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Home My WebLink About00 - Joint Meeting - PowerPointMay 23, 2023 Special Meeting City Council and Finance Committee Joint Meeting May 23, 2023 01-7FOaI Budget Priorities: • Providing high quality municipal services that residents expect • Maintaining the safety and security of our neighborhoods • Keeping Newport Beach looking great • Maintaining a prosperous, fiscally sustainable, and economically viable city Additional Focus: Continued emphasis on elimination of the City's long-term liabilities Ensuring proper funding of long-term infrastructure maintenance and replacement Addressing key City Council priorities identified at the January 28, 2023, City Council Planning Session City of Newport Beach — Finance Department C � �"R . I♦IFOaI Thursday, January 13, 2023 Finance Committee Meeting Saturday, January 28, 2023 Special City Council Meeting Thursday, March 16, 2023 F Finance Committee Meeting Tuesday, March 28, 2023 City Council Study Session Thursday, April 13, 2023 Tuesday, May 23, 2023 Thursday, May 25, 2023 Tuesday, June 13, 2023 Finance Committee Meeting ' Joint City Council/Finance 4ommittee Study Session Finance Committee Meeting City Council Public Hearing Long -Range Financial Forecast (LRFF) update City Council Planning Session Overview of FY 2023-24 Revenue Projections Early Look at CIP Budget Proposed FY 2023-24 Expenditure Budget Review FY 2023-24 Operating Budget Review Finalize Recommendations to City Council Adoption of FY 2023-24 Budget City of Newport Beach — Finance Department 4 FY 2022-23 Budget Status City of Newport Beach — Finance Department C � �"R . �IFOaI • General Fund Revenue is projected to be $10 million (3.4%) higher than the Amended $286m $296m Budget $300 • $6 million of projected expenditure savings is currently projected $250 • A surplus of $15.8 million is currently $200 projected: Other • $8 million to be utilized to set -aside funds 0 Transfers ° $150 TOT for the Contingency Reserve and to Sales Tax replenish the Facilities Financing Plan $100 ■ Property Tax (FFP) Fund and General Fund CIP for amounts attributable to the Dove Street $50 Property Purchase • City Council will determine the use of the $0 Amended Current unassigned budget surplus in October in Budget Projection accordance with Policy F-5 City of Newport Beach — Finance Department All Funds Budget Overview City of Newport Beach — Finance Department C � �"R - �IFOa Operating Budget 287,812,218 290,407,369 291,523,400 330,919,923 351,870,115 6.3% Transfers Out 47,637,351 27,979,154 39,075,536 53,035,836 58,859,125 11.0% CIP New Appropriations 45,686,890 31,377,224 35,506,078 71,030,292 29,375,044 -58.6% Total Budget 381,136,459 349,763,747 366,105,014 454,986,051 440,104,284 -3.3% • 6.3% growth in operating budget, primarily due to: • Additional step added to all classifications • Continuation of 1.5% pension holiday/increase to cafeteria allowance • Higher volume year for routine vehicle replacement • Proposed Program Enhancement Requests • FY 2022-23 includes capital project funding from prior surpluses and ARPA Note: Prior year amounts have been restated to align with the current accounting for Tideland expenditures. City of Newport Beach — Finance Department C � �"R . �IFOaI General Fund 250, 556, 288 225, 858, 038 246,163, 632 276,111,174 293, 917, 485 6.4% Tidelands Fund 18,502,088 20,084,234 20,727,144 20,978,717 23,312,029 11.1% Water Enterprise Fund 261584,151 27,969,925 27,933,241 32,069,765 33,623,346 4.8% Wastewater Enterprise Fund 3,966,734 4,284,105 3,956,840 4,884,651 5,097,917 4.4% Other Funds 51,797,406 57,319,375 49,408,984 49,911,451 54,778,463 9.8% 351,406,668 335,515,677 348,189,842 383,955,759 410,729,240 7.0% Note: Amounts Include Operating Expenditures and Transfers • General Fund growth of 6.4% outlined in detail on subsequent slides • Tidelands Fund growth of 11.1 % primarily due to: • Updated Cost Allocation Plan • Recommended staffing changes from program enhancement requests City of Newport Beach — Finance Department General Fund Budget Overview City of Newport Beach — Finance Department C � �"R . �IFOaI 4.1 % 6.3% 2.6% ■ Property Taxes Sales Tax Transient Occupancy Tax Other Taxes ■ Charges for Services ■ Property Income ■ Transfers All Other Sources City of Newport Beach — Finance Department 10 C � �"R . �IFOaI 2021-22 Actual 2022-23 Projected 2023-24 Proposed Budget $ 284.1 million Cn $350 C $ 295.5 million .° $300 $ 304.1 million $250 • Projected revenues for FY 2023-24 are $8.5 million (2.9%) higher than amounts currently $200 projected for FY 2022-23 $150 • Primary drivers of revenue growth due to: • Property Tax + $4.5 million (3.4%) $100 • TOT + $1.7 million (5.6%) $50 • Parking & Property Income + $2.2 million • Transfer from Tidelands (CAP) + $1.7 $ million FY 2021-22 FY 2022-23 FY 2023-24 Actuals Projected Year Proposed ■ Property Tax End Budget Sales Tax ■ TOT Transfers Others City of Newport Beach — Finance Department 11 C � �"R . �IFOaI • 72% of General Fund revenues are derived from three sources of revenue: • Property tax revenue represents 45% of General Fund revenues and is projected to increase 3.4% in FY 2023- 24. • Sales tax revenue represents 16% of General Fund revenues and is projected to increase 0.3% in FY 2023-24. • Transient occupancy tax revenue represents 11 % of General Fund revenues and is projected to increase 5.6% in FY 2023-24. $150 $50 c $45 0 $40 $35 $30 Property Tax Revenue $133 $138 $108 $113 $119 $124 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24 Actual Actual Actual Actual Projected Projected $39 411VNIRC Actual u) $30 LD_ $20 $25 $10 Sales Tax Revenue $46 $48 $49 $36 $39 2019-20 2020-21 2021-22 2022-23 2023-24 Actual Actual Actual Projected Projected TOT Revenue $21 2018-19 2019-20 Actual Actual $27 $30 $32 $17 2020-21 2021-22 2022-23 2023-24 Actual Actual Projected Projected City of Newport Beach — Finance Department 12 C � �"R . �IFOaI $16 $14 $12 W-$10 0 $8 $6 $4 $2 $0 22-23 23-24 Autos & Transportation Pre -Pandemic Level Adjusted for Inflation 22-23 23-24 Restaurants & Hotels 22-23 23-24 General Consumer Goods 22-23 23-24 State & County Pools Quarterly Sales Tax Trends 50% 47% 40% 34% 30% 23% o 19 /o 200 0 120 10% o 10% 3% 0%2 6% -1012/31 /21 03/31 /22 06/30/22 09/30/22 12/31 /22 Autos & Transportation General Consumer Goods City of Newport Beach — Finance Department 13 C � �"R . �IFOaI $300 2022-23 Adopted Budget $ 276.1 million $250 2022-23 Amended Budget $ 288.0 million 2023-24 Proposed Budget $ 293.9 million $200 $150 The Proposed Budget for FY 2023-24 reflects: 0 $100 • $17.8 million increase over FY 2022-23 Adopted Budget, or 6.4%. $50 • 2% increase over FY 2022-23 Amended Budget $0 • $40 million allocated to paying down the City's unfunded pension liability FY 22-23 FY 22-23 FY 23-24 Adopted Amended Proposed Budget Budget Budget ■ Salaries & Benefits ■ Non -Personnel ■ Transfers City of Newport Beach — Finance Department MI. �c� �7. IFOaI Additional Top Step $1,793,000 0.6% Pension Holiday/Cafeteria Reduction $1,141,000 0.4% Increased Internal Service Charges $1,310,000 0.5% Program Enhancements — General Fund Portion $2,960,000 1.1 % CPI Increases to M&O Budgets $1,479,000 0.5% Additional Homeless Services $500,000 0.2% Utilities Budget Adjustments (electricity, gas, and water) $528,000 0.2% Other Routine Personnel (COLAs, Increase to PERS Rates) $4,675,000 1.7% Police Recruitment Assistance $880,000 0.3% Increase in Transfers out for GF CIP, Parks CIP and FFP $2,444,000 0.9% City of Newport Beach — Finance Department 15 �c� �7. IFOaI General Fund CIP 5,000,000 5,000,000 5,700,000 5,530,000 6,000,000 8.5% Facilities Financing Plan (FFP) 10,020,333 - 8,500,000 8,600,000 444,141 -94.8% Harbor & Beaches Master Plan 5,500,000 - 4,500,000 4,600,000 4,715,000 2.5% Facilities Maintenance Plan (FMP) 2,500,000 1,000,000 1,500,000 2,500,000 2,500,000 0.0% Tidelands Operating Fund - - - 9,987,817 11,152,510 11.7% Parks Specific CIP Projects - - - - 1,000,000 100.0% Debt Service Fund - - - - 8,677,620 100.0% 800MHz Radio Fund 500,000 - - - - 0.0% Other One -Time Transfers 8,159,919 - - 379,452 - -100% Total 31,680,252 6,000,000 20,200,000 31,597,269 34,489,271 9.2% • General Fund CIP transfer reduced by $530,000 for a one-time program enhancement from the prior year and increased by $1 million to fund projects in FY 2023-24. • Added direct transfer to Debt Service instead of passing through FFP Fund. Increases to FFP and HBMP to index transfer. • Increase to Tidelands subsidy transfer as needed to support Tidelands Fund. • New $1 million transfer added to support parks infrastructure projects. City of Newport Beach — Finance Department 16 Program Enhancements and Staffing Changes City of Newport Beach — Finance Department 17 C � �"R . �IFOaI • Request to add 1 additional ambulance unit and six (6) firefighter paramedics to address demand and service needs. • Combined cost for staffing and fully outfitted ambulance amounts to $1.73 million, including $650,000 in one-time equipment in FY 2023-24. City of Newport Beach — Finance Department 18 • $500,000 dedicated for additional homeless services. • Harbor Department: • Convert 6.00 part-time Harbor Service Worker FTEs to full-time • Conversion of Code Enforcement Supervisor to Deputy Harbormaster • Extended hours of operation (additional part-time hours) • Other non -personnel enhancements include: • $55,000 in IT Services Professional for increased annual network testing • $30,000 in Finance Department for increased Internal Audit costs • $53,000 for Library building maintenance (Central and Mariners Libraries) • $40,000 in Street Furniture Replacement • $50,000 in Auto Parts and Outside Labor expense for Fleet • $50,000 for Public Works for ongoing Trellis Grant • $16,500 for Synthetic Turf Cleaning City of Newport Beach — Finance Department 19 C � �"R - �IFOa General Fund Community Development Convert PT Permit Technician II to FT 1.00 (0.50) 69,700 Community Development Add Management Assistant 1.00 - 138,225 City Attorney Convert PT Paralegal to FT 1.00 (1.10) 11,500 City Manager Convert Deputy City Manager to Assistant City Manager - - 70,325 Fire Add Six Firefighter Paramedics 6.00 - 1,084,100 Fire Convert PT Life Safety Specialist III to FT 1.00 (0.75) 47,400 Fire Convert PT Recreation Coordinator to FT 1.00 (0.85) 28,200 Human Resources Reclass HR Manager to Deputy HR Director - - 10,100 Human Resources Reclass HR Manager to HR Supervisor - - (7,800) Human Resources Reclass PT Senior HR Analyst to FT HR Supervisor 1.00 (0.75) 76,400 Library Reclass Facilities Maint. Worker II to Facilities Maint. Tech. - - 7,635 Police Convert Animal Control Officer to Senior Animal Control Officer - - 14,000 Police Convert PT Community Services Officer to FT 1.00 (1.00) 32,000 Public Works Convert PT Office Assistant to FT 1.00 (0.75) 37,900 Recreation & Senior Serv. Add PT Senior Recreation Leader Hours - 0.42 31,400 Total General Fund 14.00 (5.28) 1,651,085 Tidelands Harbor Convert PT Harbor Service Workers to FT 6.00 (6.00) 109,800 Harbor Reclass Code Enforcement Manager to Deputy Harbormaster - - 11,100 Harbor Add PT Hours to Extend Hours of Operation - 0.90 55,100 Total Tidelands Fund 6.00 (5.10) 176,000 Water Enterprise Fund Utilities Reclass PT Interns to PT Department Assistant 1.00 (1.46) (600) Fleet Equipment Fund Public Works Add Equipment Mechanic VII 1.00 - 118,000 IT Operating ISF City Manager (IT) Add IT Applications Analyst 1.00 - 96,900 Total Other Funds 3.00 (1.46) 214,300 City of Newport Beach — Finance Department 20 C � �"R . �IFOaI 1000 • Total staffing levels, including part-time employees, in the City remain 5.4% below the 15-year peak in 2009 • Part-time employees become eligible for CalPERS membership when they work more than 1,000 hours in a fiscal 600 year and remain so for the duration of their employment 500 Part-Time Positions (FTE) ■ Full -Time Positions 946 925 914 886 878 877 886 888 895 902 848 853 867 855 867 O N M T LO CD ti 00 O O N M N:T O O O O O O O O O O O O O O O N N N N N N N N N N N N N N N City of Newport Beach — Finance Department 21 General Fund Reserves and Surplus City of Newport Beach — Finance Department 22 C � �"R . �IFOaI Beginning Unrestricted Fund Balance $24,093,441 Operating Revenues & Transfers In Operating Expenditures & Transfers Out Repayment of Advances Prior Year Resources Carried Forward Non -Operating Transfers Out Preliminary Ending Unrestricted Fund Balance Increase in Contingency Reserve (estimated) Repayment of FFP & GF CIP for Dove St Additional CalPERS UAL Payment ($40m to $45m) Final Ending Unrestricted Fund Balance 295,800,140 (282,326,545) 1,250,000 4,429,573 (27,457,903) 15,788,706 (3,146,237) (5,206,562) $7,435,907 304,058,704 (293,917,485) 1,250,000 11,391,219 (5,000,000) $6,391,219 City of Newport Beach — Finance Department 23 Unfunded Pension Liability City of Newport Beach — Finance Department 24 C � �"R - �IFOa • In November 2022, CaIPERS 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 CaIPERS Pension Outlook tool has been utilized to estimate the City 7s 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 $ 223,438,444 $330,881,000 Funded Percentage 66.9 % 68.7 % 69.2 % 80.5 % 71.1 % Investment Return 8.6 % 6.7 % 4.7 % 21.3 % -7.5% * Projected City of Newport Beach — Finance Department 25 C' � 'QL� FO RCS 100 95% 92.3% 90% 85% N_ 80% u h M G7 75% 7 LL 70% 65% 60% 55% 50% Stock Market Crash of2008-2009 25% 20% 15% t 10% jy C 7 5% d N C G7 fl% E V! 69.2% 0 69.2% -5% 67.4% 67.5% 0 68 7/n 65.8% 66.0% 66.9/° 63.8% -10% 62.2% 60.6% 57.4 ° I -2c% 006-1 -25% 2007 2008 2009 2010 2011 2012 2013 2C14 2015 2016 2017 2018 2019 2020 2021 2022 =Funded Status CAPERS Investment Returns Discount Rate (Expected Return) Source: CaIPERS City of Newport Beach — Finance Department 26 C � �"R . �IFOaI 8D4 700 WO O 50 E W 4-0 0 300 200 100 0 FY 13 FY 14 FY 15 FY 16 FY 17 FY 18 FY 19 FY 20 FY 21 FY 22 FY 23 ■ Tier 1 Legacy ■ Tier 2 Classic ■ PEPRA City of Newport Beach — Finance Department 27 C � �"R - �IFOa • Newport Beach has employed an aggressive strategy to paydown its unfunded pension liability. • The Finance Committee and City Council revisit the pension paydown strategy as part of each year's budget process. • In the FY 2022-23 Adopted Budget staff recommended a $40 million per year payment from the baseline budget plus an additional $5 million added as a supplemental appropriation at the time of budget adoption. • Staff recommends maintaining the current paydown strategy for FY 2023-24 • This paydown strategy is anticipated to result in eliminating the City's pension liability in 2032. City of Newport Beach — Finance Department 28 C' 716.% �"R . �IFOaI ✓Strong budget surplus for FY 2022-23 ✓General Fund revenue projections continue to remain strong, except for sales tax revenue, which is projected to be flat next year. ✓Proposed General Fund budget is balanced ✓Updated and comprehensive savings plans for long-term needs ✓Maintained pension UAL payment of $45.0 million resulting in paydown of the liability in 2032 ✓Structural General Fund budget surplus of $6 million subject to the Council's direction as to possible additional resource allocations City of Newport Beach — Finance Department 29 C � �"R . �IFOaI Questions? City of Newport Beach — Finance Department 30