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Home My WebLink About00 - City Council Planning Session - PowerPoint 1city Council January 28, 2023 • Update on Financial Status and Budget Development • FY 2021-22 Results Recap • FY 2022-23 Current Estimates • FY 2023-24 Budget Planning and Challenges • Continuing Initiatives • General Plan Update • Addressing Homelessness • John Wayne Airport • Legislative Platform • Capital Improvement Program • Update on significant projects • Development of CIP Budget City of Newport Beach 2 Financial Overview City of Newport Beach Revenues $276 million Expenditures (��48 million) $300 Contingency Reserve Set -Aside ($4 million) $250 Year -End Budget Surplus $24 million $200 • The $24 million budget surplus was largely due o to revenues coming in higher than the original $150 budget, the result of a conservative approach to forecasting COVID-19 impacts on revenues. $100 • On November 15, 2022, the City Council approved the transfer of the budget surplus to $50 the Police Facility Fund to fund most of the purchase of the Dove Street property. $0 Revenues M. Budget Actual ■ Property Tax Sales Tax TOT Transfers Other City of Newport Beach • On November 15, 2022, the City Council authorized staff to execute an agreement to begin the process of purchasing property at 1201 Dove Street to house a new police headquarters sometime in the next decade. • The negotiated purchase price of $30.5 million is funded from the FY 2021-22 Budget Surplus of $24 million and s6.7 million from available funds in the Facilities Financing Plan Fund (FFP) and General Fund Capital Improvement Program (CIP) Fund. It is anticipated that the FFP and General Fund Capital Improvement Plan Fund will be replenished from the anticipated General Fund surplus for FY 2022-23. • The property is projected to produce $15 million to $25 million of lease revenue (net of operating expenses and building management costs) over the next 10 to 15 years, respectively. • The close of escrow is anticipated to be April, 2023. City of Newport Beach 5 Adopted Budget* $ 284 million $300 Q1 Projection* $ 287 million $250 Current Projection* $ 292 million $200 • Primary variances from adopted budget • Property Tax + $2 million • Sales Tax + $2 million • Transient Occupancy Tax + s1 million • Other Revenue + $3 million V) C 0 $150 7- $100 $50 $0 Adopted Q1 Current Budget Projection Projection ■ Property Tax Sales Tax TOT Transfers Other io City of Newport Beach • The top three revenues account for 72% of all General Fund revenue • Property tax assessed value growth drove projection higher • Record year for sales tax revenues with strong growth across the board • Hotel TOT revenues are projected to be 0.5% below the pre -pandemic level, but offset by strong growth in I s i d e n t i a l TOT City of Newport Beach $zoo Ln 0 $120 $100 $8o $50 c $45 0 $40 $35 $30 $30 C $25 0 $20 Property Tax Revenue $133 $1o8 $113 $11g $12LF FY 2o18-19 FY 2019-2o FY 2020-21 FY 2021-22 FY 2022-23 Actual Actual Actual Actual Projected Sales Tax Revenue $46 $49 $39 $36 $39 FY 2o18-19 FY 2019-2o FY 2020-21 FY 2021-22 FY 2022-23 Actual Actual Actual Actual Projected TOT Revenue $25 $27 $29 $21 $17 FY 2o18-19 FY 2019-2o FY 2020-21 FY 2021-22 FY 2022-23 Actual Actual Actual Actual Projected 7 • $3 million in expenditure savings from vacancies is currently projected. • On June 14, 2022, the FiscalYear 2022-23 budget was amended to include: • A s5 million appropriation to increase the amount paid to CalPERS towards the unfunded pension liability (from $40 million to $45 million). • An appropriation of $2.5 million to transfer funds to the Facilities Financing Plan Fund and General Fund Capital Improvement Program. • Material appropriations to the budget include employee costs associated with adjusting future cost -of -living adjustments (COLAs) & temporarily reducing employee retirement contributions or temporarily increasing monthly City contributions toward the employee Cafeteria Plan. • Revenue growth is anticipated to fully offset the mid -year appropriations. City of Newport Beach 8 • The Finance Committee will review the Second Quarter Budget Update on Februaryl6t", followed by City Council review on February 28tn • A sio million budget surplus is currently projected for FY 2022-23, which is based on $292 million in projected operating revenues and $282 million in projected operating expenditures. • It is anticipated that a portion of the budget surplus will be utilized to set -aside funds for the Contingency Reserve (pursuant to City Council Policy F-2), and to replenish the FFP and General Fund CIP Fund for amounts attributable to the Dove Street Property Purchase. City of Newport Beach I 2022-23 Projected $ 292 million $300 2023-24 Projected $ 299 million $250 • $7 million, or 2.4%, of projected revenue $200 growth, primarily due to: 0 • Property Tax + $4.5 million $15° • Sales Tax + $0.3 million $loo • TOT + so.9 million $50 • Other Revenue + $1.3 million $o 2022-23 2023-24 Projected Projected ■ Property Tax ■ Sales Tax TOT Transfers Other City of Newport Beach 10 • Property tax revenue is projected to be 46% of General Fund revenues • Property tax revenues are projected to increase by $4.5 million or 3%, which is largely related to the inflation adjustment indexed at the 2% cap allowed by Proposition 13, and due to changes in ownership, which is partially offset with an anticipated decrease in supplemental property tax revenue as home sales slow due to rising interest rates. $150 $140 0 +3% $130 +4% $138 ^ $120 � +5% $133 o +5% $124 $110 $119 $100 $108 $113 $go $8o FY 2o18-19 FY 2019-20 FY 2020-21 FY 2021-22 FY 2022-23 FY 2023-24 Actual Actual Actual Actual Projected Projected City of Newport Beach 11 • The second largest funding source for the General Fund is sales tax revenue, which is largely generated from three main industry categories including autos and transportation, general consumer goods, and restaurants and hotels. • Sales tax revenue is projected to increase approximately $26o thousand or o.5%due tomodest growth projected in sales tax revenue from restaurants and hotels, and the State & County pools, which is partially offset with projected decreases in general consumer goods and autos & transportation. $50 $45 $40 $39 $35 $30 FY zo18-19 Actual +I% +6% $49 $49 +19% $46 -6% +8% _ $39 $36 FY 2019-20 FY 2020-21 Actual Actual FY 2021-22 FY 2022-23 FY 2023-24 Actual Projected Projected City of Newport Beach 12 • Transient occupancy tax revenue is projected to be lo% of General Fund revenues • Hotel TOT revenues are projected to exceed pre -pandemic levels next fiscal year and residential TOT revenues are at a record high-level and growing. • The Fashion Island Hotel remains closed but is expected to reopen in the Summer of 2023 following a sale and renovation as the Pendry Newport Beach. However, staff has conservatively not included any revenue from the hotel in the TOT revenue projection. +3% $30 +g% $29 $30 $25 -16% +58% $2 7 Ln $ 25 c .° $20 $21 $15 $17 $10 FY M18-s9 FY 2019-20 FY 2020-21 FY 2021-22 FY 2022-23 FY 2023-24 Actual Actual Actual Actual Projected Projected City of Newport Beach 13 Operating Budget Development City of Newport Beach 14 JANUARY COUNCIL PLANNING SESSION AUTUMN/WINTER budgElyear as APRIL FINALIZE LIABILITIES & LONG - CITY MANAGER RANGE PLANNING PERSU.',.%-.- OPERATING REVIEW RmbateopenmigArabWes.sucA BUDGET DEVELOPMENT ftvawthaCfly!srewnueand as WorkersGDmpaum%,aR Genera: Co C- ...- --.: , -, - , - -;- ;: -; : , , �:!nrlg experldftum assuuFdms� Cky thg&kly. Pension.UndRELVE'a Mbn%,er makes pm6mkray WsyrwtE LfabMes Perzemrie.' a: eid'az ^g orer.—.!7jchonges. rKa-wNdWorm Cl LJ M% 61 — mk7 Ea�-j 0 NOVEMBER FEBRUARY REVENUE DEPARTMENTAL Begin ffeevrff wrth departmemy to A7.qew BUDGET revenue pr4eWonsondseek outside PREPARATION opinions from c=Oanmleparts for speda&e fnPrewsVrig sionomic trena!s. Start descuss6ons v&h Departments and the Crty Manager to identify areas where chor�gesin mr&e defWyymighrbe in arder. JUNE CITY COUNCIL REVIEW CAyCWndf1EVf9M aCYLM and VOMS unp-po-sed butet f-bft qzgram eniaanrernerus & bum mvewm MAY JULY FINANCE COMMITTEE REVIEW BUDGET F&rxvxe Commmee wY? make IMPLEMENTATION recon7nerm&mm to support or &4= ae@M FLZd Year with budgetasmvripgarn to the QyCoun& 3d0PrGdbVQW City of Newport Beach 3.5 Sat, Jan 28, 2023 Thurs, March 16, 2023 Tues, March 28, 2023 Thurs, April 13, 2023 Tues, May 9, 2023 Tues, May 23, 2023 Tues, June 13, 2023 Meeting Type Special Council Meeting Finance Committee Council Study Session Finance Committee Council Study Session City Council Planning Session Overview of Revenue Projections Early Look at the Capital Improvement Program Proposed FY 2023-24 Budget Overview FY 2023-24 1st Budget Review Joint Council / Finance I FY 2023-24 2nd Budget Review Committee Study Session Council Public Hearing Adoption of FY 2023-24 Budget City of Newport Beach 16 Pension Funding Update City of Newport Beach 17 • The pension paydown strategy is revisited each year. • On June 14, 2022, the City Council adopted the budget for Fiscal Year 2022-23, which included a baseline allocation of s4o million to paydown the City's unfunded pension liability. • On June 14, 2022, the City Council also authorized an additional discretionary contribution at a minimum level of s5 million from General Fund surplus - increasing the amount paid to CalPERS towards the unfunded pension liability from $40 million to $45 million annually. • The previous forecast projected the City's pension liability being paid off in Fiscal Year 2029-30, which was dependent on CalPERS earning 6.8% over the long-term. The investment loss for Fiscal Year 2021-22 was not known at that time. City of Newport Beach i 8 • In November 2022, CalPERS announced a 7.5% investment loss for Fiscal Year 2021-22. • The Actuarial Valuation at June 30, 2022 will not be available until August 2023. However, the CalPERS Pension Outlook tool has been utilized to estimate the City's projected funded status as of June 30, 2022, which reflects the impact associated with the 7.5% investment loss. Unfunded Liability $ 333,135,247 $ 326,289,861 $ 333,046,257 Funded Percentage 66.9 % 68.7 % 69.2 Investment Return 8.6 % 6.7 % 4.7 % * Projected $ 223, 438, 444 80.5 0/0 21.3 % $330,881,000 71.1% -7.5% City of Newport Beach 19 • Staff recommends continuing with the accelerated payment strategy recommended in 2022, which includes a baseline allocation of $40 million and an additional discretionary contribution at a minimum level of s5 million from General Fund surplus. • This is approximately$3.5 million more than required byCalPERS. • The FiscalYear 2021-22 investment losses resulted in extending the paydown schedule by two years. • The current projection shows the pension liability will be eliminated in Fiscal Year 2032-33• City of Newport Beach 20 Budget Challenges City of Newport Beach 21 • High inflation over the last year is impacting several areas • CIP Projects —The FiscalYear 2022-23 budget includes $103 million in CIP. Bids for many projects are coming in well above the engineer's estimate. Requests for additional funding will need to be evaluated on an as - needed basis. • Materials & Services Operating Costs — Reviewing the budget for increases in operating costs (e.g., electricity, gas, chemicals, etc.) • Water and Sewer Enterprise Funds — Beginning process to evaluate operations and capital projects for rate adjustments necessary for the health of these funds • Recruitment and Retention of City employees City of Newport Beach 22 There are many factors creating recruitment and retention challenges for the City, including: • Inflation • Minimum wage increases • Competition • Other public sector agencies • Private Sector • Relocations / Lifestyle Changes • Work volume City of Newport Beach 23 • Proposed adjustments are being reviewed with departments and the highest priorities will be included in the Recommended Budget for City Council review • Evaluating conversion of part-time to full-time positions based on staff turnover and operational needs • Full review of Harbor Department staffing • Additional staffing requests are being reviewed in a few targeted areas where rising demand is impacting service levels City of Newport Beach 24 Continuing Initiatives City of Newport Beach 25 O � U C'911pr)FL P General Plan Update City Council General Plan Update Steering Committee General Plan Advisory Committee LAND USE Recently Started NATURAL RESOURCES ARTS & CULTURAL In Progress (LIMITED TO HOUSING UNITS) HISTORICAL RESOURCES SAFETY HARBOR & BAY RECREATION City of Newport Beach 27 Resources • City Response: Two full-time staff members, Peninsula Enforcement Team, Interdepartmental Homeless Outreach Team, Homeless Solutions Collaborative, Community outreach programs and materials, Good Giving • City Contracted Services: City Net, Be Well OC Mobile Crisis Unit, Costa Mesa Temporary Bridge Shelter, Trellis International Community Impact Team, Permanent Supportive Housing • Countywide Coordination within the Orange County Central Service Planning Area (SPA), County Psychiatric Emergency and Response Team Support • State and Federal Programs: Emergency Housing Vouchers, Project Roomkey, Project Homekey City of Newport Beach 2 Be Well OC Mobile Crisis Unit February 14, 2022 — December 31, 2022 Contacts 2,543 (21% housed, 79% unhoused) Transports 272 Shelter Intakes 46 Crisis Stabilization Unit Intakes 35 Sobering Station Intakes Zo Reunifications (Family, Friends) 5 City of Newport Beach 29 City Net CalendarYear 2022 Contacts 723 Shelter Intakes 20 Permanently Housed 14 Interim Housing Placements 9 Assisted Living Placements 1 New Enrollments 63 Active Cases 31 City of Newport Beach 30 Costa Mesa Bridge Shelter January s— December 3l, 2022 Permanently Housed 7 Reunifications 2 Total Bed Nights 4367 Newport Beach filled, on average, 18-20 of its 20 beds nightly. City of Newport Beach 31 Additional Outreach Statistics (2022) Housing Placements by City Staff - g Trellis International Work Projects Completed - 111 City of Newport Beach 32 Permanent Supportive Housing • Selected through Request for Proposals, Jamboree Housing and National Community Renaissance (CORE) continue to look for project sites in Newport Beach • Challenging to find financially viable sites • City committed to providing $3 million of City funds • $1 million allocated in FY 2021-22 • Two Development Agreements include $2.1 million of funding for homelessness and affordable housing that could be utilized for this purpose City of Newport Beach 33 • 1.985 Settlement Agreement • Term expires 2030, curfew 2035 • Consultant Support in key areas: • Addressing noise incidents • Researching noise abatement strategies • Government Relations /Advocacy • Aviation Committee key priorities for 2023 City of Newport Beach 34 • City's legislative platform summarizes its core legislative principles and positions and guides local, state and federal advocacy efforts. • Platform was last updated in 2019 • Tentative City Council review — February 28 • City's government relations and advocacy consultants: • Federal (Dredging and Aviation) — Carpi & Clay • $114,600/year • County and State —Townsend Public Affairs • $7z, 000 City of Newport Beach 35 Questions? City of Newport Beach —Finance Department 36