HomeMy WebLinkAboutFinance Committee - April 15, 2021CITY OF NEWPORT BEACH
FINANCE COMMITTEE MEETING WILL BE HELD VIA
ZOOM. PLEASE SEE SPECIAL NOTICE REGARDING
COVID-19 FOR PUBLIC COMMENT INFORMATION.
AGENDA - FinalThursday, April 15, 2021 - 3:00 PM
Finance Committee Members:
Will O'Neill, Chair
Brad Avery, Mayor
Noah Blom, Council Member
William Collopy, Committee Member
John Reed, Committee Member
Joe Stapleton, Committee Member
Larry Tucker, Committee Member
Staff Members:
Grace K. Leung, City Manager
Scott Catlett, Finance Director/Treasurer
Steve Montano, Deputy Director, Finance
Marlene Burns, Administrative Specialist to the Finance Director
SPECIAL NOTICE REGARDING COVID-19
On March 4, 2020, Governor Newsom proclaimed a State of Emergency in California as a result of the threat of COVID-19.
On March 12, 2020, Governor Newsom issued Executive Order N-25-20, which allows Finance Committee Members to
attend Finance Commission meetings by electronic means. Please be advised that to minimize the spread of COVID-19,
Finance Committee Members may attend this meeting either electronically or telephonically.
Also, please be advised that on March 17, 2020, Governor Newsom issued Executive Order N-29-20, which allows for the
public to participate in any meeting of the Finance Committee telephonically or by other electronic means. Given the
health risks associated with COVID-19, the City of Newport Beach will conduct this meeting via Zoom. As a member of
the public, if you would like to participate in this meeting, you can participate via the following options:
1.You can submit your questions and comments in writing for the Finance Committee’s consideration by sending
them to Scott Catlett Finance Director/Treasurer, at scatlett@newportbeachca.gov. To give the Finance Committee
adequate time to review your questions and comments, please submit your written comments by Wednesday, April 14,
2021, at 5 p.m. All emails will be made part of the record.
2.You can connect with a computer by joining through Zoom. Use the link below to register for the meeting using a
valid email address. You will receive a confirmation email allowing you to join the meeting:
https://zoom.us/webinar/register/WN_IvZU5gJBQgun1h5oLGTVfQ.
3.Or you may connect by Phone/Audio Only by calling: 669-900-9128. The meeting ID is 951 8991 9015#
4.Attendees must raise their hand in the Zoom module if they would like to speak. If attending by phone, press *9 to
raise hand.
Please know that it is important for the City to allow public participation at this meeting. While the City does not expect
there to be any changes to the above process for participating in this meeting, if there is a change, the City will post the
information as soon as possible to the City’s website.
The City of Newport Beach thanks you in advance for continuing to take precautions to prevent the spread of the COVID
19 virus.
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.
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April 15, 2021
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Finance Committee Meeting
I.CALL MEETING TO ORDER
II.ROLL CALL
III.PUBLIC COMMENTS
Public comments are invited on agenda and non-agenda items generally considered to be
within the subject matter jurisdiction of the Finance Committee. Speakers must limit comments
to three (3) minutes. Before speaking, we invite, but do not require, you to state your name for
the record. The Finance Committee has the discretion to extend or shorten the speakers’ time
limit on agenda or non-agenda items, provided the time limit adjustment is applied equally to all
speakers. As a courtesy, please turn cell phones off or set them in the silent mode.
IV.CONSENT CALENDAR
MINUTES OF MARCH 11, 2021A.
Recommended Action:
Approve and file.
DRAFT MINUTES 03112021
CORRESPONDENCE
V.CURRENT BUSINESS
AUDIT SERVICES RECOMMENDATIONA.
Summary:
Staff will propose the selection of a new external financial reporting and disclosure
auditor.
Recommended Action:
Receive and file.
PROPOSED FISCAL YEAR 2021-22 BUDGET OVERVIEWB.
Summary:
Staff will provide an overview of the Proposed Fiscal Year 2021-22 Operating
Budget.
Recommended Action:
Receive and file.
STAFF PRESENTATION
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Finance Committee Meeting
BUDGET AMENDMENTS FOR QUARTER ENDING MARCH 31, 2021C.
Summary:
Staff will report on the budget amendments from the prior quarter.
Recommended Action:
Receive and file.
STAFF REPORT
ATTACHMENT A
WORK PLAN REVIEWD.
Summary:
Staff and Finance Committee to review the proposed work plan and adjust as
necessary.
Recommended Action:
Receive and file.
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
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Finance Committee Meeting Minutes March 11, 2021
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CITY OF NEWPORT BEACH FINANCE COMMITTEE MARCH 11, 2021 MEETING MINUTES I. CALL MEETING TO ORDER The meeting was called to order at 3:00 p.m. via teleconference. II. ROLL CALL PRESENT: Chair Will O’Neill, Mayor Brad Avery, Council Member Noah Blom,
Committee Member William Collopy, Committee Member John Reed, Committee Member Joe Stapleton, and Committee Member Larry Tucker ABSENT: None
STAFF PRESENT: City Manager Grace K. Leung, Finance Director/Treasurer Scott Catlett,
Deputy Director/Finance Steve Montano, Administrative Specialist to the Finance Director Marlene Burns, Senior Accountant Theresa Schweitzer, Acting Accounting Manager Trevor Power, Budget Manager Shannon Espinoza, and Payroll Specialist Rochelle Myers
MEMBERS OF THE
PUBLIC: Charles Klobe, Jim Mosher, and Nancy Scarbrough
OTHER ENTITY: Bob Callanan, Audit Partner, CliftonLarsonAllen LLP III. PUBLIC COMMENTS
None IV. CONSENT CALENDAR MINUTES OF FEBRUARY 18, 2021 Recommended Action:
Approve and file.
Chair O’Neill called for public comments and hearing none, closed the public comments. MOTION: Committee Member Blom moved to approve the minutes, seconded by Mayor Avery. The motion carried 7 ayes – 0 noes
V. CURRENT BUSINESS A. FINANCIAL STATEMENT AUDIT RESULTS AND RELATED COMMUNICATION FROM THE AUDITORS Summary: The City’s external audit firm will meet with the Finance Committee to discuss the audit findings for the fiscal year ending 6/30/2020. The Committee will have an opportunity to discuss any
potential areas of concern and the auditors can discuss any changes in accounting standards or disclosures that were relevant for the audit year. Recommended Action: Receive and file
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Finance Director/Treasurer Scott Catlett introduced Bob Callanan, Audit Partner, CliftonLarsonAllen LLP, and advised the Finance Committee they have been provided with a copy of their opinion letter inside of the financial statements for the City, and two accompanying letters reporting out the findings from the audit. Mr. Callanan reported that CliftonLarsonAllen LLP issued an unmodified opinion on the City’s
Financial Statements, which is the highest form of opinion that can be provided under auditing standards. He reported a few of the Governmental Accounting Standards Board (GASB) statements that were due to be implemented were postponed for one year and will come into play for FY 2020-21. He advised the City made a change in the way it estimates the allowance for uncollectible accounts receivable, which is listed in one of the letters provided. He noted it was a change in estimate and methodology and they believe it to be reasonable considering
the change in the circumstances. Mr. Callanan reported that the Financial Statements contain significant estimates of the City’s pension plans and the reporting of the City’s other post employment benefit (OPEB) plans. He
advised the claims liability reported is also an estimate based on experience and existing claims in-process. He noted additional details can be found in footnotes 8, 10, and 11. He advised
that there were no significant difficulties in performing the audit and there were a few audit corrections that management agreed to make and have been booked. He noted that there are no disagreements with management on any issues related to financial reporting or audit procedures. He noted that management provided a representation letter that provided full
access to whatever was needed to complete the audit under auditing standards.
Chair O’Neill called for public comments and hearing none, closed the public comments.
The item was received and filed. B. INTERNAL AUDIT PROGRAM UPDATE Summary:
Staff will provide the Finance Committee with a verbal update on the status of the Internal Audit Program. Recommended Action: Receive and file.
Finance Director/Treasurer Catlett provided a brief overview of the Internal Audit Program. He
reported that the program was established to assist the City by enhancing operational performance and improving the effectiveness of risk management, internal controls, and
governance. He advised an Enterprise Risk Assessment was completed along with an Internal Controls Review, which developed into a work plan of recommended topics to be reviewed in
the Internal Audit Program.
Finance Director/Treasurer Catlett reported a contract is in-process to initiate the first year of the program and provided a list of topics that will be covered in the year ahead. He reported
MGO will be working on the Operational Review and Internal Controls testing for Procurement and Moss Adams will be handling the IT Operational Review and Internal Controls Testing,
Cash Handling Internal Controls Testing, and the City’s Fiscal Policy Inventory and Implementation Plan. He advised that staff will provide an update in two months since the program is getting underway.
In response to Committee Member Collopy, Finance Director/Treasurer Catlett explained the City is paying Moss Adams $120,000 for the three topics included in year one of the program
and $25,000 to MGO for the procurement review. In response to Committee Member Tucker’s inquiry, Finance Director/Treasurer Catlett believes the City will be reviewing three program areas per year. Deputy Director/Finance
Steve Montano advised a hierarchy has not been established for the subsequent years but
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noted the City took the highest priority items as was suggested through the Enterprise Risk Assessment but believes the entire list could be reviewed in the following two years. Committee Member Collopy commented on the development of key performance indicators and noted he thinks of it as a budget tool that each of the individual Directors develops to rationalize their budget to management.
In response to Committee Member Collopy’s inquiry, Deputy Director/Finance Montano explained that one component of the audit was to look for operational efficiencies and to make recommendations from an operational standpoint. He advised there have not been strong key performance indicators in the budget and the thinking was the work on the audit side may be suggestive since they are in the weeds with all of the operations listed and believe it would be
a good segue into developing those performance measures for the budget. Committee Member Collopy explained that he is not concerned with who develops them or how they are developed he simply wants to see them happen.
Finance Director/Treasurer Catlett remarked that the intention would be to work collaboratively
with the department and use this as a starting tool needed to have this program in place prospectively as part of the budget process. In response to Committee Member Tucker’s inquiry, Deputy Director/Finance Montano
confirmed cybersecurity is included in the IT Operation Review and Internal Controls Testing. He advised cybersecurity is an ongoing effort within the IT Division. He noted another big area
for the IT Division is to achieve the highest standard of PCI compliance for credit card processing to do more with merchants. He noted any findings, recommendations, or
improvements would be dovetailed into those efforts.
City Manager Grace Leung indicated that IT has performed penetration testing for cybersecurity and explained that this review will help establish best practices for determining
the type and frequency of future testing that should be completed. She advised that much of the City’s data is in the cloud, so the IT Division remains very mindful of how important
cybersecurity is to the City.
In response to Committee Member Collopy’s inquiry, City Manager Leung reported she was unaware of any successful penetration attempts but added that she will confirm with the IT
Division.
In response to Committee Member Collopy’s inquiry, Finance Director/Treasurer Catlett explained the Finance Customer Service Operational Review is a look at customer service
practices to ensure the City is delivering the best level of service to the public. Deputy Director/Finance Montano further explained the review would also cover any pay points in the
City that performs any type of revenue collection from a customer service operational standpoint.
In response to Mayor Avery’s inquiry, Director/Finance Montano advised that the City has never
undertaken a study or an analysis of this magnitude in prior years and noted auditors have not found any issues so there are no historical reports to review. Committee Member Tucker suggested that the Accounts Payable Internal Controls be
reviewed next. Director/Finance Montano agreed with the suggestion.
Chair O’Neill opened public comments. Nancy Scarbrough inquired if the phone system was being included in the IT Audit as well noting that has been an area for false billing. Deputy Director/Finance Montano advised the
phone systems are not specifically being reviewed in the scope but are willing to include that
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in the review. Ms. Scarbrough reported her small business phone system was compromised and the loss was not covered by insurance. Deputy Director/Finance Montano noted the review will identify and assess strategies to meet the need for increased cybersecurity readiness so phones may flow into that part of the review. Chair O’Neill closed public comments.
Committee Member Tucker thanked City Manager Leung for prioritizing the Internal Audit Program. The item was received and filed. C. DISCUSS REVENUE ASSUMPTIONS Summary: Staff will provide an overview of revenue assumptions for the FY 2021-22 Proposed Budget. Recommended Action:
Receive and file.
Senior Accountant Theresa Schweitzer presented the FY 2021-22 Revenue Outlook, which will include General Fund Revenues, Tidelands Funds, Water Funds, and Wastewater Funds. She reported almost 75% of General Fund Revenue comes from Property Tax, Sales Tax, and Transient Occupancy Tax (TOT) and noted the City ended FY 2019-20 very close to where it
ended FY 2018-19. She advised that staff meets regularly with departments to keep an eye on revenue projections given the uncertainty throughout last year and the constantly changing
environment. She reported the total General Revenue estimate for FY 2020-21 is $218.6 million and the projection for FY 2021-22 is $232.9 million.
Senior Accountant Schweitzer provided an overview of Historical General Fund Revenues. She
advised that Revenues are doing much better than expected but are still under where they would have been had the pandemic not occurred.
In response to Chair O’Neill’s inquiry regarding the City’s American Rescue Plan Act funding
allocation, Finance Director/Treasurer Catlett clarified that the City will receive approximately $9 million. Senior Accountant Schweitzer confirmed the $9 million was not taken into
consideration for this presentation. City Manager Leung explained the $9 million will be received over the next two years. She noted the City needs to think about the $9 million
carefully because it is a one-time payment. Chair O’Neill concurred.
In response to Chair O’Neill’s inquiry regarding what types of funding is included in the General Fund budget for non-recurring expenditures, City Manager Leung advised one-time expenses
include the $5 million transfer to Capital Improvement Program (CIP), $8.5 million to the Facilities Financial Plan (FFP). In response to Committee Member Tucker’s inquiry, City
Manager Leung confirmed the $8.5 million to the FFP is largely for debt service. Chair O’Neill commented the City may end up treating the stimulus money the same way it would a Surplus.
Senior Accountant Schweitzer reported the City receives 17.15% of the 1% collected for
Property Taxes. She advised that Property Tax makes up almost half of General Fund Revenues and includes a variety of categories including secured, unsecured and supplemental with secured making up about 85% of our total revenues within property tax. Lastly, she advised the Assessed Valuation for FY 2021-22 was $63.7 billion and is the second largest in Orange
County. In response to Committee Member Joe Stapleton’s inquiry, Senior Accountant Schweitzer advised that the number one city was Irvine.
Senior Accountant Schweitzer reported COVID-19 has had limited impacts on Property Taxes so the FY 2020-21 estimate will remain the same. She advised if payments continue to come in as they have been the year will finish higher than projected. She estimates a 4% growth in
FY 2021-22 and noted only a 1% Consumer Price Index (CPI) adjustment is being received for
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FY 2021-22. She reminded the Finance Committee that staff is directed through Council Policy F-3 to budget revenues conservatively and although the graph shows the City is below the trend line it actually can and often does come in higher than projected. In response to Committee Member Collopy’s inquiry, Senior Accountant Schweitzer clarified the FY 2020-21 projected is $118 million, the FY 2020-21 Post-COVID Projection is $119.1
million, and the trend line is $119.5 million. In response to Committee Member John Reed’s inquiry, Senior Accountant Schweitzer reported she has not received any kind of a calculation regarding Proposition 19 from the City’s Property Tax consultant that would impact these numbers. She will ask for more information from the consultant.
Senior Accountant Schweitzer reported the City receives 1% of the 7.75% sales tax paid which equates to over 15% of General Fund revenues. She advised Autos and Transportation, Restaurants and Hotels, and General Consumer Goods make up the majority of the Sales Tax
Revenue. She reported the City also receives 0.3% of the 0.5% that the County collects for Public Safety.
In response to Committee Member Tucker’s inquiry, Senior Accountant Schweitzer confirmed the payment is received from the California Department of Tax and Fee Administration. She clarified that Property Tax and Public Safety funds are remitted to the City by the County. She
reported Autos and Transportation accounts for 36% of the Sales Tax received and has thrived during the pandemic. She advised General Consumer Goods and Restaurants and Hotels are
usually over 20% but are lower due to the pandemic.
Senior Accountant Schweitzer reported the United States Supreme Court ruled that states can mandate that businesses without a physical presence in the State collect and remit sales tax.
She noted Assembly Bill (AB) 147 requires retailers outside of California to register and collect California use tax and was signed into law on April 25, 2019. She advised AB147 has sharply
increased the Sales Tax collected.
Senior Accountant Schweitzer reported the City is keeping the FY 2020-21 mid-year estimate at a conservative $34.5 million. She advised the FY 2019-20 Q4 payment was less than
expected but noted the Governor did allow for a three-month payment date extension, so the reduced Q4 payment may be due to those missing payments. She reported the FY 2021-22
estimate was provided by the City’s Sales Tax consultant who anticipates slowing growth for Autos and Transportation as well as Building and Construction, but expects Restaurants to be
back at approximately 93% of their peak along with Consumer Goods continuing to recover.
In response to Committee Member Collopy’s inquiry, Senior Accountant Schweitzer explained the $6 million in anticipated growth from FY 2020-21 is not outside of the line where the City
would have expected to be had the pandemic not occurred. She advised the Sales Tax consultant estimated approximately $36 million for FY 2020-21 but noted the City wanted to
stay with the conservative $34.5 million because the fourth quarter payment came in less than the consultant was expecting and opined that it was better to opt for the more conservative
amount. Senior Accountant Schweitzer reported on TOT and advised the City collects 10% of the rent. She reported TOT makes up 9.1% of General Fund Revenues and includes hotel and
residential less payments to Visit Newport Beach Inc. She further explained last year TOT made up 11% of General Fund Revenues. She reported that over half of the City’s hotels were
closed last spring with Fashion Island Hotel remaining closed and the Renaissance Hotel just recently reopening. She noted Residential TOT is performing better than prior years but Hotel TOT is still down. She projects Hotel TOT will get back to 60% of pre-COVID actuals by the end of FY 2020-21 and get up to 80% of pre-COVID actuals by the end of FY 2021-22 with
Residential TOT projecting flat. Lastly, she reported that although TOT has performed better
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than projected it is still considerably below the trend line. She noted there is confidence that once the pandemic is over TOT revenues will bounce back as there is much pent-up demand. Senior Accountant Schweitzer reported on Other Taxes and Revenues and estimates it to be 20% less than the prior year based on prior recession trends. She advised the hardest-hit category from the virus was Charges for Services largely due to limited recreation and senior
service classes. She noted other areas impacted by the pandemic were Facility Rentals, Marine Charter Tax, and Investment Income. She reported some areas have fared well during the pandemic such as Parking Revenues and Plan Checks. She clarified that there are decreases in Intergovernmental and Other Revenues which are due to grants and donations that are not budgeted until they are known.
Senior Accountant Schweitzer reported 99% of revenue within the Tideland Fund comes from the use of money and property such as Parking Meter Revenue, Lease of Properties, Onshore and Offshore Moorings, and Marina Park Revenue. She advised a handful of accounts within the Tideland Fund are capped and anything over an established baseline goes into the Harbor
Capital Fund to help fund capital improvements within the Harbor. She reported Parking dropped at the end of FY 2019-20 but bounced back quickly in FY 2020-21. She advised
Leases had minor impacts from COVID and are still up year over year. She noted Investment Income is down and Sale of Oil is down in the FY 2020-21 estimate but is showing improvement.
Senior Accountant Schweitzer reported 97% of revenue within the Water Fund comes from Charges for Services which include the Sale of Water, both fixed and usage charges, Meter
Turn On, and Connection Charges. She advised the Water Rate Adjustment became effective in January 2020 with annual increases until 2024. She reported Sale of Water is based on
consumption and can vary every year. She reported Water Capital Fund Revenues are related to Investment Income which is projected to be down for FY 2020-21 and FY 2021-22, which
explains the drastic decrease.
Senior Accountant Schweitzer reported 98% of the revenue within the Wastewater Fund comes from Charges for Services. She advised the Wastewater Rate was adjusted effective January
1, 2018, with annual increases until January 2022. She explained sewer use is based on water consumption and can vary. Lastly, she reported Water Capital Fund Revenues are related to
Investment Income which is projected to be down for FY 2020-21 and FY 2021-22.
In response to Committee Member Tucker’s inquiry, Senior Accountant Schweitzer reported that much of the revenue that comes in for the recreation classes is from contract classes so it
would be expected that expenditure would be down as well.
Chair O’Neill called for public comments and hearing none, closed the public comments. Chair O’Neill reported that he has spoken to several colleagues in other cities who are scrambling and noted that the City of Anaheim has had it rough. He advised that Anaheim just received word they would be receiving approximately $100 million from the American Rescue Plan Act federal stimulus package, which only covers one year of lost revenue for them. He noted Disneyland will be reopening at 35% capacity at best and restricted to California residents which does not help bring back tourism to Anaheim. He appreciates how conservative the City has been with revenue assumptions and hopes the expected summer economic activity comes to fruition. He encouraged residents to continue to shop locally, support local businesses, and encouraged people to take staycations. The item was received and filed. D. WORK PLAN REVIEW Summary: Staff and Finance Committee to review the proposed work plan and adjust as necessary.
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Recommended Action: Receive and file. Chair O’Neill reported that the next meeting of the Finance Committee will be April 15 where Audit Services recommendations and the Proposed Budget will be discussed. He indicated that there may be a meeting on April 29 but will discuss the need with City Manager Leung. He
clarified there will be a meeting on May 13 where discussions regarding the budget will continue. He reported there will be a Joint City Council/Finance Committee Budget Study Session on May 25 and requested all Finance Committee members attend in-person or virtually and believes it will start at 4:00 p.m. He advised there will be a May 27 Finance Committee meeting at 3:00 p.m. to review the budget and make a recommendation to the City Council. He suggested the Finance Committee retain the June 10 meeting on the calendar but noted it will
probably be canceled. Chair O’Neill opened public comments.
Jim Mosher requested clarification if the intention is to hold non-joint meetings in a virtual format. He expressed his frustration with technical difficulties that prevent him from joining the
virtual meeting before the meeting has started for two months in a row. He suggested he email his non-agenda comments since he was unable to connect to the meeting when comments were expected.
Chair O’Neill noted he would extend the three-minute speaking limit for Mr. Mosher given the technical issues he described. In response to Mr. Mosher’s inquiry, Chair O’Neill commented
he is unable to provide an answer regarding the intent to continue holding the meetings virtually.
Chair O’Neill reopened agenda and non-agenda comments.
Mr. Mosher reported approximately one month ago he was unable to locate the contract with
Socrata. He commented that the City spends $20,000 in software maintenance for both the Open Expenditure and the Open Budget Software sometimes referred to as Open Checkbook.
He noted the contract runs through the end of November and inquired if the City will still be using the Open Expenditure module internally, and if it will be used after November, and lastly,
will it ever be made public like other cities to show real-time expenditure activity of the City.
Mr. Mosher reported that during the same time he could not locate the larger contract with Tyler Technologies for the City’s Enterprise Resource Planning (ERP) Software System. He
noted he was only able to find the contract made in 2014 which expired in 2019. He also noted the City Clerk shows the contract as being expired yet it has been amended after the expiration
date. He requested the status of the ERP software contract.
Mr. Mosher reported an error on Page 7 of the minutes of February 18 which should be corrected to reflect the Library copy charge is increasing from $0.15 per page to $0.35 per
page.
Mr. Mosher inquired how the City’s Auditor became CliftonLarsonAllen LLP as it had been White Nelson Diehl Evans. He noted he has never seen the Comprehensive Annual Financial Report agendized at either the Finance Committee or the City Council for discussion and expressed concern that the City spends a lot of money on a very lengthy report that is not
discussed.
Chair O’Neill closed the agenda and non-agenda comments. Deputy Director/Finance Montano advised staff does access some of the functionality internally that is available in Open Expenditures. He noted there has not been much demand for releasing
it for public access other than Mr. Mosher.
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Chair O’Neill encouraged the public to review the Comprehensive Annual Financial Report available on the City’s website. The item was received and filed. VI. FINANCE COMMITTEE ANNOUNCEMENTS ON MATTERS WHICH MEMBERS WOULD LIKE PLACED ON A FUTURE AGENDA FOR DISCUSSION, ACTION OR REPORT (NON-DISCUSSION ITEM) None VII. ADJOURNMENT The Finance Committee adjourned at 3:53 p.m. to the next regular meeting of the Finance Committee. The agenda for the Regular Meeting was posted on March 4, 2021, at 5:52 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
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April 15, 2021, Finance Committee Agenda Comments
These comments on an item on the Newport Beach Finance Committee agenda are submitted by: Jim
Mosher ( jimmosher@yahoo.com ), 2210 Private Road, Newport Beach 92660 (949-548-6229)
Item IV.A. MINUTES OF MARCH 11, 2021
Changes to the draft minutes passages shown in italics are suggested in strikeout underline format.
Page 3 (agenda packet page 6), paragraph 5 from end, last sentence: “Deputy Director/Finance
Montano further explained the review would also cover any pay points in the City that performs
perform any type of revenue collection from a customer service operational standpoint.”
Page 4, paragraph 3 from end, first sentence: “In response to Chair O’Neill’s inquiry regarding
what types of funding is are included in the General Fund budget for non-recurring expenditures,
City Manager Leung advised one-time expenses include the $5 million transfer to the Capital
Improvement Program (CIP), $8.5 million to the Facilities Financial Plan (FFP).”
Page 5, paragraph 2: “In response to Committee Member Collopy’s inquiry, Senior Accountant
Schweitzer clarified the FY 2020-21 projected property tax revenue is $118 million, the FY 2020-
21 Post-COVID Projection is $119.1 million, and the trend line is $119.5 million.”
Page 5, paragraph 3: “In response to Committee Member John Reed’s inquiry, Senior Accountant
Schweitzer reported she has not received any kind of a calculation regarding Proposition 19 from
the City’s Property Tax consultant that would impact these numbers.”
Page 6, full paragraph 4, last sentence: “Lastly, she reported Water Wastewater Capital Fund
Revenues are related to Investment Income which is projected to be down for FY 2020-21 and FY
2021-22.”
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FY 2021-22 Proposed Budget Finance
Committee
Meeting
April 15, 2021
13
City of Newport Beach –Finance Department 2
Principles Guiding Development of the Budget
Budget Emphasizes:
•Providing high quality municipal services that residents expect
•Providing a safe and secure neighborhood
•Keeping Newport Beach looking great
•Maintaining a prosperous, fiscally sustainable, and economically viable city
Additional Focus:
•Restoring budget cuts made due to the COVID-19 Pandemic
•Addressing key City Council priorities identified at the January 30, 2021, City Council
Planning Session
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City of Newport Beach –Finance Department 3
Straight to the Point: Key Messages
•A strong budget surplus is still projected for FY 2020-21
•The FY 2021-22 budget is balanced
•Parallel action will restore as needed the remaining reductions to the FY 2020-21 budget
•Property tax revenue continues growth at a steady pace
•Sales tax and transient occupancy tax revenues remain on a strong recovery trajectory
•Proposed expenditures remain relatively flat, with additional funding allocated to key City
Council priorities
•Continued strategy of allocating $35 million to reducing the unfunded pension liability, with
additional funding allocations likely at year-end
•Continued funding of capital improvement projects, including neighborhood enhancement
projects, with additional funding allocations likely at year-end
15
City of Newport Beach –Finance Department 4
Budget Development Timeline
Source and Use Projections
Personnel Budget Development
Departmental CIP Preparation
Departmental Budget Preparation
City Manager Review
Finance Committee Review
City Council Review
Budget Adoption
Budget Implementation
Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep
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City of Newport Beach –Finance Department 5
Opportunities for Public Review of the Budget
Date Meeting Type Meeting Purpose
Saturday, January 30, 2021 Special City Council Meeting City Council Planning Session
Thursday, February 18, 2021 Finance Committee Meeting Long-Range Financial Forecast (LRFF) update
Tuesday, March 9, 2021 City Council Study Session Early look at Capital Improvement Program
Thursday, March 11, 2021 Finance Committee Meeting Review of revenue budget assumptions
Thursday, April 15, 2021 Finance Committee Meeting Review of proposed budget
Tuesday, May 25, 2021 Joint City Council / Finance Committee
Study Session Joint review of proposed budget
Thursday May 27, 2021 Finance Committee Meeting Finalize recommendations to City Council
Tuesday, June 8, 2021 City Council Meeting Public hearing and adoption of budget
17
Updated FY 2020-21
Budget Information
6City of Newport Beach –Finance Department 18
City of Newport Beach –Finance Department 7
Recap of Second Quarter Budget Update
•Positive revenue variance of $17.2 million
•$0.5 million of projected expenditure savings
•$17.7 million net improvement
•Still under the historical trendline
•$27.5 million of projected excess reserves
•$30.2 of budget cuts not yet restored
•Preliminary third quarter projections show
sustained improvement in revenues
•Staff will be recommending restoration of all
appropriate remaining budget reductions
$-
$25
$50
$75
$100
$125
$150
$175
$200
$225
$250
Adopted ProjectedMillions
Property Tax Sales Tax TOT Other
19
Tier 1 Tier 2 Tier 3 Tier 4 Tier 5 Tier 6
Operating Cuts Temporary
Hiring Freeze
Deferred
Capital
ISF Charge
Reductions
Contingency
Reserve
Service Level
Cuts
Professional and Contract Svcs.1,621,760$ -$ -$ -$ -$ -$ 1,621,760$
Other Non-Personnel Budgets 1,136,807 - - - - - 1,136,807
Personnel Services - 2,000,000 - - - - 2,000,000
Transfers Out - - 18,477,137 500,000 - - 18,977,137
Capital Budgets - - 2,500,000 - - - 2,500,000
Insurance - - - 2,000,000 - - 2,000,000
Equipment Replacement - - - 2,500,000 - - 2,500,000
Contingency Reserve Draw - - - - 2,304,399 - 2,304,399
Total 2,758,567$ 2,000,000$ 20,977,137$ 5,000,000$ 2,304,399$ -$ 33,040,103$
Cuts Restored in First Quarter - - - (500,000) (2,304,399) - (2,804,399)
Cuts To be Restored
Transfer to FFP - - (8,500,000) - - - (8,500,000)
Transfer to Harbor Capital - - (4,500,000) - - - (4,500,000)
General Fund CIP - - (1,537,060) - - - (1,537,060)
Neighborhood Enhancement - - (2,339,014) - - - (2,339,014)
Restoration Not Required (2,758,567) (2,000,000) (4,101,063) (4,500,000) - - (13,359,630)
Remaining Cuts in Place -$ -$ -$ -$ -$ -$ -$
Total
City of Newport Beach –Finance Department 8
Tiered Budget Balancing Framework
•$33.0 million of reductions
approved
•$2.8 million of reductions
restored in the first quarter
•$4.8 million of tier 1 and tier 2
reductions in spending achieved
•$16.9 million of reductions
recommended for restoration
•Restoration of the remaining
$8.6 million of reductions is not
required
20
City of Newport Beach –Finance Department 9
Tiered Budget Balancing Framework
Restoration of $16.9 Million
•$8.5 million contribution to Facilities
Financial Plan (FFP)
•$4.5 million contribution to Harbor CIP
•$1.5 million of General Fund CIP
•$2.3 million of Neighborhood
Enhancement projects
Restoration Not Required of $8.6 Million
•$4.1 million of CIP projects that are not
ready to move forward
•$2.0 million of fund balance returned from
insurance funds
•$2.0 million of fund balance returned from
information technology fund
•$500,000 contribution to facilities
maintenance plan
With these restorations, all FY 2020-21 budget reductions will be addressed.
21
Budget Overview
10City of Newport Beach –Finance Department 22
City of Newport Beach –Finance Department 11
Summary of All Funds -Expenditures
FY 18 FY 19 FY 20 FY 21 FY 22
Adopted Adopted Adopted Adopted Proposed
Operating Budget 282,068,157$ 291,709,382$ 304,005,215$ 307,759,024$ 309,002,305$ 0.40%
CIP New Appropriations 25,724,200 46,807,906 45,686,890 31,377,224 35,506,078 13.16%
Total Budget 307,792,357$ 338,517,288$ 349,692,105$ 339,136,248$ 344,508,383$ 1.58%
% Variance
•Minimal growth in operating expenditures of 0.40%
•Routine fluctuations in capital spending
•1.58% growth in overall budget
23
City of Newport Beach –Finance Department 12
All Funds Operating Expenditures Trend
Adopted Adopted Adopted Adopted Proposed
$250 M
$275 M
$300 M
$325 M
$350 M
FY 18 FY 19 FY 20 FY 21 FY 22
24
City of Newport Beach –Finance Department 13
Expenditures by Fund
General Fund
73%
Tidelands
1%
Water
9%
Wastewater
1%
Other
16%
25
City of Newport Beach –Finance Department 14
Major Fund Operating Expenditures
FY 18 FY 19 FY 20 FY 21 FY 22
Adopted Adopted Adopted Adopted Proposed
General Fund 202,757,357$ 208,745,822$ 219,111,935$ 219,859,038$ 225,851,633$ 2.73%
Tidelands 3,138,803 3,299,157 2,544,989 2,955,080 3,136,238 6.13%
Water 22,606,550 24,669,005 26,584,151 27,969,925 27,933,241 -0.13%
Wastewater 3,592,976 3,824,712 3,966,734 4,284,105 3,956,840 -7.64%
Other 49,972,471 51,170,686 51,797,406 52,690,876 48,124,354 -8.67%
Total Operating Budget 282,068,157$ 291,709,382$ 304,005,215$ 307,759,024$ 309,002,306$ 0.40%
% Variance
•Minimal growth in operating expenditures of 0.40%
•General Fund growth under 3%, including program enhancements
26
City of Newport Beach –Finance Department 15
CIP Investment in Infrastructure and Facilities
•Fluctuations in capital spending are routine
•Nearly $75 million budgeted for continued capital investment
•All routine General Fund transfers in support of capital spending
have been restored
FY 18 FY 19 FY 20 FY 21 FY 22
Adopted Adopted Adopted Adopted Proposed
CIP New Appropriations 25,724,200$ 46,807,906$ 45,686,890$ 31,377,223$ 35,506,078$ 13.16%
CIP Estimated Rebudgets 35,194,809 30,757,550 47,562,633 55,774,942 39,341,387 -29.46%
Total Budget 60,919,009$ 77,565,456$ 93,249,523$ 87,152,165$ 74,847,465$ -14.12%
% Variance
27
General Fund
Budget Overview
16City of Newport Beach –Finance Department 28
City of Newport Beach –Finance Department 17
Historical General Fund Revenues
$235
$241
$219
$200 $204
$217
$230 $230
$219
$233
$170
$180
$190
$200
$210
$220
$230
$240
$250
$260
$270
2016-17 Actual 2017-18 Actual 2018-19 Actual 2019-20 Actual 2020-21 Projected 2021-22 ProjectedMillions
Pre-COVID Projection Initial Post-COVID Projection Actual and Current Projection
29
City of Newport Beach –Finance Department 18
General Fund Revenue
0%
25%
50%
75%
100%
FY 18 FY 19 FY 20 FY 21 FY 21 Proj.FY 22
Other Revenue
Charges for Services
Other Taxes
TOT
Sales Tax
Property Tax
30
City of Newport Beach –Finance Department 19
General Fund Revenue (in millions)
52%
17%
8%
5%
8%
10%Property Taxes $122.2
Sales Tax $40.3
Transient Occupancy Tax $19.0
Other Taxes $10.8
Charges for Services $19.0
All Other Sources $22.3
31
City of Newport Beach –Finance Department 20
General Fund Expenditures (in millions)
61.6%29.8%
0.3%
8.2%
Salaries & Benefits $151.7
Maintenance & Operations $73.4
Capital Outlay $0.8
Transfers $20.2
32
City of Newport Beach –Finance Department 21
General Fund Expenditures by Department
FY 18 FY 19 FY 20 FY 21 FY 22
Adopted Adopted Adopted Adopted Proposed
Police 60,632,280 62,627,537 66,040,641 67,002,345 67,401,926 0.60%
Fire 48,353,522 50,514,086 53,193,484 54,790,911 55,861,885 1.95%
Public Works 34,323,356 35,774,140 38,255,532 37,274,177 41,193,237 10.51%
Recreation and Senior Services 13,549,465 13,624,221 13,853,165 13,325,836 13,360,496 0.26%
Community Development 12,616,114 12,834,324 12,952,728 12,525,476 12,772,405 1.97%
Finance 9,070,922 9,157,560 9,461,368 9,573,969 9,667,618 0.98%
Library 8,638,644 9,021,784 9,265,651 9,559,849 9,655,108 1.00%
Utilities 4,164,163 4,336,136 4,759,656 5,033,549 5,144,631 2.21%
City Manager 3,112,978 3,022,380 3,344,155 3,543,321 4,571,940 29.03%
Human Resources 3,130,353 3,142,478 3,293,238 3,423,267 3,448,725 0.74%
City Attorney 2,526,908 2,593,143 2,623,784 2,708,230 2,725,458 0.64%
City Clerk 1,043,415 1,131,339 1,065,439 1,206,539 1,080,305 -10.46%
City Council 1,008,533 834,796 881,199 848,125 841,003 -0.84%
Misc Non Op 586,704 131,896 121,896 1,043,444 126,896 -87.84%
Vacancy Factor - - - (2,000,000) (2,000,000) 0.00%
202,757,357$ 208,745,820$ 219,111,935$ 219,859,038$ 225,851,633$ 2.73%
% Variance
33
City of Newport Beach –Finance Department 22
General Fund Operating Expenditures Trend
Adopted Adopted Adopted Adopted Proposed
$180 M
$190 M
$200 M
$210 M
$220 M
$230 M
$240 M
FY 18 FY 19 FY 20 FY 21 FY 22
34
City of Newport Beach –Finance Department 23
General Fund Transfers
•All routine General Fund transfers in support of capital spending
have been restored
•800 MHz Radio Fund transfer no longer required
FY 18 FY 19 FY 20 FY 21 FY 22
Adopted Adopted Adopted Projected Proposed
General Fund CIP 5,397,520$ 5,525,000$ 5,220,000$ 5,000,000$ 5,000,000$ 0.0%
Facilities Financing Plan (FFP)8,500,000 8,500,000 10,020,333 8,500,000 8,500,000 0.0%
Harbor & Beaches Capital Plan 6,000,000 4,000,000 5,500,000 4,500,000 4,500,000 0.0%
Facilities Maintenance Plan (FMP)1,000,000 1,000,000 2,500,000 1,000,000 1,500,000 50.0%
800 MHz Radio Fund 500,000 534,000 500,000 - - -
Other One-Time Transfers *400,000 5,350,000 8,159,919 2,200,000 700,000 -68.2%
Total 21,797,520$ 24,909,000$ 31,900,252$ 21,200,000$ 20,200,000$ -4.7%
* FY 22 amount is a transfer out of the Oceanfront Encroachment Reserve
Note: Some transfers prior to FY 21 were funded from year-end surplus.
% Variance
35
City of Newport Beach –Finance Department 24
Internal Service Fund Charges
FY 18 FY 19 FY 20 FY 21 FY 22
Adopted Adopted Adopted Adopted Proposed
Information Technology 5,756,155 5,964,619 7,149,139 7,232,902 7,307,210 1.03%
Vehicle Replacement 2,778,697 2,906,655 2,906,655 3,420,827 4,084,061 19.39%
Equipment Replacement 2,838,467 2,853,036 3,086,604 3,351,330 3,330,552 -0.62%
Insurance 6,822,155 9,992,921 11,224,997 11,225,000 8,961,000 -20.17%
OPEB 8,085,678 3,834,916 3,852,251 4,924,163 4,924,163 0.00%
Compensated Absences 2,509,457 2,549,427 2,625,002 2,669,045 2,713,272 1.66%
Total 28,790,610$ 28,101,574$ 30,844,648$ 32,823,267$ 31,320,257$ -4.58%
% Variance
•Increase in vehicle replacement charges to recommended level of
funding
•Decrease in insurance charges to draw down excess fund balance
36
City of Newport Beach –Finance Department 25
Changes in Full-Time Staffing 2009-2020
832
805
792
763
752
736 728 730 724 726 726 728 728 730
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022# of PositionsFiscal Year
37
F/T FTE F/T FTE F/T FTE F/T FTE F/T FTE
General Fund
City Clerk 4.00 2.71 5.00 1.00 5.00 1.00 5.00 1.00 5.00 1.00
City Attorney 7.00 1.00 7.00 1.00 7.00 1.60 7.00 1.60 7.00 1.60
City Manager 6.50 1.00 6.00 1.50 6.00 1.30 6.00 1.30 6.00 1.30
Human Resources 11.00 0.50 11.00 0.50 11.00 1.25 11.00 1.25 11.00 1.25
Finance 32.50 3.02 32.00 4.26 32.00 4.55 33.00 4.55 33.00 4.55
Police 229.00 13.43 231.00 14.87 232.00 14.87 232.00 14.87 232.00 14.87
Fire 143.10 41.42 143.90 42.17 143.90 43.12 143.80 43.12 143.80 42.56
Community Development 49.90 4.10 50.10 8.37 50.10 10.22 49.20 10.20 50.20 10.20
Library 36.00 22.83 36.00 22.83 36.00 22.83 36.00 22.83 36.00 22.83
Recreation and Senior Services 42.50 36.86 42.00 37.96 42.00 38.00 42.00 38.00 42.00 39.43
Public Works 92.50 4.08 90.50 5.08 85.50 5.68 85.50 5.67 85.50 9.47
Utilites 1.00 - 1.00 - 9.50 - 9.50 - 9.50 -
Total 655.00 130.95 655.50 139.54 660.00 144.42 660.00 144.39 661.00 149.06
Other Funds 70.00 9.84 70.50 11.46 68.00 13.79 68.00 15.73 69.00 15.23
Grand Total 725.00 140.79 726.00 151.00 728.00 158.21 728.00 160.12 730.00 164.29
FY 21
Adopted
FY 22
Proposed
FY 18
Adopted
FY 19
Adopted
FY 20
Adopted
City of Newport Beach –Finance Department 26
Five-Year Staffing Detail
38
Staffing Changes
and Program
Enhancements
27City of Newport Beach –Finance Department 39
City of Newport Beach –Finance Department 28
Proposed Additional Staffing
•Harbor Department
•Full-time Permit Technician
•Community Development
•Full-time Senior Civil Engineer position to replace contract staffing (offset by reduction)
•Public Works
•3.0 part-time Maintenance Aides to replace contract staffing (mostly offset by reduction)
•0.3 part-time Associate Engineer for utility undergrounding projects
•Recreation and Senior Services
•1.43 part-time FTEs approved during FY 2020-21 for the Marina Park Community Boating
Program
40
City of Newport Beach –Finance Department 29
Key General Fund Program Enhancements
•Anticipated refuse / recycling contract increase and related additional revenue included in the
base budget and not listed as a program enhancement
•Net General Fund impact of $1.5 million
•$500,000 General Fund commitment to the Costa Mesa Homeless Shelter
•20 beds allocated to Newport Beach in a 5-year agreement
•Capital contribution of $1.6 million funded from Affordable Housing Reserve and Hoag
Development Agreement
•Remaining funding this year coming from accumulated funds from the Hoag 10-year
contribution of $300,000 per year
•Some additional ongoing funding will be required in future years
41
City of Newport Beach –Finance Department 30
Key General Fund Program Enhancements
•$200,000 for the Police Department’s Boardwalk Ambassador Program
•Two 2-person teams, including a supervisor, staffed through Community Service
Corporation (CSC), which is a private contractor with boardwalk safety experience
•Staffed seven days per week in the Summer and Saturdays and Sundays during the rest
of the year with staff that are highly visible, approachable, and professionally uniformed
•Focus is to improve the quality of life for residents and visitors to the peninsula by
ensuring compliance with the municipal code and boardwalk safety rules
•Patrolling E Street to 36th Street, including the Balboa and Newport Piers
•Provide friendly advice, guidance, and directions to visitors in need of assistance
•The goal of the program is to provide additional presence and visibility on the boardwalk
to augment the PET, HLO, and Area 1 Patrol deployments
42
City of Newport Beach –Finance Department 31
Key General Fund Program Enhancements
•$123,760 for additional after hours and weekend contract hours for Code Enforcement
•Funding for seven days per week from July to September and four days per week for
the rest of the fiscal year
•Goal is to augment City staff at times when additional enforcement is required
•$107,463 for a full-time Permit Technician in the Harbor Department
•Will provide support and technical assistance for permittees
•Enhanced focus on recordkeeping including inspections, registration, and insurance
•Will add a subject matter expert to the Department in these areas
•Will free up the Code Enforcement Supervisor’s time for enforcement activities
43
City of Newport Beach –Finance Department 32
Summary of Recommended Enhancements
Fund Department Item Description Net Budget Impact
General Fund City Manager Costa Mesa Homeless Shelter Operating Costs 500,000
Police Boardwalk Ambassador Program 200,000
Community Development Increase Code Enforcement Contract Staffing 123,760
Various Miscellaneous Personnel Budget Changes 266,261
Miscellaneous Non-Personnel Budget Changes 129,887
Total General Fund 1,219,908
Tidelands Harbor Full-Time Permit Technician 107,463
Water Utilities Camera / Security Upgrade at Big Canyon Reservoir 40,000
Total Other Funds 147,463
Total FY 22 Program Enhancements 1,367,371
44
General Fund
Reserves and Surplus
33City of Newport Beach –Finance Department 45
City of Newport Beach –Finance Department 34
General Fund Sources and Uses
•Two FY 21 transfers in
•Drawdown of excess
operating reserves in FY 21
•Tier restorations
•Contingency Reserve
growth
FY 20 FY 21 FY 21 FY 22
Actual Q2 Projection Adjusted Proposed
SOURCES:
Beginning Unrestricted Fund Balance 23,119,513$ 24,081,225$ 24,081,225$ 8,646,269$
Operating Revenues 229,953,017 218,605,517 218,605,517 233,731,142
Less: Restricted Revenues (2,785,622) (765,967) (765,967) (1,128,513)
Prior Year Resources Carried Forward - 2,095,632 2,095,632 -
Transfers In from Other Funds 17,207,099 19,160,543 19,888,810 1 13,197,157
TOTAL SOURCES 267,494,007 263,176,950 263,905,217 254,446,055
USES:
Operating Expenditures 211,066,539 227,513,609 227,513,609 225,851,633
Transfers Out 32,346,243 8,200,000 8,200,000 20,200,000
Appropriations from Excess Operating Reserves - - 16,876,074 2 -
Addition to 25% Contingency Reserve - - 2,669,266 3 -
TOTAL USES 243,412,782 235,713,609 255,258,949 246,051,633
ENDING UNRESTRICTED RESOURCES 24,081,225$ 27,463,341$ 8,646,269$ 8,394,422$
1 CIOSA and 800 MHz fund balance.
2 Previously discussed restoration of budget reductions.
3 Required increase to 25% Contingency Reserve due to growth in FY 22 budget.
46
City of Newport Beach –Finance Department 35
Proposed General Fund Surplus Allocation
•Historically year-end surplus funds have been held over until the end of the fiscal year for allocation
•Staff propose shifting this discussion to September –October after the books are closed
•Allows for more timely utilization of excess resources, including for purposes outlined in City Council
Policy F-5
•The projected $8.6 million year-end surplus is likely to grow with typical budget savings
•Staff are recommending two allocations at this time
•$1.0 million toward the Permanent Supporting Housing Project (remaining $2.0 million to be funded
by development agreements and/or affordable housing funds
•$650,000 toward the General Plan update
•Decisions would be made in September –October regarding additional funding toward the City’s
unfunded pension liability and neighborhood enhancement projects / infrastructure consistent with City
Council Policy F-5
47
City of Newport Beach –Finance Department 36
Proposed General Fund Surplus Allocation
Near Term Long-Term
Improvements Obligations
Available Unrestricted Resources 8,646,269$
Fund Now:
Permanent Supportive Housing 1,000,000$ -$ 1,000,000$
General Plan Update 650,000 - 650,000
Business Tax Waiver Program 251,847 - 251,847
Total to be Funded Now 1,901,847 - 1,901,847
-
Fund Later:
Unfunded Pension Liability Contribution - 3,372,211 3,372,211
Neighborhood Enhancements / Infrastructure - 3,372,211 3,372,211
Total to be Funded Later - 6,744,422 6,744,422
Total Allocation 1,901,847$ 6,744,422$ 8,646,269$
Remaining Unrestricted Resources -$
Total
48
City of Newport Beach –Finance Department 37
What’s Not Included: Federal Funds
•The City expects to receive approximately $9.3 million from the $130.2 billion allocated to
cities and counties in the American Rescue Plan
•Significantly smaller allocation than many of our neighbors due to the allocation
methodology, which is based on the CDBG allocation formula
•Funds will be received over two fiscal years, with half expected before the end of the current
year in June
•Very limited guidance is available at this time regarding eligible uses
•Staff expect that the entire amount can be transferred to the General Fund as an offset to
revenue losses, but this will depend on the definition of revenue losses in the finalized
guidance
•Staff is not recommending any action regarding utilizing the funds until the finalized
guidance is available
49
Unfunded Pension
Liability
38City of Newport Beach –Finance Department 50
City of Newport Beach –Finance Department 39
Accelerated PERS Payment History (All Funds)
FY 2018 FY 2019 FY 2020 FY 2021 FY 2022
Actuals Actuals Actuals Revised Proposed
Minimum Payment $24,959,949 $25,569,840 $26,196,003 $29,078,448 $30,029,330
Base Annual Discretionary Payment 8,914,622 8,930,159 8,803,997 5,921,552 4,970,670
CalPERS Investment Loss Mitigation - - - 5,000,000 TBD
Total Planned UAL Payment 33,874,571 34,499,999 35,000,000 40,000,000 35,000,000
•Maintain $35 million minimum contribution
•Consider additional contribution toward CalPERS investment loss
mitigation from budget surplus as part of year-end results report
51
City of Newport Beach –Finance Department 40
Impact of Continued $35 Million Payments
Source: CalPERS Pension Outlook Overview tool
Assumed 7% investment return
$329 $299 $283 $267 $249 $231 $211 $189 $166 $142 $115 $85 $52
$16
$0$35 $35 $35 $35 $35 $35 $35 $35 $35 $36 $37 $38 $38
73%75%77%79%80%82%84%86%89%91%93%95%97%99%100%
$-
$100
$200
$300
$400
2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036
UAL Balance (Mil)Payment (Mil)Funded Status
52
City of Newport Beach –Finance Department 41
Recap: Key Messages
•A strong budget surplus is still projected for FY 2020-21
•The FY 2021-22 budget is balanced
•Parallel action will restore as needed the remaining reductions to the FY 2020-21 budget
•Property tax revenue continues growth at a steady pace
•Sales tax and transient occupancy tax revenues remain on a strong recovery trajectory
•Proposed expenditures remain relatively flat, with additional funding allocated to key City
Council priorities
•Continued strategy of allocating $35 million to reducing the unfunded pension liability, with
additional funding allocations likely at year-end
•Continued funding of capital improvement projects, including neighborhood enhancement
projects, with additional funding allocations likely at year-end
53
City of Newport Beach –Finance Department 42
Questions?
54
CITY OF NEWPORT BEACH
FINANCE COMMITTEE
STAFF REPORT
Agenda Item No. 5C
April 15, 2021
TO: HONORABLE CHAIR AND MEMBERS OF THE COMMITTEE
FROM: Finance Department
Scott Catlett, Finance Director
949-644-3126 or scatlett@newportbeachca.gov
SUBJECT: BUDGET AMENDMENTS FOR QUARTER ENDING MARCH 31, 2021
EXECUTIVE SUMMARY
The purpose of this memorandum is to report on the budget amendments for the third
quarter of FY 2020-21. All budget amendments are in compliance with City Council Policy
F-3, Budget Adoption and Administration.
DISCUSSION
City Council Policy F-3, Budget Adoption and Administration, identifies how
appropriations can be transferred, increased or reduced. The Finance Committee
reviews a quarterly report of City Council and City Manager budget amendments including
their effect on fund balance. Please find the list of budget amendments included as
Attachment A.
Prepared by: Submitted by:
/s/ Walid Harding
/s/ Scott Catlett
Walid Harding Scott Catlett
Budget Analyst Finance Director
Attachment:
A. Budget Amendments Fiscal Year 2020-21 Quarter Ending March 31,
2021
55
ATTACHMENT A
BUDGET AMENDMENTS FISCAL YEAR 2020-21 QUARTER ENDING MARCH 31, 2021
56
BA #Date Amendment Type Fund Revenues Expenditures
Net Effect on Fund Balance
Increase/(Decrease)Department Explanation
023 1/12/2021 City Council General Fund 40,500.00 40,500.00 - Library To increase revenue estimates and expenditure appropriations
and accept funding from the California State Library for Literary Services (CLLS) annual grant program.
024 1/26/2021 City Council General Fund 11,038.00 11,038.00 - Police To increase expenditure appropriations and revenue estimates from the acceptance of the Emergency Management Performance Grant (EMPG); a pass through grant from the Federal Emergency Management Agency (FEMA) to be used for supplies and equipment for the City's Emergency Operations
Center.
025 1/7/2021 City Manager General Fund - 5,000.00 (5,000.00) City Manager To transfer reserve funds for the use of PEG Equipment.
026 1/26/2021 City Council General Fund - 18,030.93 (18,030.93) Human Resources To increase expenditure appropriations to provide funding for the
first six months of the Appointed Employees updated contracts.
027 1/26/2021 City Council Small Business Grants 290,000.00 290,000.00 - City Manager To increase revenue estimates and expenditure appropriations by accepting funds from the County of Orange for economic support initiatives for the community's small businesses.
028 3/9/2021 City Council General Fund 50,000.00 - 50,000.00 Recreation and Senior Services To increase revenues from the approval and acceptance of grant funding from the Hoag Memorial Hospital Presbyterian
Community Benefit Program to provide funding support for the
OASIS Senior Center Transportation Program.
029 2/9/2021 City Council Asset Forfeiture Fund - 336,964.43 (336,964.43) Police To increase expenditure appropriations out of existing Asset Forfeiture fund balance for the purchase of locker room lockers for the Police Station Locker Room Remodel project.
Asset Forfeiture Fund - 178,254.06 (178,254.06)
General Fund - 366,254.06 (366,254.06)
Facilities Maintenance 366,254.06 366,254.06 -
Assessment District #124 135,000.00 135,000.00 -
General Fund - 135,000.00 (135,000.00)
033 3/11/2021 City Manager General Fund 11,369.00 10,000.00 1,369.00 Police To increase expenditure appropriations for an evidence packing station and crime light. The County of Orange will reimburse the City $11,369 through the County's Prop 69 - DNA Identification Fund, as the crime scene light and packing station will enhance
the DNA Program. The $1,369 variance between the cost of the
supplies and requested expenditures increase will be covered by the Department's existing budget appropriations.
City of Newport BeachFiscal Year 2020-21 Budget AmendmentsQuarter Ending March 31, 2021
To increase expenditure appropriations for the Police Station Locker Room Remodel project. Remaining Asset Forfeiture funds will be used to fund PD overtime expenditures. The General Fund will fund a transfer into the Facilities Maintenance Plan to fund the remaining project expenditures not covered with existing Police
Station Locker Room Remodel CIP project funds.
Police0302/9/2021 City Council
2/23/2021031 To increase expenditure appropriations for the Underground
Assessment District #124 with an advance from General Fund unappropriated fund balance for the engineering and design work.
Public WorksCity Council
57
4/9/21
Scheduled Date Agenda Title Agenda Description
Thursday, April 15, 2021 Audit Services Recommendation Staff will propose the selection of a new external financial reporting and
disclosure auditor.
Proposed Fiscal Year 2021-22 Budget Overview Staff will provide an overview of the Proposed Fiscal Year 2021-22 Operating
Budget.
Budget Amendments for Quarter Ending March 31, 2021 Staff will report on the budget amendments from the prior quarter.
Work Plan Review Staff and Finance Committee to review the proposed work plan and adjust as necessary.
Thursday, April 29, 2021 Proposed FY 2021-22 Budget Overview (optional - if needed)Staff will provide an overview of the Proposed FY 2021-22 Operating Budget.
Thursday, May 13, 2021 Quarterly Budget Update Present results of quarter ending March 31.
Proposed FY 2021-22 Follow-Up Meeting Staff will be available to answer follow-up questions on the proposed Fiscal
Year 2021-22 budget. Finance Committee may discuss their impending recommendation(s) to Council.
Internal Audit Program Update Staff will provide a progress to date report of the internal control and
performance audit program.
Tuesday, May 25, 2021 Joint City Council/Finance Committee Budget Study Session FY 2021-22 Proposed budget review.
Thursday, May 27, 2021 Recommendation FY 2021-22 Budget Make final recommendation to the City Council on the proposed FY 2021-22 Operating Budget.
Thursday, June 10, 2021 Audit Entrance Conference (Optional)Auditors will contact members of the Finance Committee individually to discuss
the work plan for the fiscal year ending 6/30/2021 CAFR audit. Alternatively, the
auditor may request an audience with the Finance Committee as a whole, in which case a meeting may be convened during this month. The committee will
have an opportunity to discuss any potential areas of concern they wish the
auditors to review and the auditors can discuss any changes in accounting standards or disclosures that may be relevant for the audit year.
Committee Recess
Committee Recess
April
May
June
Newport Beach Finance Committee Work Plan Calendar Year 2021
January
February
March
July
August
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4/9/21
Scheduled Date Agenda Title Agenda Description
Newport Beach Finance Committee Work Plan Calendar Year 2021
Thursday, September 16, 2021 Investment Performance Review Staff and/or one or more investment advisors will describe the performance of
the City's investment portfolio.
Annual Investment Policy Review and Update In furtherance of Section K-2 of Council Policy F-1, Statement of Investment
Policy (the Policy), the Finance Department has completed an annual review of
the Policy to ensure its consistency with the overall objectives of preservation of principal, liquidity and return, and its relevance to current law and financial and
economic trends. Staff is proposing no modifications to the Policy at this time
as recommended by Chandler Asset Management and supported by the City’s Finance Director/Treasurer.
Quarterly Budget Update Present results of quarter ending June 30.
Budget Amendments for Quarter Ending June 30, 2021 Staff will report on the budget amendments from the prior quarter.
Internal Audit Program Update Staff will provide a progress to date report of the internal control and
performance audit program.
Thursday, October 14, 2021 Financial Statement Audit Results and Related Communication The City’s external audit firm, will meet with the Finance Committee to discuss
the audit findings for the fiscal year ending 6/30/2020. The Committee will have an opportunity to discuss any potential areas of concern and the auditors can
discuss any changes in accounting standards or disclosures that were relevant
for the audit year.
External Audit Update External audit update for transient occupancy tax (hotels, agents and residential owners), charter boat companies, waste haulers and vendor
agreements.
Budget Amendments for Quarter Ending September 30, 2021 Staff will report on the budget amendments from the prior quarter.
Thursday, November 4, 2021 CalPERS Update Staff will present the latest actuarial valuation changes to actuarial
assumptions, a review of investment returns, the potential impact of future rates, and the results of employee cost sharing.
Fiscal Year 2019-20 and Fiscal Year 2020-21 Financial Updates Staff will provide a fiscal year ending June 30, 2020, and first quarter FY 2020-
21 budget performance update.
Budget Amendments for the Previous Quarter Staff will report on the budget amendments for the prior quarter.
Quarterly Budget Update Present results of quarter ending September 30.
Internal Audit Program Update Staff will provide a progress to date report of the internal control and
performance audit program.
Committee Recess
December
October
November
September
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