HomeMy WebLinkAbout03 - PFC - Review of Annual Financial StatementsQ �EwPpRT
CITY OF
s NEWPORT BEACH
`q</Fo'P PUBLIC FACILITIES CORPORATION STAFF REPORT
August 27, 2024
Agenda Item No. 3
TO: HONORABLE CHAIRPERSON AND MEMBERS OF THE BOARD
OF DIRECTORS
FROM: Jason AI -Imam, Finance Director/Treasurer — 949-644-3126
jalimam@newportbeachca.gov
PREPARED BY: Trevor Power, Accounting Manager - 949-644-3125
tpower@newportbeachca.gov
TITLE: Review of Annual Financial Statements
ABSTRACT:
The bylaws of the Newport Beach Public Facilities Corporation (Corporation) call for an
annual meeting of its Board of Directors. The bylaws also specify that the chief financial
officer shall maintain adequate financial records concerning the receipts and
disbursements of the Corporation and the Board of Directors is entitled to inspect the
associated financial records upon request. The attached financial statements represent
the financial position and financial activities of the Corporation for the year ended
June 30, 2024.
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; and
b) Receive and file the annual financial statements for the year ended June 30, 2024.
DISCUSSION:
The Newport Beach Public Facilities Corporation was created on March 9, 1992, by the
City of Newport Beach under the authority of California law. The purpose of the
Corporation is to assist the City in the financing of public improvements, including in the
past with the Central Library and the Civic Center. This type of non-profit corporation is
utilized to facilitate the issuance of public financing instruments called Certificates of
Participation (COPs). COPs are a common California public financing instrument utilized
for the acquisition or construction of public facilities and/or equipment. They are structured
as a type of lease purchase that requires a third party, the Corporation, to be a party to
the lease transaction along with the City of Newport Beach. The Corporation assigns all
of the rights, obligations, and financial transactions associated with the COPs issuance
to a trustee bank to facilitate the debt issuance.
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Review of Annual Financial Statements
August 27, 2024
Page 2
The Corporation is governed by a Board of Directors that has historically been comprised
of the seven Newport Beach City Council members. Normally, the mayor serves as
chairperson of the Board, with the Mayor Pro Tern serving as Vice Chairperson. Under
the Corporation's bylaws, the City Manager serves the Corporation as President, the
City Clerk serves as Secretary, and the Finance Director serves as Chief Financial
Officer.
In 1992, the City issued $7.5 million of COPs to finance the construction of the
Central Library and subsequently refinanced this obligation in 1998. In 2010, the City
issued approximately $126.7 million of new COPs. Of this financing, $122.8 million was
used for the Civic Center project and $3.9 million was used to refinance the remaining
balance of the Central Library COPs. In 2020, the City issued $7.9 million of new COPs
to finance the construction of Fire Station No. 2. The Corporation's financial data and
transactions are included in the Debt Service Fund in the City's financial statements. The
City's Debt Service Fund is used solely to account for the activities of the Corporation and
contains no other City debt financing activities. Even though the Corporation is a separate
legal entity, it is considered a component unit of the City and is included in the City's
Annual Comprehensive Financial Report and its transactions are reviewed as part of the
City's annual financial statement audit.
The main sources of revenues of the Corporation are lease payments from the City and
Federal Build America Bond (BAB) interest subsidy payments for the Civic Center COPs,
both of which are pledged for the sole purpose of paying interest and principal on the
outstanding COPs. The Corporation has assigned its rights to receive and collect these
payments to a trustee bank who makes the semi-annual debt service payments to the
bondholders. Therefore, the lease and BAB subsidy payments are received directly by
the trustee bank. While the outstanding debt has been issued by the Corporation,
ultimately it is an obligation of the City, not the Corporation. The City owns the properties
that are encumbered through the COPs' lease transactions, which remain encumbered
until such time as the outstanding debt has been repaid in full.
During the year, the trustee bank received lease payments from the City totaling
$8.6 million and BAB interest subsidy payments totaling $2.1 million. Together with
investment earnings and any restricted funds already on hand with the trustee bank, there
were sufficient resources available to satisfy the annual debt service payments totaling
$10.7 million. The table on the following page illustrates the remaining combined debt
service payment schedule and principal balance outstanding on the Civic Center and Fire
Station No. 2 COPs.
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Review of Annual Financial Statements
August 27, 2024
Page 3
Year Ending
COP Debt Service
June 30
Principal
Interest
BAB Subsidy
Total
Balance
2025
$ 4,235,000
$ 6,357,471
$ (2,027,487)
$ 8,564,984
89, 290, 000
2026
4,430,000
6,074,260
(1,943,783)
8,560,477
84,860,000
2027
4,635,000
5,777,615
(1,856,041)
8,556,574
80, 225, 000
2028
4,840,000
5,467,189
(1,764,147)
8,543,042
75, 385, 000
2029
5,060,000
5,142, 526
(1,667,983)
8,534,543
70, 325, 000
2030-2034
25,910,000
20,459,211
(6,728,634)
39,640,577
44,415,000
2035-2039
30, 250, 000
10, 695, 373
(3,530,008)
37, 415, 365
14,165, 000
2040-2041
14,165, 000
1,026,996
(338, 960)
14, 853, 036
-
$ 93,525,000
$ 61,000,641
$ (19,857,043)
$ 134,668,598
The combined outstanding principal of the obligations was $93.5 million as of
June 30, 2024. Of that amount, $87.8 million was related to the 2010 COPs which are
payable through 2041, and $5.7 million was related to the 2020 COPs which are payable
through 2031. The remaining interest of $61.0 million does not yet reflect the remaining
expected BAB subsidy of $19.9 million, so the remaining interest net of the BAB subsidy
totals $41.1 million.
FISCAL IMPACT:
There is no fiscal impact related to this item.
ENVIRONMENTAL REVIEW:
Staff recommends the Board of Directors of the Public Facilities Corporation find this
action is not subject to the California Environmental Quality Act (CEQA) pursuant to
Sections 15060(c)(2) (the activity will not result in a direct or reasonably foreseeable
indirect physical change in the environment) and 15060(c)(3) (the activity is not a project
as defined in Section 15378) of the CEQA Guidelines, California Code of Regulations,
Title 14, Chapter 3, because it has no potential for resulting in physical change to the
environment, directly or indirectly.
LIre'ldralk,rel
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).
ATTACHMENT:
Attachment A — Financial Statements
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Attachment A
Financial Statements
M
NEWPORT BEACH PUBLIC FACILITIES CORPORATION
Comparative Balance Sheet
June 30, 2024 and 2023
Assets
Cash with fiscal agent
Intergovernmental receivable
Total Assets
Liabilities and Fund Balances
Liabilities:
Accounts payable
Total Liabilities
Fund balances:
Nonspendable
Restricted for:
Debt Service
Committed
Assigned
Unassigned
Total fund balance
Total liabilities and fund balance
2024
2023
$ 7,503,160
1,039,804
$ 8,533,482
-
$ 8,542,964
$ 8,533,482
8,542,964
8,533,482
8,542,964
8,533,482
$ 8,542,964 $ 8,533,482
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NEWPORT BEACH PUBLIC FACILITIES CORPORATION
Comparative Statement of Revenues,
Expenditures and Changes in Fund Balances
For the Fiscal Years Ending June 30, 2024 and June 30, 2023
2024
2023
Revenues:
Lease revenues
$ 8,550,011
$ 8,603,642
Investment income
85,741
61,136
Federal interest subsidy
2,073,983
2,133,824
Total revenues
10,709,735
10,798,602
Expenditures:
Debt service:
Principal
4,085,000
3,940,000
Interest and fiscal charges
6,615,253
6,832,688
Total expenditures
10,700,253
10,772,688
Excess (deficiency) of revenues
over expenditures
9,482
25,914
Fund balance, beginning
8,533,482
8,507,568
Fund balance, ending
$ 8,542,964
$ 8,533,482
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