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CITY OF
s NEWPORT BEACH
C'94IF09 Newport Beach Public Facilities
Staff Report
Corporation
August 8, 2017
NBPFC Agenda Item No. 2
TO: HONORABLE CHAIR AND BOARD OF DIRECTORS OF THE
NEWPORT BEACH PUBLIC FACILITIES CORPORATION
FROM: Finance Department
Dan Matusiewicz, Finance Director/Treasurer
949-644-3123, danm(a�newportbeachca.gov
PREPARED BY: Trevor Power, Senior Accountant
TITLE: Review of Annual Financial Statements
ABSTRACT:
The Bylaws of the Newport Beach Public Facilities Corporation call for an annual meeting of the
Board of Directors. The Bylaws also specify that the Chief Financial Officer shall maintain
adequate financial records concerning the receipts and disbursements of the Corporation and the
Board of Directors are entitled to inspect the associated financial records upon request. The
attached financial statements represent the financial position and financial activities of the
corporation for the year ended June 30, 2017.
RECOMMENDATION:
Receive and file the financial report.
FUNDING REQUIREMENTS:
There are no funding requirements associated with this action.
DISCUSSION:
The Newport Beach Public Facilities Corporation ("Corporation") was created on March 9, 1992,
by the City of Newport Beach ("City") under the authority of California law. The purpose of the
Corporation is to assist the City in the financing of public improvements, including a public library
and most recently the new Civic Center project. This type of non-profit corporation is required by
the Federal IRS code in order to issue a public financing instrument called a Certificate of
Participation ("COP"). A COP is a typical California public financing instrument for public facilities
or equipment. It is essentially a type of lease purchase that requires a third party, the Corporation,
for the lease transaction. The Corporation assigns all of the rights, obligations and financial
transactions to others, such as the Trustee for the COP.
The Corporation is governed by a Board of Directors that is comprised of the seven City Council
Members of the City. Normally, the Mayor serves as Chairperson of the Board, with the Mayor
Pro -Tem serving as Vice -Chairperson. The City Manager serves the Corporation as President,
the City Clerk serves as Secretary, and the City Treasurer serves as Chief Financial Officer.
NBPFC 2-1
Review of Annual Financial Statement
August 8, 2017
Page 2
In 1992, the City issued $7.5 million of COPs to finance the construction of the Central Library. In
2010, the City issued approximately $126.7 million of new COPs. Of this financing, $122.8 million
was used for the Civic Center project and $3.9 million was used to refinance the remaining
balance of the Central Library COPs. The Corporation's financial data and transactions are
included in the debt service fund in the City's financial statements. The City's debt service fund
is used solely to account for the activities of the Corporation and contains no other City debt
financing activities. Even though the Corporation is a separate legal entity, it is considered a
component unit of the City and is included in the audit of the Comprehensive Annual Financial
Report.
The main sources of revenues of the Corporation are lease payments from the City and Federal
Build America Bond (BAB) Interest Subsidy payments; both of which are pledged for the sole use
of paying interest and principal on the COPs. The Corporation has assigned its rights to receive
and collect these payments to a trustee who makes the semi-annual debt service payments to
the bond holders. Therefore, the lease and BAB subsidy payments are received directly by the
Trustee. The debt is an obligation of the City, not the Corporation. The City owns the financed
properties.
During the year, the trustee received lease payments from the City totaling $8.2 million and
Federal Build America Bond (BAB) Interest Subsidy of $2.4 million. Together with investment
earnings, there were sufficient resources necessary to satisfy the annual debt service requirement
of $10.6 million. The table below illustrates the remaining debt service payment and principal
balance on the COPs:
Year Ending
2010 COP Debt Service
June 30
Principal
Interest
Total
Balance
2018
3,185,000
7,340,517
10,525,517 $
107,410,000
2019
3,310,000
7,204,077
10,514,077
104,100,000
2020
3,405,000
7,052,048
10,457,048
100,695,000
2021
3,065,000
6,895,351
9,960,351
97,630,000
2022
3,165,000
6,733,265
9,898,265
94,465,000
2023-2026
13,850,000
24,955,179
38,805,179
80,615,000
2027-2030
16,490,000
20,771,058
37,261,058
64,125,000
2031-2034
19,710,000
15,637,984
35,347,984
44,415,000
2035-2038
23,635,000
9,442,944
33,077,944
20,780,000
2039-2041
20,780,000
2,279,424
23,059,424
-
$ 110,595,000
$ 108,311,847 $ 218,906,847
* Remaining interest before considering federal interest subsidy.
Interest remaining
net of
expected federal
subidy amounts to
$73.1 million.
The total BAB subsidy payments will be approximately 32 percent of total interest payable, which
we expect to total $50 million. Before considering the federal interest subsidy, total interest on the
project and refinancing amounts to $155.3 million. Interest, net of the revised federal subsidy, is
expected to be $105.3 million in total for the project and refinancing. The outstanding principal of
the obligation was $110.6 million as of June 30, 2017. After the July 1, 2017, debt service
payment, the remaining principal balance is now $107.4 million.
NBPFC 2-2
Review of Annual Financial Statement
August 8, 2017
Page 3
ENVIRONMENTAL REVIEW:
Staff recommends the Board of Directors of the Public Facilities Corporation find this action is not
subject to the California Environmental Quality Act ("CEQA") pursuant to Sections 15060(c)(2)
(the activity will not result in a direct or reasonably foreseeable indirect physical change in the
environment) and 15060(c)(3) (the activity is not a project as defined in Section 15378) of the
CEQA Guidelines, California Code of Regulations, Title 14, Chapter 3, because it has no potential
for resulting in physical change to the environment, directly or indirectly.
NOTICING:
The agenda item has been noticed according to the Brown Act (72 hours in advance of the
meeting at which the Board of Directors considers the item).
ATTACHMENT:
Attachment A — Financial Statements
NBPFC 2-3
Attachment A
Financial Statements
NBPFC 2-4
NEWPORT BEACH PUBLIC FACILITIES CORPORATION
Comparative Balance Sheet
June 30, 2017 and 2016
Assets
Cash with fiscal agent
Total Assets
Liabilities and Fund Balances
Liabilities:
Accounts payable
Total Liabilities
Fund balances:
Nonspendable
Restricted for:
Debt Service
Committed
Assigned
Unassigned
Total fund balance
Total liabilities and fund balance
2017
2016
$ 8,069,571
$ 8,004,755
$ 8,069,571
$ 8,004,755
8,069,571
8,004,755
8,069,571
8,004,755
$ 8,069,571 $ 8,004,755
NBPFC 2-5
NEWPORT BEACH PUBLIC FACILITIES CORPORATION
Comparative Statement of Revenues,
Expenditures and Changes in Fund Balances
June 30, 2017 and 2016
NBPFC 2-6
2017
2016
Revenues:
Lease revenues
$ 8,228,725
$ 8,235,838
Investment income
3,849
191
Federal interest subsidy
2,360,267
2,362,802
Total revenues
10,592,841
10,598,831
Expenditures:
Debt service:
Principal
3,060,000
2,940,000
Interest and fiscal charges
7,468,025
7,591,299
Total expenditures
10,528,025
10,531,299
Excess (deficiency) of revenues
over expenditures
64,816
67,532
Fund balance, beginning
8,004,755
7,937,223
Fund balance, ending
$ 8,069,571
$ 8,004,755
NBPFC 2-6