HomeMy WebLinkAbout02 - Review of Annual Financial StatementsSEW PpRr
CITY OF
z NEWPORT BEACH
<,FORNP Newport Beach Public Facilities Corporation Staff Report
August 13, 2019
NBPFC Agenda Item No. 2
TO: HONORABLE MAYOR AND MEMBERS OF THE PUBLIC
FACILITIES CORPORATION
FROM: Dan Matusiewicz, Finance Director - 949-644-3123,
dmatusiewicz@newportbeachca.gov
PREPARED BY: Trevor Power, Senior Accountant,
tpower@newportbeachca.gov
PHONE: 949-644-3125
TITLE: Review of Annual Financial Statements
ABSTRACT:
The Bylaws of the Newport Beach Public Facilities Corporation call for an annual meeting of the
Board of Directors. The Bylaws also specify that the Chief Financial Officer shall maintain
adequate financial records concerning the receipts and disbursements of the Corporation and the
Board of Directors are entitled to inspect the associated financial records upon request. The
attached financial statements represent the financial position and financial activities of the
corporation for the year ended June 30, 2019.
RECOMMENDATION:
a) Determine this action is exempt from the California Environmental Quality Act (CEQA)
pursuant to Sections 15060(c)(2) and 15060(c)(3) of the CEQA Guidelines because this action
will not result in a physical change to the environment, directly or indirectly; and
b) Receive and file the financial report.
FUNDING REQUIREMENTS:
There are no funding requirements associated with this action.
DISCUSSION:
The Newport Beach Public Facilities Corporation ("Corporation") was created on
March 9, 1992, by the City of Newport Beach ("City") under the authority of California law. The
purpose of the Corporation is to assist the City in the financing of public improvements, including
a public library and most recently the new Civic Center project. This type of non-profit corporation
is required by the Federal IRS code in order to issue a public financing instrument called a
Certificate of Participation ("COP"). A COP is a typical California public financing instrument for
public facilities or equipment. It is a type of lease purchase that requires a third party, the
Corporation, for the lease transaction. The Corporation assigns all of the rights, obligations and
financial transactions to others, such as the Trustee for the COP.
NBPFC 2-1
Review of Annual Financial Statements
August 13, 2019
Page 2
The Corporation is governed by a Board of Directors that is comprised of the seven City Council
Members of the City. Normally, the Mayor serves as Chairperson of the Board, with the Mayor
Pro -Tem serving as Vice -Chairperson. The City Manager serves the Corporation as President,
the City Clerk serves as Secretary, and the City Treasurer serves as Chief Financial Officer.
In 1992, the City issued $7.5 million of COPs to finance the construction of the Central Library
and subsequent refinanced this obligation in 1998. In 2010, the City issued approximately $126.7
million of new COPs. Of this financing, $122.8 million was used for the Civic Center project and
$3.9 million was used to refinance the remaining balance of the Central Library COPs. The
Corporation's financial data and transactions are included in the debt service fund in the City's
financial statements. The City's debt service fund is used solely to account for the activities of
the Corporation and contains no other City debt financing activities. Even though the Corporation
is a separate legal entity, it is considered a component unit of the City and is included in the
Comprehensive Annual Financial Report.
The main sources of revenues of the Corporation are lease payments from the City and Federal
Build America Bond (BAB) Interest Subsidy payments; both of which are pledged for the sole use
of paying interest and principal on the COPs. The Corporation has assigned its rights to receive
and collect these payments to a trustee who makes the semi-annual debt service payments to
the bondholders. Therefore, the lease and BAB subsidy payments are received directly by the
Trustee. The debt is an obligation of the City, not the Corporation. The City owns the financed
properties.
During the year, the Trustee received lease payments from the City totaling $8.2 million and
Federal Build America Bond (BAB) Interest Subsidy of $2.3 million. Together with investment
earnings, there were sufficient resources necessary to satisfy the annual debt service requirement
of $10.5 million. The table below illustrates the remaining debt service payment and principal
balance on the COPs:
Year Ending
June 30
2020
2021
2022
2023
2024
2025-2028
2029-2032
2033-2036
2037-2040
2041
Principal
3,405,000
3,065,000
3,165,000
3,275,000
3,390,000
15,060,000
18,025,000
21,580,000
25,890,000
7,245,000
$ 104,100,000
2010 COP Debt Service
Interest
Total
Balance
7,052,048
10,457,048
100,695,000
6,895,351
9,960,351
97, 630, 000
6,733,265
9,898,265
94,465,000
6,556,869
9,831,869
91,190,000
6,365,978
9,755,978
87,800,000
23,000,936
38,060,936
72,740,000
18,326,556
36,351,556
54,715,000
12,681,984
34,261,984
33,135,000
5,894,605
31,784,605
7,245,000
259,661
7,504,661
-
$ 93,767,253
$ 197,867,253
The outstanding principal of the obligation was $104.1 million as of June 30, 2019. The remaining
interest of $93.8 million does not yet reflect the remaining expected BAB subsidy of $30.8 million
so the remaining interest net of the BAB subsidy totals $63.0 million.
NBPFC 2-2
Review of Annual Financial Statements
August 13, 2019
Page 3
ENVIRONMENTAL REVIEW:
Staff recommends the Board of Directors of the Public Facilities Corporation find this action is not
subject to the California Environmental Quality Act ("CEQA") pursuant to Sections 15060(c)(2)
(the activity will not result in a direct or reasonably foreseeable indirect physical change in the
environment) and 15060(c)(3) (the activity is not a project as defined in Section 15378) of the
CEQA Guidelines, California Code of Regulations, Title 14, Chapter 3, because it has no potential
for resulting in physical change to the environment, directly or indirectly.
NOTICING:
The agenda item has been noticed according to the Brown Act (72 hours in advance of the
meeting at which the Board of Directors considers the item).
ATTACHMENT:
Attachment A — Financial Statements
NBPFC 2-3
Attachment A
Financial Statements
NBPFC 2-4
NEWPORT BEACH PUBLIC FACILITIES CORPORATION
Comparative Balance Sheet
June 30, 2019 and 2018
Assets
Cash with fiscal agent
Intergovernmental receivable
Total Assets
Liabilities and Fund Balances
Liabilities:
Accounts payable
Total Liabilities
Fund balances:
Nonspendable
Restricted for:
Debt Service
Committed
Assigned
Unassigned
Total fund balance
Total liabilities and fund balance
2019
2018
$ 6,977,065
1,171,872
$ 8,138,751
-
$ 8,148,937
$ 8,138,751
8,148,937
8,138,751
8,148,937
8,138,751
$ 8,148,937 $ 8,138,751
NBPFC 2-5
NEWPORT BEACH PUBLIC FACILITIES CORPORATION
Comparative Statement of Revenues,
Expenditures and Changes in Fund Balances
June 30, 2019 and 2018
NBPFC 2-6
2019
2018
Revenues:
Lease revenues
$ 8,154,464
$ 8,210,403
Investment income
39,324
20,755
Federal interest subsidy
2,335,637
2,367,873
Total revenues
10,529,425
10,599,031
Expenditures:
Debt service:
Principal
3,310,000
3,185,000
Interest and fiscal charges
7,209,239
7,344,851
Total expenditures
10,519,239
10,529,851
Excess (deficiency) of revenues
over expenditures
10,186
69,180
Fund balance, beginning
8,138,751
8,069,571
Fund balance, ending
$ 8,148,937
$ 8,138,751
NBPFC 2-6