HomeMy WebLinkAboutFiscal Year 2006-07 Financial StatementCITY OF NEWPORT BEACH
COMPREHENSIVE ANNUAL FINANCIAL REPORT
YEAR ENDED JUNE 30, 2007
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Comprehensive Annual Financial Report
For the Year Ended June 30, 2007
Prepared by the Administrative Services Department
Dennis C. Danner, Director
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The City of Newport Beach was incorporated September 1, 1906
The present City Seal was adopted July 22, 1957
Introductory Section
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CITY OF NEWPORT BEACH
Comprehensive Annual Financial Report
Year Ended June 30, 2007
TABLE OF CONTENTS
INTRODUCTORY SECTION
(Unaudited)
Tableof Contents ............................................................ ...............................
Letter of Transmittal ........................................................ ...............................
GFOA Certificate of Achievement for Excellence in Financial Reporting ......
List of City Officials ......................................................... ...............................
OrganizationChart .......................................................... ...............................
FINANCIAL SECTION
.........................1
......................... 5
.......................17
.......................18
.......................19
Independent Auditors' Report ............................................................... .............................23
Management's Discussion and Analysis ............................................. .............................27
(Required Supplementary Information)
Basic Financial Statements
Government -wide Financial Statements:
Statement of Net Assets .................................................................... .............................47
Statement of Activities ........................................................................ .............................48
Fund Financial Statements:
Governmental Funds:
BalanceSheet ................................................................................. .............................56
Reconciliation of the Balance Sheet of Governmental Funds to the
Statement of Net Assets ............................................................ .............................57
Statement of Revenues, Expenditures and Changes in Fund Balances ......................
58
Reconciliation of Statement of Revenues, Expenditures and Changes
In Fund Balances of Governmental Funds to the Statement of Activities ..............59
Budgetary Comparison Statements:
GeneralFund ............................................................................ .............................60
Tide and Submerged Land Fund ............................................... .............................62
MarinersLibrary ........................................................................ .............................63
ContributionsFund .................................................................... .............................64
Proprietary Funds:
Statement of Net Assets ............................................................... .............................67
Statement of Revenues, Expenses and Changes in Fund Net Assets .....................68
Statementof Cash Flows ........................................................... ............................... 69
Fiduciary Funds:
Statement of Fiduciary Assets and Liabilities — Agency Funds ..... ............................... 73
Notes to the Financial Statements ..................................................... .............................77
Supplementary Schedules
Non -Major Governmental Funds:
Combining Balance Sheet .................................. ............................... ............................136
Combining Statement of Revenues, Expenditures and Changes in
FundBalances ................................................... ............................... ............................142
Budgetary Comparison Schedules:
StateGas Tax Fund ........................................... ............................... ............................148
Asset Forfeiture Fund ........................................ ............................... ............................149
Circulation and Transportation Fund .................. ............................... ............................150
Building Excise Tax Fund ................................... ............................... ............................151
Combined Transportation Fund ......................... ............................... ............................152
Arterial Highway Rehabilitation Fund ................. ............................... ............................153
Community Development Block Grant Fund ...... ............................... ............................154
182
Air Quality Management District Fund ............... ............................... ............................155
Environmental Liability Fund .............................. ............................... ............................156
Supplemental Law Enforcement Fund ............... ............................... ............................157
Traffic Congestion Relief ..................................... ............................... ...........................158
Newport Coast Annexation Fund ....................... ............................... ............................159
Internal Service Funds:
Combining Statement of Net Assets .................. ............................... ............................163
Combining Statement of Revenues, Expenses and Changes in Fund Net Assets.......
164
Combining Statement of Cash Flows ................. ............................... ............................165
Fiduciary Funds:
Combining Statement of Fiduciary Assets and Liabilities ................. ............................169
Statement of Changes in Fiduciary Net Assets .. ............................... ............................170
STATISTICAL SECTION (Unaudited)
Financial Trends:
Net Assets by Component ....................................... ............................... ............................173
Changesin Net Assets ............................................. ............................... ............................174
Fund Balances of Governmental Funds ................... ............................... ............................176
Changes in Fund Balance of Governmental Funds . ............................... ............................177
Revenue Capacity:
Assessed Value and Estimated Actual Value of Taxable Property ......... ............................178
Property Tax Rates, Direct and Overlapping Governments, Last Ten Fiscal Years ...........179
Principal Property Taxpayers as of June 30, 2007 .. ............................... ............................180
Property Tax Levies & Collections ........................... ............................... ............................181
Debt Capacity:
Ratio of Outstanding Debt by Type ................................................... ................ ..................
182
Ratio of General Bonded Debt Outstanding ............. ............................... ............................184
Schedule of Direct and Overlapping Debt ................ ............................... ............................185
Computation of Legal Debt Margin .......................... ............................... ............................186
Revenue Bond Coverage, Last Ten Fiscal Years .... ............................... ............................188
Demographic and Economic Information:
Demographic and Economic Statistics, Last Ten Fiscal Years ............... ............................189
PrincipalEmployers ................................................. ............................... ............................190
Operating Information
Full Time City Employees by Function ..................... ...............................
............................191
Operating Indicators by Function ............................. ...............................
............................192
Capital Asset Statistics by Function ......................... ...............................
............................194
Water Sold by Customer Type ................................. ...............................
............................196
WaterRates ............................................................. ...............................
............................197
Major Water Customers ........................................... ...............................
............................198
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CITY OF NEWPORT BEACH
ADMINISTRATIVE SERVICES
Dennis Danner, Director- /Treasurer
December 15. 2007
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, 2007, is hereby submitted.
The CAFR was prepared in conformance with generally accepted accounting principles
(GAAP) as promulgated by the Governmental Accounting Standards Board (GASB).
This report consists of City management's representations concerning the finances of
the City of Newport Beach. Responsibility for the accuracy and completeness of the
data presented rests with the City. Management of the City is also responsible for
establishing and maintaining an internal control structure designed to ensure that the
assets of the government are protected from loss, theft, or misuse, and to ensure that
adequate accounting data is compiled to allow for the preparation of financial
statements in conformity with generally accepted accounting principles. The internal
control structure is designed to provide reasonable, but not absolute, assurance
that these objectives are met. The concept of reasonable assurance recognizes that:
(1) the cost of a control should not exceed the benefits likely to be derived; and (2) the
valuation of costs and benefits requires estimates and judgments by management. We
believe the information presented in this report is complete and accurate in all material
respects, and that it is reported in a manner designed to fairly present the financial
position and results of operations of the various activities of the City of Newport Beach.
The City of Newport Beach's financial statements have been audited by Mayer Hoffman
McCann P.C., 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, 2007, 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, 2007, 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.
CALIFORNIA IN PERSPECTIVE
California's gross state product is over $1.6 trillion, making it one of the largest
economies of the world according to the Legislative Analyst's Office (LAO). California
accounts for over 13% of the nation's output. Our nation's next largest state economy is
Texas which is approximately 60% the size of California.
California Ranks Among the
World's Trap Ten Economies
Unit
United
4 6 B 10 12 14
Gross Product in 2005
(!n 7rmtiuns)
Source: 2006 Cal Facts (LAO)
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.
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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 84,218. 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;
building inspection, plan check, and code enforcement services; libraries and cultural
and arts services; recreation and senior services; and 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 1 a of the notes to the financial statements.
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LOCAL ECONOMIC MIX
From 1950 to 2007, the population of the City increased from 12,120 to 84,218. 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
$149 million. The top three revenue categories include Property Taxes, Sales Taxes,
and Transient Occupancy Taxes (TOT). These account for 69% of General Fund
revenues. The remaining 31 % of revenue is generated by significantly smaller and very
diverse sources.
General Fund Revenues
8.10% All
Other Sources
18.8%
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% is multi - family units. The City receives, on
average, approximately 16.5% of the property taxes generated within City limits. The
remainder goes to school districts, the County, and other government entities.
Sales Taxes — The following chart demonstrates the diversity of the City Sales Tax
revenue. The largest segment, "Auto Sales - New," accounts for 21% of total sales
taxes and is represented by 10 dealerships. The next largest segment, "Restaurants,"
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30.9%
■ Property Taxes
42.2%
• Sales Taxes
a ■
■Transient Occupancy Taxes
Other Sources
18.8%
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% is multi - family units. The City receives, on
average, approximately 16.5% of the property taxes generated within City limits. The
remainder goes to school districts, the County, and other government entities.
Sales Taxes — The following chart demonstrates the diversity of the City Sales Tax
revenue. The largest segment, "Auto Sales - New," accounts for 21% of total sales
taxes and is represented by 10 dealerships. The next largest segment, "Restaurants,"
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accounts for 18% of total sales taxes and is represented by 295 restaurants. The
"Other" categorization accounts for another 13% and is represented by 655 businesses.
The City's sales tax base is largely diverse and is not dependent on any one segment or
any one individual merchant.
Sales Taxes by Business Segment
■Auto Sales - New - 10
13%
21%
3%
3%
4% Q
4%
4% � 18%
7%
7% 7% 9%
■ Restaurants - 295
❑ Department Stores - 25
❑ Miscellaneous Retail - 632
■ Leasing - 44
■Apparel Stores - 152
■ Service Stations - 17
❑ Misc. Vehicle Sales - 37
■ Furniture / Appliance - 232
■ Food Markets - 34
❑ Light Industry - 168
■ Other - 655
Transient Occupancy Taxes (TOT) — The TOT accrues to the City at a rate of 10% of
room charges (with 18% of this 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 approximately twenty inns, motels, hotels and resorts and accounts for
91% of TOT revenues. The residential category is made up of some 700 vacation
rentals representing only 9% of TOT revenue. Together, they account for nearly
$12.1 million in annual TOT revenue.
Annual
Revenues
Percent
(In Millions) of Total
Commercial Property:
Inns, Motels and Hotels $ 11.0 91%
Residential Property:
Vacation Rentals $ 1.1 9%
$ 12.1 100%
01
ECONOMIC OUTLOOK & FACTORS EFFECTING FISCAL PLANNING
U.S. Economy — Despite sporadic positive financial news, most economists believe the
economy is currently in a slowing mode. Led by continuing problems in the housing
market and high oil prices, the overall economy is expected to be particularly weak in
the first half of 2008. As illustrated below, Gross Domestic Product (GDP) growth has
slid sharply from a high of 3.6% in 2004 to approximately 2.1 % in 2007 and is expected
to remain suppressed during 2008.
I T- MIC17ACTU fiP
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3.5%
3.0%
2.5%
2.0%
1.5%
2004
2005
2006
2007 Estimated
2008 Projected
GDP Growth
3.6%
3.1%
2.9%
2.1%
1.9%
Substantiating this concern, the Federal Reserve board reduced the Federal funds rate
by a total of one percent since September in three successive rate decreases.
State of California — The economic outlook for the State mirrors that of the nation as a
whole, although problems in the real estate market appear to more pronounced in
California than the rest of the nation resulting in a slightly more depressed outlook.
The State of California has had significant structural budget shortfalls since 2001 -02
when revenues plunged following steep the stock market decline. As demonstrated in
the following chart, the annual gap between projected revenues and expenditures had
been massive and continues to exist into the foreseeable future.
10
$0
-$2
-$4
-$6
-$8
-$10
California Operating Budget Shortfalls
as Estimated by Legislative Analyst's Office
(In Billions)
2007 -08 2008 -09 2009 -10 2010 -11 2011 -12 2012 -13
The primary factor responsible for the decrease in budget shortfall between 2010 and
2011 is that the previous $11.3 billion in deficit financing would be fully paid off during
2010. This will free up over $3 billion in annual debt service payments. In order to
balance the 2009 budget, the State's Legislative Analysts office reports that the State
will have to adopt nearly $10 billion in budgetary solutions. The State has previously
addressed the annual shortfalls with limited -term solutions such as substantial
borrowing and spending deferrals. A plan that permanently addresses the State's
structural deficit represents an enormous challenge and will require substantial ongoing
solutions.
Housing Boom and Meltdown - The State experienced a dramatic boom in its real
estate markets between 2001 and 2005, fueled by a basic demand for housing by
California's growing population and real estate speculation. Use of sub -prime mortgage
loans and loose credit standards facilitated home sales to marginally qualified
purchasers. During this time, inflation adjusted home prices doubled, sales reached all
time highs and new construction registered its highest levels in 15 years. The State is
now in the midst of a major real estate correction with home sales and new construction
activity falling sharply. The growing number of mortgage delinquencies, foreclosures,
and rising unsold home inventories seem to indicate that further correction is in store.
These factors will continue to place pressure on homeowners and construction and real
estate related industries. The depth and persistence of the correction will determine the
extent to which these pressures will create spillover effects on the State's economy at
large.
Regionally, the effects of the real estate market will vary to some degree based on the
prevalence of high -risk loans with marginally qualified borrowers and the amount of
localized speculative housing activity.
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1116ZN_1a*0]ki [d�JII
Property Taxes - Unlike many cities, property taxes, not sales taxes, are the number
one source of revenue for the City, representing 42.2% of all General Fund revenues.
Due to the limited supply of scenic coastal property and the unique access to the scenic
Newport Bay and one of the best recreational yacht harbors, the Newport Beach
community consists of 70% affluent residential neighborhoods and 30% high -end
commercial districts. Sales data for the month of October, 2007 demonstrate the
relatively high density of affluence throughout the residential communities.
CITY OF NEWPORT BEACH
Median Home Sales*
Month Ending October 2007
* Source: DataQuick Information Systems
Since Californians passed Proposition 13 in 1978, assessed property value is
reassessed to market value only when it changes ownership. Otherwise, the assessed
value grows by no more than 2% per year. This practice creates a constant lag and
buffer between assessed and market values. Even still, the recent real estate boom of
the early 2000's led to dramatic increases in local property tax revenues. Those
increases reflected a combination of soaring real estate prices and historically high
sales rates (both of which led to large reassessments).
Due in part to Proposition 13 and in part to a constant and vigorous demand for coastal
property, the City enjoys long -term stability in its number one revenue source. Over a
ten -year period, assessed valuation increased an average of 10.9% per annum and
7.6% over a twenty year period. Even after considering recent market corrections,
assessed property values will continue to increase but at a much slower pace than in
recent years.
In 2005 -06, Newport Beach assessed property value increased by nearly 12.6% before
dropping to 9.8% in 2006 -07 and 8.7% in 2007 -08. Assessed property value growth
may continue to decrease to as low as 6% in 2008 -09 and even 4% in 2009 -2010.
Although assessed property growth is expected to slow for the next several years, it is
not expected to dip below a 4% annual increase before modestly rebounding in years
thereafter. We believe these to be very conservative estimates.
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Median
% Price
Sales
Zip
Sales
Change from
Home
Change from
Code
Price
2006
Sales
2006
92625
$1,580,000
18.1%
6
-33.3%
92660
$1,505,000
25.4%
17
-10.5%
92661
$3,450,000
-23.3%
6
100.0%
92663
$2,600,000
100%
7
-53.3%
92657
$2,325,000
-26.8%
4
-76.5%
* Source: DataQuick Information Systems
Since Californians passed Proposition 13 in 1978, assessed property value is
reassessed to market value only when it changes ownership. Otherwise, the assessed
value grows by no more than 2% per year. This practice creates a constant lag and
buffer between assessed and market values. Even still, the recent real estate boom of
the early 2000's led to dramatic increases in local property tax revenues. Those
increases reflected a combination of soaring real estate prices and historically high
sales rates (both of which led to large reassessments).
Due in part to Proposition 13 and in part to a constant and vigorous demand for coastal
property, the City enjoys long -term stability in its number one revenue source. Over a
ten -year period, assessed valuation increased an average of 10.9% per annum and
7.6% over a twenty year period. Even after considering recent market corrections,
assessed property values will continue to increase but at a much slower pace than in
recent years.
In 2005 -06, Newport Beach assessed property value increased by nearly 12.6% before
dropping to 9.8% in 2006 -07 and 8.7% in 2007 -08. Assessed property value growth
may continue to decrease to as low as 6% in 2008 -09 and even 4% in 2009 -2010.
Although assessed property growth is expected to slow for the next several years, it is
not expected to dip below a 4% annual increase before modestly rebounding in years
thereafter. We believe these to be very conservative estimates.
12
Sales and Transient Occupancy Revenues - Because sales tax and TOT revenues
follow the whim of consumer sentiment, they are impacted with much greater volatility
than property taxes. Due to the housing market downturn, most analysts fear the
slowdown will become so severe that it could drag the entire country into a recession,
much as the bursting of the stock market bubble in 2000 led to the 2001 slump. The
threat is that the fall in home prices could have a significant impact on consumer
spending patterns. The wealth effect pushed consumer spending higher during the
housing boom as soaring home prices made homeowners feel wealthier and thus more
inclined to spend money. But falling home prices could have the reverse effect and
depress consumer spending. Consumer spending patterns have been mixed thus far,
with many consumers potentially adopting a wait- and -see attitude.
Bolstered by the recent addition of a large new car dealership and significant major
hotel renovations, sales tax and TOT collections through the first quarter of 2007 -08
compare favorably to collections for the same period in 2006 -07. Provided that
consumer confidence does not erode significantly, sales tax and TOT revenues are
expected to present modest gains in 2007 -08.
OTHER FACTORS IMPACTING FISCAL PLANNING
Defined Benefit Pension Costs — The City contracts with the California Public
Employees' Retirement System (CaIPERS) 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. For more information on the City's pension plan and funding
levels, see Footnote 10 in the notes to the financial statements.
Post Employment Health Plans — Effective January 2006, the City and its employee
associations agreed to major changes to the Post Employment Healthcare Plan. New
employees and employees with less than five years of service participate in a program
that 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 the plan. Employees with greater than five years of service or
miscellaneous employees that had a combined factor of age and years of service that is
greater than, or equal to, 50 (47 for safety employees) had the option to retain a hybrid
of the former defined benefit formula or fully convert to the new plan. As of June 30,
2007, 341 retirees were participating in the defined benefit plan and 387 employees are
still eligible to receive future benefits of $400 ($425 for certain retired Police employees)
per month under this plan. This program was largely funded on a pay -as- you -go basis;
13
however, the City has set aside $6.2 million to offset the unfunded portion of the post
employment health benefit plan. For the year ended June 30, 2007, the City began
setting aside an amount approximating the annual required contribution (excluding the
implied subsidy) determined by an actuarial valuation. These assets are accounted for
in an internal service fund and classed as unrestricted net assets on the statement of
net assets. As of June 30, 2007, the actuarial accrued liability was $56 million and the
unfunded accrued liability (UAL) was $49.8 million. Of this amount $26.4 million
represents an implied subsidy while the explicit portion of the UAL only represents $23.4
million.
Comprehensive Facilities Replacement Plan — Recently, City staff, along with a
citizen -based committee, developed a funding plan to replace all major critical facilities
within fifteen years through a combination of utilizing cash resources and staggered
debt issues. The intent of the plan was to develop a perpetual, systematic basis for
replacing critical facilities with a level contribution built into the operating budget. As of
June 30, 2007, the City has set aside $14 million to pre -fund this effort.
STEWARDSHIP
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, save during
difficult economic periods and maintain extremely low debt ratios. The City has
managed to fully fund Council designations totaling $62.7 million in the General Fund of
which $17.4 is specifically designated for contingencies. The City has taken aggressive
actions to recognize the costs and future implications of current programs, to advance
fund capital projects when feasible and, simply, to demonstrate its ability to live within its
means.
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 direction, 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 meets with each department and prepares a proposed budget document for 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.
14
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 (LAIF) 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, which is 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 Treasurer's 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, 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 fourteen
straight years. The City has been fortunate to receive 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, 2006. 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.
15
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.
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 City Manager, and 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, Mayer Hoffman McCann
P.C., for their time and assistance in the preparation of the report. This report was
completely prepared and published by City employees.
1 WV;V��4Z-1 4��7
Home L. Bludau Dennis C. Danner
City Manager Administrative Services Director
16
Certificate of
Achievement
for Excellence
in Financial
Reporting
Presented to
City of Newport Beach
California
For its Comprehensive Annual
Financial Report
for the Fiscal Year Ended
June 30, 2006
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 amoral financial
reports (CAFRs) achieve the highest
standards in goverment accounting
and financial reporting.
JUmRA OS1AlE5
4� t
�CkgMA I '° President
.meroanm /v S.
op�t,Si2ac
LXi[ \60 � J
Executive Director
17
NEWPORT BEACH CITY OFFICIALS
CITY COUNCIL
L to R: Council Members Michael F. Henn and Keith D. Curry, Mayor Pro Tem Edward D. Selich,
Mayor Steven Rosansky, Council Members Nancy Gardner, Don Webb and Leslie Daigle
L to R: City Manager Homer Bludau, City Attorney Robin Clauson, City Clerk LaVonne Harkless
Sharon Wood ........... ...............................
Assistant City Manager /Director of Community & Economic Development
DaveKiff ............................................................................
............................... ......................Assistant City Manager
Dennis C. Danner .....................................................
............................... Administrative Services Director /Treasurer
JayElbettar .......................................................................................................
............................... Building Director
SteveLewis ..................................................................................................................
............................... Fire Chief
Mark Harmon ......................................................................................
............................... General Services Director
Barbara Ramsey ..............................................................................
............................... Human Resources Director
Linda Katsouleas ..................................................................................
............................... Library Services Director
DavidLepo .......................................................................................................
............................... Planning Director
JohnKlein .........................................................................................
............................... .........................Police Chief
Steve Badum .............................................................................................
............................... Public Works Director
Wes Morgan ....................................................................
............................... Recreation & Senior Services Director
SteveMyrter ..................................................................................
............................... ......................Utilities Director
18
ELECTORATE
r 8UILDING GOOE 1
BOARD OFAPPFALS
r , CI7V CLERK
CIVIL SERVICE BOARD
L- - - - - -J
r- - - - - -� II
PLANNING COMMISSION
L- - - - - -J
ASSISTANT CITY MANAGER
conimunl
Core swcamic o.vel.pmem
. EmoR.m.m
PLANNING
LsM Use and Development
long -Range Planning
Planning Commission Support
Housing Programs
BUILDING
Adminiatretion Peen Checidit it Services
Public Gaunter Inspection
Use and Occupancy Residential Building Retards
FIRE
Fire Suppression(Operationa) Organ Life ... me
Training and Education Haaardous Materials
File Prevention Junior LifeguaM Program
Administration Emergency Medical Services
POLICE
Patrol Support Services
Traffic Chief of Police
Detective
MAYOR
COUNCIL
II CITYATTORNEY II
ADMINISTRATIVE SERVICES
Ar.mninglRepodinglBudgeting
Treasury Management
Billing & Receivables
PayrolllAccounts Payable
I
Cashledng
Geographic Information Systems
Revenue
Information Technology
Purchaeing & Warehousing
Printing & Postal Services
O
ELECTED OFFICIALS
Fiscal Year 2007 -2008
(Updated March 23, 2007)
r - - - - - - i
BOARD OF LIBRARYTRUSTEES
L- - - - - -J
r PARKS, BEACHES& ,
RECREATION COMMISSION
10,
- CITY ARTS COMMISSION
L - - - - - -J
r- - - - - -�
HARBOR COMMISSION
L- - - - - -J
ASSISTANTCITY MANAGER
H.roorRie-
Pudlc lrFOirn
ea.00�mamal emomamem
UTILITIES
Weler Service Wastewater Collection
Eleddcal Services Oil & Gas Production
Administration BVSet Light,
GENERAL SERVICES
Parks and Trees
Operators Support
Field Maintenance
Traffic Signs & Makings
Building Maintenance
Refuse Collection
Equipment Maintenance
Recycling
PUBLIC WORKS
Engineering CIP Design &Could" ion
Infmstructure Master Planning Development Be,,..
Traffic Planning &Engineering Public Right of Way Pencilling
LIBRARY SERVICES
Central Library & Branches
Information & Reference Services
Adult & Youth Progrems
Ads & Cultural Services
Literacy Services
Board of Library Trustees Suppod
City Arts Commission Support
Sister City Association Support
RECREATION & SENIOR SERVICES
Vouch &Adult Sports Programs Senior Programs &Services
Playground/Park Development Special Events
Facility ManagementlReservatlons PB &RCommiswon Suppod
HUMAN RESOURCES
Recruit ment
Generel Llabllity
Employeeltabor Relations
Benefits Administration
I
ClassificafiowC rquonsation
Workers Compensation
Citywide Training
Retiree Counseling &Benefits
Civil Service8oaNSUppori
Grievances &Dis ices
COUNCILAPPOINTED BOARDS & COMMISSIONS COUNCILAPPOINTED POSITIONS CITY DEPARTMENTS
19
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20
Financial Section
21
N
A
eo
n
O
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22
Mayer Hoffman fvlcCarm P.C.
An independent CPA Firm
Conrad Government Services I)MMon
2301 Dupont Drive, Suite 200
Irvine, California 92612
949 - 474 -2020 ph
949- 263 -5520 fx
www.mhni- pc.com
City Council
City of Newport Beach
Newport Beach, California
Independent Auditors' Report
We have audited the accompanying financial statements of the governmental activities, the
business -type activities, each major fund, and the aggregate remaining fund information of the
City of Newport Beach, California, as of and for the year ended June 30, 2007, which
collectively comprise the City's basic financial statements, as listed in the table of contents.
These financial statements are the responsibility of the City of Newport Beach's management.
Our responsibility is to express an opinion 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 opinion.
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, as of
June 30, 2007, and the respective changes in financial position and cash flows, where applicable,
of the City of Newport Beach, California and the respective budgetary comparison information
for the general fund and major special revenue funds of the City 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 are not a required part of the basic financial statements, but are supplementary
information required by the accounting standards 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, 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
City Council
City of Newport Beach
Newport Beach, California
In accordance with Government Auditing Standards, we have also issued a report dated
December 20, 2007 on our consideration of the City's internal control over financial reporting
and on our tests of its compliance with certain provisions of laws, regulations, contracts and
grant agreements and other matters. The purpose of that report is to describe the scope of our
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.
Irvine, California
December 20, 2007
24
Management's
Discussion and Analysis
25
I
r�-
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26
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, 2007. 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 assets
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
$2.261 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 $2.134 billion, while the remaining balance of net assets totaled
$126.8 million. Of this amount, $91.1 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 $25.4 million (1.13 %) to $2.26 billion as a result
of current year activities. The increase is partially attributable to contributions for
cooperative projects including Santa Ana Heights Fire Station, Big Canyon sewer
system improvements and several smaller capital projects .
• The City's total debt increased by $348,688, from $53 million to $53.4 million, during
the current fiscal year. The increase is the net result of regular debt service
payments, offsetting increases in long -term obligations related to workers'
compensation of $3 million, claims and judgments of $2.3 million, compensated
absences payable of $2.1 million, and a new installment purchase agreement for
Sunset Ridge Park. The Sunset Ridge Park purchase installment agreement is $5
million, of which $2 million was paid in the current year.
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 of 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 $97.4 million, a decrease of $3.3 million.
Approximately $78.8 million is unreserved fund balance available to fund current
obligations at the City Council's discretion. Of the $78.8 million unreserved fund
27
balance, City Council has designated $17.4 million for contingencies, $7.9 million for
capital projects related to the Back Bay Science Center, Santa Ana Heights Fire Station,
and Newport Coast Community Center, $24.3 million is designated for other special
purposes, $12.8 million is designated for appropriations, while the remaining $16.3
million is made up of smaller amounts designated across various funds.
• The General Fund reported an increase of $15.3 million in fund balance after
transferring $20.1 million to other funds. Of this transfer, $17 million represented a
routine transfer to subsidize the operations of the Tide and Submerged Land Fund,
$2.5 million was transferred to subsidize internal service reserve funds, and $567,509
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
$62.4 million, or 52.11% 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. 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.
28
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
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 to 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.
29
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
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, 2007, as shown in
Table 1, were $2.261 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
2006 2007
$ 150,708 $ 155,365
2,027,616 2,050,294
2,178,324 2,205,659
47,095 48,829
17,107 18,797
64,202 67,626
2,005,644 2,027,026
51,901 35,770
56,662 75,237
$ 2,114,207 $ 2,138,033
Business -Type Activities
2006 2007
$ 20,227 $ 20,832
109,095 110,285
129,322 131,117
5,925 4,540
1,888 3,537
7,813 8,077
104,602 107,231
0
16,907 15,809
$ 121,509 $ 123,040
Total
2006 2007
$ 170,935 $ 176,197
2,136,711 2,160,579
2,307,646 2,336,776
53,020 53,369
18,995 22,334
72,015 75,703
2,110,246 2,134,257
51,901 35,770
73,569 91,046
$ 2,235,716 $ 2,261,073
Invested in Capital Assets - By far the largest component of net assets, $2.134 billion
(94.4 %), 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
30
acquire those assets. The City's capital assets do not represent a financial resource and
consequently are not readily available for funding current obligations.
Restricted Assets - An additional portion of the City's net assets, $35.8 million (1.6 %),
represents resources that are subject to external restrictions on how they may be used.
Unrestricted Assets - The remaining balance of unrestricted net assets, $91 million (4 %)
may be used to meet the City's ongoing obligations to citizens and creditors.
Overall the City's net assets increased $25.4 million during the current fiscal year. The
increase is partially attributable to capital contributions of $6.9 million consisting of capital
projects. Other key financial activity for the year ended June 30, 2007 is as follows:
Table 2
Changes in Net Assets
(in thousands)
Governmental Activities Business -Type Activities
2006 2007 2006 2007
Total
2006 2007
Revenues:
14,166
-
-
14,510
Program Revenues:
67,789
69,795
-
-
Charges for services
$ 36,527 $
38,919
$ 21,234 $ 21,454 $ 57,761
$ 60,373
Operating grants and capital contributions
12,773
16,172
- - 12,773
16,172
Capital grants and contributions
69,474
6,904
- - 69,474
6,904
General Revenues:
-
-
13,804
23,304
Taxes:
523
-
-
480
Property taxes
57,889
63,003
- - 57,889
63,003
Sales tax
27,186
28,436
- - 27,186
28,436
Transient occupancy taxes
9,833
12,059
- - 9,833
12,059
Othertaxes
7,312
8,776
- - 7,312
8,776
Intergovernmental (Unrestricted):
2,242
1,530
86,620
25,441
Motor Vehicle License Tax
508
515
- - 508
515
Investment related income
1,224
2,631
380 736 1,604
3,367
Property income
-
-
- - -
-
Miscellaneous
777
2,232
- - 777
2,232
Share of joint venture net income (loss)
(514)
253
- - (514)
253
Total revenues
222,989
179,900
21,614 22,190 244,603
202,090
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
14,510
14,166
-
-
14,510
14,166
67,789
69,795
-
-
67,789
69,795
33,870
39,180
-
-
33,870
39,180
8,158
9,021
-
-
8,158
9,021
13,804
23,304
-
-
13,804
23,304
480
523
-
-
480
523
-
-
16,204
17,400
16,204
17,400
3,168
3,260
3,168
3,260
138,611
155,989
19,372
20,660
157,983
176,649
84,378
23,911
2,242
1,530
86,620
25,441
40
(40)
-
84,418
23,911
2,202
1,530
86,620
25,441
2,029,789
2,114,122
119,307
121,510
2,149,096
2,235,632
$2,114,207
$ 2,138,033
$121,509
$123,040
$ 2,235,716
$ 2,261,073
31
Governmental Activities — The cost of all governmental activities in the current fiscal year
was $156 million. As shown in the statement of activities, $38.9 million of the cost was paid by
those who directly benefited from the programs, $23.1 million was financed by contributions
and grants received from other governmental organizations, developers, and property owners
for both capital and operating activities, and $94 million was subsidized through general City
revenues.
Net assets, as restated, for governmental activities of the City at the beginning of the year
were $2.114 billion, and increased by $23.1 million by the end of the year, accounting for
93.9% of total Citywide net asset growth of $25.4 million. The growth was primarily attributable
to an overall increase in general revenues of $10.1 million, an increase in program revenues
from charges for services of $2.4 million, an increase from operating grants and capital grants
of $8.3 million, after excluding $67.4 million of land contributions from the prior year, as well as
various smaller fluctuations both up and down.
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 (Library Services 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.
32
Each program's 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
80.000
70.000
60.000
50.000
40.000
30.000
20.000
10.000
Table 3
Governmental Activities
(in thousands)
2006 2007
Total Cost Net Cost Total Cost Net Cost
of Service of Service of Service of Service
$ 14,510
$ (11,687)
67,789
(51,535)
33,870
35,815
8,158
(2,491)
13,804
10,541
480
(480)
$ 138,611 $ (19,837)
$ 14,166
$ (10,364)
69,795
(52,681)
39,180
(17,241)
9,021
(3,338)
23,304
(9,846)
523
(523)
$ 155,989 $ (93,993)
Table 4
Program Expenses and Revenue - Governmental Activities
Year Ended June 30, 2007
(in millions)
General Public Safety Public Works Community Community Interest
Government Development Services
■Total Expenses ❑Program Revenues
Of the $94 million in program revenues that financed the governmental activities,
$52.7 million was utilized for public safety, $10.4 million was utilized for general government,
$3.3 million was utilized for community development, $17.2 million was utilized for public
33
works, $9.8 million was utilized for community services and $523,401 was utilized for interest
on long -term debt.
Sources of Revenue
(Excluding Special Items)
Table 5
Governmental Activities
Year Ended June 30, 2007
• Charges for Services
■Contributions
O Taxes
3% 0Other
Functional Expenses
15% D% 9%
6%
25-1. 45%
■General Government
■ Public Safety
O Public Works
O Community Development
• Community Services
• Interest
Major Governmental Activities in the current fiscal year included the following:
Revenues:
• Excluding transfers, total program and general revenues in the current year amounted to
$179.9 million. Of this amount, 34.5% represents program revenue, 35% is from property
taxes, and 22.5% is from sales taxes and transient occupancy taxes. The remaining
revenue sources of 8% are represented by significantly smaller sources and are broadly
diverse.
• The City reported capital contributions of $4.8 million in public works program revenues and
$2.1 million in community services program revenues to reflect $6.9 million in capital
contributions. The majority of these contributions are related to the Back Bay Science
Center project, a cooperative project with County and State governments. Although the City
has no ownership interest in this project, the community receives several indirect benefits
from this project, including increased water quality monitoring, and educational opportunities
for the community.
• Excluding the contributions of $6.9 million noted above from the current year, and the
$67.4 million related to prior year governmental land assets, total program and general
revenues are up $17.5 million from the prior year. The net increase over prior year is a
combination of a few key factors:
o At $63 million, 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 11.7% per year. Assessed property values increased
9.8% in the current year. Property tax revenues, in total, including unsecured
34
property and prior year collections increased $5.1 million or 8.8% in the current
year.
• At nearly $28.4 million and $12 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 $1.3 million (2.2 %) from the prior year while transient
occupancy taxes are up $4.6 million (22.6 %).
• Charges for services were up $2.4 million from the previous year from the net
effect of increases and decreases within the various functions of the City.
• Operating grants and contributions for public works are up $3.4 million over
the prior year due to contributions related to the Back Bay Science Center.
• Capital grants and contributions are down $62.6 million from the prior year.
This decrease is primarily due to land contributions of $67.4 million in the prior
year.
• Higher investment income offset by a decrease in the fair value of investments
resulted in a $1.4 million net increase in revenues from the prior year. A
decrease in the fair value of investment usually occurs in a rising interest rate
environment when the current market rate of return exceeds the stated rate of
return when the security was purchased.
Expenses:
. In the current year, expenses for all governmental activities are $156 million. Overall, an
increase of $17.4 million (12.5 %) from the prior year, which can be attributed to the following
factors:
o General government expenses are down $344,000 (13 %) when compared to
the prior year.
o Public safety expenses are up $2 million (3 %) in the current year. The
increase is primarily due to increases in salaries and benefits expenses and
increased expenditures for general insurance.
c Public works expenses were up $5.3 million (15.7°/x) for costs associated with
increases in refuse collection expenses related to additional housing
development in the Newport Coast area, increases for landscaping of parks,
increases for redesign of general services offices and yard, as well as various
other one -time infrastructure maintenance projects.
o Community services expenses increased $9.5 million in the current year,
primarily due to $5.9 million in expenses related to capital contribution
expenditures in connection with the construction of the Back Bay Science
Center which is owned by the State and County governments, a one time
expense of $500,000 related to the centennial celebration, increased
expenses to provide additional recreational classes, expenses for planning
35
and design of the new OASIS Senior Center, as well as various water quality
studies and projects and other miscellaneous projects.
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 $1.5 million increase in net assets. The increase in net assets
was comprised of operating income of $1.2 million, non - operating revenues of $533,625, and
an off - setting $208,800 consolidation adjustment related to internal service fund activities.
20.000
15.000
10.000
5.000
Table 6
Program Expense & Revenue - Business -type Activities
Year Ended June 30, 2007
(in millions)
Water Wastewater
■Total Expenses ■Program Revenues
Major Business -type Activities in the current fiscal year included the following:
Water
Of the $17.4 million in water related expenses, $7.8 million (44.9 %) is for the purchase of
water, $2.4 million (13.6°/x) is for maintenance, supplies, and depreciation of the water system,
$3.7 million (21.4 %) covers employee related costs, $1.6 million (9.5 %) is for professional
services, and the remaining $1.9 million (10.6 %) is collectively attributable to interest on
outstanding debt and other miscellaneous expenses.
Wastewater
Of the $3.3 million in wastewater related expenses, $1.4 million (41.9 %) is maintenance,
supplies, and depreciation of the wastewater system, $1.2 million (37.6 %) is employee related
costs, and the remaining $581,378 (20.5 %) is attributable to other individually insignificant
expenses.
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 $97.4 million, a decrease of $3.3 million from the
prior year. The General Fund represented $69.9 million or 71.8% of the combined fund
balances of the Governmental Funds.
Reserved Fund Balance — The City has $18.4 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 ($11.4 million), 2) for
permanent endowment ($4.6 million), 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 ($1.3 million).
Unreserved Fund Balance — The remaining $78.7 million is classified as unreserved
fund balance, which is available for spending at the City Council's discretion.
Major activities in the Governmental Funds in the current fiscal year included the following:
• The General Fund ended the year with a $69.9 million fund balance, a net increase of
$15.3 million. Excluding net transfers out of $20.1 million and $5 million in proceeds from
long term debt related to the Sunset Ridge Park purchase installment agreement, excess
revenues over expenditures totaled $29.4 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 ($17 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 $786,931 in fund balance.
• The Mariners Library Fund ended the year with a $2.1 million negative fund balance, a
decrease of $311,108 from the prior year. The decrease is due to current year capital
outlays for which the City had not been reimbursed at year end.
• The Contributions Fund ended the year with a $1.7 million fund balance, a decrease of
$1.5 million from the prior year. The decrease is primarily due to current year capital
outlays for which the City had not requested reimbursement at year end, resulting in
unavailable revenues of $3 million.
37
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 $1.3 million and increased in the Wastewater Fund
by $482,686. Unrestricted net assets at year end were $13.2 million for the Water Fund,
and $2.7 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 $11.8 million. Included in
this amount is an accumulated deficit in the Insurance Reserve Fund and the Compensated
Absence Fund in the amounts of $5.4 million and $7.3 million, respectively.
• Net assets increased $3.7 million in the current year. The increase is a combination of
decreases and increases in the various Internal Service Funds; namely, an increase of $1.8
million in the Insurance Reserve Fund, a $268,730 increase in the Compensated Absences
Fund, and a $634,381 increase in Retiree Insurance. Also a contributing factor, the
Equipment Maintenance Fund net assets increased by $1 million in the current year
through user fees charged to departments for maintenance and replacement of the City's
rolling stock fleet.
GENERAL FUND BUDGETARY HIGHLIGHTS
Changes to Original Budget
Final budgeted revenues for the General Fund increased $2.3 million from the original budget
during the year ended June 30, 2007. Significant factors contributing to this fluctuation are
highlighted as follows:
Final budgeted intergovernmental revenues increased $1.4 million from the original budget
due to 1) $360,000 in funding from the Urban Area Security Initiative for police department
fencing, 2) $300,000 from the CALFED Bay Delta Program, and $288,000 from
Metropolitan Water District of Orange County rebates for irrigation and run -off
improvement, and 3) $298,385 Office of Traffic Safety grants for DUI checkpoints, as well
as $513,615 of other smaller amendments to intergovernmental revenues.
Final budgeted expenditures for the General Fund decreased $18.9 million from the original
budget during the year ended June 30, 2007. Significant factors contributing to this fluctuation
are highlighted as follows:
38
• Budgeted expenditures for public safety and public works functions decreased by $10.3
million and $2.5 million respectively. Both decreases are primarily due to a re- allocation of
appropriations to the Tide and Submerged Land Fund for police, fire and beach
maintenance services utilized in support of tidelands operations.
• Budgeted expenditures for the Planning Department related to community development
functions increased $1.2 million. This increase is due to budget amendments for
professional and technical services related to rewriting the zoning codes for the General
Plan Update, increased salaries expense due to additional staffing and a document
imaging project, pier repairs, as well as other smaller budgetary adjustments both up and
down.
• Budgeted expenditures for community services increased $1.4 million due to amendments
reflecting additional expenditures related to new grants for library materials, operations,
maintenance and repairs.
• Final budgeted capital outlays from the General Fund decreased $1.4 million from the
original budget during the year ended June 30, 2007, primarily due to budgetary reductions
to reflect project timing differences which are re- budgeted in the following fiscal year for
1) oceanfront alley water main and bay crossing water main repairs, 2) Sunset Ridge
Park design, 3) Citywide way finding signs, 4) Rhine Channel Wharf repairs, as well as
5) various smaller budgetary decreases.
Changes to budgeted transfers out of the General Fund were made in response to budgetary
changes within all other funds occurring throughout the year. During the current year, final
transfers out budgeted for the General Fund varied from the original budget by approximately
$19.5 million primarily due to expenditures allocated to the Tidelands Fund.
These transactions, combined with numerous smaller amendments throughout the year,
resulted in a reduction of projected draws against existing General Fund Balance of $412,926.
Variance with Final Budget
Actual revenues exceeded final budget by $10.8 million for the year ended June 30, 2007.
Significant factors contributing to this favorable variance are summarized as follows:
• Higher than expected property tax, sales tax, and other tax revenues of approximately
$3.9 million.
• A $2.2 million increase in transient occupancy tax revenues, primarily due to a higher
number of hotel units available for occupancy that were not available in the prior year
due to large hotel renovation projects that were in progress.
• A $313,751 increase in license and permit revenues, made up of $57,466 from
demolition permit fees and $48,261 from park fees, $44,962 from collection fees, and
$163,062 from various smaller budgetary variances, both increases and decreases.
• A $765,300 increase in charges for services primarily due to higher plan checking fees,
engineering fees, paramedic service fees and various staff service fees.
• A $599,337 increase in intergovernmental revenues caused by timing differences
between budgeted revenues which are based on acceptance of grant funding and
actual revenues which are based on reimbursable expenditure of the grant funds.
39
Actual General Fund expenditures of $119.8 million were significantly less than final budgetary
estimates of $123.2 million. Significant factors contributing to this $8.4 million favorable
variance are summarized as follows:
• A $3.6 million favorable variance was realized from capital improvement projects that
were not completed by year end.
• A $1.4 million favorable variance in public safety expenditures was realized primarily
from personnel turnover and temporary vacancies in the Fire Department.
• A $637,464 favorable variance from public works, primarily due personnel vacancies.
Conservative budgeting, timing of expenditures and favorable variances contributed to the
$15.3 net increase in General Fund, Fund Balance.
CAPITAL ASSET AND DEBT ADMINISTRATION
Capital Assets
The City's investment in capital assets for governmental and business -type activities as of
June 30, 2007, amounts to $2.161 billion (net of accumulated depreciation). This investment is
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 $23.9 million represents a
1.1% increase over last year. The $23.9 million net increase is the net result of additions of
$39.6 million, and deletions of $15.7 million.
Table 7
Capital Assets at Year End
(net of depreciation, in thousands)
Governmental Activities
2006 2007
as Restated
Business -Type Activities
2006 2007
Total
2006 2007
as Restated
Land
$ 1,780,699
$ 1,785,699
$ 2,016
$ 2,016
$ 1,782,715
$ 1,787,715
Structures
23,966
35,847
104
99
24,070
35,946
Equipment
8,769
9,073
10
7
8,779
9,080
Infrastructure
192,240
194,376
105,989
106,001
298,229
300,377
Work in progress
21,941
25,299
976
2,162
22,917
27,461
Totals
$ 2,027,615
$ 2,050,294
$ 109,095
$ 110,285
$ 2,136,710
$ 2,160,579
Major capital asset events during the current fiscal year included the following:
• The City capitalized $39.6 million in capital assets in the current year. Of the
$39.6 million, $25.2 million was paid for through current year expenses, the remaining
$14.4 million represents additions from work in progress started in previous years, and
no contributions of land were received.
40
• Of the $37.7 million capitalized as governmental assets in the current year, $13.8 million
represents additions from work in progress started in previous years.
• Of the $1.9 million capitalized in the current year as business -type assets, $2 million
represented additions for infrastructure consisting of major repairs and upgrades to the
water mains, additions to wastewater and water pump stations, and completion of 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
$53.4 million for all governmental and business -type activities.
Table 8
Outstanding Debt at Year -End
(in thousands)
The City's total debt increased $348,688 during the current fiscal year. The $348,688 increase
is the net result of regular debt service payments, offsetting increases in long -term obligations
related to workers' compensation of $3 million, claims and judgments of $2.3 million,
compensated absences payable of $2.1 million, and a new purchase installment agreement for
Sunset Ridge Park. The Sunset Ridge Park purchase installment agreement resulted in $5
million in long term debt, of which $2 million was paid in the current year. 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.
41
Governmental
Business -Type
Total
Activities
Activities
2006
2007
2006 2007
2006
2007
Certificates of participation
$ 5,280 $
4,980
$ - $ -
$ 5,280 $
4,980
Note payable
1,633
1,469
- -
1,633
1,469
Pre - annexation agreement
13,200
12,000
- -
13,200
12,000
CDBG Loan
2,207
2,134
- -
2,207
2,134
Purchase Installment Agreement
-
3,000
-
-
3,000
Capital leases
166
50
- -
166
50
Revenue bonds
-
5,925 4,540
5,925
4,540
Claims and judgments
4,812
4,837
- -
4,812
4,837
Workers' compensation payable
11,160
11,442
- -
11,160
11,442
Compensated absences
8,637
8,917
- -
8,637
8,917
Totals
$ 47,095 $
48,829
$ 5,925 $ 4,540
$ 53,020 $
53,369
The City's total debt increased $348,688 during the current fiscal year. The $348,688 increase
is the net result of regular debt service payments, offsetting increases in long -term obligations
related to workers' compensation of $3 million, claims and judgments of $2.3 million,
compensated absences payable of $2.1 million, and a new purchase installment agreement for
Sunset Ridge Park. The Sunset Ridge Park purchase installment agreement resulted in $5
million in long term debt, of which $2 million was paid in the current year. 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.
41
FACTORS AFFECTING NEXT YEAR'S BUDGET
Overall the 2007 -2008 operating budget, excluding capital improvement projects and internal
service charges, increased only 0.37% over the 2006 -2007 amended budget. A brief summary
of the factors considered when preparing the 2007 -2008 budget are as follows:
• The City has recently updated our Facilities Financing Plan which includes a review of
existing City structures as well as developing a financing plan for the replacement of these
facilities, such as Police Headquarters, Fire Stations, Library Branches, Lifeguard
Headquarters, OASIS Senior Center, and the Civic Center Complex. Three new facilities
will be added to the City's Capital Assets this calendar year: Santa Ana Heights Fire
Station, the Back Bay Science Center, and the Newport Coast Community Center. In
addition, fundraising efforts have been started for the replacement of the OASIS Senior
Center.
• In the fall of 2006, voters approved the City's comprehensive General Plan update, the first
in 30 years. The General Plan serves as the statement of official policy for Newport
Beach's long -term physical development. Eleven elements were updated or written for the
first time, and a complete program environmental impact report was prepared. The update
process occurred over several fiscal years and involved the use of several consultants as
well as a significant public participation component. The implementation of the Plans'
policies is now in progress. The Planning Department's major project for this fiscal year is
the rewrite of the City's Zoning Code, which will serve as the implementation tool for many
of the new policies included in the General Plan.
• Also in the fall of 2006, we began a comprehensive cost allocation study to identify
overhead expenses City -wide and by department. Concurrent with the cost allocation
study, we are conducting a cost of services study to ensure our fees and charges are
appropriate. The last time we completed similar studies was in 1996. Both of these
projects will be completed and submitted to Council with a goal toward implementing any
necessary changes this summer. The cost of services and cost allocation plan models will
allow City staff to prospectively identify changes in the level of services for which fees are
imposed and annually recommend to the City Council adjustments to the Master Fee
Schedule.
• Salary and benefit contracts with all the miscellaneous employee bargaining units expired
on June 30, 2007, but were settled soon thereafter. Although the precise settlement details
were not available when the 2007 -08 budget was developed, the City did reserve sufficient
resources in anticipation of the negotiations. The Firefighters Association and the Fire
Management Association contracts expire December 31, 2007 and negotiations with these
groups are currently underway.
• The City participates in the CaIPERS defined benefit pension plans for its Miscellaneous
and Safety employees. The down -turn in the equities markets from 2001 to 2003, caused a
profound impact on pension assets world -wide which in -turn dramatically spiked employer
contribution rates to record highs. Certain pension providers, including CalPERS instituted
rate - smoothing techniques which are intended to reduce the volatility of employer
contribution rates that might otherwise be caused by market fluctuations of pension
investments. Even though investment returns have improved significantly since that time,
the new rate smoothing techniques have locked up investment gains to be allocated over a
long period of time. Consequently, employer contribution rates are still very high relative to
normal plan costs.
42
• Major changes were recently negotiated to the City's retiree medical program that impact
future operating budgets. Effective January 1, 2006, the City closed the defined benefit
component of the retiree medical plan to new participants. New participants and certain
existing participants were enrolled into a retiree medical plan based on certain defined
contributions that are funded on a current basis. In addition, the former defined benefit
retiree medical plan was actuarially valued and the City has began funding the remaining
defined benefit obligations at a level that approximates the actuarial cost attributable to the
current operating period (excluding the implied subsidy) plus a twenty -year amortization of
the previously unfunded retiree medical liability.
• Although the nationwide troubles in the housing market have slowed the growth of Newport
Beach assessed property values from 9.8% in 2006 -07 down to 8.7% in 2007 -08, the 2007-
08 budget was built around a very conservative 4% assessed value growth assumption.
Although assessed values do not appear to be negatively impacting the 2007 -08 budget,
many factors associated with the housing market crisis are being considered in preparation
for the 2008 -09 budget.
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. The City's Budgets,
Comprehensive Annual Financial Reports as well as other City financial information can be
found on the City's website at: www. city. newport- beach.ca.us /financialinfo.
43
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Government -wide
Financial Statements
45
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CITY OF NEWPORT BEACH
Statement of Net Assets
June 30, 2007
Assets:
Cash and investments (note 4)
Receivables:
Accounts
Notes
Interest
Intergovernmental receivables
Cash with fiscal agent (note 4)
Internal balances
Due from agency fund
Investment in joint venture (note 15)
Prepaid items
Inventory
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
Restricted for:
Community development
Public works
Community services
Debt Service
Permanent Funds:
Nonexpendable
Expendable
Unrestricted
Total net assets
Governmental
Business -type
Activities
Activities
Total
$ 122,479,211
$ 14,782,704
$ 137,261,915
8,631,115
4,634,378
13,265,493
50,000
-
50,000
1,592,648
1,592,648
15,372,058
-
15,372,058
3,293,977
1,486,117
4,780,094
71,703
(71,703)
-
436,484
436,484
2,496,560
2,496,560
514,294
514,294
427,002
-
427,002
1,810,998,205
4,178,456
1,815,176,661
370,870,708
153,086,468
523,957,176
(131,575,367)
(46,979,733)
(178,555,100)
2,205,658,598
131,116,687
2,336,775,285
10,176,566
3,257,410
13,433,976
2,409,520
101,223
2,510,743
201,360
99,950
301,310
3,897,519
78,439
3,975,958
2,111,954
-
2,111,954
9,593,821
1,445,000
11,038,821
39,234,805
3,095,000
42,329,805
67,625,545
8,077,022
75,702,567
2,027,026,053
107,231,308
2,134,257,361
6,707,629
-
6,707,629
15,934,622
-
15,934,622
7,271,319
-
7,271,319
566,559
-
566,559
4,629,782
-
4,629,782
660,029
-
660,029
75,237,060
15,808,357
91,045,417
$ 2,138,033,053
$ 123,039,665
$ 2,261,072,718
See accompanying notes to basic financial statements
47
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, 2007
Program Revenues
Operating
Capital
Total
Charges for
Grants and
Grants and
Program
Expenses
Services
Contributions
Contributions
Revenues
$ 14,166,168
$ 2,944,100
$ 858,403
$ - $
3,802,503
69,795,386
15,756,327
1,358,443
-
175114,770
39,179,844
5,482,167
11,700,316
4,755,994
21,938,477
9,020,868
5,682,636
-
-
5,682,636
23,304,053
9,054,504
2,254,861
2,148,722
13,458,087
523,401
-
-
-
-
155,989,720
38,919,734
16,172,023
6,904,716
61,996,473
17,399,900 17,918,968
3,259,837 3,535,050
20,659,737 21,454,018
- 17,918,968
3,535,050
- 21,454,018
$ 176,649,457 $ 60,373,752 $ 16,172,023 $ 6,904,716 $ 83,450,491
See accompanying notes to basic financial statements
48
General revenues:
Taxes:
Property tax
Sales tax
Sales tax in -lieu
Transient occupancy tax
Business license tax
Franchise tax
Other taxes
Intergovernmental (Unrestricted):
Motor vehicle license tax
Investment income
Net decrease in fair
value of investments
Other
Share of joint venture net income (note 15)
Total general revenues
Change in net assets
Net assets at beginning of year,
as restated (notes 5 and 17 )
Net assets at end of year
Net (Expense) Revenue and Changes in Net Assets
Primary Government
Governmental
Business -type
Activities
Activities Total
$ (10,363,665)
$ - $ (10,363,665)
(52,680,616)
- (52,680,616)
(17,241,367)
- (17,241,367)
(3,338,232)
- (3,338,232)
(9,845,966)
- (9,845,966)
(523,401)
- (523,401)
93,993,247) (93,993,247)
-
519,068
519,068
-
275,213
275,213
-
794,281
794,281
$ (93,993,247)
$ 794,281
$ (93,198,966)
63,003,057
-
63,003,057
21,088,118
-
21,088,118
7,348,253
-
7,348,253
12,059,008
-
12,059,008
3,770,172
-
3,770,172
4,613,932
-
4,613,932
391,559
-
391,559
515,128
-
515,128
3,175,582
792,936
3,968,518
(545,533)
(57,185)
(602,718)
2,232,070
-
2,232,070
253,207
-
253,207
117,904,553
735,751
118,640,304
23,911,306
1,530,032
25,441,338
2,114,121,747
121,509,633
2,235,631,380
$ 2,138,033,053
$ 123,039,665
$ 2,261,072,718
See accompanying notes to basic financial statements
49
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Fund
Financial Statements
51
y
This page left blank intentionally.
WA
Governmental Funds
53
GOVERNMENTAL FUNDS
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 Mariners Library Fund is a Special Revenue Fund used to account for
revenues and expenditures of funds for the Mariners Library Capital Project.
The Contributions Fund is used to account for revenues received from other
government agencies or private developers and expended for specific streets,
highway, construction, or water quality projects.
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.
54
This page left blank intentionally.
55
CITY OF NEWPORT BEACH
Governmental Funds
Balance Sheet
June 30, 2007
Liabilities and Fund Balances
Liabilities:
Accounts payable $
6,314,060
Title and
$ - $
746,147
Other
$ 9,948,996
Accrued payroll
2,358,540
Submerged
Mariners
-
Governmental
2,381,712
Assets
General
Land
Library
Contributions
Funds
Totals
Cash and investments (note 4)
$ 63,551,764
$ 904,674
$ -
$ 199,836
$ 28,885,539
$ 93,541,813
Receivables:
135,950
-
1,758,771
2,978,443
2,792,226
7,665,390
Accounts
4,636,290
954,075
-
703,520
2,113,103
8,406,988
Notes
50,000
-
-
-
-
50,000
Interest
1,592,648
-
-
-
-
1,592,648
Intergovemmental receivables
5,857,894
-
1,758,771
4,838,422
2,916,971
15,372,058
Cash with fiscal agent (note 4)
-
-
-
-
3,293,977
3,293,977
Due from other funds (notel2)
7,351,061
-
-
-
-
7,351,061
Due from agency fund
436,484
-
-
-
-
436,484
Prepaid items
492,032
-
-
-
-
492,032
Inventory
220,864
-
-
-
-
220,864
Total assets
$ 84,189,037
$ 1,858,749
$ 1,758,771
$ 5,741,778
$ 37,209,590
$130,757,925
Liabilities and Fund Balances
Liabilities:
Accounts payable $
6,314,060
$ 893,086
$ - $
746,147
$ 1,995,703
$ 9,948,996
Accrued payroll
2,358,540
23,172
-
-
-
2,381,712
Deposits payable
3,741,959
155,560
-
-
-
3,897,519
Unearned revenue
1,725,326
-
-
360,729
25,899
2,111,954
Unavailable revenue
135,950
-
1,758,771
2,978,443
2,792,226
7,665,390
Due to other funds (note 12)
2,061,268
5,289,793
7,351,061
Total liabilities
14,275,835
1,071,818
3,820,039
4,085,319
10,103,621
33,356,632
Fund balances:
Reserved for encumbrances
5,395,182
642,985
-
1,656,459
3,673,170
11,367,796
Reserved for debt service
-
-
-
-
566,559
566,559
Reserved for permanent endowment
-
-
-
-
4,629,782
4,629,782
Reserved for affordable housing
1,329,420
-
-
-
-
1,329,420
Reserved for prepaid items
492,032
-
-
-
-
492,032
Reserved for inventories
220,864
-
-
-
-
220,864
Reserved for long -term receivable
50,000
-
-
-
-
50,000
Unreserved:
Designated for special purposes
24,289,406
-
-
-
-
24,289,406
Designated, reported in:
Special revenue funds
-
143,946
-
-
19,384,743
19,528,689
Capital projects funds
-
-
-
-
2,506,020
2,506,020
Permanent funds
-
-
-
-
660,029
660,029
Designated for contingencies
17,368,974
-
-
-
-
17,368,974
Designated for capital projects
7,944,545
-
-
-
-
7,944,545
Designated for appropriations
12,822,779
-
-
-
-
12,822,779
Undesignated, reported in:
Special Revenue Funds
-
-
-
-
(611,381)
(611,381)
Capital projects funds
(2,061,258)
(3,702,953)
(5,764,221)
Total fund balances
69,913,202
786,931
(2,061,268)
1,656,459
27,105,969
97,401,293
Total liabilities and
and fund balances $
84,189,037
$ 1,858,749
$ 1,758,771 $
5,741,778
$ 37,209,590
$130,757,925
See accompanying notes to basic financial statements
CITY OF NEWPORT BEACH
Governmental Funds
Reconciliation of the Balance Sheet of Governmental Funds
to the Statement of Net Assets
June 30, 2007
Fund balances of governmental funds $ 97,401,293
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 2,042,340,172
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 (4,980,000)
Note payable (1,469,202)
Pre - annexation agreement (12,000,000)
CDBG loan (2,134,000)
Purchase agreement (3,000,000)
Accrued interest payable for the current portion of interest due on long -term debt
has not been reported in the governmental funds. (201,360)
Some of the revenue will be collected after year -end, but is not available soon
enough to pay for the current period's expenditures, and therefore is reported as
unavailable revenue in the governmental funds. 7,665,390
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. 11,842,497
Investment in joint ventures is not a current financial resource and therefore not reported
in the governmental funds. 2,496,560
Internal balance created by the consolidation of internal service fund activities 71,703
related to enterprise funds is not reported in the governmental funds.
Net assets of governmental activities $ 2,138,033,053
See accompanying notes to basic financial statements
57
Revenues
Taxes and assessments:
Property tax
Sales tax
Sales tax in -lieu
Transient occupancy tax
Othertaxes
Intergovernmental
Licenses and permits
Charges for services
Fines and forfeitures
Investment income
Net decrease in fair value of investments
Property income
Donations
Other
Total revenues
Expenditures
Current:
General government
Public safety
Public works
Community development
Community services
Capital ou6ay
Debt service (note 6):
Principal
Interest and fiscal charges
Total expenditures
Excess (deficiency) of revenues
over expenditures
Other financing sources (uses)
Transfers in (note 13)
Transfers out (note 13)
Proceeds from long -tens debt
Total other financing sources
(uses)
Net change in fund balances
Fund balances, beginning
Fund balances, ending
CITY OF NEWPORT BEACH
Governmental Funds
Statement of Revenues, Expenditures and Changes in Fund Balances
Year Ended June 30, 2007
29,401,533 (16,573;503) (311,108) (1,566,588) (17,036,337) (6,086,003)
1,027,127
Tide and
-
-.
Other
20,271,396
(20,102,519)
Submerged
Mariners
-.
Governmental
(22,521,396)
General
Land
Library
Contributions
Funds
Totals
(14,075,392)
16,793,836
31,556
2,750,000
$ 63,003,057
$ -
$ -
$ -
$ -
$ 63,003,057
21,088,118
-
-
-
-
21,088,118
7,348,253
-
-
-
-
7,348,253
12,059,008
-
-
-
-
12,059,008
8,309,012
-
-
-
422,606
8,731,618
3,811,671
-
-
4,880,885
10,174,373
18,866,929
3,108,651
1,299,945
-
-
166,063
4,574,659
14,368,652
84,071
-
-
-
14,452,723
3,706,150
1,048
-
-
419,153
4,126,351
3,175,582
167,957
-
234,465
1,853,133
5,431,137
(545,533)
-
-
(17,781)
(63,567)
(626,881)
6,471,129
7,494,686
-
-
-
13,965,815
1,323,550
-
-
55,911
-
1,379,461
1,967,465
1,967,465
149,194,765
9,047,707
5,153,480
12,971,761
176,367,713
13,624,189
81,872
-
-
-
13,706,061
50,424,717
18,207,654
-
-
211,576
68,843,947
24,403,360
3,745,213
-
-
203,720
28,352,293
7,223,202
329,275
-
-
200,558
7,753,035
11,749,016
1,928,465
311,108
-
-
13,988,589
10,368,748
1,091,669
-
6,720,068
27,434,684
45,615,169
2,000,000
163,587
-
-
1,573,000
3,736,587
73,475
384,560
458,035
119,793,232
25,621,210
311,108
6,720,968
30,008,098
182,453,716
29,401,533 (16,573;503) (311,108) (1,566,588) (17,036,337) (6,086,003)
1,027,127
17,026,010
-
-.
2,218,259
20,271,396
(20,102,519)
(232,174)
-
-.
(2,186,703)
(22,521,396)
5,000,000
5,000,000
(14,075,392)
16,793,836
31,556
2,750,000
15,326,141
220,333
(311,108)
(1,566,588)
(17,004,781)
(3,336,003)
54,587,061
566,598
(1,750,160)
3,223,047
44,110,750
100,737,296
$69,913,202
$ 786,931
$ (2,061,268)
$ 1,656,459
$27,105,969
$ 97,401,293
See accompanying notes to basic financial statements
58
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, 2007
Net change in fund balances - total governmental funds $ (3,336,003)
Amounts reported for governmental activities in the statement of activities differ
from the amounts reported in the statement of activities because:
Governmental funds report capital outlays as expenditures. However, in the statement
of activities, the costs of those assets is allocated over their estimated useful lives
as depreciation expense. This is the amount by which capital outlays exceeded
depreciation in the current period. 22,767,500
Payment of debt service principal is an expenditure in the governmental funds, but the (1,263,413)
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. (62,364)
Some of the revenue will be collected after year -end, but is not available soon
enough to pay for the current period's expenditures, and therefore is reported as
unavailable revenue in the governmental funds.This is the net change in unearned revenue for the current 1,667,506
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. 3,676,073
Investment in joint ventures creates an explicit, measurable equity interest reported only
in the statement of activities. 253,207
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. 208,800
Change in net assets of governmental activities $ 23,911,306
See accompanying notes to basic financial statements
59
CITY OF NEWPORT BEACH
General Fund
Budgetary Comparison Statement
For the Year Ended June 30, 2007
•1
Variance with
Final Budget
Budgeted
Amounts
Positive
Original
Final
Actual
(Negative)
Revenues
Taxes and assessments:
Property
$ 60,234,724
$ 60,234,724
$ 63,003,057
$ 2,768,333
Sales
21,944,142
21,944,142
21,088,118
(856,024)
Sales tax in -lieu
6,867,730
6,867,730
7,348,253
480,523
Transient occupancy
9,897,529
9,897,529
12,059,008
2,161,479
Othertaxes
6,819,182
6,819,182
8,309,012
1;489,830
Intergovernmental
2,138,100
3,212,334
3,811,671
599,337
Licenses and permits
2,794,900
2,794,900
3,108,651
313,751
Charges for services
13,211,560
13,603,352
14,368,652
765,300
Fines and forfeitures
3,567,500
3,567,500
3,706,150
138,650
Investment income
2,000,000
2,000,000
3,175,582
1,175,582
Net decrease in fair value of investments
-
-
(545,533)
(545,533)
Property income
6,181,010
6,181,010
6,471,129
290,119
Donations
156,000
413,500
1,323,550
910,050
Other
262,142
877,984
1,967,465
1,089,481
Total revenues
136,074,519
138,413,887
149,194,765
10,780,878
Expenditures
General government:
City council
1,770,611
1,799,010
1,184,210
614,800
City clerk
493,001
510,701
457,105
53,596
City attorney
1,050,727
1,346,927
1,480,305
(133,378)
City manager
1,722,536
1,906,315
1,521,190
385,125
Administrative services
7,666,629
7,595,358
7,230,573
364,785
Human resources
1,680,710
1,685,765
1,750,806
(65,041)
Total General government
14,384,214
14,844,076
13,624,189
1,219,887
Public safety:
Police
39,878,233
32,862,774
32,659,356
203,418
Fire
29,313,338
18,980,577
17,765,361
1,215,216
Total Public safety
69,191,571
51,843,351
50,424,717
1,418,634
Public works:
General services
21,708,133
19,202,277
18,941,960
260,317
Public works
5,066,128
4,689,021
4,202,750
486,271
Utilities
1,149,526
1,149,526
1,258,650
(109,124)
Total Public works
27,923,787
25,040,824
24,403,360
637,464
•1
CITY OF NEWPORT BEACH
General Fund
Budgetary Comparison Statement
(continued)
Variance with
Final Budget
Budgeted Amounts Positive
Original Final Actual (Negative)
Community development
Planning
2,783,178
3,985,361
2,916,490
1,068,871
Building
3,759,712
3,760,912
4,086,318
(325,406)
Code and Water Quality Enforcement
647,869
318,594
220,394
98,200
Total Community development
7,190,759
8,064,867
7,223,202
841,665
sources (uses)
9,759,639
(9,775,371)
Community services:
(4,300,021)
Net change in fund balance
(1,334,554)
412,926
Library Services
6,087,752
6,613,037
6,092,403
520,634
Recreation and senior services
5,033,295
5,885,281
5,656,613
228,668
Total Community services
11,121,047
12,498,318
11,749,016
749,302
Capital outlay
15,357,334
13,934,154
10,368,748
3,565,406
Debt service:
Principal
2,000,000
2,000,000
2,000,000
-
Total expenditures
147,168,712
128,225,590
119,793,232
8,432,358
Excess (deficiency) of revenues
over expenditures
(11,094,193)
10,188,297
29,401,533
19,213,236
Other financing sources (uses)
Transfers in
5,329,889
5,329,889
1,027,127
(4,302,762)
Transfers out
(570,250)
(20,105,260)
(20,102,519)
2,741
Proceeds from long -term debt
5,000,000
5,000,000
5,000,000
-
Total other financing
sources (uses)
9,759,639
(9,775,371)
(14,075,392)
(4,300,021)
Net change in fund balance
(1,334,554)
412,926
15,326,141
14,913,215
Fund balance, beginning
54,587,061
54,587,061
54,587,061
-
Fund balance, ending
$ 53,252,507
$ 54,999,987
$ 69,913,202
$ 14,913,215
61
CITY OF NEWPORT BEACH
Tide and Submerged Land
Budgetary Comparison Statement
For the Year Ended June 30, 2007
W,
Variance with
Final Budget
Budgeted
Amounts
Positive
Original
Final
Actual
(Negative)
Revenues
Intergovernmental
$ -
$ -
$ -
$ -
Licensesandpermits
1,260,700
1,260,700
1,299,945
39,245
Charges for services
40,000
40,000
84,071
44,071
Fines and forfeitures
700
700
1,048
348
Investment income
80,000
80,000
167,957
87,957
Net decrease in fair value of investments
-
-
-
-
Property income
6,738,129
6,738,129
7,494,686
756,557
Other
Total revenues
8,119,529
8,119,529
9,047,707
928,178
Expenditures
General government
-
81,872
81,872
-
Public safety
-
18,207,655
18,207,654
1
Public works
478,514
3,699,756
3,745,213
(45,457)
Community services
1,985,598
1,988,759
1,928,465
60,294
Community development
-
329,275
329,275
-
Capital outlay
3,177,610
1,826,610
1,091,669
734,941
Debt service:
Principal
163,587
163,587
163,587
-
Interest and fiscal charges
73,475
73,475
73,475
Total expenditures
5,878,784
26,370,989
25,621,210
749,779
Excess (deficiency) of revenues
over expenditures
2,240,745
(18,251,460)
(16,573,503)
1,677,957
Other financing sources (uses)
Transfers in
-
16,991,572
17,026,010
34,438
Transfers out
(4,624,439)
(4,658,887)
(232,174)
4,426,713
Total other financing
sources (uses)
(4,624,439)
12,332,685
16,793,836
4,461,151
Net change in fund balance
(2,383,694)
(5,918,775)
220,333
6,139,108
Fund balance, beginning
566,598
566,598
566,598
-
Fund balance (deficit), ending
$ (1,817,096)
$ (5,352,177)
$ 786,931
$ 6,139,108
W,
Revenues
Intergovernmental
Investment income
Net decrease in fair value of investments
Total revenues
Expenditures
Capital outlay
Debt service (note 6):
Principal
Total expenditures
(Deficiency) of revenues
over expenditures
CITY OF NEWPORT BEACH
Mariners Library
Budgetary Comparison Statement
For the Year Ended June 30, 2007
Budgeted Amounts
Original Final
23,743 23,743
23,743 23,743
472,340 472,340
472,340 472,340
Actual
311.108
Variance
with Final
Budget
Positive
(Negative)
(23,743)
(23,743)
161,232
311,108 161,232
(448,597) (448,597) (311,108) 137,489
Net change in fund balance
(448,597)
(448,597)
(311,108) 137,489
Fund balance, beginning
(1,750,160)
(1,750,160)
(1,750,160) -
Fund balance (deficit), ending
$ (2,198,757)
$ (2,198,757)
$ (2,061,268) $ 137,489
63
CITY OF NEWPORT BEACH
Contributions Fund
Budgetary Comparison Statement
For the Year Ended June 30, 2007
RE
Variance
with Final
Budget
Budgeted Amounts
Positive
Original
Final
Actual
(Negative)
Revenues:
Intergovernmental
$ 1,114,214
$ 2,252,956
$4,880,885
$ 2,627,929
Investment income
17,299
216,684
234,465
17,781
Net decrease in fair value of investments
-
-
(17,781)
(17,781)
Donations
5,357
55,911
50,554
Total revenues
1,131,513
2,474,997
5,153,480
2,678,483
Expenditures:
Capital outlay
13,562,287
11,635,428
6,720,068
4,915,360
Net change in fund balance
(12,430,774)
(9,160,431)
(1,566,588)
7,593,843
Fund balance, beginning
3,223,047
3,223,047
3,223,047
-
Fund balance (deficit), ending
$ (9,207,727)
$(5,937,384)
$ 1,656,459
$ 7,593,843
RE
Proprietary Funds
65
PROPRIETARY FUNDS
Business -type Activities
The Water Fund is a Major Fund used to account for the operations of the City's
water utility, a self - supporting activity which is entirely financed though user
charges.
The Wastewater Fund is a Major Fund used to account for the operations of the
City's wastewater system, a self- supporting activity which is entirely financed
through user charges.
Governmental Activities
The Internal Service Funds are used to allocate the cost of providing goods and
services by one department to other departments on a cost reimbursement basis.
.^
CITY OF NEWPORT BEACH
Proprietary Fund
Statement of Net Assets
June 30, 2007
Assets
Current assets:
Cash and investments (note 4)
Receivables:
Accounts
Intergovernmental receivables
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
3,095,000 - 3,095,000 -
- - - 8,349,707
- - - 3,398,093
7,167,751
3,095,000 - 3,095,000 18,915,551
7,860,256 216,766 8,077,022 25,500,802
76,862,556 30,368,752 107,231,308 7,903,884
13,205,652 2,674,408 15,880,060 3,938,613
$ 90,068,208 $ 33,043,160 123,111,368 $ 11,842,497
(71,703)
$ 123,039,665
See accompanying notes to basic financial statements
67
Enterprise Funds
Governmental
Total
Activities
Enterprise
Internal Service
Water
Wastewater
Funds
Funds
$ 12,638,622
$ 2,144,082
$ 14,782,704
$ 28,937,398
3,887,286
747,092
4,634,378
224,127
-
-
-
206,138
22,262
16,525,908
2,891,174
19,417,082
29,389,925
1,486,117
-
1,486,117
-
2,016,450
-
2,016,450
-
205,793
-
205,793
-
148,191
-
148,191
21,700,159
110,450,820
42,281,664
152,732,484
-
2,121,588
40,418
2,162,006
-
(35,026,403)
(11,953,330)
(46,979,733)
(13,746,785)
79,916,439
30,368,752
110,285,191
7,953,374
81,402,556
30,368,752
111,771,308
7,953,374
97,928,464
33,259,926
131,188,390
37,343,299
3,067,299
190,111
3,257,410
227,570
74,592
26,631
101,223
27,808
78,415
24
78,439
-
99,950
-
99,950
-
1,445,000
-
1,445,000
-
-
-
49,490
-
-
-
3,092,293
-
-
-
1,438,955
1,749,135
4,765,256
216,766
4,982,022
6,585,251
3,095,000 - 3,095,000 -
- - - 8,349,707
- - - 3,398,093
7,167,751
3,095,000 - 3,095,000 18,915,551
7,860,256 216,766 8,077,022 25,500,802
76,862,556 30,368,752 107,231,308 7,903,884
13,205,652 2,674,408 15,880,060 3,938,613
$ 90,068,208 $ 33,043,160 123,111,368 $ 11,842,497
(71,703)
$ 123,039,665
See accompanying notes to basic financial statements
67
CITY OF NEWPORT BEACH
Proprietary Fund
Statement of Revenues,
Expenses and Changes in Fund Net Assets
For the Year Ended June 30, 2007
Enterprise Funds
Operating revenues:
Charges for sales and services:
Water sales
Intergovernmental - rebates
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
Gain on removal of capital assets
Interest expense
Other fiscal charges
Total nonoperating revenues (expenses)
Income (loss) before transfers
Transfers in (note 13)
Transfers out (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
$ 17,825,992 $
- 3,502,724
92,976 32,326
17,918;968 3,535,050
7,805,548
3,725,065
1,463,759
1,645,641
882,104
14,003
1,224,610
545,426
360,423
593,165
227,814
1,540,298
220,955
17,076,418
3,172,393
842,550
362,657
663,057 129,879
(47,336) (9,849)
(199,900) -
(2,226)
413,595 120,030
1,256,145 482,687
1,256,145 482,687
88,812,063 32,560,473
$ 90,068,208 $ 33,043,160
See accompanying notes to basic financial statements
W.
Governmental
Total Activities
Enterprise Internal Service
Funds Funds
$ 17,825,992 $
3,502,724 -
125,302 14,422,990
21,454,018 14,422,990
7,805,548
4,949,675
1,371,573
2,009,185
1,964,316
2,006,064
56,678
1,475,269
878,723
241,817
-
- 435,632
- 3,005,598
- 2,255,591
- 1,854,659
- 2,574,945
1,761,253 -
20,248,811 14, 397,715
1,205,207 25,275
792,936
1,395,819
(57,185)
(105,852)
113,833
(199,900)
(3,002)
(2,226)
-
533,625
1,400,798
1,738,832
1,426,073
-
2,500,000
(250,000)
1,738,832
3,676,073
(208,800)
$ 1,530,032
8,166,424
$ 11,842,497
CITY OF NEWPORT BEACH
Proprietary Fund
Statement of Cash Flows
For the Year ended June 30, 2007
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 noncapital financing activities:
Cash received from other funds
Cash paid to other funds
Net caah 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 liabilities
Other fiscal charges
Net cash (used) for capital related financing activities
Cash flows from investing activities:
Interest on investments
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 rash 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
Decrease in inventories
Decrease in prepaid items
Increase (decrease) in accounts payable and accrued payroll
(Decrease) in accrued interest payable
Increase in deposits payable
Increase in workers' compensation
Increase in general liability
Increase in compensated absences
Total adjustments
Net cash used for operating activities
Non -cash investing, capital and financing activities:
Net decrease in fair value of investments
Total of non -cash activities
2,500,000
(250,000)
2,250,000
(1,913,802)
Enterprise Funds
(1,285,663)
(3,199,465)
(1,966,854)
-
Governmental
-
205,922
Total
Activities
-
(1,385,000)
Enterprise
Internal Service
Water
Wastewater
Funds
Funds
$ 18,528,072
$ 3,439,493
$ 21,967,565
$ 13,854,248
(3,712,191)
(1,229,314)
(4,941,505)
(5,665,075)
(8,864,334)
(1,031,223)
(9,895,557)
(6,952,364)
(1,447,322)
(188,629)
(1,635,951)
88,738
4,504,225
990,327
5,494,552
1,325,547
2,500,000
(250,000)
2,250,000
(1,913,802)
(1,285,663)
(3,199,465)
(1,966,854)
-
-
-
205,922
(1,385,000)
-
(1,385,000)
(116,566)
(199,900)
-
(199,900)
(3,002)
(2,226)
(2,226)
(3,500,928)
(1,285,663)
(4,786,591)
(1,880,500)
615,721
120,030
735,751
1,289,967
615,721
120,030
735,751
1,289,967
1,619,018
(175,306)
1,443,712
2,985,014
12,505,721
2,3191388
14,825,109
25,952,384
$ 14,124,739
$
2,144,082
$ 16,268,821
$ 28,937,398
$ 12,638,622
$
2,144,082
$ 14,782,704
28,937,398
1,486,117
1,486,117
$ 14,124,739
$
2,144,082
$ 16,268,821
$ 28,937,398
$ 842,550
$
362,657
$ 1,205,207
$ 25,275
1,463,759
545,426
2,009,185
1,964,316
(124,384)
(63,231)
(187,615)
(218,193)
818,532
-
818,532
-
-
-
3,635
-
-
-
60,473
1,525,267
145,475
1,670,742
(1,096,800)
(29,431)
-
(29,431)
-
7,932
-
7,932
-
-
-
-
282,000
25,046
279,795
3,661,675
627,670
4,289,345
1,300,272
$ 4,504,225
$
990,327
$ 5494,552
$ 1,325,547
$ (47,336)
$
(9,849)
$ (57,185)
$ (105,852)
$ (47,336)
$ (9,849)
$ (57,185)
$ (105,852)
See accompanying notes to basic financial statements
69
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70
Fiduciary Funds
71
A DII SI E",WO IDIR
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.
72
CITY OF NEWPORT BEACH
Agency Funds
Statement of Fiduciary Assets and Liabilities
June 30, 2007
Assets Totals
Cash and investments (note 4)
$ 3,294,227
Cash with fiscal agent (note 4)
3,022,209
Intergovernmental receivable
436,485
Total assets
$ 6,752,921
Liabilities
Due to bondholders
$ 6,191,382
Due to others
125,054
Due to City of Newport Beach
436,485
Total liabilities
$ 6,752,921
See accompanying notes to basic financial statements
73
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74
Notes to the
Financial Statements
y
75
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76
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30. 2007
(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
77
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30. 2007
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.
Amounts paid to acquire capital assets are capitalized as assets in the
government -wide financial statements, rather than reported as an expenditure.
78
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30. 2007
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
transaction upon which they are based takes place. Imposed non- exchange
transactions are recognized as revenues in the period for which they were
79
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30. 2007
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.
Proprietary & Fiduciary Funds
The City's enterprise and internal service funds are proprietary funds. In the fund
financial statements, proprietary and fiduciary funds are presented using the
f
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30. 2007
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.
NE
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30. 2007
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.
Mariners Library
The Mariners Library Fund is used to account for the receipt and expenditure
of funds for the Mariners Library Capital Project.
Contributions Fund
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.
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.
[i
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30. 2007
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 respective
funds based on each fund's average monthly cash and investments balance.
The City's investment in LAIF is $12,086,487 at June 30, 2007. 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.
e. 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, 2007, the balance of this account was
$15,372,058 of which $2,000,000 represents a receivable from the Irvine Ranch
Water District in conjunction with the Newport Coast Pre - annexation Agreement.
See Note (16) for more information.
f. 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.
g. 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
99
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30. 2007
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
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 capital asset class as follows:
Structures
30 -75 years
Equipment
3 -15 years
Infrastructure
20 -75 years
[n
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30. 2007
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
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 — 1 t installment
March 1 — 2nd installment
Collection dates
December 10 — 1st installment
April 10 — 2 "d 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
[R
(2)
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30. 2007
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.
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 $97,401,293 differs
from "net assets" of governmental activities $2,138,033,053 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.
Capital 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
$2,160,168,754
Accumulated depreciation
(117,828,582)
Total capital assets, net`
$2.042.340.172
*Amount excludes net capital assets of $7,953,374 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, 2007 were:
Certificates of participation $ 4,980,000
Note payable 1,469,202
l
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30. 2007
Pre - annexation agreement
CDBG Loan
Purchase agreement
Total
Accrued Interest
12,000,000
2,134,000
3.000.000
$23.583.202
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 S201-360
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 $2.496 560
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 $7.665.390
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 $11,842,497
Reclassifications and Eliminations
Interfund balances must generally be eliminated in the government -wide
statements, except for net residual amounts due between governmental
915
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30. 2007
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.
13.'
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30. 2007
This page left blank intentionally.
T
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30. 2007
Explanation of Differences betweeen Government Funds
Balance Sheet and the Statement of Net Assets
Assets
Cash and investments
Receivables:
Accounts
Notes
Interest
Intergovernmental receivables
Cash with fiscal agent
Interfund balances
Due from agency fund
Investment in joint venture
Prepaid items
Inventory
Other
Capital assets
Accumulated depreciation
Total assets
Liabilities and Fund Balances / Net Assets
Total Capital Long -term
Governmental Related Accumulated Debt
Funds Items Depreciation Transactions
$ 93,541,813 $ - $ - $ -
8,406,988 - -
50,000 - -
1,592,648 - -
15,372,058 - -
3,293,977 - -
7,351,061 - -
436,484 - -
492,032
220,864
- 2,160,168,754 -
- - (117,828,582)
$ 130,757,925 $ 2,160,168,754 $ (117,828,582) $
Liabilities:
Accounts payable
$ 9,948,996
$ -
Accrued payroll
2,381,712
- - -
Accrued interest payable
-
- - -
Deposits payable
3,897,519
- - -
Capital leases payable
-
- - -
Claims payable
-
- - -
Workers' compensation payable
-
- - -
Compensated absences payable
-
- - -
Unearned revenue
2,111,954
- - -
Unavailable revenue
7,665,390
- - -
Interfund payables
-
- - -
Due to other funds
7,351,061
- - -
Long -term liabilities
-
- - 23,583,202
Total liabilities
33,356,632
- - 23,583,202
Fund balances /net assets
97,401,293
2,160,168,754 (117,828,582) (23,583,202)
Total liabilities and
and fund balances /net assets $ 130,757,925 $ 2,160,168,754 _L_( 117,828,582) $ -
l
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30. 2007
Investment
Internal
Reclassifications
Interest in Joint
Unavailable Service
and
Statement of
Payable Venture
Revenue Funds
Eliminations
Net Assets
$ - S -
$ - $ 28,937,398
$ -
$ 122,479,211
- -
- 224,127
-
8,631,115
2,496,560
$ 2,496,560 $
- 50,000
- - 1,592,648
- - 15,372,058
- - 3,293,977
- (7,279,358) 71,703
436,484
- 2,496,560
22,262 - 514,294
206,138 - 427,002
- 21,700,159 - 2,181,868,913
- (13,746,785) - (131,575,367)
$ 37,343,299 $ (7,279,358) $ 2,205,658,598
- $ - $ - $ 227,570 $ - $ 10,176,566
- - - 27,808 - 2,409,520
201,360 - - - - 201,360
- - - - - 3,897,519
49,490 - 49,490
1,438,955 - 1,438,955
- - - 3,092,293 - 3,092,293
- - - 1,749,135 - 1,749,135
- - 2,111,954
- - (7,665,390) - - -
(7,351,061)
18,915,551 - 42,498,753
201,360 - (7,665,390) 25,500,802 (7,351,061) 67,625,545
(201,360) 2,496,560 7,665,390 11,842,497 71,703 2,138,033,053
$ - $ 2,496,560 $ - $ 37,343,299 $ (7,279,358) $ 2,205,658,598
91
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30. 2007
b. Explanation of Differences between Enterprise Funds and Government -
wide Statement of Net Assets
Total net assets of the City's Enterprise Funds of $123,111,368 differs from net
assets of the business -type activities of $123,039,665 reported in the
government -wide statement of net assets. The difference, ($71,703), results from
the consolidation of internal service fund activities related to the enterprise funds.
Explanation of Differences between Enterprise Funds
and Government -wide Statement of Net Assets
Total Internal Government wide
Enterprise Service Statement of
Assets Funds Funds Net 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
$ 14,782,704 $ $ 14,782,704
4,634,378 4,634,378
1,486,117 1,486,117
- (71,703) (71,703)
110,285,191 110, 285,191
$ 131,188,390 $ (71,703) $ 131,116,687
$ 3,257,410 $
$ 3,257,410
101,223
101,223
99,950
99,950
78,439
78,439
1,445, 000
1,445, 000
3,095,000
3,095,000
8,077,022
8,077,022
Net Assets
Invested in capital assets, net of related debt $ 107,231,308 - $ 107,231,308
Unrestricted 15,880,060 (71,703) 15,808,357
$ 123,111,368 $ (71,703) $ 123,039,665
WE
C.
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30. 2007
Explanation of Differences between Governmental Fund Operating
Statements and the Statement of Activities
The "net change in fund balances" for governmental funds $3,336,003 differs
from the "change in net assets" for governmental activities $22,883,229 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.
Capital outlay
Net change to Internal Service Fund capital
assets
Net change in capital related items
Depreciation expense
Deletions to accumulated depreciation
Net change in accumulated depreciation
93
$33,167,783
(5.641.800)
$27.525.983
($9,227,603)
2,644,992
($6.582.6111
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30. 2007
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 $ 300,000
Note payable 163,587
Pre - annexation agreement 1,200,000
CDBG loan 73,000
Purchase agreement 2,000,000
Total principal payments made $3 736 587
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 162 364
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 SZ53 207
Unavailable Revenue
Some of the revenue will be collected after year -end, but is not available soon
enough to pay for current period's expenditures, and therefore is reported as
unavailable revenue in the governmental funds.
Net change in unavailable revenue $1.667.506
94
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30. 2007
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 $3.676.073
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.
95
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30. 2007
Explanation of Differences between Governmental Fund
Operating Statements and the Statement of Activities
Total Capital
Contributions from property owners
Contributed capital
Gain on sale of capital assets
Other
Total revenues
Expenditures:
Current:
General government
Public safety
Public works
Community development
Community services
Capital outlay
Debt service:
Principal retirement
Interest and fiscal charges
Service fee
Total expenses
Other financing sources (uses):
Transfers in
Transfers out
Proceeds from long -term debt
Total other financing sources
(uses)
Net change in fund balances I
net assets
1,967,465
176,367,713
13,706,061
68,843,947
28,352,293
7,753,035
13,988,589
45,615,169
3,736,587
458,035
274,476
Long -term
Debt
Transactions
$
1,966,854 (1,023,223) -
2,646,869 5,558,243 -
- 112,920
864,144
(33,167,783) - -
(3,736,587)
182,453,716 (28,554,060) 5,786,560 (3,736,587)
20,271,396 - - -
(22,521,396) - - -
5,000,000 (5,000,000)
2,750,000 (5,000,000)
(3,336,003) 28,554,060 (5,786,560) (1,263,413)
Fund balances / net assets beginning of year
as restated 100,737,296 2,131,614,694 (112,042,022) (22,319,789)
Fund balances / net assets end of year $ 97,401,293 $ 2,160,168,754 $ (117,828,582) $ (23,583,202)
l
Governmental Related Accumulated
Funds Items Depreciation
Revenues:
Taxes and assessments
$ 112,230,054 $ - $
Intergovernmental
18,866,929 -
Licenses and permits
4,574,659 -
Charges for services
14,452,723 -
Fines and forfeitures
4,126,351
Investment income
5,431,137
Net increase in fair value of investments
(626,881) -
Property income
13,965,815 -
Share of joint venture net loss
- -
Donations
1,379,461 -
Contributions from property owners
Contributed capital
Gain on sale of capital assets
Other
Total revenues
Expenditures:
Current:
General government
Public safety
Public works
Community development
Community services
Capital outlay
Debt service:
Principal retirement
Interest and fiscal charges
Service fee
Total expenses
Other financing sources (uses):
Transfers in
Transfers out
Proceeds from long -term debt
Total other financing sources
(uses)
Net change in fund balances I
net assets
1,967,465
176,367,713
13,706,061
68,843,947
28,352,293
7,753,035
13,988,589
45,615,169
3,736,587
458,035
274,476
Long -term
Debt
Transactions
$
1,966,854 (1,023,223) -
2,646,869 5,558,243 -
- 112,920
864,144
(33,167,783) - -
(3,736,587)
182,453,716 (28,554,060) 5,786,560 (3,736,587)
20,271,396 - - -
(22,521,396) - - -
5,000,000 (5,000,000)
2,750,000 (5,000,000)
(3,336,003) 28,554,060 (5,786,560) (1,263,413)
Fund balances / net assets beginning of year
as restated 100,737,296 2,131,614,694 (112,042,022) (22,319,789)
Fund balances / net assets end of year $ 97,401,293 $ 2,160,168,754 $ (117,828,582) $ (23,583,202)
l
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30. 2007
(138,996)
Investment
5,997,884
Internal
Reclassifications
2,114,121,747
Accrued
in Joint
Unavailable
Service
and
Statement of
Interest
Venture
Revenue
Fund
Eliminations
Activities
$ -
$ -
$ -
$ -
$ -
$ 112,230,054
-
-
1,667,506
-
-
20,534,435
-
-
-
-
-
4,574,659
-
-
-
208,800
14,661,523
-
-
-
-
-
4,126,351
-
-
-
1,395,819
-
6,826,956
-
-
-
(105,852)
-
(732,733)
-
-
-
-
-
13,965,815
-
253,207
-
-
-
253,207
-
-
-
-
-
1,379,461
-
-
-
113,833
-
113,833
,967,465
253,207
1,667,506
1,403,800
208,800
179,901,026
-
-
-
166;383
19,248
14,166,168
-
-
-
(25,111)
32,919
69,795,386
-
-
-
(209,097)
2,831,536
39,179,844
-
-
-
104,490
1,050,423
9,020,868
-
-
-
(61,940)
8,513,260
23,304,053
-
-
-
-
(12,447,386)
-
62,364
3,002
523,401
62,364
(22,273)
155,989,720
-
-
-
2,500,000
(22,771,396)
-
-
-
-
(250,000)
22,771,396
-
2,250,000
(62,364)
253,207
1,667,506
3,676,073
208,800
23,911,306
(138,996)
2,243,353
5,997,884
8,166,424
(137,097)
2,114,121,747
$ (201,360) $
2,496,560
$ 7,665,390
$ 11,842,497 $
71,703
$ 2,138,033,053
97
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30. 2007
Explanation of Differences between Enterprise Funds Operating Statement
and the Statement of Activities
The change in net assets for the City's enterprise funds $1,738,832 differs from
the change in net assets of the business -type activities $1,530,032 reported in
the government -wide statement of activities. The difference ($208,800) results
from the consolidation of internal service fund activities related to the enterprise
funds.
Explanation of Differences between Enterprise Funds
Operating Statement and the Statement of Activities
Nonoperating revenues (expenses)
Investment income
Total
Internal
Business -type activities
Net decrease in fair value of investments
Enterprise
Service
Statement of
Gain on removal of capital assets
Funds
Fund
Activities
Operating revenues:
(199,900)
(199,900)
Charges for sales and services:
(2,226)
-
(2,226)
Water sales
$ 17,825,992
$
$ 17,825,992
Intergovernmental
-
-
-
Sewer service and connection fees
3,502,724
-
3,502,724
Other
125,302
121,372,536
125,302
Total operating revenues
21,454,018
-
21,454,018
Operating expenses:
$ (71,703) $
123,039,665
Purchase of Water
7,805,548
7,805,548
Salaries and wages
4,949,675
4,949,675
Depreciation
2,009,185
-
2,009,185
Professional Services
2,006,064
2,006,064
Maintenance and supplies
1,475,269
208,800
1,684,069
System maintenance
241,817
-
241,817
Other
1,761,253
-
1,761,253
Total operating expenses
20,248,811
208,800
20,457,611
Operating income
1,205,207
(208,800)
996,407
Nonoperating revenues (expenses)
Investment income
792,936
792,936
Net decrease in fair value of investments
(57,185)
-
(57,185)
Gain on removal of capital assets
Interest expense
(199,900)
(199,900)
Other
(2,226)
-
(2,226)
Total nonoperating revenues (expenses)
533,625
-
533,625
Change in net assets
1,738,832
(208,800)
1,530,032
Net assets, beginning of year
121,372,536
137,097
121,509,633
Net assets, end of year
$ 123,111,368
$ (71,703) $
123,039,665
EL
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30. 2007
(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.
RZ
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30. 2007
Expenditures exceeded appropriations in the following non -major governmental funds.
Appropriations Expenditures Variance
Environmental Liability
$
90,000
$
184,685
Supplemental Law Enforcement
$
120,000
$
165,072
Traffic Congestion Relief
$
701,030
$
736,412
The following funds reported deficit fund balances:
Special Revenue Funds
Arterial Highway Rehabilitation $ 538,307
Community Development Block Grant $ 73,074
Mariners Library $ 2,061,268
Capital Projects
Bonita Canyon Development $ 28,283
Fire Station 7 $ 975,402
Marine Science Center $ 994,894
City Hall Improvement $ 232,645
Misc SAH Projects $ 182,977
Internal Service Funds
Insurance Reserve
Compensated Absences
$ 5,372,158
$ 7,265,808
$ (94,685)
$ (45,072)
$ (35,382)
The City's intentions are to eliminate deficit fund balances through future grant funding,
other future revenue sources, or interfund transfers.
(4) Cash and Investments
Cash and investments as of June 30, 2007 are classified in the accompanying financial
statements as follows:
Statement of net assets
Cash and investments
$ 137,261,915
Cash with fiscal agent
4,780,094
Fiduciary funds:
Cash and investments
3,294,227
Cash with fiscal agent
3,022,209
Total cash and investments
$ 148,358,445
100
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30. 2007
Cash and investments as of June 30, 2007 consist of the following:
Cash on hand $ 28,332
Deposits with financial institutions 2,032,285
Investments 146,297,828
Total cash and investments $ 148,358,445
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
Investments Authorized by Debt Agreements
101
Maximum
Maximum
Maximum
Percentage
Investment
Authorized Investment Type
MaM turity
of Portfolio'
in One Issuer
Local Agency Bonds
5 years
15%
None
U.S. Treasury Obligations
5 years
None
None
U.S. Agency Securities
5 years
None
None
Banker's Acceptances
180 days
30%
10%
Commercial Paper
270 days
25%
10%
Negotiable Certificates of Deposit
1 years
30%
10%
Repurchase Agreements
30 days
None
None
Reverse Repurchase Agreements
30 days
10% of base value
None
Medium -Term Notes
4 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
5%
None
Local Agency Investment Fund (LAIF)
N/A
None
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
Investments Authorized by Debt Agreements
101
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30. 2007
Investment of debt proceeds held by bond trustee (i.e. fiscal agent) 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.
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:
102
Investment Type
Money Market Funds
U.S. Treasury Notes
U.S. Agencies
Corporate Notes
Municipal Bond
Commercial Paper
LAIF
Repurchase Agreements
Asset - backed Securities
Cash with Fiscal Agent:
Money Market Funds
Investment Agreements
Total
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30. 2007
$ 146,297.828 S 71,034,686 $ 56,611.464 $ 17,471,101 $ 1,180,576 $ 146,297,828
Investment agreements are recorded at cost (not fair value) because these
agreements represent nonparticipating contracts that are nonnegotiable and whose
redemption terms do not consider market rates.
Investments with Fair Values Hiohly Sensitive to Interest Rate Fluctuations
As of June 30, 2007 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.
103
Investment Maturities (In Years)
' Fair Value
Less than 1
1 to 3
3 to 5
More than 5
Total
$ 3,869,304
$ 3,869,304 $
- $
- $ - $
3,869,304
10,776,510
4,600.413
4,569,918
1,606,178 -
10,776,510
66,750,751
20,060,537
31,822,591
14,867,623 -
66,750,751
26,765,214
7,802,987
17,964,927
997,300 -
26,765,214
1,988,410
997,230
991,180
- -
1,988,410
2,900,000
2,900,000
-
- -
2,900,000
12,086,487
12,086,487
-
- -
12,086,487
12,096,000
12,096,000
-
- -
12,096,000
1,262,848
-
1.262,848
- -
1,262,848
6,621,728
6,621,728
-
- -
6,621,728
1.180.576
-
-
- 1.180.576
1.180.576
$ 146,297.828 S 71,034,686 $ 56,611.464 $ 17,471,101 $ 1,180,576 $ 146,297,828
Investment agreements are recorded at cost (not fair value) because these
agreements represent nonparticipating contracts that are nonnegotiable and whose
redemption terms do not consider market rates.
Investments with Fair Values Hiohly Sensitive to Interest Rate Fluctuations
As of June 30, 2007 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.
103
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2007
Minimum Exempt
Legal From
Fair Value Rating Disc�l r_ PPA PAt PA AA-
Investment Type
Money Markel Funds $
3,869,304
A $ -
U.S.Treasury Notes
10,776,510
NIA 2,575,699
U.S. Agenues
66 750,751
NIA -
Corporate Notes
26,765,214
A
Municipal Bond
1,988,410
AA -
Commemial Paper
2,900,000
A -1 -
Lowl Agency Investment Fund
12,086,487
NIA
Repurchase Agreements
12,096,000
NIA -
Asset- eacked Securities
1,262,808
AAA -
Cash with Flacal Agent:
Money Market Fund.
6,621,728
A -
InvestmeMAgreements
1,180,576
NIA -
101,997 $ - $
2,965,151 -
66,750,751 -
4,434,fi36 2,600,734 1903,951
1,988,410 -
1,262,846
6,621,728
At
1982,059 2872,919 1,130915
1,180.576
Not
A-1 Recea
$ 3,767,307
5,235,460
2,900.000
12,08fi 487
12,098,000
146,297,828 2,575,699 84,125,521 2,600,734 7,943951 9,162,635 2,672,919 111301915 2,90,000 33,185,254
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.
Investments in any one issuer that represent 5% or more of total City's investments are
as follows:
Issuer Investment Type Reported Amount
FHLB Federal agency securities $19,151,170
FHLMC Federal agency securities $17,457,637
FNMA Federal agency securities $27,350,333
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, 2007, 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, 2007, City investments in the following
104
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30. 2007
investment types were held by the same broker - dealer (counterparty) that was used by
the City to buy the securities:
Investment Type
Money Market Funds
U.S. Treasury Notes
U.S. Agencies
Corporate Notes
Repurchase Agreements
Commercial Paper
Asset - Backed Securities
Reported Amount
$ 22,012
2,801,227
20,969,837
11,909,594
12,096,000
750,000
1,262,848
For investments identified herein as restricted cash with fiscal agent, the fiscal agent
selects the investment under the terms of the applicable trust agreement, acquires the
investment, and holds the investment on behalf of the reporting government.
Investment in State Investment Pool
The City is a voluntary participant in the Local Agency Investment Fund (LAIF) that is
regulated by the California Government Code under the oversight of the Treasurer of the
State of California. The fair value of the City's investment in this pool is reported in the
accompanying financial statements at amounts based upon the City's pro -rata share of
the fair value provided by LAIF for the entire LAIF portfolio (in relation to the amortized
cost of that portfolio). The balance available for withdrawal is based on the accounting
records maintained by LAIF, which are recorded on an amortized cost basis. LAIF is not
rated.
105
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30. 2007
(5) Capital Assets
Capital asset activity for the year ended June 30, 2007 was as follows:
Governmental Activities:
Non - depreciable:
Land and rights of way
Work in progress
Depreciable:
Structures
Equipment
Infrastructure
Less accumulated
depreciation for:
Structures
Equipment
Infrastructure
Net Capital Assets
Beginning
Balance, as
Restated Additions Deletions
$ 1,780,698,769
21,941,456
34,803,231
24,361,234
290,803,663
2,152,608, 353
(10,836,840)
(15,591,980)
(98,563,936)
(124, 992,756)
$ 5,000,000
17,113,926
12, 640,179
2,550,481
9,619,143
46,923,729
(759,899)
(2,237,170)
(6,230,534)
(9,227,603)
43
(13,755,946)
(1,260,354)
(2,646,869)
(17,663,169)
1,250, 527
1,394,465
2,644,992
Balance
June 30, 2007
$ 1,785,698,769
25,299,436
47,443,410
25,651,361
297,775,937
2,181,868,913
(11,596,739)
(16,578,623)
(103,400,005)
(131,575,367)
$ 2,027,615,597 $ 37,696,126 $ (15,018,177) $ 2,050,293,546
Beginning balance has been restated to include correction to the value of work in progress, equipment and
related accumulated depreciation. See Note (17) for further discussion.
106
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30. 2007
Business -type Activities:
Less accumulated depreciation for
Structures (101,885) (5,145) (107,030)
Equipment (138,624) (3,189) (141,813)
Infrastructure (44,730,039) (2,000,851) (46,730,890)
(44,970,548) (2,009,185) (46,979,733)
Net $ 109,094,911 1,856,057 $ (665,777) $ 110,285,191
Depreciation expense was charged in the following functions in the Statement of Activities:
Beginning
Business -type
Balance
Activities
Balance
Additions
Deletions June 30, 2007
Non - depreciable:
Public safety
1,023,355
-
Land
$ 2,016,450
$ -
$ - $ 2,016,450
Work in progress
976,125
1,851,658
(665,777) 2,162,006
Depreciable:
Water
-
1,463,759
Structures
205,793
-
205,793
Equipment
148,191
-
148,191
Infrastructure
150,718,900
2,013,584
152,732,484
154,065,459
3,865,242
(665,777) 157,264,924
Less accumulated depreciation for
Structures (101,885) (5,145) (107,030)
Equipment (138,624) (3,189) (141,813)
Infrastructure (44,730,039) (2,000,851) (46,730,890)
(44,970,548) (2,009,185) (46,979,733)
Net $ 109,094,911 1,856,057 $ (665,777) $ 110,285,191
Depreciation expense was charged in the following functions in the Statement of Activities:
107
Governmental
Business -type
Activities
Activities
General government
$ 274,476
$ -
Public safety
1,023,355
-
Public works
6,952,708
-
Community development
112,920
-
Community service
864,144
-
Water
-
1,463,759
Wastewater
-
545,426
$ 9,227,603
$ 2,009,185
107
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30. 2007
(6) Lonq -Term Debt
Changes in Long-Term Liabilities
Long -term liability for the year ended June 30, 2007, was as follows:
Amounts
Beginning Ending Due Within
Balance Additions Deletions Balance One Year
Governmental activities:
Certificates of participation
payable $ 5,280,000 $
Note payable 1,632,789
Pre - annexation agreement 13,200,000
CDBG Loan 2,207,000 -
Purchase Agreement
Payable - 5,000,000
Capital leases payable 166,056
Workers' compensations
payable 11,160,000 3,005,597
Claims and judgements
$ (300,000) $
4,980,000 $
315,000
(163,587)
1,469,202
170,948
(1,200,000)
12,000,000
1,200,000
(73,000)
2,134,000
78,000
(2,000,000)
3,000,000
1,500,000
(116,566)
49,490
49,490
(2,723,597)
11,442,000
3,092,293
payable
4,812,002
2,284,546 (2,259,500)
4,837,048
1,438,955
Compensated absences
8,637,091
2,134,454 (1,854,659)
8,916,886
1,749,135
Total governmental
activities
47,094,938
12,424,597 (10,690,909)
48,828,626
9,593,821
Business -type activities:
Water Revenue Bonds
payable
5,925,000
- (1,385,000)
4,540,000
1,445,000
Total $ 53,019,938 $ 12,424,597 $ (12,075,909) $ 53,368,626 $ 11,038,821
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.
M
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30. 2007
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 $300,000 to $535,000 through June 1, 2019. Principal payments are
payable annually on June 1 of each year. At June 30, 2007, the City has a required
cash reserve balance for debt service of $566,559, which is recorded as a restricted
asset and reservation of fund balance in the Debt Service Fund. The outstanding
balance at June 30, 2007, amounted to $4,980,000.
The annual amortization requirements of the Certificates of Participation are as
follows:
Year Ending
June 30
2008
2009
2010
2011
2012
2013 -2016
2017 -2019
Principal
315,000
330,000
345,000
360,000
380,000
1,720,000
1,530,000
Interest
249,480
235,463
220,448
203,025
184,845
537,380
160,165
Total
564,480
565,463
565,448
563,025
564,845
2,257,380
1,690,165
$ 4,980,000 $ 1,790,806 $ 6,770,806
109
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30. 2007
• 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, 2007, amounted to
$1,469,202
The annual amortization requirements for the Note Payable are as follows:
Year Ending
June 30
Principal
Interest
Total
2008
170,948
66,114
237,062
2009
178,641
58,421
237,062
2010
186,679
50,383
237,062
2011
195,080
41,982
237,062
2012
213,032
24,030
237,062
2012 -2016
524,822
54,334
579,156
$ 1,469,202
$ 295,264
$ 1,764,466
• 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, 2007, amounted to $12,000,000.
• 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, 2007,
amounted to $2,134,000.
110
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30. 2007
The annual amortization requirements for the CDBG Loan are as follows:
Year Ending
June 30
Principal
Interest
Total
2008
78,000
115,482
193,482
2009
84,000
112,253
196,253
2010
89,000
108,535
197,535
2011
95,000
104,345
199,345
2012
102,000
99,653
201,653
2013 -2016
479,000
340,829
819,829
2017 -2021
804,000
247,841
1,051,841
2022 -2023
403,000
25,013
428,013
$ 2,134,000
$ 1,153,951
$ 3,287,951
• Purchase Agreement Payable
In Fiscal Year 2007, the City entered into an agreement with the California
Department of Transportation (CalTrans) for the purchase of a 15.05 -acre parcel of
land at the corner of Superior Avenue and Coast Highway. The purchase price was
$5 million, to be paid in three installments with a 4.75% interest. Principal and
interest is payable annually on December 31st of each year until December 31, 2009.
The outstanding balance at June 30, 2007 amounted to $3,000,000. The annual
amortization requirements for the Purchase Agreement are as follows:
Year Ending
June 30
Principal
Interest
Total
2008
1,500, 000
142,000
1,642,000
2009
1,500,000
71,250
1,571,250
$ 3,000,000
$ 213,250
$ 3,213,250
• 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 has been recorded at the present value of its 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.
111
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30. 2007
Future minimum lease payments under the leases are as follows:
Year Ending June 30 Payment
2008 49,820
Less: amount representing interest (330)
Present value of future
minimum lease payment $ 49,490
• 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, 2007, 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, 2007, for general liability
amounted to $4,837,048 and for workers' compensation was $11,442,000.
• Compensated Absences
The City's policies relating to compensated absences are described in Note (1). This
liability, to be paid in future years from available and future resources, at June 30,
2007, is $8,916,886.
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, 2007, the City has a required cash reserve
balance of $1,486,117 which is recorded as 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, 2007, the outstanding principal
balance was $4,540,000, and accrued interest payable was $99,950.
The annual amortization requirements for the Water Revenue Bonds are as follows:
112
(7)
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30. 2007
Year Ending
Original Issue
June 30, 2007
No.
June 30
Principal
Interest
Total
2008
1,445,000
137,765
1,582,765
2009
1,510,000
71,325
1,581,325
2010
1,585,000
-
1,585,000
CDM Blk -133
$ 4,540,000
$ 209,090
$ 4,749,090
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, 2007
for each district under the Bond Acts of 1911 and 1915, and other special assessments,
are as follows:
Bonds Outstanding
Assessment District
Original Issue
June 30, 2007
No.
63
Newport Island
536,531
30,000
No.
64
Channel Road
180,794
46,000
No.
66
East Newport
171,911
20,000
No.
67
CDM Blk -133
64,431
13,000
No.
68
Newport Shores
3,813,562
3,325,000
No.
69
West Newport
4,978,498
4,215,000
No.
70
Bay Shores
1,380,996
1,105,000
No.
71
Balboa Boulevard
796,942
370,000
No.
72
Balboa Coves
192,908
25,000
No.
74
Island Avenue
222,629
160,000
No.
75
Balboa Business
821,204
705,000
No.
78
Little Balboa Island
1,348,196
915,000
No.
79
Beacon Bay
1,215,134
860,000
No.
82
Corona del Mar
274,967
200,000
No.
86
Balboa Peninsula
300,174
195,000
No.
95 -1
CIOSA Refunding Series A
15,495,000
10,685,000
Other Limited Obligation Bonds
113
(8)
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30. 2007
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, 2007 are as follows:
Series 2005 $200,000,000
Series 2007A $ 80,000,000
Series 2007B $ 80,000,000
Series 2007C $ 90,000,000
Series 2007D $ 86,475,000
Series 2007E $ 86,475,000
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 2005 bonds commence on December 1, 2016, and are
required to be made through December 1, 2040. For the 2007 Series bonds, varying
redemption payments commence on December 1, 2016, and are required to be made
through December 1, 2040.
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 $26 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 $1,000,000 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
114
(9)
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30. 2007
fund that accounts for part -time or full -time employees. The total charge allocated to
each of the funds is calculated using trends in actual experience after considering
unexpected and unusual claims.
Fund Liabilities are reported when it is probable that a loss has occurred and the amount
of the loss can be reasonably estimated. Liabilities include an amount for claims that
have been incurred but not reported (IBNR). Claims liabilities are calculated considering
the effects of inflation, recent claim settlement trends including frequency and amount of
payouts and other economic and social factors. The total liability claims payable include
$16,279,048 which represents the discounted present value at June 30, 2007; the
claims were discounted using an interest rate of five percent.
General Liability Workers' Compensation
June 30, 2006 June 30, 2007 June 30, 2006 June 30, 2007
Unpaid claims, beginning of
fiscalyear $ 3,367,961 $ 4,812,002 $ 10,631,277 $ 11,160,000
Incurred claims (including
IBNR) 5,229,366 2,284,546 3,823,652 3,005,597
Claim payments (3,785,325) (2,259,500) (3,294,929) (2,723,597)
Unpaid claims, end of fiscal
year $ 4,812,002 $ 4,837,048 $ 11,160,000 $ 11,442,000
For the past three years, no payment on any claim or judgment has exceeded the
amount of applicable insurance.
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 $65,797,480 at June 30, 2007.
115
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30. 2007
(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 9.132% for non - safety employees and 25.453% 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 2007, the City's annual pension cost of $16,207,422 for PERS was equal to the
City's required and actual contributions. A summary of principle assumptions and
methods used to determine the annual required contribution is shown below:
Valuation Date
Actuarial Cost Method
Amortization Method
Average Remaining
Period
Asset Valuation Method
Actuarial Assumptions
Investment Rate of
Return
Miscellaneous Plan
June 30, 2004
Entry Age Actuarial Cost
Method
Level Percent of Payroll
32 Years as of the Valuation
Date
15 -Year Smoothed Market
7.75% (net of administrative
expenses)
116
Safety Plan
June 30, 2004
Entry Age Actuarial Cost
Method
Level Percent of Payroll
32 Years as of the Valuation
Date
15 -Year Smoothed Market
7.75% (net of administrative
expenses)
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30. 2007
Safety Plan
3.25% to 13.15% depending
on age, service, and type of
employment
3.00%
3.25%
A merit scale varying by
duration of employment
coupled with an assumed
annual inflation growth of
3.0% and an annual
production growth of 0.25%
Initial unfunded liabilities are amortized over a closed period that depends on the plan's
date of entry into PERS. Subsequent plan amendments are amortized as a level percent
of pay over a closed 20 -year period. Gains and losses that occur in the operation of the
plan are amortized over a rolling period, which results in an amortization of 10% of
unamortized gains and loses each year. If the plan's accrued liability exceeds the
actuarial value of plan assets, then the amortization payment on the total unfunded
liability may not be lower than the payment calculated over a 30 -year amortization
period.
THREE -YEAR TREND INFORMATION FOR PERS ($ Amount in Thousands)
Fiscal
Miscellaneous Plan
Projected Salary
3.25% to 14.45% depending
Increases
on age, service, and type of
employment
Inflation Rate
3.00%
Payroll Growth
3.25%
Individual Salary
A merit scale varying by
Growth
duration of employment
coupled with an assumed
annual inflation growth of 3.0%
and an annual production
growth of 0.25%
Safety Plan
3.25% to 13.15% depending
on age, service, and type of
employment
3.00%
3.25%
A merit scale varying by
duration of employment
coupled with an assumed
annual inflation growth of
3.0% 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
Annual Pension
Year
Cost (APC)
6/30/05
$12,442
6/30/06 $15,064
6/30/07 $16,207
117
Percentage of Net Pension
APC Contributed Obligation
100% $0
100% $0
100% $0
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30. 2007
SCHEDULE OF FUNDING PROGRESS FOR PERS ($ Amount in Thousands
Entry Age
Unfunded
Normal
Actuarial
Liability
Annual
$151,246
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]
06/30/2004
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%
06/30/2005
Misc.
$161,371
$150,730
$
10,641
93.4%
$ 34,218
31.098%
Safety
267,192
215,965
51,227
80.8%
24,303
210.785%
Total
$428,563
$366,695
$
61,868
85.6%
$ 58,521
105.719%
06/30/2006
Misc.
$183,637
$163,158
$
20,479
88.8%
$ 37,224
55.016%
Safety
296,420
231,701
64,719
78.2%
26,053
248.413%
Total
$480,057
$394,859
$
85,198
82.3%
$ 63,277
134.643%
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, 2007, the City's covered payroll for employees participating
in the plan was $3,817,694. Employees made contributions of $143,164 (3.75% of
current covered payroll), which was matched by the employer in the same amount.
Assets of the plan totaled $1,803,803 at June 30, 2007.
118
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30. 2007
(11) Post - Employment Health Care Benefits (OPEB)
Plan Description
The City sponsors an employee benefit program known as The City of Newport Beach
Medical Expense Reimbursement Plan (the Plan). The purpose of the Plan is to provide
participants reimbursement for eligible health care expenses after retirement. All active
employees and eligible retirees participate in a Health Reimbursement Arrangement
( "HRA ") sponsored by the City, held in an Integral Part Trust managed by ING (Trustee),
under IRS Revenue Ruling 2002 -41 (June 26, 2002) and IRS Notice 2002 -45 (June 26,
2002). The City of Newport Beach is the sole employer for the Plan. Total participants
involved in the Plan as of June 30, 2007 were 1,165 consisting of 507 miscellaneous
employees, 271 safety employees, and 387 retirees. The Plan has characteristics of
both a defined benefit and a defined contribution plan.
All employees, hired after January 1, 2006, and employees with less than five years of
service at January 1, 2006, as well as employees who elected to fully convert to a
defined contribution formula, participate in a program that requires mandatory defined
employee and employer contributions. However, once the contributions have been made
to the employee's HRA account, the City has no further funding obligation to the Plan on
their behalf. As of June 30, 2007, 437 active employees participated in the defined
contribution program of the Plan.
Employees with greater than five years of service or miscellaneous employees that have
a combined factor, of age and years of service, that is greater than or to equal 50 (47 for
safety employees) had the option to retain a hybrid of the former defined benefit formula
or fully convert to the new plan. The hybrid of the former defined benefit formula
provides post - employment health care benefits to employees who retire from the City
with seven years of service and participate in PIERS retirement. Those employees are
eligible to receive health care benefits covering themselves and a qualified family
member from the City's insurance carriers, Blue Cross and PERS. Retirees receive a
defined employer contribution of $400 per month ($425 for certain retired Police
employees). As of June 30, 2007, 341 active employees and 387 retirees were
participating in the hybrid of the defined benefit.
This program is largely funded on a pay -as- you -go basis. In July 2000, the City began
setting resources aside to fund the "promise to pay" current active employees this future
defined benefit over the working life of the employee. For the year ended June 30, 2007,
the City began setting aside an amount approximating the actuarially determined annual
required contribution (excluding the implied subsidy) based on certain available actuarial
information that has been provided with respect to this benefit. This additional
information has been provided to enhance the reader's understanding of this benefit.
This information should not be construed to be an implementation of GASB Statement
No. 45, which the City plans on implementing in 2007 -08. These assets are accounted
for in an internal service fund and classified as unrestricted net assets on the statement
of net assets.
119
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30. 2007
The actuarial valuation is based on the assumption that the City will pre -fund the retiree
healthcare defined benefit through an irrevocable pre- funding trust during the fiscal year
ended June 30, 2008 using the assets that have been set aside for this purpose in the
internal service fund. Additional assumptions used in the actuarial valuation include a
7.75% discount rate for the cash subsidy, a 5% discount rate for the implied subsidy,
and an amortization period not to exceed 30 years. As of June 30, 2007 the actuarial
accrued liability was $56.million, the City has set aside $6.2 million to partially pre -fund
the OPEB liability and the unfunded actuarial accrued liability was $48.2 million.
The City's expenditures for post - employment health care benefits for the past three fiscal
years is as follows:
Year Ending
June 30
2005
2006
2007
Plan Financial Statements
Post - Employment Health Care
Expenditures
$ 936,042
$1,231,231
$1,986,113
Complete Separate Financial Statements for the Plan can be obtained at the City of
Newport Beach offices at 3300 Newport Boulevard, Newport Beach California.
Plan summary of significant accounting policies
Basis of accounting — the Plan presents stand alone Financial Statements on an accrual
basis of accounting. The Plan's fiscal year is different than that of the City. The most
recent Plan Financial Statements are prepared as of, and for the year ended December
31, 2006.
Accounting policies — For the plan's fiscal year ended December 31, 2006, the Plan
adopted GASB Statement No. 43 which establishes uniform financial reporting for Other
Post Employment Benefit Plans (OPEB) which supersedes the guidance in GASB
Statement No 26. GASB 43 addresses standards for the measurement, recognition, and
display of employers' OPEB expense and related liabilities (assets); note disclosures;
and if applicable, required supplementary information.
Estimates — The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect reported amounts of assets and liabilities and changes therein,
and disclosures of contingent assets and liabilities. Accordingly actual results may differ
from those estimates.
120
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30. 2007
Investment valuation and income recognition — The Plan's investments are stated at fair
value. Quoted market prices, if available are used to value investments. Shares of
mutual funds are valued at quoted market prices which represent the net asset value of
shares held by the Plan at year end. Investments are participant directed. Purchases
and sales of securities are recorded on a trade -date basis. Dividends are recorded on
the ex- dividend date.
Contribution revenue - is recognized when receivables are due based on contracts with
the various bargaining units.
Benefit and refund expense - are recognized when due and payable in accordance with
the terms of the Plan. Benefits consist of all claims that meet the Plan's definition of
eligible health care expenses.
(12) Interfund Receivables and Payables
At June 30, 2007, interfund receivables and payable were as follows:
General Fund
Nonmajor funds
Total
(13) Interfund Transfers
Due from
$ 7,351,061
$ 7,351,061
Due to
7,351,061
$ 7,351,061
Interfund transfers at June 30, 2007, consisted of the following:
General Fund
OJTide and
o-ISubmerged Land
'2
c Internal Service
,0- Fund
Non -Major Funds
Total
Transfers In
Tide and
Submerged Internal Non -Major
General Fund Land Service Fund Funds Total
$ - $ 17,026,010 $ 2,500,000 $ 576,509 $ 20,102,519
250,000
777,127
$ 1,027,127 $ 17,026,010
121
232,174 232,174
- 250,000
1,409,576 2,186,703
$ 2,500,000 $2,218,259 $ 22,771,396
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30. 2007
The City typically uses transfers to fund ongoing subsidies. The general fund transferred
$17,026,010 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 $537,127 in the Newport Coast Annexation fund, 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
yearend.
Reserved for debt service
This account sets aside a portion of fund balance to meet the annual debt service
requirements.
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.
122
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30. 2007
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 bonds 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
public facilities including parks and road improvements. At June 30, 2007, the remaining
bond proceeds are held in trust as cash with fiscal agent totaling $95,027. 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
123
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30. 2007
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 $241,024 for
fiscal year 2006 -07. The City's 50% interest in the net equity of this joint venture at
June 30, 2007, amounts to $2,414,745. 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 $440,385. The City's 10.25% interest in the net equity of this joint
venture at June 30, 2007, amounts to $81,815. Complete separate financial statements
can be obtained at the Metro Cities Fire Authority offices at 201 S. Anaheim Boulevard,
Suite 302, Anaheim, California.
Integrated Law and Justice Agency of Orange County
The City is a participant in a joint venture agreement with the several other public
agencies of Orange County for the operation of the Integrated Law and Justice Agency
of Orange County ( ILJAOC). The Integrated Law and Justice Agency of Orange County
went into effect fiscal year 2007. The ILJAOC consists of twenty -three (23) member
agencies with an oversight board consisting of twelve (12) members from the
participating member agencies. The City acts as a treasurer for the ILJAOC and as such
the activities of the ILJAOC are recorded in an Agency Fund. Annually, each member
agency pays a percentage of the operating and replacement costs for the ILJAOC. The
City's annual contribution and interest in the net equity of this joint venture at June 30,
2007 was immaterial. Complete separate financial statements can be obtained at the
City of Newport Beach., 3300 Newport Boulevard, Newport Beach, California
124
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30. 2007
(16) Commitments and Contingencies
Claims and Judgments
Numerous claims and suits have been filed against the City in the normal course of
business. The estimated liability under such claims, based upon information received
from the City Attorney, contracted attorneys and the Risk Manager, has been estimated
and recorded as accrued claims and judgments payable (See Note 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 $12,191,760
had been received as of June 30, 2007. 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, 2007, the City received $419,153 of Fair Share Fees, and
$209,576 was paid to the CIOSA Construction capital projects fund. Through June 30,
2007, $3,193,165 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, $23.0 million has been received and the
remaining $2.0 million is due January 1, 2008. At June 30, 2007, the remaining
receivable of $2.0 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 $13.2 million outstanding
125
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30. 2007
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:
Total Project
Project To Date Unexpended
Budget Expenditures Commitments
Pipeline Master Plan Replacement $
1,291,026 $
649,766
$ 800,781
Sewer Main Master Plan Improvement
4,753,455
4,437,183
69,641
Water Transmission Main Master Plan Impro
3,116,745
1,089,449
2,232,282
General Plan
2,746,901
1,843,850
903,052
Newport Coast Community Center
9,707,440
8,702,215
1,005,225
Back Bay Science Center
7,772,124
7,003,983
1,288,752
Fire Station # 7
11,984,397
11,577,273
914,792
(17) Net Asset Restatements
Beginning Net Assets have been restated by the net effect of changes resulting from the
correction in the valuation of work in progress, equipment and related accumulated
depreciation. The adjustment decreased the government -type activities beginning net
assets by $(85,236).
Net Assets
Government -type Activities:
Net assets at July 1, 2006, as previously reported $ 2,114,206,983
Adjustments:
Adjustment to work in progress (1,010,505)
Adjustment to equipment, net of accumulated
depreciation 925,269
Net adjustment (85,236)
Net assets at July 1, 2006, as restated $ 2,114,121,747
Equipment Maintenance Fund - Internal Service Fund
Net assets at July 1, 2006, as previously reported 15,902,474
Adjustment to equipment, net of accumulated
depreciation 925,269
Net assets at July 1, 2006, as restated $ 16,827,743
126
CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30. 2007
(18) Subsequent Events
Orange County Redevelopment Agency Agreement
Subsequent to year end the City finalized a second amendment to the Memorandum of
Understanding, dated July 8, 2003, with the County of Orange, and the Orange County
Redevelopment Agency ( OCRDA).
The second amendment realigns OCRDA funding for projects the OCRDA had
previously agreed to fund in the recently annexed Santa Ana Heights area, which the
City had agreed to construct as a Capital Improvement Project (CIP). The amendment
reflects changes in the planned projects, and increased construction costs related to the
Santa Ana Heights Fire Station. As the amendment was not in place at year end no
associated transactions were accrued. The second amendment includes additional
OCRDA funding of $5.5 million for completion of the Santa Ana Heights Fire Station
project, bringing the total allocation of OCRDA funds for the Fire Station to $9.6 million.
Additionally the second amendment cancels OCRDA funding for, and City Construction
of, the Santa Ana Heights Community Center project, as the Santa Ana Heights Fire
Station project provides sufficient additional space available to the community. Finally,
the amendment prioritizes funding for miscellaneous Santa Ana Heights CIPs. The City
budgeted and expended general fund resources towards the completion of the fire
station project prior to year end. The additional $5.5 million from the OCRDA was
received August 17, 2007.
Western Borders Reorganization
On February 14, 2006, the City adopted a Resolution of Application that started a
reorganization process that could lead to the annexation of unincorporated sections
within or adjacent to the City's sphere of influence known as West Santa Ana Heights,
the Emerson /Churchill Tract and the General Services Yard Fueling Area. This action
allowed the City to file a reorganization application with the Orange County Local
Agency Formation Commission ( LAFCO). The application was the first step in the
reorganization process as outlined in California Law (Government Code §56000 et.seq.).
LAFCO approved the City's application on July 11, 2007, and met to record the
annexations on September 12, 2007. Under the proposed reorganization plan, the City
plans to provide services on January 1, 2008. In general, the City will provide law
enforcement, fire, paramedic, animal control, library, recreation, public works, general
maintenance, and administrative services to the proposed areas of annexation. The net
economic impact of the reorganization is expected to be negligible.
127
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128
Supplementary
Information
129
o�
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130
Non Major Governmental Funds
131
IAN] �Q��I_l �L�I 'Z�I�P1�:7��i�if��i�_1w11P►I�y
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 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 Traffic Congestion Relief Fund is used to account for all revenues received from the State
Treasury related to Assembly Bill 2928. State law requires that these funds be used exclusively
for maintenance or reconstruction costs on public streets and roads.
The Newport Coast Annexation Fund is used to account for revenues and expenditures related
to the Newport Coast Annexation Agreement.
132
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 OR 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 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 Marine Science Center Fund is used to account for the design and construction of a new
Marine Science Center.
The City Hall Improvement Fund is used to account for the design and construction of a new
Civic Center Complex.
The Santa Ana Heights Community Center Fund is used to account for the property
acquisition, design and construction of a new community center in the part of the City known as
Santa Ana Heights.
The Misc. Santa Ana Heights Projects Fund is used to account for various grants and projects
associated with providing public works, parks and recreation opportunities within the part of the
City known as Santa Ana Heights.
133
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.
134
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135
CITY OF NEWPORT BEACH
Combining Balance Sheet
Non -Major Governmental Funds
June 30, 2007
Liabilities and Fund Balances
Liabilities:
Accounts payable
$ 35,038
Special Revenue
$ 44,428
$ 11,043
Unearned revenue
-
-
Circulation
Building
Unavailable revenue
State
Asset
and
Excise
Due to other funds
Gas Tax
Forfeiture
Transportation
Tax
Assets
35,038
946
44,428
11,043
Cash and investments
$ 3,196,971
$ 47,295
$ 2,297,627
$ 236,691
Receivables:
512,310
-
1,032,745
27,114
Accounts
-
-
-
-
Intergovernmental receivables
-
64,120
-
-
Cash with fiscal agent
-
-
-
-
Due from other funds
-
-
-
-
Prepaid items
-
-
-
-
Total Assets
$ 3,196,971
$ 111,415
$ 2,297,627
$ 236,691
Liabilities and Fund Balances
Liabilities:
Accounts payable
$ 35,038
$ 946
$ 44,428
$ 11,043
Unearned revenue
-
-
-
-
Unavailable revenue
-
-
-
-
Due to other funds
-
-
-
-
Total Liabilities
35,038
946
44,428
11,043
Fund balances:
Reserved for encumbrances
512,310
-
1,032,745
27,114
Reserved for debt service
-
-
-
-
Reserved for permanent endowment
-
-
-
-
Reserved for prepaid items
-
-
-
-
Unreserved:
Designated for special purposes
2,649,623
110,469
1,220,454
198,534
Undesignated
-
-
-
-
Total fund balances
3,161,933
110,469
2,253,199
225,648
Total liabilities and
fund balances
$ 3,196,971
$ 111,415
$ 2,297,627
$ 236,691
136
$ 44,511 $ 10,901 $ 8,915 $ 1,045 $ 4,661
25,899 - - - -
14,610 545,049 49,590 - -
- 527,406 64,159 - -
85,020 1,083,356 122,664 1,045 4,661
355,631
1,960,395
263,601
- (538,307) (73,074) -
2,316,026 (538,307) (73,074) 263,601
2,755,182
2,755,182
$ 2,401,046 $ 545,049 $ 49,590 $ 264,646 $ 2,759,843
(continued)
137
Special Revenue
Arterial
Community
Air Quality
Combined
Highway
Development
Management
Environmental
Transportation
Rehabilitation
Block Grant
District
Liability
$ 2,142,834
$ -
$ -
$ 264,646
$ 2,754,017
-
-
5,826
258,212
545,049
49,590
-
-
$ 2,401,046
$ 545,049
$ 49,590
$ 264,646
$ 2,759,843
$ 44,511 $ 10,901 $ 8,915 $ 1,045 $ 4,661
25,899 - - - -
14,610 545,049 49,590 - -
- 527,406 64,159 - -
85,020 1,083,356 122,664 1,045 4,661
355,631
1,960,395
263,601
- (538,307) (73,074) -
2,316,026 (538,307) (73,074) 263,601
2,755,182
2,755,182
$ 2,401,046 $ 545,049 $ 49,590 $ 264,646 $ 2,759,843
(continued)
137
138
CITY OF NEWPORT BEACH
Combining Balance Sheet
Non -Major Governmental Funds
June 30, 2007
(continued)
Special Revenue
Debt Service
Supplemental
Traffic
Newport
Law
Congestion
Coast
Library
Enforcement
Relief
Annexation
COP
Assets
Cash and investments
S -
$ 37,666
$
10.379,836
$
-
Receivables:
Accounts
-
-
-
Intergovernmental receivables
-
-
2.000.000
-
Cash with fiscal agent
-
-
-
566,559
Due from other funds
-
-
-
-
Prepaid items
-
-
-
-
Total Assets
$ -
$ 37,666
$
12,379,836
$
566,559
Liabilities and Fund Balances
Liabilities:
Accounts payable
$ -
$ 35,595
$
27,930
$
-
Unearned revenue
-
-
-
-
Unavailable revenue
-
-
2,000,000
-
Due to other funds
-
-
-
-
Total Liabilities
-
35,595
2,027,930
-
Fund balances:
Reserved for encumbrances
-
2,071
125,421
-
Reserved for debt service
-
-
-
566,559
Reserved for permanent endowment
-
-
-
-
Reserved for prepaid items
-
-
-
-
Unreserved:
Designated for special purposes
-
-
10,226,485
-
Undesignated
-
-
-
-
Total fund balances
-
2,071
10,351,906
566,559
Total liabilities and
fund balances
$ -
$ 37,666
$
12,379,836
$
566,559
138
Capital Projects
Assessment
CIOSA
Bonita Canyon
Oil Spill
District
Construction
Development
Remediation Fire Station 7
$ -
$ 2,203,830
$ -
$ 33,515 $ -
16,200
-
-
- -
2,632,391
-
95,027
- -
$ 2,203,830
$ 2,648,591
$ 95,027
$ 33,515 $
103,473 $
1,934,192
2,037,665
317,508
293,418
610,926
$ - $ 13,125 $ 902,530
123,310 - 72,872
123,310 13,125 975,402
2,203,830 -
- (28,283)
2,203,830 (28,283)
$ 2,648,591 $ 2,203,830 $ 95,027 $
139
11,618
8,772
- (975,402)
20,390 (975,402)
33,515 $
(continued)
Assets
Cash and investments
Receivables:
Accounts
Intergovernmental receivables
Cash with fiscal agent
Due from other funds
Prepaid items
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
Undesignated
Total fund balances
Total liabilities and
fund balances
CITY OF NEWPORT BEACH
Combining Balance Sheet
Non -Major Governmental Funds
June 30, 2007
(continued)
Capital Projects
SAH
Marine City Hall Community Misc
Science Center Improvements Center SAH Projects
1,908,100
182,977
$ 1,908,100 $ $ - $ 182,977
$ 706,705 $ 36,814 $ - $ 7,243
- - - 182,977
2,196,289 195,831 - 175,734
2,902,994 232,645 - 365,954
1,288,752 - - -
(2,283,646) (232,645) - (182,977)
$ 1,908,100 $ - $ - $ 182,977
140
Permanent Fund
Total
Other
Ackerman Governmental
Bay Dredging Donation Funds
$ 4,233,511 $ 1,057,100 $ 28,885,539
- 2,113,103
- 2,916,971
- 3,293,977
$ 4,233,511 $ 1,057,100 $ 37,209,590
$ 800 $ 1,995,703
- 25,899
- 2,792,226
- 5,289,793
800 10,103,621
3,673,170
- - 566,559
3,857,000 772,782 4,629,782
376,511
4,233,511
$ 4,233,511 $
283,518 22,550,792
- (4,314,334)
1,056,300 27,105,969
1,057,100 $ 37,209,590
141
Revenues:
Other taxes
Intergovernmental
Licenses, permits and fees
Fines and forfeitures
Investment income
Net decrease in fair value of investments
Donations
Total revenues
Expenditures:
Current:
General government
Public safety
Public works
Community development
Community services
Capital outlay
Debt service:
Principal
Interest and fiscal charges
Total expenditures
Excess (deficiency) of revenues
over expenditures
Other financing sources (uses):
Transfers in
Transfers out
Total other financing sources (uses)
Net change in fund balances
Fund balances, beginning
Fund balances (deficit), ending
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, 2007
Special Revenue
Circulation
Building
State
Asset
and
Excise
Gas Tax
Forfeiture
Transportation
Tax
1,505,806
69,476
-
-
-
-
-
166,063
-
-
419,153
-
160,658
3,655
144,343
14,428
(12,183)
(51)
(10,946)
(1,094)
1,654,281
73,080
552,550
179,397
46,504
1,064,836 - 868,820 252,146
1,064,836 46,504 868,820 252,146
589,445 26,576 (316,270) (72,749)
(160,000)
(160,000)
429,445
(289,576)
(289,576)
26,576 (605,846) (72,749)
2,732,488 83,893 2,859,045 298,397
$ 3,161,933 $ 110,469 $ 2,253,199 $ 225,648
142
- 19,035 184,685
114,061 - -
2,208,268 1,219,345 76,742 - -
- - 73,000 - -
- - 118,224 - -
2,208,268 1,219,345 382,027 19,035 184,685
(292,256) (472,604) 186,264 93,402 365,899
40,116
40,116
(292,256) (472,604) 226,380 93,402 365,899
2,608,282 (65,703) (299,454) 170,199 2,389,283
$ 2,316,026 $ (538,307) $ (73,074) $ 263,601 $ 2,755,182
(continued)
143
Special Revenue
Arterial
Community
Air Quality
Combined
Highway
Development
Management
Environmental
Transportation
Rehabilitation
Block Grant
District
Liability
$ -
$ -
$ -
$ -
$ 422,606
1,800,974
746,741
567,510
101,725
-
124,478
-
781
11,591
138,480
(9,440)
-
-
(879)
(10,502)
1,916,012
746,741
568,291
112,437
550,584
- 19,035 184,685
114,061 - -
2,208,268 1,219,345 76,742 - -
- - 73,000 - -
- - 118,224 - -
2,208,268 1,219,345 382,027 19,035 184,685
(292,256) (472,604) 186,264 93,402 365,899
40,116
40,116
(292,256) (472,604) 226,380 93,402 365,899
2,608,282 (65,703) (299,454) 170,199 2,389,283
$ 2,316,026 $ (538,307) $ (73,074) $ 263,601 $ 2,755,182
(continued)
143
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, 2007
(continued)
Revenues:
Other taxes
Intergovernmental
Licenses, permits and fees
Fines and forfeitures
Investment income
Net decrease in fair value of investments
Donations
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, beginning
Fund balances (deficit), ending
Revenue
Debt Service
Supplemental Traff ic Newport
Law Congestion Coast Library
Enforcement Relief Annexation COP
-
162,501 699,791 - -
2,571 25,148 682,252 30,148
165,072 724,939 682,252 30,148
165,072 - - -
- 736,412 6,031,738 -
1,200,000 300,000
- - - 266,336
165,072 736,412 7,231,738 566,336
(11,473) (6,549,486) (536,188)
- - 1,200,000 536,393
(1,737,127) -
(537,127) 536,393
(11,473) (7,086,613) 205
13,544 17,438,519 566,354
$ - $ 2,071 $ 10,351,906 $ 566,559
144
Assessment
CIOSA
Bonita Canyon
Oil Spill
District
Construction
Development
Remediation Fire Station 7
$ -
S -
$ -
S - $ -
16,200
-
-
- 1,600,000
86,092
140,243
4,101
2,847 -
3,078
-
-
(216) -
105,370
140,243
4,101
2,631 1,600,000
1,420,535 861,411 93,000
101,085 6,568,795
1,420,535 861,411 93,000 101,085 6,568,795
(1,315,165) (721,168) (88,899) (98,454) (4,968,795)
209,576
209,576
(1,315,165) (511,592)
(88,899)
(98,454) (4,968,795)
1,926,091 2,715,422 60,616 118,844 3,993,393
$ 610,926 $ 2,203,830 $ (28,283) $ 20,390 $ (975,402)
(continued)
145
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, 2007
(continued)
Revenues:
Othertaxes
Intergovernmental
Licenses, permits and fees
Fines and forfeitures
Investment income
Net decrease in fair value of investments
Donations
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
SAH
Marine City Hall Community Misc
Science Center Improvement Center SAH Projects
$ - $ $ $
2,802,290 - 100,859 500
2,802,290 - 100,859 500
81,773
5,894,737 36,814 - -
5,894,737 36,814
81,773
(3,092,447) (36,814) 100,859 (81,273)
Other financing sources (uses):
Transfers in 232,174 - -
Transfers out - - -
Total other financing sources (uses) 232,174 - -
Net change in fund balances (2,860,273) (36,814) 100,859 (81,273)
Fund balances, beginning 1,865,379 (195,831) (100,859) (101,704)
Fund balances (deficit), ending $ (994,894) $ (232,645) $ - $ (182,977)
(continued)
146
Permanent Funds
Total
Other
Ackerman
Governmental
Bay Dredging
Donation
Funds
$ -
$ -
$ 422,606
-
-
10,174,373
-
166,063
-
419,153
224,970
56,347
1,853,133
(17,061)
(4,273)
(63,567)
207,909
52,074
12,971,761
211,576
- 203,720
4,724 200,558
- 27,434,684
1,573,000
- 384,560
4,724 30,008,098
207,909 47,350 (17,036,337)
- - 2,218,259
(2,186,703)
31,556
207,909 47,350 (17,004,781)
4,025,602 1,008,950 44,110,750
$ 4,233,511 $ 1,056,300 $ 27,105,969
147
CITY OF NEWPORT BEACH
Budgetary Comparison Schedule
State Gas Tax Special Revenue Fund
For the Year Ended June 30, 2007
Revenues:
Intergovernmental
Investment income
Net decrease in fair value of investments
Donations
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
(160,000) (160,000) (160,000)
(691,466) 54,717 429,445 374,728
2,732,488 2,732,488 2,732,488 -
$ 2,041,022 $ 2,787,206 3,161,933 $ 374,728
148
Variance
with Final
Budget
Budgeted
Amounts
Positive
Original
Final
Actual
(Negative)
$ 1,807,500
$ 1,807,500
$ 1,505,806
$ (301,694)
140,000
140,000
160,658
20,658
-
-
(12,183)
(12,183)
1,947,500
1,947,500
1,654,281
(293,219)
2,478,966
1,732,783
1,064,836
667,947
(531,466)
214,717
589,445
374,728
(160,000) (160,000) (160,000)
(691,466) 54,717 429,445 374,728
2,732,488 2,732,488 2,732,488 -
$ 2,041,022 $ 2,787,206 3,161,933 $ 374,728
148
CITY OF NEWPORT BEACH
Budgetary Comparison Schedule
Asset Forfeiture Special Revenue Fund
For the Year Ended June 30, 2007
149
Variance
with Final
Budget
Budget Amounts
Positive
Original
Final
Actual
(Negative)
Revenues:
Intergovernmental
$ 40,000
$ 40,000
$ 69,476
$ 29,476
Investment income
5,000
5,000
3,655
(1,345)
Net decrease in fair value of investments
-
-
(51)
(51)
Total revenues
45,000
45,000
73,080
28,080
Expenditures
Public safety
89,337
89,337
46,504
42,833
Net change in fund balance
(44,337)
(44,337)
26,576
70,913
Fund balance, beginning
83,893
83,893
83,893
-
Fund balance, ending
$ 39,556
$ 39,556
$ 110,469
$ 70,913
149
CITY OF NEWPORT BEACH
Budgetary Comparison Schedule
Circulation and Transportation Special Revenue Fund
For the Year Ended June 30, 2007
150
Variance
with Final
Budget
Budgeted
Amounts
Positive
Original
Final
Actual
(Negative)
Revenues:
Licenses, permits and fees
$ 300,000
$ 300,000
$ 419,153
$ 119,153
Investment income
148,000
148,000
144,343
(3,657)
Net decrease in fair value of investments
-
-
(10,946)
(10,946)
Total revenues
448,000
448,000
552,550
104,550
Expenditures:
Capital outlay
3,600,063
2,024,618
868,820
1,155,798
Excess (deficiency) of revenues
over expenditures
(3,152,063)
(1,576,618)
(316,270)
1,260,348
Other financing uses:
Transfers out
(230,000)
(80,000)
(289,576)
(209,576)
Net change in fund balance
(3,382,063)
(1,656,618)
(605,846)
1,050,772
Fund balance, beginning
2,859,045
2,859,045
2,859,045
-
Fund balance (deficit), ending
$ (523,018)
$ 1,202,427
$ 2,253,199
$ 1,050,772
150
CITY OF NEWPORT BEACH
Budgetary Comparison Schedule
Building Excise Tax Special Revenue Fund
For the Year Ended June 30, 2007
151
Variance
with Final
Budget
Budgeted
Amounts
Positive
Original
Final
Actual
(Negative)
Revenues:
Licenses, permits and fees
$ 150,000
$ 150,000
$ 166,063
$ 16,063
Investment income
10,000
10,000
14,428
4,428
Net decrease in fair value of investments
-
-
(1,094)
(1,094)
Total revenues
160,000
160,000
179,397
19,397
Expenditures:
Capital outlay
351,343
262,843
252,146
10,697
Net change in fund balance
(191,343)
(102,843)
(72,749)
30,094
Fund balance, beginning
298,397
298,397
298,397
-
Fund balance, ending
$ 107,054
$ 195,554
$ 225,648
$ 30,094
151
CITY OF NEWPORT BEACH
Budgetary Comparison Schedule
Combined Transportation Special Revenue Fund
For the Year Ended June 30, 2007
Revenues:
Intergovernmental
Investment income
Net decrease in fair value of investments
Total revenues
Expenditures:
Capital outlay
Net change in fund balance
Fund balance, beginning
Fund balance, ending
(1,945,985) (1,436,700) (292,256)
2,608,282 2,608,282 2,608,282
$ 662,297 $ 1,171,582 $ 2,316,026
152
1,144,444
$ 1,144,444
Variance
with Final
Budget
Budgeted
Amounts
Positive
Original
Final
Actual
(Negative)
$ 1,100,000
$ 1,100,000
$ 1,800,974
$ 700,974
56,928
56,928
124,478
67,550
-
-
(9,440)
(9,440)
1,156,928
1,156,928
1,916,012
759,084
3,102,913
2,593,628
2,208,268
385,360
(1,945,985) (1,436,700) (292,256)
2,608,282 2,608,282 2,608,282
$ 662,297 $ 1,171,582 $ 2,316,026
152
1,144,444
$ 1,144,444
CITY OF NEWPORT BEACH
Budgetary Comparison Schedule
Arterial Highway Rehabilitation Special Revenue Fund
For the Year Ended June 30, 2007
153
Variance
with Final
Budget
Budgeted
Amounts
Positive
Original
Final
Actual
(Negative)
Revenues:
Intergovernmental
$ 400,000
$ 400,000
$ 746,741
$ 346,741
Investment Income
-
-
-
-
Net decrease in fair value of investments
Total revenues
400,000
400,000
746,741
346,741
Expenditures:
Capital outlay
1,980,797
1,327,797
1,219,345
108,452
Net change in fund balance
(1,580,797)
(927,797)
(472,604)
455,193
Fund balance (deficit), beginning
(65,703)
(65,703)
(65,703)
-
Fund balance (deficit), ending
$ (1,646,500)
$ (993,500)
_L j5
$ 455,193
153
CITY OF NEWPORT BEACH
Budgetary Comparison Schedule
Community Development Block Grant Special Revenue Fund
For the Year Ended June 30, 2007
Expenditures:
Community development
Capital outlay
Debt service:
Principal
Interest and fiscal charges
Total expenditures
Excess (deficiency) of revenues
over expenditures
Other financing sources:
Transfers In
Net change in fund balance
Fund balance (deficit), beginning
Fund balance (deficit), ending
135,682 135,692 114,061 21,631
91,217 76,717 76,742 (25)
73,000
73,000
73,000
118,224
Variance
118,224
418,123
403,633
382,027
with Final
(43,331)
11,159
186,264
Budget
Budgeted
Amounts
Positive
Original
Final
Actual
(Negative)
Revenues:
Intergovernmental
$ 373,292
$ 413,292
$ 567,510
$ 154,218
Investment income
1,500
1,500
781
(719)
Total revenues
374,792
414,792
568,291
153,499
Expenditures:
Community development
Capital outlay
Debt service:
Principal
Interest and fiscal charges
Total expenditures
Excess (deficiency) of revenues
over expenditures
Other financing sources:
Transfers In
Net change in fund balance
Fund balance (deficit), beginning
Fund balance (deficit), ending
135,682 135,692 114,061 21,631
91,217 76,717 76,742 (25)
73,000
73,000
73,000
118,224
118,224
118,224
418,123
403,633
382,027
(43,331)
11,159
186,264
21,606
175,105
40,116 40,116
(43,331) 11,159 226,380 215,221
(299,454) (299,454) (299,454)
$ (342,785) $ (288,295) $ (73,074)
154
$ 215,221
CITY OF NEWPORT BEACH
Budgetary Comparison Schedule
Air Quality Management District Special Revenue Fund
For the Year Ended June 30, 2007
155
Variance
with Final
Budget
Budgeted
Amounts
Positive
Original
Final
Actual
(Negative)
Revenues:
Intergovernmental
S 100,000
$ 100,000
$ 101,725
$ 1,725
Investment income
4,000
4,000
11,591
7,591
Net decrease in fair value of investments
-
-
(879)
(879)
Total revenues
104,000
104,000
112,437
8,437
Expenditures:
Public works
26,415
26,415
19,035
7,380
Net change in fund balance
77,585
77,585
93,402
15,817
Fund balance, beginning
170,199
170,199
170,199
-
Fund balance, ending
$ 247,784
$ 247,784
$ 263,601
$ 15,817
155
CITY OF NEWPORT BEACH
Budgetary Comparison Schedule
Environmental Liability Special Revenue Fund
For the Year Ended June 30, 2007
Expenditures
Public works
$ 90,000
$ 90,000
$ 184,685
Variance
Capital outlay
-
-
-
with Final
Total expenditures
90,000
90,000
184,685
Budget
Net change in fund balance
Budgeted
Amounts
365,899
Positive
Fund balance, beginning
Original
Final
Actual
(Negative)
Revenues:
$ 2,745,283
$ 2,745,283
$ 2,755,182
$ 9,899
Taxes
$ 370,000
$ 370,000
$ 422,606
$ 52,606
Investment income
76,000
76,000
138,480
62,480
Net decrease in fair value of investments
-
-
(10,502)
(10,502)
Total revenues
446,000
446,000
550,584
104,584
Expenditures
Public works
$ 90,000
$ 90,000
$ 184,685
$ (94,685)
Capital outlay
-
-
-
Total expenditures
90,000
90,000
184,685
(94,685)
Net change in fund balance
356,000
356,000
365,899
199,269
Fund balance, beginning
2,389,283
2,389,283
2,389,283
-
Fund balance, ending
$ 2,745,283
$ 2,745,283
$ 2,755,182
$ 9,899
156
CITY OF NEWPORT BEACH
Budgetary Comparison Schedule
Supplemental Law Enforcement Special Revenue Fund
For the Year Ended June 30, 2007
Revenues:
Intergovernmental
Investment income
Total revenues
Expenditures:
Public safety
Net change in fund balance
Fund balance, beginning
Fund balance (deficit), ending
157
Variance
with Final
Budget
Budgeted Amounts
Positive
Original
Final
Actual
(Negative)
$ 120,000
$ 120,000
$ 162,501
$ 42,501
2,000
2,000
2,571
571
122,000
122,000
165,072
43,072
120,000
120,000
165,072
(45,072)
2,000
2,000
-
(2,000)
$ 2,000
$ 2,000
$
$ (2,000)
157
CITY OF NEWPORT BEACH
Budgetary Comparison Schedule
Traffic Congestion Special Revenue Fund
For the Year Ended June 30, 2007
158
Variance
with Final
Budget
Budgeted Amounts
Positive
Original
Final
Actual
(Negative)
Revenues:
Intergovernmental
$ 350,000
$ 350,000
$ 699,791
$ 349,791
Investment income
5,000
5,000
25,148
20,148
Net decrease in fair value of investments
-
-
-
-
Total revenues
355,000
355,000
724,939
369,939
Expenditures:
Capital outlay
325,500
701,030
736,412
(35,382)
Net change in fund balance
29,500
(346,030)
(11,473)
334,557
Fund balance, beginning
13,544
13,544
13,544
-
Fund balance (deficit), ending
$ 43,044
$ (332,486)
$ 2,071
$ 334,557
158
CITY OF NEWPORT BEACH
Newport Coast Annexation
Budgetary Comparison Statement
For the Year Ended June 30, 2007
Expenditures
Capital outlay
6,381,603
Variance
6,031,738
124,865
with Final
-
Budget
Budgeted Amounts
Positive
1,200,000
Original Final
Actual (Negative)
Revenues
7,581,603
7,356,603
Intergovernmental
$ -
$
Investment income
718,000 718,000
682,252 (35,748)
Net decrease in fair value of investments
over expenditures
-
Total revenues
718,000 718,000
682,252 (35,748)
Expenditures
Capital outlay
6,381,603
6,156,603
6,031,738
124,865
Debt service (note 6):
-
Principal
1,200,000
1,200,000
1,200,000
-
Total expenditures
7,581,603
7,356,603
7,231,738
124,865
(Deficiency) of revenues
over expenditures
(6,863,603)
(6,638,603)
(6,549,486)
89,117
Other financing uses
Transfers in
1,200,000
1,200,000
1,200,000
-
Transfers out
(1,400,000)
(1,400,000)
(1,737,127)
(337,127)
Total other financing (uses)
(200,000)
(200,000)
(537,127)
(337,127)
Net change in fund balance
(7,063,603)
(6,838,603)
(7,086,613)
(248,010)
Fund balance, beginning
17,438,519
17,438,519
17,438,519
-
Fund balance, ending
$ 10,374,916
$ 10,599,916
$ 10,351,906
$ (248,010)
159
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160
Internal Service Funds
161
INTERNAL SERVICE FUNDS
The Internal Service Funds are used to allocate the cost of providing goods
and services by one department to other departments on a cost
reimbursement basis.
The City of Newport Beach Internal Service Funds are listed below:
The Insurance Reserve Fund is used to account for the City's self- insured
general liability and workers' compensation program.
The Compensated 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.
162
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, 2007
21,700,159 21,700,159
(13,746,785) (13,746,785)
7,953,374 7,953,374
10,987,709 1,651,078 6,639,119 18,065,393 37,343,299
80,819
3,772 142,979
- 27,808
49,490
3,092,293 - -
1,438,955 - - -
1,749,135
4,612,067 1,749,135 3,772 220,277
227,570
27,808
49,490
3,092,293
1,438,955
1,749,135
6,585,251
8,349,707
- -
-
8,349,707
Total
Insurance
Compensated
Retiree
Equipment
Internal
Reserve
Absence
Insurance
Maintenance
Service Funds
$ 10,987,709
$ 1,651,078
$ 6,436,147
$ 9,862,464
$ 28,937,398
-
-
180,710
43,417
224,127
-
-
-
206,138
206,138
$ (5,372,158)
$ (7,265,808) $ 6,635,347
22,262
$ 11,842,497
22,262
10,987,709
1,651,078
6,639,119
10,112,019
29,389,925
21,700,159 21,700,159
(13,746,785) (13,746,785)
7,953,374 7,953,374
10,987,709 1,651,078 6,639,119 18,065,393 37,343,299
80,819
3,772 142,979
- 27,808
49,490
3,092,293 - -
1,438,955 - - -
1,749,135
4,612,067 1,749,135 3,772 220,277
227,570
27,808
49,490
3,092,293
1,438,955
1,749,135
6,585,251
8,349,707
- -
-
8,349,707
3,398,093
- -
-
3,398,093
7,167,751
7,167,751
11,747,800
7,167,751 -
-
18,915,551
16,359,867
8,916,886 3,772
220,277
25,500,802
-
- -
7,903,884
7,903,884
(5,372,158)
(7,265,808) 6,635,347
9,941,232
3,938,613
$ (5,372,158)
$ (7,265,808) $ 6,635,347
$ 17,845,116
$ 11,842,497
163
CITY OF NEWPORT BEACH
Internal Service Funds
Combining Statement of Revenues, Expenses
and Changes in Fund Net Assets
For the Year Ended June 30, 2007
164
Total
Insurance
Compensated
Retiree
Equipment
Internal
Reserve
Absence
Insurance
Maintenance
Service Funds
Operating revenues:
Charges for services
$ 6,528,119
$ 2,054,074
$ 437,041
$ 5,315,018
$ 14,334,252
Other
381
-
26,075
60,282
88,738
Total operating revenues
6,528,500
2,054,074
465,116
5,375,300
14,422,990
Operating expenses:
Salaries and wages
-
-
-
1,371,573
1,371,573
Depreciation
-
-
-
1,964,316
1,964,316
Professional services
-
-
56,678
56,678
Maintenance and supplies
-
-
-
878,723
878,723
Fleet parts and supplies
-
-
-
435,632
435,632
Workers' compensation
3,005,598
-
-
-
3,005,598
Claims and judgments
2,255,591
-
-
-
2,255,591
Compensated absences
-
1,854,659
-
-
1,854,659
Retiree Insurance
2,574,945
2,574,945
Total operating expenses
5,261,189
1,854,659
2,574,945
4,706,922
14,397,715
Operating income (loss)
1,267,311
199,415
(2,109,829)
668,378
25,275
Nonoperating revenues (expenses):
Investment income
528,345
75,003
264,249
528,222
1,395,819
Net decrease in fair value of investments
(40,067)
(5,688)
(20,039)
(40,058)
(105,852)
Gain on sale of capital assets
-
-
-
113,833
113,833
Interest expense
(3,002)
(3,002)
Total nonoperating revenues
488,278
69,315
244,210
598,995
1,400,798
Income (loss) before transfers
1,755,589
268,730
(1,665,619)
1,267,373
1,426,073
Transfers in
-
-
2,500,000
-
2,500,000
Transfer out
(250,000)
(250,000)
Change in net assets
1,755,589
268,730
634,381
1,017,373
3,676,073
Net assets (accumulated
deficit), beginning, as restated
(7,127,747)
(7,534,538)
6,000,966
16,827,743
8,166,424
Net assets, (accumulated
deficit), ending
$ (5,372,158)
$ (7,265,808)
$ 6,635,347
$ 17,845,116
$ 11,842,497
164
CITY OF NEWPORT BEACH
Combining Statement of Cash Flows - Internal Service Funds
For the Year Ended June 30, 2007
Total
Insurance Compensated Retiree Equipment Internal
Reserve Absences Insurance Maintenance Service Funds
Cash flows from operating activities
Receipts from user departments $
6,528,119
$ 2,054,074
$ -
$ 5,272,055
$ 13,854,248
Payments to employees
(2,723,598)
(1,574,864)
-
(1,366,613)
(5,665,075)
Payments to suppliers
(2,298,705)
(730)
(2,252,385)
(2,400,544)
(6,952,364)
Other operating cash receipts
381
8,993,234
28,075
60,282
88,738
Net cash provided (used) for operating activities
1,506,197
478,480
(2,224,310)
1,565,180
1,325,547
Cash flows from noncapital financing activities:
-
-
(175,230)
(42,963)
(218,193)
Cash received from other funds
-
-
2,500,000
-
2,500,000
Cash paid to other funds
-
-
-
(250,000)
(250,000)
Net cash provided (used)by noncapital financing
2.500.000
(250.000)
2.250.000
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 (decrease) 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
(1,966,854) (1,966,854)
205,922 205,922
(116,566) (116,566)
(3,002) (3,002)
(1,880,500) (1,880,500)
488,278
69,315
244,210
488,164
1,289,967
488,278
69,315
244,210
488,164
1,289,967
to net cash provided by operating activities:
1,994,475.
547,795
519,900
(77,156)
2,985,014
8,993,234
1,103,283
5,916,247
9,939,620
25,952,384
$ 10,987,709
$ 1,651,078
$ 6,436,147
$ 9,862,464
$ 28,937,398
Operating income (loss)
$ 1,267,311
$ 199,415
$ (2,109,829)
$ 668,378
$ 25,275
Adjustments to reconcile operating income (loss)
to net cash provided by operating activities:
Depreciation
-
-
-
1,964,316
1,964,316
Changes in operating assets and liabilities:
(increase) in accounts receivable
-
-
(175,230)
(42,963)
(218,193)
Decrease in inventories
-
-
-
3,635
3,635
Decrease in prepaid items
-
-
60,473
-
60,473
Increase (decrease) in accounts payable and accrued
payroll
(68,160)
(730)
276
(1,028,186)
(1,096,800)
Increase in workers' compensation
282,000
-
-
-
282,000
Increase in general liability
25,046
-
-
-
25,046
Increase in compensated absences
-
279,795
-
-
279,795
Total adjustments
238,886
279,065
(114,481)
896,802
1,300,272
Net cash provided (used) by operating activities
$ 1,506.197
_1__L78 ,480
$ (2,224,310)
_L_1 565180
$ 1.325,547
Non -cash investing, capital, and financing activities:
Net decrease in fair value of investments
(40,067)
(5,688)
(20,039)
(40,058)
(105,852)
Total of non -cash activities
$ (40,067)
$ (5,688)
$ (20,039)
$ (40,058)
$ (105,852)
165
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166
Fiduciary Funds
167
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.
The Integrated Law and Justice Agency for Orange County (ILJAOC) is used to
account for monies collected from member agencies for the operation of ILJAOC.
W
CITY OF NEWPORT BEACH
Agency Funds
Combining Statement of Fiduciary Assets and Liabilities
June 30, 2007
Special Business
Assessment District Improvement ILJAOC
Assets Fund Fund Fund Totals
Cash and investments $ 3,169,173 $ 125,054 $ $ 3,294,227
Cash with fiscal agent 3,022,209 - 3,022,209
Intergovernmental receivable - - 436,485 436,485
Total assets $ 6,191,382 $ 125,054 $ 436,485 $ 6,752,921
Liabilities
Due to bondholders $ 6,191,382 $ - $ 6,191,382
Due to others - 125,054 125,054
Due to City of Newport Beach - - 436,485 436,485
Total liabilities $ 6,191,382 $ 125,054 $ 436,485 $ 6,752,921
169
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
CITY OF NEWPORT BEACH
Statement of Changes in Fiduciary Net Assets
All Agency Funds
For the Year Ended June 30, 2007
Balance
116,734
$
Balance
June 30, 2006
Additions
Deductions
June 30, 2007
116,734
$
349,620
$ (341,300)
$ 1,803,541
$ 4,359,491
$ (2,993,859)
$ 3,169,173
4,432,708
2,742,047
(4,152,546)
3,022,209
$ 6,236,249
$ 7,101,538
$ (7,146,405)
$ 6,191,382
$ 6,236,249
$ 7,101,538
$ (7,146,405)
$ 6,191,382
$
116,734
$
349,620
$ (341,300)
$
125,054
$
116,734
$
349,620
$ (341,300)
$
125,054
ILJAOC:
4,709,111
Assets
$ 3,294,227
Cash and investments
$
Intergovernmental receivable
$
Total Assets
$
Liabilities
436,485
Due to City of Newport Beach
$
Totals - All Agency Funds:
Assets
Cash and investments $ 1,920,275
Cash with fiscal agent 4,432,708
Intergovernmental receivable -
Total Assets $ 6,352,983
$ 436,485 $ $ 436,485
$ 436,485 $ $ 436,485
$ 436,485 $ $ 436,485
$
4,709,111
$ (3,335,159)
$ 3,294,227
$
2,742,047
$ (4,152,546)
3,022,209
$
436,485
$
436,485
$
7,887,643
$ (7,487,705)
$ 6,752,921
Liabilities
Due to bondholders $ 6,236,249
$ 7,101,538
$ (7,146,405)
$ 6,191,382
Due to others 116,734
349,620
(341,300)
125,054
Due to City of Newport Beach -
436,485
436,485
Total Liabilities $ 6,352,983
$ 7,887,643
$ (7,487,705)
$ 6,752,921
170
Statistical Section
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171
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172
CITY OF NEWPORT BEACH
Net Assets by Component
Last Six Fiscal Years
(accrual basis of accounting)
Business -type activities:
Fiscal Year
2002
2003
2004
2005
2006
2007
Governmental activities:
net of related debt
$ 87,470,314
$ 91,912,205
$ 94,206,704
$ 99,641,411
$ 104,602,266
Invested in capital assets,
Restricted
-
-
-
-
-
net of related debt
$ 1,391,677,813
$ 1,412,372,465
$ 1,512,651,096
$ 1,915,348,883
$ 2,005,643,651
$ 2,027,026,053
Restricted
38,689,956
37,650,692
45,494,082
54,285,743
51,901,103
35,017,831
Unrestricted
41,095,786
49,322,283
46,772,913
61,894,956
56,662,229
75,989,169
Total governmental
$ 1,471,463,555
$ 1,499,345,440
$ 1,604,918,091
$ 2,031,529,582
$ 2,114,206,983
$ 2,138,033,053
activities
Business -type activities:
Invested in capital assets,
net of related debt
$ 87,470,314
$ 91,912,205
$ 94,206,704
$ 99,641,411
$ 104,602,266
$ 107,231,308
Restricted
-
-
-
-
-
-
Unrestricted
26,123,500
24,227,579
21,493,528
19,665,535
16,907,367
15,808,357
Total business -type
$ 113,593,814
$ 116,139,784
$ 115,700,232
$ 119,306,946
$ 121,509,633
$ 123,039,665
activities
Primary government:
Invested in capital assets,
net of related debt $ 1,479,148,127 $ 1,504,284,670 $ 1,606,857,800 $ 2,014,990,294 $ 2,110,245,917 $ 2,134,257,361
Restricted 38,689,956 37,650,692 45,494,082 54,285,743 51,901,103 35,017,831
Unrestricted 67,219,286 73,549,862 68,266,441 81,560,491 73,569,596 91,797,526
Total primary government $ 1,585,057,369 $ 1,615,485,224 $ 1,720,618,323 $ 2,150,836,528 $ 2,235,716,616 $ 2,261,072,718
The City of Newport Beach implemented GASB 34 for the fiscal year ended June 30, 2002.
Information prior to the implementation of GASB 34 is not available.
173
CITY OF NEWPORT BEACH
Changes in Net Assets
Last Six Fiscal Years
(accrual basis of accounting)
Fiscal Year
174
2002
2003
2004
2005
2006
2007
Expenses:
Governmental activities:
General government
$
12,792,860
$
10,799,630
$
11,428,379
$
11,378,609
$
14,509,827
$
14,166,168
Public safety
47,168,918
56,521,871
58,178,633
63,214,291
67,789,121
70,823,463
Public works
30,320,516
32,089,038
38,127,832
46,359,871
33,870,359
39,179,844
Community development
4,471,397
5,782,215
6,229,785
6,437,006
8,157,925
9,020,868
Community services
11,044,086
10,404,285
14,741,504
13,073,215
13,803,755
23,304,053
Interest on long -term debt
517,102
673,944
542,126
508,869
479,529
523,401
Total governmental activities
expenses
$
106,314,879
$
116,270,983
$
129,248,259
$
140,971,861
$
138,610,516
$
157,017,797
Business -type activities:
Water
$
14,806,514
$
14,540,036
$
17,185,034
$
14,467,233
$
16,228,213
$
17,399,900
Wastewater
2,588,833
3,115,136
3,363,954
2,740,908
3,143,629
3,259,837
Total business -type activities
expenses
$
17,395,347
$
17,655,172
$
20,548,988
$
17,208,141
$
19,371,842
$
20,659,737
Total primary government
expenses
$
123,710,226
$
133,926,155
$
149,797,247
$
158,180,002
$
157,982,358
$
177,677,534
Program revenues:
Governmental activities:
Charges for services:
General government
$
2,270,082
$.
3,008,162
$
2,109,141
$
2,412,769
$
2,623,272
$
2,944,100
Public safety
10,549,410
11,603,584
15,739,912
16,264,493
13,669,509
15,756,327
Public works
5,436,948
5,009,048
5,481,464
6,031,248
5,133,728
5,482,167
Community development
3,236,483
4,022,904
5,196,276
5,129,858
5,667,289
5,682,636
Community services
2,533,899
6,039,226
3,846,566
3,952,862
9,433,278
9,054,504
Operating Grants and
Contributions:
7,891,059
8,750,565
10,681,329
17,480,834
12,772,599
16,172,023
Capital Grants and
Contributions
1,562,458
4,146,728
674,815
20,205,948
69,473,891
6,904,716
Total governmental activities
program revenues
$
33,480,339
$
42,580,217
$
43,729,503
$
71,478,012
$
118,773,566
$
61,996,473
Business -type activities:
Charges for services:
Water
16,665,724
16.489,284
18,430,000
17,573,196
17,923,523
17,918,968
Wastewater
2,945,804
2,768,941
2,882,793
2,900,672
3,311,089
3,535,050
Total business -type activities
program revenues
$
19,611,528
$
19,258,225
$
21,312,793
$
20,473,868
$
21,234,612
$
21,454,018
Total primary government
program revenues
$
53,091,867
$
61,838,442
$
65,042,296
$
91,951,880
$
140,008,178
$
83,450,491
Net revenues (expenses):
Governmental activities
$ (72,834,540.00)
$ (73,690,766.00)
$ (85,518,756.00)
$ (69,493,849.00)
$ (19,836,950.00)
$ (95,021,324.00)
Business -type activities
2,216,181
1,603;053
763,805
3,265,727
1,862,770
794,281
Total net revenues (expenses)
$
(70,618,359)
$
(72,087,713)
$
(84,754,951)
$
(66,228,122)
$
(17,974,180)
$
(94,227,043)
174
CITY OF NEWPORT BEACH
Changes in Net Assets
Last Six Fiscal Years
(accrual basis of accounting)
Fiscal Year
2002 2003 2004 2005 2006 2007
General revenues and other changes in net assets:
Governmental activities:
Taxes:
Property taxes $ 33,583,659 $ 39,474,864 $ 43,631,829 $ 46,303,366 $ 57,888,545 $ 63,003,057
Sales tax 18,796,571 20,133,598 21,843,884 18,977,828 21,465,557 21,088,118
Sales tax in -lieu - - - 5,339,827 5,720,028 7,348,253
Transient occupancy taxes 7,690,655 8,055,266 8,045,132 9,215,862 9,832,729 12,059,008
Business license 2,470,857 2,030,845 2,830,127 3,458,165 3,848,381 3,770,172
Franchise taxes 2,735,641 2,465,584 2,765,519 3,029,476 3,162,588 4,613,932
Motor vehicle license fees 4,380,070 3,970,103 3,624,917 6,395,860 300,751 391,559
Motor vehicle fines 711,693 742,957 - - - -
Othertaxes 341,820 314,725 266,642 240,534 508,331 515,128
Investment income 2,171,474 2,111,451 564,415 1,209,074 1,939,941 3,175,582
Net increase in fair value of
investments 1,093,913 318,686 (360,586) (258,125) (715,615) (545,533)
Gain on sale of assets 160,236 130,954 - - - -
Other 12,570 1,294,628 214,536 761,111 776,907 2,232,070
Property income 3,771,556 - - - -
Share of joint venture net 2,120,582 389,418 146,819 100,325 (513,791) 253,207
income
Capital contributions 836,206,102 17,836,792 102,713,421 213,779,060 - -
Sale of service rights 25,000,000 - - - - -
Transfers 33,277 57,783 40,000
Total governmental activities $ 941,247,399 $ 99,303,148 $ 186,364,438 $ 308,552,363 $ 104,254,352 $ 117,904,553
Business -type activities:
Investment income $ 888,779 $ 505,619 $ 203,041 $ 424,157 $ 549,012 $ 792,936
Net increase in fair value of
investments 428,199 440,697 (87,078) (87,921) (169,095) (57,185)
Property income 27,100 29,880 29,280 26,970 - -
Capital contributions - - 215,331 - - -
Transfers - (33,277) (57,783) - (40,000) -
Total business -type activities $ 1,344,078 $ 942,919 $ 302,791 $ 363,206 $ 339,917 $ 735,751
Total primary government $ 942,591,477 $ 100,246,067 $ 186,667,229 $ 308,915,569 $ 104,594,269 $ 118,640,304
Changes in net assets
Governmental activities $ 868,412,859 $ 25,612,382 $ 100,845,682 $ 239,058,514 $ 84,417,402 $ 22,883,229
Business -type activities 3,560,259 2,545,972 1,066,596 3,628,933 2,202,687 1,530,032
Total primary government $ 871,973,118 $ 28,158,354 $ 101,912,278 $ 242,687,447 $ 86,620,089 $ 24,413,261
The City of Newport Beach implemented GASB 34 for the fiscal year ended June 30, 2002
Information prior to the implementation of GASB 34 is not available.
175
CITY OF NEWPORT BEACH
Fund Balances of Governmental Funds
Last Six Fiscal Years
(modified accrual basis of accounting)
Fiscal Year
2002 2003 2004 2005 2006 2007
General fund:
Reserved $ 3,165,787 $ 4,393,418 $ 6,678,579 $ 4,673,198 $ 9,374,722 $ 7,233,703
Unreserved 25,171,551 31,929,366 37,765,801 49,814,197 45,212,339 62,679,499
Total general fund $ 28,337,338 $ 36,322,784 $ 44,444,380 $ 54,487,395 $ 54,587,061 $ 69,913,202
Tide and submerged land fund
Reserved
$
294,876
$
457,777
$
340,208
$
552,713
$
538,965
$ 642,985
Unreserved
238,822
11,057,395
356,075
16,895,613
120,328
7,506,021
194,174
Capital projects funds
27,633
143,946
Total tide and submerged land fund
$
533,698
$
813,852
$
460,536
$
746,887
$
566,598
$ 786,931
Total all other governmental funds
$ 22,847,399
$ 23,482,295
$ 20,869,436
$ 28,692,060
$ 28,145,118
Mariners library fund:
Reserved
$
-
$
382,900
$
142,016
$
1,029,047
$
-
$ -
Unreserved
-
596,800
824,438
-
(1,750,160)
(2,061,268)
Total Mariners library fund
$
-
$
979,700
$
966,454
$
1,029,047
$
(1,750,160)
$ (2,061,268)
Contributions fund
Reserved $ 7,501 $ 1,155,638 $ 3,223,047 $ 1,656,459
Unreserved (457,464) (956,689) 1,042,147 -
Total Contributions fund $ 7,501 $ (457,464) $ (956,689) $ 2,197,785 $ 3,223,047 $ 1,656,459
All other governmental funds
Reserved
$ 4,669,957
$ 4,693,197
$ 3,973,823
$ 12,230,132
$ 18,157,202
$ 8,958,652
Unreserved, reported in:
Special revenue funds
11,057,395
18,789,098
16,895,613
10,099,453
7,506,021
18,684,221
Capital projects funds
7,120,032
-
-
6,076,969
2,077,124
(1,196,933)
Permanent funds
15
-
-
285,506
404,771
660,029
Total all other governmental funds
$ 22,847,399
$ 23,482,295
$ 20,869,436
$ 28,692,060
$ 28,145,118
$ 27,105,969
The City of Newport Beach has elected to show only six years of data for this schedule_
176
CITY OF NEWPORT BEACH
Changes in Fund Balances of Governmental Funds
Last Six Fiscal Years
(modified accrual basis of accounting)
Fiscal Year
2002 2003 2004 2005 2006 2007
Revenues:
Taxes
$ 65,878,471 $
72,864,836
$ 79,874,751
$ 86,995,139
$ 102,737,810
$ 112,230,054
Intergovernmental
26,227,740
10,379,792
16,108,023
24,125,313
14,842,994
18,866,929
Licenses and permits
3,350,958
4,397,520
5,429,632
4,968,234
5,708,965
4,574,659
Charges for services
10,338,569
11,156,294
11,516,782
13,104,478
13,135,366
14,452,723
Fines and forfeitures
3,384,164
3,448,826
3,605,963
3,422,735
3,841,843
4,126,351
Investment income
2,758,557
1,941,046
887,513
2,356,747
3,847,982
5,431,137
Net increase (decrease) in fair
19,418,067
21,259,782
22,780,896
24,365,996
value of investments
1,268,972
1,468,682
(360,586)
(493,879)
(1,325,211)
(626,881)
Property income
10,130,165
10,947,021
11,857,671
12,337,339
13,625,142
13,965,815
Donations
746,774
1,819,159
2,704,367
1,087,826
883,405
1,379,461
Contributions from property
-
-
14,779,013
-
-
owners
38,613,906
14,684,897
15,188,550
Other
1,782,696
2,590,504
478,200
980,446
1,042,882
1,967,465
Total revenues
$ 125,867,066 $
121,013,680
$ 132,102,316
$ 163,663,391
$ 158,341,178
$ 176,367,713
Expenditures
Current:
General government
$
12,292,008
$ 9,689,275
$
11,024,256
$
10,920,667
$
12,531,200
$
13,706,061
Public safety
47,841,176
53,035,377
56,649,718
59,482,134
65,262,069
68,843,947
Public works
19,418,067
21,259,782
22,780,896
24,365,996
26,430,751
28,352,293
Community development
4,586,192
5,457,498
5,723,031
6,144,917
7,900,503
7,753,035
Community services
9,418,041
9,382,608
10,827,346
10,351,414
12,730,727
13,988,589
Capital outlay
38,613,906
14,684,897
15,188,550
33,486,048
24,811,237
40,615,169
Debt service:
Principal retirement
1,291,099
1,822,913
1,668,350
1,688,801
1,715,542
3,736,587
Interest and fiscal charges
466,974
529,808
520,228
499,077
480,909
458,035
Total expenditures
$
133,927,463
$ 115,862,158
$
124,582,375
$
146,939,054
$
151,862,938
$
177,453,716
Excess (deficiency) of revenues
over (under) expenditures
$
(8,060,397)
$ 5,151,522
$
7,519,941
$
16,724,337
$
6,478,240
$
(1,086,003)
Other financing sources (uses).
Transfers in
$
10,927,460
$ 14,376,167
$
16,553,395
$
20,601,957
$
25,194,920
$
20,271,396
Transfers out
(11,669,089)
(14,342,890)
(18,495,612)
(20,612,176)
(31,177,725)
(22,521,396)
Proceeds from issuance of debt
18,000,000
2,630,736
Total other financing sources
(uses)
$
17,258,371
$ 2,664,013
$ (1,942,217)
$ (10,219)
$ (5,982,805)
$ (2,250,000)
Net change in fund balances
$
9,197,974
$ 7,815,535
$
5,577,724
$
16,714,118
$
495,435
$
(3,336,003)
Debt service as a percentage of
noncapital expenditures
1,9%
2.4%
2.0%
2.0%
1.8%
3.2%
The City of Newport Beach has elected to show only six years of data for this schedule.
177
CITY OF NEWPORT BEACH
Assessed Value and Estimated Actual Value of Taxable Property
Last Ten Fiscal Years
Fiscal Year
Taxable Assessed
Total Direct
Ended June
Value
Tax Rate
30
Public Utility
Secured
Unsecured
1998
354,820
11,551,641,504
778,209,144
12,330,205,468
0.149%
1999
354,820
12,343,526,263
1,009,975,297
13,353,856,380
0.149%
2000
324,960
13,091,299,313
1,295,776,000
14,387,400,273
0.149%
2001
2,000
15,087,602,671
915,394,966
16,002,999,637
0.147%
2002
2,000
16,515,797,641
913,075,074
17,428,874,715
0.146%
2003
16,531,505
21,339,270,499
1,085,951,066
22,425,221,565
0.146%
2004
16,531,505
23,219,166,299
1,372,432,950
24,591,599,249
0.146%
2005
53,310
25,193,662,254
1,484,019,033
26,677,681,287
0.146%
2006
53,310
28,136,607,566
1,914,106,993
30,050,714,559
0.146%
2007
53,310
31,423,473,042
1,569,867,249
32,993,340,291
0.146%
kU00
In 1978 the voters of the State of California passed Proposition 13 which limited property taxes to a total
maximum rate of 1% based upon the assessed value of the property being taxed. Each year, the assessed
value of property may be increased by an "inflation factor" (limited to a maximum increase of 2 %). With few
exceptions, property is only re- assessed at the time that it is sold to a new owner. At that point, the new
assessed value is reassessed at the purchase price of the property sold. The assessed valuation data
shown above represents the only data currently available with respect to the actual market value of taxable
property and is subject to the limitations described above.
Source: County of Orange Auditor - Controller's Office
178
Source: Orange County Auditor Controller's Office
179
CITY OF NEWPORT BEACH
Direct and Overlapping Property Tax Rates
(Rate per $100 of assessed value)
Last Ten Fiscal Years
1998 1999 2000 2001 2002 2003
2004
2005
2006
2007
City Direct Rates:
City basic rate
$ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
$ 1.000
$ 1.000
$ 1.000
$ 1.000
Total City Direct Rate
$ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
$ 1.000
$ 1.000
$ 1.000
$ 1.000
Overlapping Rates:
Water Districts
$ 0.009 $ 0.009 $ 0.009 $ 0.009 $ 0.008 $ 0.007
$ 0.006
$ 0.005
$ 0.005
$ 0.005
School Districts
0.0000 0.0000 0.0000 0.0000 0.0069 0.0067
0.0122
0.0343
0.0349
0.0315
Total Direct Rate
$ 1.009 $ 1.009 $ 1.009 $ 1.009 $ 1.015 $ 1.013
$ 1.018
$ 1.040
$ 1.040
$ 1.036
NOTE:
In 1978, California voters passed Proposition 13 which sets the property tax rate at a 1.00% fixed amount.
This 1.00%
is shared by
all taxing
agencies for which the subject property resides within. In addition to the 1.00% fixed amount, property
owners
are charged
taxes as a
percentage of assessed property values for the payment of other debt obligations.
Source: Orange County Auditor Controller's Office
179
CITY OF NEWPORT BEACH
Principal Property Taxpayers
Current Year and Nine Years Ago
2007
Source: HdL, Coren and Cane Co.
1998
Rank
1
3
2
7
0
Percent of Total
City Taxable
Assessed Value
5.76%
1.51%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00°
0.00%
0.00%
4.50%
0.44%
0.00%
0.34°
0.00%
12.55%
Percent of Total
Taxable Assessed
Taxable Assessed
City Taxable
Value
Taxpayer
Value
Rank
Assessed Value
Irvine Company
$ 1,243,516,927
1
3.77%
$ 710,299,311
Irvine Apartment Communities
347,625,585
2
1.05%
185,805,423
Jazz Semiconductor Inc.
155,336,921
3
0.47%
N/A
4000 Macarthur
127,089,890
4
0.39%
N/A
UDR Newport Beach North
126,354,918
5
0.38 %
N/A
Balboa Bay Club Inc.
124,988,500
6
0.38%
N/A
Coronado South Apartments
110,160,000
7
0.33%
N/A
100 Bayview LLC
117,000,000
8
0.35%
N/A
Jgkallins Investment Newport LLC
103,917,993
9
0.31%
N/A
Macarthur 4500 LLC
85,595,000
10
0.26%
N/A
Rockwell Semiconductor Systems Inc.
71,023,565
11
0.22 %
554,699,772
Park Newport Land Limited
67,855,196
12
0.21%
54,598,830
Cornerstone Partners IV LLC
65,279,999
13
0.20%
N/A
Downey S & L Association
67,806,601
14
0.21%
42,208,579
HHR Newport Beach LLC
53,168,110
15
0.16%
N/A
$ 2,866,719,205
8.69%
$ 1,547,611,915
Source: HdL, Coren and Cane Co.
1998
Rank
1
3
2
7
0
Percent of Total
City Taxable
Assessed Value
5.76%
1.51%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00°
0.00%
0.00%
4.50%
0.44%
0.00%
0.34°
0.00%
12.55%
Fiscal Year Taxes Levied for
Ended June
30 the Fiscal Year
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
21,144,504
22,738,432
24,667,494
27,405,295
31,298,541
37,092,528
42,469,238
45,111,328
47,286,816
70,194,492
CITY OF NEWPORT BEACH
Property Tax Levies and Collections
Last Ten Fiscal Years
Collected within the Fiscal
Year of Levy
Amount
20,472,716
22,084,910
24,207,104
26,856,091
30,651,143
36,351,026
41,420,410
54,063,951
45,558,039
68,820,402
Total Collections to Date
Percent of
Amount Levy
21,512,836 101.74%
23,198,860 102.02%
25,605,677 103.80%
27,742,716 101.23%
30,753,144 98.26%
36,881,012 99.43%
42,091,095 99.11%
54,547,755 2 120.92%
46,286,404 97.88%
69,629,167 99.19%
Includes estimated levy for Newport Coast properties that were annexed on January 1, 2002.
2 Collections include nearly $10 million of Property Tax in lieu of Sales Tax and Vehicle License Fees not included in
the levy.
Source: Orange County Auditor Controller's Office
181
Collections in
Percent of
Subsequent
Levy
Years
96.82%
1,040,120
97.13%
1,113,950
98.13%
1,398,573
98.00%
886,625
97.93%
102,001
98.00%
529,986
97.53%
670,685
119.85% 2
483,804
96.34%
728,365
98.04%
808,765
Total Collections to Date
Percent of
Amount Levy
21,512,836 101.74%
23,198,860 102.02%
25,605,677 103.80%
27,742,716 101.23%
30,753,144 98.26%
36,881,012 99.43%
42,091,095 99.11%
54,547,755 2 120.92%
46,286,404 97.88%
69,629,167 99.19%
Includes estimated levy for Newport Coast properties that were annexed on January 1, 2002.
2 Collections include nearly $10 million of Property Tax in lieu of Sales Tax and Vehicle License Fees not included in
the levy.
Source: Orange County Auditor Controller's Office
181
CITY OF NEWPORT BEACH
Ratios of Outstanding Debt by Type
Last Ten Fiscal Years
Governmental Activities
Fiscal
Year
Ended
June 30
Certificates of
Participation
Note Payable
Pre- Annexation
Agreement
CDBG Loan
Capital Leases
Purchase
Agreement
Payable
1998
6,780,000
2,703,949
N/A
N/A
1,532,071
N/A
1999
7,070,000
2,589,255
N/A
N/A
2,657,180
N/A
2000
6,845,000
2,469,399
N/A
N/A
1,798,655
N/A
2001
6,610,000
2,350,930
N/A
N/A
914,830
N/A
2002
6,365,000
2,219,660
18,000,000
N/A
1,150,927
N/A
2003
6,110,000
2,082,483
16,800,000
2,400,000
1,293,586
N/A
2004
5,845,000
1,939,133
15,600,000
2,340,000
862,975
N/A
2005
5,570,000
1,789,332
14,400,000
2,276,000
420,773
N/A
2006
5,280,000
1,632,789
13,200,000
2,207,000
166,056
N/A
2007
4,980,000
1,469,202
12,000,000
2,134,000
49,490
5,000,000
Note: This excludes claims and judgements and employee compensated absence liabilities .Details
regarding the City's outstanding debt can be found in the notes to the financial statements.
These ratios are calculated using personal income and population for the prior calendar year.
182
Business -type Activities
Total Percentage of
Governmental Water Revenue Total Business- Total Primary Personal Debt Per
Activities Bonds type Activities Government Income 1 Capita 1
11,016,020
14,560,000
14,560,000
25,576,020
0.65%
365
12,316,435
14,225,000
14,225,000
26,541,435
0.62%
365
11,113,054
13,200,000
13,200,000
24,313,054
0.53%
329
9,875,760
12,095,000
12,095,000
21,970,760
0.50%
314
27,735,587
10,950,000
10,950,000
38,685,587
0.80%
511
28,686,069
9,765,000
9,765,000
38,451,069
0.72%
484
26,587,108
8,535,000
8,535,000
35,122,108
0.65%
435
24,456,105
7,255,000
7,255,000
31,711,105
0.56%
382
22,485,845
5,925,000
5,925,000
28,410,845
0.45%
341
25,632,692
4,540,000
4,540,000
30,172,692
0.46%
358
183
CITY OF NEWPORT BEACH
Ratio of General Bonded Debt Outstanding
Last Ten Fiscal Years
(In Thousands, except Per Capita)
Fiscal Year Certificates of
Ended June 30 Participation
1998
6,780
1999
7,070
2000
6,845
2001
6,610
2002
6,365
2003
6,110
2004
5,845
2005
5,570
2006
5,280
2007
4,980
Total
1 ARI91
7,070
6,845
6,610
6,365
6,110
5,845
5,570
5,280
4,980
Percent of
Assessed
Value'
0.05%
0.05%
0.05%
0.04%
0.04%
0.03%
0.02%
0.02%
0.02%
0.02%
Per Capita
97
97
93
94
84
77
72
67
63
59
' Assessed value was used because the actual value of taxable property is not
readily available in the State of California.
Im
CITY OF NEWPORT BEACH
Direct and Overlapping Debt
June 30, 2007
City Assessed Valuation:
Redevelopment Agency Incremental Valuation:
Adjusted Assessed Valuation:
OVERLAPPING TAX AND ASSESSMENT DEBT:
Orange County Teeter Plan Obligations
Metropolitan Water District
Coast Community College District
Rancho Santiago Community College District
Laguna Beach Unified School District
Laguna Beach U.S.D. Community Facilities District No. 98 -1
Newport Mesa Unified School District
Newport Mesa U.S.D. Community Facilities District No. 90 -1
Santa Ana Unified School District
Irvine Ranch Water District Improvement Districts
Bonita Canyon Public Facilities Financing Authority Community Facilities District No.
98 -1
City of Newport Beach Special Improvement District No. 95 -1
City of Newport Beach 1915 Act Bonds
Orange County Assessment District No. 88 -1
Orange County Assessment District No. 99 -1R
Orange County Assessment District No. 01 -1
Orange County Assessment District No. 01 -iR
TOTAL OVERLAPPING TAX AND ASSESSMENT DEBT
DIRECT AND OVERLAPPING GENERAL FUND DEBT:
OVERLAPPING GENERAL FUND DEBT:
Orange County General Fund Obligations
Orange County Pension Obligations
Orange County Board of Education Certificates of Participation
Orange County Transit District Authority
Orange County Sanitation District Certificates of Participation
Municipal Water District of O.C. Water Facilities Corporation
South O.C. Comm. College District Certificates of Participation
Newport Mesa U.S.D. Certificates of Participation
Santa Ana Unified School District Certificates of Participation
Irvine Ranch Water District Certificates of Participation
TOTAL GROSS OVERLAPPING GENERAL FUND DEBT
DIRECT GENERAL FUND DEBT:
City of Newport Beach Certificates of Participation
TOTAL GROSS DIRECT AND OVERLAPPING GENERAL FUND DEBT
TOTAL GROSS DIRECT AND OVERLAPPING BONDED DEBT
Less: Orange County Transit District Authority (80% self- supporting)
MWDCO Water Facilities Corporation (100% self-supporting)
TOTAL NET DIRECT AND OVERLAPPING BONDED DEBT
$ 32,993,340,291
677,871,382
$ 32,315,468,909
Percentage Outstanding Debt Estimated Share of
Applicable 1 6/30/07 Overlapping Debt
9.486%
1.989%
33.932%
3.540%
12.440%
100.000%
71.409%
100.000%
8.547%
17.643 % -
100.000%
123,725,000
359,115,000
353,203,867
324,638,495
35,490,000
9,890,000
172,188,480
15,735,000
130,951,207
53,746,310
100.000%
597,550,000
43,155,000
100.000%
9.486%
10,685,000
100.000%
1,235,000
12,184,000
100.000%
11.339%
38,253,296
100.000%
36,910,000
17,200,000
100.000%
8.547%
57,820,000
100.000%
41,600,000
8,255,000
1,766,235,655
9.486% $
597,550,000
9.486%
89,893,078
9.486%
19,720,000
9.486%
1,235,000
13.249%
117,705,000
11.339%
20,800,000
2.815%
36,910,000
71.409%
1,480,000
8.547%
66,856,251
11.633%
41,600,000
993.749,329
100.000% 4,980,000
998,729,329
11,736,554
7,142,797
119,849,136
11,492,203
4,414,956
9,890,000
122,958,072
15,735,000
11,192,400
47,613,413
43,155,000
10,685,000
12,184,000
38,253,296
17,200,000
57,820,000
8,255,000
549,576,827 2
$ 56,683,593
8,527,257
1,870,639
117,152
15,594,735
2,358,512
1,039,017
1,056,853
5,714,204
4,839,328
97,801,291
4,980,000
102,781,291
$ 652,358,117
(93,722)
(2,358,512)
$ 649.905.883
1 The percentage of overlapping debt applicable is estimated using taxable assessed property values. Applicable percentages were estimated by
determining the portion of another governmental unit's taxable assessed value that is within the city's boundaries and dividing it by each unit's total
taxable assessed value.
2 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 ($4,980,000)
0.020%
Total Gross Combined Debt
2.020%
Total Net Combined Debt
2.010%
STATE SCHOOL BUILDING AID REPAYABLE AS OF 6/30106:
0.000%
Source: California Municipal Statistics, Inc.
185
CITY OF NEWPORT BEACH
Legal Debt Margin Information
Last Ten Fiscal Years
Fiscal Year
1998 1999 2000 2001 2002
Assessed valuation $ 12,330,205,468 $ 13,353,856,380 $ 14,387,400,273 $ 16,002,999,637 $ 17,428,874,715
Conversion percentage 25% 25% 25% 25% 25%
Adjusted assessed. valuation 3,082,551,367 3,338,464,095 3,596,850,068 4,000,749,909 4,357,218,679
Debt limit percentage 15% 15% 15% 15% 15%
Debt limit 462,382,705 500,769,614 539,527,510 600,112,486 653,582,802
Total net debt applicable to limit:
General obligation bonds 6,780,000 7,070,000 6,845,000 6,610,000 6,365,000
Legal debt margin $ 455,602,705 $ 493,699,614 $ 532,682,510 $ 593,502,486 $ 647,217,802
Total debt applicable to the limit
as a percentage of debt limit 1.5% 1.4% 1.3% 1.1% 1.0%
NOTE:
The Government Code of the State of California provides for a legal debt limit of 15% of gross assessed valuation. However, this provision was enacted
when assessed valuation was based upon 25% of market value. Effective with the 1981 -82 fiscal year, each parcel is now assessed at 100% of market
value (as of the most recent change in ownership for that parcel). The computations shown above reflect a conversion of assessed valuation data for
each fiscal year from the current full valuation perspective to the 25% level that was in effect at the time that the legal debt margin was enacted by the
State of California for local governments located within the state.
Source: City Administrative Services Department
186
6,110,000 5,845,000 5,570,000 5,280,000 4,980,000
$ 834,835,809 $ 916,339,972 $ 994,843,048 $ 1,121,621,796 $ 1,232,270,261
0.7% 0.6% 0.6% 0.5% 0.4%
187
Fiscal Year
2003
2004
2005
2006
2007
$ 22,425,221,565
$ 24,591,599,249 $
26,677,681,287
$ 30,050,714,559 $
32,993,340,291
25%
25%
25%
25%
25%
5,606,305,391
6,147,899,812
6,669,420,322
7,512,678,640
8,248,335,073
15%
15%
15%
15%
15%
840,945,809
922,184,972
1,000,413,048
1,126,901,796
1,237,250,261
6,110,000 5,845,000 5,570,000 5,280,000 4,980,000
$ 834,835,809 $ 916,339,972 $ 994,843,048 $ 1,121,621,796 $ 1,232,270,261
0.7% 0.6% 0.6% 0.5% 0.4%
187
CITY OF NEWPORT BEACH
Pledged- Revenue Coverage
Last Ten Fiscal Years
1 Gross revenues includes operating revenues, interest, property, and intergovernmental revenues
in the Water Fund.
2 Total Water Fund operating expenses do not include interest or depreciation expenses.
E .1.1
Water Revenue Bonds
Debt Service
Fiscal
Year
Less Operating
Net Available
Ended
Water Revenue
Expenses
Revenue
June 30
1
Principal
Interest
Coverage
1998
16,497,212
12,350,445
4,146,767
875,000
784,390
2.50
1999
17,658,076
11,145,936
6,512,140
335,000
593,469
7.01
2000
17,770,491
11,713,223
6,057,268
1,025,000
551,668
3.84
2001
17,839,320
11,784,120
6,055,200
1,145,000
510,224
3.66
2002
17,809,919
13,257,934
4,551,985
1,105,000
465,572
2.90
2003
17,326,604
12,430,144
4,896,460
1,185,000
418,172
3.05
2004
18,321,122
15,261,360
3,059,762
1,230,000
367,742
1.92
2005
17,878,016
12,967,118
4,910,898
1,280,000
314,622
3.08
2006
18,026,750
14,190,147
3,836,603
1,330,000
258,762
2.41
2007
18,534,689
15,614,885
2,919,804
1,385,000
199,900
1.84
1 Gross revenues includes operating revenues, interest, property, and intergovernmental revenues
in the Water Fund.
2 Total Water Fund operating expenses do not include interest or depreciation expenses.
E .1.1
CITY OF NEWPORT BEACH
Demographic and Economic Statistics
Last Ten Fiscal Years
Fiscal Year Population
Personal Income
(in thousands)
Per Capita Unemployment
Income Rate
1998
70,030
3,921,680
56,000
2.0%
1999
72,623
4,288,461
59,051
1.8%
2000
73,965
4,630,061
62,598
1.6%
2001
70,032
4,413,066
63,015
1.6%
2002
75,662
4,865,294
64,303
2.5%
2003
79,392
5,325,060
67,073
2.4%
2004
80,800
5,434,285
67,256
1.9%
2005
83,120
5,635,370
67,798
2.4%
2006
83,361
6,335,186
75,997
2.1%
2007
84,218
6,518,052
77,395
2.6%
Source: City of Newport Beach Library Services Department
189
CITY OF NEWPORT BEACH
Principal Employers
Current Year
' Information for prior years is not available.
2 The Island Hotel was formerly the Four Seasons Hotel.
Source: Newport Beach Chamber of Commerce
190
2007
2005'
Number of
Percent of Total
Number of
Percent of Total
Employer
Employees
Rank
Employment
Employees
Rank
Employment
Hoag Memorial Hospital
4,390
1
5.35%
3,640
1
N/A
Pacific Life Insurance
2,788
2
3.40%
2,788
2
N/A
Downey Savings & Loan
2,566
3
3.13%
1,386
3
N/A
City of Newport Beach
814
4
0.99%
788
4
N/A
Jazz Semi - Conductor
730
5
0.89%
730
5
N/A
Conexant Systems Inc.
650
6
0.79%
650
6
N/A
The Island Hotel
550
7
0.67%
525 2
8
N/A
Pacific Investment Management Co.
530
8
0.65%
530
7
N/A
Newport Beach Marriott Hotel &
Tennis Club
500
9
0.61%
475
9
N/A
Mindspeed Technology
390
10
0.48%
390
10
N/A
' Information for prior years is not available.
2 The Island Hotel was formerly the Four Seasons Hotel.
Source: Newport Beach Chamber of Commerce
190
Function
General government
Public safety
Community development
Public works
Community services
Balboa yacht basin
Water
Wastewater
CITY OF NEWPORT BEACH
Full -time City Employees by Function
Last Ten Fiscal Years
Full -Time Employees as of June 30, 2007
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
62
63
69
75
77
77
84
86
90
93
336
342
344
358
384
384
385
385
388
393
36
37
39
42
44
46
46
47
48
52
156
154
157
155
163
164
162
162
163
163
46
49
51
53
57
58
57
60
65
66
1
1
1
1
1
1
1
1
31
31
31
34
33
33
33
34
34
34
11
11
11
10
12
12
13
13
13
13
Total 679 688 703 728 771 775 781 788 801 814
Source: City Administrative Services Department
191
CITY OF NEWPORT BEACH
Operating Indicators by Function
Last Ten Fiscal Years
Police:
Adult Arrests
Parking Citations Issued
Fire:
Fire Responses
Fire Inspections
General Services:
Street Patching (tons of mix)
Sidewalk Repair (square feet)
Recreation & Senior Services:
Co- Sponsored Youth Organizations
Senior Transportation Services
Water:
New connections
Average daily consumption (hundred cubic ft.)
Sewer:
New connections
Average daily sewage treatment (hundred cubic ft.)
Library Services:
Library Circulation of Materials
Source: City of Newport Beach
192
Fiscal Year
1998
1999
2000
2001
2,954
3,029
3,396
3,494
68,133
72,711
76,993
74,068
238
260
353
365
7,500
6,216
6,173
6,173
2,403
3,200
4,400
5,000
36,055
59,645
65,000
50,000
128,900
132,500
141,594
165,464
12,800
10,260
10,260
11,000
103
253
163
154
17
17
17
17
N/A
N/A
N/A
N/A
20
20
20
20
1,430,000
1,240,000
1,130, 000
1,250,713
192
193
Fiscal Year
2002
2003
2004
2005
2006
2007
3,684
3,485
3,201
3,079
3,138
3,273
73,191
68,907
71,076
72,665
74,860
73,576
359
442
423
228
208
242
4,402
4,460
4,500
4,550
5,939
5,939
5,500
5,500
5,000
4,500
5,235
4,980
50,000
55,000
50,000
50,000
53,428
59,459
188,689
200,077
185,627
194,749
194,722
201,258
10,917
12,094
12,041
11,936
13,000
13,493
118
99
53
55
52
95
17
17
17
17
17
17
NIA
50
25
24
24
45
20
20
20
20
20
20
1,263,200
1,347,583
1,392,346
1,475,025
1,443,078
1,622,573
193
CITY OF NEWPORT BEACH
Capital Asset Statistics by Function
Last Ten Fiscal Years
Police:
Stations
Fire:
Fire stations
Lifeguard Headquarters
Public works:
Streets (miles)
Streetlights
Traffic signals
Recreation & Senior Services:
Parks
Community centers
Aquatic Center
Water:
Water mains (miles)
Maximum daily capacity (thousands of gallons)
Wastewater:
Sanitary sewers (miles)
Storm sewers (miles)
Library Services:
Libraries
Source: City of Newport Beach
194
Fiscal Year
1998
1999
2000
2001
1
1
1
1
6
6
6
6
1
1
1
1
234
234
311
315.00
N/A
N/A
N/A
N/A
N/A
N/A
N/A
121
43
45
45
45
10
10
10
10
1
1
1
1
N/A
N/A
N/A
282.35
N/A
N/A
N/A
20,959
N/A
N/A
N/A
200.02
N/A
N/A
N/A
103.08
4
4
4
4
194
195
Fiscal Year
2002
2003
2004
2005
2006
2007
1
1
1
1
1
1
7
7
7
8
8
8
1
1
1
1
1
1
325.00
333.00
333.00
333.00
333.00
399.00
7,277
7,277
7,277
7,277
7,277
7,278
130
131
131
144
147
145
47
47
47
47
47
47
11
11
11
11
11
12
1
1
1
1
1
1
294.81
294.81
294.81
298.42
299.88
297.40
20,796
21,291
20,092
20,633
19,369
19,369
176.90
178.40
179.15
179.15
179.15
202.80
51.40
53.50
57.60
57.60
57.60
95.50
4
4
4
4
4
4
195
CITY OF NEWPORT BEACH
Water Sold by Type of Customer
Last Ten Fiscal Years
(in hundred cubic feet)
Fiscal Year
Source: City Utilities Department
196
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
Type of Customer:
Residential
N/A
N/A
N/A
4,227,699
4,459,302
4,430,485
4,362,402
4,289,629
4,190,791
4,492,489
Commercial
N/A
N/A
N/A
1,487,538
1,552,366
1,604,931
1,659,565
1,568,462
1,440,377
1,302,578
Government
N/A
N/A
N/A
678,594
480,809
597,395
486,051
487,189
607,650
601,659
Total
N/A
N/A
N/A
6,393,831
6,492,477
6,632,811
6,508,018
6,345,280
6,238,818
6,396,726
Total direct rate
per 100 cubic ft.
$ 2.00
2.00
2.00
2.00
2.00
2.00
2.00
2.00
2.08
2.08
Source: City Utilities Department
196
CITY OF NEWPORT BEACH
Water Rates
Last Ten Fiscal Years
Fiscal Year
Ended June Monthly Rate per
30 Base Rate 100 cubic ft
1998
$ 8.85 $
2.50
1999
8.85
2.50
2000
8.85
2.50
2001
8.85
2.50
2002
8.85
2.50
2003
8.85
2.50
2004
8.85
2.50
2005
8.85
2.50
2006
10.75
2.73
2007
10.75
2.73
Note: Rates are based on 3/4" meter, which is
the standard household meter size. The
City charges an excess -use rate above
normal demand.
197
Water Customer
Big Canyon Country Club
Irvine Apartment Management
The Irvine Company
Hoag Memorial Hospital
Bluffs Homeowners Association
Newport Beach Country Club
Park Newport Ltd
Irvine Retail Properties
UDR Newport Beach
Pacific View - Pierce Bros.
Newport -Mesa USD
Spyglass Hill Community Assoc.
Eastbluff Professional Mgmt.
Newport Dunes Resort
IOIC /PMS Engineering Dept.
CITY OF NEWPORT BEACH
Major Water Customers
Current Year and Nine Years Ago
Information for fiscal years ended prior to 2001, is not available.
Source: City Revenue Division
W-
2007
2001 �
Percent of Total
Percent of Total
Water Charges
Rank
Water Revenues
Water Charges
Rank
Water Revenues
$ 200,464
1
1.08%
$ 169,900
2
0.95%
153,078
2
0.83%
N/A
0.00%
129,194
3
0.70%
267,688
1
1.50%
126,209
4
0.68%
101,436
6
0.57%
125,790
5
0.68%
N/A
0.00%
118,389
6
0.64%
152,362
3
0.85%
104,148
7
0.56%
150,062
4
0.84%
102,558
8
0.55%
N/A
0.00%
92,155
9
0.50%
N/A
0.00%
68,636
10
0.37%
47,466
11
0.27%
66,691
11
0.36%
N/A
0.00%
46,548
12
0.25%
N/A
0.00%
45,002
13
0.24%
N/A
0.00%
44,762
14
0.24%
N/A
0.00%
41,294
15
0.22%
63,948
8
0.36%
$ 1,464,918
7.90%
$ 952,862
5.34%
Information for fiscal years ended prior to 2001, is not available.
Source: City Revenue Division
W-