HomeMy WebLinkAboutFinance Committee - December 13, 2018CITY OF NEWPORT BEACH
FINANCE COMMITTEE AGENDA - Final
100 Civic Center Drive - Crystal Cove Conference Room, Bay 2D
Thursday, December 13, 2018 - 3:00 PM
Finance Committee Members:
Will O'Neill, Chair / Mayor Pro Tem
Diane Dixon, Council Member
Scott Peotter, Council Member
William Collopy, Committee Member
Joe Stapleton, Committee Member
Larry Tucker, Committee Member
VACANT, Committee Member
Staff Members:
Grace K. Leung, City Manager
Carol Jacobs, Assistant 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 NOVEMBER 29, 2018A.
Recommended Action:
Approve and file.
DRAFT MINUTES 112918
December 13, 2018
Page 2
Finance Committee Meeting
V.CURRENT BUSINESS
REVISIONS TO CITY COUNCIL POLICY F-14 - AUTHORITY TO CONTRACTA.
Summary:
The purpose of Council Policy F-14 is to establish authority for City contracts, such
as service contracts and purchase orders, which collectively encompass the majority
of the City’s procurement activities. It also provides clarity in areas where the state
and federal statutes may be silent or ambiguous. The Finance Department recently
conducted a review of F-14 with the overall objective to determine its relevance to
current and best practices, trends, and current law. After soliciting input from
Department Directors and consulting with the City Attorney, staff is proposing
numerous changes to the policy.
Recommended Action:
Staff welcomes input and recommendations on the proposed revisions to Council
Policy F-14. Finance staff will bring Committee recommendation, if any, to the City
Council for consideration.
STAFF REPORT
ATTACHMENT A
REVIEW OF SELECT FINANCIAL POLICIESB.
Summary:
The Finance Committee is charged with a variety of tasks including, but not limited
to, reviewing and monitoring events and issues that may affect the financial status of
the City and making recommendations to the City Council regarding amendments to
financial and budgetary policies. A subcommittee of the Finance Committee was
appointed to review and recommend changes if deemed necessary to nine select
financial policies.
Recommended Action:
Review the draft changes to the select financial policies and recommend further
changes as needed for submission to the City Council for final approval.
STAFF REPORT
ATTACHMENTS A-I
December 13, 2018
Page 3
Finance Committee Meeting
WORK PLAN REVIEWC.
Summary:
Staff has prepared a list of key FY 2019/20 budget preparation milestones and
alternate dates for Finance Committee meetings in calendar year 2019. Specific
and detailed work plan elements can be determined in January after the new City
Council session begins.
Recommended Action:
Select appropriate meeting dates for calendar year 2019 or select the date of
January meeting and defer work plan development to January.
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)
VII.ADJOURNMENT
Finance Committee Meeting Minutes
November 29, 2018
Page 1 of 11
CITY OF NEWPORT BEACH
FINANCE COMMITTEE
NOVEMBER 29, 2018 MEETING MINUTES
I. CALL MEETING TO ORDER
The meeting was called to order at 3:00 p.m. in the Crystal Cove Conference Room, Bay 2D, 100
Civic Center Drive, Newport Beach, California 92660.
II. ROLL CALL
PRESENT: Mayor Pro Tem/Chair Will O’Neill, Council Member Scott Peotter, Council
Member Diane Dixon, Committee Member William Collopy, Committee
Member Joe Stapleton, and Committee Member Larry Tucker
ABSENT: Committee Member (VACANT POSITION)
STAFF PRESENT: City Manager Grace K. Leung, Finance Director/Treasurer Dan
Matusiewicz, Deputy Director/Finance Steve Montano, Administrative
Specialist to the Finance Director Marlene Burns, Public Works
Administrative and Financial Manager Jamie Copeland, Fire
Administrative Manager Angela Crespi, Budget Manager Susan
Giangrande, Senior Accountant Theresa Schweitzer, Revenue Manager
Evelyn Tseng, Budget Analyst Jason Loya, Assistant Fire Chief Jeff
Boyles, and Real Property Administrator Lauren Wooding Whitlinger
OTHER ENTITIES: John Bartel (Bartel Associates, LLC), Julio Morales (Urban Futures, Inc.),
Jim Netzer (Netzer & Associates), and Hillary Davis (The Daily Pilot)
MEMBERS OF THE
PUBLIC: Jim Mosher, Carl Cassidy, and Sam Christensen
III. PUBLIC COMMENTS
Chair O’Neill opened public comments.
Jim Mosher suggested adjusting the electronic bookmarks on the online version of the agenda,
inquired as to various aspects of the City’s insurance limits, and requested information related to
the delay in filling the current vacancy on the Committee.
Carl Cassidy requested an agenda item related to contracts and policies, and requested further
information related to the “Riverwatch” matter.
Chair O’Neill stated he would respond to Mr. Cassidy’s inquiry at the end of the meeting as that
would be the appropriate time to address this matter.
Noting there were no other members of the public who elected to speak on this item, Chair O’Neill
closed public comments.
Finance Committee Meeting Minutes
November 29, 2018
Page 2 of 11
IV. CONSENT CALENDAR
A. MINUTES OF OCTOBER 18, 2018
Recommended Action:
Approve and file.
MOTION: Committee Member Tucker moved, and Committee Member Stapleton seconded,
to approve the minutes, with proposed amendments by Jim Mosher and Committee Member
Collopy. The motion carried 5 – 0, 1 vacancy, 1 abstention (Peotter).
V. CURRENT BUSINESS
A. PRELIMINARY PENSION FUNDING RECOMMENDATION – FISCAL YEAR 2019/20
Summary:
Staff and consultant(s) will summarize the funded status, required contributions as of the latest
valuations, June 30, 2017, and provide preliminary funding recommendations for CalPERS
pension plans for Fiscal Year 2019/20.
Recommended Action:
Provide feedback to staff regarding recommendations.
Finance Director Matusiewicz provided a staff report and a PowerPoint Presentation was
displayed. He noted CalPERS financing is complicated and acknowledged the City’s CalPERS
contributions and obligations are among the most important financial matters to be addressed
by the City at this time. The City is currently funded at 66% (PowerPoint Slide No. 3), although
he would prefer the percentage was higher at this point.
Finance Director Matusiewicz reported Unfunded Accrued Liability (UAL) is moving
“downward” in the Cities of Irvine, Laguna Beach, and Newport Beach. The CalPERS actuary
provided a projection for 2018 and five years forward; assuming a 7% annual return sees the
plan moving toward a healthier state. “Normal cost” is the normal operating cost of pension
plans, assuming all actuarial assumptions. Normally, there is very little movement, unless there
is a change in an actuarial valuation. It was stated that it will be “decades” before there will be
a lowering of costs as a result of PEPRA (pension reform) and Tier II.
Committee Member Collopy inquired as to how staff develops an exact UAL contribution
number in the annual budget. Finance Director Matusiewicz stated the number is the result of
the arithmetic difference between the required payment and the normal costs. The impact of
discount rate changes would require $34.5 to $35 million to pay down the UAL in 15-year
period. However, that action would significantly impact the City’s ability to allocate funding
toward other City activities.
Council Member Dixon inquired whether the UAL is increasing every year and how the City’s
normal costs compare to other municipalities. Finance Director Matusiewicz responded the
discount rate increases. There is a presumption that payroll will grow annually by approximately
3% and the City has limited authority over management of normal costs. He noted City staff
has been reduced by approximately 100 positions over the past several years; however, that
does not significantly impact on-going costs until Newport Beach employees or former
employee no longer collect CalPERS retirement through mortality or other reasons. Council
Member Dixon acknowledged the annual 7% increase in UAL is still a very high amount for
municipalities to manage.
Chair O’Neill clarified the 7% number includes two “baked-in” numbers, the increase in payroll
and reduction in the discount rate. Finance Director Matusiewicz stated normal costs do not
typically fluctuate.
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November 29, 2018
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Finance Director Matusiewicz introduced John Bartel of Bartel Associates, and Julio Morales
of Urban Futures, an expert in refinancing debt. John Bartel stated there would be a financial
impact resulting from the decrease in discount rate and hiring new employees who come in at
a lower pension rate.
Finance Director Matusiewicz referenced the PowerPoint Slide No. 5, Net Employer Cost
Projection. He is projecting to budget $35 million for Fiscal Year 2019/2020 and it will not
dramatically change the current UAL appropriation. The total “all-in” pension cost, including
normal costs and amortization of the UAL for Fiscal Year 2019/2020 is approximately $52
million. Negotiations with employee groups to “kick-in” employee contributions have come up
to approximately $11 million. The net pension costs are approximately $41 million, $35 of which
is related to the UAL. Employee contributions have been very helpful, and the City is also
benefitting from a robust economy.
John Bartel noted the City of Newport Beach, at a net employer cost of 2.3%, is doing very well
as compared to his other clients. Typical clients are experiencing a larger increase, and very
few are making discretionary payments.
Finance Director Matusiewicz noted other agencies are still “riding the costs upward”, whereas
the City of Newport Beach adjusted upward early to address the financial impacts of the liability.
The success in paying down the UAL has come from the City’s practice of Additional
Discretionary Payments (ADP) and the previous “fresh starts.”
Council Member Peotter inquired whether the $8.8 million of ADP for Fiscal Year 2018/2019
(PowerPoint Slide No. 5, Net Employer Cost Projection) represents discretionary funds.
Finance Director Matusiewicz responded that it is, and the “other part” of UAL payment has
become compulsory as the result of a previous fresh start. He referred to PowerPoint Slide No.
6, CalPERS Tier Summary.
Finance Director Matusiewicz stated the City had adopted its own employee benefit Tier (Tier
II) prior to the adoption of PEPRA (pension reform). He referred to Slide No. 6, CalPERS Tier
Summary, which displayed how the Tiers and PEPRA have impacted the City’s financial
position. John Bartel added there have been increases in the number of PEPRA employees
and Tier II “classic” employees; however, savings as related to these two methods will be
realized in a much longer term.
Council Member Dixon stated Tier II also includes lateral transfers. Finance Director
Matusiewicz stated that the City’s Tier II policy is good in the long run; however, it hurts the
City in terms of lateral recruitments, particularly for “seasoned” executive/management level
employees.
Chair O’Neill acknowledged the difficulty in recruiting senior-level employees due to the Tier II
system. Finance Director Matusiewicz noted if all cities adopted Tier II, recruitments would not
be a problem. Although the Tier II strategy will result in long-term savings, the unintended
consequences are its impacts on recruitments.
Finance Director Matusiewicz referred to PowerPoint Slide No. 7, Amortization Schedule.
There will be a “level” amortization instead of a level percent increase. He noted if the City
maintained the default payment schedule; it would take an additional eight years before the
City is at “square one” of the original liability. The proposed new policy would not include a
thirty-year payment option. The City can pursue a “partial fresh start” combining multiple
amortization bases or the City can opt to pay the UAL through an ADP.
Julio Morales stated the amortization by CalPERS is oriented towards reducing volatility by
adding a base and spreading it out over time. There is a need for “inter-generational” equity.
The City has the option to “true up” its portfolio every year, and noted CalPERS valuations lag
Finance Committee Meeting Minutes
November 29, 2018
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two years. Most cities do not have the resources to “true up” year to year. There is a two-year
lag and a five-year phase in, resulting in a total seven-year process.
Chair O’Neill commented there is a political nature to the “inter-generational” equity argument
and may be related to elected officials avoiding the pension issue until they are no longer
serving in elected capacities. The City of Newport Beach is not engaging in that strategy as it
is paying down the UAL using ADP’s.
Finance Director Matusiewicz referred to PowerPoint Slide No. 9, Funding Options and noted
that the City is administratively challenged to manage eight separate bases for the various
employee groups, and staff is proposing rolling several bases into one “fresh start.” This is
reflected in staff recommendation, Option 3A.
Chair O’Neill inquired as how to explain “fresh start” to the public in “layperson” terms. John
Bartel suggested explaining the “fresh start” as a method to take existing debts and restructure
them into a single payment with the same interest rate. This will spread them over an average
period, a portion of which included the UAL. The original “fresh start” was twenty years and it
now has fifteen years remaining. Each individual “base” has a shorter or longer period;
however, consolidating them all together results in a twenty-year period. These do not include
the ADP’s.
Council Member Dixon stated this clarified her understanding.
John Bartel described how “fresh starts” happen. Finance Director Matusiewicz added it was
the City Council’s sensitivity to increasing the required contributions that led staff to propose a
“happy medium” of twenty years that does not result in a significant change in the annual UAL
payment.
Julio Morales stated this method is like a consolidation term, which may be shorter or equal,
yet the percentage remains the same, at 7%. This is more an administrative tool, one that is
encouraged to be paid sooner.
Chair O’Neill stated the answers to Committee questions are likely found on PowerPoint Slide
Nos. 16 and 17.
Finance Director Matusiewicz stated there are two default options. The assumption change is
spread over twenty years, and investment gain is spread over thirty years. In 2018, if the City
let things go and only paid the minimum, the payment schedule would lose efficiency. A full
fresh start would have an efficiency ratio of 160%, and the City would save $21 million in today’s
dollars. Option 2 is a hybrid and includes $20 million spread over twenty years. Option 3
includes continuing discretionary payments from operating payments not to exceed $30 million.
This would realize a total saving of $45 million, a present-day value of $22 million, to be saved
as compared to following the default option.
Committee Member Tucker summarized by saying there is only fifteen years left on the original
“fresh start” plus eight, with a fixed schedule of obligatory payments. The City has a series of
different impacts, including gains, losses, and assumption changes. This is now converted to
payments on a twenty-year term and monies that are due to the City are on a thirty-year term.
With the original “fresh start” from 2013 and a new “partial fresh start” from 2018, the City will
amortize over fifteen years. He noted this will only deal with today’s problems and will not
address any changes in pension in the future.
Julio Morales stated his clients all want these problems to go away and cities are now required
to actively manage their pension liability. He noted this is the “past due” bill and next year there
will be a market value adjustment.
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November 29, 2018
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Finance Director Matusiewicz stated the City is obligated to pay based on the 2017 valuation.
The City has electively chosen to factor in results following the 2017 valuation.
Committee Member Tucker inquired whether the “fresh start” is an obligated payment and the
ADP is an optional payment. Finance Director Matusiewicz responded if the City stays with the
default option, it would still be required to make discretionary payments. He is recommending
an administrative “clean up” utilizing the partial fresh start and where to apply the discretionary
payment.
Council Member Dixon stated the recommendation makes sense.
Committee Member Tucker inquired as to whether the “partial fresh start” can be applied to a
net gain or net loss position. Finance Director Matusiewicz stated the “partial fresh start” could
be applied in either position. John Bartel added with the gain base the City must extend the
amortization period. There are technical reasons for why this is not a recommended strategy.
Committee Member Tucker stated he understood the logic for the twenty-year process.
Finance Director Matusiewicz noted starting with 2019, new investment losses would be twenty
years, which is reasonable. This action would place the program on “autopilot,” and in twenty
years the City would not have large amortization bases. He referred to PowerPoint Slide No. 8
of the presentation.
Julio Morales stated the City of Newport Beach proactively addresses their liability, where his
other clients have not. In the past, some cities did not make contributions because they did
could not make the payments. The cities with the greatest financial distress are not making
proactive financial decisions. Finance Director Matusiewicz referred to PowerPoint Slide No.
12, UAL Payment Comparison – All Options, which illustrates the minimal impact in the short-
term. Staff is not recommending increasing the payment amount currently.
Chair O’Neill inquired as to the twenty-year term versus the fifteen-year term. Finance Director
Matusiewicz stated the twenty-year term would include no additional discretionary payments.
Option 3A, which is proposed by staff, will not change the proposed budgeted amount. He
expressed a preference for the City to get to $35 million and “level out.”
Committee Member Collopy acknowledged the City would have reduced from twenty-years to
fifteen-years.
Chair O’Neill commented the previous “fresh start” was conducted after the last election and
was based upon the 2013 valuation. The 2014 “fresh start” dramatically increased the default
amount, which the current proposed “partial fresh start” does not. Given the parameters, he
expressed support for the “partial fresh start.” Finance Director Matusiewicz responded it would
not “move the needle” much more than what the City has already been doing; however, it
makes the bases much easier to administer.
Council Member Peotter stated the ADP would be applied to the currently proposed “partial
fresh start.”
Chair O’Neill stated this would further assist in explaining the benefits of the “fresh start” to the
community.
Finance Director Matusiewicz stated lowering the discount rate is still on the table as “risk
mitigation.” If investments earn less, the CalPERS Board could reduce the discount rate even
further.
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November 29, 2018
Page 6 of 11
Council Member Peotter inquired if the expected rate of return was projected to decrease. John
Bartel responded there is an argument the Board should reduce the discount rate; however,
he does not anticipate the Board has the “appetite” to move forward with that strategy.
Julio Morales mentioned an overall reduction in inflation and a “run-up” in the market recently.
Another item that must be considered in portfolio review is the mortality component. At some
point, there has been discussion of a reduction in the actuarial rate of return. General
Committee discussion ensued on the potential for adjustments to CalPERS investment
policies.
Council Member Dixon stated CalPERS has a current investment policy concerned with “social”
investing and inquired if this strategy will continue. Finance Director Matusiewicz stated one
Board member lobbied based on that path and he referenced his discussions with other Chief
Investment Officers. Although there is discussion related to CalPERS investment strategies,
the differences in investment philosophies do not “move the needle” that much.
Council Member Peotter inquired as to the performance of CalPERS as compared to other
portfolios. Finance Director Matusiewicz encouraged long-term views on investing. In the short-
term equity growth is expected at approximately 6% return over the next 10 years. He
expressed support for utilizing 7% as a good average in the long-term.
Council Member Peotter inquired how the CalPERS investment strategy compares to other
similar retirement systems’ investment strategies over the long-term. John Bartel stated a
comparison could be conducted relative to other large retirement systems in the United States.
He mentioned return comparisons are dependent on the period one is analyzing. He estimates
CalPERS is likely underperforming in the short-term. However, long-term they are comparable
to other systems. He did note CalPERS is the single largest retirement system in the country
and they do represent the market. He is not too concerned with CalPERS underperformance.
Chair O’Neill opened public comments.
Jim Mosher requested clarification related to the discretionary payment decreasing. Finance
Director Matusiewicz responded, by definition, the ADP should be dropping, given a ceiling of
$35 million for UAL payments. If payments are going up and the “cap” is $35 million,
discretionary payments will go down.
Committee Member Collopy noted this was a one-time discussion for a “fresh start.”
Council Member Dixon stated the proposed “partial fresh start” would allow the City to
accomplish its other continuing goals and objectives while proactively addressing pension
costs.
Carl Cassidy thanked staff for their work and proactive efforts to manage pension costs. He
referred to PowerPoint Presentation Slide No. 4, Funded Status Trend and Projection. He also
called attention to the efforts of City of Newport Beach who have “stepped up” their
contributions to their pension obligations.
Chair O’Neill closed this portion of public comments, noting he would reopen public comments
after the Section 115 Trust presentation.
Finance Director Matusiewicz provided an overview of the Section 115 Trust investment option.
He noted the potential benefits come from flexibility and control at the local level. CalPERS is
very diversified, and it would be challenging for the City to design a portfolio, which would be a
direct hedge against the existing CalPERS portfolio.
Finance Committee Meeting Minutes
November 29, 2018
Page 7 of 11
Finance Director Matusiewicz further explained a Section 115 Trust could allow the City to
access a broader “universe” of stocks and bond investments. He would caution against holding
equities less than five years. Investment volatility could be reduced with a more conservative
mix of equities. He expressed concern regarding utilizing equities as a “rainy day” fund.
Committee Member Collopy inquired as to the liquidity of funds investment in a Section 115
Trust. Finance Director Matusiewicz stated funds placed into a Section 115 Trust could only be
utilized for pension payments.
Chair O’Neill confirmed the dollars invested by the City in a Section 115 Trust may only be
utilized for paying down pension obligations.
Committee Member Collopy thanked the Committee and staff for clarification.
Council Member Peotter provided an example of utilizing a Section 115 Trust for infrastructure
needs in the future; assuming higher return rates could be achieved. Finance Director
Matusiewicz stated the City of Mission Viejo utilized a similar strategy; however, a “swap” would
have to be conducted. Discussion ensued related as to how the “swap” could be conducted,
as infrastructure projects would not be directly funded. Finance Director Matusiewicz also
mentioned this strategy would likely double the fund administration costs.
Committee Member Collopy explained the City could place $10 million in a Section 115 Trust,
continue to make ADP payments, and continue to pay obligated pension costs. At a future date,
the City could decide to take funds from the Section 115 Trust to make ADP payments and use
the General Fund money that would have gone to the ADP payments towards funding an
infrastructure project.
Council Member Peotter mentioned that he does not recommend funding CalPERS any higher
than the average. He suggested getting up to 70% and not paying any more than the City is
obligated to pay. Council Member Peotter inquired as to consequences of municipal “default,”
and whether it will affect overall return on the fund. Julio Morales explained each City would
still receive their own return, as they are each considered their own “silo” from an accounting
perspective. Each City is “immunized” from the actions taken by other agencies. He further
noted UAL are now “fixed” payments due to the increase in retirees.
John Bartel responded if there were an agency that defaulted; it would be their own respective
unfunded liability, which would be “hit.” There would be no additional liability assumed by the
City of Newport Beach.
Committee Member Collopy stated that he does not envision large returns from a Section 115
Trust investment overall.
Committee Member Collopy expressed interest in taking the $8.8 million total and placing it in
a Section 115 Trust.
Committee Member Tucker does not want the General Fund to be diminished. It is the City
Council’s prerogative to determine where the $8.8 million will be allocated.
Committee Member Collopy inquired whether there are prohibitions related to contributing or
taking funds from a Section 115 Trust. John Bartel noted there are no legal prohibitions;
however, he recommends a pre-determined City plan for making and withdrawing funds from
the Section 115 Trust.
Committee Member Tucker stated the key question is whether the City should exercise a
Section 115 Trust effort to “potentially” receive a higher rate of return.
Finance Committee Meeting Minutes
November 29, 2018
Page 8 of 11
Committee Member Collopy does not support the use of Section 115 Trusts for ADP payments
and prefers their use as part of a General Fund reserve strategy.
Chair O’Neill stated it would take approximately 10 years of earnings prior to the City having
the ability to pay the ADP using interest on a Section 115 investment.
Committee Member Tucker stated the only reason to invest in a Section 115 Trust is
anticipation of a higher rate of return. He acknowledged more information is needed prior to
making any recommendation in this regard.
Committee Member Collopy stated the City has a reserve of $50 million and he considers it
generous. In his opinion, if the City maintained a reserve of $35 to $40 million, it could utilize
the approximately $15 million difference for other opportunities. However, he did note this
would come at a cost of flexibility and liquidity of the funds. He expressed a preference for
retaining flexibility and liquidity of the reserve.
Council Member Dixon inquired whether this was an appropriate method to save for
infrastructure projects, and acknowledged it is a different investment strategy as related to the
City’s past practice.
Committee Member Collopy stated ADP payments are discretionary. There is potential for
“refreshing” the reserve with the ADP payments and utilizing the earnings in the Section 115
Trust to make the ADP payments.
Committee Member Stapleton stated $10 million was a “high risk” assuming the City needs to
move forward and would prefer a “dollar cost averaging” method.
Committee Member Collopy stated if the City performs “dollar cost averaging” and a specific
payment plan, the difference between the 1.5% and the 7% will be very small. Finance Director
Matusiewicz stated that new money is currently invested at approximately 2.8%.
Chair O’Neill reopened public comments.
Carl Cassidy requested this item appear on a future agenda for further discussion and
expressed interest in whether the City can maximize investment returns utilizing Section 115
Trusts.
Noting there were no other members of the public who elected to speak on this item, Chair
O’Neill closed public comments.
MOTION: Chair O’Neill moved, and Council Member Dixon seconded, to recommend to the
City Council approval of Option 3A, the partial “fresh start,” as proposed in the staff report. The
motion carried 6 – 0, 1 vacancy.
There was no further action taken on this item.
B. CONSIDERATION OF HARBOR FEES FOR THE NEW HARBOR DEPARTMENT AND
SELECT RENTS
Summary:
The Harbor Commission reviewed, and recommended for Council adoption, updates to harbor
fees and changes to select fair-market rent categories. Staff will summarize the various
updates for Committee input.
Recommended Action:
Staff welcomes comments and recommendations related to the proposed Harbor Department
fee and rent updates. Based upon Finance Committee input, staff will bring the proposed
recommendations to the City Council for formal action.
Finance Committee Meeting Minutes
November 29, 2018
Page 9 of 11
A staff report was given by Senior Accountant/Revenue Division Theresa Schweitzer related
to the Harbor Department Fees and Select Rents. A PowerPoint Presentation was displayed.
The City recently began managing Harbor Operations. A fee study analysis and fair market
analysis of rents were conducted utilizing consultants and in-house staff. The proposed fees
and rents were reviewed by the Harbor Commission who recommended approval with minor
changes. The proposal included various “clean-up” fees, fines, and rents. Overall, the study
noted a potential revenue increase to the City of $458,354.
Chair O’Neill stated fees, fines, and rents are governed by City Council-adopted ordinances.
The City Council is the only legislative body that can waive or reduce fees, fines, and rents, as
exemplified by the Junior Guards program. The Finance Committee has limited jurisdiction over
this process; however, it is important for them to receive informational updates in the context
of their responsibility to review the proposed budget each year.
Committee Member Tucker does not see the Finance Committee as the appropriate party to
determine fees. He is interested in whether the City is recovering costs for service
Chair O’Neill stated this item was mainly for general review and the City Council will determine
the Finance Committee’s role in reviewing fees, fines, and rents.
Council Member Dixon shared Committee Member Tucker’s sentiment in whether the City is
recovering costs for services in general. It is of interest to the Finance Committee to review
these types of items related to how costs are determined and apportioned.
Committee Member Stapleton stated staff provided a very in-depth review and study of this
item. He inquired whether the large vessel study has been completed.
Lauren Wooding Whitlinger stated the Harbor Department has made a recommendation related
to large vessels.
Committee Member Stapleton noted the City would need to readjust fees for cost recovery.
Chair O’Neill acknowledged each City Commission and Committee might have items that may
warrant review by the Finance Committee.
Chair O’Neill opened public comments.
Carl Cassidy attended the Harbor Commission meeting when this matter was addressed and
acknowledged the in-depth and professional work conducted by staff and the Harbor
Commission.
Jim Mosher expressed concerns that there have been changes to the proposed study
subsequent to its approval by the Harbor Commission, which are now being forwarded to
Council and recommended clean-up of minor details within the study. He referenced charges
for “racks” and requested clarification on the cost difference between empty racks and those
with vessels stored on them. He noted the proposed study lacks clarity, including the listing of
the interval of assessed fee charges (per night / per year / per day). He also requested
clarification of the $100 appeal flat rate, noting it is not an hourly fee.
Chair O’Neill questioned whether the proposed dingy fee is $50 per night to store.
Theresa Schweitzer clarified the dingy storage fee is currently set at $50 per night.
Lauren Wooding Whitlinger mentioned the proposed fee is for vessels left at the public pier and
acknowledged there were various other “clean-up” items in the study. Discussion ensued
Finance Committee Meeting Minutes
November 29, 2018
Page 10 of 11
regarding the proposed rate based on on-shore guest mooring when a party has not returned
to pick up their property. This is based upon 0.625 per linear foot/per night and is more
comparable to the on-shore mooring fee.
Noting there were no other members of the public who elected to speak on this item, Chair
O’Neill closed public comments.
MOTION: Council Member Dixon moved, and Council Member Peotter seconded, to support
the proposed updates to harbor fees and changes to select fair-market rent categories as
presented by staff and recommend the matter to the City Council for their consideration. The
motion carried 6 – 0, 1 vacancy, 1 abstention.
There was no further action taken on this item.
C. WORK PLAN REVIEW
Summary:
Staff has provided the Committee agenda topics scheduled for the remainder of the calendar
year.
Recommended Action:
Receive and file.
Chair O’Neill suggested a comprehensive review of Section 115 Trusts and preparation for the
Finance Committee’s review of the upcoming Fiscal Year City budget at the January/February
2019 meetings. He requested topics from the Finance Committee related to these items.
Additionally, he requested an item be placed on an upcoming agenda related to a request from
the Beacon Bay residents to review and reevaluate their lease.
Committee Member Tucker requested an informational agenda item regarding “accrued
liability,” including development of actuarial numbers.
Chair O’Neill noted the next Finance Committee meeting is scheduled for December 13, 2018.
The City Council will review Finance Committee appointments in January 2019.
Marlene Burns will send an email to Finance Committee members regarding the 2019 meeting
dates.
Chair O’Neill opened public comments. Noting there were no members of the public who
elected to speak on this item, Chair O’Neill closed public comments.
The item was unanimously received and filed by the Committee.
There was no further action taken on this item.
VI. FINANCE COMMITTEE ANNOUNCEMENTS ON MATTERS WHICH MEMBERS WOULD LIKE
PLACED ON A FUTURE AGENDA FOR DISCUSSION, ACTION OR REPORT (NON-
DISCUSSION ITEM)
VII. ADJOURNMENT
The Finance Committee adjourned at 5:06 p.m. to the next regular meeting of the Finance
Committee.
Filed with these minutes are copies of all materials distributed at the meeting.
Finance Committee Meeting Minutes
November 29, 2018
Page 11 of 11
The agenda for the Regular Meeting was posted on November 21, 2018, at 1:29 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:
___________________________________ _____________________
Will O’Neill, Chair Date
Finance Committee
CITY OF NEWPORT BEACH
FINANCE COMMITTEE
STAFF REPORT
Agenda Item No. 5A
December 13, 2018
TO: HONORABLE CHAIRMAN AND MEMBERS OF THE COMMITTEE
FROM: Dan Matusiewicz, Finance Director
949-644-3123 or danm@newportbeachca.gov
SUBJECT: REVISIONS TO CITY COUNCIL POLICY F-14 – AUTHORITY TO
CONTRACT
ABSTRACT:
The purpose of Council Policy F-14 is to establish authority for City contracts, such as
service contracts and purchase orders, which collectively encompass the majority of the
City’s procurement activities. It also provides clarity in areas where the state and federal
statutes may be silent or ambiguous. The Finance Department recently conducted a
review of F-14 with the overall objective to determine its relevance to current and best
practices, trends, and current law. After soliciting input from Department Directors and
consulting with the City Attorney, staff is proposing numerous changes to the policy.
RECOMMENDATION:
Staff welcomes input and recommendations on the proposed revisions to Council Policy
F-14. Finance staff will bring Committee recommendation, if any, to the City Council for
consideration.
DISCUSSION:
Background
Section 1106 of the City’s Charter establishes a centralized purchasing system for all City
departments. Adoption of a centralized procurement model ensures efficient procedures
for the purchase of goods, materials, equipment and services at the most advantageous
financial cost and operational benefit to the City.
Various statutes such as the California Government Code, Public Contracts Code and
Uniform Commercial Code provide the framework of rules and regulations regarding
procurement for local, state and federal public agencies. Each of these statutes may apply
in different purchasing scenarios. For example, the Public Contracts Code determines
Revisions to City Council Policy F-14 – Authority to Contract
December 13, 2018
Page 2
how capital improvement bids are to be conducted but the use of federal or state grant
funds trigger purchasing procedures from the Code of Federal Regulations. F-14 provides
clarity in areas where these statutes may be silent or ambiguous with regard to the City’s
contracting activities.
Whereas the City Charter establishes contracting authority at the City Council level, F-14
delegates certain authority to the City Manager and through him or her, to the Department
Directors. The policy defines this contracting authority, based on amount, and mandates
that the City Council review and approve all contracts in excess of $120,000. As part of
the delegation of authority, F-14 also authorizes the City Manager to award and sign
contracts up to $120,000. Department Directors may award and sign contracts up to
$75,000. The policy also establishes procedures and authorization limits regarding
contract amendments at the City Manager and Department Director level.
As part of the policy review, staff compared the City Manager’s signature authority of
$120,000 to that of other City Managers of agencies throughout Orange and Los Angeles
County. The table below provides this comparison, using the basis of the signature limit
as a percent of each respective agency’s General Fund operating budget, sorted from
highest percent of general fund operating budget to lowest.
AGENCY
POPULATION
CITY
MANAGER
AUTHORITY
GENERAL FUND
OPERATING
BUDGET
% OF GENERAL
FUND OPERATING
BUDGET
Westminster 91,565 $175,000 $61,064,608 0.2866%
Aliso Viejo 51,424 $25,000 $19,214,825 0.1301%
Fountain Valley 56,529 $50,000 $42,659,606 0.1172%
Seal Beach 24,440 $30,000 $30,662,900 0.0978%
Manhattan Beach 35,741 $50,000 $75,689,871 0.0661%
Laguna Niguel 65,328 $25,000 $41,123,508 0.0608%
Newport Beach 86,688 $120,000 $208,745,822 0.0575%
Mission Viejo 96,396 $30,000 $58,365,314 0.0514%
Irvine 266,122 $100,000 $199,702,369 0.0501%
Laguna Beach 23,190 $30,000 $63,790,000 0.0470%
Huntington Beach 200,652 $100,000 $228,371,521 0.0438%
Long Beach 470,130 $200,000 $537,585,679 0.0372%
Anaheim 351,043 $100,000 $326,452,201 0.0306%
Pasadena 142,059 $75,000 $246,060,000 0.0305%
Orange 140,504 $30,000 $111,631,193 0.0269%
Torrance 147,195 $50,000 $204,246,000 0.0245%
Beverly Hills 34,484 $50,000 $221,803,085 0.0225%
Garden Grove 174,858 $50,000 $226,243,800 0.0221%
Santa Monica 92,478 $80,000 $373,662,732 0.0214%
Costa Mesa 112,822 $25,000 $137,657,668 0.0182%
Santa Ana 334,217 $25,000 $264,561,085 0.0094%
Redondo Beach* 67,867 $0 $92,383,776 N/A
* The City of Redondo Beach requires that their Council approve all contracts, regardless of amount.
Revisions to City Council Policy F-14 – Authority to Contract
December 13, 2018
Page 3
The analysis shows that while the signature authority of $120,000 is among the three
highest amounts in this comparison, when calculated in proportion to the City’s General
Fund operation budget, the amount falls closer to the median of compared agencies. As
a result, staff does not recommend any changes to the City Manager’s authority amount
at this time.
In addition to authorization limits, F-14 also identifies the various contract types that the
City may enter into and if applicable, special contracting and procurement provisions or
overriding statues that may apply to these contract types. Inclusion of these procedures
in F-14 places the City in compliance with various local, state and federal guidelines on
public procurement.
Whereas F-14 provides the policy and procedure framework and authority for contracting
and purchasing, there are also Administrative Procedures referenced through the Policy.
Approved by the City Manager, the Administrative Procedures to F-14 elaborate upon the
Policy and provide detailed procedural instructions including how to conduct formal and
informal bidding, limits on contract amendments, bid protest procedures, internal contract
routing procedures, bid award criteria and restrictions on the aggregation of multiple
contracts. During this review process, some of these items in the current version of F-14
were transferred to the Administrative Procedures. Updates to the Procedures will take
place after the latest amendments to F-14 have been approved.
Proposed Changes to Policy F-14
In summary, staff is proposing to make various changes to Council Policy F-14. Only
substantive changes are summarized below.
1. Under General Authority to Enter Into Contracts, language was added to authorize
the City Manager, after consultation with the City Attorney, Risk Manager and
Department Directors, if necessary, to make exception to the City’s standard
contract terms. This allows the City Manager to weigh risks involved with modifying
the City’s standard contract terms against operational considerations.
2. Clarification was added to include the City Attorney and City Clerk under the
authorization limits granted to Department Directors. The current policy does not
specifically identify the City Attorney and City Clerk’s authorization limit, even
though in practice these two offices have the same authorization limit as
Department Directors.
3. The policy was updated to enable the Human Resources Director to enter into
contracts to resolve claims, litigation and other legal disputes. The authorization
limit for these contracts is commensurate with the Department Director limit of
$75,000.
Revisions to City Council Policy F-14 – Authority to Contract
December 13, 2018
Page 4
4. Sections regarding contract amendments were condensed and certain terms were
defined for clarity. The current version of F-14 authorizes the City Manager to
amend contracts approved by the City Council, so long as the amendment does
not increase the total contract amount by more than $120,000, or the amended
contract is not more than 125% of the original contract amount. The amounts and
percentages described herein remain the same in the proposed changes, but the
language was amended to make this section more concise.
5. Staff recommends fee-based recreation instructor contracts carry a maximum term
of five years. The current policy limits these contracts to two years and the
recommendation for the term increase is to increase operational and contracting
efficiency, and to put these contracts in line with the City’s on-call contracts. The
Recreation & Senior Services Department typically enters into 120 of these
contracts on an annual basis.
6. Various contract types were added to the section entitled Types of Contracts and
Method of Award. Purchase Orders were formerly addressed in a previous iteration
of Council Policy F-5 (the City’s purchasing policy for goods, equipment and
materials). In 2016, the City Council incorporated F-5 into F-14 because of their
similarities and the addition of Purchase Orders into F-14 serves to bind them to
the same standards as other contract types. Additionally, on-call contracts and
emergency contracts were separated from being described in one section because
they have different applications.
7. Professional service contracts with former City Council members are
recommended to be subject to the same requirements and receive the same
consideration as contracts with former City employees. When not more than five
years has passed since a former City Council member or City employee has left
service with the City, the City Council shall review and approve contracts for
services with these parties.
8. Upon consulting with other government agencies, it was discovered that a common
practice is for services to be transacted via a Purchase Order instead of a service
contract. It is staff’s recommendation to adopt this practice and the proposed
changes provide for clearly defined parameters based on expenditures per vendor,
per fiscal year that shall be adhered to when procuring services using a Purchase
Order. The objective of this practice is to enable departments to secure low-dollar
services in a timely manner and to enable staff to conduct transactions with smaller
businesses that may not have the capacity to review or process service contracts.
Revisions to City Council Policy F-14 – Authority to Contract
December 13, 2018
Page 5
Staff welcomes input and recommendations on Council Policy F-14. Finance staff will
bring Committee recommendation, if any, to the City Council for consideration.
/s/ Anthony Nguyen
_____________________________
Anthony Nguyen
Purchasing Agent
Attachment:
A. Council Policy F-14 (redline)
ATTACHMENT A
COUNCIL POLICY F-14 (REDLINE)
F-14
AUTHORITY TO CONTRACT
Purpose and Limitation
The purpose of this policy is to set out the City’s policy establishing authority for City contracts.
This policy applies to all contracts, whether entered into through standard, emergency, or other
procedures, including, but not limited to, professional services, purchase requisitions, acquisition
of goods, supplies, equipment, and materials, settlements, right of entry agreements, cost sharing
agreements, joint defense agreements, cooperative agreements, reimbursement agreements, grant
agreements, audit services, legal and investigative services, independent instructional and
recreation services, former employee services, on-call and emergency services, temporary labor
services, training services, public works projects, and public property maintenance, installation,
custodial, and repair services.
General Authority to Enter Into Contracts
Provisions of the Charter govern the methods through which the City may be bound by contracts.
Under the Charter, all contracting authority, with the exception of services rendered by a person
in the employ of the City at a regular salary, rest with the City Council. The Charter states that
the City shall not be bound by any contract or amendment thereto, unless the same shall be made
in writing, approved by the City Council and signed on behalf of the City by the Mayor and City
Clerk or by such other officer or officers as shall be designated by the City Council (Charter § 421).
The City Attorney shall approve the form of all contracts made by or amendment thereto and all
bonds given to the City, endorsing his or her approval thereon in writing (Charter § 602(e)).
The City Council may, however, by ordinance or resolution authorize the City Manager to bind
the City, with or without a written contract, for the acquisition of equipment, materials, supplies,
labor, services or other items included within the budget approved by the City Council, and may
impose a monetary limit upon such authority.
The City Manager has final authority to approve any contract within the City Manager’s approval
limit and may make exceptions to the City’s standard contract terms, including but not limited
to, insurance and indemnification requirements, based on operational considerations and
weighing the particular risks involved. When deciding whether to modify standard contract
terms, the City Manager shall consult with the City Attorney, Risk Manager, and Department
Directors, as necessary. This authority shall not be delegated below the Assistant City Manager
level.
Contracts may not be written to circumvent any of the authority limits described herein.
Delegation of Authority to Enter Into and Amend Contracts
The City Council hereby delegates its authority to contract to the City Manager and through him
or her to the Assistant City Manager, Department Directors, and to the City Attorney as set out below.
All formalities required under the provisions of the Charter shall be applied to these contracts. As
such, the City Attorney shall review, approve and sign all such contract documents prior to
contract award and execution and the City Clerk shall sign all such contracts attesting to their
F-14
being entered into by the City. Additionally, the City Manager shall adopt and enforce
administrative procedures that assure all contracts are: (1) entered into at a reasonable, fair and
competitive price to the City; (2) all necessary formalities are followed and the requirements of
federal, state, and local laws, including Council policies, are met; (3) best accounting practices are
followed; and (4) the contracting process of the City is open and transparent, and provides
accountability.
A. Authority to Enter into Contracts
The authority to enter into original contracts is delegated as set out below.
1. The City Manager.
The City Manager is authorized to award and sign all contracts and agreements for
services or purchase requisitions for the acquisition of goods, materials or
equipment, without prior Council approval, in an amount not in excess of $120,000,
provided funding for the contract was approved by the City Council as part of the
annual approved Department budget. , authorized budget amendment, City Council
action or is available in an applicant deposit account. With the exception of grants
and donations, which are covered in City Council Policies F-3, F-25 and B-17, the City
Manager is authorized to sign all contracts without prior Council approval where the
City is receiving or expending an amount not in excess of $120,000. This authority
shall not be delegated below the Assistant City Manager level.
2. Department Directors.
Contracts for Services
Department Directors, including the City Attorney and City Clerk, are authorized to
award and sign contracts and agreements for services or purchase requisitions for the
acquisition of goods, materials or equipment, without prior City Manager or Council
approval, in an amount not in excess of $75,000, provided that the services and funds
were approved by the City Council or City Manager as part of the annual approved
Department budget., authorized budget amendment, City Council action, or are
available in an applicant deposit account. This authority may not be delegated below
the Department Assistant or Deputy Director level.
Contracts or Purchase Requisitions for the Acquisition of Goods and Materials
Department Directors, including the City Clerk and the City Attorney, are
authorized to award and sign contracts or purchase requisitions for the acquisition
of goods and materials, with prior City Manager or Council approval, in an amount
not in excess of $75,000 provided that the funds were approved by the City Council
as part of the annual Department budget, authorized budget amendment, City
Council action or are available in a deposit account.
3. City Attorney.
F-14
The City Attorney is authorized to award and sign contracts for all services for
outside counsel, investigators, and experts related directly to and necessary for
prosecution and defense of pending litigation as defined in the Brown Act, and for
services for outside counsel, investigators, and experts necessary to address other
pending or potential legal claims or legal issues so long as funds for outside counsel,
investigators, experts and related legal services were approved by the City Council
as part of the approved annual budget. The City Attorney shall keep Council
informed regarding any such expense that exceeds $120,000 on not less than a
quarterly basis and shall seek budget updates, if needed, within a timely fashion.
4. Human Resources Director.
The Human Resources Director shall have authority to enter into contracts to resolve
claims, litigation and other legal disputes where the City is receiving or expending
an amount not in excess of $75,000. This authority may not be delegated below the
Department Deputy Director or Risk Manager level.
B. Authority to Amend Contracts
If circumstances arise that were are not reasonably foreseeable by the parties at the time of
contracting which make extra work or material necessary for the proper completion of the
service originally contracted for, a contract amendment and corresponding increase in total
contract amount may be necessary. Under those circumstances, the City Manager, and
Department Directors, City Clerk and City Attorney are authorized to amend a contracts
as set out below. For purposes of this policy, "total contract amount" shall be defined as the
total consideration paid over the term of the agreement, including any previous
amendments to the contract. “Original contract amount” shall be defined as either the
amount of compensation agreed upon when the contract was first entered into or the
amount of compensation last most recently approved to by the City Council by
amendment, whichever is greater.
1. City Manager.
Contracts within the City Manager’s Contracting Authority
The City Manager may sign and award any contract amendment, including but not
limited to, amendments to extend the term of a contract, so long as the total contract
amount as amended does not exceed $120,000.
Contracts approved by City Council
The City Manager may sign and award a contract amendment on a contract
approved by the Council if the total cost will not exceed 125% of the original contract
amount, or increase the original contract by more than $120,000, whichever amount
is less. Otherwise the City Manager may sign and award a contract amendment,
including but not limited to, amendments to extend the term of a contract, so long
as the total contract amount as amended does not exceed $120,000.
The City Manager may sign and award any contract amendment, including but not
limited to, amendments to extend the term of a contract, so long as the total contract
F-14
amount does not exceed 125% of the original contract amount or the original contract
amount plus an additional $120,000, whichever amount is less.
2. Department Directors.
2. Contracts within the Contracting Authority of the Department Director
The Department Director overseeing the contract may sign the contract amendment
if that amendment will not cause the total contract amount to exceed $75,000.
The Department Director, including the, City Clerk, or City Attorney, who entered
into the contract, or whose department is designated as the contract administrator in
the contract, may sign and award any contract amendment, including but not limited
to, amendments to extend the term of a contract, so long as the total contract amount
as amended does not exceed $75,000.
3. Amendments in Cases of Possible Work Stoppage or Undesirable Delay.
In certain situations, the City Manager and the Department Director in charge of the
contract may determine that ana contract amendment may beis needed that will
cause the total contract amount to exceed the City Manager’s amendment
signaturesigning authority, and that the timing is such that a work stoppage or
other undesirable consequence will result if approval of the change is delayed until
the next City Council meeting. In those these situations, the City Manager may
approve an amendment that increases the total contract amount up to 150% of the
original contract amount. HoweverWithin twenty-four (24) hours, the City
Manager will shall notify allthe City Council Members of any such amendment.
individually if this situation develops, and if any individual Council Member
objects to the increase, a special meeting of the City Council will be called to address
the issue
4. Amendments Necessary to Address Emergency Situations
In event of emergency work that requires an amendment to an existing contract,
the emergency contracting policy outlined below may be followed.
Types of Services Contracts and How toMethod of Award Them
It is recognized that by their nature, service contracts cannot always be awarded as a result
of a competitive bid process. However, competitive proposals should be obtained whenever
possible before resorting to negotiated awards.
A. Professional Services Consultant SelectionContracts
Professional consultant services differ from other services in that they are of a
professional nature, and due to the ethical codes of some of the professions involved, as
well as the nature of the services provided, do not readily fall within the competitive
bidding process. Professional consultants should be individually selected through a
qualifications-based selection process for a specific project or service on the basis ofbased
on demonstrated competence and qualifications for the types of services to be performed
F-14
and with the objective of selecting the most qualified consultant at a fair, reasonable and
verifiably appropriate cost. The procedures for achieving this goal shall be adopted and
applied by the City Manager in the Administrative Procedures Manual.
This section shall include, but not be limited to, procurements for services in the following
fields: Engineering (civil, mechanical, electrical, structural, traffic, geotechnical, etc.);
Building plan review and grading plan review and/or inspection services; Architecture;
Landscape Architecture; Construction Project Management Firms; Environmental;
Planning; Economic Analysis; Property Appraisals; Land Surveying; Financial Services;
Data Processing Services; Legal Services not otherwise authorized in the section titled
Authority to Enter into Contracts, A (3), of this policy; and Training and Temporary Labor
Services.
This policy shall include, but not be limited to, services in the following fields:
Engineering (civil, mechanical, electrical, structural, traffic,
geotechnical, etc.)
Building plan review and grading plan review and/or inspection services
Architecture
Landscape Architecture
Construction Project Management Firms
Environmental
Planning
Economic Analysis
Property Appraisals
Land Surveying
Financial Services
Data Processing Services
Legal Services not otherwise authorized in the section titled Authority to Enter into
Contracts, A (3), Section A(3) of this Policy
Training and Temporary Labor Services
B. General Services Contracts (Non-Professional)
Non-Professional Services Contracts that are not public works under Charter Section 1110,
are used where services are not strictly professional in nature but where such services are
F-14
needed by the City. Examples include, but are not limited to janitorial services, printing
services, closed circuit television services, steam cleaning, window washing and refuse
collection.
The City shall select services contractors though a Request for Proposal or a Request for
Bid process, whichever serves the City’s greater benefit. Contracts through a Request for
Bid process shall be awarded based solely on pricing and minimum qualifications to
determine the most responsive and responsible bidder. Contracts through a Request for
Proposal process shall be awarded based on both qualifications and pricing to determine
the best value to the City.
General Services Contracts are not strictly professional in nature, but arise where operations,
repair, installation, and maintenance services, or other services of a non- professional nature, are
provided to the City. Contracts that typically fall into this category are for repair and maintenance
of roadways, landscape maintenance, repair and maintenance of City facilities, and other such non-
professional services.
Some General Service Contracts may be considered “public works” under the Charter and, if so,
the work covered by the General Service Contract shall be awarded in accordance with the laws
governing the award of “public works” contracts. If not considered a “public work” under the
Charter, the City shall select general services contractors though a Request for Proposal or a
Request for Bid process, whichever serves the City’s greater benefit, based on each contract or
procurement. Contracts through a Request for Bid process shall be awarded based solely on pricing
and minimum qualifications to determine the most responsive and responsible bidder. Contracts
through a Request for Proposal process shall be awarded based on qualifications and pricing in
order to determine the best value to the City.
C. Maintenance and Repair Contracts
Maintenance and Repair Contracts are used where services are not strictly professional in
nature but where such maintenance and repair services extend the life of City assets,
facilities and/or infrastructure. Examples include, but are not limited to: pavement
patching, plumbing and facilities maintenance services.
If a contract for these types of services is under $120,000 the City shall select services
contractors though a Request for Proposal or a Request for Bid process, whichever serves
the City’s greater benefit based on the service to be provided. Contracts through a Request
for Bid process shall be awarded based solely on pricing and minimum qualifications to
determine the most responsive and responsible bidder. Contracts through a Request for
Proposal process shall be awarded based on both qualifications and pricing to determine
the best value to the City.
Service contracts for maintenance or repair over $120,000 are considered a Public Work
and thus need to be requisitioned as a Public Works Contract.
C.D. Capital Improvement ProgramPublic Works Contracts
Contracts for Public Works where the total expenditures for the project exceed $120,000,
shall be awarded consistent with the provisions of Charter Section 1110 and Chapter 15.75
F-14
of the Newport Beach Municipal Code and relevant provisions of the California Public
Contract Code. Public Works contracts are used for the construction or improvement of
public buildings, works, streets, drains, sewers, utilities, parks or playgrounds, and every
purchase of supplies or materials for any such project, as well as all projects for the
maintenance or repair of such facilities intended to extend their useful life.
Contracts for public works shall be awarded consistent with the provisions of Charter
Section 1110 and Chapter 15.75 of the Newport Beach Municipal Code as updated and
amended from time to time. Under the terms of City Charter Section 1110, contracts for
public works that exceed $120,000 in total expenditures must be awarded by the City
Council through the conducting of a formal bidding process. At its option, the City Council
may direct that such contracts be signed by the Mayor, the City Manager or the Public
Works Director.
D.E. Procurements and Contracts Involving Federal or Pass-Through Funding
Procurements expending funds from federal grants or awards received directly by the City
or from a pass-through agency such as the State of California, must comply with the
provisions of Title 2 of the Code of Federal Regulations (“CFR”) §200.318 through §200.326.
To ensure the City’s adherence to the Federal guidelines related to these procurements
and contracts, the City Manager has adopted procurement procedures for such projects in
the Administrative Procedures Manual.
E.F. Independent Instructional and Recreation Contractors
Where contractors are paid for services from fees collected for the services provided,
Department Directors are authorized to award and sign contracts with independent
contractors for instructional, educational, cultural, or recreational purposes where the fees
paid by the City are based upon either a percentage of fees collected by City for a program
or on a flat rate basis for tasks performed by the contractor. Contracts with such
independent contractors may be up to two five (52) years in duration and must include a
termination clause granting the City the right, at its sole discretion and with or without
cause, to terminate the contract at any time by giving seven (7) calendar days’ prior written
notice to the Contractor.
Should fees paid to any contractor exceed $75,000 during the term of the contract, the
Department Director shall provide written notice to the City Manager identifying the
program and, independent contractor and anticipated total fees to be paid. The City
Manager shall give written notice to the City Council should fees paid exceed $120,000.
F.G. On-Call or Emergency Contracts for Services
Under limited circumstancescircumstances, the use of formal contracting procedures to procure
services is not an effective or an efficient use of City resources. The following contracting
procedures are authorized for entering into on-call agreements for services as needed and for
procuring services in times of emergency.
1. On-Call Agreements.
The City Manager and Department Directors are authorized to enter into on- call
F-14
agreements for obtaining services on an as needed basis, including, but not limited to,
professional services, and repair and maintenance services and emergencies, that are
needed from time to time where the size of the job does not warrant the expense of entering
into individual agreements for each service. On-call agreements must be within the
authority of the individual entering into the agreement on behalf of the City and the initial
term cannot exceed three five (53) years. The City Manager is authorized to extend the term
of an on-call agreement for up to six (6) months if work has been authorized or encumbered
during the initial term but not yet completed. Selection of consultants and contractors for
award of on-call agreements shall be consistent with the award procedures for the type of
contract being awarded as set out above. Procedures for entering into on-call agreements
shall be prescribed by the City Manager in the Administrative Procedure Manual.
H. Emergency Contracts
If a contract for services is necessary under the provisions of Newport Beach Municipal
Code Section 2.20.020, the City Emergency Procedures shall be followed.
If a contract for services is entered into in times of urgent necessity under the authority of
Newport Beach City Charter Section 1110, and If the contract amount exceeds the signing
authority of the City Manager relevantor Department Director or City Manager as authorized
in this pPolicy, then that contract shall be brought to the City Council at its next regularly
scheduled meeting for review or authorization, if the contract constitutes a Public Works,
in accordance with Charter Section 1110. .
Whenever possible, the City shall enter Emergency On-Call AgreementsContracts with
contractors or consultants who can be relied upon to assist the City in advance of any actual
emergency.
Emergency On-Call AgreementsContracts, that are entered into prior to an emergency,
shall be submitted to Council for approval after being reviewed and approved by the Office
of the City Attorney. After the Emergency On-Call AgreementContract is approved,
services provided on an emergency basis under an Emergency On-Call
AgreementContract may be retained by oral commitment of the City Manager (or, in the
case of an emergency described by Municipal Code Section 2.20.020, the Director or
Assistant Director of Emergency Services), to be memorialized in a Letter Agreement
between the parties as soon as possible thereafter.
When a written contract has been entered into in order to address an emergency, a copy of
the written contract shall be provided to the City Clerk as soon as possible.
G.I. Contracts with Former Council Members and City Employees
When not more than five (5) years has passed since a person who is a former Council
Member or City employee has left service with the City:
1. All professional services contracts with former Council Member or City
employees or temporary employment contracts with retiring or former City
employees shall require approval of the City Council; and
F-14
2. City Council approval shall also be required for professional services
contracts with a corporation or other business entity owned or operated by a
former Council Member or City employee or that employs a former Council
Member or City employee.
J. Purchase Orders for Goods, Materials or Equipment
Departments shall submit requests for the purchase of goods, materials or equipment
through a Purchase Requisition that is approved by the proper approval authority
described in this policy, based on the purchase amount.
The Finance Department shall conduct the necessary and proper bidding or proposal
process for each purchase request and issue Purchase Orders to procure goods, materials
or equipment.
K. Purchase Orders for Services
While typically used for the procurement of goods, materials or equipment, Purchase
Orders may be used for services, subject to the following conditions:
1. Purchase Orders for services, may be issued to a vendor not in excess of
$7,500 per Purchase Order and $15,000 per vendor, per fiscal year.
2. The $7,500 per Purchase Order and $15,000 per vendor, per fiscal year limit
shall apply to each Department separately.
I. Commodities and Unique Services
Certain commodities and service types are not subject to traditional procurement and
bidding procedures. The City Manager shall prescribe in the Administrative Procedures
Manual procedures to ensure that pricing involved in these transactions is competitive.
2.
General Procedures
A. Contract Retention
The City Clerk shall retain all original executed contracts in accordance with the
City’s current adopted Records Retention Schedule. Contracts shall be posted into
the City’s electronic document databasedata base in order to maintain transparency
in contracting.
F-14
B. Insurance
All contracts shall be accompanied by proof of the appropriate level of insurance at
the time of execution. The insurance level required shall be in accordance with the
City’s published Contract Templates (or as otherwise approved by the City
Manager or City’s Risk Management DivisionRisk Manager).
C. Reporting
At least once annually, the City Manager shall report to the Council the summary
of all contracts entered into by the City Manager and Department Directors. The
summary shall include the vendor, the department responsible that will oversee the
contract, the purpose of the contract, and the contract amount.
Future Amendments to Policy
Any future changes in the provisions of this pPolicy shall be made by resolution of
the City Council.
History
Adopted F-14 – 09-22-1969 (Purchase Authority for Goods & Materials)
Reaffirmed F-14 - 03-09-1970
Reaffirmed F-14 - 02-14-1972
Amended F-14 – 11-11-1974
Amended F-14 – 11-24-1975
Amended F-14 – 12-08-1975
Amended F-14 – 11-24-1986
Amended F-14 – 05-26-1987
Adopted F-14 – 01-24-1994 (new F-14) (Authority for Contracts)
Amended F-14 – 01-24-1994 (old F-14) (changed to F-5)
Amended F-5 – 02-26-1996
Amended J-1 – 11-10-1997 (Contracts with Former Employees)
Amended J-1 – 03-09-1998
Amended J-1 – 03-22-1999 (changed to F-20)
Amended F-5 – 03-14-2000
Amended F-20 – 04-08-2003
Amended F-14 – 04-13-2004
Amended F-5 – 11-22-2005
Amended F-14 – 05-09-2006
Amended F-14 & F-5 – 01-25-2011
Amended F-14 – 05-12-2015
Amended F-14 – 02-23-2016 ( incorporating F-5 & F-20 and renaming “Authority to Contract”)
Amended F-14 – 06-26-2018
CITY OF NEWPORT BEACH
FINANCE COMMITTEE
STAFF REPORT
Agenda Item No. 5B
December 13, 2018
TO: HONORABLE CHAIRMAN AND MEMBERS OF THE COMMITTEE
FROM: Finance Department
Dan Matusiewicz, Finance Director
949-644-3123, danm@newportbeachca.gov
SUBJECT: REVIEW OF SELECT FINANCIAL POLICIES
SUMMARY:
The Finance Committee is charged with a variety of tasks including, but not limited to,
reviewing and monitoring events and issues that may affect the financial status of the City
and making recommendations to the City Council regarding amendments to financial and
budgetary policies. A subcommittee of the Finance Committee was appointed to review
and recommend changes if deemed necessary to the following financial policies:
F-3 Budget Adoption and Administration
F-4 Revenue Measures
F-7 Income Property
F-8 City Travel Policy Statement
F-11 Custody and Disposal of Controlled Property
F-13 Distribution of Public Information in Municipal Services Statements and Business
License Renewals
F-15 External Financial and Compliance Reporting, Disclosure & Annual Audits
F-25 Grant Administration
F-28 Facilities and Harbor and Beaches Financial Planning Programs
Subcommittee member Larry Tucker met with staff to help inform the nature and extent
of the proposed changes.
RECOMMENDED ACTION:
Review the draft changes to the select financial policies and recommend further changes
as needed for submission to the City Council for final approval.
Review of Select Financial Policies
December 13, 2018
Page 2
DISCUSSION:
Most of the changes are minor in nature. Other changes made by staff and members of
the subcommittee are proposed to align policy with current practices. While staff is in
agreement with the majority of the changes, staff respectfully asks for reconsideration of
the following changes proposed by the subcommittee.
Policy F-3 – Budget Adoption and Administration (Section C.)
We recommend removal of the reference relating to the occurrence and time of the joint
budget meeting with the Council and Finance Committee to provide future elected and
appointed officials the flexibility to determine the timing and necessity of such meetings.
Memorializing current practices would limit future flexibility. The removal of the
recommended policy provision does not limit the continuance of such joint meetings.
Staff’s recommended language:
The City Council shall hold as many budget study sessions as it deems necessary. The
Finance Committee shall make a recommendation to the City Council on the Budget
Detail. Such recommendation need not include any recommendation on items on the
Budget Checklist unless the Finance Committee is specifically asked to do so by the City
Council.
Policy F-4 – Revenue Measures (Section E.)
We recommend the removal of the proposed requirement that every new or revised
revenue measure must go to the Finance Committee. Some revenue measures such as
establishing a street vending permit fee have little to no fiscal impact. Taking revenue
measures with little fiscal impact to the Finance Committee is administratively
cumbersome and time-consuming (slowing the time of approval by the City Council).
Staff always aligns fees with the actual costs of providing services. In addition, based on
comments made by members of the Finance Committee on November 29, there appears
to be consensus among Finance Committee members that cost of services recovery fee
updates should be the sole purview of City Council.
Therefore, the following language is proposed instead:
The Finance Department, with the assistance of the initiating Department, shall present
any new or revised revenue measures with an annual fiscal impact exceeding $120,000
to the Finance Committee for review, excepting cost of services recovery fee updates.
Any revised fees or new revenue measures will be referred to the City Council for review
and action. The Finance Department shall endeavor to consult with private individuals,
business groups and individual business persons on the economic impact any
recommended revenue measure changes may have on them. Their response, the
Review of Select Financial Policies
December 13, 2018
Page 3
estimated costs to the City in providing the product or service and the recommended
revision to the revenue measure shall be included in the information forwarded to the City
Council.
The proposed financial policy revisions and proposals are prudent tools for the
governance of the City’s financial resources. With the Committee’s comments and
approval, Finance staff will bring Committee recommendations to the City Council for
consideration and approval.
Prepared and Submitted by:
/s/ Steve Montano
_____________________________
Steve Montano
Deputy Finance Director
Attachments:
A. F-3 Budget Adoption and Administration
B. F-4 Revenue Measures
C. F-7 Income Property
D. F-8 City Travel Policy Statement
E. F-11 Custody and Disposal of Controlled Property
F. F-13 Distribution of Public Information in Municipal Services Statements and
Business License Renewals
G. F-15 External Financial and Compliance Reporting, Disclosure & Annual Audits
H. F-25 Grant Administration
I. F-28 Facilities and Harbor and Beaches Financial Planning Programs
ATTACHMENT A
F-3 BUDGET ADOPTION AND ADMINISTRATION
F-3
1
BUDGET ADOPTION AND ADMINISTRATION
PURPOSE
To establish the policy for the preparation, adoption, and administration of the City's
Annual Budget.
POLICY
A. Budgeting PhilosophyDevelopment.
The City shall prepare and adopt an annual budget by June 30, of each year, as
required by Section 1104 of the City Charter. To the extent practicable, the budget
shall be prepared so as to generate a surplus in most years by conservatively
estimating projected revenues and liberally estimating projected expenses.
Surpluses will be allocated by the City Council pursuant to to the Harbor and
Beaches Master Plan, the Facilities Financing Plan, long term obligations of the
City, such as unfunded accrued liabilities under the City’s pension obligations and
other uses consistent with Council Policy F-5 or as otherwise determined by ,
General Fund Surplus Utilization or as the City Council may determine.The
budget shall incorporate a results-based budgeting approach that allows the
public and the City Council to prioritize City expenditures strategically aligned
with core community values.
The City has a wide variety of obligations associated with its activities and shall
establish appropriate reserves for such obligations based upon the best available
information at the time each budget is prepared. The City Council shall directs
and controls the planned use of reserves through the budget appropriation
process. Appropriations for operating expenditures shall generally be balanced
within relation to current revenue sources and absent compelling, unexpected
circumstances will generally not over-rely on one-time revenue sources or
reserves. However, Tthis constraint is not intended to limit the periodic use of
financial resources that were accumulated over time for a specific project or
purpose or use of reserves consistent with their intended purpose.
The City Council shall establish a policy to set asidemaintain a an unassigned
contingency reserve that shall be a “safety net” for the purpose of addressing
exigent circumstances consistent with Council Policy F-2 section E. 1. and willthis
reserve will generally not be used for other purposes. The unassigned contingency
F-3
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reserve will be invested in short- term readily liquid assets so they can be utilized
on short notice.
The budget may be developed with one or more contingency plans to protect
against volatilitye or unexpected events. When significant uncertainty exists
concerning revenue volatility or threateneding/pending obligations, the City
Council and City Manager reserve the right to impose any special fiscal control
measures, including a personnel hiring freeze, and other spending controls,
whenever circumstances warrant. The City Council may authorize the use of
Ccontingency reserves only during emergency situationsfor any purpose as set
forth by Council Policy F-32.
B. Organization of the Annual Budget.
The Annual Budget shall encompass and an Operating Budget and Capital
Improvement Plan (CIP). The Operating Budget shall be developed to authorize
the expenditure address the operating authorize the expenditure of funds and
address the operating needs of the city. and Capital Improvement Plan (CIP) to
address the annual appropriation of funds annual operation shall address the
annual operating needs the City through the development and authorization of an
operating plan is published inshall consist of three two volumes,: the Performance
Plan, the Budget Detail and the Capital Improvement Program (CIP).
The Performance Plan provides an overview of each department’s mission, departmental
programs, core functions, goals, work plan, budget and performance measures. It also
provides summary information regarding the Capital Improvement Program, as well as
summary information for budgeted and historical overall City revenues, expenditures,
and fund balances.
The Budget Detail is an Operating Budget which shall also provides historical
trends of summary level information and contains line by line detail regarding
operating expenditures and revenue estimates for the prior year, current year and
budget year. Operating expenditures are categorized into four five classifications
within the Operating Budget. These are Salaries and Benefits, Maintenance and
Operations, Capital Outlay, Debt Services and Other Financing UsesInterfund
Transfers.
The CIP document provides a summary of current and future planned projects,
basic descriptions of each project, the anticipated funding source and the scope of
work to be performed. CIPs improvements are generally major facility or
F-3
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infrastructure improvement projects managed by the Public Works Department.
The Finance Committee generally will not make a recommendation on the CIP
Budget because it is within the purview of the City Council alone to determine
how best to spend the City’s resources. However, to the extent needed capital
improvements or repairs come to the attention of the Finance Committee and the
failure to construct those improvements or make those repairs may expose the City
to financial risk, the Finance Committee may make a recommendation that such
improvements be installed in the coming fiscal year(s). Because of the nature and
scope of the CIP improvements, in most instances, the construction of such
improvements will take place over more than one fiscal year.
C. Budget Process.
In November of each year, the Finance Department will prepare a budget calendar
and issue budget instructions to each department for use in preparing the budget.
During December of each year, the Finance Department shall will prepare updated
revenue estimates and fund balance projections for the current year and prepare
preliminary revenue projections for the next fiscal year. In January of each year,
the Finance Department shall prepare a budget calendar and issue budget
instructions to each department for use in preparation of the next year's City
budget. Included in these instructions will be budget guidelines and, if deemed
necessary, appropriation targets for each department. These guidelines will be
developed by the Finance Director and approved by the City Manager.
After further refinements of revenue estimates and the completion of Department
proposed expenditure appropriation requests, the Finance Departments will
summarize department requests for review by the City Manager. After the City
Manager has reviewed and amended the Department Head Directors requests, the
Finance Department shall will prepare the City Manager’s proposed budget for
the next fiscal year and shall submit it to the City Council and to the Finance
Committee. The Finance Committee should have the opportunity to question staff
and discuss the Budget Detail on at least two occasions.
The City Council shall hold as many budget study sessions as it deems necessary.
The City Council and the Finance Committee should have a joint meeting (which
may be in a Study Session) not later than the second Council meeting in May to
discuss the Budget Detail. After the joint meeting, the Finance Committee shall
make a recommendation to the City Council on the Budget Detail. Such
recommendation need not include any recommendation on items on the Budget
F-3
4
Checklist unless the Finance Committee is specifically asked to do so by the City
Council.
All proposed Council changes to the City Manager's proposed budget shall be
itemized in a document referred to as theon a bBudget cChecklist of revisions. The
City Council shall hold a budget hearing and adopt the proposed budget with any
desired Budget cChecklist revisions on or before June 30 by formal budget
resolution. When adopted, the proposed budget as supplement byalong with the
finalized Budget cChecklist, become the final budget.
F-3
5
D. Administration of the Annual Budget.
During the budget year, Department Heads Directors and their designated
representatives may authorize only those expenditures that are based on
appropriations previously approved by City Council action, and only from
accounts under their organizational responsibility. Any unexpended
appropriations, except valid encumbrances such as commitments already made
[like what?], expire at fiscal year end unless specifically reappropriated by the City
Council for expenditure during the ensuingnew fiscal year. Department Directors
shallHeads are responsible for not authorizeing expenditures above budget
appropriations in any given expenditure cClassification within their purview,
without additional appropriation or transfer as specified below. Appropriations
may be transferred, amended or reduced subject to the following limitations:
1. New Appropriations. During the Budget Year, the City Council may
appropriate additional funds as it deems appropriatefor special purposes
by a City Council Budget Amendment. The City Manager has authority to
approve requests for budget increases not to exceed $10,000 in any Budget
line item or aActivity or Capital Project. (Note: The ability of the City
Manager to approve such requestsThis must be specifically included in
each year's Budget Resolution to remain valid.)
2. Grants & Donations. The City Manager may accept grants or donations of
up to $30,000 on behalf of the City. However, if a new or additional
appropriation is a condition of any such grant or donationrequired, the City
Manager’s authority to create new appropriations is limited to $10,000 as
stated above., but shall refer any such grant or donation to the City Council
for consideration if a condition of such grant or donation entails any duty
of the City to contribute and/or expend a sum in excess of $10,000 not
covered by such grant or donation, or that carries a future obligation to
maintain and/or insure any improvement. The City Council will be
formally notified of such all grants or donationsactions on a quarterly basis
by way of a receive and file or other Council meeting agenda item. (Note:
This provision ability of the City Manager to accept grants or donations
must be specifically included in each year's Budget Resolution to remain
valid.)
Additionally, grant related appropriations approved by City Council may
be carried forward to the following fiscal year(s) as long as the grant terms
remain valid, the expenditures are consistent with the previous Council
F-3
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authorization, and the funds would otherwise need to be returned to the
granting or donor agency. Also, see Council Policy F-25 for specific grant
acceptance and administration procedures.
Grant agreements and restricted donations in excess of $30,000 must be
specifically approved by the City Council. Occasionally, the terms and
conditions of a grant are approved by City Council in a year prior to when
the program activity will take place and therefore, the funds are not
appropriated to carry out the grant at that time. In such cases, the City
Manager may appropriate the funds when they are received, provided the
expenditures clearly meet the amount, terms, nature and intent of the grant
or donation previously approved by City Council.
3. Assessment District Appropriation. Assessment district projects are
typically funded by property owner contributions and bond financing
secured by property assessments. City staff will initially seek appropriation
to advance City resources for the assessment engineering and the design
work related to a proposed assessment district. Since the City’s advance is
at risk until a district is formed at a public hearing, the appropriation
related to advanced resources shall be subject to the normal budget policies.
However, once the district has been formed at a public hearing, the City
Council will adopt a “project-length” budget for the assessment district and
City staff will be allowed to roll the appropriations forward into future
fiscal years without rebudgeting the project through the formal CIP
process.
When assessment bonds are issued to finance the improvements, the bond
issuance costs will beare estimated at the maximum amount that would be
required to complete the improvements because it is not known how many
property owners will opt to pay the assessment in full during the cash
collection period, thereby reducing the size of the bond. Finance staff will
also have the authority to reduce Council appropriations (related to bond
issuance costs) after bonds are resized and sold. Money advanced by the
City will be included in the assessment amount and be reimbursed to the
City when the assessment district is formed except to the extent otherwise
agreed to by City Council resolution.
4. Transfers within Departments. During the fiscal year, actual expenditures
may exceed budget appropriations for specific expenditure line items
within departmental budgets. If a total departmental budget, within a
F-3
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specific Classification, is not exceeded, the Finance Director has the
authority to transfer funds elsewhere within that Classification and
Department, to make the most efficient use of those funds appropriated by
the City Council. (Salaries and Benefits, Maintenance and Operations,
Capital Outlay and Other Financing Uses are the City’s four Classifications
within the operating budget).
5. Transfers between Departments. Further, funds may be realigned between
one Department and another, within the same Classification, with City
Manager approval. For example, if a Fire Department function and the
employee who accomplishes it are replaced by a slightly different function
assigned to the Police Department, the City Manager may authorize the
transfer of appropriated funds to support this function.
6. Transfers between Expenditure Categories. Any reprogramming of funds
(i.e. movement) of funds among the fourthreefive Classifications (Salaries
and Benefits, Maintenance and Operations, and Capital Outlay and Other
Financing Sources) within the General or other Fund(s) a given fund [not
sure I understand how money would move between “funds”] requires the
City Manager’s approval. Any budget revision that changes the total
amount budgeted for any fund (other than the minor provisions contained
in paragraphs CD.1. and CD.7.b.) must be approved by the City Council.
7. Transfers between Capital Improvement Projects (CIP). Budget Transfers
between Capital Improvement Projects shall be subject to the following
parameters:
a. Excess Project Appropriations or savings may be transferred to a
“Project Savings Account,” within the same fundshould be closed
out and returned to the project’s fund balance. Funds may then be
reappropriated to a new or existing project with the approval of City
Council.
b. Excess Project Appropriations may also be transferred from one CIP
project to another, provided that the projects utilize the same
funding source and are for substantially the same project purpose
and physical location. Project appropriation transfers of this nature
shall require the approval of the City Manager.
F-3
8
All proposed budget amendments and transfers will be submitted to the Finance
Director for review and processing prior to City Manager or Council
authorization.
All unexpended and unencumbered appropriations for the operating budget will
be canceled on June 30 of each fiscal year. All appropriations in the Capital
Improvement Budget for projects currently underway and remaining unexpended
at June 30th, as approved by the City Manager, will be appropriated to those e
projects in the following fiscal year CIP Budget. Incomplete projects may be
reappropriated by the City Council during the bBudget process or by separate
Council action.
E. Management Authorization and& Responsibilities. . Once the final Budget has
been approved by the City Council, specific City Council approval to make
expenditures consistent with the Budget will not be required except as provided
by other Council Policies and Administrative Procedures. It is the responsibility of
the City Manager and management to administer the City’s budget within the
framework of policy and appropriation as approved by the City Council.
1. The Finance Director is responsible for checking purchase requests against
availability of funds and authorization as per the approved Budget.
2. Unless otherwise directed, routine filling of vacancies in staff positions
authorized within the Budget, will not require further City Council
approval. However, new positions, not addressed by the adopted budget,
shalldo require City Council approval.
3. At fiscal year end, the Finance Director is authorized to record accruals and
transfers between funds and accounts in order to close projects or the books
of accounts of the City of Newport Beach in accordance with generally
accepted governmental accounting principles as established by the
Government Accounting Standards Board, Government Finance Officers
Association, and other appropriate accounting pronouncements. Any net
shortage within a Fund will be recorded as a decrease in Fund Balance. Any
net excess will be recorded as an increase to one or more appropriate
Reserve Accounts as recommended by the Finance Director and approved
by the City Manager or as is otherwise dictated by Council Reserve Policy
(F-2). The net change in fund balances will be reported to City Council
through various documents including Quarterly Financial Reports, the
Comprehensive Annual Financial Report (CAFR), Budget Documents and
F-3
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other financial presentations. Funds that exceeded appropriations during
the year or ended the year with a deficit fund balance are reported annually
in the CAFR notes to the financial statements. (Information regarding the
policy parameters and administration of City Reserves is contained in City
Council Policy F-2.)
Adopted - January 24, 1994
Amended - February 27, 1995
Corrected - February 26, 1996
Amended - May 13, 1996
Amended - May 26, 1998
Amended - August 8, 2000
Amended – May 8, 2001
Amended – April 23, 2002
Amended – April 8, 2003
Amended – April 13, 2004
Amended – September 13, 2005
Amended - October 10, 2006
Amended – August 11, 2009
Amended – September 27, 2011
Formerly F-10, F-11, F-12, and F-21
ATTACHMENT B
F- 4 REVENUE MEASURES
F-4
1
REVENUE MEASURES
PURPOSE
In consideration of long-term fiscal sustainability and to establish a basis for staff
recommendations on revenue matters, the following revenue policies are established.
A. Revenue measure changes may be processed at any time during the entire fiscal
year.
B. Special services, which can be identified with the recipients, will be self-supported
from service fees to the maximum extent practicablepossible. Service fees shall be
established by City Council resolution, and can be found in the Schedule of Rents,
Fines and Fees Master Fee Schedule in compliance with applicable State law, , and
shall be periodically reviewed and updated for compliance with applicable State
law.
C. Every rReasonable effort will be made to establish revenue measures which will
cause the transients and recreation visitors to Newport Beach to carry a fair portion
of the expenses incurred by the City as a result of their use of public facilities.
D. The City will establish appropriate cost-recovery targets for its fee structure and
will periodically annually adjust its fee structure to ensure that the fees continue
to meet cost recovery targets. When requested by the Finance Director, or his/her
designee, each dDepartment shall provide the Finance Department with a listing
of the services and the respective fees imposed by dDepartment. This listing shall
identify the estimated costs to the City in providing the product or service
associated with each fee as well as any recommended revision in the fee. The
Finance Department may study, internally or using an outside consultant, the
costs of providing such services and recommend fees to each dDepartment.
E. The Finance Department, with the assistance of the initiating dDepartment, shall
present any new or revised revenue measures to the Finance Committee City
Council for review. The purpose of the review of the Finance Committee shall will
be to confirm that increases in existing fees or any new fees are intended to recoup
costs being incurred by the City, or revisions in proposed taxes or other charges
are fairly charged. Any revised fees or new revenue measures will then be referred
to the City Council for review and action. The Finance Department shall endeavor
to consult with private individuals, business groups and individual business
persons on the economic impact any recommended revenue measure changes may
Commented [MS1]: Some revenue measures such as
establishing a street vending permit fee have little to no fiscal
impact. Taking revenue measures with little fiscal impact to the
Finance Committee is administratively cumbersome and time
consuming. Staff always aligns fees with the actual costs of
providing services.
F-4
2
have on them. Their response, the estimated costs to the City in providing the
product or service and the recommended revision to the revenue measure shall be
included in the information forwarded to the City Council.
F. The City will proactively seek to protect and expand its tax base by encouraging a
healthy underlying economy.
G. The City will work to enhance and protect the property values of all Newport
Beach residents and property owners.
H. The City will encourage shopping, dining, and visiting at Newport Beach stores,
restaurants and hotels.
I. The City will oppose efforts of the State and County governments to divert
revenues from the City or to increase unfunded service mandate of City taxpayers.
J. The City will seek additional intergovernmental funding and grants, with a
priority on funding one-time capital projects. Grant-funded projects that require
multi-year financial support of the City will be reviewed by City Council.
K. The City will not rely on one-time revenue sources to fund operations. One-time
revenues sources, whenever possible, will be used to fund one-time projects,
augment reserve balances or fund unfunded liabilities.
Adopted - August 26, 1968 Amended - February 27, 1995
Reaffirmed - November 12, 1968 Corrected - February 26, 1996
Reaffirmed - March 9, 1970 Amended - May 26, 1998
Reaffirmed - February 14, 1972 Amended – May 8, 2001
Reaffirmed - December 10, 1973 Amended – April 13, 2004
Reaffirmed - November 11, 1974 Amended – September 27, 2011
Amended - January 24, 1994
Formerly F-13
ATTACHMENT C
F-7 INCOME PROPERTY
F-7
1
INCOME PROPERTY
The City owns and manages an extensive and valuable assortment of property including
streets, parks, beaches, public buildings and service facilities. The City also owns or
ground leases and/or operates a yacht basin, resort hotel and apartment propertya
mobile home park, a luxury residential development and various other income
producing properties. MuchMost of the income property is tidelands, filled tidelands or
waterfront. Unencumbered fee value of income property is substantial.estimated at
upwards of one four hundred million dollars, and income typically contributes ten
percent of all City revenues.
As owner/manager of property, the City is the steward of a public trust, and state law
requires the City to maximize its returns on state-managed property or be subject to a
charge of making a gift of public funds. Nevertheless, the City Council recognizes the
importance of this property not only as a revenue generator, but also as a means to
provide otherwise financially less unfeasible uses and facilities thatto benefit the
community.
In managing its property, the City will continually evaluate the potential of all City
owned property to produce revenue. This may include leasing or licensing unused land,
renting vacant space, and establishing concessions in recreation areas or other similar
techniques. The City Council will evaluate the appropriateness of establishing new
income generating opportunities on City controlled areasproperties using sound
business principles and after receiving input from neighbors, and users and the public.
The policy of the City Council is that income property be held and managed in
accordance with the following:
A. Whenever a lease, license, management contract, concession, sale or similar action
regarding income property is considered by the City, an analysis shall be
conducted to determine the maximum or open market value of the property. This
analysis shall be conducted using appraisals or other techniques to determine the
highest and best use of the property and the highest income generating usevalue
of the property.
B. All negotiations regarding the lease, license, management contract, concession,
sale or similar action regarding income property shall include review of an
appraisal or analysis of the use being considered for the property conducted by a
reputable and independent professional appraiser, real estate consultant, or
business consultant.
C. The City shall seek, whenever practical and financially advantageous both in the
short and long term, to operate or manage all property and facilities directly with
F-7
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City staff or contractors, provided staff has the expertise needed to competently
do so, or to oversee the work of contractors.
D. In all negotiations regarding the lease, license, management contract, concession,
sale or similar action regarding an non-residential income property, the City shall
seek revenue equivalent to the open market value of the highest and best use; and,
whenever practicablepossible the City shall conduct an open bid or proposal
process to ensureinsure the highest financial return.
E. Whenever less than the open market or appraised value is received or when an
open bid process is not conducted, the City shall make specific findings setting
forth the reasons thereof.
Such findings may include but need not be limited to the following:
1. The City is prevented by tideland grants, Coastal Commission guidelines or
other restrictions from selling the property or converting the propertyit to
another use.
2. Redevelopment of the property would require excessive time, resources,
expertise and costs, which would outweigh other financial benefits.
3. Converting the property to another use or changing the operator, manager,
concessionaire, licensee, or lessee of the property would result in excessive
vacancy, relocation or severance costs, real estate commissions, tenant
improvement allowances or rent concessions which would outweigh other
financial benefits.
4. Converting residential property to another use or opening residential leases to
competitive bid would create recompensable liabilities and other inequities for
long-term residents.
5. The property provides an essential or unique service to the community or a
clearly preferred use that enjoys substantial support in the community that
might not otherwise be provided were full market value of the property be
required.
6. The property serves to promote other goals of the City such as affordable
housing, preservation of open space, uses available to the public or marine
related services.
F. Generally, lengths of licenses, leases, management contracts, concessions, or
similar agreements will be limited to the minimum necessary to meet market
standards or encourage high quality improvements and will contain appropriate
F-7
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reappraisal and inflation protection provisions. Also, all agreements shall contain
provisions to assure complete audits periodically through their terms.
G. All negotiations regarding the license, lease, management contract, concession,
sale or similar action regarding income property shall be conducted by the City
Manager or his/her designee under the direction of any appropriate City
committees.
H. To provide an accurate accounting of actual net revenues generated by the City’s
income property, all costs and charges directly attributable or allocable to the
management of a specific income property shall be chargeddebited against the
gross revenues collected on that property in the fiscal year the costs are incurred.
Costs soand chargeables include but are not limited to property repairs and
maintenance, property appraisals, and consultant fees, as authorized by the City
Council, City Manager, or by this Income Property Policy.
I. The City Manager or his/her designee is authorized to sign a license, lease,
management contract, concession, or similar agreement or any amendment
thereto, on behalf of the City. Notwithstanding the foregoing, the City Manager
or his/her designee, or a City Council member, may refer any license, lease,
management contract, concession or similar agreement or any amendment
thereto, to the City Council for its consideration and/or action.
J. The City’s portfolio of quality income producing properties adds an element of
diversification to a portfolio otherwise invested primarily in financial assets.
Accordingly, prior to offering any income property for sale, an analysis shall be
prepared to determine the following:
1. The maximum open market value of the City’s interest in the property as
is.
2. If the property is in an important location, a determination of the possible
future consequences of the City no longer controlling that property.
3. If the current rent is contractually low and significant rent increases are
likely within a finite period.
4. The likelihood of significant increases in the ability of the property to
generate income after the expiration of any current lease of the property.
5. The likelihood of a lease extension being requested by the tenant and the
ability to substantially increase rents or require significant improvements
to enhance the utility and the value of the property as consideration for
granting such an extension.
1.6. The use of the proceeds of the sale and if, considering the totality of the
circumstances, that use is preferable to retaining the property in question.
F-7
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Adopted - July 27, 1992
Amended - January 24, 1994
Amended - February 27, 1995
Amended - February 24, 1997
Amended - May 26, 1998
Amended – August 11, 2009
Amended – May 14, 2013
Formerly F-24
ATTACHMENT D
F-8 CITY TRAVEL POLICY STATEMENT
F-8
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CITY TRAVEL POLICY STATEMENT
PURPOSE
To set forth the policy for official City travel for reimbursement of expenses incurred by
City Council members, appointed officials, members of special boards, commissions,
committees, and employees while traveling overnight on official City business. This
policy shall will not apply for commuter (local) training seminars and local City
business expenses, nor is it intended to supersede Police Officer Standard Training
reimbursable travel policies established by the State of California or the Newport Beach
Police Department. The governing rule for all City travel expenses shall will be
availability, economy, convenience, and propriety.
TRAVEL POLICY
A. The City shall will provide reimbursement for expenses directly related to
attendance at approved conferences, seminars, meetings, and other official
functions/ purposes.
B. Official travel is planned, approved, and budgeted, and controlled at the
Department level, except in specific cases described below.
C. Authorized travel approved in the annual budget requires no further approval
beyond the departmental level. If, however, it becomes apparent that the total
travel cost will exceed the budget estimate, the approval of the Finance Director
must be obtained. All official travel must be approved prior toat the time of the
travel by the Finance Director.
D. Unbudgeted, unplanned travel requests shall be submitted by the Department
Director to the Finance Director who will forward the requests to the City
Manager for approval. Such requests shall include the proposed funding source
for the travel (other travel canceled, reprogramming of other funds within the
department, etc.).
E.D. The City Manager shall will adopt and enforce administrative procedures that
assure that all City authorized travel is:
1. Paid directly by the City or reimbursed to the traveler based on actual,
itemized expenses or should be covered by per diem payment.
F-8
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2. The City’s per diem rate for Meals and Incidental Expenses (M&IE) shall
will be equal to the U.S. General Services Administration’s (GSA) M&IE
rates. (www.GSA.gov).
PROCEDURE
A. Each Department Director shall will include all planned trips in the Department's
annual budget requests. The Travel Authorization Form shall will be used as a
planning/cost estimation guide. For unbudgeted, unplanned travel, the same
form shall will be prepared at the time travel is requested.
B. All requests for travel advances shall will include the original Travel
Authorization Form signed by the Department DirectorHead.
C. The Travel Expense Claim Form shall will be used to file the final travel claim
with the Finance Director. A copy of the Travel Authorization Form must be
attached.
D. The Finance Department shall will make a record of all travel payments on the
original Travel Authorization form.
SPECIAL REIMBURSEMENT RULES RELATED TO CITY COUNCIL
The California Government Code Section 53232 provides restrictions on expense
reimbursements paid to members of legislative bodies. Members of a legislative body
may only be reimbursed for actual and necessary expenses incurred in the performance
of official duties and their travel claims must be accompanied by the receipts
documenting each expense.
CONTINUITY OF CITY GOVERNMENT POLICY
With the advent of different modes of rapid transportation, there is the possibility of
accidents injuring or killing several people simultaneously. Since Council Members are
required to attend conferences, conventions and meetings outside City Hall, it is
desirous to require that whenever possible, no more than three members of the City
Council use the same transportation at the same time.
When it comes to the Council's attention that a conference, convention, or meeting in
which transportation is required, Council Members shall make an effort to arrange their
itinerary so that no more than three members of the City Council use the same
F-8
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transportation. The City Clerk shall will be utilized to provide alternate travel
arrangements where necessary in order to comply with this policy.
This policy will help insure that there will be a continuity of City government and that
there is always a majority of Council members capable of fulfilling the responsibilities
placed upon them by the City.
In addition, the City Manager, Department DirectorsHeads and other key personnel
should use the same guidelines in traveling separately on official business whenever
practicable.
Adopted - June 8, 1992
Amended - January 24, 1994
Amended - February 26, 1996
Amended – April 23, 2002
Amended – October 10, 2006
Amended – August 11, 2009
Amended – September 27, 2011
Formerly F-25
ATTACHMENT E
F-11 CUSTODY AND DISPOSAL OF CONTROLLED PROPERTY
F-11
CUSTODY AND DISPOSAL OF CONTROLLED PROPERTY
PURPOSE
To set forth the City’s policy concerning custody and disposal of controlled property.
DEFINITION
Controlled Property is generally defined as City-owned portable materials, equipment,
tools and furniture subject to theft, loss or misuse. Conversely, major capital assets with
no potential for theft, such as buildings, land and other infrastructure assets affixed to the
earth are exempted from this policy. For further discussion of “Controlled Property” and
property control procedures, see Administrative Procedures concerning Controlled
Property.
PROPERTY CONTROL RESPONSIBILITIES
The Finance Director shall establish and maintain citywide property acquisition and
disposal procedures. However, the ultimate accountability for Controlled Property, along
with the responsibility for maintaining reasonable safeguards to secure Controlled
Property, lies with the Director of the Department Head that acquired the property until
such time the item has been formally transferred to another Department Head or has been
formally approved by the Finance Department for sale/disposal. Procedures for
acquisition, transfer, sale/disposal of controlled property vary by property type and
value and are addressed through Administrative Procedures. As property custodians,
Departments Heads Directors are also responsible for a periodic inventory of their
Controlled Property in accordance with Administrative Procedures. At the discretion of
the Finance Director, material losses or discrepancies in Controlled Property will be
reported to the Finance Committee.
Adopted - January 24, 1994
Corrected - February 26, 1996
Amended - August 12, 1996
Amended – April 23, 2002
Amended – April 13, 2004
Amended – September 27, 2011
1
ATTACHMENT F
F-13 DISTRIBUTION OF PUBLIC INFORMATION IN MUNICIPAL SERVICES STATEMENTS AND BUSINESS LICENSE RENEWALS
F-13
1
DISTRIBUTION OF PUBLIC INFORMATION IN MUNICIPAL SERVICES
BILLING STATEMENTS AND BUSINESS LICENSE RENEWALS
PURPOSE
The purpose of this Policy is to establish guidelines for the distribution of written
materials with the Municipal Services Statement and Business License Tax Renewal
forms.
Periodically, material is distributed to residents through the Municipal Services
Statement and Business License Renewal form. This material shall be approved by the
Finance Director using the guidelines below as criteria for approval. Material not
completely consistent with the guidelines below will not be distributed with Municipal
Services Billing Statements or Business License Tax Renewal forms without specific
Council authorization. All costs associated with the inclusion of such material must be
paid by the Ddepartment submitting the request for inclusion.
Mailing may include the following:
A. A. Notification of schedules or procedures affecting City services.
B. Notification of any changes in procedure or process affecting business license
holders.
B. Information on the availability and scope of City services and facilities.
C. Information concerning the functions and responsibilities of City departments
and financial aspects of City operations.
D. Information on municipal projects or future programs where a reaction from the
community, business, or a neighborhood is desired.
E. Information on recommended courses of action to protect the public or property
from fire, theft, damage, and related hazards.
F. Other materials which are designed to keep the public informed on the activities
of its government.
Mailings shall not contain information of a political or commercial nature, or from a
commercial entity. Mailings may include factual financial information except if the
topic of such financial information pertains to a ballot measure in an upcoming election
unless otherwise determined by the City Council.
With the approval of the City Manager, information from community based, non-
commercial organizations may be included in the Municipal Services Statement and
Business License Renewal. The primary purpose of any such material should be to
F-13
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provide information of a public service nature. The material must not contain direct
solicitation for contributions or promotions of events whose primary purpose is fund
raising (such as $200 per plate dinners). However, announcements of other events are
generally appropriate, even if a nominal fee or “bake sale” type activity is an incidental
part of the function. All costs associated with the inclusion of such material must be
paid by the non-commercial organization.
The Municipal Services Statement subscribers list shall not be made available for any
private or organizational use. The City Manager may authorize exceptions to this
restriction.
Adopted - December 9, 1968
Amended - October 25, 1977
Amended - May 13, 1991
Amended - January 24, 1994
Amended - February 27, 1995
Corrected - February 26, 1996
Amended – April 13, 2004
Amended – September 27, 2011
Formerly G-2
ATTACHMENT G
F-15 EXTERNAL FINANCIAL AND COMPLIANCE REPORTING, DISCLOSURE & ANNUAL AUDITS
F-15
1
EXTERNAL FINANCIAL AND COMPLIAAINCE REPORTING, DISCLOSURE &
ANNUAL AUDITS
PURPOSE
To establish City policy regarding external financial reporting, financial disclosure
filings and contracting for annual audit services by an external accounting firm.
POLICY
Accounting standards boards and regulatory agencies set the minimum standards and
disclosure requirements for annual financial reports and continuing disclosure
requirements associated with municipal securities. The City places a high value on
transparency and full disclosure in all matters concerning the City’s financial position
and results of operations. To this end, the City endeavors to make superior disclosure
in the City’s Comprehensive Annual Financial Report and Continuing Disclosure filings
by going above and beyond the minimum reporting requirements including certificate
of achievement programs and voluntary event disclosure filings.
The City prepares its financial statements in conformance with Generally Accepted
Accounting Principles (GAAP). Responsibility for the accuracy and completeness of the
financial statements rests with the City. However, the City retains the services of an
external accounting firm to audit the financial statements on an annual basis. The
primary point of contact for the auditor is the Finance Director, but the auditors will
have direct access to the City Manager, City Attorney, Finance Committee or City
Council on any matters they deem appropriate.
The financial statement audit and compliance audits will be conducted in accordance
with the United States Generally Accepted Auditing Standards (GAAS), standards
applicable to financial audits contained in Government Auditing Standards, issued by
the Comptroller of the United States, and standards set by regulatory agencies if
applicable.
After soliciting and receiving written proposals from qualified independent accounting
firms, the Finance Director shall submit a recommendation to the Finance Committee
and City Council. Under the premise that multiyear audit agreements are more cost
efficient, allow for greater continuity and reduce audit disruption, the City may engage
auditors in multi-year contracts, but the term of each contract shall not exceed five
years. Generally, the City will request proposals for audit services every five years.
However, the Finance Committee may make an exception to the competitive proposal
No Changes Suggested. LT
F-15
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requirement if extraordinary circumstances exist and a change in auditors may not be
prudent. If the City Council is satisfied with the performance of the auditors, the
independent accountants firm may submit additional proposals through a competitive
selection process, but it is the City’s policy to require mandatory audit firm rotation
after ten years of consecutive service.
After audit results have been communicated to the City, the Finance Department is then
responsible for responding to all findings within six months to the Finance Committee
and appropriate regulatory agencies, if applicable.
Adopted - January 24, 1994
Amended - February 27, 1995
Corrected - February 26, 1996
Amended – September 13, 2005
Amended – September 27, 2011
Formerly A-14
ATTACHMENT H
F–25 GRANT ADMINISTRATION
F-25
1
GRANT ADMINISTRATION
PURPOSE
To establish guidelines for the application, acceptance, administration, and financial
reporting of grants including, but not limited to federal, state, local, and restricted
donations (also considered grants for the purpose of this policy).
POLICY
A. Grant Application and Responsibility
Individual departments are encouraged to investigate sources of funding
relevant to their respective departmental activities.
The individual dDepartment applying for a grant or receiving a restricted
donation shall will generally be considered the Program Administrator of the
grant. The Office of Management and Budget (OMB)Financial Planning Division
in the Finance Department may assist in the financial administration and
reporting of the grant, but the Program Administrator is ultimately responsible
for meeting all terms and conditions of the grant, insuring that only allowable
costs are charged to the grant program and is responsible for adhering to City
budgeting and fiscal procedures. Individual Departments and Program
Administrators are not authorized to execute grant contracts. Grant contracts
shallshould be reviewed by the City Attorney’s office and executed by the City
Manager and/ or the Mayor on behalf of the City Council.
B. Grant Acceptance & Appropriation by City Council
Even though the funding source for an activity may be provided by a
grantor/donor, only City Council can appropriate funds for official City
activities except as authorized by Council Policy F-3 (Budget Adoption and
Administration). Therefore, prior to the acceptance of a grant, the City Manager
and City Council shallwill:
1. Approve the terms and conditions of the proposed grant including the
specific City obligations that may be created by the grant contract in terms
of required City matching expenditures or staff activities, even if the
F-25
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expenditures were previously appropriated through the budget adoption
process.
2. Approve budget appropriations for the grant expenditures and City
matching expenditures unless previously appropriated through the
budget adoption process.
3. Approve and execute the Grant Contract(s).
Note: The City Council review and approval of items 1 and 3 are not required if
the grant is under $30,000, however, Council expenditure appropriation is
required for all new appropriations in excess of $10,000 or as otherwise specified
by Council Policy F-3. If the grant or gift terms require that the City spend
money and seek reimbursement from the grant or gift, the City will need to
appropriate the expenditure and then seek reimbursement or draw-downs in
accordance with the terms of the grant or gift.
Any budget amendments requested by the Program Administrator or operating
dDepartment shall will be reviewed by the OMB Financial Planning Division of
the Finance Department and submitted as a staff report to the Council for itstheir
review and approval. The OMB Financial Planning Division of the Finance
Department along with the Program Administrator shall will determine the
proper amount of the appropriation request during the current and future fiscal
year(s).
C. Timely Reimbursement
The Program Administrator is responsible and should pursue and/or request
grant reimbursements or draw-downs on a timely basis. If requested, the OMB
Financial Planning Division of the Finance Department will assist with grant
reimbursements or draw-downs. All checks shall will be made payable to the
City of Newport Beach and remitted to Program Administrator.
Grant checks must be forwarded to the Revenue Division of the Finance
Department should befor immediate deposited immediately with the City
Treasurer and include along with supporting documentation. received by the
Program Administrator. Copies should also be forwarded to the OMB of the
Finance Department.
F-25
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The Program Administrator will keep the OMB Financial Planning Division of
the Finance Department apprised of the annual estimated grant revenues and
expenditures and a tentative schedule of cash-flows for the grant program.
Whenever practicable, the Program Administrator shall seek to receive the grant
or gift funds prior to the expenditure of any sums by the City.
F-25
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D. Financial and Grant Reporting
Grant reporting requirements vary widely by grant and sometimes include
monthly, quarterly, and or annual reporting. Subsequent to the approval of a
grant application, and during the project period, any required reports shall will
be the responsibility of the Program Administrator, or if requested by the
Program Administrator, the OMB Financial Planning Division of the Finance
Department. Program Administrators submitting their own reports shall will
forward a copy of each report to the OMB Financial Planning Division of the
Finance Department.
E. Grants Containing Direct Federal Assistance of and/or Federal “Pass-Through”
Funds
Program Administrators acknowledge that Federal Funds or Federal Funds that
“pass-through” state and local programs are required to be reported on the
City’s Schedule of Expenditures of Federal Awards Financial Assistance and
included in the City’s annual Single Audit (compliance audit of all Federal
Funds). Program Administrators will identify and keep the OMB Financial
Planning Division of the Finance Department apprised of those grant programs
that contain direct Federal Funding or Federal pass-through funds identifying
the Catalog of Federal Domestic Assistance (CFDA) number when at all possible.
F. Record Keeping & Retention Requirements
For the purpose of Grantor inquiries and grant specific compliance audits,
Program Administrators are responsible for maintaining adequate records asto
evidence that program activities and expenditures met the terms and conditions
of the grant and that all grant reporting requirements were met timely. Record
retention requirements vary by grant, but it is recommended that original grant
records should be maintained in a manner and duration consistent with the
City’s Records Retention Policy, unless otherwise for a minimum of the life-of-
the-grant plus three years, unless otherwise specified by the grant contract.
Electronic copies of the grant or gift records shall be retained indefinitely.
G. Documents to be forwarded to Accountingthe Finance Department:
Information received from a granting or donor agency or private party or entity
that is pertinent to the terms, conditions, approval, extension, denial, revocation,
F-25
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and administration of a grant shall will be forwarded to the OMB Financial
Planning Division of the Finance Department including but not limited to:
F-25
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Grant Award Notification
Expenditure Authorization Date (if applicable)
Grant Contracts
Grant Extension Letters
Grant Termination Letter
Program and or Financial Reports
Notices of Questioned Costs or instances of non-compliance
Any Document setting or modifying terms and conditions of the grant
Adopted – September 13, 2005
Amended – September 27, 2011
ATTACHMENT I
F–28 FACILITIES AND HARBOR AND BEACHES FINANCIAL PLANNING PROGRAMS
F-28
1
FACILITIES AND HARBOR AND BEACHES FINANCIAL PLANNING PROGRAMS
PURPOSE
To establish the policy for the administration of the City of Newport Beach’s (“City”)
Facilities and Harbor and Beaches Financial Planning Programs (“Programs”).
DISCUSSION
In addition to the annual Capital Improvement Program (“CIP”), the City has
established a long- term plan for major renovation or replacement of aging General
Fund supported facilities and installation of new infrastructure. The primary focus of
the Programs is the replacement or major renovation of existing physical infrastructure.
The addition of new facilities is also a goal of the Programs. The emphasis is on
structures and adjacent grounds, rather than transportation, environmental, or other
projects funded either in whole or in part by the General Fund.
OBJECTIVES
A. To insure that a long-term programs addressing large, non-recurring projects for
replacement of facilities is addressed as part of the budget process each year.
B. To insure that development fees and, proceeds derived from redevelopment or
redeployment of existing land and capital assets owned by the City, and other
non-recurring revenues are dedicated to the replacement of infrastructure
facilities, rather than ongoing operating expenses.
C. To provide a consistent, level funding plan to the extent practicable so as tothat
will minimize the peaks’ and valleys’ in General Fund support levels for
elements of the Programs.
D. To insure that projects are properly prioritized and scheduled, taking into
consideration the relative age, condition, and functional viability of current
facilities; pairing of projects implementation where prudent; and cost
implications of immediate projects for the overall long-term Programs.
F-28
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E. E. Spreading or matching the costs of facilities over the useful life of such
facilities should be a goal of all long-term capital project financings. Debt
financing that extends beyond the useful life of the assets the debt was borrowed
to finance should be avoided.
E. Budgeting the cost of facilities while those facilities are in use is consistent with
good government management practices. However, creating a legacy of excessive fixed
costs for debt service is not. Therefore, one of the objectives of this the Programs is to
insure that future generations will not be required to carry a disproportionate fiscal
burden for previously completed projects.
SOURCES AND USES OF FUNDS
Funding for the Programs comes from development fees and proceeds derived from
redevelopment or redeployment of existing land and capital assets owned by the City
contributions from individuals and organizations within the community, annual budget
allocations from the General Fund, incremental rent or fees originating from harbor
activity received by the City, net proceeds of Certificates of Participation or other
financing instruments, and investment earnings on temporarily idle funds.
Program fundsFunds for both Programs are used for actual site acquisition, design,
construction, and directly related costs; as well as debt service expenses.
POLICY AND PROCEDURE
A. In advance part of the budget process, staff shall prepare an update of the
Facilities Financial Planning Tool and the Harbor and Beaches Capital Financial
Plan for review, modification, and approval by the City Council.
B. If requested by the City Council, Tthe Finance Committee will subsequently
review the fiscal impacts associated with, and recommend the most
advantageous methods to fund the high-priority projects in, the Facilities
Financial Planning Tool and the Harbor and Beaches Capital Financial Plan. The
City Manager will consider these recommendations in the annual preparation
and presentation of the City’s Manager’s annual budget to the City Council.
F-28
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B.C. Unless otherwise specified in individual development agreements, other
governing documents, or as otherwise specifically directed by the City Council,
all development fees received by the City will be credited to dedicated to the
Facilities Financial Planning Reserve fund.
C.D. Prudent assumptions regarding revenue and expenditure growth, inflation, and
all relevant factors will be included in each year’s update of the Facilities
Financial Planning Tool and the Harbor and Beaches Capital Financial Plan.
D.E. General Fund contributions to the Facilities Financial Plan Program shall
generally not be less than three percent (3%) of the total General Fund Revenue
Budget. However, Iif there is a shortfall in General Fund revenue due to a
decline in economic activity or other unexpected circumstances and it is
necessary to reduce expenditures, General Fund contributions to the Facilities
Financial Planning Program and the Harbor and Beaches Capital Financial Plan
can be temporarily reduced tomodified to maintain contributions under the three
percent (3%) threshold.
E.F. The financing duration for any borrowed funds shall not exceed thirty (30) years
or the projected life of the new facility, whichever is less.
F.G. The Facilities Financial Planning Tool and Harbor and Beaches Capital Financial
Plan may be amended by City Council action in the event of a natural disaster or
financial crisis.
Adopted – August 11, 2009
Amended – May 14, 2013
Amended – June 9, 2015
Calendar Year 2019 Finance Committee Workplan Development
= FC meeting date to be determined
City Council (CC) or
Finance Committee (CC)
Meeting
Dates Alternate Finance Committee Dates
JANUARY 1/10/2019 OR 1/24/2019
CC 22 Council Study Session - Beacon Economics Forecast
CC 26 Special Council Meeting - Annual Goal Setting Workshop
FEBRUARY 2/14/2019 OR 2/28/2019
FC Long-Range Fiscal Forecast Update
MARCH 3/14/2019 OR 3/28/2019
CC 12 City Council Study Session - Early Look CIP
FC #1 Review FY 20 Budget (Revenue Assumptions)
APRIL*4/11/2019 OR 4/25/2019
FC #2 Review FY 20 Budget
MAY 5/16/2019 OR 5/30/2019
CC/FC 14 #3 Joint FC/CC FY 20 Budget Review Study Session
CC 28 Second CC FY 20 Budget Review Study Session
FC #4 Final FC Budget Review and Recommendations to CC
JUNE 6/13/2019 OR 6/27/2019
CC 11 Public Hearing and Adoption of FY 20 Budget
JULY RECESS
AUGUST RECESS
SEPTEMBER 9/12/2019 OR 9/26/2019
OCTOBER 10/10/2019 OR 10/24/2019
NOVEMBER 11/14/2019 OR 11/28/2019
DECEMBER 12/12/2019
*Proposed operating budget document may not be published
by April 11th; therefore, the FC will likely review
expenditures on the 25th.