:
Statement of Net Assets ............................................................. ............................... 59
Statement of Revenues, Expenses and Changes in Fund Net Assets .....................60
Statementof Cash Flows ............................................................. .............................61
Fiduciary Funds:
Statement of Fiduciary Assets and Liabilities — Agency Funds ....... .............................65
Notes to the Financial Statements ..................................................... .............................67
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Supplementary Schedules
Non -Major Governmental Funds:
Combining Balance Sheet .................................. ............................... ............................118
Combining Statement of Revenues, Expenditures and Changes in
FundBalances ................................................... ............................... ............................124
Budgetary Comparison Schedules:
StateGas Tax Fund ........................................... ............................... ............................129
AssetForfeiture Fund ........................................ ............................... ............................130
ContributionsFund ............................................. ............................... ............................131
Circulation and Transportation Fund .................. ............................... ............................132
Building Excise Tax Fund ................................... ............................... ............................133
Combined Transportation Fund ......................... ............................... ............................134
Arterial Highway Rehabilitation Fund ................. ............................... ............................135
Community Development Block Grant Fund ...... ............................... ............................136
Air Quality Management District Fund ............... ............................... ............................137
Environmental Liability Fund ................................ ............................... ..........................138
Supplemental Law Enforcement Fund ............... ............................... ............................139
Miscellaneous Grants Fund ............................... ............................... ............................140
Internal Service Funds:
Combining Statement of Net Assets .................. ............................... ............................143
Combining Statement of Revenues, Expenses and Changes in Fund Net Assets.......
144
Combining Statement of Cash Flows ................. ............................... ............................145
Fiduciary Funds:
Combining Statement of Fiduciary Assets and Liabilities ................. ............................149
Statement of Changes in Fiduciary Net Assets .. ............................... ............................150
STATISTICAL SECTION (Unaudited)
Miscellaneous Statistics .............................................. ............................... ............................151
Governmental Revenues by Source, Last Ten Fiscal Years ..................... ............................152
Governmental Expenditures by Function, Last Ten Fiscal Years .............. ............................152
Assessed and Estimated Actual Values of Taxable Property, Last Ten Fiscal Years ...........154
Secured Property Tax Levies and Collections, Last Ten Fiscal Years ...... ............................154
Construction Activity, Last Ten Fiscal Years ............... ............................... ............................156
Bank Deposits, Last Ten Fiscal Years ........................ ............................... ............................156
Property Tax Rates, Direct and Overlapping Governments, Last Ten Fiscal Years ..............158
Computation of Legal Debt Margin ............................. ............................... ............................158
Principal Property Taxpayers as of June 30, 2005 ..... ............................... ............................159
Schedule of Direct and Overlapping Bonded Debt ..... ............................... ............................160
Revenue Bond Coverage, Last Ten Fiscal Years ....... ............................... ............................161
Demographic Statistics, Last Ten Fiscal Years .......... ............................... ............................162
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CITY OF NEWPORT BEACH
ADMINISTRATIVE SERVICES
Dennis Danner, Director /Treasurer
December 13, 2005
Honorable Mayor and Members of the
City Council,
and Citizens of the City of Newport Beach
Newport Beach, California
The City Charter and California state law require that the City of Newport Beach issue
annually a complete set of financial statements and that an independent firm of certified
public accountants audit this report in conformance with generally accepted auditing
standards (GARS). The Comprehensive Annual Financial Report (CAFR) of the City of
Newport Beach for the year ended June 30, 2005, is hereby submitted.
The CAFR was prepared in conformance with generally accepted accounting principles
(GAAP) as promulgated by the Governmental Accounting Standards Board (GASB).
This report consists of City management's representations concerning the finances of
the City of Newport Beach. Responsibility for the accuracy and completeness of the
data presented rests with the City. Management of the City is also responsible for
establishing and maintaining an internal control structure designed to ensure that the
assets of the government are protected from loss, theft, or misuse, and to ensure that
adequate accounting data is compiled to allow for the preparation of financial
statements in conformity with generally accepted accounting principles. The internal
control structure is designed to provide reasonable, but not absolute, assurance that
these objectives are met. The concept of reasonable assurance recognizes that: (1) the
cost of a control should not exceed the benefits likely to be derived; and (2) the
valuation of costs and benefits requires estimates and judgments by management. We
believe the information presented in this report is complete and accurate in all material
respects, and that it is reported in a manner designed to fairly present the financial
position and results of operations of the various activities of the City of Newport Beach.
Further, the City of Newport Beach's financial statements have been audited by Conrad
and Associates, 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 ended June 30, 2005, 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
unqualified opinion that the City of Newport Beach's financial statements for the year
ended June 30, 2005, 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.
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3300 Newport Boulevard • Post Office Box 1768 • Newport Beach, California 92658 -8915
Telephone: (949) 644 -3127 • Fax: (949) 644 -3339 •Website: www.city.newport- beach.ca.us
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
The City of Newport Beach is 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 offering one of the
finest climates in the United States. Orange County is now the second largest county in
California trailing only Los Angeles and surpassing San Diego and is the sixth largest
county in the nation. In fact, according to the 2000 Census, Orange County now has a
greater number of residents than twenty of the Country's states including Montana,
Mississippi, and New Hampshire.
The City of Newport Beach is one of Southern California's most scenic and dynamic
communities. It surrounds Newport Bay, well known for its picturesque islands and one
of the greatest natural yacht harbors in the world, accommodating over 9,000 boats of
all types docked within its 21 square mile harbor area. This bay area and the ten miles
of ocean beach offer outstanding fishing, swimming, surfing, and aquatic sports
activities. The City has a permanent population of 83,120. During the summer months,
the population grows to over 100,000 with 20,000 to 100,000 tourists daily. There are
fine residential areas, modern shopping facilities, and a quality school system. A major
campus of the University of California is located immediately adjacent to the City, and
eight other colleges are within a 30 -mile radius.
The City of Newport Beach was incorporated September 1, 1906. The current City
Charter was adopted in 1954. The City operates under a Council- Manager form of
government. Council members are elected by district but voted on by the population as
a whole, and serve four -year staggered terms. The governing council consists of the
mayor and six other members and is responsible for among other things, policy- making,
passing local ordinances, adopting the budget, appointing committees and hiring the
City Manager, City Attorney, and City Clerk. The City Manager is responsible for
carrying out the policies and ordinances of the City Council, for overseeing the day to
day operations of the City, and for appointing heads of departments. The City of
Newport Beach is a full service city providing its residents and visitors with the following
functional services: general governance, legal, financial, information technology, and
administrative management; police, fire, paramedic, lifeguard, and emergency medical
transport services; engineering, construction, and maintenance of public facilities, public
streets, beaches, and parks; planning, zoning, and economic development services;
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building inspection, plan check, and code enforcement services; libraries and cultural
and arts services; recreation and senior services; water, wastewater, rubbish disposal,
and street light utility services. The City provides water and sewer service to most areas
within City limits, but it does not provide gas, electrical, or other utility service. Public
elementary and secondary education is provided by school districts, which are separate
government entities.
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 have
continuing accountability 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 footnote 1a of the notes to the financial statements.
LOCAL ECONOMIC FACTORS
From 1950 -2005, the population of the City increased from 12,120 to 83,120. As vacant
land becomes increasingly scarce, population growth is expected to flatten considerably
as the City becomes relatively built -out. According to the Center for Demographic
Research at California State University Fullerton, the City of Newport Beach will be
home to an estimated 89,528 residents by 2010 and 91,409 residents by the year 2015.
Newport Beach's physical setting encompasses about 25.2 square miles of land, of
which approximately 75% is developed and 25% is undeveloped including the City's
coastal beaches used for recreation and open space. The developed land is 70%
residential and 30% non - residential.
This current land use mix produces General Fund revenues of approximately $123
million. The top three revenue categories include Property Taxes, Sales Taxes, and
Transient Occupancy Taxes (TOT). These account for 68.5% of General Fund
revenues. The remaining 31.5% of revenue is generated by significantly smaller and
very diverse sources.
General Fund Revenues
31.5%
■ Property Taxes
45.7% ■ Sales Taxes
❑ Transient Occupancy Taxes
7.5% ❑ All Other Sources
15.4%
Property Taxes — Largely a residential community, residential property accounts for
nearly 80% of all City Property Tax. Of the City's 41,850 dwelling units, 60% of the
housing is single - family units and 40% are multi - family units. The City receives, on
average, approximately 16.5% of the property taxes generated within City limits. The
remainder goes to the school district, the County, and other government entities.
Property taxes are the number one revenue source of the City representing nearly 46%
of all General Fund revenues so it is important to review the rules governing property
taxes in California.
In 1978, Californians passed Proposition 13, severely restricting the ability of local
governments to raise revenue through property taxes. The proposition does the
following:
1. Caps the property tax rate to 1 % of full market value.
2. Limits the annual increase in assessed property value at 2 %; reassessment to full
market value occurs only upon change of ownership.
3. Rolled back property values for tax purposes to 1975 -76 levels in 1978.
4. Requires 2/3 voter approval to raise "special taxes."
5. Requires any bill to increase State revenues to be approved by 2/3 vote of each
house of the state legislature.
6. Transfers the authority for allocating property tax revenues from local government to
the State.
The immediate effects of this proposition cut local government property tax revenues by
60 %, shifted the tax allocation authority to the State and created greater reliance on the
State general fund. Since then, the voters and public officials have engaged in an
almost continual tug -of -war over public finances, with State and local governments
seeking creative ways to increase their revenues and taxpayers frequently using the
initiative process to prevent new fees and taxes. As a gradual result, local governments
have dramatically raised user fees and placed a greater fiscal emphasis on land use
and redevelopment.
Another unanticipated result of Proposition 13 is the creation of an enormous gap
between the assessed valuation and current market value of real property, especially
with the tremendous run up of property values in California in the past decade. Because
a property is not reassessed until it changes ownership, assessed valuation would
never equal market value unless 100% of the properties changed hands in one year.
Consequently, Proposition 13 and the last decade's real estate boom have created a
natural cushion against the adverse impact that market volatility might otherwise have
on assessed property tax values. Effectively, the lag behind market value, smoothes the
volatility of assessed property value.
Due to the limited supply of scenic coastal property, constant demand for local property
is resulting in relatively affluent residential neighborhoods and high -end commercial
districts. Market value of local property has skyrocketed in recent years posting
repeated double digit gains. Meanwhile, due to Proposition 13, total assessed property
values increased at a much more moderate pace. Over a ten -year period, assessed
valuation increased an average of 8.7% per annum and 7.1 % over a twenty year period.
Although this is an unintended consequence of Proposition 13, the City enjoys the
benefit of stability in its number one revenue source even in a year where there might
be a sudden and substantial drop in property values due to over - heated market
conditions or a cyclical downturn.
Sales Taxes — The chart below demonstrates the diversity of the City Sales Tax
revenue stream. The largest segment, "Restaurants," accounts for only 19% of total
sales taxes and is represented by 347 restaurants. The next largest segment, "New
Auto Sales," accounts for 17% of total sales taxes and is represented by five
dealerships. The "All- Other," categorization accounts for another 14% and is
represented by 926 businesses. The City's sales tax base is largely diverse and is not
dependent on any one segment or any one individual merchant.
FA
Sales Tax by Business Segment
14% 19%
2%
2%
3 °/ Q
3%
17%
O
4%
4% a
6%
8% 8% 10%
■ RESTAURANTS - 347
■ AUTO SALES - NEW - 4
❑ DEPARTMENT STORES - 40
❑ MISCELLANEOUS RETAIL - 858
■ LEASING - 63
■ APPAREL STORES -175
■ FURNITURE /APPLIANCE - 365
p FOOD MARKETS - 40
■ SERVICE STATIONS - 15
■ MISC. VEHICLE SALES - 51
❑ OFFICE EQUIPMENT - 117
® LIGHT INDUSTRY - 254
■ OTHER -926
Transient Occupancy Taxes (TOT) — The TOT accrues to the City at a rate of 10% of
room charges (with 18% of the collection going to the local Conference and Visitors
Bureau). The City distinguishes its transient occupancy taxpayers in two broad property
type categories, commercial and residential property. The commercial category is
composed of nine hotels (Balboa Bay Club, Extended Stay America, Four Seasons
Hotel, Hyatt Newporter Hotel, Marriott Ownership Resorts, Marriott Suites, Marriott
Hotel & Tennis Club, Newport Hotel, and Sutton Place Hotel) and eleven inns and
motels. The residential category is made up of some 737 vacation rentals. Together,
they account for nearly $9.2 million in annual TOT revenue as follows:
Commercial Property:
Hotels
Inns / Motels
Residential Property:
Vacation Rentals (737 Units)
Annual
Revenues Percent
In Millions of Total
$ 7.9 86%
$ 0.3 3%
$ 1.0 11%
$ 9.2 100%
ECONOMIC OUTLOOK & FACTORS EFFECTING FISCAL PLANNING
U.S. Economy — National, state and local economies have continued to experience
solid, broad based economic growth in the last year despite sharply rising energy costs,
interest rates and three catastrophic hurricanes in the Gulf region. The positive trends in
employment growth, personal income and housing related activity were only slightly
under 2004 levels.
Looking ahead, many economists expect economic growth to taper modestly in 2006
due to the rising energy costs, high household debt levels and rising interest rates. The
combined effect of rising inflation (primarily due to higher energy costs), and rising
interest rates will likely dampen consumer spending and slowing overall economic
growth.
State of California — The State has had significant structural budget shortfalls since
2001 -02 when revenues plunged following the recession and steep stock market
decline. The annual gap between projected revenues and expenditures has been
massive, reaching as much as twenty -five percent of General Fund spending. While the
State has addressed the annual shortfalls in each of the past several budgets, many of
the budget - balancing actions involved limited -term solutions such as substantial
borrowing, spending deferrals, accounting shifts and diversions of local government tax
revenues. The 2004 -05 State budget grappled with a $15 billion dollar deficit however,
the State's budget outlook has improved considerably over the last year.
Primarily due to higher than expected personal income taxes, revenues exceeded the
2004 -05 budget estimates by over $1 billion. Revenues are now expected to exceed the
2005 -06 budget estimates by $2.8 billion. The sharp increases in revenues along with
modest reductions in expenditures gave cause for the Legislative Analyst's Office (LAO)
to revise their estimate of the State's year -end reserve for 2005 -06 upward to $5.2
billion. Although this is clearly good news, most of this will be needed to balance the
State's 2006 -07 budget. The LAO predicts revenues to climb to $91.1 billion and
expenditures to total $95.1 billion, resulting in a $4 billion operating shortfall. Further,
the LAO projects continued shortfalls through 2010 -11, after which the State is expected
to outgrow its structural deficit.
$0
-$1
-$2
-$3
ISE
-$5
California Operating Budget Shortfalls
as Estimated by Legislative Analyst Office's
(In Billions)
2004 -05 2005 -06 2006 -07 2007 -08 2008 -09 2009 -10 2010 -11
Until it becomes clearer that the State will be able to outgrow its current budget
problems, the State will undoubtedly be looking at corrective actions to bridge the
projected deficits. Those budget - balancing actions might include a combination of using
remaining reserves, expenditure reductions, and use of the remaining $3.7 billion in
authorized deficit financing bonds or other legislative action. It is the legislative actions
that normally concern counties, cities and school districts. For many years the cities
have been contending with financial uncertainty due to anticipated State "takeaways."
The State has developed a habit to permanently dip into local governments' pockets.
One example of this has been the 14 year -old practice of shifting local property taxes to
a special Educational Revenue Augmentation Fund (ERAF) in each county to be
distributed to schools, allowing the State's General Fund responsibility for school
funding to be reduced and the monies spent elsewhere in the State budget. In Newport
Beach, ERAF versions I & II have cost residents in excess of $50 million dollars in lost
property tax dollars that would have otherwise been used to fund City operations and
capital improvements. Last year, the State introduced three new budget balancing
actions as part of SB 1096 that heavily impact local governments. The three elements
are commonly referred to as "ERAF III ", the "Triple Flip" and the "VLF Swap." ERAF III
resulted in an additional loss of $2.2 million however, the Triple Flip and the VLF swap
largely only changed the timing of the cash flows but does not represent an ongoing
material impact on City finances.
To combat this practice, California voters approved Proposition 1A in 2004 backed by a
broad coalition that included Governor Arnold Schwarzenegger, legislators, other local
governments, and public safety, business and community organizations. This landmark
amendment to the State constitution was intended to restore predictability and stability
to local government budgets.
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Proposition 1A does the following:
1. Strengthens prohibitions against unfunded State mandates by requiring the State to
suspend State mandates in any year the Legislature does not fully fund the
reimbursement of costs associated with those mandates;
2. Expands definition of a State mandate to include transfer of responsibility of a
program for which the State previously had full or partial responsibility;
3. Prohibits the State from:
• Reducing the local Bradley -Burns Uniform Sales & Use Tax rate or altering its
method of allocation, except to comply with federal law or an interstate compact;
• Decreasing Vehicle License Fee revenue from the 0.65 percent rate without
providing replacement funding to cities and counties; and
• Shifting property taxes from cities, counties or special districts, with the following
exceptions:
a) The State may reallocate among cities, counties and special districts (but not
schools or any other local entity) with a two - thirds vote of both houses of the
Legislature.
b) Beginning in FY 2008 -09, the State may borrow up to 8 percent of the
property tax revenue within a county (currently about $1.3 billion on a
statewide basis) if:
— The governor declares a "fiscal hardship';
— The Legislature enacts an urgency statute by a two - thirds vote;
— The funds are repaid within three years;
— The FY 2003 -04 VLF backfill gap has been repaid;
— Any previous borrowing of this kind has been repaid; and
— The State has not borrowed from the revenues more than twice in 10
years.
Although the State will continue to face substantial budget shortfalls for the next several
years, this proposition limits the State's ability to divert tax revenues that were intended
for local government. California's policymakers therefore face an even more difficult
challenge in resolving their budget problems. Cities and school districts, citizen groups
and other stakeholders are sure to be watching how this situation unfolds over the next
several years with great anticipation.
Local Economy — Since geographic and socioeconomic conditions in Orange County
and the City are very desirable, property values in Newport Beach are projected to
remain high, and the City's property tax revenues are anticipated to maintain a
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favorable trend for many years to come. The total Newport Beach assessed valuation
for 2004 -05 increased by nearly 8.4% and the ten year average is 8.7 %.
Recent home sale prices by Newport Beach zip code are as follows:
Median Home Sales*
For the Month Ending 10/31/2005
* Source: DataQuick Information Systems
Sales Tax and Transient Occupancy Taxes remain solid but are expected to taper a bit
as consumer spending slows due to higher energy costs and higher interest rates.
Sales tax collections through the first quarter of 2005 -06 are ahead of schedule as
compared to the same quarter in 2004 -05.
Other Budgetary Concerns —
Defined Benefit Pension Costs — The City contracts with the California Public
Employees' Retirement System (PERS) for certain defined pension benefits. The City's
contributions to the plan include a fixed employer paid member contribution and an
actuarially determined employer contribution that fluctuates each year based on an
annual actuarial plan valuation. This variable rate employer contribution includes the
normal cost of providing the contracted benefits plus or minus an amortization of plan
changes and net actuarial gains and losses since the last valuation period. It is the
City's policy to make contributions to the plan equaling at least 100% of the actuarially
required contribution (annual pension cost) and in most years will prepay the employer
contribution in full at the beginning of the year. Because the City pays the entire
actuarially required contribution each year, by definition, its net pension obligation at the
end of each year is $0.
Benefit revisions in recent years have and will impact future PERS rates. California
Senate Bill 90 increased the maximum benefit level for safety employees from 85% to
90% of total compensation. Other contract benefit changes include the miscellaneous
employees' benefit formula increase from 2% at age 60 to 2% at age 55 and the police
safety employees benefit formula increase from 2% at age 50 to 3% at age 50. Newport
Beach fire and marine safety employees have a 3% at age 55 benefit formula. A portion
of the accrued unfunded benefits related to all prior covered service credit will be paid
12
Median
Percentage
Sales
Change from
Zip Code
Price
2004
92625
$1,925,000
52.5%
92660
$1,795,000
38.6%
92661
$2,124,000
27.6%
92662
$ 2,650,000
21.0 %
92663
$1,788,000
- 18.8%
92657
$2,150,000
4.9%
* Source: DataQuick Information Systems
Sales Tax and Transient Occupancy Taxes remain solid but are expected to taper a bit
as consumer spending slows due to higher energy costs and higher interest rates.
Sales tax collections through the first quarter of 2005 -06 are ahead of schedule as
compared to the same quarter in 2004 -05.
Other Budgetary Concerns —
Defined Benefit Pension Costs — The City contracts with the California Public
Employees' Retirement System (PERS) for certain defined pension benefits. The City's
contributions to the plan include a fixed employer paid member contribution and an
actuarially determined employer contribution that fluctuates each year based on an
annual actuarial plan valuation. This variable rate employer contribution includes the
normal cost of providing the contracted benefits plus or minus an amortization of plan
changes and net actuarial gains and losses since the last valuation period. It is the
City's policy to make contributions to the plan equaling at least 100% of the actuarially
required contribution (annual pension cost) and in most years will prepay the employer
contribution in full at the beginning of the year. Because the City pays the entire
actuarially required contribution each year, by definition, its net pension obligation at the
end of each year is $0.
Benefit revisions in recent years have and will impact future PERS rates. California
Senate Bill 90 increased the maximum benefit level for safety employees from 85% to
90% of total compensation. Other contract benefit changes include the miscellaneous
employees' benefit formula increase from 2% at age 60 to 2% at age 55 and the police
safety employees benefit formula increase from 2% at age 50 to 3% at age 50. Newport
Beach fire and marine safety employees have a 3% at age 55 benefit formula. A portion
of the accrued unfunded benefits related to all prior covered service credit will be paid
12
from available pension assets while the remaining obligation will be amortized and paid
in conjunction with the normal cost employer rate and is included in the actuarially
required contribution.
More significant than the benefit changes have been the pension asset investment
losses caused by the downturn in the equities markets between 2000 and 2003.
Although PERS has a fifteen -year average return on investments of 9.99°/x, the actuarial
investment losses from 2001 to 2003 have had a significant impact on actuarially
required employer contributions. Until recently PERS actuaries assumed an annual
investment return of 8.25 %. The actual investment returns for fiscal years ended 2001,
2002, and 2003 were -7.2 %, -5.9 %, and 3.9% respectively. This produced a three -year
actuarial loss of - 15.45 %, - 14.15 %, and -4.35% respectively or a three -year cumulative
actuarial loss of - 33.95 %. It was the first time in the pension fund's history to have three
consecutive years of actuarial investment losses and these three years had a profound
impact on employer contribution rates.
Recently, the investment returns rebounded to achieve a 16.57% and 12.7% market
value rate of return for fiscal years ended 2004 and 2005 respectively. It has been the
second straight year in a row that the pension fund achieved a double digit return,
exceeding its new actuarially assumed rate of return of 7.75 %.
The chart below depicts the rapid increase caused by the downturn in the equities
market. Since the CalPERS actuarial reports lag behind three years, the impact of the
2001 -2003 equities market slump can be seen starting to impact rates in 2004, peaking
in 2006 and starting to recover in 2007.
30.000%
25.000%
20.000%
15.000%
10.000%
5.000%
0.000%
CaIPERS Employer Pension Rates
2001 2002 2003 2004 2005 2006 2007 2008'
■ Miscellaneous
■ Safety
* 2008 rates projected by CalPERS actuaries assuming a return on pension assets of 7.75 %.
13
After studying their rate smoothing methodologies after this investment loss period,
CalPERS implemented a new rate stabilization methodology that spreads investment
gains and losses over a much longer period of time. Consequently, the rates are
expected to fall slower than they rose. During the years leading up to the bursting of the
".com" bubble, pension asset returns were very good and as a result, the City's
employer pension rates were well below the normal cost rate of the plans. The table
below compares the normal cost rate of the plan to the actual rate (net of actuarial gains
& losses).
CalPERS EmDlover Pension Rates
Miscellaneous Plan Safety Plan
Over / Under
Normal Actual Normal Normal Actual
Cost Cost Cost Cost Cost
Over / Under
Normal
Cost
2001
4.281%
0.000%
- 4.281%
11.215%
5.659%
- 5.556%
2002
5.985%
0.000%
- 5.985%
13.461%
5.153%
- 8.308%
2003
6.364%
0.000%
- 6.364%
13.853%
8.698%
- 5.155%
2004
6.436%
0.000%
- 6.436%
15.130%
17.580%
2.450%
2005
6.623%
4.328%
- 2.295%
15.287%
26.105%
10.818%
2006
7.217%
10.203%
2.986%
13.913%
28.095%
14.182%
2007
7.182%
9.132%
1.950%
14.200%
25.456%
11.256%
2008
7.182%
9.100% *
1.918%
14.200%
25.200% *
11.000%
* Rate projected by CalPERS actuaries assuming a pension asset return of 7.75%
Although actual pension costs currently exceed the normal cost, for many years prior to
the 2001 -2003 slumps, the actual cost was well below the normal cost of the plan.
Recognizing the impact that the losses in the equities markets would have on future
rates, the City began setting aside a large portion of the savings into a reserve for future
PIERS rate increases. By the end of 2004, the City had set aside $9 million dollars to
offset expected increases in fiscal years 2004 -2007. Conservative budgeting and strong
revenues has not made it necessary to utilize any of these reserves and all of the
pension increases have been absorbed within our operating budget. Now that it appears
that pension rates have peaked and are on the decline, the City will release a portion of
this reserve to help fund large capital needs including a proposed Civic Center project.
For more information on the City's pension plan and funding levels, see Footnote 10 in
the notes to the financial statements.
14
[a]I: 121 :ay_T01 to] :k44aa*01l,[Hyl,r_1,[d W WK•lad10 Is] a
Post Employment Health Plan — The City of Newport Beach provides post -
employment health benefits (75% of health insurance premiums up to $400 per month)
for eligible retirees. An employee must have seven years of service in order to become
eligible this benefit. At the end of the current fiscal year, there were 319 retirees enrolled
in City's health plans out of the 609 retirees eligible to receive this benefit, which has
largely been funded on a pay -as- you -go basis. Since July 2000, the City began
contributing an amount in excess of the current cash flow requirements to accumulate
sufficient resources to fund the current and future expected costs of the plan. To date,
the City has accumulated $2.2 million to fund future benefit payments.
Subsequent to year end, the City reached agreement with all bargaining units to close
the defined benefit formulae to new participants and current employees with less than
five years of service. On a go forward basis, the new plan only requires a defined
contribution with no further funding requirements to guarantee a set benefit amount.
Additional information on the City of Newport Beach post - employment benefits can be
found in footnotes 11 & 19.
Summary of Economic Status — Even though the rippling effect of the past economic
recession and the State's ongoing budget crisis is still very serious, it appears that the
City will make it through the economic crisis with little impact due to conservative fiscal
policy and strong local economic vitality. The City's number one revenue source,
property tax, has experienced strong growth for the past several years due to the
annexation of Newport Coast, the strong real estate market in Orange County and low
interest rates. In addition, the City has taken a conservative approach to forecasting
revenues, often assuming a "worst case scenario." This fiscal conservatism has helped
stabilize the City's finances and as a result, we are able to maintain our course without
cuts in service.
The City has demonstrated fiscal discipline with an ability to prepare balanced budgets
and save during difficult economic periods. Just a few short years after the past
economic recession and amidst the State's ongoing budget crisis, the City has
managed to fund reserves at historic highs. As of June 30, 2005, the City's General
Fund Contingency reserve was fully funded at $15.4 million. In addition, the City has
designated nearly $26.1 million for special purposes and other designations totaling an
additional $8.5 million.
15
6'19Arir /_1NX1;1:I I
Budget — The annual budget serves as the foundation for the City of Newport Beach's
financial planning and control. The Administrative Services Department, with City
Manager approval, develops budget guidelines and appropriation limits for each
department every year in January. The departments then submit revenue and
expenditure appropriation requests which are summarized by the Administrative
Services Department and presented to the City Manager for review. The City Manager
then presents a proposed budget document to the City Council. The City Council holds
a budget hearing and adopts a budget on or before June 30, the close of the City's
fiscal year.
Budgets are adopted for the General Fund and Special Revenue Funds. 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
increase the total appropriations of any fund over $10,000 must be approved by the City
Council.
Cash Management — It is the City's policy to invest all temporarily idle short-term funds
and longer -term reserves in a manner that will maximize return without sacrificing
security or jeopardizing liquidity requirements. Idle funds are invested in accordance
with the Government Code and a formal Investment Policy approved by the City
Council. The policy, which is reviewed and updated annually, allows investments in a
variety of specific instruments, as well as certain State, County, and private sector
investment pools and asset management services. Certificates of deposit, demand
deposits, bankers acceptances, U.S. Government and agency securities, commercial
paper, repurchase agreements, and the State Treasurer's Local Agency Investment
Fund are examples.
The City's current investment strategy is to normally place most of the funds with five
private sector investment management firms. Each of these intermediaries is guided by
and constrained to an investment program at least as restrictive as the policy governing
the City's direct investments. Regular reporting, both in writing and by personal
presentation, is required. Additionally, with regard to the private sector firms, well -
established and highly reputable third party custodians hold all cash or securities
managed by them on the City's behalf. Smaller, more liquid portions of the portfolio are
invested directly by City staff or placed with the State Pool (LAIF). For more information
on the City's investment policy, see Footnote 4 in the notes to the financial statements.
Risk Management — The City maintains a risk management program, which is a
combination of self- insured retention, excess insurance coverage, and written policies
regarding department safety procedures. The City is also insured for environmental
liabilities associated with waste disposal. As part of the City's risk management
program, resources are aggressively set aside in an Internal Service Fund (Insurance
Reserve Fund) to meet current and probable losses. All claims are investigated, valued,
16
reserved, and defended and /or settled in accordance with generally accepted industry
practices. Additional information on the City of Newport Beach's risk management
activity can be found in Footnote 8 in the notes to the financial statements.
AWARDS & ACKNOWLEDGMENTS
Awards — The City has prepared a comprehensive annual financial report for twelve
straight years. The City has been fortunate to receive state and national awards for
excellence in financial reporting each of those years.
The Government Finance Officers Association of the United States and Canada
(GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to
the City of Newport Beach for its comprehensive annual financial report for the fiscal
year ended June 30, 2004. In order to be awarded a Certificate of Achievement, a
government unit must publish an easily readable and efficiently organized
comprehensive annual financial report. This report must satisfy both generally accepted
accounting principles and applicable legal requirements.
A Certificate of Achievement is valid for a period of one year only. We believe our
current comprehensive annual financial report continues to conform to the Certificate of
Achievement Program's requirements and we are submitting it to GFOA to determine
its eligibility for another certificate.
The California Society of Municipal Finance Officers ( CSMFO) is a state organization
which sponsors extensive training and emphasizes high standards in all aspects of
municipal finance operations, including financial reporting. As a result of last year's
report, the City of Newport Beach is fortunate to have remained among the ranks of
California cities that have met the rigorous standards of financial reporting required of
recipients of the CSMFO Outstanding Financial Reporting Award. We will be submitting
the report to CSMFO for consideration again this year as well.
Acknowledgments - Preparation of this report was accomplished through the efficient
and dedicated services of virtually everyone in the City's Accounting Division and Print
Shop. In addition, members of the Administrative Services Department would like to
thank the Mayor and City Council for their interest and support in planning and
conducting the financial operations of the City in a responsible and progressive manner.
We would also like to thank our auditors, CONRAD ANo ASSOCIATES, LLP for their
time and assistance in the preparation of the report. This report was completely
prepared and published by City employees.
W�Z-
Ho ,er L. ludau
City Manager
17
Dennis C. Danner
Administrative Services Director
Ilta 1 11 1�irIgoo
Presented to
California
For its Comprehensive Annual
Financial Report
for the Fiscal Year Ended
June 30, 2004
A Certificate of Achievement for Excellence in Financial
Reporting is presented by the Government Finance Officers
Association of the United States and Canada to
government units and public employee retirement
systems whose comprehensive annual financial
reports (CAFRs) achieve the highest
standards in government accounting
and financial reporting.
U GE xF
e•�NSv ixi���4 G.�r
(uwno
ES
x sraiis
A 1N
CANAIIA �o[
5
G coPr0PAT,j �> President
� eaio
Executive Director
18
California Society of
c7kunicipal jinance Officers
Certificate of Award
� t''i' /IP!!t , �M/
]Presented to the
q
This certificate is issued in recognition ofineeting professional standards and criteria h, reporting
which r fleet a high level ofquality in the annual financial statements
and in the underlying accounting system from which the reports were prepared.
February24, 2005
Dedicated to Excellence in Municipal Financial Management
19
Bill Thomus, Chm,
Pm &oiuual & Technical Standards committee
Dedicated to Excellence in Municipal Financial Management
19
NEWPORT BEACH CITY OFFICIALS
City Council
John Heffernan
Mayor
Tod W. Ridgeway Don Webb Steven Rosansky
Council Member Mayor Pro Tern Council Member
6 i
Leslie J. Daigle Edward D. Selich Richard A. Nichols
Council Member Council Member Council Member
Principal Administrative Officers
1
Homer L. Bludau
City Manager
LaVonne M. Harkless Robin Clauson
City Clerk City Attorney
Sharon Wood .......... ............................... Assistant City Manager /Director of Community & Economic Development
DaveKiff ............................................................................ ............................... ......................Assistant City Manager
Dennis C. Danner ..................................................... ............................... Administrative Services Director /Treasurer
BobMCDonell .............................................................................. ............................... ..........................Chief of Police
TimRiley... ........................ ....... ...... ....... ...... ............................. ....... ...... ................ ..... Fire Chief
Mark Harmon ..................................................................................... ............................... General Services Director
Marie Knight... .................. ...... ..................... ................ ...... .......... Recreation & Senior Services Director
Patricia L. Temple ............................................................................................. ............................... Planning Director
JayElbettar ....................................................................................................... ............................... Building Director
Steve Badum ............................................................................................. ............................... Public Works Director
Barbara Ramsey .............................................................................. ............................... Human Resources Director
Eldon Davidson ............................................................................. ............................... ......................Utilities Director
Linda Katsouleas .................................................................................. ............................... Library Services Director
20
ELECTORATE
_ r- BNLDINGCODE
r L BOARDOFAPPEALS J
I
LCIVIL SERVICE BOARD J CITY CLERK
I
I - - - --
L PLANNING COMMISSION J
III
I ASSISTANT CITV MANAGER
I Cwnmurmyarm Emnomm oevalnPnam
I I tabs Relatinm
CoENEnnranmenbl Enlortemerrt
III
I PLANNING
L Current Plans & Projects
Advance Planning
II
II
II
FIRE
Fire Supponsion(Oparations) Ocean Lifeguards
Training and Education Hazardous Materials
Fire Prevention Jii Lifeguard Pci
Adminismation Emergency Medical Servo
II
II
II
Lt --
I
I
I
MAYOR
COUNCIL
CITY ATTORNEY
CITY MANAGER
r- - - - - --
PUBLIC WORKS I
Plan Checking
OF LIBRARYTRUSTEES ,
Insptia
ecna
1BOARD
I
Development Services
_____
affil I
II
17- II
PARKS, BEACHES &
1
L RECREATION COMMISSION,
L - - II
CITYARTS COMMISSION
J
L
II
HARBOR COMMISSION
L- - - - -�,
I I
I I I
NTCITYMANAGER
Hi Psonsms, -J
CWLEnvi —in IEntammenl
UTILITIES I I
Water I I
Wastewater
Electrical
Oil & G.
Administration
II
II
POLICE I
Patrol I
Traffic Supponservicea
Detective Animal Control
Parking
II
II
BUILDING
PUBLIC WORKS I
Plan Checking
Engineering
CIP Management
Insptia
ecna
Conatmi Management
Permits
Development Services
IN
affil I
II
17- II
ADMINISTRATIVE SERVICES
Amounting Purchasing & Warehousing
Treasury Management Billing & Remivables
Geographic Informal System Telecommunications
Management Information Systems Revenue
I
I
L
O
ELECTED OFFICIALS
Fiscal Year 2004 -2005
April 19, 2004
GENERALSERVICES
Parkland Trees
Operations Support
Field Maintenance
Traffic Signs & Markings
Building Maintenance
Refuse Collection
guipment Maintenance
Recycling
II
II
II
HUMAN RESOURCES RECREATION & SENIOR SERVICES
Personnel Administration Recreation
Benefit Management Senior Services
Risk Management
Labor Relations
I
I
LIBRARY SERVICES I
Library - J
Guttural Ana
r - - - --1 0 0
COUNCILAPPOINTED BOARDS & COMMISSIONS COUNCILAPPOINTED POSITIONS CITYDEPARTMENTS
21
This page left blank intentionally.
22
Financial Section
�l. ,� �..
CERTIFIED PUBLIC ACCOUNTANTS
2301 DUPONT DRIVE, SUITE 200
IRVINE, CALIFORNIA 92612
(949) 474 -2020
Fax(949)263 -5520
City Council
City of Newport Beach, California
Independent Auditors' Report
We have audited the accompanying financial statements of the governmental activities, the
business -type activities, each major fiend, and the aggregate remaining fund information of the
City of Newport Beach, California, as of and for the year ended June 30, 2005, which
collectively comprise the City's basic financial statements, as listed in the table of contents.
These financial statements are the responsibility of the management of the City of Newport
Beach. Our responsibility is to express opinions on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United
States of America and the standards applicable to financial audits contained in Government
Auditing Standards, issued by the Comptroller General of the United States. Those standards
require that we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinions.
In our opinion, the financial statements referred to above present fairly, in all material respects,
the respective financial position of the governmental activities, the business -type activities, each
major fund, and the aggregate remaining fund information of the City of Newport Beach,
California, as of June 30, 2005, and the respective changes in financial position and cash flows,
where applicable, of the City of Newport Beach, California for the year then ended in conformity
with accounting principles generally accepted in the United States of America.
The information identified in the accompanying table of contents as management's discussion
and analysis is not a required part of the basic financial statements, but is supplementary
information required by accounting principles generally accepted in the United States of
America. We have applied certain limited procedures, which consisted principally of inquiries of
management regarding the methods of measurement and presentation of the required
supplementary information. However, we did not audit the information and express no opinion
on it.
Our audit was conducted for the purpose of forming opinions on the financial statements that
collectively comprise the City of Newport Beach's basic financial statements. The introductory
section, combining and individual nonmajor fund financial statements and schedules and
statistical tables are presented for purposes of additional analysis and are not a required part of
the basic financial statements. The combining and individual nonmajor fund financial statements
and schedules have been subjected to the auditing procedures applied in the audit of the basic
financial statements and, in our opinion, are fairly stated in all material respects in relation to the
basic financial statements taken as a whole. The introductory section and statistical tables have
not been subjected to the auditing procedures applied in the audit of the basic financial
statements and, accordingly, we express no opinion on them.
23
MEMBERS OF AICPA AND CALIFORNIA SOCIETY OF CERTIFIED PUBLIC ACCOUNTANTS
MEMBER OF AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS PRIVATE COMPANIES PRACTICE SECTION
City Council
City of Newport Beach, California
Page Two
In accordance with Govermnent Auditing Standards, we have also issued a report dated October
28, 2005 on our consideration of the City's internal control over financial reporting and our tests
of its compliance with certain provisions of laws, regulations, contracts, grant agreements, and
other matters. The purpose of that report is 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 internal control over financial reporting or on compliance. That report is an
integral part of an audit performed in accordance with Government Auditing Standards and
should be considered in assessing the results of our audit.
October 28, 2005
24
Management's
Discussion and Analysis
MANAGEMENT'S DISCUSSION AND ANALYSIS
This section of the City of Newport Beach's Comprehensive Annual Financial Report (CAFR)
presents management's discussion and analysis of the City's financial performance during the
fiscal year that ended on June 30, 2005. This analysis should be read in conjunction with the
Transmittal Letter at the front of this report and the accompanying Basic Financial Statements.
FINANCIAL HIGHLIGHTS
Long -term Economic Resource (Government -wide) Focus — Economic resources are
differentiated from financial resources in that the economic measurement focus measures
changes in net assets as soon as the event occurs regardless of the timing of related cash
flows. Therefore, this measurement focus includes both current spendable resources and fixed
non - spendable assets, and long -term claims against these assets. The resulting net asset
utilizing this measurement focus provides one measure of the City's overall long -term financial
condition.
• The assets of the City exceeded liabilities at the close of the most recent fiscal year by
$2.151 billion. The vast majority of this figure is represented by illiquid capital assets
including land and infrastructure. Capital assets net of accumulated depreciation and
any related debt totaled $2.015 billion, while the remaining balance of net assets totaled
$135.8 million. Of this amount, $81.6 million represents unrestricted net assets that may
be used to meet the City's ongoing obligations to citizens and creditors for both
governmental and business -type activities.
• The City's total net assets increased $242.7 million (12.7 %) to $2.151 billion as a result
of current year activities. The increase is attributable to a $213.8 million special item.
This special item represented capital contributions consisting of right -of -way and
infrastructure, as a result of the State of California's relinquishment of Pacific Coast
Highway between Newport Coast Drive and Jamboree Road; excluding the special
item, net assets increased $28.9 million.
• The City's total debt decreased by $1.1 million during the current fiscal year from $54.2
million to $53.1 million. The decrease is the net result of regular debt service payments,
net increases in the worker's comp payable, and in claims and judgments payable, and
with a net decrease to compensated absences.
Short -term Financial Resource (Fund) Focus — The Financial resources focus measures
inflows of current spendable assets. The resulting net difference between current financial
assets and current financial liabilities otherwise known as fund balance (or net working capital
in the private sector) is a measure the City's ability to finance activities in the near term.
• At the close of the current fiscal year, the City's Governmental Funds reported a
combined ending fund balance of $100.2 million, an increase of $16.7 million.
Approximately $82.6 million is unreserved fund balance available to fund current
obligations at the City Council's discretion. Of the $82.6 million unreserved fund
25
balance, City Council has designated $15.2 for unspecified contingencies while the
remaining $67.4 million is designated for capital projects, appropriations, and other
special purposes.
• The General Fund reported an increase of $10.0 million in fund balance after
transferring $18.2 million to other funds. Of this transfer, $14.2 million represented a
routine transfer to subsidize the operations of the Tide and Submerged Land Fund,
while $3.4 million represented a nonrecurring transfer to certain Capital Project funds.
At the end of the current fiscal year, unreserved fund balance for the General Fund was
$49.8 million, or 52.0% of total General Fund expenditures. Although unreserved and
available to fund current obligations, 100% of this balance is designated for
contingencies, capital projects, appropriations, and other special purposes.
OVERVIEW OF THE FINANCIAL STATEMENTS
The financial section of the comprehensive annual financial report contains the following
information: Independent Auditor's Report, Management's Discussion and Analysis (this
section), the Basic Financial Statements, 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. The 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 are
intended to provide a "Big Picture" view of the City as a whole using accounting methods
similar to those used by private sector companies. The statement of net assets includes all of
the City's assets (including non - spendable assets like streets, roads, and land rights) and
liabilities (including long -term liabilities that may be paid over twenty or so more years). All of
the current year revenues and expenses are accounted for in the statement of activities
regardless of when cash is received or paid.
The two Government -wide Financial Statements report the City's net assets and how they
have changed. Net assets — the difference between the City's assets and liabilities — is one
way to measure the City's financial health, or position. Over time, increases or decreases in
the City's net assets 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 the City's roads.
The Government -wide Financial Statements of the City are divided into two categories:
Governmental Activities — This statement depicts the extent to which programs are
self - supporting and the net amount provided by property taxes and other general
revenues. Most of the City's basic services are included in this category, such as the
26
public safety, public works, community development and community services
departments, and general administration. Taxes and other general revenues finance
most of these activities.
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 — Funds are accounting devices that the City uses to track and
control resources intended for specific 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. Some funds are required by State and Federal law or by bond covenants. Other funds
are utilized simply to control and manage resources intended for particular purposes.
The City utilizes three broad categories of funds:
Governmental Funds — Governmental Funds are used to account for essentially the
same functions reported as Governmental Activities in the Government -wide Financial
Statements. However, unlike the 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 for the extent that only earnings, not principal, may
be used for purposes that support City programs.
Proprietary Funds — Services for which the City charges customers a fee are generally
reported in Proprietary Funds (Enterprise Funds and Internal Service Funds). Like the
Government -wide Financial Statements, these funds provide both long and short-term
financial information utilizing the economic resources measurement focus. The City's
Enterprise Funds (Water and Wastewater Funds) are individual funds represented in
the combined presentation of Business -type Activities in the Government -wide Financial
Statements. The individual fund presentation provides more detailed information about
each business segment, its operating statements, and statements of cash flow. The City
also uses Internal Service Funds that are utilized to report and allocate the cost of
certain centrally managed and operated activities (e.g. fleet maintenance, risk
management, etc.). Because the Internal Service Funds primarily serve the
government, they are reported with Governmental Activities rather than the Business -
type Activities in the Government -wide Financial Statements.
Fiduciary Funds — The City utilizes Fiduciary Funds to account for assets held by the
City in a trustee capacity, or as an agent for other governmental entities, private
organizations, or individuals. All of the City's fiduciary activities are reported in a
separate statement of fiduciary net assets and a statement of changes in fiduciary net
27
assets. 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.
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 non -major
Governmental Funds, Internal Service Funds, and Fiduciary Funds.
GOVERNMENT -WIDE FINANCIAL ANALYSIS
Net Assets - Net assets may serve over time as a useful indicator of a government's financial
position. The City's combined net assets for the year ended June 30, 2005, as shown in Table
1, were $2.151 billion.
Current and other assets
Capital assets
Total assets
Long -term liabilities outstanding
Other liabilities
Total liabilities
Net assets
Invested in capital assets, net of debt
Restricted
Unrestricted
Total net assets
Table 1
Net Assets
(in thousands)
Governmental Activities
2004 2005
Business -Type Activities
2004 2005
$ 128,078
$ 149,299
$ 25,822
$ 22,357
1,538,211
1,946,230
101,316
106,896
1,666,290
2,095,529
127,138
129,253
45,615
45,832
8,535
7,255
15,756
18,167
2,903
2,691
61,372
63,999
11,438
9,946
1,512,651
1,915,349
45,494
54,286
46,773
61,895
$ 1,604,918
$ 2,031,530
94,207 99,641
21,494 19,666
$ 115,700 $ 119,307
Total
rZrNL�I4d::
$ 153,900
1,639,528
$ 171,656
2,053,126
1,793,428
2,224,782
54,150
53,087
18,659
20,858
72,809
73,945
1,606,858 2,014,990
45,494 54,286
68,266 81,561
$ 1,720,618 $ 2,150,837
Invested in Capital Assets - By far the largest component of net assets, $2.015 billion
(93.7 %), reflects the City's investment in capital assets (e.g., land, buildings, infrastructure,
and equipment) less accumulated depreciation and any related outstanding debt used to
acquire those assets. The City's capital assets do not represent a financial resource and
consequently are not readily available for funding current obligations.
28
Restricted Assets - An additional portion of the City's net assets, $54.3 million (2.5 %),
represents resources that are subject to external restrictions on how they may be used.
Unrestricted Assets - The remaining balance of unrestricted net assets, $81.6 million (3.8 %)
may be used to meet the City's ongoing obligations to citizens and creditors.
Overall the City's net assets increased $242.7 million during the current fiscal year. This
increase is attributable to a $213.8 million special item, capital contribution related to the State
of California's relinquishment of Pacific Coast Highway, between Newport Coast Drive and
Jamboree Road (see Note (16) in the Notes to the Financial Statements). Excluding this
special item, net assets increased $28.9 million in the current year. The key financial activity
for the year ended June 30, 2005 is as follows:
Table 2
Changes in Net Assets
(in thousands)
Expenses:
General government
Public safety
Public works
Community development
Community services
Interest
Water
Wastewater
Total expenses
Increases in net assets before transfers
Transfers
Increase in net assets
Net assets, beginning, as restated
Net assets, ending
11,428
Governmental Activities
Business -Type Activities
Total
58,179
63,214
2004
2005
2004
2005
2004
2005
Revenues:
6,437
-
-
14,742
13,073
-
Program Revenues:
542
509
-
-
-
-
Charges for services
$ 31,812
$ 33,791
$ 21,312
$ 20,474
$ 53,124 $
54,265
Operating grants and capital contributions
10,681
17,481
-
-
10,681
17,481
Capital grants and contributions
675
20,206
-
-
675
20,206
General Revenues:
Taxes:
Property taxes
43,632
46,303
-
-
43,632
46,303
Sales tax
21,844
24,318
-
-
21,844
24,318
Transient occupancy taxes
8,045
9,216
-
-
8,045
9,216
Othertaxes
10,049
6,728
-
-
10,049
6,728
Intergovernmental (Unrestricted):
Motor Vehicle License Tax
-
6,396
-
-
-
6,396
Investment related income
224
951
116
336
340
1,287
Property income
-
-
30
27
30
27
Miscellaneous
215
761
-
-
215
761
Share of joint venture net income
147
100
-
-
147
100
Special Item:
-
Capital contributions
102,713
213,779
215
102,929
213,779
Total revenues
230,036
380,030
21,673
20,837
251,709
400,867
Expenses:
General government
Public safety
Public works
Community development
Community services
Interest
Water
Wastewater
Total expenses
Increases in net assets before transfers
Transfers
Increase in net assets
Net assets, beginning, as restated
Net assets, ending
11,428
11,379
-
-
58,179
63,214
-
-
38,128
46,360
-
-
6,230
6,437
-
-
14,742
13,073
-
-
542
509
-
-
-
-
17,185
14,467
3,364
2,741
129,248
140,972
20,549
17,208
100,788
239,058
1,124
3,629
58
(58)
11,428
11,379
58,179
63,214
38,128
46,360
6,230
6,437
14,742
13,073
542
509
17,185
14,467
3,364
2,741
149,797 158,180
101,912 242,687
100,846 239,058 1,066 3,629 101,912 242,687
1,504,072 1,792,471 114,634 115,678 1,618,706 1,908,149
$1,604,918 $ 2,031,529 $115,700 $119,307 $1,720,618 $2,150,836
29
Governmental Activities — The cost of all governmental activities in the current fiscal year
was $141.0 million. As shown in the statement of activities, $33.8 million of the costs was paid
by those who directly benefited from the programs, $37.7 million was financed by contributions
and grants received from other governmental organizations, developers, and property owners
for both capital and operating activities, and $69.5 million was subsidized through general City
revenues.
Net assets for governmental activities of the City at the beginning of the year were $1.8 billion,
and increased by $239.1 million by the end of the year accounting for 98.5% of the total growth
of net asset for the City as a whole. The growth was attributable to a special item, capital
contribution discussed above.
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 Administrative Services) providing general governance,
executive management, legal services, records management, risk management, finance,
accounting, and information technology services.
Public Safety is comprised of two departments (Police and Fire) providing general law
enforcement, fire suppression and prevention services, paramedic and medical transport
services, disaster preparedness, and ocean lifeguard services.
Public Works is comprised of two departments (Public Works and General Services) providing,
engineering, construction and maintenance of public streets, highways, buildings, beaches,
parks, and related infrastructure; as well as traffic engineering, street lighting, and trash
disposal services.
Community Development is comprised of two departments (Planning and Building) that
provide planning and zoning services; economic development services, and building plan
check and code enforcement services.
Community Services is comprised of two departments (Libraries & Arts and Recreation &
Senior Services) providing library services, cultural and arts programs, recreation services, and
senior social and transportation services.
Business Enterprise Operations are overseen by one department (Utilities) providing water and
wastewater services.
30
Each programs' net cost (total cost less revenues generated by the activities) is presented
below. The net cost shows the extent to which the City's general taxes support each of the
City's programs.
General government
Public safety
Public works
Community development
Community services
Interest
$70
$60
$50
$40
$30
$20
$10
$0
Table 3
Governmental Activities
(in thousands)
2004
Total Cost Net Cost
of Service of Service
$ 11,428
$ (9,301)
58,179
(41,030)
38,128
(26,161)
6,230
(1,034)
14,742
(7,451)
542
(542)
$ 129,248
$ (85,519)
fIF77CS!
2005
Total Cost
Net Cost
of Service
of Service
$ 11,379
$ (8,966)
63,214
(44,758)
46,360
(8,882)
6,437
(1,307)
13,073
(5,072)
509
(509)
$ 140,972
$ (69,494)
Program Expenses and Revenue - Governmental Activities
Year Ended June 30, 2005
(in Millions)
General Public Safety Public Works Community Community Interest
Government Development Services
■Total Expenses ❑Program Revenues
Of the $69.5 million in general revenues that financed the Governmental Activities, 64% was
utilized for Public Safety, 13% was utilized for Public Works, and the remaining 23%
supplemented Community Development, Community Services, General Government, and
Interest.
31
52%
Table 5
Governmental Activities
Year Ended June 30, 2005
Sources of Revenue
(Excluding Special Item)
5% 1 20%
23%
■ Charges for Ser
■ Contributions
o Taxes
o Other
33%
Functional Expenses
9% 0% 8%
■ General Government
■ Public Safety
❑ Public Works
45% 0 Community Development
■ Community Services
■ Interest
Major Governmental Activities in the current fiscal year included the following:
Revenues:
• Excluding transfers and the special item, total program and general revenues in the current
year amounted to $166.3 million. Of this amount, 43% represents program revenue, 28% is
from property taxes, and 20% is from sales taxes and transient occupancy taxes. The
remaining revenue sources of 9% are represented by significantly smaller sources and are
broadly diverse.
• As mentioned above, the City reported a special item related to the capital contribution of
right -of -way, pavement, sidewalks, and other infrastructure. The contribution resulted in a
one time infusion of $213.8 million in the statement of activities, and increased
governmental land and infrastructure assets.
Excluding the special item, total program and general revenues are up $38.9 million. The
net increase over prior year is a combination of a few key factors:
o At $46.3 million per year, property taxes represent the largest individual
recurring source of revenue for the City. Over the past ten years, assessed
values have increased an average of 8.9% per year. Assessed property values
increased 8.4% in the current year. Property Tax revenues, in total, including
unsecured property and prior year collections increased only $2.7 million or
6.1 % in the current year. The variance between the assessed property value
increase and the property tax collection increase is primarily due to the State
withholding of ERAF III previously discussed in the Transmittal Letter.
32
o At nearly $24.3 and $9.2 million respectively, sales taxes and transient
occupancy taxes represent the number two and three top individual revenue
sources for the City. Sales taxes, which are comprised of sales tax and sales
tax in -lieu, are up $2.5 million (11.3 %) from the prior year while transient
occupancy taxes are up $1.2 million (14.6 %).
o Charges for services were up $1.4 million from the previous year from the net
effect of increases and decreases within the various functions of the City. The
most significant swings within this account related to increases in Public Safety
and Public Works charges for services and minor increases and decreases in
the other functions.
o Operating and capital grants are up $26.3 million over the prior year primarily
due to the unusually high activity in the current year. In Public Works,
operating grants and contributions totaled $13.5 million this year resulting from
a $3.9 million bay dredging contribution and the remaining from street
maintenance contributions. Capital grants and contributions totaled $20.2. The
largest components were $14.9 in underground utilities assessment district
capital contributions and a $2.5 million capital contribution from a local
redevelopment agency for the purchase of fire station land that will be owned
and operated by the City.
o Rising interest rates in the fixed income equities market combined with a
changing interest rate environment had a combined positive impact on
investment income. Investment income combined with the net decrease in the
fair value of investments resulted in a $0.7 million increase in revenues from
the prior year.
o All other general tax revenues were down a net $1.0 million (approximately
10 %) while all other revenues were up $0.4 million.
Expenses:
• In the current year, expenses for all governmental activities are $141.0 million. Overall, the
amount is up $11.7 million (9.1 %) from the prior year which can be attributed to the following
factors:
o General government expenses remain relatively flat with a decrease of
$49,770 (0.4 %) when compared to the prior year.
o Public safety expenses are up $5.0 million (8.7 %) in the current year. The
primary reasons for the increase are the Safety PERS pension rates
increasing from an annual average of 17.5% in 2003 -04 to 26.1% in 2004 -05
and a mid -year cost of living adjustment.
o Public works expenses were up $8.2 million (21.6°/x) which include costs
associated with repair and maintenance of City streets, infrastructure and
facilities. As noted above in the operating contributions discussion, street
related operating contributions are up sharply this year too.
33
o Community services' expenses are down $1.7 million (11.3 %) in the current
year, due to high activity in the prior year.
o Community development expenses are up $0.2 million (3.3 %) in the current
year primarily due consultant contracts associated with the City's General Plan
update process.
Business -type Activities — Business -type activities are financed primarily by fees charged to
external parties for goods and services. The City's two business -type activities, water and
wastewater utilities, produced a $3.6 million increase in net assets. The increase in net assets
was comprised of operating income of $3.3 million, non - operating revenues of $116,868, and
$165,943 consolidation adjustment related to internal service fund activities.
$20
$15
$10
$5
$0
Table 6
Program Expense & Revenue - Business -type Activities
Year Ended June 30, 2005
(in Millions)
Water Wastewater
■Total Expenses ■Program Revenues
Major Business -type Activities in the current fiscal year included the following:
Water
Of the $14.6 million in water related expenses, $6.0 million (41.0 %) is for the purchase of
water, $2.1 million (14.4 %) is for maintenance, supplies and depreciation of the water system,
$3.3 million (22.9 %) covers employee related costs, and the remaining $3.2 million (21.7 %) is
collectively attributable to interest on outstanding debt and other miscellaneous expenses.
Wastewater
Of the $2.8 million in wastewater related expenses, $1.1 million (40.4 %) is maintenance,
supplies and depreciation of the wastewater system, $1.2 million (42.8 %) is employee related
costs, and the remaining $0.5 million (16.8 %) is attributable to other individually insignificant
expenses.
34
FINANCIAL ANALYSIS OF THE CITY'S FUNDS
As noted earlier, the City uses fund accounting to highlight available financial resources and to
ensure and demonstrate compliance with finance - related legal requirements.
Governmental Funds — Utilizing the financial resources measurement focus, the City's
Governmental Funds provide information on near -term inflows and outflows, and balances of
spendable resources. This information is useful in assessing the City's financing requirements.
In particular, unreserved fund balance 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 of the end of the current fiscal year, the City's Governmental Funds
reported combined fund balances of $100.2 million, an increase of $16.7 million from
the prior year. The General Fund represented $54.5 million or 54.4% of the combined
fund balances of the Governmental Funds.
Reserved Fund Balance — The City has $17.7 million in fund balance that is reserved
to indicate it is not available to finance new activities because it has already been
committed: 1) to fulfill contractual obligations and purchase orders ($10.1 million), 2) as
a debt service reserve consistent with bond covenants ($568,240), 3) as a reserve for
affordable housing ($1.3 million), and 4) for a variety of other restrictions that make
these resources unavailable for spending ($5.7 million).
Unreserved Fund Balance — The remaining $82.6 million is classified as unreserved
fund balance, which is available for spending at the City's discretion.
Major activities in the Governmental Funds in the current fiscal year included the following:
• The General Fund ended the year with a $54.5 million fund balance, a net increase of
$10.0 million. Excluding net transfers out of $18.2 million, excess revenues over
expenditures totaled $27.6 million. See Note (13) in the Notes to the Financial Statements
for more information regarding interfund transfers.
The activities of the Tide and Submerged Land Fund are routinely subsidized by the
General Fund. At year end, the General Fund transferred sufficient resources ($14.2
million) to cover the Tide and Submerged Land Fund's deficit and other outstanding
commitments and designations of fund balance. The Tide and Submerged Land Fund
ended the current year with $746,887 in fund balance.
The Newport Coast Annexation Fund ended the year with a $16.3 million fund balance. The
net decrease of $1.4 million in fund balance in the current year is due to the regularly
scheduled debt service payments and capital outlay of $374,535.
35
Proprietary Funds — The City's Proprietary Funds (Enterprise and Internal Service Funds)
presented in the Fund Financial Statements section basically provide the same type of
information in the Government -wide Financial Statements, but include individual segment
information.
Major activities in the Enterprise Funds in the current fiscal year included the following:
Net assets in the Water Fund grew by $3.3 million and increased in the Wastewater Fund
by $193,662. Unrestricted net assets at year -end were $16.5 million for the Water Fund,
and $3.0 million in the Wastewater Fund.
• Other factors concerning the finances of these two funds have already been addressed
above in the discussion of the City's business -type activities.
Major activities in the Internal Service Funds in the current fiscal year included the following:
• Net assets at fiscal year end for the Internal Service Funds was $4.9 million. Included in
this amount is an accumulated deficit in the Insurance Reserve Fund and the Compensated
Absence Fund in the amounts of $6.8 million and $6.2 million, respectively.
• Net assets decreased $1.9 million in the current year. The decrease is a combination of
decreases and increases in the various Internal Service Funds; namely, a decrease of $3.4
million in the Insurance Reserve Fund, $26,382 increase in the Compensated Absence
Fund, and a $52,397 increase in Retiree Insurance. Also a contributing factor, the
Equipment Maintenance Fund contributed a $1.4 million increase in current year net assets
through user fees charged to departments related to the maintenance and replacement of
the City's rolling stock fleet.
GENERAL FUND BUDGETARY HIGHLIGHTS
The final appropriations for the General Fund at year -end were $13.4 million less than the
original budget and total actual expenditures were $7.7 million less than the final budget. The
factors contributing to the final variance can be briefly summarized as follows:
Changes to Original Budget
Approximately $16.2 million of costs budgeted in the General Fund were reclassified to
the Tide and Submerged Lands Fund per an inter -fund reimbursement policy between
these funds.
• $1.7 million increase for the construction of the Mariners Library.
• $800,000 increase related to an assessment for underground utilities on City -owned
property.
36
These transactions combined with several smaller amendments up and down throughout the
year resulted in a net decrease of nearly $13.4 million. Actual expenditures were significantly
less and revenues exceeded budgetary estimates eliminating the need to draw upon existing
fund balance.
Variance with Final Budget
• The timing of capital projects in this fund account for over $3.8 million of this variance.
Of this amount, $2.4 million was encumbered and $1.4 was re- budgeted to be
expended during the following fiscal year.
CAPITAL ASSET AND DEBT ADMINISTRATION
Capital Assets
The City's investment in capital assets for governmental and business -type activities as of
June 30, 2005, amounts to $2.05 billion (net of accumulated depreciation). This investment in
a broad range of capital assets includes land, buildings and systems, improvements,
machinery and equipment, park facilities, roads, storm drains, piers, oil wells, sound walls, and
bridges. The total net increase (including additions and deletions) of $226.1 million represents
a 12.4% increase over last year. The $226.1 million net increase is the net result of additions
of $228.8 million, of which $213.8 million is attributable to the special item, capital contribution,
and deletions of $2.7 million.
Table 7
Capital Assets at Year End
(net of depreciation, in thousands)
Governmental Activities Business -Type Activities Total
2004 2005 2004 2005 2004 2005
Land
$ 1,314,840
$ 1,713,154
$ 2,016
$ 2,016
$ 1,316,856
$ 1,715,170
Structures
25,070
24,347
114
109
25,184
24,456
Equipment
7,711
7,722
17
13
7,728
7,735
Infrastructure
186,571
192,034
96,496
96,617
283,067
288,651
Work in progress
4,020
8,973
2,673
8,141
6,692
17,114
Totals $ 1,5387211 $ 1,946,230 $ 101,316 $ 106,896 $ 1,639,528 $ 2,053,126
Major capital asset events during the current fiscal year included the following:
• Excluding the $213.8 million in capital contributions related to the special item
mentioned above, the City capitalized $25.6 million in capital assets in the current year.
Of the $25.6 million, $24.2 million was paid for through current year expenses and the
remaining $1.4 million represents additions from work in progress started in previous
years.
37
• Of the $232.0 million capitalized as governmental assets in the current year, $213.8
million represents the capital contribution disclosed as a special item, $1.4 million paid
in previous years for completion of MacArthur Blvd. and Jamboree Road medians, and
$6.4 million in work in progress. Of the $7.4 million capitalized in the current year as
business -type assets, $1.5 million represented additions for major repairs and upgrades
to the water mains, $0.4 million in additions to wastewater and water pump stations, and
$5.5 million as current year additions to the Big Canyon Reservoir Cover Project.
Additional information on the City's capital assets can be found in Note (5) of the Notes
to the Financial Statements.
Long -term Debt
At the end of the current fiscal year, the City had total long -term debt outstanding of $53.1
million for all governmental and business -type activities.
Table 8
Outstanding Debt at Year -End
(in thousands)
Governmental Activities Business -Type Activities Total
2004 2005 2004 2005 2004 2005
Certificates of participation
$ 5,845,000 $
5,570,000
$ - $ 5,845,000
$ 5,570,000
Note payable
1,939,133
1,789,332
- 1,939,133
1,789,332
Pre - annexation agreement
15,600,000
14,400,000
- 15,600,000
14,400,000
CDBG Loan
2,340,000
2,276,000
- 2,340,000
2,276,000
Capital leases
862,975
420,773
- 862,975
420,773
Revenue bonds
-
-
8,535,000 7,255,000 8,535,000
7,255,000
Claims and judgments
2,839,000
3,367,961
- 2,839,000
3,367,961
Workers' compensation payable
8,393,227
10,631,277
- 8,393,227
10,631,277
Compensated absences
7,796,024
7,376,403
- 7,796,024
7,376,403
Totals
$ 45,615,359 $
45,831,746
$ 8,535,000 $ 7,255,000 $ 54,150,359
$ 53,086,746
The City's total debt decreased by $1.1 million during the current fiscal year as the net result of
regular debt service payments; claims and judgments, and compensated absences payable
decreased by $0.4 million. The City's Revenue Bonds and Certificates of Participation were
insured and therefore, maintain "AAA" rating from Standard & Poor's Corporation and an "Aaa"
from Moody's Investors Services.
Additional information on the City's long -term debt can be found in Note (6) of the Notes to the
Financial Statements.
38
FACTORS AFFECTING NEXT YEAR'S BUDGET
Overall the 2005 -2006 operating budget excluding capital improvement projects and internal
charges increased 1.9% over the 2004 -2005 amended budget. A brief summary of the factors
considered when preparing the 2005 -2006 budget are as follows:
• This is the last year of ERAF III which was implemented by the State of California to
deal with their budget deficit. The City's ERAF III loss was in excess of $2.2 million in
property tax revenues in 2004 -2005 and 2005 -2006.
• Multiple year bargaining unit agreements were reached with all miscellaneous units and
most safety units. The agreements provide for moderate salary and benefit increases.
The Police contracts are due to expire in December 2006.
• Cal PERS has reported recent investments gains which has stabilized the City's
pension costs and will ultimately provide for a decrease to employer contribution rates.
• In an effort to reduce the City's exposure to funding risks associated with defined
benefits for the City's post employment medical plan, the City has reached agreement
with all full -time employee bargaining units that will allow for the transition from a
defined benefit formula to a defined contribution formula. The transition years will be
more costly to administer in the short-term but will reduce the City's exposure to interest
rate risk and other actuarial losses in the long -term.
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 Administrative Services Department, 3300
Newport Boulevard, Newport Beach, CA 92663 -3884, (949) 644 -3126.
39
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40
Government -wide
Financial Statements
CITY OF NEWPORT BEACH
Statement of Net Assets
June 30, 2005
Assets:
Cash and investments (note 4)
Receivables:
Accounts
Notes
Interest
Intergovernmental receivables
Cash with fiscal agent (note 4)
Internal balances
Investment in joint venture (note 15)
Prepaid items
Inventory
Other
Capital assets, (note 5):
Non - depreciable
Depreciable
Accumulated depreciation
Total assets
Liabilities:
Accounts payable
Accrued salaries and benefits
Accrued interest payable
Deposits payable
Unearned revenue
Noncurrent liabilities (note 6):
Due within one year
Due in more than one year
Total liabilities
Net Assets:
Invested in capital assets, net of related debt
Temporarily Restricted for:
Community development
Public safety
Public works
Community services
Debt Service
Permanently Restricted for:
Endowment - nonexpendable
Endowment - expendable
Unrestricted
Total net assets
Governmental
Business -type
Activities
Activities
Total
$ 119,966,320
$ 15,900,893
$ 135,867,213
6,262,301
4,853,515
11,115,816
50,000
-
50,000
952,747
952,747
13,702,948
-
13,702,948
4,158,772
1,436,225
5,594,997
(165,943)
165,943
-
2,757,144
-
2,757,144
876,994
-
876,994
731,909
-
731,909
5,533
-
5,533
1,722,126,272
10,157,849
1,732,284,121
343,052,673
139,783,246
482,835,919
(118,949,129)
(43,044,684)
(161,993,813)
2,095,528,541
129,252,987
2,224,781,528
7,412,541
2,289,102
9,701,643
5,255,861
165,351
5,421,212
147,371
157,311
304,682
3,079,389
79,277
3,158,666
2,272,051
-
2,272,051
7,416,544
1,330,000
8,746,544
38,415,202
5,925,000
44,340,202
63,998,959
9,946,041
73,945,000
1,915,348,883
99,641,411
2,014,990,294
10,912,357
-
10,912,357
380,874
-
380,874
20,386,313
-
20,386,313
17,122,672
-
17,122,672
568,240
-
568,240
4,629,781
-
4,629,781
285,506
-
285,506
61,894,956
19,665,535
81,560,491
$ 2,031,529,582
$ 119,306,946
$ 2,150,836,528
See accompanying notes to basic financial statements
41
Functions /Programs
Primary government:
Governmental activities:
General government
Public safety
Public works
Community development
Community services
Interest on long -term debt
Total governmental activities
Business -type activities:
Water
Wastewater
Total business -type activities
Total primary government
CITY OF NEWPORT BEACH
Statement of Activities
Year Ended June 30, 2005
14,467,233 17,573,196
2,740,908 2,900,672
17, 208,141 20,473, 868
- 17,573,196
2,900,672
- 20,473,868
$ 158,180,002 $ 54,265,098 $ 17,480,834 $ 20,205,948 $ 91,951,880
See accompanying notes to basic financial statements
42
General revenues:
Taxes:
Property tax
Sales tax
Sales tax in -lieu
Transient occupancy tax
Business license tax
Franchise tax
Othertaxes
Intergovernmental (Unrestricted):
Motor vehicle license tax
Investment income
Net decrease in fair
value of investments
Other
Property income
Share of joint venture net income (note 15)
Special Item:
Capital contributions (note 16)
Total general revenues, special items
capital contributions and transfers
Change in net assets
Net assets at beginning of year,
as restated (notes 5 and 18 )
Net assets at end of year
Program Revenues
Operating
Capital
Total
Charges for
Grants and
Grants and
Program
Expenses
Services
Contributions
Contributions
Revenues
$ 11,378,609
$ 2,412,769
$ -
$ - $
2,412,769
63,214,291
16,264,493
2,191,564
-
18,456,057
46,359,871
6,031,248
13,536,246
17,910,133
37,477,627
6,437,006
5,129,858
-
-
5,129,858
13,073,215
3,952,862
1,753,024
2,295,815
8,001,701
508,869
-
-
-
-
140,971,661
33,791,230
17,480,834
20,205,948
71,478,012
14,467,233 17,573,196
2,740,908 2,900,672
17, 208,141 20,473, 868
- 17,573,196
2,900,672
- 20,473,868
$ 158,180,002 $ 54,265,098 $ 17,480,834 $ 20,205,948 $ 91,951,880
See accompanying notes to basic financial statements
42
General revenues:
Taxes:
Property tax
Sales tax
Sales tax in -lieu
Transient occupancy tax
Business license tax
Franchise tax
Othertaxes
Intergovernmental (Unrestricted):
Motor vehicle license tax
Investment income
Net decrease in fair
value of investments
Other
Property income
Share of joint venture net income (note 15)
Special Item:
Capital contributions (note 16)
Total general revenues, special items
capital contributions and transfers
Change in net assets
Net assets at beginning of year,
as restated (notes 5 and 18 )
Net assets at end of year
Net (Expense) Revenue and Changes in Net Assets
Primary Government
Governmental Business -type
3,105,963
159,764
Activities Activities
Total
$ (8,965,840) $ -
$ (8,965,840)
(44,758,234) -
(44,758,234)
(8,882,244) -
(8,882,244)
(1,307,148) -
(1,307,148)
(5,071,514) -
(5,071,514)
(508,869) -
(508,869)
(69,493,849) - (69,493,849)
- 3,105,963
- 159,764
3,105,963
159,764
- 3,265,727
3,265,727
$ (69,493,849) $ 3,265,727 $ (66,228,122)
46,303,366
-
46,303,366
18,977,828
-
18,977,628
5,339,827
-
5,339,827
9,215,862
-
9,215,862
3,458,165
-
3,458,165
3,029,476
-
3,029,476
240,534
-
240,534
6,395,860
-
6,395,860
1,209,074
424,157
1,633,231
(258.,125)
(87,921)
(346,046)
761,111
-
761,111
-
26,970
26,970
100,325
-
100,325
213,779,060
-
213,779,060
308,552,363
363,206
308,915,569
239,058,514
3,628,933
242,687,447
1,792,471,068
115,678,013
1,908,149,081
$ 2,031,529,582
$ 119,306,946
$ 2,150,836,528
See accompanying notes to basic financial statements
43
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44
Fund
Financial Statements
Governmental Funds
45
GOVERNMENTALFUNDS
Major Funds
The General Fund is used to account for fiscal resources which are dedicated to
governmental operations of the City, and not required to be accounted for in another
fund.
The Tide and Submerged Land Fund is a Special Revenue Fund used to account for
all revenues and expenditures related to the operation of the City's tidelands, including
beaches and marinas.
The Newport Coast Annexation Fund is a Special Revenue Fund used to account for
revenues and expenditures related to the Newport Coast Annexation Agreement.
Non -major Funds
Non -major governmental funds are those governmental funds which do not meet the
criteria of a major fund. For reporting purposes in this section, they are combined
together as Other Governmental Funds.
46
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47
Assets
Cash and investments (note 4)
Receivables:
Accounts
Notes
Interest
Intergovernmental receivables
Cash with fiscal agent (note 4)
Due from otherfunds (note12)
Prepaid items
Inventory
Other
Total assets
Liabilities and Fund Balances
Liabilities:
Accounts payable
Accrued payroll
Deposits payable
Unearned revenue
Unavailable revenue
Due to other funds (note 12)
Total liabilities
Fund balances:
Reserved for encumbrances
Reserved for debt service
Reserved for permanent endowment
Reserved for affordable housing
Reserved for prepaid items
Reserved for inventories
Reserved for long -term receivable
Unreserved:
Designated for special purposes
Designated, reported in:
Special revenue funds
Capital projects funds
Permanent funds
Designated for contingencies
Designated for capital projects
Designated for appropriations
Total fund balances
Total liabilities and
and fund balances
CITY OF NEWPORT BEACH
Governmental Funds
Balance Sheet
June 30, 2005
2,432,061 552,713 218,037
1,329,420 - -
648,365 - -
213,352 - -
50,000 - -
26,113,286 194,174 9,400,000
6,853,828
10,056,639
Tide and
568,240
Newport
Other
-
1,329,420
178,283
Submerged
-
Coast
Governmental
50,000
8,099,582
General
Land
7,095,959
Annexation
Funds
Totals
$
56,026,328
$ 570,684
$
16,388,400
$ 27,263,686
$ 100,249,098
3,491,709
771,949
-
1,979,186
6,242,844
50,000
-
-
-
50,000
952,747
-
-
-
952,747
7,359,786
-
5,000,000
1,343,162
13,702,948
-
-
-
4,158,772
4,158,772
1,041,123
-
-
-
1,041,123
648,365
-
-
178,283
826,648
213,352
-
-
-
213,352
5,533
5,533
$
69,783,410
$ 1,342,633
$
21,388,400
$ 34,928,622
$ 127,443,065
$
4,768,396
$ 417,273
$
72,881
$ 1,658,790
$ 6,917,340
5,129,689
29,260
-
-
5,158,949
2,930,176
149,213
-
-
3,079,389
1,341,227
-
-
930,824
2,272,051
1,126,527
-
5,000,000
2,605,825
8,732,352
1,041,123
1,041,123
15,296,015
595,746
5,072,881
6,236,562
27,201,204
2,432,061 552,713 218,037
1,329,420 - -
648,365 - -
213,352 - -
50,000 - -
26,113,286 194,174 9,400,000
6,853,828
10,056,639
568,240
568,240
4,629,781
4,629,781
-
1,329,420
178,283
826,648
-
213,352
1,402,100
50,000
35,707,460
-
- - 10,099,453
10,099,453
-
- - 6,076,969
6,076,969
-
- - 285,506
285,506
15,202,852
- - -
15,202,852
1,402,100
- 6,697,482 -
8,099,582
7,095,959
7,095,959
54,487,395
746,887 16,315,519 28,692,060
100,241,861
$ 69,783,410
$ 1,342,633 $ 21,388,400 $ 34,928,622
$ 127,443,065
See accompanying notes to basic financial statements
48
CITY OF NEWPORT BEACH
Governmental Funds
Reconciliation of the Balance Sheet of Governmental Funds
to the Statement of Net Assets
June 30, 2005
Fund balances of governmental funds
Amounts reported for governmental activities in the statement of net assets 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.
Long term debt that have not been reported in the governmental fund activity.
Amounts exclude long -term debt activity from internal service funds
which have been added below:
Certificates of participation payable
Note payable
Pre - annexation agreement
CDBG loan
Accrued interest payable for the current portion of interest due on long -term debt
has not been reported in the governmental funds.
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
unearned revenue in the governmental funds.
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 assets (including
capital assets) and liabilities of the internal service funds must be added to the
statement of net assets.
Investment in joint ventures is not a current financial resource and therefore not reported
in the governmental funds.
Internal balance created by the consolidation of internal service fund activities
related to enterprise funds is not reported in the governmental funds.
Net assets of governmental activities
See accompanying notes to basic financial statements
49
100,241,861
1,939,236,544
(5,570,000)
(1,789,332)
(14,400,000)
(2,276,000)
(147, 371)
8,732,352
4,910,327
2.757.144
(165,943)
$ 2,031,529,582
CITY OF NEWPORT BEACH
Governmental Funds
Statement of Revenues, Expenditures and Changes in Fund Balances
Year Ended June 30, 2005
See accompanying notes to basic financial statements
50
Tide and
Newport
Other
Submerged
Coast
Governmental
General
Land
Annexation
Funds
Totals
Revenues
Taxes and assessments:
Property tax
$46,303,366
$ -
$ -
$ -
$ 46,303,366
Sales tax
18,977,828
-
-
-
18,977,828
Sales tax in -lieu
5,339,827
-
-
-
5,339,827
Transient occupancy tax
9,215,862
-
-
-
9,215,862
Othertaxes
6,800,009
-
-
358,247
7,158,256
Intergovernmental
8,879,397
-
-
15,245,916
24,125,313
Licenses and permits
3,061,667
1,276,362
-
630,205
4,968,234
Charges for services
13,063,134
41,344
-
-
13,104,478
Fines and forfeitures
3,422,735
-
-
-
3,422,735
Investment income
1,209,074
37,909
418,279
691,485
2,356,747
Net decrease in fair value of investments
(258,125)
(8,262)
(91,163)
(136,329)
(493,879)
Property income
6,142,960
6,194,379
-
-
12,337,339
Donations
156,835
-
-
930,991
1,087,826
Contributions from property owners
-
-
-
14,779,013
14,779,013
Other
980,446
980,446
Total revenues
123,295,015
7,541,732
327,116
32,499,528
163,663,391
Expenditures
Current:
General government
10,856,506
64,161
-
-
10,920,667
Public safety
43,420,385
15,678,971
-
382,778
59,482,134
Public works
20,796,272
3,091,345
-
478,379
24,365,996
Community development
5,680,432
320,295
-
144,190
6,144,917
Community services
9,162,025
1,189,389
-
-
10,351,414
Capital outlay
5,790,097
886,555
374,535
26,434,861
33,486,048
Debt service (note 6):
Principal
-
149,801
1,200,000
339,000
1,688,801
Interest and fiscal charges
87,261
411,816
499,077
Total expenditures
95,705,717
21,467,778
1,574,535
28,191,024
146,939,054
Excess (deficiency) of revenues
over expenditures
27,589,298
(13,926,046)
(1,247,419)
4,308,504
16,724,337
Other financing sources (uses)
Transfers in (note 13)
621,876
14,212,397
1,200,000
4,567,684
20,601,957
Transfers out (note 13)
(18,168,159)
(1,390,453)
(1,053,564)
(20,612,176)
Total other financing sources
(uses)
(17,546,283)
14,212,397
(190,453)
3,514,120
(10,219)
Net change in fund balances
10,043,015
286,351
(1,437,872)
7,822,624
16,714,118
Fund balances, beginning
44,444,380
460,536
17,753,391
20,869,436
83,527,743
Fund balances, ending
$ 54,487,395
$ 746,887
$ 16,315,519
$ 28,692,060
$ 100,241,861
See accompanying notes to basic financial statements
50
CITY OF NEWPORT BEACH
Reconciliation of the Statement of Revenues, Expenditures,
and Changes in Fund Balances of Governmenal Funds
to the Statement of Activities
Year ended June 30, 2005
Net change in fund balances - total governmental funds $ 16,714,118
Amounts reported for governmental activities in the statement of activities differ
from the amounts reported in the statement of activities because:
Donations of capital assets are not reported as revenue in the governmental funds 213,779,060
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 capital outlays exceeded
depreciation in the current period. 6,696,654
Payment of debt service principal is an expenditure in the governmental funds, but the 1,688,801
repayment reduces long -term liabilities in the statement of net assets.
Accrued Interest for debt service. This is the net change in accrued interest for the current period. 7,782
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
unearned revenue in the governmental funds.This is the net change in unearned revenue for the current 2,116,070
period.
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. (1,900,572)
Investment in joint ventures creates an explicit, measurable equity interest reported only
in the statement of activities. 100,325
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. (143,724)
Change in net assets of governmental activities $ 239,058,514
See accompanying notes to basic financial statements
51
CITY OF NEWPORT BEACH
General Fund
Budgetary Comparison Statement
For the Year Ended June 30, 2005
See accompanying notes to basic financial statements
52
Variance with
Final Budget
Budgeted
Amounts
Positive
Original
Final
Actual
(Negative)
Revenues
Taxes and assessments:
Property
$ 44,216,619
$ 44,216,619
$ 46,303,366
$ 2,086,747
Sales
20,874,237
20,874,237
18,977,828
(1,896,409)
Sales tax in -lieu
-
-
5,339,827
5,339,827
Transient occupancy
8,969,240
8,969,240
9,215,862
246,622
Other
5,200,630
5,200,630
6,800,009
1,599,379
Intergovernmental
6,514,749
6,691,336
8,879,397
2,188,061
Licenses and permits
2,339,575
2,339,575
3,061,667
722,092
Charges for services
11,222,558
11,573,751
13,063,134
1,489,383
Fines and forfeitures
3,548,000
3,548,000
3,422,735
(125,265)
Investment income
1,500,000
1,500,000
1,209,074
(290,926)
Net decrease in fair value of investments
-
-
(258,125)
(258,125)
Property income
6,113,163
6,113,163
6,142,960
29,797
Donations
547,798
591,303
156,835
(434,468)
Other
326,800
839,558
980,446
140,888
Total revenues
111,373,369
112,457,412
123,295,015
10,837,603
Expenditures
General government:
City council
1,296,191
1,287,004
1,544,886
(257,882)
City clerk
381,217
388,429
375,456
12,973
City attorney
1,013,702
1,018,389
970,473
47,916
City manager
1,224,517
1,217,818
1,038,657
179,161
Administrative services
5,978,575
5,950,301
5,638,825
311,476
Human resources
1,313,863
1,323,698
1,288,209
35,489
Total General government
11,208,065
11,185,639
10,856,506
329,133
Public safety:
Police
35,004,012
28,397,123
28,081,092
316,031
Fire
25,928,119
16,746,483
15,339,293
1,407,190
Total Public safety
60,932,131
45,143,606
43,420,385
1,723,221
Public works:
General services
18,424,195
16,247,212
16,057,368
189,844
Public works
4,124,059
3,759,024
3,643,209
115,815
Utilities
1,096,799
1,101,486
1,095,695
5,791
Total Public works
23,645,053
21,107,722
20,796,272
311,450
See accompanying notes to basic financial statements
52
Community development:
Planning
Building
Code and Water Quality Enforcement
Total Community development
Community services:
Library Services
Recreation and senior services
Total Community services
Capital outlay
Total expenditures
Excess (deficiency) of revenues
over expenditures
Other financing sources (uses)
Transfers in
Transfers out
Long -term debt issued
Total other financing
sources (uses)
Net change in fund balance
Fund balance, beginning
Fund balance, ending
CITY OF NEWPORT BEACH
General Fund
Budgetary Comparison Statement
(continued)
566,938 (17,678,592) (17,546,283) 132,309
(4,829,616) (8,638,843) 10,043,015 18,681,858
44,444,380 44,444,380 44,444,380
$ 39,614,764 $ 35,805,537 7 54,487,395 $ 18,681,858
See accompanying notes to basic financial statements
53
Variance with
Final Budget
Budgeted Amounts
Positive
Original
Final
Actual
(Negative)
2,905,355
2,962,840
2,181,631
781,209
3,016,969
3,058,784
3,292,619
(233,835)
522,009
222,342
206,182
16,160
6,444,333
6,243,966
5,680,432
563,534
4,924,613
5,500,000
5,172,456
327,544
3,710,519
4,236,636
3,989,569
247,067
8,635,132
9,736,636
9,162,025
574,611
5,905,209
10,000,094
5,790,097
4,209,997
116,769,923
103,417,663
95,705,717
7,711,946
(5,396,554)
9,039,749
27,589,298
18,549,549
-
440,000
621,876
181,876
566,938
(18,118,592)
(18,168,159)
(49,567)
566,938 (17,678,592) (17,546,283) 132,309
(4,829,616) (8,638,843) 10,043,015 18,681,858
44,444,380 44,444,380 44,444,380
$ 39,614,764 $ 35,805,537 7 54,487,395 $ 18,681,858
See accompanying notes to basic financial statements
53
CITY OF NEWPORT BEACH
Tide and Submerged Land
Budgetary Comparison Statement
For the Year Ended June 30, 2005
Net change in fund balance
Fund balance, beginning
Fund balance, ending
(208,711) (4,731,604) 286,351
460,536 460,536 460,536
5,017,955
$ 251,825 $ (4,271,068) $ 746,887 $ 5,017,955
See accompanying notes to basic financial statements
54
Variance with
Final Budget
Budgeted Amounts
Positive
Original
Final
Actual
(Negative)
Revenues
Intergovernmental
$ -
$ -
$ -
$ -
Licenses and permits
1,217,700
1,217,700
1,276,362
58,662
Charges for services
27,500
27,500
41,344
13,844
Investment income
50,000
50,000
37,909
(12,091)
Net decrease in fair value of investments
(8,262)
(8,262)
Property income
5,663,783
5,663,783
6,194,379
530,596
Other
-
-
-
-
Total revenues
6,958,983
6,958,983
7,541,732
582,749
Expenditures
General government
-
64,161
64,161
-
Public safety
-
15,678,971
15,678,971
Public works
399,175
3,071,038
3,091,345
(20,307)
Community services
1,411,248
1,411,248
1,189,389
221,859
Community development
-
320,295
320,295
-
Capital outlay
1,448,013
1,448,013
886,555
561,458
Debt service:
Principal
149,801
149,801
149,801
-
Interest and fiscal charges
87,261
87,261
87,261
Total expenditures
3,495,498
22,230,788
21,467,778
763,010
Excess (deficiency) of revenues
over expenditures
3,463,485
(15,271,805)
(13,926,046)
1,345,759
Other financing sources (uses)
Transfers in
-
14,212,397
14,212,397
-
Transfers out
(3,672,196)
(3,672,196)
-
3,672,196
Total other financing
sources (uses)
(3,672,196)
10,540,201
14,212,397
3,672,196
Net change in fund balance
Fund balance, beginning
Fund balance, ending
(208,711) (4,731,604) 286,351
460,536 460,536 460,536
5,017,955
$ 251,825 $ (4,271,068) $ 746,887 $ 5,017,955
See accompanying notes to basic financial statements
54
CITY OF NEWPORT BEACH
Newport Coast Annexation
Budgetary Comparison Statement
For the Year Ended June 30, 2005
Expenditures
Capital outlay
575,000
575,000
Variance
200,465
Debt service (note 6):
with Final
Principal
Budget
1,200,000
Budgeted Amounts
-
Positive
1,775,000
Original Final
Actual
(Negative)
Revenues
Intergovernmental
$ - $ -
$ -
$
Investment income
415,000 415,000
418,279
3,279
Net decrease in fair value of investments
- -
(91,163)
(91,163)
Total revenues
415,000 415,000
327,116
(87,884)
Expenditures
Capital outlay
575,000
575,000
374,535
200,465
Debt service (note 6):
Principal
1,200,000
1,200,000
1,200,000
-
Total expenditures
1,775,000
1,775,000
1,574,535
200,465
(Deficiency) of revenues
over expenditures
(1,360,000)
(1,360,000)
(1,247,419)
112,581
Other financing uses
Transfers in
1,200,000
1,200,000
1,200,000
-
Transfers out
(1,200,000)
(1,200,000)
(1,390,453)
(190,453)
Total other financing (uses)
-
-
(190,453)
(190,453)
Net change in fund balance
(1,360,000)
(1,360,000)
(1,437,872)
(77,872)
Fund balance, beginning
17,753,391
17,753,391
17,753,391
-
Fund balance, ending
$ 16,393,391
$ 16,393,391
$ 16,315,519
$ (77,872)
See accompanying notes to basic financial statements
55
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56
Proprietary Funds
57
ll 0.101a1;11:*CAryd1UOIW
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.
58
CITY OF NEWPORT BEACH
Proprietary Fund
Statement of Net Assets
June 30, 2005
Assets
Current assets:
Cash and investments (note 4)
Receivables:
Accounts
Inventories
Prepaid items
Total current assets
Non - current assets:
Cash with fiscal agent (note 4)
Capital assets (note 5):
Land
Structures
Equipment
Infrastructure
Work in progress
Less accumulated depreciation
Total capital assets (net of accumulated depreciation)
Total noncurrent assets
Total assets
Liabilities
Current liabilities:
Accounts payable
Accrued payroll
Deposits payable
Accrued interest payable
Bonds payable (note 6)
Capital leases - current
Workers' compensation - current
General liability - current
Compensated absences - current
Total current liabilities
Non- current liabilities (note 6):
Bonds payable
Capital leases
Workers' compensation
General liability
Compensated absences
Total noncurrent liabilities
Total liabilities
Net Assets
Invested in capital assets, net of related debt
Unrestricted
Total Net Assets
Adjustment to reflect the consolidation of internal
service fund activities related to enterprise funds
Net assets of business -type activities
165,943
$ 119,306,946
See accompanying notes to basic financial statements
59
Enterprise Funds
Governmental
Total
Activities
Enterprise
Internal Service
Water
Wastewater
Funds
Funds
$ 13,033,755
$ 2,867,138
$ 15,900,893
$ 19,717,222
4,164,433
689,082
4,853,515
19,457
-
-
-
518,557
50,346
17,198,188
3,556,220
20,754,408
20,305,582
1,436,225
-
1,436,225
-
2,016,450
-
2,016,450
-
205,793
-
205,793
-
148,191
-
148,191
20,402,719
99,971,588
39,457,674
139,429,262
-
7,291,467
849,932
8,141,399
-
(32,088,466)
(10,956,218)
(43,044,684)
(13,409,447)
77,545,023
29,351,388
106,896,411
6,993,272
78,981,248
29,351,388
108,332,636
6,993,272
96,179,436
32,907,608
129,087,044
27,298,854
1,799,782
489,320
2,289,102
495,201
116,821
48,530
165,351
96,912
79,253
24
79,277
-
157,311
-
157,311
-
1,330,000
-
1,330,000
-
-
-
-
254,326
-
-
-
2,843,492
-
-
-
1,403,184
1,200,000
3,483,167
537,874
4,021,041
6,293,115
5,925,000
-
5,925,000
-
-
-
-
166,447
-
-
-
7,787,785
-
-
-
1,964,777
6,176,403
5,925,000
5,925,000
16,095,412
9,408,167
537,874
9,946,041
22,388,527
70,290,023
29,351,388
99,641,411
6,572,499
16,481,246
3,018,346
19,499,592
(1,662,172)
$ 86,771,269
$ 32,369,734
119,141,003
$ 4,910,327
165,943
$ 119,306,946
See accompanying notes to basic financial statements
59
CITY OF NEWPORT BEACH
Proprietary Fund
Statement of Revenues,
Expenses and Changes in Fund Net Assets
For the Year Ended June 30, 2005
Enterprise Funds
Operating revenues:
Charges for sales and services:
Water sales
Intergovernmental
Sewer service and connection fees
Other
Total operating revenues
Operating expenses:
Purchase of water
Salaries and benefits
Depreciation
Professional services
Maintenance and supplies
System maintenance
Fleet parts and supplies
Workers' compensation
Claims and judgments
Compensated absences
Retiree insurance
Other
Total operating expenses
Operating income (loss)
Nonoperating revenues (expenses):
Investment income
Net decrease in fair value of investments
Property income
Gain on removal of capital assets
Interest expense
Other fiscal charges
Total nonoperating revenues (expenses)
Income (loss) before transfers
Transfers in (note 13)
Change in net assets
Net assets, beginning of year
Net assets, end of year
Adjustment to reflect the consolidation of internal
service fund activities related to enterprise funds
Change in net assets of business -type activities
$ 16,677,054 $ -
787,523 664
- 2,887,914
108,619 12,094
17,573,196 2,900,672
5,992,768
3,339,714
1,326,947
1,534,684
706,073
67,995
1,183,981
517,406
297,163
520,092
79,281
1,323,478 167,473
14,291,659 2,765,396
$ 16,677,054 $ -
788,187
2,887,914 -
120,713 13,145,092
20,473,868 13,145,092
5,992,768
Governmental
Total
Activities
Enterprise
Internal Service
Funds
Funds
$ 16,677,054 $ -
788,187
2,887,914 -
120,713 13,145,092
20,473,868 13,145,092
5,992,768
-
4,523,695
1,143,813
1,844,353
1,629,644
1,831,847
32,587
1,226,165
478,624
147,276
-
-
379,271
-
5,238,811
-
3,335,731
-
1,579,160
-
1,735,921
1,490,951
-
17,057,055
15,553,562
3,281,537
135,276
3,416,813
(2,408,470)
349,500
74,657
424,157
464,911
(71,650)
(16,271)
(87,921)
(105,686)
26,970
-
26,970
-
-
-
-
136,028
(314,623)
-
(314,623)
(17,574)
(2,406)
(2,406)
(12,209)
58,386
46,177
497,679
3,269,328
193,662
3,462,990
(1,910,791)
-
-
-
10,219
3,269,328
193,662
3,462,990
(1,900,572)
83,501,941 32,176,072
$ 86,771,269 $ 32,369,734
165,943
$ 3,628,933
See accompanying notes to basic financial statements
0317
6,810,899
$ 4,910,327
CITY OF NEWPORT BEACH
Proprietary Fund
Statement of Cash Flows
For the Year ended June 30, 2005
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 received (payments made) for other operating activities
Net cash provided by operating activities
Cash Flows from noncepital financing activities:
Cash received from other funds
Cash paid to other funds
Net cash provided by noncapital financing activities
Cash Flows from capital related financing activities:
Acquisition of capital assets
Proceeds from sale of capital assets
Principal payments on long -term liabilities
Interest paid on long -term liabili0es
Other fiscal charges
Net cash (used) for capital related financing activities
Cash Flows from investing activities:
Interest on investments
Property income
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 of cash equivalents to the statement of net assets
Cash and investments reported on statement of net assets
Cash and investments with fiscal agent reported on statement of net assets
Cash and cash equivalents
Reconciliation of operating income to net cash
used for operating activities:
Operating income (loss)
Adjustments to reconcile operating income
to net cash used for operating activities:
Depreciation
(Increase) in accounts receivable
Decrease in intergovernmental receivable
(increase) in inventories
Decrease in prepaid items
Increase (decrease) in amounts payable and accrued payroll
(Decrease) in accrued interest payable
Increase in deposits payable
Increase in workers' compensation
Increase in general liability
(Decrease) in compensated absences
Total adjustments
Net cash used for operating activities
Non -cash investing, capital and financing activities:
Disposal of capital assets
Gain on disposal of capital assets
Total of non -cash activities
10,219
10,219
(6,144,634)
Enterprise Funds
(1,209,332)
(7,353,966)
(1,624,197)
-
Governmental
-
Total
Activities
(1,280,000)
Enterprise
Internal Service
Water
Wastewater
Funds
Funds
$ 17,794,028
$ 2,774,428
$ 20,568,456
$ 13,089,852
(3,379,918)
(1,187,612)
(4,567,530)
(6,098,373)
(8,766,235)
(605,499)
(9,371,734)
(6,008,998)
(1,285,549)
(155,379)
(1,440,928)
51,203
4,362,326
825,938
51188,264
1,033,684
10,219
10,219
(6,144,634)
(1,209,332)
(7,353,966)
(1,624,197)
-
-
-
140,856
(1,280,000)
-
(1,280,000)
(442,202)
(314,623)
-
(314,623)
(17,574)
(2,406)
(2,406)
(7,741,663)
(1,209,332)
(8,950,995)
(1,943,117)
277,850
58,386
336,236
379,225
26,970
26,970
304,820
58,386
363,206
379,225
(3,074,517)
(325,008)
(3,399,525)
(519,988)
17,544,497
3,192,146
20,736,643
20,237,210
$ 14,469,980
$
2,867,138
$
17,337,118
$ 19,717,222
$ 13,033,755
$
2,867,138
$
15,900,893
19,717,222
1,436,225
1,436,225
$ 14,469,980
$
2,867,138
$
17,337,118
$ 19,717,222
$ 3,281,537
$
135,276
$
3,416,813
$ (2,408,470)
1,326,947
517,406
1,844,353
1,629,644
(614,324)
(114,150)
(728,474)
(4,036)
867,299
-
867,299
-
-
-
-
(200,293)
-
25,848
(478,358)
287,406
(190,952)
(356,399)
(26,560)
-
(26,560)
-
5,785
-
5,785
-
-
-
-
2,238,050
-
-
-
528,961
(419,621)
1,080,789
690,662
1,771,451
3,442,154
$ 4,362,326
$
825,938
$
5,188,264
$ 1,033,684
$ 105,047
$
-
$
105,047
$ 4,828
36,028
$ 105,047
$
$
105,047
$ 140,856
See accompanying notes to basic financial statements
61
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62
Fiduciary Funds
63
FIDUCIARY FUNDS
Agency Funds, a type of Fiduciary Funds, are used to account for assets held by the
City as an agent for other government entities, private organizations, or individuals.
64
CITY OF NEWPORT BEACH
Agency Funds
Statement of Fiduciary Assets and Liabilities
June 30, 2005
Assets Totals
Cash and investments (note 4)
$ 2,152,649
Cash with fiscal agent (note 4)
3,326,425
Total assets
$ 5,479,074
Liabilities
Due to bondholders $ 5,402,049
Due to others 77,025
Total liabilities $ 5,479,074
See accompanying notes to basic financial statements
65
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M.-
Notes to the
Financial Statements
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2005
(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. The City operates under a Council- Manager
form of government and provides the following services: public safety (police,
fire, and marine), highway and streets, cultural and recreation, public
improvements, planning and zoning, utilities, and general administrative services.
The financial statements present the financial activity of the City of Newport
Beach (the primary government) and its component unit. The component unit
discussed below is included in the City's reporting entity because of the
significance of its operational or financial relationship with the City. This entity is
legally separate from the City. However, the City of Newport Beach's elected
officials have continuing full or partial accountability for fiscal matters of the
component unit. The financial reporting entity consists of: (1) the City, (2)
organizations for which the City is financially accountable, and (3) organizations
for which the nature and significance of their relationship with the City are such
that exclusion would cause the City's financial statements to be misleading or
incomplete.
An organization is fiscally dependent on the primary government if it is unable to
adopt its budget, levy taxes or set rates or charges, or issue bonded debt without
approval by the primary government. In a blended presentation, a component
unit's balances and transactions are reported in a manner similar to the balances
and transactions of the City. Component units are presented on a blended basis
when the component unit's governing body is substantially the same as the City's
or the component unit provides services almost entirely to the City.
Blended Component Unit
The financial statements of the City of Newport Beach include the financial
activities of the Newport Beach Public Facilities Corporation (the "Corporation ").
The Corporation was formed on March 9, 1992, for the purpose of assisting the
City of Newport Beach in the financing of public improvements, including a public
library. The Corporation is governed by a Board of Directors comprised of seven
individuals appointed by the City Council of the City of Newport Beach. The
Corporation's financial data and transactions are included in the debt service
67
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2005
fund. Separate financial statements are not prepared for the Corporation. The
debt service fund is used solely to account for the activities of the Corporation
and contains no other City debt financing activities.
b. Basis of Accounting and Measurement Focus
The basic financial statements of the City are composed of the following:
• Government -wide financial statements
• Fund financial statements
• Notes to the financial statements
Financial reporting is based upon all GASB pronouncements, as well as the
FASB Statements and Interpretations, APB Opinions, and Accounting Research
Bulletins that were issued on or after November 30, 1989 that do not conflict with
or contradict GASB pronouncements.
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.
[:P
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2005
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 another 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.
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, 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 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.
Sales taxes, property taxes, franchise taxes, gas taxes, motor vehicle license
fee, transient occupancy taxes, grants, and interest associated with the current
fiscal period are all considered to be susceptible 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.
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
We
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2005
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 current liabilities are generally included on their balance sheets. The
reported fund balance (net current assets) 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 net current assets. 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.
Special reporting treatments are used to indicate, however, that they should not
be considered "available spendable resources," since they do not represent net
current assets. Recognition of governmental fund type revenue represented by
non - current receivables is deferred until they become current receivables. Non-
current portions of other long -term receivables are offset by fund balance reserve
accounts. Revenues, expenses, gains, losses, assets, and liabilities resulting
from non - exchange transaction are recognized in accordance with the
requirements of GASB Statement No. 33.
Because of their spending measurement focus, expenditure recognition for
governmental fund types excludes amounts represented by non - current liabilities.
Since they do not affect net current assets, 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.
When both restricted and unrestricted resources are combined in a fund,
expenses are considered to be paid first from restricted resources, and then from
unrestricted resources.
70
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2005
Proorietary & 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 and all
liabilities (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 assets.
Proprietary fund operating revenues, such as charges for services, result from
exchange transactions associated with principal activity of the fund. Exchange
transactions are those in which each party receives and gives up essentially
equal values. Non - operating revenues, such as subsidies, taxes, and investment
earnings result from non - exchange transactions or ancillary activities. Amounts
paid to acquire capital assets are capitalized as assets in the proprietary fund
financial statements, rather than reported as expenditure. Proceeds of long -term
debt are recorded as a liability in the proprietary fund financial statements, rather
than as other financing source. Amounts paid to reduce long -term indebtedness
of the proprietary funds are reported as a reduction of the related liability, rather
than as expenditure.
Agency funds are custodial in nature (assets equal liabilities) and do not involve
the recording of City revenues and expenses.
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 met 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.
71
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2005
Tide and Submerged Land
The Tide and Submerged Land Fund is used to account for all revenues and
expenditures related to the operation of the City's tidelands, including
beaches and marinas.
Newport Coast Annexation Fund
The Newport Coast Annexation Fund is used to account for revenues and
expenditures related to the Newport Coast Annexation Agreement.
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.
Internal Service Funds — The Internal Service Funds are used to account for
the City's self- insured general liability and workers' compensation, compensated
absences, retiree insurance, and the cost of maintaining and replacing the City's
rolling stock fleet. City departments are the primary users of these services and
are charged a fee on a cost reimbursement basis.
Fiduciary Funds — The Fiduciary Funds are used to account for assets held by
the City as an agent for property owners with special assessments, local
businesses in business improvements districts, and other individuals who have
made miscellaneous special deposits with the City.
Cash and Investments
For purposes of the statement of cash flows, 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. For financial
statement presentation purposes, cash and cash equivalents are shown as cash
and investments and restricted cash and investments in the proprietary funds.
Investments
Investments are generally stated at fair value.
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
72
e.
a
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2005
respective funds based on each fund's average monthly cash and investments
balance.
The City's investment in LAIF is $7,687,899 at June 30, 2005. This investment
value is based on information provided by the State Treasurer's Office. The
carrying value of the City's position in the fund is materially consistent with the
fair value of the fund shares. This pool is under the regulatory oversight of the
State Treasurer's Office. The LAIF Board consists of five members as designated
by Statute. The Chairman is the State Treasurer, or his designated
representative. Two members qualified by training and experience in the field of
investment of 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.
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, 2005, the balance of this account was
$13,702,948 of which $5,000,000 represents a receivable from the Irvine Ranch
Water District in conjunction with the Newport Coast Pre- annexation Agreement.
See Note (17) for more information.
Inventories
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 type inventories are recorded as expenditures when
consumed.
Notes Receivable
Included in notes receivable is a $50,000 loan to the City Manager to purchase a
home in the City. As required by the City Charter and the employment
agreement, the City Manager has to establish residency in, and become an
elector of, the City of Newport Beach. The City Manager shall pay a simple
interest on the unpaid balance of the loan, which shall be due on or before
September 15`h of each fiscal year.
The interest rate on the loan shall be the average rate of return on all City
investments during the fiscal year. The City Manager may, but is not required to
make payments to reduce the principal amount of the loan at any time and
73
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2005
payments to reduce the principal shall not be subject to any pre - payment penalty.
The entire unpaid balance of the loan is due March 26, 2012, or at the City
Manager's separation from City employment.
h. Capital Assets
Capital assets, which include land, structures, equipment, and infrastructure
assets, are reported in the applicable governmental or business -type activities
columns in the Government -wide Financial Statements. Capital assets are
recorded at cost where historical records are available and at an estimated
original cost where no historical records exist. Equipment purchased in excess of
$5,000 is capitalized if it has an expected useful life of three years or more.
Building, infrastructure, and improvements are capitalized if cost is in excess of
$30,000. The cost of normal maintenance and repairs that do not add to the
value of the asset's lives are not capitalized. The City chose to value and report
on infrastructure assets in their entirety (e.g. Prior to 1980).
Major capital outlay for capital assets and improvements are capitalized as
projects are constructed. For debt - financed capital assets, interest incurred
during the construction phase is reflected in the capitalization value of the asset
constructed, net of interest earned on the invested proceeds over the same
period. Capital assets acquired through lease obligations are valued at the
present value of future lease payments at the date acquired. Contributed capital
assets are valued at their estimated fair market value at the date of contribution.
Capital assets used in operations are depreciated over their estimated useful
lives using the straight -line method in the government -wide financial statements
and in the fund financial statements of the proprietary funds. Depreciation is
charged as an expense against operations and accumulated depreciation is
reported on the respective balance sheet. The range of lives used for
depreciation purposes for each fixed asset class as follows:
Structures
30 -75 years
Equipment
3 -15 years
Infrastructure
20 -75 years
L 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
74
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2005
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.
j. Property Taxes
The assessment, levy, and collection of property taxes are the responsibility of
the County of Orange. The City records property taxes as revenue when
received from the County, except at year -end, when property taxes received
within 60 days are accrued as revenue. Property taxes are assessed and
collected each fiscal year according to the following property tax calendar:
Lien date
March 1
Levy date
July 1
Due dates
November 1 — 15t installment
March 1 — 2nd installment
Collection dates
December 10 — 1st installment
April 10 — 2nd installment
k. Compensated Absences
It is the City's policy to permit employees to accumulate earned but unused
vacation and limited amounts of earned but unused sick leave benefits, which will
be paid to employees upon separation from City service. Beginning in fiscal year
1990, the City adopted a general leave plan to replace the traditional vacation
and sick leave plan. The City uses a general leave plan which permits a
maximum of three years' accrual for every employee, above which the excess is
paid out as current compensation. All employees hired prior to January 1, 1990,
were given the option of remaining in the traditional vacation and sick leave plan
or enrolling in the general leave plan. All employees hired on or after January 1,
1990, are automatically enrolled in the general leave plan. Compensated
absences are 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.
Unearned Revenue
Unearned revenues are those where asset recognition has been met, but the
revenue recognition criteria have not been met.
75
(2)
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2005
Reconciliation of Government -wide and Fund Financial Statements
a. Explanation of Differences Between Governmental Funds Balance Sheet
and the Statement of Net Assets
The "total fund balances" of the City's governmental funds $100,241,861 differs
from "net assets" of governmental activities $2,031,529,582 reported in the
statement of net assets. This difference primarily results from the long -term
economic focus of the statement of net assets versus the current financial
resources focus of the governmental fund balance sheets.
Caoital Related Items
When capital assets (property, plant, and equipment) that are to be used in
governmental activities are purchased or constructed, the cost of those assets
are reported as expenditures in governmental funds. However, the statement of
net assets includes those capital assets among the assets of the City as a whole.
Cost of capital assets
$2,044,776,226
Accumulated depreciation
(105,539,682)
Total capital assets, net'
$1,939-236,544
"Amount excludes net capital assets of $6,993,272 from
Internal Service funds.
Long -term Debt Transactions
Long -term liabilities applicable to the City's governmental activities are not due
and payable in the current period and accordingly are not reported as fund
liabilities. All liabilities (both current and long -term) are reported in the statement
of net assets. Balances at June 30, 2005 were:
Certificates of participation $ 5,570,000
Note payable 1,789,332
Pre - annexation agreement 14,400,000
CDBG Loan 2,276,000
Total $24.035.332
76
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2005
Accrued Interest
Accrued liabilities in the statement of net assets differ from the amount reported
in governmental funds due to accrued interest on outstanding debt payable (see
Note 6).
Accrued interest added 147 371
Investment in Joint Venture
Investment in joint ventures is not a current financial resource and hence
reported only in the statement of net assets.
Net equity in joint venture $2.757.144
Unavailable Revenue
Some of the revenue will be collected after year -end, but is not available soon
enough to pay for current period's expenditures, and therefore is reported as
unavailable revenue in the governmental funds.
Unavailable revenue $8.732.352
Internal Service Funds
Internal service funds are used by management to charge the costs of certain
activities (such as equipment management and self- insurance authorities) to
individual funds. The assets (including capital assets) and liabilities of the internal
service funds are included in governmental activities in the statement of net
assets, because they primarily serve governmental activities of the City.
Internal Service Funds $4.910.327
Reclassifications and Eliminations
Interfund balances must generally be eliminated in the government -wide
statements, except for net residual amounts due between governmental
activities. Amounts involving fiduciary funds should be reported as external
transactions. Any allocations must reduce the expenses of the function from
which the expenses are being allocated, so that expenses are reported only once
— in the function in which they are allocated.
Investments in joint ventures are not a current financial resource and are not
reported in the governmental funds. Therefore, it is added for the statement of
net assets. Interfund balance created due to the consolidation of internal service
activities to governmental and enterprise funds is not reported in the fund
statements and must be added to the statement of net assets.
77
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2005
(2) Explanation of Differences between Governmental Funds
(a) Balance Sheet and the Statement of Net Assets, (Continued)
Liabilities and Fund Balances I Net Assets
Liabilities:
Total
Capital
Long -term
Accrued payroll
Governmental
Related
Accumulated Debt
Assets
Funds
Items
Depreciation Transactions
Cash and investments
$ 100,249,098
$ -
$ - $ -
Receivables:
- - - -
Unearned revenue
2,272,051 - - -
Accounts
6,242,844
-
- -
Notes
50,000
-
- -
Interest
952,747
-
- -
Intergovernmental receivables
13,702,948
-
- -
Cash with fiscal agent
4,158,772
-
- -
Interfund balances
1,041,123
-
- -
Investmentinjoint venture
-
-
- -
Prepaid items
826,648
-
- -
Inventory
213,352
-
- -
Other
5,533
-
- -
Capital assets
-
2,044,776,226
- -
Accumulated depreciation
-
-
(105,539,682) -
Total assets
$ 127,443,065
$ 2,044,776,226
$ (105,539,682) $ -
Liabilities and Fund Balances I Net Assets
Liabilities:
Accounts payable
$ 6,917,340 $ - $ - $ -
Accrued payroll
5,158,949 - - -
Accrued interest payable
- - - -
Deposits payable
3,079,389 - - -
Capital leases payable
- - - -
Claims payable
- - - -
Workers' compensation payable
- - - -
Compensated absences payable
- - - -
Unearned revenue
2,272,051 - - -
Unavailable revenue
8,732,352 - - -
Interfund payables
- - -
Due to other funds
1,041,123 - - -
Long -term liabilities - - - 24,035,332
Total liabilities 27,201,204 - - 24,035,332
Fund balances /net assets 100,241,861 2,044,776,226 (105,539,682) (24,035,332)
Total liabilities and
and fund balances /net assets $ 127,443,065 $ 2,044,776,226 $ (105,539,682) $ -
78
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30. 2005
Investment
Internal
Reclassifications
Interest in Joint Unearned
Service
and
Statement of
Payable Venture Revenue
Funds
Eliminations
Net Assets
$ - S - $ -
$ 19,717,222
$ -
$ 119,966,320
- - -
19,457
-
6,262,301
- - -
-
-
50,000
- - -
-
-
952,747
- - -
-
-
13,702,948
- - -
-
-
4,158,772
- - -
-
(1,041,123)
-
- 2,757,144
-
2,757,144
- - -
50,346
-
876,994
- - -
518,557
-
731,909
- - -
-
-
5,533
- - -
20,402,719
-
2,065,178,945
- - -
(13,409,447)
-
(118,949,129)
$ - $2,757,144 $ -
$27,298,854
$ (1,041,123)
$2,095,694,484
$ - $ - $ - $ 495,201 $ - $ 7,412,541
- - - 96,912 - 5,255,861
147,371 - - - - 147,371
- - - - - 3,079,389
- - - 254,326 - 254,326
- - - 1,403,184 - 1,403,184
- 2,843,492 - 2,843,492
- - - 1,200,000 - 1,200,000
- - 2,272,051
- (8,732,352) - - -
- - 165,943 165,943
- - - - (1,041,123) -
16,095,412 - 40,130,744
147,371 - (8,732,352) 22,388,527 (875,180) 64,164,902
(147,371) 2,757,144 8,732,352 4,910,327 (165,943) 2,031,529,582
$ - $2,757,144 $ - $27,298,854 $ (1,041,123) $2,095,694,484
79
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30. 2005
b. Explanation of Differences between Enterprise Funds and Government -wide
Statement of Net Assets
Total net assets of the City's Enterprise Funds of $119,141,003 differs from net
assets of the business -type activities of $119,306,946 reported in the
government -wide statement of net assets. The difference, $165,943 results from
the consolidation of internal service fund activities related to the enterprise funds.
(2) Reconciliation of government -wide and fund financial statements
(b) Explanation of Differences between Enterprise Funds and
Government -wide Statement of Net Assets, (Continued)
Assets
Cash and investments
Receivables:
Accounts
Cash with fiscal agent
Interfund balances
Capital assets, net
Total assets
Liabilities and Fund Balances / Net Assets
Liabilities:
Accounts payable
Accrued payroll
Accrued interest payable
Liabilities from restricted assets
Noncurrent liabilities:
Due within one year
Due in more than one year
Total liabilities
Net Assets
Invested in capital assets, net of related debt
Unrestricted
rn
Total Internal Government wide
Enterprise Service Statement of
Funds Funds Net Assets
$ 15,900,893 $ - $ 15,900,893
4,853,515 - 4,853,515
1,436,225 - 1,436,225
- 165,943 165,943
106,896,411 - 106,896,411
$ 129,087,044 $ 165,943 $ 129,252,987
$ 2,289,102 $ - $
2,289,102
165,351 -
165,351
157,311 -
157,311
79,277 -
79,277
1,330,000 -
1,330,000
5,925,000 -
5,925,000
9,946,041 -
9,946,041
99,641,411 -
99,641,411
19,499, 592 165,943
19, 665, 535
$ 119,141,003 $ 165,943 $
119,306,946
C.
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2005
Explanation of Differences between Governmental Fund Operating
Statements and the Statement of Activities
The "net change in fund balances" for governmental funds $16,714,118 differs
from the 'change in net assets' for governmental activities $239,058,514
reported in the statement of activities. The differences arise primarily from the
long -term economic focus of the statement of activities versus the current
financial resources focus of the governmental funds. The effect of the difference
is illustrated below.
Capital Related Items
When capital assets that are to be used in governmental activities are purchased
or constructed, the resources expended for those assets are reported as
expenditures in governmental funds. However, in the statement of activities, the
cost of those assets is allocated over their estimated useful lives and reported as
depreciation expense. In governmental funds, significant maintenance projects
are reclassified as functional expenses in the statement of net assets. Also,
contributed capital is not recorded in governmental funds; therefore it is added for
the statement of net assets. Beginning net assets in the statement of activities
has been changed to reflect a correction in valuation of infrastructure. See Note
(18) for more information.
Capital outlay
Net change to Internal Service Fund capital
assets
Capital contribution
Net change in capital related items
Depreciation expense
Deletions to accumulated depreciation
Net change in accumulated depreciation
81
$16,805,989
(4,577,275)
213,779.060
$226.007.774
($8,743,817)
2,338.035
($6.405.7821
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2005
Long -term Debt Transactions
Repayment of debt service is reported as an expenditure in governmental funds
and, thus, has the effect of reducing fund balance because current financial
resources have been used. Issuance of debt is reported as an other financing
source in governmental funds, thus increasing fund balance. For the City as a
whole, however, the principal payments reduce the liabilities, and proceeds from
long term debt increase liabilities in the statement of net assets.
Certificates of Participation $275,000
Note payable 149,801
Pre - annexation agreement 1,200,000
CDBG loan 64.000
Total principal payments made $1.688.801
Accrued Interest
Interest accrued on outstanding debt payable is not recorded as an expenditure
in governmental funds, and, thus has been added to the statement of activities.
Net change in accrued interest $7,782
Investment in Joint Venture
Investment in joint ventures creates an explicit, measurable equity interest
reported only in the statement of activities.
Net change in investment in joint venture alaQ 325
82
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2005
Unavailable Revenue
Some of the revenue will be collected after year -end, but is not available soon
enough to pay for current period's expenditures, and therefore is reported as
unavailable revenue in the governmental funds.
Net change in unavailable revenue $2.116.067
Internal Service Funds
Internal service funds are used by management to charge the costs of certain
activities, such as equipment management and self- insurance activities, to
individual funds. The adjustments for internal service funds "closes" those funds
by reimbursing or charging additional amounts to participating departments in
individual funds for costs over or under charged for those activities.
Net change in Internal Service Funds $1300.572
Reclassification and Eliminations
Interfund balances must generally be eliminated in the government -wide financial
statements, except for net residual amounts due between governmental and
business -type activities. Any allocations must reduce the expenses of the
function from which the expenses are being allocated, so that expenses are
reported only once — in the function in which they are allocated. Amounts
involving fiduciary funds should be reported as external transactions.
83
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30. 2005
(2) Reconciliation of Government -wide and Fund Financial Statements
(c) Explanation of Differences between Governmental Fund
Operating Statements and the Statement of Activities, (Continued)
Fund balances / net assets beginning of year 83,527,743 1,818,768,452 (100,007;622) (25,724,133) (155,153)
Fund balances / net assets end of year $ 100,241,861 $ 2,044,776,226 $ (105,539,682) $ (24,035,332) $ (147,371)
84
Total
Capital
Long -term
Governmental
Related
Accumulated
Debt Accrued
Funds
Items
Depreciation
Transactions Interest
Revenues:
Taxes and assessments
$ 86,995,139 $
-
S -
$ - 5 -
Intergovernmental
24,125,313
-
-
- -
Licenses and permits
4,968,234
-
-
- -
Charges for services
13,104,478
-
-
- -
Finesandforfeitures
3,422,735
-
-
- -
Investment income
2,356,747
-
-
-
Net increase in fair value of investments
(493,879)
-
-
- -
Property income
12,337,339
-
-
- -
Share of joint venture net income
-
-
-
- -
Donations
1,087,826
-
-
- -
Contributions from property owners
14,779,013
-
-
- -
Contributed capital
-
213,779,060
-
- -
Gain on sale of capital assets
-
-
-
- -
Other
980,446
Total revenues
163,663,391
213,779,060
Expenditures:
Current:
General government
10,920,667
197,277
-
Public safety
59,482,134
1,630,797
(643,517)
-
Public works
24,365,996
2,946,478
5,012,356
-
Community development
6,144,917
94,407
-
Community services
10,351,414
871,537
- -
Capital outlay
33,486,048
(16,805,989)
- -
Debt service:
Principal retirement
1,688,801
-
-
(1,688,801) -
Interest and fiscal charges
499,077
(7,782)
Total expenses
146,939,054
(12,228,714)
5,532,060
(1,688,801) (7,782)
Other financing sources (uses):
Transfers in
20,601,957
-
-
- -
Transfers out
(20,612,176)
Total other financing sources
(uses)
(10,219)
Net change in fund balances /
net assets
16,714,118
226,007,774
(5,532,060)
1,688,801 7,782
Fund balances / net assets beginning of year 83,527,743 1,818,768,452 (100,007;622) (25,724,133) (155,153)
Fund balances / net assets end of year $ 100,241,861 $ 2,044,776,226 $ (105,539,682) $ (24,035,332) $ (147,371)
84
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30. 2005
Investment
22,622
Internal
Reclassifications
1,228,415
in Joint
Unavailable
Service
and
Statement of
Venture
Revenue
Fund
Eliminations
Activities
$ -
$ -
$ -
$ -
$ 86,995,139
-
2,116,070
-
-
26,241,383
-
-
-
-
4,968,234
-
-
-
(143,724)
12,960,754
-
-
-
-
3,422,735
-
-
484,911
2,841,658
-
-
(105,686)
-
(599,565)
-
-
-
-
12,337,339
100,325
-
-
-
100,325
-
-
-
-
1;087,826
-
-
-
-
14,779,013
-
-
-
-
213,779,060
-
-
136,028
-
136,028
980,446
100,325
2,116,070
515,253
(143,724)
380,030,375
238,043
22,622
11,378,609
1,516,462
1,228,415
63,214,291
525,613
13,509,428
46,359,871
35,284
162,398
6,437,006
93,068
1,757,196
13, 073, 215
(16,680,059)
-
17,574 508,869
2,426,044 140,971,861
10,219 (20,612,176)
20,612,176
10,219
100,325 2,116,070 (1,900,572) (143,724) 239,058,514
2,656,819 6,616,282 6,810,899 (22,219) 1,792,471,068
$ 2,757,144 $ 8,732,352 $ 4,910,327 $ (165,943) $ 2,031,529,582
85
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30. 2005
Explanation of Differences between Enterprise Funds Operating Statement
and the Statement of Activities
The change in net assets for the City's enterprise funds $3,462,990 differs from
the change in net assets of the business -type activities $3,651,152 reported in
the government -wide statement of activities. The difference $188,162 results
from the consolidation of internal service fund activities related to the enterprise
funds.
(22) Reconciliation of Government -wide and Fund Financial Statement
(d) Explanation of Differences between Enterprise Funds
Operating Statement and the Statement of Activities. (Continued)
Operating revenues:
Charges for sales and services:
Water sales
Intergovernmental
Sewer service and connection fees
Other
Total operating revenues
Operating expenses:
Purchase of Water
Salaries and wages
Depreciation
Professional Services
Maintenance and supplies
System maintenance
Other
Total operating expenses
Operating income
Nonoperating revenues (expenses):
Investment income
Net increase in fair value of investments
Property income
Gain on removal of capital assets
Interest expense
Other
Total other financing sources
Income before transfers
Capital contributions
Transfers out
Total Internal Business -type activities
Enterprise Service Statement of
Funds Fund Activities
$ 16,677,054 $ - $ 16,677,054
788,187 - 788,187
2,887,914 - 2,887,914
50,022 50,022
20,403,177 20,403,177
5,992,768 -
4,523,695 -
1,844,353 -
1,831,847 -
1,226,165 (188,162)
147,276
1,490,951
17,057,055 (188,162)
3,346,122 188,162
424,157
(87,921)
26,970
70,691
(314,623)
(2,406)
116,868
5,992,768
4,523,695
1,844,353
1,831,847
1,038,003
147,276
1,490,951
16,868,893
3,534,284
- 424,157
- (87,921)
- 26,970
- 70,691
- (314,623)
(2,406)
116.868
3,462,990 188,162 3,651,152
Change in net assets 3,462,990 188,162 3,651,152
Net assets, beginning of year 115,678,013 (22,219) 115,655,794
Net assets, end of year $ 119,141,003 $ 165,943 $ 119,306,946
M.
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2005
(3) Budgetary Control and Compliance
The City adheres to the following general procedures in establishing the budgetary data
reflected in the financial statements:
• During April, the City Manager submits to the City Council a proposed operating
budget for the fiscal year commencing the following July 1. The operating budget
includes proposed expenditures and the means of financing them. Public
hearings are conducted at City Council meetings to obtain taxpayer comments.
Prior to July 1, the budget is legally adopted through passage of an appropriation
resolution.
• Budgets are adopted on an annual basis consistent with generally accepted
accounting principles for General and Special Revenue Funds.
• The City of Newport Beach does not present budget information on Capital
Projects Funds since the City approved project - length budgets. These project -
length budgets authorize total expenditures over the duration of a construction
project rather than year -by -year budgeting.
• The City of Newport Beach does not present budget information on Debt Service
and Permanent Funds since the City is not required to and does not adopt an
annual budget.
• The budget is formally integrated into the accounting system and employed as a
management control device during the year.
• The legal level of budgetary control is at the fund level. The City Manager is
authorized to transfer budgeted amounts between departments within any fund;
however, any revisions which alter the total appropriations of any fund must be
approved by City Council.
• At fiscal year -end, budget appropriations lapse. Budget appropriations for
incomplete capital projects are re- budgeted in the following fiscal year by Council
action and are included in the revisions noted above. Projects that are not started
during the budget year are reevaluated 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 reservations of
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.
87
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30. 2005
Expenditures exceeded appropriations in the following non -major governmental funds.
Appropriations Expenditures Variance
Environmental Liability
$
128,699
$
273,393
$
(144,694)
Miscellaneous Grants
$
24,500
$
24,983
$
(483)
Supplemental Law Enforcement
$
118,685
$
119,658
$
(973)
The following funds reported deficit fund balances:
Internal Service Funds
Insurance Reserve $6,790,552
Compensated Absences $6,210,604
(4) Cash and Investments
Cash and investments as of June 30, 2005 are classified in the accompanying financial
statements as follows:
Statement of net assets:
Cash and investments
Cash with fiscal agent
Fiduciary funds:
Cash and investments
Cash with fiscal agent
Total cash and investments
$ 135,867,213
5,594,997
2,152,649
3,326,425
$ 146,941,284
Cash and investments as of June 30, 2005 consist of the following:
Cash on hand
Deposits with financial institutions
Investments
Total cash and investments
MI.
$ 28,232
1,783,214
145,129,838
$ 146,941,284
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2005
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, where more restrictive) that address interest rate risk and
concentration of credit risk. This table does not address investments of debt proceeds
held by bond trustee 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.
* Excluding amounts held by bond trustee that are not subject to California Government Code restrictions
We
Maximum
Maximum
Maximum
Percentage
Investment
Authorized Investment Type
Maturity
of *Portfolio
in One Issuer
Local Agency Bonds
5 years
None
None
U.S. Treasury Obligations
5 years
None
None
U.S. Agency Securities
5 years
None
None
Banker's Acceptances
180 days
30%
30%
Commercial Paper
270 days
25%
10%
Negotiable Certificates of Deposit
5 years
30%
None
Repurchase Agreements
1 year
None
None
Reverse Repurchase Agreements
92 days
10% of base value
None
Medium -Term Notes
5 years
30%
None
Mutual Funds
N/A
20%
10%
Money Market Mutual Funds
N/A
20%
10%
Mortgage Pass - Through Securities
5 years
20%
None
County Pooled Investment Funds
N/A
None
None
Local Agency Investment Fund (LAIF)
N/A
5%
None
JPA Pools (other investment pools)
N/A
None
None
* Excluding amounts held by bond trustee that are not subject to California Government Code restrictions
We
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2005
Investments Authorized by Debt Agreements
Investment of debt proceeds held by bond trustee 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 trustee. The table also identifies certain
provisions of these debt agreements that address interest rate risk, credit risk, and
concentration of credit risk.
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 evenly
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 trustee) to market interest rate fluctuations is provided by the
following table that shows the distribution of the City's investments by maturity:
Ell
Maximum
Maximum
Percentage
Investment
Authorized Investment Type
Maximum Maturity
Allowed
in One Issuer
U.S. Treasury Obligations
None
None
None
U.S. Agency Securities
None
None
None
Banker's Acceptances
30 days - 360 days
None
None
Commercial Paper
180 days - 270 days
None
10%
Money Market Mutual Funds
N/A
None
None
Investment Agreements
None
None
None
Certificates of Deposit
None
None
None
Demand Deposits
30 days - 360 days
None
None
Time Deposits
30 days - 360 days
None
None
Local Agency Bonds
None
None
None
Forward Delivery Agreement
None
None
None
Forward Purchase and Sale Agreement
None
None
None
Corporate Notes
None
None
None
Repurchase Agreements
None
None
None
Local Agency Investment Fund
N/A
None
None
Municipal Obligations
None
None
None
County Pooled Investment Funds
N/A
None
None
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 evenly
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 trustee) to market interest rate fluctuations is provided by the
following table that shows the distribution of the City's investments by maturity:
Ell
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30. 2005
Investment Type
Money Market Funds
U.S. Treasury Notes
U.S. Agencies
Corporate Notes
Municipal Bond
Commercial Paper
Local Agency Investment Fund
Cash with Fiscal Agent:
Money Market Funds
Total
I Fair Value I Less than 1 1 1 to 3 1 3 to 5 1 Total I
$ 7,807,500 $ 7,807,500
23,621,397 8,013,968
79,270,570 26,105,719
15,852,739 2,083,899
975,290 -
993,020 993,020
7,687,899 7,687,899
$ - $ - $ 7,807,500
13,327,967 2,279,462 23,621,397
51,587,742 1,577,109 79,270,570
13,768,841 - 15,852,740
975,290 - 975,290
- - 993,020
- 7,687,899
8,921,422 8,921,422 8,921,422
$ 145,129,837 $61,613,427 $79,659,840 $ 3,856,571 $ 145,129,838
Investments with Fair Values Hiahly Sensitive to Interest Rate Fluctuations
As of June 30, 2005 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 below is the minimum
rating required by (where applicable) the California Government Code, the City's
investment policy, or debt agreements, and the actual rating as of year end for each
investment type.
Investment Type
Money Market Funds
U.S. Treasury Notes
U.S. Agencies
Corporate Notes
Municipal Bond
Commercial Paper
Local Agency Investment Fund
Cash with Fiscal Agent
Money Market Funds
Minimum Exempt
Legal From
Fair Value Ratino Disclosure AAA
$ 7,807,500 A $ - $ 4,173,035 $
23,621,397 N/A 23,621,397 -
79,270,570 N/A - 79,141,055
15,852,740 A - 4,535,907
975,290 N/A - 975,290
993,020 A - -
7,687,899 N/A - -
AA AA-
3,698,691 7,618,142
Not
A -1+ Rated
$ - $ 3,634,465
129,515
993,020 -
- 7,687,899
8,921,422 A - 8,921,422 - - - -
$145,129,836 $23,621,397 $97,746,709 $3,698,691 $7,618,142 $1,122,535 $11,322,364
91
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30. 2005
Concentration of Credit Risk
The investment policy of the City contains no limitations on the amount that can be
invested in any one issuer beyond that stipulated by the California Government Code.
For the year ended June 30, 2005 the City did not have investments in any one issuer
(other than U.S. Treasury securities, mutual funds, and external investment pools) that
represent 5% or more of total City investments.
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 market 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, 2005, none of the
City's deposits with financial institutions in excess of federal depository amounts were
held in uncol lateral ized accounts. As of June 30, 2005, City investments in the following
investment types were held by the same broker - dealer (counterparty) that was used by
the City to buy the securities:
Investment Type Reported Amount
Money Market Funds 7,715,547
U.S. Treasury Notes 10,175,452
U.S. Agencies 29,657,754
Corporate Notes 6,961,034
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
92
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30. 2005
accompanying financial statements at amounts based upon the City's pro -rata share of
the fair value provided by LAIF for the entire LAIF portfolio (in relation to the amortized
cost of that portfolio). The balance available for withdrawal is based on the accounting
records maintained by LAIF, which are recorded on an amortized cost basis.
(5) Capital Assets
Capital asset activity for the year ended June 30, 2005 was as follows:
Governmental Activities:
Beginning balance has been restated to include correction of value and of infrastructure.
See Note (18) for further discussion.
93
Beginning
Beginning
Balance
Balance
Balance
July 1, 2005
Restatement
as Restated
Additions
Deletions
June 30, 2005
Non - depreciable:
Land
$ 1,314,839,649
$ 183,386,523
$ 1,498,226,172
$ 214,927,597
$ -
$ 1,713,153,769
Work in progress
4,019,743
-
4,019,743
6,394,977
(1,442,217)
8,972,503
Depreciable:
-
Structures
34,451,196
-
34,451,196
-
-
34,451,196
Equipment
22,379,152
-
22,379,152
1,933,817
(767,351)
23,545,618
Infrastructure
275,065,008
4,166,454
279,231,462
8,770,875
(2,946,478)
285,055,859
1,650,754,748
187,552,977
1,838,307,725
232,027,266
(5,156,046)
2,065,178,945
Less accumulated
depreciation for:
Structures
(9,381,526)
(722,264)
-
(10,103,790)
Equipment
(14,668,191)
(1,998,799)
843,422
(15,823,568)
Infrastructure
(88,493,630)
(6,022,754)
1,494,613
(93,021,771)
(112,543,347)
(8,743,817)
2,338,035
(118,949,129)
Net Capital Assets
$ 1,725,764,378
S223,283,449_
$ (2,818,011)
$ 1,946,229,816
Beginning balance has been restated to include correction of value and of infrastructure.
See Note (18) for further discussion.
93
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30. 2005
Business -type Activities:
Non - depreciable:
Land
Work in progress
Depreciable:
Structures
Equipment
Infrastructure
Less accumulated depreciation for:
Structures
Equipment
Infrastructure
Net
Beginning Balance
Balance Additions Deletions June 30, 2005
$ 2,016,450 $ - $ $ 2,016,450
2,672,576 5,468,823 8,141,399
205,793 205,793
148,191 - 148,191
137,649,166 1,885,143 (105,047) 139,429,262
142,692,176 7,353,966 (105,047) 149,941,095
(91,595) (5,145) (96,740)
(131,158) (4,277) - (135,435)
(41,153,316) (1,834,931) 175,738 (42,812,509)
(41,376,069) (1,844,353) 175,738 (43,044,684)
$ 101,316,107 $ 5,509,613 $ 70,691 $ 106,896,411
Depreciation expense was charged in the following functions in the Statement of Activities:
94
Governmental
Business -type
Activities
Activities
General government
$ 197,277
$ -
Public safety
1,073,627
-
Public works
6,506,969
-
Community development
94,407
-
Community service
871,537
-
Water
-
1,326,947
Wastewater
-
517,406
$ 8,743,817
$ 1,844,353
94
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30. 2005
(6) Long -Term Debt
Changes in Long -Term Liabilities
Long -term liability for the year ended June 30, 2005, was as follows:
Internal service funds predominantly serve the governmental funds. Accordingly, long -term
liabilities for them are included as part of the above totals for governmental activities. Also,
liabilities for workers' compensation, claims and judgments, and compensated absences
are typically liquidated from the Internal Service funds through resources collected from
individual funds.
95
Amounts
Beginning
Ending
Due Within
Balance
Additions
Deletions
Balance
One Year
Governmental activities:
Certificates of participation payable
$ 5,845,000
$ -
$ (275,000) $
5,570,000
$ 290,000
Note payable
1,939,133
-
(149,801)
1,789,332
156,542
Pre - annexation agreement
15,600,000
-
(1,200,000)
14,400,000
1,200,000
CDBG Loan
2,340,000
-
(64,000)
2,276,000
69,000
Capital leases payable
862,975
-
(442,202)
420,773
254,326
Workers' compensations payable
8,393,227
7,476,861
(5,238,811)
10,631,277
2,843,492
Claims and judgements payable
2,839,000
3,864,692
(3,335,731)
3,367,961
1,403,184
Compensated absences
7,796,024
1,159,539
(1,579,160)
7,376,403
1,200,000
Total governmental activities
45,615,359
12,501,092
(12,284,705)
45,831,746
7,416,544
Business -type activities:
Water Revenue Bonds payable
8,535,000
-
(1,280,000)
7,255,000
1,330,000
Total
$ 54,150,359
$ 12,501,092
$ (13,564,705) $
53,086,746
$ 8,746,544
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, and compensated absences
are typically liquidated from the Internal Service funds through resources collected from
individual funds.
95
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30. 2005
Governmental Activities
• Certificates of Participation
In Fiscal Year 1998 -99, the Newport Beach Public Facilities Corporation issued
$7,330,000 of Refunding Certificates of Participation to advance refund the 1992
Certificates of Participation used to finance the construction of the Central Library. The
refunding was undertaken to reduce total debt service payments over the next twenty
years by $690,228 and resulted in an economic gain of $495,745. The Refunded
Certificates were executed and delivered pursuant to the Prior Trust Agreement. The
City has previously entered into a project lease with the Newport Beach Public
Facilities Corporation to lease certain property, facilities, improvements, and
equipment.
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 May 15,
1994, and are in amounts sufficient to cover the payment of principal and interest of
the Certificates. The 1998 Certificates consist of $2,995,000 of Serial Certificates with
interest rates from 3.6% to 4.55% and $4,335,000 of Term Certificates with interest
rates from 5.05% to 5.15 %. Interest on the Certificates is payable semiannually on
June 1 and December 1 of each year. Future principal payments range from $275,000
to $535,000 through June 1, 2019. Principal payments are payable annually on June 1
of each year. At June 30, 2005, the City has a required cash reserve balance for debt
service of $568,240, which is recorded as a restricted asset and reservation of fund
balance in the Debt Service Fund. The outstanding balance at June 30, 2005,
amounted to $5,570,000.
The annual amortization requirements of the Certificates of Participation are as
follows:
Year Ending
June 30
Principal
Interest
2006
$ 290,000
$ 275,000
2007
300,000
262,530
2008
315,000
249,480
2009
330,000
235,463
2010
345,000
220,448
2011 -2015
2,000,000
823,225
2016 -2019
1,990,000
262,190
Total
565,000
562,530
564,480
565,463
565,448
2,823,225
2,252,190
$ 5,570,000 $ 2,328,336 $ 7,898,336
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30. 2005
• Note Payable
Note payable consists of a note to the California Department of Boating and
Waterways in 1987 for a loan in the amount of $3,300,000. The note is payable in
thirty annual principal and interest installments of $237,062 at 4.5% rate of interest
beginning August 1, 1987. The outstanding balance at June 30, 2005, amounted to
$1,789,331.
The annual amortization requirements for the Note Payable are as follows:
Year Ending
June 30
Principal
Interest
Total
2006
$ 156,542
$ 80,520
$ 237,062
2007
163,587
73,475
237,062
2008
170,948
66,114
237,062
2009
178,641
5 8, 421
2 37, 062
2010
186,679
50,383
237,062
2011 -2015
882,675
118,084
1,000,759
2016
50,259
2,262
52,521
$ 1,789,331
$ 449,259
$ 2,238,590
• Newport Coast Pre - Annexation Agreement Payable
In conjunction with the January 1, 2002, annexation of Newport Coast, the City entered
into an agreement payable with the Newport Coast Committee for a total of
$18,000,000 to reduce property owner assessments used to finance certain road and
street improvements. The principal -only agreement which began in the 2003 fiscal
year, is payable over a period of fifteen years in equal installments of $1,200,000. The
outstanding balance at June 30, 2005, amounted to $14,400,000.
• CDBG Loan
In fiscal year 2003, the City received $2,400,000 in Section 108 loan proceeds to
assist with the funding for the Balboa Village Improvement Program. The loan is
collateralized by future Community Development Block Grant allocations with an
average interest rate of 6.5 %. Future principal payments range from $69,000 to
$208,000 through June 30, 2023. The outstanding balance at June 30, 2005,
amounted to $2,276,000.
97
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30. 2005
The annual amortization requirements for the CDBG Loan are as follows:
Year Ending
Payments
2006
261,321
June 30
Principal
Interest
Total
2006
$ 69,000
$ 120,514
$ 189,514
2007
73,000
118,224
191,224
2008
78,000
115,482
193,482
2009
84,000
112,253
196,253
2010
89,000
108,535
197,535
2011 -2015
544,000
469,521
1,013,521
2016 -2020
754,000
293,121
1,047,121
2021 -2023
585,000
55,039
640,039
$ 2,276,000
$ 1,392,689
$ 3,668,689
• Capital Leases
Rolling Stock Leases - Equipment Maintenance Internal Service Fund.- In fiscal year
2003, the City entered into a lease- purchase agreement, payable monthly, as lessee
for financing the acquisition of heavy duty street maintenance vehicles and fire trucks.
The term of the lease is five years and the interest rate for the lease is 2.72 %. The
lease agreement qualifies as a capital lease for accounting purposes as the title
transfers at the end of the lease term or the lease contains a bargain purchase option,
and therefore have been recorded at the present value of their future minimum lease
payment as of the inception date. The assets acquired through capital leases, totaling
$6,754,827, were classified as equipment in the Equipment Maintenance Internal
Service Fund.
Future minimum lease payments under the leases are as follows:
Year Ending June 30
Payments
2006
261,321
2007
119,567
2008
49,820
Total minimum lease payments
430,708
Less: amount representing interest
(10,326)
Present value of future
minimum lease payments
$ 420,382
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2005
• Claims and Judgments
The City retains the risk of loss for general liability and workers' compensation claims
as described in note (8). These amounts represent estimates of amounts to be paid for
reported general liability and workers' compensation claims including incurred- but -not-
reported claims based upon past experience, modified for current trends and
information. While the ultimate amount of losses incurred through June 30, 2005, is
dependent on future developments, based upon information from the City's attorneys,
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, 2005, for general liability amounted to $3,367,961
and for workers' compensation was $10,631,277.
• Compensated Absences
The City's policies relating to compensated absences are described in Note (1). This
liability, to be paid in future years from available and future resources, at June 30,
2005, is $7,376,403.
Business -type activities
• Water Revenue Bonds
In Fiscal Year 1998 -99, the City issued $14,225,000 of Refunding Water Revenue
Bonds to refund the 1994 Water Revenue Bonds used to finance the construction and
acquisition of water storage and transmission facilities. The refunding was undertaken
to reduce total debt service payments over a ten -year period by $481,153 and resulted
in an economic gain of $418,469. The bonds are secured by a pledge of net revenues
of the water fund. The 1998 Serial Bonds bear interest ranging from 3.6% to 4.5 %. At
June 30, 2005, the City has a required cash reserve balance of $1,436,225 which is
recorded as a cash with fiscal agent. Ten annual principal payments are payable on
August 1, and semiannual interest payments are payable on February 1 and August 1.
At June 30, 2005, the outstanding principal balance was $7,255,000, and accrued
interest payable was $157,311.
w7
(7)
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30. 2005
The annual amortization requirements for the Water Revenue Bonds are as follows:
Year Ending
59
McFadden Square
No.
June 30
Principal
Interest
Total
2006
$ 1,330,000
$ 286,693
$ 1,616,693
2007
1,385,000
229,331
1,614,331
2008
1,445,000
168,833
1,613, 833
2009
1,510,000
104,545
1,614, 545
2010
1,585,000
35,663
1,620,663
$ 7,255,000
$ 825,065
$ 87080,065
Limited Obligation Bonds
Special Assessment Districts Bonds
The City has issued certain Assessment District and Community Facilities District
Bonds. Although the City collects and disburses funds for these districts, the City has no
obligation or duty to pay any delinquency out of any available funds of the City. Neither
the faith and credit nor the taxing power of the City is pledged to the payment of the
bonds, and therefore the bonded indebtedness is not shown in the financial statements
of the City. The City holds reserve funds on behalf of bondholders; the assets are
recorded in the Special Assessment Agency Fund. Bonds outstanding at June 30, 2005
for each district under the Bond Acts of 1911 and 1915, and other special assessments,
are as follows:
Assessment District
No.
59
McFadden Square
No.
63
Newport Island
No.
64
Channel Road
No.
66
East Newport
No.
67
CDM Blk -133
No.
68
Newport Shores
No.
69
West Newport
No.
70
Bay Shores
No.
71
Balboa Boulevard
No. 72
No.
No.
No.
No.
No.
No.
No.
74
75
78
79
82
86
95 -1
Balboa Coves
Island Avenue
Balboa Business
Little Balboa Island
Beacon Bay
Corona del Mar
Balboa Peninsula
CIOSA Refunding Series A
100
Original Issue
$ 530,609
536,531
180,794
171,911
64,431
3,813,562
4,978,498
1,380,996
796,942
192,908
222,629
821,204
1,348,196
1,215,134
274,967
300,174
15,495,000
Bonds Outstanding
June 30. 2005
$ 105,000
85,000
63,000
40,000
23,000
3,813,562
4,978,498
1,310,000
470,000
35,000
190,000
821,204
1,070,000
1,055,000
230,000
270,000
13,155,000
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2005
Other Limited Obligation Bonds
The City has issued revenue bonds for the purpose of advancing the net proceeds of the
bonds to Hoag Memorial Hospital Presbyterian for the purposes of financing the
acquisition, construction and equipping of health facilities located within the City.
The bonds are limited obligations of the City payable from payments required to be
made by Hoag Memorial Hospital. The City is not obligated to pay the principal or
interest of the bonds except from payments made by Hoag, and neither the faith and
credit nor the taxing power of the City is pledged to the payment of the principal and
interest on the bonds.
Bonds outstanding at June 30, 2005 are as follows:
Series 1992 $ 91,000,000
Series 1996 100,000,000
Series 1999 125,000,000
The revenue bonds are subject to, at the option of Hoag Memorial Hospital Presbyterian,
optional and mandatory tender for purchase. If no tender or purchase is made, varying
redemption payments on the 1992 bonds commence on October 1, 2013 and are
required to be made through October 1, 2022. For the Series 1996 bonds, if no tender
for purchase is made, redemption is required to be made on October 1, 2026. If no
tender or purchase is made for the Series 1999 bonds, redemption is required to be
made on December 1, 2029.
(8) Risk Management — General Liability and Workers' Compensation
The City is exposed to various risks of loss related to torts, theft of, damage to, and
destruction of assets, errors and omissions, injuries to employees, and natural disasters.
The City carries commercial insurance with independent third parties for loss risks
associated with real and personal property, and automotive liability. The City purchases
fidelity bonds for employees in key positions. Settled claims from these risks have not
exceeded commercial insurance coverage for the past three years. For general liability,
the City has excess insurance coverage of $25 million per occurrence with a self- insured
retention (SIR) of $500,000 per occurrence.
For workers' compensation and employer's liability insurance, the City has excess
insurance coverage of $1,000,000 per occurrence with a $300,000 SIR. This coverage
provides for work - related accidents and diseases.
The Insurance Reserve fund was established to account for costs associated with
general liability and workers' compensation. The Insurance Reserve fund is accounted
for as an internal service fund where assets are set aside for risk management,
administration, claim settlements and benefit distribution. A premium is charged to each
fund that accounts for part-time or full -time employees. The total charge allocated to
101
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30. 2005
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 amount of
payouts and other economic and social factors. The total liability claims payable include
$13,999,238 which represents the discounted present value at June 30, 2005; the
claims were discounted using an interest rate of five percent.
Unpaid claims, beginning of fiscal year
Incurred claims (including IBNR)
Claim payments
Unpaid claims, end of fiscal year
General Liability
June 30, 2005
June 30, 2006
$ 4,285,236
$ 2,839,000
416,109
3,864,692
(1,862,345)
(3,335,731)
$ 2,839,000
$ 3,367,961
Workers' Compensation
June 30, 2005
June 30, 2006
$ 7,326,000
$ 8,393,227
5,433,852
7,476,861
(4,366,625)
(5,238,811)
$ 8,393,227
$ 10,631,277
For the past three years, no payment on any claim or judgment has exceeded the
amount of applicable insurance.
(9) Deferred Compensation Plan
The City offers its employees a deferred compensation plan created in accordance with
Internal Revenue Code Section 457. The plan, available to all City employees, permits
them to defer a portion of their salary until future years.
Section 457 plan assets were placed in trust for the exclusive benefit of all employees
and their beneficiaries. Therefore, all employee assets held in Section 457 plans are not
the property of the City and are not subject to the claims of the City's general creditors.
The assets under the plan, which are not included in the accompanying financial
statements, totaled $53,372,542 at June 30, 2005.
102
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2005
(10) Pension Plan
Plan Description - Defined Benefit Plan
The City contributes to the California Public Employees Retirement System (PERS), an
agent multiple - employer public employee defined benefit pension plan. PERS provides
retirement and disability benefits, annual cost -of- living adjustments, and death benefits
to plan members and beneficiaries. PERS acts as a common investment and
administrative agent for participating public entities within the State of California. Benefit
provisions and all other requirements are established by state statute and city ordinance.
Copies of PERS' annual financial report may be obtained from their executive office: 400
P Street, Sacramento, CA 95814.
Funding Policy
Participants are required to contribute 7% (9% for safety employees) of their annual
covered salary. The City makes the contributions required of City employees on their
behalf and for their account. The City is required to contribute at an actuarially
determined rate; the current rate is 4.628% for non - safety employees and 26.105% for
safety employees of annual covered payroll. The contribution requirements of plan
members and the City are established and may be amended by PERS.
Annual Pension Cost
For 2005, the City's annual pension cost of $12,441,624 for PERS was equal to the
City's required and actual contributions. A summary of principle assumptions and
methods used to determine the annual required contribution is shown below:
Valuation Date
Actuarial Cost Method
Amortization Method
Average Remaining
Period
Asset Valuation Method
Actuarial Assumptions
Investment Rate of
Return
Projected Salary
Increases
Miscellaneous Plan
June 30, 2002
Entry Age Actuarial Cost
Method
Level Percent of Payroll
22 Years as of the Valuation
Date
3 Year Smoothed Market
8.25% (net of administrative
expenses)
3.75% to 14.20% depending
on age, service, and type of
employment
103
Safety Plan
June 30, 2002
Entry Age Actuarial Cost
Method
Level Percent of Payroll
15 Years as of the Valuation
Date
3 Year Smoothed Market
8.25% (net of administrative
expenses)
4.27% to 11.59% depending
on age, service, and type of
employment
Inflation Rate
Payroll Growth
Individual Salary
Growth
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2005
3.50%
3.75%
A merit scale varying by
duration of employment
coupled with an assumed
annual inflation growth of 3.5%
and an annual production
growth of 0.25%
3.50%
3.75%
A merit scale varying by
duration of employment
coupled with an assumed
annual inflation growth of
3.5% and an annual
production growth of 0.25%
Initial unfunded liabilities are amortized over a closed period that depends on the plan's
date of entry into PERS. Subsequent plan amendments are amortized as a level percent
of pay over a closed 20 -year period. Gains and losses that occur in the operation of the
plan are amortized over a rolling period, which results in an amortization of 10% of
unamortized gains and loses each year. If the plan's accrued liability exceeds the
actuarial value of plan assets, then the amortization payment on the total unfunded
liability may not be lower than the payment calculated over a 30 -year amortization
period.
THREE -YEAR TREND INFORMATION FOR PERS ($ Amount in Thousands)
Fiscal
Year
6/30/03
6/30/04
6/30/05
Annual Pension
Cost (APC)
$6,283
$12,442
104
Percentage of Net Pension
APC Contributed Obligation
100% $0
100% $0
100% $0
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30. 2005
SCHEDULE OF FUNDING PROGRESS FOR PERS ($ Amount in Thousands
Entry Age
$139,983
Unfunded
$ (12,522) 110.4% $ 29,910 (41.866 %)
Safety 212,722 184,202
Normal
Actuarial
Liability
Annual
229,155
Valuation Accrued
Value of
(Excess
Funded Covered
UAAL as a
Date Liability
Assets
Assets )
Status Payroll
% of Payroll
(A)
(B)
(A - B)
(B / A) (C)
[(A -B) / C]
06/30/2002
$139,983
Misc. $120,030 $132,552
$ (12,522) 110.4% $ 29,910 (41.866 %)
Safety 212,722 184,202
$28,520 86.6% 22,955 124.243%
Total $ 332,752 $ 316,754
$ 15,998 95.2% $ 52,865 30.262%
06/30/2003
Misc.
$139,983
$134,113
$
5,870
95.8%
$ 31,586
18.584%
Safety
229,155
188,309
40,846
82.2%
23,941
170.611%
Total
$ 369,138
$ 322,422
$
46,716
87.3%
$ 55,527
84.132%
06/30/2004
Misc.
$151,246
$140,911
$
10,335
93.2%
$ 34,085
30.321%
Safety
250,554
200,715
49,839
80.1%
24,734
201.500%
Total
$401,800
$341,626
$
60,174
85.0%
$ 58,819
102.304%
More current information regarding actuarial data is not yet available from PERS.
Plan Description - Defined Contribution Plan
As of January 1, 1992, the City entered into a defined contribution plan with Public
Agency Retirement System ( "PARS ") for all of its part-time employees. 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, 2005, the City's covered payroll for employees participating
in the plan was $2,401,023. The City made employer contributions of $90,038 (3.75% of
current covered payroll). Assets of the plan totaled $1,668,612 at June 30, 2005.
(11) Post - Employment Health Care Benefits
As established by a City Council approved Memorandum of Understanding between the
City and its employees, the City provides post - employment health care benefits.
Employees who retire from the City with seven years of service and participate in PERS
retirement are eligible to receive health care benefits covering themselves and a
105
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30. 2005
qualified family member from the City's insurance carriers, Health Net and PERS.
Retirees are covered for 75% of plan premiums up to $400 per month. The City pays
50% of the total plan premiums while the active and retired employees split the
remaining premium at a rate of 25% each. This program is largely funded on a pay -as-
you-go basis. As of June 30, 2005, 319 retirees are enrolled in City's health plans out of
the 609 retirees eligible to receive benefits.
In July 2000, the City established a program to begin setting resources aside to fund the
"promise to pay" current active employees this future benefit over the working life of the
employee. The City contributes $20 per employee per month to this fund and the active
employees each contribute $10 per month. As of June 30, 2005, the City has set aside
$2.2 million to offset the unfunded portion of this benefit. These assets are accounted
for in an internal service fund and classed as unrestricted net assets on the statement of
net assets.
The City's expenditure for post - employment health care benefits for the past three fiscal
years are as follows:
Year Ending
June 30
2003
2004
2005
Post - employment Health
Care Expenditure
See Note 19 for further information on this plan.
(12) Interfund Receivables and Pavables
$ 844,316
$1,017,692
$ 936,042
At June 30, 2005, interfund receivables and payables were as follows:
General Fund
Nonmajor funds
Total
Due From
$ 1,041,123
$ 1,041,123
Due to
1,041,123
$ 1,041,123
Interfund receivables and payables were created in order to eliminate deficit cash
balances in special revenue and capital projects funds.
106
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2005
(13) Interfund Transfers
Interfund transfers at June 30, 2005, consisted of the following:
Transfers In:
The City typically uses transfers to fund ongoing subsidies. The general fund transferred
$14,212,397 to subsidize for the maintenance and operation of the Tide and Submerged
Land Fund. As required by the pre- annexation agreement, interest accrued in the
amount of $190,453 in the Newport Coast Annexation fund, but is due to and was
subsequently transferred to the General Fund.
(14) Reserved and Designated Fund Balances
The City has set up `reserves" of fund equity to segregate fund balances which are not
appropriable for expenditure in future periods, or which are legally set aside for a
specific future use. Fund "designations' also may be established to indicate tentative
plans for financial resource utilization in a future period.
The following provides explanations as to the nature and purpose of each reserve and
designation.
Reserved for encumbrances
Amounts reserved for encumbrances are commitments for materials and services on
purchase orders and contracts that are legally committed but not expended by fiscal
year end.
Reserved for debt service
This account sets aside a portion of fund balance to meet the annual debt service
requirements.
107
Tide and
Coast
Equipment
Submerged
Annexation
Maintenance
Non -major
General Fund
Land
Fund
Fund
Funds
Total
General Fund
$ -
$ 14,212,397
$ -
$ 10,219
$3,945,543
$ 18,168,159
O
m Non -major Funds
431,423
-
-
-
622,141
1,053,564
N
C
2 Newport Coast
190,453
-
1,200,000
-
-
1,390,453
Annexation Fund
Total
$ 621,876
$ 14,212,397
$ 1,200,000
$ 10,219
$4,567,684
$ 20,612,176
The City typically uses transfers to fund ongoing subsidies. The general fund transferred
$14,212,397 to subsidize for the maintenance and operation of the Tide and Submerged
Land Fund. As required by the pre- annexation agreement, interest accrued in the
amount of $190,453 in the Newport Coast Annexation fund, but is due to and was
subsequently transferred to the General Fund.
(14) Reserved and Designated Fund Balances
The City has set up `reserves" of fund equity to segregate fund balances which are not
appropriable for expenditure in future periods, or which are legally set aside for a
specific future use. Fund "designations' also may be established to indicate tentative
plans for financial resource utilization in a future period.
The following provides explanations as to the nature and purpose of each reserve and
designation.
Reserved for encumbrances
Amounts reserved for encumbrances are commitments for materials and services on
purchase orders and contracts that are legally committed but not expended by fiscal
year end.
Reserved for debt service
This account sets aside a portion of fund balance to meet the annual debt service
requirements.
107
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2005
Reserved for permanent endowment
This account reflects a permanent endowment established for the maintenance and
dredging of Upper Newport Bay.
Reserved for affordable housing
This account reflects amounts collected from developers to build affordable housing to
all income levels in compliance with State planning laws.
Reserved for prepaid items
This account reflects prepaid items which are not available, spendable resources.
Reserved for inventories
This account reflects the value of inventories purchased by the City but not yet issued to
the operating departments.
Reserved for long -term receivable
This account reflects the value of the note receivable which is not an available and
spendable resource.
Designated for special purposes
This account reflects funds that have been designated for special projects which vary in
nature.
Designated for contingencies
Contingency designations represent funds for unexpected emergencies.
Designated for capital projects
This account reflects unspent appropriations committed to capital projects in the prior
year.
Designation for appropriations
This account reflects unspent appropriations that may be utilized to augment the
operating budget.
(15) Joint Venture Agreements
Bonita Canyon Public Facilities Financing Authority
The Bonita Canyon Public Facilities Financing Authority (Authority) is a joint venture
formed by the City of Newport Beach, Irvine Unified School District, and Newport-Mesa
Unified School District. The Authority's Board is comprised of two members appointed by
each of the member agencies. The Authority created Community Facilities District 98 -1
to finance public facilities that will benefit the properties within their boundaries. The
Authority issued $45,000,000 of special tax bands that will be repaid by special
assessments; the City is not obligated in any manner to repay the bonds. The Authority
paid the City $30,577,712 (81.7 %) to pay for the costs of acquiring and constructing
108
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2005
public facilities including parks and road improvements. At June 30, 2005, the remaining
bond proceeds are held in trust as cash with fiscal agent totaling $319,341. The City
does not make any annual contributions to this joint venture. The City does not include
the Authority as a component unit, as the City is not financially accountable for the
Authority's activities and the Authority is not fiscally dependent on the City. The City's
equity interest in this joint venture is not readily determinable. Complete separate
financial statements can be obtained at the Newport Mesa Unified School District, 2985
Bear Street, Suite 8M, Costa Mesa, California.
Air Borne Law Enforcement
The City is a participant in a joint venture agreement with the City of Costa Mesa for the
operation of the Air Borne Law Enforcement program (ABLE). The oversight Board
consists of the Chiefs of Police of Costa Mesa and Newport Beach and one appointee
for each Member Agency for a total of four (4) Board Members. The Cities have a 50
percent interest in the venture, with each City having provided an initial investment of
two helicopters and related equipment. The City of Newport Beach's cost of participating
in the ABLE program is recorded in the General Fund, which provides for the
maintenance and operation of the program as well as replacement of capital equipment
used in the operation of the program. Annually, the amounts paid by the City to this joint
venture are approximately $500,000. Operation costs are offset by fees collected from
surrounding cities that may subscribe to regular patrol or request assistance on an as-
needed basis. Shared equally between the Cities of Newport Beach and Costa Mesa,
the City's share of net income from subscribers and other cities amounts to $100,325 for
fiscal year 2004 -05. The City's 50% interest in the net equity of this joint venture at
June 30, 2005, amounts to $2,757,144. Complete separate financial statements can be
obtained at the City of Costa Mesa at 77 Fair Drive, Costa Mesa, California.
Metro Cities Fire Authority
The City of Newport Beach is a Member of a joint venture agreement with the Cities of
Anaheim, Fountain Valley, Fullerton, Garden Grove, Huntington Beach, and Orange for
the operation of a communication network to provide fire suppression, emergency
medical assistance, and rescue services. The oversight board consists of one voting
member and one alternate appointed by the governing body of each member agency.
The City of Newport Beach's costs are based each fiscal year upon the number of
recorded incidents attributable to the City divided by the recorded incidents attributable
to all members during the year and, are recorded in the General Fund as an expenditure
for service. Upon termination of the agreement, the proceeds from the sale of the
property and assets of the joint venture will be paid to each member agency pursuant to
their fair share percentage. Annually, the amounts paid by the City to this joint venture
are approximately $393,019. The City's 10.06% interest in the net equity of this joint
venture at June 30, 2005, amounts to $82,058. Complete separate financial statements
can be obtained at the Metro Cities Fire Authority offices at 201 S. Anaheim Boulevard,
Suite 302, Anaheim, California.
109
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2005
(16) Special Item
Capital Contributions
In the current year, the City received contributed capital of $214 million consisting of
right -of -way and infrastructure as a result of the State of California's relinquishment of
Pacific Coast Highway between Jamboree Road and Newport Coast Drive. The
relinquishment of Pacific Coast Highway was initiated by the City of Newport Beach. In
the Governmental -wide Financial Statements, the contributed capital is recorded as a
special item in the General Revenue section of the Statement of Activities. This amount
is also reported as a current year addition to Capital Assets as land on the Government -
wide Statement of Net Assets.
(17) Commitments and Continqencies
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 6).
Circulation Improvement and Open Space Agreement
The City entered into a Circulation Improvement and Open Space Agreement (CIOSA)
with a developer whereby the City could receive a loan amount up to $14,395,572 to be
used only for certain transportation and circulation improvements, of which $11,967,082
had been received as of June 30, 2005. The City agreed to match the contribution
(without interest) by pledging 50% of future Fair Share Fees (developer impact fees)
which are recorded in the Circulation and Transportation Special Revenue Fund. During
the year ended June 30, 2005, the City received $411,229 of Fair Share Fees, and
$205,614 was paid to the CIOSA Construction capital projects fund. Through June 30,
2005, $2,537,048 of Fair Share Fees has been paid. No additional liability has been
recorded, because any future repayment is uncertain; any amounts not contributed by
February 20, 2016, will be forgiven.
Newport Coast Pre - Annexation Agreement
In Fiscal Year 2001 -02, the City entered into a Pre- Annexation Agreement with the
Newport Coast Committee that stipulated certain terms and conditions for the
annexation of property collectively known as Newport Coast.
In conjunction with the annexation, the City also agreed to sell the water service rights
for the annexed area to Irvine Ranch Water District for $25.0 million. Of the $25.0 million
payable from the Irvine Ranch Water District, $20.0 million was received in prior years
and the remaining $5.0 million is due in two installments ranging from $2.0 to $3.0
110
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2005
million through January 1, 2008. At June 30, 2005, the remaining receivable of $5.0
million has been recorded as an Intergovernmental Receivable in the Newport Coast
Annexation Special Revenue Fund.
Among other basic provisions, the Pre - Annexation Agreement stipulates specific
requirements for the use of proceeds from the sale of the water rights to Irvine Ranch
Water District. The City has entered into an agreement to reimburse Newport Coast
residents $18.0 million of the $25.0 million for certain public road and street
improvements previously financed by property owner assessments. The assessment
debt relief will be provided to Newport Coast residents in equal installments of $1.2
million over 15 years. The remaining $7.0 million may be used in locating, planning, and
constructing a Community Center within the annexed area. In the event that the
Community Center is constructed for less than $7.0 million, or not at all, the Newport
Coast Committee has the option to allocate the funds to further reduce the property
owner assessments. In the Government -wide Statements, the $14.4 million outstanding
assessment debt relief has been recorded as a Noncurrent Liability, and the $7.0 million,
including applicable interest earnings, has been restricted in the Net Assets.
Construction and contractual commitments for major construction projects are as follows:
111
Total
Project
Project
To Date
Unexpended
Budget
Expenses
Commitments
General Plan
$ 649,580
$ 158,232
$ 458,661
Sewer Pump Master Plan Improv
1,577,626
801,655
776,084
Seawind Community Pavement Rehab
942,000
1,039
942,000
Jamboree Road Widening
959,483
18,730
904,753
Water Main Master Plan Improv
3,079,749
1,454,027
1,632,193
Big Canyon Cover Project
3,770,020
3,213,141
527,558
Newport Coast Watershed Assessment
374,236
95,027
529,099
Mariners Library
5,565,512
1,783,478
3,806,392
111
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2005
(18) Net Asset Restatements
Beginning Net Assets have been restated by the net effect of changes resulting from the
correction of an error in the valuation of City -owned capital assets. The adjustment
increased the government -type activities beginning net assets by $187,552,977.
Net Assets
Government -type Activities:
Net assets at July 1, 2004, as previously reported
Adjustments:
Land
Infrastructure
Total adjustment
Net assets at July 1, 2004, as restated
(19) Subsequent Event
Conduit Debt Issuance
$ 1,604,918,091
183,386,523
4,166,454
187,552,977
$ 1,792,471,068
The City has issued certain limited obligation, conduit debt, listed as follows:
Conduit Debt
Series A -C Hoag Memorial Presbyterian
Par Value
$200,000,000
Issue Date
August 24, 2005
The City has issued revenue bonds for the purpose of advancing the net proceeds of the
bonds to Hoag Memorial Hospital Presbyterian for the purposes of financing the
acquisition, construction and equipping of health facilities located within the City.
The bonds are limited obligations of the City payable from payments required to be
made by Hoag Memorial Hospital. The City is not obligated to pay the principal or
interest of the bonds except from payments made by Hoag, and neither the faith and
credit nor the taxing power of the City is pledged to the payment of the principal and
interest on the bonds.
Post - Employment Healthcare Plan Changes
Subsequent to year end, the City and employee associations agreed to major changes
to Post Employment Healthcare Plan. New employees and employees with less than five
years of service will participate in a Health Reimbursement Arrangement ( "HRA ") under
IRS Revenue Ruling 2002 -41 (June 26, 2002) and IRS Notice 2002 -45
112
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2005
(June 26, 2002). The new plan requires certain defined employee and employer
contributions. However, once the contributions have been made to the employee's
account, the City has no further funding obligation to fund the plan.
Employees with greater than five years of service or employees that have a combined
factor, of age and years of service, that is greater than or to equal 50 will have the option
to retain a hybrid of the former defined benefit formula or fully convert to the new plan.
As of the date of this report, employee plan elections have not yet been determined.
Once the employee elections have been cast and demographic data is clear, the City
plans to recalculate the actuarial liability associated with the former plan and amortize
the unfunded liability over a period not -to- exceed thirty years.
113
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114
Supplementary
Information
Non Major Governmental Funds
115
Non -major 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 Asset Forfeiture Fund was established to account for all revenues resulting from the seizure of assets in
conjunction with criminal cases (primarily drug trafficking). It is the City's policy that all such funds shall be used
for enhancement of law enforcement programs.
The Contributions Fund is used to account for revenues received from other government agencies or private
developers and expended for specific street or highway construction projects.
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 Combined Transportation Fund is used to account for the revenues and expenditures of funds received
from the Orange County Combined Transportation Funding Program. Expenditures from this fund are used
exclusively for transportation related purposes.
The Arterial Highway Rehabilitation Fund is used to account for federal funds available through the Federal
Highway Administration Arterial Highway Rehabilitation Program to share the cost of rehabilitating certain
arterial roadways in the City.
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 Misc. Grants Fund is used to account for all other short-term grant programs
116
Non -major Debt Service Funds
Debt Service Funds are used to account for debt service transactions including revenue
collections and payments of principal and interest on long -term obligations of the City. The
City of Newport Beach Debt Service Fund is as follows:
The Library COP Fund is used to account for the debt service transactions related to the Certificates of
Participation used to finance the construction of the Central Library.
Non -major 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 CIOSA Construction Fund is used to account for the receipt and expenditure of funds for the Circulation
Improvement and Open Space Agreement ( CIOSA). The improvements include street and frontage
improvements.
The Bonita Canyon Development Fund is used to account for the receipt and expenditure of funds for the
Bonita Canyon Public Facilities Agreement. The improvements include certain public parks and recreation
facilities, and street improvements and facilities.
The Oil Spill Remediation Fund is used to account for the receipt of the settlement proceeds from the
American Trader Company. These funds must be used on projects affecting the areas damaged by the spill.
The Mariners Library Fund is used to account for the receipt and expenditure of funds for the Mariners Library
Capital Project.
The Fire Station 7 Fund is used to account for the property acquisition, design and construction of a new
fire station which will replace a temporary fire station that provides service in the northern part of the city.
The City Hall Improvement Fund is used to account for the design and construction of a new Civic
Center Complex.
The Marine Science Center Fund is used to account for the design and construction of a new Marine
Science Center.
Non -major 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 Fund is as follows:
The Bay Dredging Fund is used to account for the receipt of permanent endowments intended to fund the
ongoing cost of maintaining and dredging of the Upper Newport Bay.
The Ackerman Fund is used to account for the receipt of permanent endowments intended as follows: 75% of
the fund's investment proceeds will be used for the purchase of High Tech Library Equipment while the
remaining 25% will be used for Scholarships for needy students.
117
CITY OF NEWPORT BEACH
Combining Balance Sheet
Non -Major Governmental Funds
June 30, 2005
Liabilities and Fund Balances
Liabilities:
Accounts payable
$ 77,492
Special Revenue
$ 372,589
$ 230,532
Unearned revenue
-
-
Circulation
-
State
Asset
-
and
-
Gas Tax
Forfeiture
Contributions
Transportation
Assets
Total Liabilities
77,492
8,776
1,955,561
Cash and investments
$ 3,610,122
$ 142,668
$ 2,545,010
$ 4,246,535
Receivables:
Reserved for encumbrances
782,954
48,291
1,155,638
Accounts
-
-
518,283
-
Intergovernmental receivables
-
-
1,090,053
-
Cash with fiscal agent
-
-
-
-
Prepaid items
-
-
-
-
Other
-
-
85,601
-
Total Assets
$ 3,610,122
$ 142,668
$ 4,153,346
$ 4,246,535
Liabilities and Fund Balances
Liabilities:
Accounts payable
$ 77,492
$ 8,776
$ 372,589
$ 230,532
Unearned revenue
-
-
206,445
-
Unavailable revenue
-
-
1,376,527
-
Due to other funds
-
-
-
-
Total Liabilities
77,492
8,776
1,955,561
230,532
Fund balances:
Reserved for encumbrances
782,954
48,291
1,155,638
1,184,963
Reserved for debt service
-
-
-
-
Reserved for permanent endowment
-
-
-
-
Reserved for prepaid items
-
-
-
-
Unreserved:
Designated for special purposes
2,749,676
85,601
1,042,147
2,831,040
Total fund balances
3,532,630
133,892
2,197,785
4,016,003
Total liabilities and
fund balances
$ 3,610,122
$ 142,668
$ 4,153,346
$ 4,246,535
118
Building
Arterial
Community
Air Quality
Excise
Combined Highway
Development
Management
Tax
Transportation Rehabilitation
Block Grant
District
$ 399,105 $ 2,622,994 $ 6,575 $ 465,204 $ 98,741
- 493,200 - - -
52,034 - 201,075 -
- - 5,533
$ 399,105 $ 3,168,228 $ 6,575 $ 671,812 $ 98,741
$ 6,951 $ 15,221 $ - $ 7,911 $ 3,135
- 476,218 - 11,073 -
69,016 - 201,074 -
- - - 218,263 -
6,951 560,455 - 438,321 3,135
2,595 1,768,965 - 54,150 -
389,559 838,808 6,575 179,341 95,606
$ 399,105 $ 3,168,228 $ 6,575 $ 671,812 $ 98,741
(continued)
119
Assets
Cash and investments
Receivables:
Accounts
Intergovernmental receivables
Cash with fiscal agent
Prepaid items
Other
Total Assets
Liabilities and Fund Balances
Liabilities:
Accounts payable
Unearned revenue
Unavailable revenue
Due to other funds
Total Liabilities
Fund balances:
Reserved for encumbrances
Reserved for debt service
Reserved for permanent endowment
Reserved for prepaid items
Unreserved:
Designated for special purposes
Total fund balances
Total liabilities and
fund balances
CITY OF NEWPORT BEACH
Combining Balance Sheet
Non -Major Governmental Funds
June 30, 2005
(continued)
Special Revenue
Supplemental
Environmental Law Misc
Liability Enforcement Grants
Debt Service
Library
COP
$ 1,887,517 $
8,495
- - - 568,240
178,283 - - -
$ 2,074,295 $ $ $ 568,240
$ 14,912
14,912
178,283
1,881,100
568,240
568,240
$ 2,074,295 $ - $ - $ 568,240
120
Capital Projects
Assessment CIOSA Bonita Canyon Oil Spill Mariners
District Construction Development Remediation Library
$ - $ 3,331,647 $ - $ 914,396 $ 1,404,986
- - - 959,208
3,271,191 - 319,341 - -
$ 3,271,191 $ 3,331,647 $ 319,341 $ 914,396 $ 2,364,194
$ 170,504 $
814,327
984,831
478,992
$ 232,582 $ 4,066 $ 375,939
- 959,208
8,533
241,115 4,066 1,335,147
56,063 1,029,047
1,807,368 3,331,647 78,226 854,267 -
2,286,360 3,331,647 78,226 910,330 1,029,047
$ 3,271,191 $ 3,331,647 $ 319,341 $ 914,396 $ 2,364,194
(continued)
121
CITY OF NEWPORT BEACH
Combining Balance Sheet
Non -Major Governmental Funds
June 30, 2005
(continued)
Capital Projects
Marine City Hall
Fire Station 7 Science Center Improvements
Assets
Cash and investments $ 121,084 $ 297,166 S 254,649
Receivables:
Accounts - - -
Intergovernmental receivables - - -
Cash with fiscal agent - - -
Prepaid items - - -
Other - -
Total Assets $ 121,084 $ 297,166 $ 254,649
Liabilities and Fund Balances
Liabilities:
Accounts payable
$ 95,460 $
9,173
$ 33,547
Unearned revenue
-
237,088
-
Unavailable revenue
-
-
-
Due to other funds
-
-
-
Total Liabilities
95,460
246,261
33,547
Fund balances:
Reserved for encumbrances
25,624
45,444
221,102
Reserved for debt service
-
-
-
Reserved for permanent endowment
-
-
-
Reserved for prepaid items
-
-
-
Unreserved:
Designated for special purposes
-
5,461
-
Total fund balances
25,624
50,905
221.102
Total liabilities and
fund balances
$ 121,084 $
297,166
$ 254,649
122
Permanent Fund
Total
Other
Ackerman Governmental
Bay Dredging Donation Funds
3,925,883 $ 989,404 $ 27,263,686
1,979,186
1,343,162
4,158,772
178,283
5,533
$ 3,925,883 $ 989,404 $ 34,928,622
1,658,790
930,824
2,605,825
1,041,123
6,236,562
6,853,828
- - 568,240
3,857,000 772,781 4,629,781
- - 178,283
68,883 216,623 16,461,928
3,925,883 989,404 28,692,060
$ 3,925,883 $ 989,404 $ 34,928,622
123
CITY OF NEWPORT BEACH
Non -Major Governmental Fund Types
Combining Statement of Revenues,
Expenditures and Changes in Fund Balances
For the Year ended June 30, 2005
Revenue
Other financing sources (uses)
Transfers in
-
- 188,971
-
Circulation
(160,000)
State
Asset
Total other financing sources (uses)
and
- 56,459
Gas Tax
Forfeiture
Contributions
Transportation
Revenues:
Fund balances (deficit), beginning
3,602,988
134,808 (956,689)
4,310,303
Other taxes
$ -
$ -
$ -
$ -
Intergovernmental
1,497,280
233,471
4,673,823
-
Licenses, permits and fees
-
-
-
411,229
Investment income
87,792
3,986
-
112,739
Net decrease in fair value of investments
(19,134)
(236)
-
(24,571)
Donations
-
-
628,005
-
Contributions from property owners
-
-
-
-
Total revenues
1,565,938
237,221
5,301,828
499,397
Expenditures:
Current:
General government
-
-
-
-
Public safety
-
238,137
-
Public works
-
-
-
-
Community development
-
-
-
-
Community services
-
-
-
-
Capital outlay
1,476,296
-
2,203,813
508,083
Debt service:
Principal
-
-
-
-
Interest and fiscal charges
-
-
-
-
Total expenditures
1,476,296
238,137
2,203,813
508,083
Excess (deficiency) of revenues
over expenditures
89,642
(916)
3,098,015
(8,686)
Other financing sources (uses)
Transfers in
-
- 188,971
-
Transfers out
(160,000)
- (132,512)
(285,614)
Total other financing sources (uses)
(160,000)
- 56,459
(285,614)
Net change in fund balances
(70,358)
(916) 3,154,474
(294,300)
Fund balances (deficit), beginning
3,602,988
134,808 (956,689)
4,310,303
Fund balances, ending
$ 3,532,630
$ 133,892 $ 2,197,785
$ 4,016,003
124
Special Revenue
Building
Arterial
Community
Air Quality
Excise
Combined
Highway
Development
Management
Environmental
Tax
Transportation
Rehabilitation
Block Grant
District
Liability
$ -
$ -
$ -
$ -
$ -
$ 358,247
-
1,595,549
-
559,698
111,940
-
218,976
-
-
-
-
-
9,692
55,991
160
7,905
1,466
50,013
(2,112)
(12,203)
(35)
-
(320)
(10,900)
226,556 1,639,337
169,563 1,043,658
169,563 1,043,658
56,993 595,679
(56,459)
(56,459)
56,993 539,220
125 567,603 113,086 397,360
66,297 273,393
136,690
58,711
64,000
122,301
381,702 66,297 273,393
125 185,901 46,789 123,967
125 18 5, 901 46,789 123,967
335,161 2,068,553 6,450 47,590 48,817 1,935,416
$ 392,154 $ 2,607,773 $ 6,575 $ 233,491 $ 95,606 $ 2,059,383
(continued)
125
CITY OF NEWPORT BEACH
Non -Major Governmental Fund Types
Combining Statement of Revenues,
Expenditures and Changes in Fund Balances
For the Year ended June 30, 2005
(continued)
Revenues:
Other taxes
Intergovernmental
Licenses, permits and fees
Investment income
Net decrease in fair value of investments
Donations
Contributions from property owners
Expenditures:
Current:
General government
Public safety
Public works
Community development
Community services
Capital outlay
Debt service:
Principal
Interest and fiscal charges
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 (deficit), beginning
Fund balances (deficit), ending
Special Revenue
Debt Service
Capital Projects
Supplemental
Law
Misc
Library
Assessment CIOSA
Enforcement
Grants
COP
District Construction
118,685
24,569
-
- -
1,186
531
8,279
87,144 96,335
(213)
(117)
-
(10,376) (20,996)
-
-
-
14,779,013 -
119,658
24,983
8,279
14,855,781 75,339
119,658 24,983 - - -
- - - - 138,689
12,372,689 1,244,958
275,000
- - 289,515 - -
119,658 24,983 564,515 12,372,689 1,383,647
126
(556,236) 2,483,092 (1,308,308)
558,319 - 205,614
- - (25,113) -
558,319 (25,113) 205,614
2,083 2,457,979 (1,102,694)
566,157 (171,619) 4,434,341
$ 568,240 $ 2,286,360 $ 3,331,647
Capital Projects
Bonita Canyon Oil Spill Mariners Marine City Hall
Development Remediation Library Fire Station 7 Science Center Improvement
- - - 2,500,000 76,901 -
7,147 22,881 23,702 - 1,227 -
- (4,987) (5,166) - (267) -
302,986 - - -
7,147 17,894 321,522 2,500,000 77,861
856,156 53,818 1,784,912 4,402,221 24,790
235,193
856,156 53,818 1,784,912 4,402,221 24,790 235,193
(849,009) (35,924) (1,463,390) (1,902,221) 53,071 (235,193)
1,525,983 1,350,000 132,512 606,285
- (14,155) (134,678) (149,990)
1,525,983 1,335,845 (2,166) 456,295
(849,009) (35,924) 62,593 (566,376) 50,905 221,102
927,235 946,254 966,454 592,000 - -
$ 78,226 $ 910,330 $ 1,029,047 $ 25,624 $ 50,905 $ 221,102
(continued)
127
CITY OF NEWPORT BEACH
Non -Major Governmental Fund Types
Combining Statement of Revenues,
Expenditures and Changes in Fund Balances
For the Year ended June 30, 2005
(continued)
Revenues:
Other taxes
Intergovernmental
Licenses, permits and fees
Investment income
Net decrease in fair value of investments
Donations
Contributions from property owners
Total revenues
Expenditures:
Current:
General government
Public safety
Public works
Community development
Community services
Capital outlay
Debt service:
Principal
Interest and fiscal charges
Excess (deficiency) of revenues
over expenditures
Other financing sources (uses):
Transfers in
Transfers out
Permanent Funds
3,922,718
(82,648)
7,822,624
Total
3,165
1,072,052
Other
Ackerman
Governmental
Bay Dredging
Donation
Funds
$ -
$ -
$ 358,247
3,854,000
-
15,245,916
-
630,205
87,869
25,440
691,485
(19,151)
(5,545)
(136,329)
930,991
-
-
14,779,013
3,922,718
19,895
32,499,528
382,778
- 478,379
7,500 144,190
26,434,861
339,000
411.816
7,500 28,191,024
3,922,718 12,395 4,308,504
4,567,684
(95,043) (1,053,564)
(95,043) 3,514,120
128
3,922,718
(82,648)
7,822,624
Fund balances (deficit), beginning
3,165
1,072,052
20,869,436
Fund balances (deficit), ending
$ 3,925,883
$ 989,404 $
28,692,060
128
CITY OF NEWPORT BEACH
Budgetary Comparison Schedule
State Gas Tax Special Revenue Fund
For the Year Ended June 30, 2005
Variance
with Final
Budget
Budgeted Amounts Positive
Original Final Actual (Negative)
Revenues:
Intergovernmental $ 1,282,500 $ 1,282,500 $ 1,497,280 $ 214,780
Investment income 43,750 43,750 87,792 44,042
Net decrease in fair value of investments - - (19,134) (19,134)
Total revenues 1,326,250 1,326,250 1,565,938 239,688
Expenditures:
Capital outlay
Excess (deficiency) of revenues
over expenditures
Other financing uses:
Transfers out
Net change in fund balance
Fund balance, beginning
Fund balance, ending
3,137,842 2,281,175 1,476,296 804,879
(1,811,592) (954,925) 89,642 1,044,567
(160,000) (160,000) (160,000)
(1,971,592) (1,114,925) (70,358) 1,044,567
3,602,988 3,602,988 3,602,988 -
$ 1,631,396 $ 2,488,063 $ 3,532,630 $ 1,044,567
129
CITY OF NEWPORT BEACH
Budgetary Comparison Schedule
Asset Forfeiture Special Revenue Fund
For the Year Ended June 30, 2005
130
Variance
with Final
Budget
Budget Amounts
Positive
Original
Final
Actual
(Negative)
Revenues
Intergovernmental
$ 215,230
$ 215,230
$ 233,471
$ 18,241
Investment income
5,000
5,000
3,986
(1,014)
Net decrease in fair value of investments
-
-
(236)
(236)
Total revenues
220,230
220,230
237,221
16,991
Expenditures
Public safety
257,606
260,668
238,137
22,531
Net change in fund balance
(37,376)
(40,438)
(916)
39,522
Fund balance, beginning
134,808
134,808
134,808
-
Fund balance, ending
$ 97,432
$ 94,370
$ 133,892
$ 39,522
130
CITY OF NEWPORT BEACH
Budgetary Comparison Schedule
Contributions Special Revenue Fund
For the Year Ended June 30, 2005
Revenues
Intergovernmental
Donations
Total revenues
Expenditures
Capital outlay
Excess (deficiency) of revenues
over expenditures
Other financing sources (uses):
Transfers in
Transfers out
Net change in fund balance
Fund balance (deficit), beginning
Fund balance (deficit), ending
188,971 188,971
(132,512) (132,512)
(3,145,071) (296,077) 3,154,474 3,450,551
(956,689) (956,689) (956,689) -
$ (4,101,760) $(1,252,766) $2,197,785 $ 3,450,551
131
Variance
with Final
Budget
Budgeted Amounts
Positive
Original
Final
Actual
(Negative)
$ 1,341,025
$ 2,263,296
$4,673,823
$ 2,410,527
-
535,700
628,005
92,305
1,341,025
2,798,996
5,301,828
2,502,832
4,486,096
3,095,073
2,203,813
891,260
(3,145,071)
(296,077)
3,098,015
3,394,092
188,971 188,971
(132,512) (132,512)
(3,145,071) (296,077) 3,154,474 3,450,551
(956,689) (956,689) (956,689) -
$ (4,101,760) $(1,252,766) $2,197,785 $ 3,450,551
131
CITY OF NEWPORT BEACH
Budgetary Comparison Schedule
Circulation and Transportation Special Revenue Fund
For the Year Ended June 30, 2005
132
Variance
with Final
Budget
Budgeted
Amounts
Positive
Original
Final
Actual
(Negative)
Revenues
Licenses, permits and fees
$ 200,000
$ 200,000
$ 411,229
$ 211,229
Investment income
125,000
125,000
112,739
(12,261)
Net decrease in fair value of investments
-
-
(24,571)
(24,571)
Total revenues
325,000
325,000
499,397
174,397
Expenditures
Capital outlay
2,644,010
1,735,052
508,083
1,226,969
Excess (deficiency) of revenues
over expenditures
(2,319,010)
(1,410,052)
(8,686)
1,401,366
Other financing uses:
Transfers out
(80,000)
(80,000)
(285,614)
(205,614)
Net change in fund balance
(2,399,010)
(1,490,052)
(294,300)
1,195,752
Fund balance, beginning
4,310,303
4,310,303
4,310,303
-
Fund balance, ending
$ 1,911,293
$ 2,820,251
$ 4,016,003
$ 1,195,752
132
CITY OF NEWPORT BEACH
Budgetary Comparison Schedule
Building Excise Tax Special Revenue Fund
For the Year Ended June 30, 2005
133
Variance
with Final
Budget
Budgeted
Amounts
Positive
Original
Final
Actual
(Negative)
Revenues
Licenses, permits and fees
$ 150,000
$ 150,000
$ 218,976
$ 68,976
Investment income
7,000
7,000
9,692
2,692
Net decrease in fair value of investments
-
-
(2,112)
(2,112)
Total revenues
157,000
157,000
226,556
69,556
Expenditures
Capital outlay
396,785
238,377
169,563
68,814
Net change in fund balance
(239,785)
(81,377)
56,993
138,370
Fund balance, beginning
335,161
335,161
335,161
-
Fund balance, ending
$ 95,376
$ 253,784
$ 392,154
$ 138,370
133
CITY OF NEWPORT BEACH
Budgetary Comparison Schedule
Combined Transportation Special Revenue Fund
For the Year Ended June 30, 2005
Revenues
Intergovernmental
Investment income
Net decrease in fair value of investments
Total revenues
Expenditures
Capital outlay
Excess (deficiency) of revenues
over expenditures
Other financing uses:
Transfers out
Net change in fund balance
Fund balance, beginning
Fund balance, ending
(56,459)
(1,675,102) (1,374,377) 539,220
2,068,553 2,068,553 2,068,553
$ 393,451 $ 694,176 $ 2,607,773
134
(56,459)
1,913,597
$ 1,913,597
Variance
with Final
Budget
Budgeted
Amounts
Positive
Original
Final
Actual
(Negative)
$ 1,558,077
$ 1,558,077
$ 1,595,549
$ 37,472
38,750
38,750
55,991
17,241
-
-
(12,203)
(12,203)
1,596,827
1,596,827
1,639,337
42,510
3,271,929
2,971,204
1,043658
1,927,546
(1,675,102)
(1,374,377)
595,679
1,970,056
(56,459)
(1,675,102) (1,374,377) 539,220
2,068,553 2,068,553 2,068,553
$ 393,451 $ 694,176 $ 2,607,773
134
(56,459)
1,913,597
$ 1,913,597
CITY OF NEWPORT BEACH
Budgetary Comparison Schedule
Arterial Highway Rehabilitation Special Revenue Fund
For the Year Ended June 30, 2005
135
Variance
with Final
Budget
Budgeted
Amounts
Positive
Original
Final
Actual
(Negative)
Revenues
Investment Income
S -
S
$ 160
$ 160
Net decrease in fair value of investments
(35)
(35)
Total revenues
125
125
Expenditures
Capital outlay
18,520
18,520
-
18,520
Net change in fund balance
(18,520)
(18,520)
125
18,645
Fund balance, beginning
6,450
6,450
6,450
-
Fund balance (deficit), ending
$ (12,070)
$ (12,070)
$ 6,575
$ 18,645
135
CITY OF NEWPORT BEACH
Budgetary Comparison Schedule
Community Development Block Grant Special Revenue Fund
For the Year Ended June 30, 2005
136
Variance
with Final
Budget
Budgeted
Amounts
Positive
Original
Final
Actual
(Negative)
Revenues:
Intergovernmental
$ 426,000
$ 426,000
$ 559,698
$ 133,698
Investment income
-
-
7,905
7,905
Total revenues
426,000
426,000
567,603
141,603
Expenditures:
Community development
188,104
188,104
136,690
51,414
Capital outlay
300,000
60,712
58,711
2,001
Debt service:
Principal
64,000
64,000
64,000
-
Interest and fiscal charges
123,056
123,056
122,301
755
Total expenditures
675,160
435,872
381,702
54,170
Excess (deficiency) of revenues
over expenditures
(249,160)
(9,872)
185,901
195,773
Other financing sources:
Transfers out
(15,450)
(15,450)
-
15,450
Net change in fund balance
(264,610)
(25,322)
185,901
211,223
Fund balance, beginning
47,590
47,590
47,590
-
Fund balance (deficit), ending
$ (217,020)
$ 22,268
$ 233,491
$ 211,223
136
CITY OF NEWPORT BEACH
Budgetary Comparison Schedule
Air Quality Management District Special Revenue Fund
For the Year Ended June 30, 2005
Other financing uses
Transfers out
Net change in fund balance
50,324
50,324
46,789
Variance
Fund balance, beginning
48,817
48,817
48,817
with Final
Fund balance (deficit), ending
$ 99,141
$ 99,141
$ 95,606
Budget
Budgeted
Amounts
Positive
Original
Final
Actual
(Negative)
Revenues
Intergovernmental
$ 136,000
$ 136,000
$ 111,940
$ (24,060)
Investment income
-
-
1,466
1,466
Net decrease in fair value of investments
-
-
(320)
(320)
Total revenues
136,000
136,000
113,086
(22,914)
Expenditures
Public works
85,676
85,676
66,297
19,379
Excess (deficiency) of revenues
over expenditures
50,324
50,324
46,789
(3,535)
Other financing uses
Transfers out
Net change in fund balance
50,324
50,324
46,789
(3,535)
Fund balance, beginning
48,817
48,817
48,817
-
Fund balance (deficit), ending
$ 99,141
$ 99,141
$ 95,606
$ (3,535)
137
CITY OF NEWPORT BEACH
Budgetary Comparison Schedule
Environmental Liability Special Revenue Fund
For the Year Ended June 30, 2005
Expenditures
Public works
126,699
128,699
273,393
Variance
Net change in fund balance
281,301
281,301
123,967
with Final
Fund balance, beginning
1,935,416
1,935,416
1,935,416
Budget
Fund balance (deficit), ending
Budgeted
Amounts
$ 2,059,383
Positive
Original
Final
Actual
(Negative)
Revenues
Taxes
$ 370,000
$ 370,000
$ 358,247
$ (11,753)
Investment income
40,000
40,000
50,013
10,013
Net decrease in fair value of investments
-
-
(10,900)
(10,900)
Total revenues
410,000
410,000
397,360
(12,640)
Expenditures
Public works
126,699
128,699
273,393
(144,694)
Net change in fund balance
281,301
281,301
123,967
(157,334)
Fund balance, beginning
1,935,416
1,935,416
1,935,416
-
Fund balance (deficit), ending
$ 2,216,717
$ 2,216,717
$ 2,059,383
$ (157,334)
138
CITY OF NEWPORT BEACH
Budgetary Comparison Schedule
Supplemental Law Enforcement Special Revenue Fund
For the Year Ended June 30, 2005
139
Variance
with Final
Budget
Budgeted Amounts
Positive
Original
Final
Actual
(Negative)
Revenues
Intergovernmental
$ 120,000
$ 120,000
$ 118,685
$ (1,315)
Investment income
1,186
1,186
Net decrease in fair value of investments
-
-
(213)
(213)
Total revenues
120,000
120,000
119,658
(342)
Expenditures
Public safety
120,000
118,685
119,658
(973)
Net change in fund balance
-
1,315
-
(1,315)
Fund balance, beginning
-
-
-
-
Fund balance (deficit), ending
$ -
$ 1,315
$ -
_L__11,3151
139
CITY OF NEWPORT BEACH
Budgetary Comparison Schedule
Miscellaneous Grants Special Revenue Fund
For the Year Ended June 30, 2005
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
140
Variance
with Final
Budget
Budgeted
Amounts
Positive
Original
Final
Actual
(Negative)
$ 24,500
$ 24,500
$ 24,569
$ 69
-
-
531
531
-
-
(117)
(117)
24,500
24,500
24,983
483
24,500
24,500
24,983
(483)
140
Internal Service Funds
141
i►l19A:10V -11 W :1.01 i[1111] Mall01W1
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 Absence 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 Benefit.
The Equipment Fund is used to account for the cost of maintaining and replacing the
City's rolling stock fleet and the rental of the fleet to operating departments.
142
Assets
Current assets:
Cash and investments
Receivables:
Accounts
Inventories
Prepaid items
Total current assets
Non - current assets:
Capital assets:
Equipment
Less accumulated depreciation
Total capital assets (net of
accumulated depreciation)
Total assets
Liabilities
Current liabilities:
Accounts payable and accrued liabilities
Accrued payroll
Capital leases - current
Workers' compensation - current
General liability - current
Compensated absences - current
Total current liabilities
Non - current liabilities:
Capital leases
Workers' compensation
General liability
Compensated absences
Total Noncurrent liabilities
Total liabilities
Net Assets
Invested in capital assets, net of related
Unrestricted
Total net assets
CITY OF NEWPORT BEACH
All Internal Service Funds
Combining Statement of Net Assets
June 30, 2005
14, IJV,u" I,YJV,OVJ
OLV, /YY LL,JO V,JLI
-
-
- 6,572,499
6,572,499
Total
Insurance
Compensated
Retiree
Equipment
Internal
Reserve
Absence
Insurance
Maintenance
Service Funds
$ 7,340,368
$ 1,226,259
$ 2,177,358
$ 8,973,237
$ 19,717,222
-
-
15,265
4,192
19,457
-
-
-
518,557
518,557
-
12,031
38,315
50,346
7,340,368
1,226,259
2,204,654
9,534,301
20,305,582
-
-
-
20,402,719
20,402,719
(13,409,447)
(13,409,447)
-
-
-
6,993,272
6,993,272
7,340,368
1,226,259
2,204,654
16,527,573
27,298,854
131,682
-
-
363,519
495,201
-
60,460
-
36,452
96,912
-
-
-
254,326
254,326
2,843,492
-
-
-
2,843,492
1,403,184
-
-
-
1,403,184
1,200,000
1,200,000
4,378,358
1,260,460
-
654,297
6,293,115
-
-
-
166,447
166,447
7,787,785
-
-
-
7,787,785
1,964,777
-
-
-
1,964,777
-
6,176,403
-
-
6,176,403
9,752,562
6,176,403
-
166,447
16,095,412
14, IJV,u" I,YJV,OVJ
OLV, /YY LL,JO V,JLI
-
-
- 6,572,499
6,572,499
(6,790,552)
(6,210,604)
2,204,654 9,134,330
(1,662,172)
_L(6,790,552)
$(6,210,604)
$ 2,204,654 $ 15,706,829
$ 4,910,327
143
CITY OF NEWPORT BEACH
Internal Service Funds
Combining Statement of Revenues, Expenses
and Changes in Fund Net Assets
For the Year Ended June 30, 2005
144
Total
Insurance
Compensated
Retiree
Equipment
Internal
Reserve
Absence
Insurance
Maintenance
Service Funds
Operating revenues:
Charges for services
$ 5,028,122
$ 1,576,627
$ 1,746,822
$ 4,742,318
$ 13,093,889
Other
555
50,648
51,203
Total operating revenues
5,028,677
1,576,627
1,746,822
4,792,966
13,145,092
Operating expenses:
Salaries and wages
-
-
-
1,143,813
1,143,813
Depreciation
-
-
-
1,629,644
1,629,644
Professional services
-
-
-
32,587
32,587
Maintenance and supplies
-
-
-
478,624
478,624
Fleet parts and supplies
-
-
-
379,271
379,271
Workers' compensation
5,238,811
-
-
-
5,238,811
Claims and judgments
3,335,731
-
-
-
3,335,731
Compensated absences
-
1,579,160
-
-
1,579,160
Retiree Insurance
1,735,921
1,735,921
Total operating expenses
8,574,542
1,579,160
1,735,921
3,663,939
15,553,562
Operating income (loss)
(3,545,865)
(2,533)
10,901
1,129,027
(2,408,470)
Nonoperating revenues (expenses):
Investment income
186,433
36,973
53,061
208,444
484,911
Net decrease in fair value of investments
(40,633)
(8,058)
(11,565)
(45,430)
(105,686)
Gain on sale of capital assets
-
-
-
136,028
136,028
Interest expense
-
-
-
(17,574)
(17,574)
Total nonoperating revenues
145,800
28,915
41,496
281,468
497,679
Income (loss) before transfers
(3,400,065)
26,382
52,397
1,410,495
(1,910,791)
Transfers in ( note 13)
10,219
10,219
Change in net assets
(3,400,065)
26,382
52,397
1,420,714
(1,900,572)
Net assets (accumulated
deficit), beginning
(3,390,487)
(6,236,986)
2,152,257
14,286,115
6,810,899
Net assets (accumulated
deficit), ending
$ (6,790,552)
$ (6,210,604)
$ 2,204,654
$ 15,706,829
$ 4,910,327
144
CITY OF NEWPORT BEACH
Combining Statement of Cash Flows - Internal Service Funds
For the Year Ended June 30, 2005
Total
Insurance Compensated Retiree Equipment Internal
Reserve Absences Insurance Maintenance Service Funds
Cash flows from operating activities
Receipts from user departments $ 5,028,122 $ 1,576,627 $ 1,737,905 $ 4,747,198 $ 13,089,852
Payments to employees (3,000,761) (1,938,321) - (1,159,291) (6,098,373)
Payments to suppliers (2,835,435) - (1,671,758) (1,501,805) (6,008,998)
Other operating cash receipts 555 - - 50,648 51,203
Net cash provided (used) for operating activities (807,519) (361,694) 66,147 2,136,750 1,033,684
Cash flows from noncapital financing activities:
Cash received from other funds
Net cash provided by noncapital financing activities
Cash flows from capital and related
financing activities:
Acquisition of capital assets
Proceeds from sale of capital assets
Principal payment
Interest paid
Net cash used for capital
and related financing activities
Cash flows from investing activities:
Interest on investments
Net cash provided for investing activities
Net increase in cash
and cash equivalents
Cash and cash equivalents, beginning
Cash and cash equivalents, ending
Reconciliation of operating income to net cash
provided (used) by operating activities:
Cash flows from operating activities
Operating Income (loss)
Adjustments to reconcile operating income (loss)
to net cash provided by operating activities:
Depreciation
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable
(Increase) in inventories
(Increase) decrease in prepaid items
Increase (decrease) in accounts payable and accrued
payroll
Increase in workers' compensation
Increase in general liability
(Decrease) in compensated absences
Total adjustments
10,219 10,219
10.219 10.219
(1,624,197)
(1,624,197)
140,856
140,856
(442,202)
(442,202)
(17,574)
(17,574)
(1,943,117) (1,943,117)
145,800
28,915
41,496
163,014
379,225
145,800
28,915
41,496
163,014
379,225
(661,719)
(332,779)
107,643
366,867
(519,988)
8,002,087
1,559,038
2,069,715
8,606,370
20,237,210
$ 7,340,368
$ 1,226,259
$ 2,177,358
$ 8,973,237
$ 19,717,222
$ (3,545,865)
$ (2,533) $
10,901
$ 1,129,027
$ (2,408,470)
-
-
-
1,629,644
1,629,644
-
-
(8,917)
4,881
(4,036)
-
-
-
(200,293)
(200,293)
-
-
64,163
(38,315)
25,848
(28,665)
60,460
-
(388,194)
(356,399)
2,238,050
-
-
-
2,238,050
528,961
-
-
-
528,961
-
(419,621)
-
-
(419,621)
2,738,346
(359,161)
55,246
1,007,723
3,442,154
Net cash provided (used) by operating activities $ (807.5191 $ (361.6941 $ 66.147 _1_2 136 750 $ 1.033.684
Non -cash investing, capital, and financing activities:
Disposal of capital assets 4,828 4,828
Total of non -cash activities $ $ $ $ 4,828 $ 4,828
145
This page left blank intentionally.
146
Fiduciary Funds
147
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 Fund is used to account for funds received from affected
property owners and payable to holders of 1911 Act, 1915 Act and other special
assessment bonds.
The Business Improvement District Fund is used to account for monies collected
from local business districts for district property improvements and business
enhancement.
148
Assets
CITY OF NEWPORT BEACH
Agency Funds
Combining Statement of Fiduciary Assets and Liabilities
June 30, 2005
Special
Assessment District
Fund
Business
Improvement
Fund
Totals
Cash and investments
$
2,075,624
$
77,025
$
2,152,649
Cash with Fiscal Agent
3,326,425
-
3,326,425
Total assets
$
5,402,049
$
77,025
$
5,479,074
Liabilities
Due to bondholders
$
5,402,049
$
-
$
5,402,049
Due to others
-
77,025
77,025
Total liabilities
$
5,402,049
$
77,025
$
5,479,074
149
Special Assessment:
Assets
Cash and investments
Cash with Fiscal Agent
Total Assets
Liabilities
Due to bondholders
Business Improvement District:
Assets
Cash and investments
Liabilities
Due to others
Totals - All Agency Funds:
Assets
Cash and investments
Cash with Fiscal Agent
Total Assets
CITY OF NEWPORT BEACH
Statement of Changes in Fiduciary Net Assets
All Agency Funds
For the Year Ended June 30, 2005
Balance
187,734
$
Balance
June 30, 2004
Additions
Deductions
June 30, 2005
$ 3,011,649
$ 2,992,407
$ (3,928,432)
$ 2,075,624
1,266,072
5,139,927
(3,079,574)
3,326,425
$ 4,277,721
$ 8,132,334
$ (7,008,006)
$ 5,402,049
$
3,199,383
$
3,241,851
$ 4,277,721
$ 8,132,334
$ (7,008,006)
$ 5,402,049
$
187,734
$
249,444
$ (360,153)
$
77,025
$
187,734
$
249,444
$ (360,153)
$
77,025
$
3,199,383
$
3,241,851
$ (4,288,585)
$
2,152,649
1,266,072
$
5,139,927
$ (3,079,574)
3,326,425
$
4,465,455
$
8,381,778
$ (7,368,159)
$
5,479,074
Liabilities
Due to bondholders $ 4,277,721 $ 8,132,334
Due to others 187,734 249,444
Total Liabilities $ 4,465,455 $ 8,381,778
150
$ (7,008,006)
(360,153)
$ (7,368,159)
$ 5,402,049
77,025
$ 5,479,074
Statistical Section
CITY OF NEWPORT BEACH
Miscellaneous Statistics
June 30, 2005
General Information
Dateof Incorportation ................................................................. ............................... 1906
Form of Government ............................................... ............................... Council- Manager
Population
Permanent............................................................................... ............................... 83,120
Summer................................................................................. ............................... 100,000
Tourist ...................................................... ............................... 20,000 to 100,000 per day
Housingunits .................................................. ............................... .........................41,400
Occupancy Factor per dwelling unit ............................................ ............................... 2.00
Area
Square Miles
Acres
Land.... ...............................
...........................25.9 .................. ...............................
16,584
Bay..................................................................
2. 5.................... ...............................
1,600
Ocean.. ...............................
...........................23.0 .................. ...............................
14,894
Total...............................
............................... 51.4 .................. ...............................
33,078
Population Density
Per square mile ................. .......................3,120.89 Per acre...........................
4.87
Recreational Area
Acres
OceanWater ........................................................................... ...............................
14,894
HarborWaters ........................................................................... ...............................
1,598
Parks............................................................................................ ...............................
258
Beaches....................................................................................... ...............................
237
Total........................................................................................ ...............................
16,987
Water Frontage
Miles
UpperBay Frontage ....................................................................... ...............................
13
Ocean............................................................................................. ...............................
10
Harbor............................................................................................ ...............................
21
TotalWater Frontage ....................................................................... .............................44
Newport Harbor
Boats......................................................................................... ...............................
9,900
Residential................................................................................. ...............................
1,230
Commercial Slips and Side Ties ................................................ ...............................
2,330
BayMoorings ............................................................................ ...............................
1,235
Public Safety Police
Fire
Numberof Stations ............. ..............................1 ............................. ...............................
8
Number of Personnel ......... ............................237 ....................... ...............................
148
Unaudited — See Accompanying Auditors' Report.
151
Governmental Revenues by Source (1)
(Last Ten Fiscal Years)
(1) Includes General, Special Revenue, Debt Service and Capital Projects Funds.
(2) Includes Investment Income and Property Income.
Governmental Expenditures by Function (1)
(Last Ten Fiscal Years)
Fiscal
General
Public
Public
Community
Fines,
Capital
Debt
Year
Government
Licenses,
Inter-
Charges
Forfeitures
Revenue from
Service
Total
Fiscal
5,442,862
Fees and
governmental
for
and
Use of Money
1,069,045
76,022,994
Year
Taxes
Permits
Revenue
Services
Penalties
and Property (2)
Other
Total
1995 -1996
42,853,480
4,851,571
8,315,543
6,278,416
2,855,063
11,000,272
6,540,913
82,695,258
1996 -1997
44,523,935
4,081,509
11,871,417
7,185,210
2,529,015
10,497,715
10,208,241
90,897,042
1997 -1998
49,385,380
7,303,302
19,656,742
8,314,830
2,573,575
11,422,977
1,593,409
100,250,215
1998 -1999
52,903,507
5,680,496
15,189,324
8,779,962
3,290,019
10,666,337
31,864,699
128,374,344
1999 -2000
58,846,994
4,247,945
10,867,163
9,068,527
3,442,171
12,405,600
1,508,626
100,387,026
2000 -2001
62,908,305
4,553,923
11,463,635
9,906,851
3,555,946
16,069,217
8,439,505
116,897,382
2001 -2002
65,878,471
3,350,958
26,227,740
10,338,569
3,384,164
14,157,694
2,529,470
125,867,066
2002 -2003
72,864,836
4,397,520
10,379,792
11,156,294
3,448,826
14,235,813
4,530,599
121,013,680
2003 -2004
79,874,751
5,429,632
16,108,023
11,516,782
3,605,963
12,384,598
3,182,567
132,102,316
2004 -2005
86,995,139
4,968,234
24,125,313
13,104,478
3,422,735
14,200,207
16,847,285
163,663,391
(1) Includes General, Special Revenue, Debt Service and Capital Projects Funds.
(2) Includes Investment Income and Property Income.
Governmental Expenditures by Function (1)
(Last Ten Fiscal Years)
Fiscal
General
Public
Public
Community
Community
Capital
Debt
Year
Government
Safety
Works
Development
Services
Outlay
Service
Total
1995 -1996
5,442,862
34,571,273
14,779,614
2,952,247
5,916,194
11,291,759
1,069,045
76,022,994
1996 -1997
5,673,321
35,647,247
15,502,095
3,329,545
6,585,335
20,696,487
890,609
88,324,639
1997 -1998
6,790,020
39,168,311
16,579,275
3,475,998
6,916,999
20,849,681
1,299,284
95,079,568
1998 -1999
7,471,850
40,514,411
16,846,674
4,688,087
7,733,720
50,684,045
1,252,111
129,190,898
1999 -2000
9,441,381
41,735,933
16,898,630
4,271,201
7,932,497
13,984,120
1,795,347
96,059,109
2000 -2001
10,239,134
45,346,306
18,477,955
3,842,610
8,623,119
17,293,323
1,777,945
105,600,392
2001 -2002
12,292,008
47,841,176
19,418,067
4,586,192
9,418,041
38,613,906
1,758,073
133,927,463
2002 -2003
9,689,275
53,035,377
19,368,504
5,457,498
11,273,886
14,684,897
2,352,721
115,862,158
2003 -2004
11,024,256
56,849,718
22,780,896
5,723,031
10,827,346
15,188,550
2,188,578
124,582,375
2004 -2005
10,920,667
59,482,134
24;365,996
6,144,917
10,351,414
33,486,048
2,187,878
146,939,054
(1) Includes General, Special Revenue, Capital Projects and Debt Service Funds.
Source: City Administrative Services Department
Unaudited -See Accompanying Auditors' Report.
152
180
160
140
A
120
O
❑ 100
w
O
0C 80
O
60
40
20
0
Governmental Revenues and Expenditures
(Last Ten Fiscal Years)
❑ Revenues
■ Expenditures —
1995 -96 1996 -97 1997 -98 1998 -99 1999 -2000 2000 -01 2001 -02 2002 -03 2003 -04 2004 -05
Governmental Revenues by Source
(Fiscal Year 2004 -2005)
0 0,
10%
2%
8%
7%
4%
53%
Governmental Expenditures by Function
(Fiscal Year 2004 -2005)
1% 7%
17%
Unaudited -See Accompanying Auditors' Report.
153
41%
m Taxes
■Licenses & Permits
■ Intergovernmental
[]Charges for Services
• Fines & Forfeitures
• Use of Money & Property
• Miscellaneous
■General Government
• Public Safety
■Public Works
• Community Development
®Culture and Recreation
• Capital Outlay
• Debt Service
Assessed and Estimated Actual Value of Taxable Property
(Last Ten Fiscal Years)
Fiscal
Year
Secured
Valuation
Public
Utility
Unsecured
Valuation
Total
Assessed & Estimated
Valuation
1995 -1996
11,078,301,482
354,820
725,943,222
11,804,599,524
1996 -1997
11,154,286,162
354,820
754,892,821
11,909,533,803
1997 -1998
11,551,641,504
354,820
778,209,144
12,330,205,468
1998 -1999
12,343,526,263
354,820
1,009,975,297
13,353,856,380
1999 -2000
13,091,299,313
324,960
1,295,776,000
14,387,400,273
2000 -2001
15,087,602,671
2,000
915,394,966
16,002,999,637
2001 -2002
16,515,797,641
2,000
913,075,074
17,428,874,715
2002 -2003
20,990,583,190
16,531,505
1,067,598,118
22,074,712,813
2003 -2004
22,666,005,413
16,531,505
1,346,385,536
24,028,922,454
2004 -2005
24,590,217,706
53,310
1,458,356,714
26,048,627,730
Source: County of Orange Auditor - Controller's Office
2000 -2001
27,405,295
Secured Property Tax Levies and Collections
(Last Ten Fiscal Years;
(1) Effective FY 92/93- 95/96, Orange County reduced Secured Property Tax Levy as a result of the State Budget
Process.
(2) Includes estimated levy for Newport Coast properties that were annexed on January 1, 2002.
(3) Collections include nearly $10 million of Property Tax in lieu of Sales Tax and Vehicle License Fees
not included in the levy.
Source: County of Orange Auditor - Controller's Office
Unaudited -See Accompanying Auditors' Report.
154
Total
Total
Percent
Delinquent
% of Total Tax
Fiscal
Current
Current
of Levy
Tax
Total
Collections
Year
Levy
Collections
Collected
Collections
Collections
Total Levy
1995 -1996
17,843,233 (1)
17,432,840
97.70%
368,913
17,801,753
99.77%
1996 -1997
20,563,561
20,096,688
97.73%
897,670
20,994,358
102.09%
1997 -1998
21,144,504
20,472,716
96.82%
1,040,120
21,512,836
101.74%
1998 -1999
22,738,432
22,084,910
97.13%
1,113,950
23,198,860
102.02%
1999 -2000
24,667,494
24,207,104
98.13%
1,398,573
25,605,677
103.80%
2000 -2001
27,405,295
26,856,091
98.00%
886,625
27,742,716
101.23%
2001 -2002
31,298,541 (2)
30,651,143
97.93 %
102,001
30,753,144
98.26%
2002 -2003
37,092,528
36,351,026
98.00%
529,986
36,881,012
99.43%
2003 -2004
42,469,238
41,420,410
97.53%
670,685
42,091,095
99.11%
2004 -2005
45,111,328
54,063,951
119.85%
483,804
54,547,755
(3) 120.92%
(1) Effective FY 92/93- 95/96, Orange County reduced Secured Property Tax Levy as a result of the State Budget
Process.
(2) Includes estimated levy for Newport Coast properties that were annexed on January 1, 2002.
(3) Collections include nearly $10 million of Property Tax in lieu of Sales Tax and Vehicle License Fees
not included in the levy.
Source: County of Orange Auditor - Controller's Office
Unaudited -See Accompanying Auditors' Report.
154
$28,000
$26,000
F $24,000
A
O $22,000
D
o $20.000
N
o $18,000
$16,000
° $14,000
A
a $12,000
y $10,000
N
m $8,000
N
Q $6.000
is
H $4,000
$2,000
$0
$55,000
$50,000
!° $45,000
0
o $40,000
N
� $35,000
m
c 0 $30,000
w $25,000
0
$20,000
u
N
p $15,000
U
c $10,000
$5,000
Total Assessed Valuation /Property Tax Collections
(Last Ten Fiscal Years)
Total Assessed Valuation
-O- Property Tax Collections
1995 -96 1996 -97 1997 -98 1998 -99 1999 -2000 2000 -01 2001 -02 2002 -03 2003 -04 2004 -05
$0 -
Total Property Tax Collections /Delinquencies
(Last Ten Fiscal Years)
Total Collections
--0- Delinquent Collections
1995 -96 1996 -97 1997 -98 1998 -99 1999 -2000 2000 -01 2001 -02 2002 -03 2003 -04 2004 -05
Unaudited -See Accompanying Auditors' Report.
155
$50,000
i
$40.000
O
C
N
w
$30,000 '0
t
N
0
O
$20,000 u
O
U
x
N
r
$10,000 it
0 0
$0
$2,000
N
$1,750 `m
0
$1,500 0
v
w
$1,250
2
$1,000
0
$750 A'
0
U
$500 y
3
c°
$250 s
c
$0
o.
Construction Activity
(Last Ten Fiscal Years)
Fiscal
Building Permits
Percentage
Estimated
Percentage
Year
Issued
Change
Valuation
Change
2000
3,455,359
2001
3,542,539
2002
1995 -1996
8,302
8.21%
145,760,839
107.22%
1996 -1997
9,085
9.43%
203,944,317
39.92%
1997 -1998
10,332
13.73%
224,507,349
10.08%
1998 -1999
12,076
16.88%
302,598,185
34.78%
1999 -2000
10,412
- 13.78%
220,623,249
- 27.09%
2000 -2001
9,361
- 10.09%
226,778,793
2.79%
2001 -2002
9,030
-3.54%
145,048,360
- 36.04%
2002 -2003
9,483
5.02%
187,489,183
29.26%
2003 -2004
11,628
22.62%
208,840,537
11.39%
2004 -2005
10,433
- 10.28%
239,157,298
14.52%
Source: City Building Department
Bank Deposits
(Last Ten Fiscal Years)
(thousands)
Calendar Year Bank Deposits
1995
4,430,534
1996
3,757,025
1997
3,431,100
1998
3,719,517
1999
3,607,965
2000
3,455,359
2001
3,542,539
2002
4,117,157
2003
5,105,026
2004
6,456,168
2005 data for bank deposits will not be available until 12 -31 -05
Source: The Findley Reports on California Financial Insitutions
Unaudited -See Accompanying Auditors' Report.
156
Estimated Value of Construction /Number of Building Permits
(Last Ten Fiscal Years)
$350 � 16,000
$300
14,000
0
°
12,000
$250
c
h
-°
10,000 E
$200
a
T
8,000 0
v $150
a
6,000
o
z
$100
4,000
N
C
u $50
- 2,000
$0
0
1995 -96 1996 -97 1997 -98 1998 -99 1999 -2000 2000 -01 2001 -02 2002 -03 2003 -04 2004 -05
$7,000
$6,000
$5,000
$4,000
$3,000
$2,000
$1,000
$0
Bank Deposits
(Millions of Dollars)
a
s +
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Unaudited -See Accompanying Auditors' Report
157
Property Tax Rates -- Direct and Overlapping Governments
(Per $100 of Assessed Value)
(Last Ten Fiscal Years)
Fiscal
School
County
County Flood
County, City
Metro Water
Year
Districts
Improvement
Control
& School Levy
District
Total
1995 -1996
0.00000
0.00012
0.00000
1.00000
0.00890
1.00902
1996 -1997
0.00000
0.00000
0.00000
1.00000
0.00857
1.00857
1997 -1998
0.00000
0.00000
0.00000
1.00000
0.00890
1.00890
1998 -1999
0.00000
0.00000
0.00000
1.00000
0.00890
1.00890
1999 -2000
0.00000
0.00000
0.00000
1.00000
0.00890
1.00890
2000 -2001
0.00000
0.00000
0.00000
1.00000
0.00880
1.00880
2001 -2002
0.00690
0.00000
0.00000
1.00000
0.00770
1.01460
2002 -2003
0.00674
0.00000
0.00000
1.00000
0.00670
1.01344
2003 -2004
0.01224
0.00000
0.00000
1.00000
0.00610
1.01834
2004 -2005
0.01224
0.00000
0.00000
1.00000
0.00610
1.01834
Source: County of Orange Auditor - Controller's Office
Computation of Legal Debt Margin
June 30, 2005
Total assessed value of all real & personal property $26,048,627,730 (1)
Debt limit percentage 15%
Total debt limit $3,907,294,160
Amount of debt applicable to debt limit $5,570,000
Legal debt margin $3,901,724,160
(1) The fiscal year 2005 debt limit is based on assessed value being equivalent to 100% of market value.
Source: City Administrative Services Department
Unaudited- See Accompanying Auditors' Report.
158
CITY OF NEWPORT BEACH
Principal Taxpayer
Balboa Bay Club
Cornerstone Partners IV LLC
Coronado South Apartments
HMH Properties Inc.
Irvine Apartment Communities
Jazz Semiconductor Inc.
Newport Beach North LLC
Park Newport Land Limited
Rockwell Semiconductor Systems Inc.
The Irvine Company
Principal Taxpayers
June 30, 2005
Property Tax
(listed alphabetically)
Total Top Ten Principal Taxpayers $ 2,397,778,434
(1) Percentange of total secured assessed valuation.
Unaudited -See Accompanying Auditors' Report.
Source: HdL, Coren and Cone Co.
159
9.20%
2004 -05
Assessed
Percent
Type of Business
Valuation
of Total 1
Hospitality
$ 121,143,929
0.47%
Real Estate
70,491,964
0.27%
Apartment Buildings
66,771,407
0.26%
Apartment Buildings
73,857,976
0.28%
Real Estate
332,394,999
1.28%
Aerospace
308,860,156
1.19%
Real Estate
68,576,771
0.26%
Real Estate
65,220,306
0.25%
Aerospace
147,865,367
0.57%
Real Estate
1,142,595,559
4.39%
Total Top Ten Principal Taxpayers $ 2,397,778,434
(1) Percentange of total secured assessed valuation.
Unaudited -See Accompanying Auditors' Report.
Source: HdL, Coren and Cone Co.
159
9.20%
Schedule of Direct and Overlapping Bonded Debt
June 30, 2005
2004 -05 Assessed Valuation:
$26,171,946,462
(after deducting $505,734,825 redevelopment incremental valuation)
DIRECT AND OVERLAPPING BONDED DEBT:
% Applicable
Debt 6130/05
OVERLAPPING TAX AND ASSESSMENT DEBT:
Orange County Teeter Plan Obligations
9.329%
$11,542,305
Metropolitan Water District
1.972%
8,270,371
Coast Community College District
32.847%
35,517,089
Rancho Santiago Community College District
4.302%
9,150,563
Laguna Beach Unified School District
7.832%
2,845,757
Laguna Beach Unified School District Community Facilities District No. 98 -1
100%
9,970,000
Newport Mesa Unified School District
70.871 %
76,087,106
Newport Mesa Unified School District Community Facilities District No. 90 -1
100%
17,140,000
Santa Ana Unified School District
10.522%
14,830,039
Irvine Ranch Water District Improvement Districts
.035-100%
56,398,274
Bonita Canyon Public Facilities Financing Authority Comm. Facilities Dist. No. 98 -1
100%
44,005,000
City of Newport Beach Special Improvement District No. 95 -1
100%
14,125,000
City of Newport Beach 1915 Act Bonds
100%
14,664,264
Orange County Assessment District No. 88 -1
100%
40,434,366
Orange County Assessment District No. 99 -1 R
100%
19,300,000
Orange County Assessment District No. 01 -1
100%
39,325,000
TOTAL OVERLAPPING TAX AND ASSESSMENT DEBT
413,605,134
DIRECT AND OVERLAPPING GENERAL FUND OBLIGATION DEBT:
Orange County General Fund Obligations
9.329%
81,768,592
Orange County Pension Obligations
9.329%
10,427,256
Orange County Board of Education Certificates of Participation
9.329 %
1,856,471
Orange County Transit District Authority
9.329%
345,639
Orange County Sanitation District Certificates of Participation
12.684%
18,337,153
Municipal Water District of Orange County Water Facilities Corporation
11.136%
3,915,974
Coast Community College District Certificates of Participation
32.847%
2,363,342
South Orange County Community College District Certificates of Participation
2.374%
962,657
Newport Mesa Unified School District Certificates of Participation
70.871 %
1,647,751
Santa Ana Unified School District Certificates of Participation
10.522%
4,913,973
Irvine Ranch Water District Certificates of Participation
11.683 %
5,537,478
City of Newport Beach Certificates of Participation
100%
5,570,000
TOTAL GROSS DIRECT AND OVERLAPPING GENERAL FUND OBLIGATION DEBT
137,646,286
TOTAL GROSS DIRECT AND OVERLAPPING BONDED DEBT
$551,251,420 (1)
Less: Orange County Transit District Authority (80% self- supporting)
(276,512)
MWDCO Water Facilities Corporation (100% self- supporting)
(3,915,974)
TOTAL NET DIRECT AND OVERLAPPING BONDED DEBT $547,058,934
(1) Excludes tax and revenue anticipation notes, revenue, mortgage revenue and
tax allocation bonds and non - bonded capital lease obligations.
Ratios to Assessed Valuation:
Combined Direct Debt ($5,570,000) 0.02%
Total Gross Combined Debt 2.11%
Total Net Combined Debt 2.09%
STATE SCHOOL BUILDING AID REPAYABLE AS OF 6/30/05: $0
Source: California Municipal Statistics, Inc.
Unaudited -See Accompanying Auditors' Report.
160
Revenue Bond Coverage
(Last Ten Fiscal Years)
Net Revenue
Fiscal
Year
Gross
Revenues(1)
Operating
Expenses(2)
Available for
Debt Service
Debt Service Requirements
Principal Interest
Total
Covera
1995 -1996
16,145,307
13,220,028
2,925,279
820,000
898,878 1,258,420
2.32
1996 -1997
18,221,967
14,651,987
3,569,980
845,000
854,130 1,699,130
2.10
1997 -1998
16,497,212
12,350,445
4,146,767
875,000
784,390 1,659,390
2.50
1998 -1999
17,658,076
11,145,936
6,512,140
335,000
593,469 928,469
7.01
1999 -2000
17,770,491
11,713,223
6,057,268
1,025,000
551,668 1,576,668
3.84
2000 -2001
18,215,185
11,784,120
6,431,065
1,105,000
510,225 1,615,225
3.98
2001 -2002
17,809,919
13,289,297
4,520,622
1,145,000
456,573 1,601,573
2.82
2002 -2003
17,326,604
12,430,144
4,896,460
1,185,000
465,573 1,650,573
2.97
2003 -2004
18,558,258
15,256,454
3,301,804
1,230,000
392,958 1,622,958
2.03
2004 -2005
17,878,016
12,964,712
4,913,304
1,280,000
367,743 1,647,743
2.98
(1) Gross revenues includes operating revenues, interest and intergovernmental revenues in the Water Fund
(2) Total Water Fund operating expense excludes depreciation.
161
Demographic Statistics
(Last Ten Fiscal Years)
Source: City Library Services Department
Unaudited -See Accompanying Auditors' Report.
162
City
Fiscal
City
Orange County
Population
Per Capita
Median
Unemployment
Year
Population
Population
% of County
Income
Age
Rate
1995 -1996
70,098
2,615,046
2.68%
52,452
40.6
3.2%
1996 -1997
69,069
2,672,457
2.58%
53,569
41.7
2.6%
1997 -1998
70,030
2,710,718
2.58%
56,000
43.5
2.0%
1998 -1999
72,623
2,775,600
2.62%
59,051
43.9
1.8%
1999 -2000
73,965
2,828,400
2.62%
62,598
44.4
1.6%
2000 -2001
70,032
2,846,289
2.46%
63,015
41.6
1.6%
2001 -2002
75,662
2,939,500
2.57%
64,303
40.9
2.5%
2002 -2003
79,392
2,978,000
2.67%
67,073
50.8
2.4%
2003 -2004
80,800
3,017,300
2.68%
67,256
50.3
1.9%
2004 -2005
83,120
3,056,865
2.72%
67,798
42.9
2.4%
Source: City Library Services Department
Unaudited -See Accompanying Auditors' Report.
162