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HomeMy WebLinkAbout13 - Year-End Budget Results and Surplus AllocationQ SEW Pp�T CITY OF z NEWPORT BEACH c�<,FORN'P City Council Staff Report October 24, 2023 Agenda Item No. 13 TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL FROM: Jason AI -Imam, Finance Director/Treasurer - 949-644-3126, jalimam@newportbeachca.gov PREPARED BY: Shelby Burguan, Budget Manager, sburguan@newportbeachca.gov PHONE: 949-644-3085 TITLE: Year -End Budget Results and Surplus Allocation ABSTRACT: The Finance Department prepares quarterly financial reports to review the status of revenues and expenditures for the City of Newport Beach (City) General Fund and to monitor budgetary trends in other City funds. This report contains information on revenues, expenditures and estimated fund balance for the fourth quarter of Fiscal Year 2022-23. In May 2023, an unrestricted General Fund operating surplus of $7.8 million was projected for Fiscal Year 2022-23 based on revenues and expenditures through the third quarter. Based on information available at the end of the fourth quarter, an unrestricted General Fund operating surplus of $11.6 million is projected for Fiscal Year 2022-23, which is $3.8 million higher than previously projected. The Finance Committee met on October 12, 2023, to review this report and recommended the unrestricted operating surplus be allocated pursuant to City Council Policy F-5 with fifty percent (50%) allocated towards the City's long-term liabilities associated with other post -employment benefits (OPEB) and with fifty percent (50%) towards infrastructure or neighborhood capital improvements. RECOMMENDATIONS: a) Determine this action is exempt from the California Environmental Quality Act (CEQA) pursuant to Sections 15060(c)(2) and 15060(c)(3) of the CEQA Guidelines because this action will not result in a physical change to the environment, directly or indirectly; b) Approve Budget Amendment No. 24-028, allocating the unrestricted operating surplus for Fiscal Year 2022-23 pursuant to City Council Policy F-5 as further outlined in this report; and c) Receive and file the attached report of the budget amendments for the fourth quarter. DISCUSSION: Economic Overview The city's assessed property values continue to increase providing a strong revenue base for the City. Recent trends in inflation and the inverted Treasury yield curves have caused concern in the broader economy and financial markets, and sales tax growth has slowed as is discussed later in this report. 13-1 Year -End Budget Results and Surplus Allocation October 24, 2023 Page 2 Transient Occupancy Tax (TOT) continues to outperform budget projections and the opening of the Pendry hotel in September 2023 should continue to bolster the City's TOT revenues. The City is well -positioned to withstand the impacts of a potential recession and is expected to maintain long-term fiscal sustainability. General Fund Revenues Overall General Fund revenue growth has outpaced projections that were incorporated into the adopted Fiscal Year 2022-23 budget, as well as projections provided at the end of the third quarter. The following table summarizes the changes to projected General Fund revenues versus the amounts previously projected for the third quarter. Details follow highlighting the reasons for the material variances. Fiscal Year 2022-23 P cted General Fund Revenues* Property Taxes 134,803,081 136,867,331 138,358,730 3,555,648 1,491,399 1% Sales Tax 46,526,493 48,401,417 46,552,459 25,966 (1,848,958) -4% Transient Occupancy Tax 27,788,728 30,292,123 30,201,648 2,412,920 (90,474) 0% Other Taxes 8,774,567 8,774,567 10,079,710 1,305,143 1,305,143 15% Service Fees & Charges 23,228,086 23,228,086 25,187,124 1,959,038 1,959,038 8% Parking Revenue 6,417,259 6,976,357 7,420,314 1,003,056 443,957 6% Licenses and Permits 5,870,375 5,870,375 5,676,619 (193,757) (193,757) -3% Property Income 6,093,309 6,828,626 7,530,393 1,437,084 701,767 10% Fines & Penalties 3,870,567 3,870,567 3,838,752 (31,815) (31,815) -1% Intergovernmental 3,108,014 3,100,151 4,379,680 1,271,666 1,279,529 41% Investment Earnings 1,300,000 1,300,000 1,690,399 390,399 390,399 30% Misc Revenues 2,964,324 2,941,824 3,469,293 504,969 527,469 18% Operating Transfers In 17,348,716 17,348,716 18,428,263 1,079,547 1,079,547 6% Total Revenues 288,093,519 295,800,140 302,813,385 14,719,866 7,013,245 2% * Based on preliminary year-end close data available as of September 15, 2023. Property Tax - Property taxes are the City's single largest General Fund revenue source and represent approximately 50% of all General Fund revenues. As these revenues are primarily dependent on the assessed valuation established in January 2022, there is typically very little variance seen from the original budget as the year progresses. The strong growth in this category is a result of the CPI factor returning to the maximum 2.0% allowed, as well as continued strong property sales activity and price appreciation. The City's total assessed valuation for Fiscal Year 2022-23 is now projected to grow from $66.2 billion to $71.2 billion. Unaudited actuals in this category exceed prior quarter estimates by $1.5 million, largely from supplemental property taxes, which average $2.4 million annually, but came in at $4.8 million for Fiscal Year 2022-23, which is offset by Property Tax Transfers, which came in $1.1 million lower than budgeted. 13-2 Year -End Budget Results and Surplus Allocation October 24, 2023 Page 3 Sales Tax - The second largest funding source for the General Fund is sales tax revenue, making up more than 15% of General Fund revenues. The City's sales tax base is largely generated from four industry categories — autos and transportation, general consumer goods, restaurants/hotels, and State & County Pools. The third quarter budget update reflected a sales tax projection of $48.4 million for Fiscal Year 2022-23, which assumed 4.8% growth in sales tax over the previous fiscal year. The projection was made considering year-to-date cash receipts through December 2022, which were 6.8% higher than the comparable period in the previous fiscal year (July 2021 — December 2021). However, actual sales tax revenue amounted to $46.6 million for Fiscal Year 2022-23, which is 0.8% higher than the previous fiscal year, nevertheless, $1.8 million lower than the amount previously projected. The lower -than -expected revenues are largely due to a $1.1 million decrease in sales from autos and transportation compared to amounts previously projected, which is largely due to a decrease in new car sales and boat sales during the last six months of the fiscal year (January 2023 — June 2023). In addition, sales from business & industry, restaurants & hotels, and general consumer goods were lower than previously projected. Transient Occupancy Tax —The third largest funding source for the General Fund is TOT revenue, which makes up approximately 10% of General Fund revenues. The third quarter budget update reflected a TOT projection of $30.3 million for Fiscal Year 2022- 23, which assumed 13.6% growth in TOT revenue over the previous fiscal year. The fourth quarter budget update shows that actual TOT revenues came in $90,000 less than the updated third quarter forecast of $30.3 million, or $2.4 million over the revised budget. The Fashion Island Hotel remained closed through the end of the Fiscal Year but reopened on September 27 following a sale and renovation as the Pendry Newport Beach. Since the timing of the Pendry's opening was uncertain, revenue from the Pendry was not included in the projection for Fiscal Year 2022-23. This reopening, combined with the expected return of more business travelers, are anticipated to have additional positive impact on the City's TOT revenues in the years ahead. All Other Revenue — This category includes all other revenue sources other than the top three (property tax, sales tax, and TOT). All Other Revenue is made up of the following: • Other Taxes — Business license taxes, marine charter taxes, and franchise fees. This category outperformed budget as well as prior quarter projections due primarily to business license tax, utility franchise fees, as well as solid waste franchise fees, all of which combined exceeded prior year actuals by over $1 million. • Service Fees and Charges — plan check fees, recreation classes, emergency medical services fees, and numerous other cost -of -service fees. This category ended Fiscal Year 2022-23 $2 million higher than budgeted, largely due to paramedic service fees, the Recreation and Senior Service Department's fee -based classes, and Junior Lifeguard fees. 13-3 Year -End Budget Results and Surplus Allocation October 24, 2023 Page 4 • Parking Revenue — all General Fund related metered parking fees that are assessed throughout the various parking zones of the city. Parking revenue outperformed third quarter projections by $444,000. • Licenses and Permits — fees charged to process building related permits, street closure permits, dog licenses, and police tow franchise fees. This category came in under budget by $194,000 largely due to building permits and electrical permits. • Property Income — City -owned and managed income producing properties, long-term ground leases to concessions, restaurants, hotels and other businesses and organizations, and rental of City facilities to the public. As is discussed in more detail later in this report, revenue from the Dove Street property is higher than budgeted. Budgeted revenues for the Dove Street property were based on projected revenues, net of property -related expenditures. However, the revenues and expenditures for the property are required to be accounted for on a gross basis — with revenues and expenditures accounted for separately in their respective classifications. Therefore, the year-end budget results reflect an increase in both revenues and expenditures over the previous quarter estimates. • Fines and Penalties — parking citation fines collected by the City, administrative citation fines, fines remitted to the City from the County of Orange (County) for vehicle code violations, and false alarm penalties. Actual revenues came in just 1 % under projections. • Intergovernmental Revenues — federal, state, and local grant revenues, which includes, but is not limited to, the City's portion of the 1/2 cent sales tax revenue paid to the County for public safety, state mandate reimbursements, reimbursement for strike teams sent to assist with fires, and revenue sharing with the County under the Waste Disposal Agreement. This category is exceeding previous projections due to rebates from the State of California for the Ground Emergency Medical Transports program. These rebates are from multiple prior years of cost reports submitted that the City received rebates for all at once. • Investment Earnings — revenue generated from the investment of City funds. surpassed Fiscal Year 2022-23 budget estimates by $390,000 due to higher than projected interest rates. • Miscellaneous Revenues — restricted revenue, damage to City property, bad debt, donations and contributions, non -operating revenues such as proceeds from the sale of materials and equipment, and other miscellaneous revenues. This category outperformed prior quarter estimates primarily in damage to City property as well as bad debt. 13-4 Year -End Budget Results and Surplus Allocation October 24, 2023 Page 5 • Operating Transfers In — Operating Transfers In reflect regular ongoing transfers into the General Fund from other funds. For Fiscal Year 2022-23, this includes the transfer from the Tidelands Fund for the expenses related to the Cost Allocation Plan. The City received an updated cost allocation calculation based on Fiscal Year 2022-23 actuals in the Tidelands fund that is $1.1 million higher than what was budgeted. This increases the amount that the General Fund transfers to the Tidelands fund to subsidize its operations. This is explained in more detail in the Tidelands Fund section of the report. General Fund Expenditures The Fiscal Year 2022-23 General Fund revised expenditure budget totals $288.6 million, including operating transfers. Spending trends in Fiscal Year 2022-23 are generally consistent with prior years and therefore budget savings are within reasonable expectation. Total expenditure savings of $12.9 million are projected at this time due to savings from vacancies and other operating categories, offset by expenditure overages that are explained in this report. The table below summarizes the revised expenditure budget for Fiscal Year 2022-23, as well as projected expenditure savings by budget category. Details follow highlighting the reasons for the material variances. Fiscal Year 2022-23 ditures * Salary & Benefits $169,503,245 $164,298,495 $159,939,252 $9,563,993 $4,359,243 5.6% Contract Services 30,042,768 29,581,872 26,810,745 3,232,023 2,771,126 10.8% Grant Operating 1,218,355 1,083,878 1,095,379 122,976 (11,501) 10.1% Utilities 3,837,745 4,004,358 4,166,763 (329,018) (162,405) -8.6% Supplies & Materials 4,882,245 4,247,705 4,732,995 149,250 (485,291) 3.1% Maintenance & Repair 14,464,897 14,369,029 14,001,415 463,481 367,614 3.2% Travel &Training 825,588 726,267 746,291 79,298 (20,023) 9.6% General Expenses 2,297,863 2,275,465 2,498,378 (200,515) (222,913) -8.7% Internal Svc Charge 28,190,206 28,190,206 28,190,206 (0) (0) 0.0% Risk Management 255,915 255,915 183,772 72,143 72,143 28.2% Capital Expenditures 1,955,539 1,605,539 1,070,008 885,531 535,532 45.3% Operating Transfers Out 31,097,817 30,687,817 32,246,069 (1,148,252) (1,558,252) -3.7% Total Expenditures 288,572,183 281,326,545 275,681,273 $12,890,910 $5,645,272 4.5% * Based on preliminary year-end close data available as of September 15, 2023. 13-5 Year -End Budget Results and Surplus Allocation October 24, 2023 Page 6 Significant expenditure budget variances are as follows: • The revised salary and benefits budget totals $169.5 million, an increase of $6.0 million over the adopted budget, primarily due to the appropriation of $5.0 million from the Fiscal Year 2022-23 structural budget surplus as an additional discretionary payment to CalPERS to further reduce the City's unfunded pension liability. Savings from vacant positions has resulted in a salary and benefit savings of $9.6 million dollars, or an additional $4.4 million more than what was projected in the third quarter update. Savings are spread across multiple departments, with particular savings in the larger departments such as Police, Public Works, and Fire. • The revised budget for contract services totals $30 million, an increase of $3.2 million over the adopted budget, largely due to carryovers from the prior year. Savings in this category total $3.2 million, which is $2.8 million more than what was projected in the third quarter update. Most of the savings in this category are not available to spend as the funding for encumbered contracts carry into the next fiscal year. The fund balance table in the next section of the report shows the reservation of fund balance for these encumbrances. • The utilities budget was increased in Fiscal Year 2022-23 by $830,000 over the Fiscal Year 2021-22 adopted budget, however, additional overages became apparent and were reported in previous quarter reports. The primary reason for this overage is in the budget for electricity. Budget savings in other expenditure categories fully offset the $329,000 overage, and staff made adjustments in the Fiscal Year 2023-24 budget to address this issue. • Savings in various other operational categories such as supplies and materials, maintenance and repair, and travel and training are typical and don't necessitate any adjustments. • An overage in the General Expenses category is associated with operating expenses at the Dove Street property. The budget amendment that the Council approved when the property was purchased accounted for only the net activity of revenues and expenses. Staff is now aware that the revenues and expenses must be accounted for at their gross amount in the City's general ledger, resulting in additional revenues and expenses that net out in the General Fund. The expenses in Fiscal Year 2022-23 are for the months of May and June and are offset by significant budget savings elsewhere so no adjustment is recommended. For Fiscal Year 2023-24, a budget amendment will be recommended in order to account for a full year of these additional expenses and revenues. • Savings in the Risk Management category are in the Human Resources department and are attributable to budgets for outside counsel and recruitment and retention. 13-6 Year -End Budget Results and Surplus Allocation October 24, 2023 Page 7 • Savings in the Capital Expenditures category are primarily in the Police Department. There is a $350,000 allocation to replace the Police Department's camera system that is being carried forward into Fiscal Year 2023-24 and is deducted from the available fund balance on the Sources, Uses, and Budget Surplus table. Most of the remaining savings are in the Fire Department for a program enhancement for EMS supplies that has also been carried forward into the Fiscal Year 2023-24 budget. • Operating Transfers Out include the annual transfers that the General Fund makes to various funds including the General Fund CIP Fund, the Tidelands Fund, the Tidelands CIP fund, the Facilities Financing Plan (FFP) Fund, and the Facilities Maintenance Plan Fund. As was described in the Transfers In section and is expanded on in the Tidelands Fund section later in this report, the Tidelands Fund Cost Allocation Plan came in higher than was previously budgeted, which resulted in an additional $1.1 million in revenue to the General Fund. As the Tidelands fund does not generate sufficient revenue to support operations, the General Fund subsidizes the Tidelands fund. The additional amounts for the Cost Allocation Plan result in the need for the subsidy to be increased by $1.1 million. Additionally, on May 23, 2023, the City Council approved a budget amendment appropriating $410,000 in the Tidelands Fund to allow for a mooring field realignment, which necessitated an additional $410,000 transfer from the General Fund. Non -Operating Transfers Included in the non -operating transfers in is the advance repayment from the Tidelands Capital Fund, which was utilized for dredging within the City's Tidelands. Included in the non -operating transfers out is the transfer of the prior year surplus to the Police Facility Fund for the purchase of a property on Dove Street, utilization of the Fiscal Year 2022-23 structural surplus which transferred funds to the Capital Improvement Fund, and the Facilities Financing Planning Fund, as well as one-time program enhancements included in the adopted budget. The purchase of the property on Dove Street for the future site of the Police Department headquarters was initially projected to total $30,775,000, however after further negotiations and the closing of escrow, the actual amount for the purchase is approximately $2.2 million less. These savings are reflected in the narrative of the General Fund Sources, Uses, and Projected Surplus portion of the report. General Fund Sources, Uses, and Projected Surplus The City continues to be in excellent financial health. Conservative budgeting and sound financial policies have resulted in a trend of General Fund operating surpluses and strong reserve levels for several years. The City is well positioned to continue delivering a high level of service to the community while targeting surplus resources to key priorities each year. 13- 7 Year -End Budget Results and Surplus Allocation October 24, 2023 Page 8 The table below illustrates the prior year sources and uses of funds, current year activity and the projected year-end results. BEGINNING UNRESTRICTED FUND BALANCE $ 24,093,441 $ 24,093,441 $ 24,881,469 $ 788,028 3.3% OPERATING RESOURCES: Operating Revenues 265,030,502 278,451,424 284,385,122 5,933,698 2.2% Prior Year Resources Carried Forward - 4,429,573 4,429,573 - --- Transfers In from Other Funds 17,300,724 17,348,716 18,428,263 1,079,547 6.2% Repayment of Advances 1,250,000 1,250,000 1,250,000 - 0.0% TOTAL OPERATING RESOURCES 283,581,226 301,479,713 308,492,958 7,013,245 2.5% OPERATING USES: Operating Expenditures 244,520,405 250,638,728 243,435,204 (7,203,524) -2.9% Transfers Out 30,687,817 30,687,817 32,246,069 1,558,252 5.1% Resources Carried Forward to Next Fiscal Year - - 5,465,426 5,465,426 --- Addition to 25% Contingency Reserve - - 3,739,907 3,739,907 --- TOTAL OPERATING USES 275,208,222 281,326,545 284,886,607 3,560,062 1.3% NET OPERATING SURPLUS $ 8,373,004 $ 20,153,168 $ 23,606,351 $ 3,453,183 41.2% NON -OPERATING RESOURCES & USES Non -Operating Transfers Out (909,452) (28,457,903) (28,457,903) - 0.0% NON -OPERATING RESOURCES & USES $ (909,452) $ (28,457,903) $ (28,457,903) $ 0.0% ENDING UNRESTRICTED FUND BALANCE $ 31,556,994 $ 15,788,707 $ 20,029,918 $ 4,241,211 13.4% As reflected in the table above, a $20 million operating surplus for the General Fund is projected for Fiscal Year 2022-23, which is net of non -operating activity that includes one-time transfers out of the General Fund to the FFP and General Fund CIP, as well as the addition to the Contingency Reserve (pursuant to City Council Policy F-2). The City Council has approved two budget amendments in Fiscal Year 2023-24 that allocate a portion of the Fiscal Year 2022-23 year-end surplus. BA 24-009 designated $2 million to the proposed permanent supportive housing project with the City of Costa Mesa and BA 24-012 designated $1.65 million to the Arroyo Park Synthetic Turf Field Installation Project (23P11). Additionally, the General Fund is scheduled to reimburse the General Fund CIP Fund and the Facilities Financing Plan (FFP) Fund for their contributions to the Dove Street property purchase. The original amounts transferred by these funds totaled just under $7 million, however, savings from the purchase have reduced that amount by $2.2 million. These uses of the General Fund surplus reduce the available unrestricted surplus to $11.6 million, as shown on the table below. Per City Council Policy F-5, "roughly fifty percent (50%) of the Budget Surplus Funds shall be used to address long-term obligations such as pension liabilities, other post -employment benefits, bonded debt, lease obligations and other long-term needs" and "roughly fifty percent (50%) of the Budget Surplus Funds shall be used to address long-term obligations such as pension liabilities." Staff recommends allocating the remaining $11.6 million surplus in a manner consistent with Council Policy, and as further described within this report. 13-8 Year -End Budget Results and Surplus Allocation October 24, 2023 Page 9 Fiscal Year 2022-23 Operating Surplus 20,029,918 Arroyo Park Synthetic Turf Field Installation Project (23P11) (1,650,000) Permanent Supportive Housing project with the City of Costa Mesa (2,000,000) Reimburse General Fund CIP for Dove Street (1,450,000) Reimburse FFP for Dove Street (3,324,919) Unrestricted Surplus 11,604,999 50% to long term obligations such as pension liability or debt 5,802,499 50% to infrastructure or neighborhood capital improvements 5,802,499 Allocation of Surplus Towards Long -Term Obligations Consistent with City Council Policy F-5, it is recommended that 50% of year-end surplus funds be allocated to long-term obligations such as pensions, debt and other long-term needs. The City's most recent actuarial valuation from CalPERS reflects a $348 million net pension liability as of June 30, 2022, which reflects a funded status of 70.9%. In Fiscal Year 2022-23, the City paid $45 million towards the City's net pension liability, which is approximately $15 million more than the amount required to be paid. The budget for Fiscal Year 2023-24 continues to reflect the City's commitment to paying $45 million per year towards the City's net pension liability, which is anticipated to result in eliminating the City's pension liability in 2032. The continuation of the $45 million pension paydown plan is based on a dollar -cost averaging approach where consistent contributions over the long-term are intended to minimize the risk from market fluctuations. If the City allocated $5.8 million of the surplus for Fiscal Year 2022-23 towards the City's pension liability, it would increase the City's pension funded status from 70.9% to 71.4%. However, considering the City's comprehensive pension paydown strategy, it is recommended that 50% of the surplus be allocated towards the City's other post -employment benefits (OPEB). The City's most recent actuarial valuation reflects a $7.5 million net OPEB liability as of June 30, 2023, which reflects a funded status of 82.4% (excluding amounts related to the implied rate subsidy). If the City allocated $5.8 million of the surplus for Fiscal Year 2022- 23 towards the City's OPEB liability, it would increase the City's OPEB funded status from 82.4% to 96.0%. The City's budget for Fiscal Year 2023-24 includes a contribution of approximately $1.5 million to paying down the OPEB liability. If the City allocated 50% of the surplus to OPEB and continues to make a contribution of $1.5 million per year towards the OPEB liability, the City expects to eliminate the OPEB liability within the next year or two, which would provide for $1.5 million in annual budgetary savings. Therefore, it is recommended that the City allocate 50% of the surplus towards the City's OPEB liability. Other Major Funds The Tidelands Fund Cost Allocations have exceeded the amount included in the revised budget by $1.1 million. This 6% increase over what was included in the adopted budget is due to a variety of changes in the cost allocation plan calculation methodology. In August of Fiscal Year 2022-23, the City awarded a Professional Contract to ClearSource Financial Consulting for the Citywide User Fee Study and Cost Allocation Plan Services. 13-9 Year -End Budget Results and Surplus Allocation October 24, 2023 Page 10 The cost allocation plan budget for Fiscal Year 2022-23 had been developed by the City's prior consultant, and this reconciliation of year-end actuals which resulted in an increase of $1.1 million, or 6% was calculated by the City's current consultant. An analysis of the changes from the prior calculation to the new calculation determined that the reasons for the increase are due to updates to the cost bases used (Fiscal Year 2022-23 actuals compared to prior year actuals used to calculate the Fiscal Year 2022-23 budget), as well as methodology changes in both the calculation of Citywide overhead allocated to the Tidelands Fund, as well as the allocation of direct services to the Tidelands Fund. The recent updates to the Cost Allocation Plan show that more Citywide services, which are fully budgeted in the General Fund, are allocable to the Tidelands Fund. Because these costs are already fully budgeted in the General Fund, and the General Fund already subsidizes the Tidelands Fund, the additional cost allocations result in increased revenue to the General Fund, which is then offset by an additional subsidy from the General Fund. It is important to account for the expenses and revenues in this way, even though they net out in both the General Fund and Tidelands Fund, because the City is required to keep complete and accurate financial records of the activity in the Tidelands area and report on them to the California State Lands Commission in the annual Tidelands Financial Report. Available Beginning Fund Balance 4,547,799 Revenues 13,640,610 Expenses (24,343,445) Surplus (Deficit) (6,155,036) CIP Rebudgets (3,071,845) Reserve Set Asides (2,319,188) Surplus (Deficit) (11,546,069) Budgeted Subsidy from General Fund 10,397,817 Additonal General Fund Subsidy (1,148,252) Staff has evaluated the fiscal condition of the City's other major operating funds (Water, and Wastewater). An analysis of the budget performance for these funds indicates that no budget adjustments are necessary and variances between budgeted and actual amounts are within reason. Preliminary Unaudited Amounts The City's financial records are undergoing a customary audit review. Therefore, the financial information presented in this report is preliminary in nature and subject to adjustments as the year-end close process continues through December. Any such adjustments are not anticipated to have a material impact on the financial information presented in this report. If any material adjustments related to Fiscal Year 2022-23 are subsequently recorded, any such adjustments will be reported to the Finance Committee. 13-10 Year -End Budget Results and Surplus Allocation October 24, 2023 Page 11 FISCAL IMPACT: As a result of approval of the Budget Amendment (Attachment A) included with this report, the Fiscal year 2022-23 unrestricted General Fund operating surplus, projected to be $11.6 million, will be allocated to long-term obligations and infrastructure or neighborhood capital improvements. 50% of the year-end surplus funds would be allocated to post -employment benefits (OPEB); the other 50% of the surplus would be allocated to infrastructure or neighborhood capital improvements. ENVIRONMENTAL REVIEW: Staff recommends the City Council find this action is not subject to the California Environmental Quality Act (CEQA) pursuant to Sections 15060(c)(2) (the activity will not result in a direct or reasonably foreseeable indirect physical change in the environment) and 15060(c)(3) (the activity is not a project as defined in Section 15378) of the CEQA Guidelines, California Code of Regulations, Title 14, Chapter 3, because it has no potential for resulting in physical change to the environment, directly or indirectly. NOTICING: The agenda item has been noticed according to the Brown Act (72 hours in advance of the meeting at which the City Council considers the item). ATTACHMENTS: Attachment A — Budget Amendment No. 24-028 Attachment B — Budget Amendments for the Fourth Quarter 13-11 �Etivaor� r, Department: Finance Requester: Jason AkImam City of Newport Beach BUDGET AMENDMENT 2023-24 ONETIME: 0 Yes ❑ No Approvals ❑ CITY MANAGER'S APPROVAL ONLY Finance Director: F21 COUNCIL APPROVAL REQUIRED City Clerk: ATTACHMENT A BA#: 24-028 Date 1O Date EXPLANATION FOR REQUEST: To appropriate the FY 2022-23 year-end surplus. Funds will be allocated to Other Post Employment Benefits (OPEB) trust, Facilitites ❑ from existing budget appropriations Financing Plan, and future Capital Improvement Projects. ❑ from additional estimated revenues 0 from unappropriated fund balance REVENUES Fund # Org Object Project Description Increase or (Decrease) ; 762 76299 691010 INTERFUNDTRANSFERS -TRANSFER IN GENERAL FUND 5,802,499.50 513 51399 691010 INTERFUNDTRANSFERS -TRANSFER IN GENERAL FUND 2,901,749.75 012 01299 691010 INTERFUNDTRANSFERS -TRANSFER IN GENERAL FUND 2,901,249.75 S u btota I 11, 604,999.00 EXPENDITURES Fund # Org Object Project Description Increase or (Decrease) 010 01099 991762 GENERAL FUND INTERFUND TRANSFR -TRANSFER OUT RETIREE MED FUND RES 5,802,499.50 762 76204 811052 RETIREE MED RES NON OP - ANNUAL OPEB PAYMENT 5,802,499.50 010 01099 991513 GENERAL FUND INTERFUND TRANSFR - TRANSFER OUT FFP 2,901,249.75 010 01099 991012 GENERAL FUND INTERFUND TRANSFR -TRANSFER OUT CIP FUND 2,901,249,75 Subtotal 17,407,498.50 FUND BALANCE Fund 4 Object Description Increase or (Decrease) $ 010 300000 GENERAL FUND FUND BALANCE CONTROL (11,604,999.00) 012 300000 GENERAL FUND CAPITAL PROJECTS - FUND BALANCE CONTROL 2,901,249.75 513 30000D FACILITIES FINANCING PLAN - FUND BALANCE CONTROL 2,901,249.75 762 300000 RETIREE MED FUND RES - FUND BALANCE CONTROL Subtotal (5,802,499.50) Fund Balance Change Required 13-12 ATTACHMENT B City of Newport Beach Fiscal Year 2022-23 Budget Amendments Quarter Ending June 30, 2023 Net Effect on Fund Balance BA# Date Amendment Type Fund Revenues Expenditures Increase/(Decrease) Department Explanation 058 04/11/2023 City Council ACKERMAN TRUST 32,533.05 32,533.05 Library To accept a donation from Ackerman Trut for purchase of Library Technology. 061 04/25/2023 City Council ARPA 2021 (41,272.00) (41,272.00) Utilities Redirecting American Rescue Plan Act Funding from the Library Lecture Hall (LLH) Project to the City Yard Fueling Support MISC FFP PROJECTS Facilities and Transfer Station Rehabilitation (CNG) Project and redirecting FFP funding for the CNG Project to the LLH Project FACILITIES FINANCING PLAN and appropriating remaining ARPA fund balance to the CNG Project and transferring associated savings from the CNG project PARKS & COMMUNITY CENTERS - 527,520.00 (527,520.00) in the FFP Fund to the FFP Fund balance. 065 04/03/2023 City Manager GENERAL FUND 3,082.70 3,082.70 Police Police Emergency Coordinator personnel reimbursement for an attended conference at the International Association of Emergency Managers (IAEM) in November 2022. O66 05/09/2023 City Council EQUIPMENT FUND - 102,817.00 (102,817.00) Public Works To approve the purchase of a bus for the Oasis Senior Center and two storm water pumps. The transit bus and both storm water pumps meet the condition replacement criteria as established by Council Policy F-9, City Vehicle/Equipment Replacement guide. 067 05/23/2023 City Council GENERAL FUND 2,072,146.75 1,027,991.75 1,044,155.00 Finance To increase revenue estimates and expenditure appropriations relating to the fiscal year 2022-23 Quarter Three staff report. TIDE & SUBMERGED LANDS FUND 500,000.00 500,000.00 PEG FEES - 47,991.75 (47,991.75) RESTRICTED PEG FEES - 20,000.00 (20,000.00) NEIGHBORHOOD ENHANCEMENT 1,000,000.00 1,000,000.00 068 05/08/2023 City Council GENERAL FUND 2,500.00 2,500.00 Library Accept donation from the Cultural Arts Foundation to fund Cultural Arts Program. 069 05/10/2023 City Manager GENERAL FUND 4,780.00 4,780.00 Library Accept CA Literacy Grant Funds and add to new Library software account. 070 05/10/2023 City Manager GENERAL FUND - 3,220.00 Library Reappropriate unused salary savings in to CA Literacy Grant expense account. 071 05/23/2023 City Council OPIOID REMEDIATION 395,765.84 395,765.84 Police Increase revenues and expenses related to a settlement received for opioid remediation. 072 05/23/2023 City Council FIRE EQUIPMENT FUND - 142,975.85 (142,957.85) Fire Increase appropriation for the sole source selection and purchase of six (6) Zoll Medical Corporation manufactured AutoPulse© mCPR devices and associated components and warranties. 073 05/23/2023 City Council GENERAL FUND - 410,000.00 (410,000.00) Harbor To increase appropriation expenditures to the Harbor Department, Professional Service accounts to abide by Comission Objective 2.3. These recommendations will improve navigation safety and TIDE & SUBMERGED LANDS FUND 410,000.00 410,000.00 410,000.00 allow additional moorings within the fields and mooring size exchange requests. 074 06/01/2023 City Manager GENERAL FUND - 385,000.00 - RSS Instructor payments for Recreation's various classes were cut in FY2020-21 as a budget reduction strategy and remained lower than the pre -pandemic levels through the current year's adopted budget. City Council approved a budget amendment with the first quarter report to increase instructor payment budgets, however, demand for classes has necessitated an additional appropriation. An analysis for salary savings caused by vacancies throughout the year has shown that sufficient savings exist, and that a transfer within the department's budget is appropriate. 075 06/27/2023 City Council GENERAL FUND - 134,477.47 (134,477.47) Fire Appropriate expenses for the first payment to the State of California for the participation in the PP-GEMT-IGT program. 13-13 City of Newport Beach Fiscal Year 2022-23 Budget Amendments Quarter Ending June 30, 2023 Net Effect on Fund Balance BA # Date Amendment Type Fund Revenues Expenditures Increase/(Decrease) Department Explanation 076 06/27/2023 City Council EQUIPMENT FUND 104,164.83 (104,164.83) Public Works To purchase three (3) vehicles for the replacement of existing vehicles that are in accordance with the replacement criteria as established by City Council Policy F-9 for the Public Works Department. The total amount for the three (3) vehicles is $99,204.60. The total expenditure requested includes an additional 5 % contingency in the amount of $4,960.23 to cover the cost of unforseen changes. 077 06/15/2023 City Manager GENERAL FUND 24,000.00 Police For the Boardwalk Enforcement Program. Council approval needed to utilize contract services allocation for NBPD overtime deployment. 078 06/30/2023 City Manager GENERAL FUND 350,000.00 Police To utilize budget savings in FY2023 to fund Police Department Camera Replacement/Integration. 13-14