HomeMy WebLinkAboutFinance Committee Agenda - April 28, 2016CITY OF NEWPORT BEACH
FINANCE COMMITTEE AGENDA - Final
100 Civic Center Drive - Crystal Cove Conference Room, Bay 2D
Thursday, April 28, 2016 - 4:00 PM
Finance Committee Members:
Keith Curry, Chair / Council Member
Diane Dixon, Mayor
Tony Petros, Council Member
Patti Gorczyca, Committee Member
William C. O’Neill, Committee Member
Larry Tucker, Committee Member
John Warner, Committee Member
Staff Members:
Dave Kiff, City Manager
Dan Matusiewicz, Finance Director / Treasurer
Steve Montano, Deputy Director, Finance
Marlene Burns, Administrative Specialist to the Finance Director
The Finance Committee meeting is subject to the Ralph M. Brown Act. Among other things, the Brown Act requires that the
Finance Committee agenda be posted at least seventy-two (72) hours in advance of each regular meeting and that the public be
allowed to comment on agenda items before the Committee and items not on the agenda but are within the subject matter
jurisdiction of the Finance Committee. The Chair may limit public comments to a reasonable amount of time, generally three (3)
minutes per person.
The City of Newport Beach’s goal is to comply with the Americans with Disabilities Act (ADA) in all respects. If, as an attendee or a
participant at this meeting, you will need special assistance beyond what is normally provided, we will attempt to accommodate
you in every reasonable manner. Please contact Dan Matusiewicz, Finance Director, at least forty-eight (48) hours prior to the
meeting to inform us of your particular needs and to determine if accommodation is feasible at (949) 644-3123 or
dmatusiewicz@newportbeachca.gov.
NOTICE REGARDING PRESENTATIONS REQUIRING USE OF CITY EQUIPMENT
Any presentation requiring the use of the City of Newport Beach’s equipment must be submitted to the Finance Department 24
hours prior to the scheduled meeting.
I.CALL MEETING TO ORDER
II.ROLL CALL
III.PUBLIC COMMENTS
Public comments are invited on agenda and non-agenda items generally considered to be
within the subject matter jurisdiction of the Finance Committee. Speakers must limit comments
to three (3) minutes. Before speaking, we invite, but do not require, you to state your name for
the record. The Finance Committee has the discretion to extend or shorten the speakers’ time
limit on agenda or non-agenda items, provided the time limit adjustment is applied equally to all
speakers. As a courtesy, please turn cell phones off or set them in the silent mode.
IV.CONSENT CALENDAR
MINUTES OF MARCH 10, 2016A.
Recommended Action:
Approve and file.
DRAFT MINUTES 031016
April 28, 2016
Page 2
Finance Committee Meeting
V.CURRENT BUSINESS
FISCAL YEAR 2016-2017 PROPOSED BUDGET PRESENTATION & CIP FIRST
LOOK
A.
Summary:
The City Manager’s Fiscal Year 2016-2017 Proposed Budget will be reviewed
with a PowerPoint presentation, with a more detailed look at the proposed Capital
Improvement Program (CIP). Budget Documents will also be posted to the web at
newportbeachca.gov/budget.
Recommended Action:
Staff recommends that the Committee review any aspect of the Budget it wishes,
asking questions of staff or asking for additional information to be brought back to
the Committee. At a point in the near future, staff will ask that the Committee
consider a motion to recommend the Fiscal Year 2016-2017 Proposed Budget for
approval by the full City Council.
STAFF REPORT
STAFF PRESENTATION
CITY COUNCIL GENERAL FUND SURPLUS UTILIZATION POLICYB.
Summary:
Staff will propose a new City Council policy for the use of surplus funds resulting
from unrestricted General Fund annual revenues exceeding total actual
expenditures, encumbrances and commitments for that year.
Recommended Action:
Review the draft General Fund Surplus Utilization Policy, suggest changes as
needed and recommend the policy for submission to the City Council for final
approval.
STAFF REPORT
ATTACHMENT A
BUDGET AMENDMENTSC.
Summary:
Staff will report on recent budget amendment activity. All budget amendments are
in compliance with City Council Policy F-3, Budget Adoption and Administration.
Recommended Action:
Receive and file.
STAFF REPORT
ATTACHMENT A
VI.FINANCE COMMITTEE ANNOUNCEMENTS ON MATTERS WHICH MEMBERS
WOULD LIKE PLACED ON A FUTURE AGENDA FOR DISCUSSION, ACTION OR
REPORT (NON-DISCUSSION ITEM)
SECTION 115 TRUSTA.
April 28, 2016
Page 3
Finance Committee Meeting
OPEB BUYOUTB.
PENSION AND OPEB FUNDING POLICYC.
VII.ADJOURNMENT
Finance Committee Meeting Minutes March 10, 2016
Page 1 of 5
CITY OF NEWPORT BEACH FINANCE COMMITTEE MARCH 10, 2016 MEETING MINUTES I. CALL MEETING TO ORDER
The meeting was called to order at 4:00 p.m. in the Crystal Cove Conference Room, Bay 2D, 100 Civic Center Drive, Newport Beach, California 92660.
II. ROLL CALL
PRESENT: Council Member Keith Curry (Chair), Mayor Diane Dixon, Council
Member Tony Petros, Committee Member Patti Gorczyca, Committee Member William C. O’Neill, Committee Member Larry Tucker, and
Committee Member John Warner
STAFF PRESENT: City Manager Dave Kiff, Finance Director/Treasurer Dan Matusiewicz, Deputy Finance Director Steve Montano, Assistant City Manager Carol
Jacobs, Budget Manager Susan Giangrande, Revenue Manager Evelyn Tseng, Accounting Manager Rukshana Virany, Senior Accountant
Theresa Schweitzer, and Administrative Specialist to the Finance Director Marlene Burns
MEMBER OF THE
PUBLIC: Jim Mosher III. PUBLIC COMMENTS
Chair Curry opened public comments.
Jim Mosher reminded the Committee of its role, to make recommendations to City Council regarding revisions to the City’s financial policies. He reported that at a recent meeting, staff
presented to City Council, a recommendation to consolidate three policies having to do with how contracts are executed, into one policy. He noted that the action was done without the Finance
Committee’s review and that under those policies, the City Attorney has unlimited authority to write, review and issue its own contracts for legal work and ignoring the Charter’s directive that
the contracts be executed and placed with the City Clerk for public inspection and the provision that if legal work is needed, beyond what the City Attorney can do, City Council must execute,
review and grant that contract. He addressed the revision to the City Charter in terms of oral contracts versus written contracts. He addressed the adopted budget and noted that the version
currently on the City’s website does not show actual expenditures that occurred.
Chair Curry closed public comments.
IV. CONSENT CALENDAR A. MINUTES OF FEBRUARY 11, 2016 Recommended Action:
Approve and file.
Committee Members Tucker and Gorczyca noted corrections to the minutes of February 11, 2016.
Committee Member Tucker moved and Committee Member Gorczyca seconded, to approve the
February 11, 2016, Finance Committee Minutes, as corrected. The motion carried, unanimously.
Finance Committee Meeting Minutes March 10, 2016
Page 2 of 5
Chair Curry noted that the Finance Committee’s meeting in May will be on May 26, 2016. V. CURRENT BUSINESS A. FISCAL YEAR 2014-2015 AUDIT RESULTS Summary:
The City’s external audit firm, White Nelson Diehl Evans, LLP will meet with the Finance Committee to discuss the audit findings for the Fiscal Year ending June 30, 2015. The
Committee will have an opportunity to discuss any potential areas of concern and the auditors can discuss any changes in accounting standards or disclosures that were relevant
for the audit year. Recommended Action: Receive and file.
Finance Director/Treasurer Dan Matusiewicz introduced Robert Callahan and Kassie
Radermacher with White Nelson Diehl Evans, LLP, the City’s external audit firm and deferred to them for a presentation.
Mr. Callahan, with a PowerPoint presentation, addressed their scope of services, required
standards, Auditor’s opinion and report, and the need to understand internal controls. He reported that they did not come across any material weaknesses during the course of the audit
but noted significant deficiencies in terms of receivables that were on the books that were uncollectable and needed to be taken off, and payable balances related to payroll that needed to
be adjusted to the appropriate amount. Mr. Callahan reported that there were no compliance issues and noted deficiencies including a change in the mooring rate (50 cents) that was not
properly billed.
Finance Director/Treasurer Dan Matusiewicz clarified that the City under-billed for a specific time and staff made a decision to correct the error on a go-forward basis.
Mr. Callahan presented details of the required communications.
Brief discussion followed regarding deferred pension liabilities and inflows and outflows based on
the estimate of the net pension liabilities. It was noted these will be amortized over different periods of time and do not affect the governmental funds financial statement. Mr. Callahan
addressed cost-sharing and noted that the beginning entry affected net position.
Finance Director/Treasurer Matusiewicz reported that Deputy Finance Director Steve Montano
and he will be authoring a white paper on how pension liabilities impacted the City’s financial
statement from one year to the next.
Mr. Callahan reported that the financial statements include significant estimates and listed them.
He stated that they did not encounter any significant difficulties in performing the audit and noted
there were some corrected and uncorrected misstatements. There were no disagreements on
any issues related during the course of the audit and Mr. Callahan reported obtaining a
representation letter from management.
Mr. Callahan addressed new GASB Standards and explained same.
In reply to Committee Member Tucker’s question regarding the City’s internal controls and the
ERP process, Ms. Radermacher reported that it was taken into consideration.
In response to Committee Member Gorczyca’s inquiry, Mr. Callahan commented on making sure
that prior balances are rolled forward, accurately, and noted they look for anomalies.
Finance Committee Meeting Minutes March 10, 2016
Page 3 of 5
Mayor Dixon asked regarding posting the documents on the website and Finance
Director/Treasurer Matusiewicz listed documents that have been posted.
Chair Curry opened public comments.
Mr. Mosher commented on the audit confirming the accuracy of the financial statements but
wondered if the Finance Committee will ever review the substantive content. He asked if some of
the errors found can be attributed to the City’s new ERP system and whether the auditor provided
input as to how it could work better and whether it will make auditing the City easier or harder in
future years. He commented on specific funds and suggested it would be beneficial if there were
some tie-in to the legislative origin of the various funds. He commented on mooring fees and
funds relative to the Library.
Chair Curry closed public comments.
In response to Chair Curry’s inquiry, Mr. Callahan reported there was nothing further to report.
B. PROPOSED FISCAL YEAR 2016-2017 BUDGET ASSUMPTIONS
Summary:
Staff will provide an overview of the Proposed Fiscal Year 2016-2017 Budget Assumptions. Recommended Action:
Receive and file.
Deputy Finance Director Steve Montano introduced a PowerPoint presentation addressing
budget assumptions, the budget process and an economic overview. City Manager Dave Kiff addressed the City’s overall projected growth, projected revenues,
assessed valuation growth, distribution of property taxes and sales tax.
In response to Chair Curry’s question regarding property tax, Finance Director/Treasurer Matusiewicz noted there are several categories of property tax and identified them.
City Manager Kiff explained the assessed valuation.
In response to a question about the decline of property taxes from the prior year, Deputy Finance Director Montano reported there was a prior year one-time receipt of redevelopment agency that makes the current year revenue appear lower.
City Manager Kiff continued the presentation addressing sales tax, sales tax by category, distribution of sales tax revenue, transit-oriented taxes (TOT) and growth in revenue. He
presented expenditure assumptions, and merit increases, and, in response to an inquiry from Committee Member O’Neill, he provided a brief explanation of the employee evaluation process and merit/salary increases.
In response to Mayor Dixon’s question, City Manager Kiff stated that during the recession, the City froze positions but not merit increases.
City Manager Kiff reported that the growth of unfunded liabilities was built into the expense
assumptions and noted the assumption of a partial fresh-start, PERS investment earnings and the application of the surplus from the prior year.
In reply to Mayor Dixon’s inquiry, City Manager Kiff described the potential projects that could be
budgeted beyond the $5 million allocated annually to the General Fund CIP.
Finance Committee Meeting Minutes March 10, 2016
Page 4 of 5
City Manager Kiff presented options for the use of the surplus, and responded to a question from
Mayor Dixon in terms of what would occur if the City did not have a surplus.
Discussion followed regarding the source of the proposed subsidy to off-set waste-water fees, salary savings, operations, next steps and subsequent meetings where the Finance Committee
will review the budget.
Ensuing discussion followed regarding factoring in Worker’s Compensation, current vacant positions and reserves.
Chair Curry reported that the April Finance Committee meeting will be on April 28, 2016.
Chair Curry opened public comments.
Jim Mosher referenced the breakdown of property tax dollars in Newport Beach noting that
allocations are different from one property to another. He commented on the surplus and expressed concerns that it is like a personal checkbook and noted that it is just a snapshot
whereas, he suggested, the City should be looking ahead.
Chair Curry closed public comments.
In response to Committee Member Tucker’s question, City Manager Kiff addressed the CIP and prioritization of projects.
Council Member Petros added that for some CIP projects, the City already made an investment in
design, permitting, etcetera and the project is therefore, ready for the expenditure.
Chair Curry stated that the Mayor’s idea of using half of the surplus for long-term obligations and the other half for one-time capital project expenditures is a good idea and suggested Council
consider a policy for such.
Discussion followed regarding funding for the sea wall.
C. UPDATED ON STATUS OF SUBCOMMITTEE RECOMMENDATIONS Summary:
An update will be provided regarding the Finance Subcommittee.
Recommended Action: Receive and file.
Committee Member Tucker reported that the Finance Subcommittee met and reviewed the
policies and decided to focus on maximizing revenues, minimizing expenses and make observations about the budget process. He added that the Subcommittee formed to have outside
people with finance experience offer their thoughts about the City’s financial process. He added that the Subcommittee prepares ideas and vets these with staff to present to the Finance
Committee. He addressed next steps and the goal of presenting the ideas to the Committee at its April meeting.
Chair Curry opened public comments.
Chair Curry closed public comments.
D. QUARTERLY ERP UPDATE
Summary: Staff will provide the Committee with a progress report on the Enterprise Resource Plan
project.
Finance Committee Meeting Minutes March 10, 2016
Page 5 of 5
Recommended Action:
Receive and file.
Deputy Finance Director Montano noted the only change made from the last report was the implementation of the work orders module and reported that the utilities billing module is well
under way with an expected live launch in October.
Council Member Petros stated he is interested in looking at programmatic budgets when the system is at equilibrium.
Deputy Finance Director Montano noted the new finance system can be configured for program
budgeting and that effort can begin as early as next year after the implementation of the remaining ERP modules.
Chair Curry opened public comments.
Chair Curry closed public comments.
VI. FINANCE COMMITTEE ANNOUNCEMENTS ON MATTERS WHICH MEMBERS WOULD LIKE PLACED ON A FUTURE AGENDA FOR DISCUSSION, ACTION OR REPORT (NON-DISCUSSION ITEM) Committee Member O’Neill requested adding the creation of a policy for use of the City’s surplus
on a future agenda.
Mayor Dixon would like a discussion on the idea of a rebate for residential property owners.
Committee Member Gorczyca requested consideration of hiring an actuary. Chair Curry noted that the City already has one and Committee Member Gorczyca suggested engaging him further.
Mayor Dixon requested a review of the City’s professional service contracts for investment
advisors.
Committee Member Gorczyca requested consideration of doing a five- or ten-year budget projection. VII. ADJOURNMENT
The Finance Committee adjourned at 5:11 p.m. to the next regular meeting of the Finance
Committee on April 28, 2016, at 4:00 p.m.
Filed with these minutes are copies of all materials distributed at the meeting.
The agenda for the Regular Meeting was posted on March 7, 2016, at 12:20 p.m., in the binder and on the City Hall Electronic Board located in the entrance of the Council Chambers at 100
Civic Center Drive.
Attest:
___________________________________ _____________________ Keith Curry, Chair Date
Finance Committee Chair
CITY OF NEWPORT BEACH FINANCE COMMITTEE
STAFF REPORT
Agenda Item No. 5A April 28, 2016
TO: HONORABLE CHAIRMAN AND MEMBERS OF THE COMMITTEE
FROM: Finance Department
Dan Matusiewicz, Finance Director (949) 644-3123, danm@newportbeachca.gov
SUBJECT: FISCAL YEAR 2016-2017 PROPOSED BUDGET PRESENTATION & CIP FIRST LOOK
SUMMARY:
The City Manager’s Fiscal Year 2016-2017 Proposed Budget will be reviewed with a PowerPoint
presentation, with a more detailed look at the proposed Capital Improvement Program (CIP). Budget Documents will also be posted to the web at newportbeachca.gov/budget.
RECOMMENDED ACTION:
Staff recommends that the Committee review any aspect of the Budget it wishes, asking questions of staff
or asking for additional information to be brought back to the Committee. At a point in the near future, staff will ask that the Committee consider a motion to recommend the Fiscal Year 2016-2017 Proposed
Budget for approval by the full City Council.
DISCUSSION:
Staff is pleased to present an overview of the City Manager’s Fiscal Year 2016-2017 Proposed Budget. Budget highlights include:
• Budget is balanced.
• Revenues remain strong. • A specific use of reserves for operations in the Wastewater Division.
• Sound bonded debt position. • Aggressive steps to pay down pension obligation - more work to do here.
• Down six full-time positions at this preliminary point. The City Manager has noted that he is still considering stated needs of a few departments regarding staffing.
• Adhered to Council guidance regarding the use of budget surplus. • Continued focus on enhancing the community’s quality of life and safety.
It is expected that the City Council will review the budget during the Study Session on May 24, 2016, and
the budget will be presented for adoption at the regular meeting on June 14, 2016. The Committee may wish to schedule one or more special meetings between now and June 14, 2016, to more closely analyze
the Proposed Budget.
Prepared and Submitted by:
/s/ Dan Matusiewicz _____________________________
Dan Matusiewicz Finance Director
Finance Committee
April 28, 2016
Public Works Department
Capital Improvement Program
Proposed FY 2016-2017 Budget
85 Items
•Projects
•Programs
•Studies
TOTAL = $64,721,425
$27.3 Million New Funding
$37.4 Million Rebudgets
Proposed 2016-17 CIP Budget
CIP Funding History
General Fund Baseline $5.4 $6.1 $3.1 $1.0 $2.0 $3.6 $5.0 $5.2 $5.5 Millions
00
20
40
60
80
100
120
140
160
180
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
$
M
i
l
l
i
o
n
s
33 PW - FTE 33 33 33 33 34 33 33 33 33 32 33 35 34 35 35 35
Note on PW Staffing FY 2012: Public Works downsizes and adds two divisions - Harbor Resources and Water Quality
Legend
Rebudgets
New Funding
Approved Budget
Adjusted Budget
Category New Budget Re-budget % Total
Facilities $3.44 M $8.89 M 19% $12.33 M
Streets & Drainage $8.20 M $15.29 M 36% $23.49 M
Transportation $1.83 M $0.62 M 4% $2.45 M
Parks, Harbors & Beaches $9.74 M $3.52 M 21% $13.26 M
Water Quality & Environment $0.02 M $6.53 M 10% $6.55 M
Water $1.65 M $1.66 M 5% $3.31 M
Wastewater $1.60 M $0.34 M 3% $1.94 M
Miscellaneous $0.83 M $0.57 M 2% $1.39 M
Total $27.31 M $37.41 M 100% $64.72 M In Millions
2016/17 CIP Budget Summary
Facilities
$12.3 M
19%
Streets &
Drainage
$23.5 M
36% Traffic
$2.4 M
4%
Parks, Harbors,
& Beaches
$13.3 M
21%
Water Quality &
Environmental
$6.5 M
10%
Water
$3.3 M
5%
Sewer
$1.9 M
3%
Misc
$1.4 M
2%
Dollars in Millions
Proposed CIP Funding $64,721,425
Grants -
Contributions
$6.5 M
10% General Fund
$12.7 M
20%
Neighborhood
Enhancement
$2.2 M
3%
Tidelands
Maintenance
$3.7 M
6% Tidelands Capital
$9.1 M
14%
Major Facilities
Financing Plan
$9.4 M
14%
Facilities
Maintenance
$2.6 M
4%
Water $3.3 M
5%
Sewer $1.9 M
3%
Other* $1.4 M
2%
Gas Tax
$5 M
8%
Measure M
Fair Share
$4.8 M
8%
Grants -
Measure M
$1.9 M
3%
Dollars in Millions
Proposed CIP Funding Sources
Questions & Comments
Your Public Works Department
A Well-Engineered Machine
Protecting and Providing Quality
Public Improvements and Services
www.newportbeachca.gov/budget
FY 2016-17 PROPOSED BUDGET
City of Newport Beach
Finance Committee
April 28, 2016
Item No. 5A2
Fiscal Year 2016-2017 Proposed Budget Presentation & CIP
First Look
Staff Presentation
April 28, 2016
FY 2016-17 Highlights
2
•Budget is balanced
•Revenues remain strong
•Sound bonded debt
position
•Aggressive steps to pay
down pension obligation-
More work to do here
•Down six full-time positions
(tentative)
•Adhered to Council
guidance regarding the use
of budget surplus
•Continued focus on
enhancing the community’s
quality of life and safety
•Wastewater Operations
requires use of reserves
Net Change In Fund Balance
3
Revenue
Estimated Operating Revenue $199.2
Total Revenues $199.2
Expenditures
Proposed Operating Expenditures $190.1
Proposed New CIP Appropriations $5.6
Total Expenditures $195.7
Plus Transfers In $7.9
Less Transfers Out -$10.0
Net Intrafund Transfers -$1.5
Net Surplus -$0.1
Summary of the FY 2016-17 Proposed Budget
General Fund (millions)
Revenue
Revenue - All Funds 292.3$
Total Revenues 292.3$
Operating Budget 270.7$
New Capital Improvement Projects (CIPs)27.3$
New Appropriations 298.0$
Planned use of fund balance (5.8)$
(Capital Improvements)
Summary of the FY 2016-17 Proposed Budget
All Funds (Millions)
Charter Requirements
•Requires Budget submittal to Council at
least 35 days prior to July 1
•Requires public notice and public hearing
•Council shall adopt budget on or before
June 30
4
REVENUES
Fiscal Year 2016-17
5
FY 2016-17 General Fund Revenue Chart
(millions)
6
47%
18%
11%
4%
20% Property Taxes $94.0
Sales Tax $36.2
Transient Occupancy Tax $22.0
Other Taxes $8.3
All Other Sources $38.7
Total $199.2 million
FY 2016-17 General Fund Revenue
Assumptions
*Note: Net of a one-time $2.0 million receipt expected in 2015-16, the budget
assumes Sales Taxes are expected to grow 3.4% during 2016-17.
7
Revenue Source
2015-16 Adopted
Revenue
2015-16 Revised
Revenue
2016-17
Proposed
Revenue
% of
Total
Revenue
Budget
%
Change
Over PY
Revised
Property Tax 87,874,505 89,514,555 93,985,344 47.2%5.0%
Sales Tax *37,000,093 36,910,863 36,173,778 18.2%-2.0%
Transient Occupancy Tax 20,656,850 20,934,950 22,001,307 11.0%5.1%
All Other Revenue 46,252,317 46,843,199 47,061,734 23.6%0.5%
Total General Fund Revenue $191,783,765 $194,203,567 $199,222,163 100.0%2.6%
Assessed Valuation
8
Property Tax
9
8.8% 7.0% 4.1% 2.7% -0.5% $-0.1%
14.0% -2.1% 5.3% 4.50% 5.0%
$-
$10,000,000
$20,000,000
$30,000,000
$40,000,000
$50,000,000
$60,000,000
$70,000,000
$80,000,000
$90,000,000
$100,000,000
Sales Tax
10
4.6% 5.1%
-14.9%
-13.6%
12.6% 7.6% 4.6%
10.8% 6.5%
12.3% -2.0%
$-
$5,000,000
$10,000,000
$15,000,000
$20,000,000
$25,000,000
$30,000,000
$35,000,000
$40,000,000
*Note: Net of a one-time $2.0 million receipt expected in 2015-16, the budget assumes Sales Taxes are
expected to grow 3.4% during 2016-17.
*
Transient Occupancy Tax
11
23.2% 5.7%
-12.4% 0.7%
39.5%
12.7%
11.9%
-8.3%
12.1% 1.4%
6.5%
$-
$5,000,000
$10,000,000
$15,000,000
$20,000,000
$25,000,000
BUDGET PRINCIPLES
Fiscal Year 2016-17
12
Principle #1: Maintain a Prosperous, Fiscally
Sustainable, and Economically Viable City
•Responsible and Affordable Debt Levels
•Strong Financial Profile
•Strong Fiscal Management and Discipline
Cash funding of big projects – CdM Library, &
Mariners Fire Stations, $12.3 Million
Partial Fresh Start $2.7 Million
Manageable OPEB Liability – Retiree Insurance
$47 Million Contingency Reserve
13
Principle #2: Keep Newport Beach
Looking Great
Maintain a high-
quality natural and
physical
environment by
creating
aesthetically
pleasing places in
which to live, work,
recreate, and visit
14
FY 17 Proposed CIP
Principle #3: Maintain Newport Harbor and the Back
Bay
15
Harbor Project Improvements
Balboa Island Sewall $7,000,000
American Legion
Bulkhead
$1,000,000
Grand Canal
Dredging
$300,000
Harbor Piers and
Gangway
Maintenance
$300,000
Eelgrass Survey $75,000
Harbor Tide Gauge $50,000
Abandoned
Watercraft Abatement
$50,000
TOTAL $8,775,000
Principle #4: Provide Safety in the Community
Police Department:
•1 new Community Service
Officer
•New police car computers
Fire Department:
•Increased staffing of part-time
seasonal lifeguards
•Increased emergency
ambulance service during
summer months
•Basic Fire Academy – training
for newly hired firefighters
16
EXPENDITURES
Fiscal Year 2016-17
17
FY 2016-17 General Fund Proposed
Operating Expenditures
by Function
(Millions)
9%
54% 6%
19%
12%
0.2%
General Government $16.7
Public Safety $101.7
Community Development $12.2
Public Works $36.8
Community Services $22.5
Non Departmental $0.2
18
Total $190.1million
General Fund Expenditure Summary
by Function
(Millions)
19
Function and Activities
2015-16
Adopted
Expenditures
2015-16
Revised
Expenditures
2016-17
Proposed
Expenditures
% of Total
Operating
Budget
% Change
Over PY
Revised
General Government 15,535,158 16,177,380 16,723,557 8.80%3.38%
Public Safety 95,581,313 97,320,099 101,705,845 53.49%4.51%
Community Development 10,949,371 11,778,682 12,175,693 6.40%3.37%
Public Works 35,512,853 36,139,455 36,817,437 19.36%1.88%
Community Services 20,428,138 21,317,720 22,536,359 11.85%5.72%
General Fund Debt Service/Non Dept Exp 318,896 318,896 168,896 0.09%-47.04%
Total General Fund Operating Budget $178,325,729 $183,052,232 $190,127,787 100.00%3.87%
General Fund CIPs 11,614,095 18,404,266 5,550,000 -69.84%
Total General Fund Budget $189,939,824 $201,456,498 $195,677,787 -2.87%
Summary of Changes from the FY 16
Original Budget
20
Total Net Change
Over PY 3.87%
1.6%
0.9%
0.5% 0.5%
0.4% 0.3% 0.3%
0.4% -0.4%
-0.6%
$(1,500,000)
$(1,000,000)
$(500,000)
$-
$500,000
$1,000,000
$1,500,000
$2,000,000
$2,500,000
$3,000,000
$3,500,000
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t
CalPERS Unfunded Acturarial Liability
Employee Agreements (MOUs)
Employee Benefits (Cafeteria Plan)
CalPERS Increases
Overtime
Employee Promotional Increases
Marina Park
Other
Completed encumbered contracts
CalPERS Employee Contributions
Budgeted Expenditures by Department
General Fund Operating (Millions)
21
General Fund Expenditures
by Type
(Millions)
69%
28%
3%
Salaries & Benefits $134.0
Maintenance & Operation $55.3
Capital Improvement Projects and
Capital Outlay $6.4
22
Changes in Full-time Staffing
FY 17 Full-time Position Changes
1 Civilian Police Position
(3)Firefighters (approved in MOU)
(1)Assistant Fire Chief
(3)Limited Term Groundsworkers
(1)Maintenance Worker I
(1)Utilities General Manager
1 Office Assistant (Recreation)
1 Recreation Coordinator
(6)Net Change in Positions
Salaries & Benefits
Most significant changes
•MOU Contracts $3.2 Million
•Salaries Increased 4% or $3 Million
•6 Net fewer employees
•Unfunded Pension Liability payment increased $3 Million or
14%
•Employee Contributions to PERS increased $1.1 Million to
$9.5 Million per year
Typical Employee (non-safety)
•Earns $79,500 in wages
•City pays $20,700 towards purchase of health insurance
•City pays $11,140 or 14% towards pension
•Employee pays $12,400 or 12.85% towards pension
Savings for Future Needs(Millions)
This budget also includes nearly $30 million of forced savings that
fund long-term liabilities and capital replacement plans.
Prefunding/Capital Savings 15-16 16-17 Change
Facilities Financial Plan - Transfers $8.5 $8.5 $ -
Facilities Maintenance Plan - Transfers 1.5 1.0 (.5)
Vehicle Replacement Plans – Department Cost 3.3 2.7 (.6)
Emergency Communication System - Transfers 1.0 .5 (.5)
Other Equipment (Safety, IT, Parking & Rec) 1.6 1.8 (.2)
Workers Compensation – Department Cost 2.8 2.8 -
General Liability – Department Cost 4.1 4.1 -
Compensated Absences – Department Cost 2.5 2.5 -
Retiree Insurance (OPEB) – Department Cost 2.8 4.0 1.2
Total $28.1 $27.9 (.2)
25
Unfunded Pension Liability
26
Projected
Accelerated PERS Payment Schedule
27
FY 2015 FY 2016
FY 2017
Estimated
Year Over Year
$ Increase
Year Over Year
% Increase
Normal Cost 14,627,830 14,909,807 15,760,618 850,811 5.71%
Amortized Cost of Unfunded Liablility*12,783,847 21,527,121 24,599,873 3,072,752 14.27%
Discretion 7,600,000 6,000,000 - - NA
Total Annual PERS Cost 27,411,677 36,436,928 40,360,491 3,923,563 10.77%
Employee Contributions 7,429,842 8,256,418 9,464,924 1,208,506 14.64%
Net Employer Cost 19,981,835 28,180,510 30,895,567 2,715,057 9.63%
Total Annual PERS Cost 27,411,677 36,436,928 40,360,491 3,923,563 10.77%
Capital Improvement Program
Capital Improvements Projects (CIPs)
Newly Proposed Projects $27 million
Re-budgeted Projects (Estimated) $37 million
Encumbered Funds (Estimated) $23 million
Total Community Reinvestment (Estimated) $87 million
28
A BALANCED APPROACH
Fiscal Year 2016-17
29
Balanced Approach to Surplus Use
Neighborhood
Enhancements?
Meet/Reduce
Obligations
30
Proposed Use of Surplus Funds 31
2015-16
Neighborhood
Enhancement
Meet/Reduce
Obligations
Total
Contingency Reserve Growth 4,000,000 4,000,000
Replenish General Liability Fund 3,000,000 3,000,000
Newport Blvd Widening 880,000 880,000
Dover/Westcliffe Pavement Quantities 78,000 78,000
Corona del Mar Entry 175,000 175,000
FIIN - Lido House Hotel Mitigation 975,000 975,000
FY 2015-16 Budget Amendments $2,108,000 $7,000,000 $9,108,000
2016-17
Irvine Avenue Pavement/Landscaping 500,000 500,000
City Parcels in Assessment Districts 679,500 679,500
Median Landscaping 500,000 500,000
Mariners Mile Study 60,000 60,000
FY 2016-17 Neighborhood Ehancement $1,739,500 $0 $1,739,500
City Manager Assignment
(Uncommitted)
3,500,000
GRAND TOTAL $7,347,500 $7,000,000 $14,347,500
SOURCE
2014-15 Surplus 14,200,000
2015-16 Surplus 147,500
14,347,500
CONCLUSION
Fiscal Year 2016-17
32
What’s next?
•5/12/16 Follow-up Finance Committee meeting
if needed.
•5/24/16 Council Study Session Budget
Council Meeting set the date for the
public hearing on budget appropriation.
•6/14/16 Public hearing and adoption of
FY 2016-17 GANN Appropriations limit.
•7/1/16 Fiscal Year 2016-17 begins.
33
Questions & Comments
City’s budget documents can be accessed at:
www.newportbeachca.gov/budget
34
CITY OF NEWPORT BEACH
FINANCE COMMITTEE STAFF REPORT
Agenda Item No. 5B
April 28, 2016 TO: HONORABLE CHAIR AND MEMBERS OF THE COMMITTEE
FROM: Finance Department Dan Matusiewicz, Finance Director
(949) 644-3123 or danm@newportbeachca.gov SUBJECT: CITY COUNCIL GENERAL FUND SURPLUS UTILIZATION POLICY
SUMMARY:
Per the direction of the Finance Committee, staff developed a draft policy for the use of surplus funds resulting from unrestricted General Fund annual revenues exceeding total actual expenditures,
encumbrances and commitments for that year. Roughly fifty percent of the budget surplus shall be used to address long-term obligations such as pension liabilities, other post-employment benefits, bonded debt,
lease obligations and other long-term needs. The remaining surplus shall be used to address infrastructure or neighborhood capital improvements, guided by a philosophy that these expenditures
improve the community’s safety, aesthetics, transportation, or quality of life.
RECOMMENDED ACTION:
Review the draft General Fund Surplus Utilization Policy, suggest changes as needed and recommend
the policy for submission to the City Council for final approval. DISCUSSION:
Due to a variety of factors, such as economic expansion, frugal operations, or changes to various projects
and programs, the City may end the fiscal year with a surplus of revenues over expenditures, encumbrances and commitments. Budget Surplus Funds are those funds that result after closing the
City’s accounting records for the fiscal year. This proposed policy shall designate surplus funds be used to fund City needs in the manner described below, as approved by the City Council, at a public meeting.
One-time funds should be used for one-time expenditures; therefore, the City should not use one-time
and budget surplus funds in a way that creates new on-going expenditure requirements unless it can be demonstrated that adequate resources exist to support the on-going expenditure requirements.
Roughly fifty percent of the budget surplus shall be used to address long-term obligations such as
pension liabilities, other post-employment benefits, and bonded debt, lease obligations and other long-term needs. Roughly fifty percent of the budget surplus shall be used such to maintain a level of
operations that reflects the community’s desire for an active, safe, and attractive community as well as investing in the City’s infrastructure.
I hope you find the attached financial policy to be a thoughtful and prudent tool for the governance of the
City’s financial resources.
City Council General Fund Surplus Utilization Policy April 28, 2016
Page 2
Prepared by: Submitted by:
/s/ Steve Montano
/s/ Dan Matusiewicz
Steve Montano Dan Matusiewicz
Deputy Finance Director Finance Director
Attachment:
A. Proposed General Fund Surplus Utilization Policy
ATTACHMENT A
Proposed General Fund Surplus Utilization Policy
F-__
1
GENERAL FUND SURPLUS UTILIZATION
PURPOSE
To establish City Council policy for the use of surplus funds resulting from unrestricted
General Fund annual revenues exceeding total actual expenditures, encumbrances and
commitments for that year.
BACKGROUND
Due to a variety of factors, such as economic expansion, frugal operations, or changes to
various projects and programs, the City may end the fiscal year with a surplus of
revenues over expenditures, encumbrances and commitments. Budget Surplus Funds
are those funds that result after closing the City’s accounting records for the fiscal year.
From time to time, the City Manager shall recommend allocations to the City Council
on the use of budget surplus funds consistent with the uses identified in this policy.
POLICY
A. One-time funds should be used for one-time expenditures; therefore, the City should
not use one-time and budget surplus funds in a way that creates new on-going
expenditure requirements unless it can be demonstrated that adequate resources
exist to support the on-going expenditure requirements.
B. After addressing approved budget amendments, reserve deficiencies and other
matters of fiscal concern, the City Manager or his designee shall recommend
surplus funds identified be used to fund City needs in the manner described below,
as approved by the City Council, at a public meeting.
C. Roughly fifty percent of the budget surplus shall be used to address long-term
obligations such as pension liabilities, other post-employment benefits, bonded debt,
lease obligations and other long-term needs.
D. Roughly fifty percent of the budget surplus shall be used such to address
infrastructure or neighborhood capital improvements, guided by a philosophy that
these expenditures improve the community’s safety, aesthetics, transportation, or
quality of life.
Adopted - __________, 2016
CITY OF NEWPORT BEACH
FINANCE COMMITTEE
STAFF REPORT
Agenda Item No. 5C
April 28, 2016
TO: HONORABLE CHAIR AND MEMBERS OF THE COMMITTEE
FROM: Finance Department
Dan Matusiewicz, Finance Director
(949) 644-3123 or danm@newportbeachca.gov
SUBJECT: BUDGET AMENDMENTS
EXECUTIVE SUMMARY
The purpose of this memorandum is to report on the budget amendments for the first two quarters of
Fiscal Year 2015-2016. All budget amendments are in compliance with City Council Policy F-3, Budget
Adoption and Administration.
DISCUSSION
The Finance Committee requested that staff provide a quarterly report of budget amendments. City
Council Policy F-3, Budget Adoption and Administration, identifies how appropriations can be transferred,
amended or reduced. Please find the list of budget amendments for the quarter ending March 31, 2016,
as Attachment A.
Prepared by: Submitted by:
/s/ Susan Giangrande
/s/ Dan Matusiewicz
Susan Giangrande Dan Matusiewicz
Budget Manager Finance Director
Attachment:
A. Budget Amendments Fiscal Year 2015-2016 Quarter Ending March 31, 2016
ATTACHMENT A
Budget Amendments Fiscal Year 2015-2016 Quarter Ending March 31, 2016
Date Amount
Amendment
Type Department Explanation
1/4/2016 10,000 City Manager Library Literacy services programming funded through donations
01/12/16 22,805 Council Library Literacy services programming funded through the California State Library
01/12/16 305,254 Council CIP - Assessment District #111 Advance of General Funds to initiate work01/12/16 177,525 Council CIP - Assessment District #116 Advance of General Funds to initiate work
01/12/16 130,560 Council CIP - Assessment District #116B Advance of General Funds to initiate work
01/26/16 175,000 Council CIP - Street Improvements Corona del Mar Entry Improvement project
01/26/16 669,752 Council Fire
Increased costs associated with Newport Beach Firefighters Association Memorandum of Understanding
01/26/16 376,920 Council Various departments
Increased costs associated with Key & Management Compensation Plan and the
Newport Beach Fire Management Memorandum of Understanding
01/26/16 77,400 Council Public Works - Harbor Resources
Net increase associated with Marina Park marina management contract & reduction of General Fund appropriation
01/26/16 880,000 Council CIP - Street Improvements Construction contract for Newport Boulevard Widening project
01/26/16 23,035 Council CIP - Street Improvements Net increase related to Dover Drive and Westcliff Drive Street Rehabilitation project
02/09/16 395,235 Council Various departments
Increased costs associated with Newport Beach Employees League Memorandum
of Understanding02/09/16 60,000 Council CIP - Miscellaneous & Studies ADA Access for Balboa Pier Fire Rings project
2/9/2016 5,000 City Manager Police Anti-Homelessness Efforts by Police Department
02/23/16 8,758,669 Council CIP - Street Improvements Park Avenue Bridge Replacement Project
02/23/16 100,000 Council Public Works - Harbor Resources South Mooring Contract for Newport Harbor operational and maintenance services
2/29/2016 66,340 City Manager Police
Transfer funding from Recreation & Senior Services to Police Department for fire
ring management3/3/2016 13,000 City Manager Fire Transfer funding within Fire Department for purchase of Fitness Equipment
03/08/16 3,409 Council Police 2015 UASI Transfer Agreement
3/11/2016 10,193 City Manager Police Calif Board of State and Community Corrections Grant to fund police overtime*
3/16/2016 5,580 City Manager Recreation Per Player Field Maintenance Agreement funding related to Adult Soccer League, Fall 2015 season
3/23/2016 5,943 City Manager City Manager - IT Transfer funding for Marina Park computer purchases
3/23/2016 15,000 City Manager City Council Increase Council Grant funding as authorized by Council approved revision to Council Policy A-12
3/31/2016 1,800 City Manager Finance Transfer funding within Finance Department for purchase of computer equipment
* appropriation limited to $10,000
City of Newport Beach
Budget AmendmentsFiscal Year 2015-16Quarter Ending March 31, 2016