HomeMy WebLinkAboutFinance Committee Agenda Packet - May 29, 2025CITY OF NEWPORT BEACH
FINANCE COMMITTEE AGENDA - Final
Community Room
100 Civic Center Drive, Newport Beach, CA 92660
Thursday, May 29, 2025 - 3:00 PM
Finance Committee Members:
Joe Stapleton, Mayor / Chair
Robyn Grant, Council Member
Sara J. Weber, Council Member
Allen Cashion, Committee Member
William Collopy, Committee Member
William Kenney, Committee Member
Kory Kramer, Committee Member
Staff Members:
Grace K. Leung, City Manager
Jason Al-Imam, Finance Director/Treasurer
Shelby Burguan, Deputy Finance Director
Vicky Nguyen, Assistant Management Analyst
NOTICE REGARDING PRESENTATIONS REQUIRING USE OF CITY EQUIPMENT
Any presentation requiring the use of the City of Newport Beach’s equipment must be submitted to the Finance
Director/Treasurer 24 hours prior to the scheduled Finance Committee meeting.
NOTICE REGARDING PUBLIC PARTICIPATION
Questions and comments may also be submitted in writing for the Finance Committee’s consideration by sending them
to Jason Al-Imam, Finance Director/Treasurer, at jalimam@newportbeachca.gov. To give the Finance Committee
adequate time to review your questions and comments, please submit your written comments by no later than 5 p.m.
the day prior to the Finance Committee meeting. All correspondence will be made part of the record.
NOTICE TO THE PUBLIC
The Finance Committee meeting is subject to the Ralph M. Brown Act. Among other things, the Brown Act requires that
their agenda be posted at least twenty-four (24) hours in advance of each special 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.
It is the intention of the City of Newport Beach to comply with the Americans with Disabilities Act (“ADA”) in all respects.
If, as an attendee or a participant at this meeting, you will need special assistance beyond what is normally provided, the
City of Newport Beach will attempt to accommodate you in every reasonable manner. If requested, this agenda will be
made available in appropriate alternative formats to persons with a disability, as required by Section 202 of the
Americans with Disabilities Act of 1990 (42 U.S.C. Sec. 12132), and the federal rules and regulations adopted in
implementation thereof. Please contact the City Clerk’s Office at least forty-eight (48) hours prior to the meeting to
inform us of your particular needs and to determine if accommodation is feasible at (949) 644-3127 or
jalimam@newportbeachca.gov.
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May 29, 2025
Page 2
Finance Committee Meeting
I.CALL MEETING TO ORDER
II.ROLL CALL
III.PLEDGE OF ALLEGIANCE
IV.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.
V.CURRENT BUSINESS
COMMITTEE RECOMMENDATION TO COUNCIL FOR THE FY 2025-26
BUDGET
A.
Summary:
The Finance Committee thoroughly reviewed the City Manager’s Proposed
Operating Budget for Fiscal Year 2025-26 and held multiple meetings in preparation
for the joint Study Session with the City Council on May 27, 2025. Pursuant to City
Council Policy F-3 and Resolution No. 2018-71, the Finance Committee is
responsible for reviewing the Proposed Operating Budget and recommending that
the City Council consider its approval following the joint meeting.
Recommended Action:
Make final recommendations to the City Council concerning the City Manager’s
Fiscal Year 2025-26 Proposed Budget.
STAFF PRESENTATION
5A1 STAFF PRESENTATION
THIRD QUARTER BUDGET UPDATEB.
Summary:
Staff will provide a presentation regarding the year-to-date and projected Fiscal Year
2024-25 budget performance.
Recommended Action:
Staff recommend that the Finance Committee review and discuss this report and
provide any recommendations for consideration by the City Manager and City
Council.
STAFF REPORT
STAFF PRESENTATION
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May 29, 2025
Page 3
Finance Committee Meeting
WORK PLANC.
Summary:
Staff will report on the upcoming Finance Committee items.
Recommended Action:
Receive and file.
WORK PLAN
VI.ADJOURNMENT
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FISCAL YEAR 2025-26
PROPOSED BUDGET
Finance Committee Meeting -May 29, 2025
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PROPOSED BUDGET REVISIONS: FISCAL YEAR 2025-26
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SUMMARY OF ALL FUNDS – EXPENDITURES WITH PROPOSED BUDGET REVISIONS
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FY 22
Adopted
FY 23
Adopted
FY 24
Adopted
FY 25
Adopted
FY 26
Proposed % Variance
Operating Budget 291,523,400 330,919,923 351,870,115 368,155,904 376,024,020 2.1%
Transfers Out 39,075,536 53,035,836 58,859,125 72,312,196 87,856,184 21.5%
CIP New Appropriations 35,506,078 71,030,292 29,375,044 54,344,000 66,743,297 22.8%
Total Budget 366,105,014 454,986,051 440,104,284 494,812,100 530,623,501 7.2%
•2.1% growth in operating budget, primarily related to:
•Routine personnel costs such as cost-of-living adjustments and merit increases
•Proposed Program Enhancement Requests / Contract CPI updates
•21.5% growth in transfers out, primarily due to increases in transfers to FFP Fund, Water Capital Fund, and Tidelands.
•22.8% growth in CIP projects for street improvements, park projects, tidelands projects, etc.
Note:
•Prior year amounts have been restated to align with current accounting for Tideland expenditures.
•Amounts for FY 26 on this slide are reflective of figures presented in budget book with inclusion of proposed budget revisions.
•Additional proposed budget revisions may be included as negotiations with various bargaining units continue.6
GENERAL FUND SOURCES AND USES
4
2025-26 Proposed
Beginning Unrestricted Fund Balance -
Operating Revenues & Transfers In 332,457,397
Operating Expenditures & Transfers Out (321,498,570)
Repayment of Advances 1,250,000
Preliminary Ending Unrestricted Fund Balance 12,208,827
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QUESTIONS?
8
FISCAL YEAR 2025-26
PROPOSED BUDGET
Finance Committee Meeting -May 29, 2025
Item No. 5A1Updated Staff PresentationMay 29, 2025
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PROPOSED BUDGET REVISIONS:
FISCAL YEAR 2025-26
2 10
SUMMARY OF ALL FUNDS – EXPENDITURES WITH
PROPOSED BUDGET REVISIONS
3
FY 22
Adopted
FY 23
Adopted
FY 24
Adopted
FY 25
Adopted
FY 26
Proposed % Variance
Operating Budget 291,523,400 330,919,923 351,870,115 368,155,904 376,024,020 2.1%
Transfers Out 39,075,536 53,035,836 58,859,125 72,312,196 87,856,184 21.5%
CIP New Appropriations 35,506,078 71,030,292 29,375,044 54,344,000 68,858,297 26.7%
Total Budget 366,105,014 454,986,051 440,104,284 494,812,100 532,738,501 7.7%
•2.1% growth in operating budget, primarily related to:
•Routine personnel costs such as cost-of-living adjustments and merit increases
•Proposed Program Enhancement Requests / Contract CPI updates
•21.5% growth in transfers out, primarily due to increases in transfers to FFP Fund, Water Capital Fund,
and Tidelands.
•26.7% growth in CIP projects for street improvements, park projects, tidelands projects, etc.
Note:
•Prior year amounts have been restated to align with current accounting for Tideland expenditures.
•Amounts for FY 26 on this slide are reflective of figures presented in budget book with inclusion of proposed budget revisions.
•Additional proposed budget revisions may be included as negotiations with various bargaining units continue.11
GENERAL FUND SOURCES AND USES
4
2025-26 Proposed
Beginning Unrestricted Fund Balance -
Operating Revenues & Transfers In 332,457,397
Operating Expenditures & Transfers Out (321,498,570)
Repayment of Advances 1,250,000
Preliminary Ending Unrestricted Fund Balance 12,208,827
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5
QUESTIONS?
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CITY OF NEWPORT BEACH FINANCE COMMITTEE STAFF REPORT
Agenda Item No. 5B May 29, 2025
TO: HONORABLE CHAIRMAN AND MEMBERS OF THE COMMITTEE
FROM: Finance Department Jason Al-Imam, Finance Director / Treasurer 949-644-3123, jalimam@newportbeachca.gov
SUBJECT: THIRD QUARTER BUDGET UPDATE
SUMMARY: The Finance Department prepares quarterly financial reports to review the status of General Fund revenues and expenditures, as well as to monitor budgetary trends in the
City’s other major funds. This report presents revenue, expenditure, and estimated fund balance information for the third quarter of Fiscal Year 2024-25. The FY 2024-25 third-quarter financial report analyzes the City’s financial activity from July 2024 through March 2025. Based on data available through the end of the third
quarter, an unrestricted General Fund operating surplus of $19.2 million is projected—an increase of $1.7 million compared to the second-quarter projection. RECOMMENDED ACTION:
Staff recommend that the Finance Committee review and discuss this report and provide any recommendations for consideration by the City Manager and City Council. DISCUSSION: Economic Overview Home sales for detached single-family residences in Newport Beach were lower during the quarter ending March 31, 2025, due to elevated interest rates. However, the median
sales price increased by 11.6% during the same period, reaching $4.6 million, which is
$476,000 higher than the median price for the quarter ending December 31, 2024. Meanwhile, uncertainty in national public policy and ongoing tariff discussions—with changing timelines and product details—continue to create challenges for capital investment and may affect consumer spending patterns. The City is continuing to closely
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Third Quarter Budget Update May 29, 2025 Page 2
monitor potential impacts on tax revenues and will modify revenue projections as needed in response to data-driven analysis. Overall, the economic outlook for Newport Beach remains strong, driven primarily by consistent and vigorous demand for coastal real
estate. This demand continues to push assessed property values higher, despite a
slowdown in home sales. This long-term trend is a key factor contributing to Newport Beach’s fiscal stability. General Fund Revenues
General Fund revenues are projected to end the year approximately 0.16%, or $0.5
million, lower than projected in the second quarter. This is primarily due to decreases in other taxes, service fees and charges, parking revenues, and license and permit revenues, which is partially offset by an increase in transient occupancy tax revenue.
The following table summarizes the changes to projected General Fund revenues versus
the quarter two projected amounts for FY 2024-25. Details explaining the reasons for material variances follow. FY 2024-25 Projected General Fund Revenues
*Gross TOT revenues total approximately $40.7 million. Through December 31, 2024, Visit Newport Beach
(VNB) received 18% of gross TOT. Starting January 1, 2025, VNB’s share increased to 23% of hotel TOT and 0% of residential TOT. VNB payments are projected at $7.7 million for the fiscal year, leaving net TOT revenues of $33 million. Property Tax - Property taxes are the City’s largest single source of General Fund revenue, accounting for approximately 50% of total General Fund revenues. As reported in the second quarter update, property tax revenue for FY 2024-25 was projected at
$152.6 million, reflecting an increase of $6.4 million, or 4.4%, over the prior year. Third-
quarter projections remain consistent with the previous forecast, and no adjustment is recommended. These figures remain steady due to stable cash receipts from supplemental property taxes. The current projections align with the previous forecast.
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Third Quarter Budget Update May 29, 2025 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 groups — autos and transportation; general consumer
goods; restaurants/hotels and the State & County Pools. As reported in the second
quarter, sales tax revenue was projected at $45.2 million in FY 2024-245, which assumed a 4% increase or $1.8 million over the prior year. Sales tax data from the California Department of Tax and Fee Administration (CDTFA) for the quarter ending on March 31, 2025, is not yet available. Therefore, the projection for the third quarter remains at $45.2
million. Transient Occupancy Tax – The third largest funding source for the General Fund is TOT, making up more than 10% of General Fund revenues. Approximately three-fourths of TOT revenue is derived from hotels, with the balance coming from short-term lodging.
While TOT receipts from short-term lodging more than doubled over the four-year period
from Fiscal Year 2018-19 through Fiscal Year 2022-23, short-term lodging revenue for FY2024-25 is projected to be 2.3% lower than the prior year actuals. However, TOT revenue from hotels is projected to be 6% higher than the prior year actuals. Therefore, the overall projection for the third quarter is 1.1% higher than projected in quarter two, or
$0.4 million.
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 other taxes, service fees and charges, parking revenue, licenses and permits, property income, fines
and penalties, intergovernmental revenues, investment earnings, and miscellaneous
revenues. Material changes in projected amounts were made to other taxes and service fees and charges:
• Other Taxes include utility, cable, and solid waste franchise taxes, as well as
business license and marine charter taxes. Second-quarter projections for
business license tax revenue anticipated 3% growth over the prior year. However, the third-quarter projection shows revenues leveling off compared to the prior year, contributing to the overall decrease in other tax revenues.
• Service Fees and Charges include plan check fees, recreation class fees,
emergency medical service fees, and various other cost-of-service charges. These revenues are projected to be $0.3 million (1.3%) lower than previously forecasted, due to a slight decrease in activity. For example, planning permit fee revenues are lower than expected, reflecting a slowdown in construction activity driven by higher
interest rates.
• Parking Revenue consists of all General Fund-related parking fees that are assessed throughout the various parking zones of the city. Third quarter figures are 1.7% lower than the revised budget, or $0.1 million.
• Licenses and Permits include fees for processing building-related permits, street closure permits, dog licenses, and police tow franchise fees. The Police Department is reporting lower-than-expected actual revenues for accounts such as police tow franchise fees and dog licenses. Additionally, the Community
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Third Quarter Budget Update May 29, 2025 Page 4
Development Department is seeing reduced permit revenues due to a decline in discretionary construction activity, which has been affected by high interest rates.
• Property Income is projected to come in $0.1 million lower than the budget
primarily due to the Dove St. property, which is experiencing increased vacancy rates within the past year.
• Intergovernmental Revenues reflects an additional settlement payment of
$460,793 from a class action lawsuit between the City of Long Beach and
Monsanto regarding polychlorinated biphenyls (PCBs) contamination. A budget amendment is requested to increase revenues within this category to reflect this additional settlement payment. This increase in revenue offsets the Fire Department’s delayed payments from PP-GEMT-IGT due to the collection process
where there is a delay between the month that the transport occurred and the
receipt of the payment.
General Fund Expenditures The FY 2024-25 General Fund expenditure budget totals $323 million. Spending trends
for the fiscal year are generally consistent with prior years and do not indicate any cause
for concern. General Fund expenditures are projected to total $313.6 million, which is $2.2 million lower than previously forecasted, primarily due to additional savings from vacant positions.
The following table summarizes budgeted expenditures compared to projected amounts,
along with expenditure savings by budget category. Details explaining the reasons for material variances follow. FY 2024-25 Projected General Fund Expenditures
* Refuse contract costs totaling $9.3 million were previously classified under maintenance and repair but
have been reclassified as contract services in the third quarter.
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Third Quarter Budget Update May 29, 2025 Page 5
Significant expenditure budget variances are as follows:
• The revised salary and benefits budget totals $188.9 million. Based on the third-
quarter budget update, expenditures are projected to be $181.3 million, which
includes an additional $1.6 million in savings compared to the second-quarter projection. The second-quarter forecast had already reflected $6 million in budget savings. Therefore, total projected savings now amount to $7.6 million, or 4%, primarily due to unfilled vacant positions.
• Maintenance and repair accounts are anticipated to slightly exceed the budget due to increased maintenance needs. These overages are expected to be offset by savings in other categories and are not a cause for concern.
• Capital expenditures are trending higher than second-quarter projections due to the reallocation of certain Dove Street Property costs between operating and capital accounts.
General Fund Sources, Uses, and Projected Surplus The table below summarizes projected General Fund sources, uses, and the budget surplus based on the third-quarter forecast compared to the second-quarter forecast.
FY 2024-25 Projected General Fund Sources, Uses, and Budget Surplus
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Third Quarter Budget Update May 29, 2025 Page 6
The City remains in excellent financial health, supported by conservative budgeting and sound financial policies that have produced consistent General Fund surpluses and strong reserves. For FY 2024-25, unrestricted General Fund resources are projected to
total $19.2 million. After allocating an estimated $2.1 million to fully fund the contingency
reserve, $17.1 million is expected to remain available for City Council appropriation. As in prior years, additional savings are anticipated, which could increase the final year-end surplus.
Other Major Funds Tidelands Fund State requirements and increased demand for oil well maintenance have caused maintenance and repair costs, as well as other agency fees, to exceed the budget. An
additional $145,000 is anticipated to be needed in the current fiscal year. However, this
need is fully offset by higher-than-budgeted oil sale revenues, resulting in no net impact to the fund. A budget amendment will be presented to the City Council to increase both revenues and expenditures in the Tidelands Fund.
Staff have evaluated the fiscal condition of the City’s other major operating funds (Water
and Wastewater). The budget performance analysis for these funds indicates that no adjustments are necessary, and variances between budgeted and actual amounts are reasonable.
Conclusion
Staff recommend that the Finance Committee review and discuss this report and provide any recommendations for consideration by the City Manager and City Council.
Prepared and Submitted by:
/s/ Jessica Nguyen ____________________________
Jessica Nguyen Budget Manager
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FISCAL YEAR 2024-25THIRD QUARTER BUDGET UPDATE
May 29, 2025
Finance Committee
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PROJECTED GENERAL FUND REVENUES
2
Revised Budget $ 322.5 million
Second Quarter Projection $ 323.4 million
Third Quarter Projection $ 322.9 million
•General Fund revenues are projected to be $0.5 million lower than previously forecasted, primarily due to decreases in service fees and charges, licenses and permits, and property income. These decreases are partially offset by an increase in TOT revenue.$0
$50
$100
$150
$200
$250
$300
$350
Revised Budget Q3 Projected
Mi
l
l
i
o
n
s
Property Tax Sales Tax TOT Other Operating Transfers In
21
115.6
123.2
128.5
138.4
146.2
152.6
$100
$110
$120
$130
$140
$150
$160
2019-20Actual 2020-21Actual 2021-22Actual 2022-23Actual 2023-24Actual 2024-25Projected
Mi
l
l
i
o
n
s
PROPERTY TAX REVENUE
3
•Property tax revenue is the City’s largest source of revenue and is projected
to increase by $6.4 million (4.4%) over the previous fiscal year. This amount
aligns with both the budget projection and the second-quarter projection.
+4.4%
+6.6%
+4.3%
+7.7%
+5.6%
22
36.2
39.0
46.2 46.6
43.4
45.2
$30
$32
$34
$36
$38
$40
$42
$44
$46
$48
2019-20Actual 2020-21Actual 2021-22Actual 2022-23Actual 2023-24Actual 2024-25Projected
Mi
l
l
i
o
n
s
SALES TAX REVENUE
4
•Sales tax revenue is the City’s second-largest source of revenue and is
projected to increase by $1.8 million (4.0%) over the previous fiscal year.
This amount aligns with both the budget projection and the second-quarter
projection.
-6.7%
+7.5%
+18.5%
+0.8%
4.0%
23
20.8
16.9
26.7
30.2
31.7 33.0
$10
$15
$20
$25
$30
$35
2019-20Actual 2020-21Actual 2021-22Actual 2022-23Actual 2023-24Actual 2024-25Projected
Mi
l
l
i
o
n
s
TRANSIENT OCCUPANCY TAX
5
•Transient Occupancy Tax (TOT) revenue is the City’s third-largest source of
revenue and is projected to increase by $1.3 million (4.1%) over prior year
actuals, driven by anticipated growth in hotel TOT receipts. The third-quarter
projection of $33.0 million is $0.4 million higher than the second-quarter
projection.
+13.2%
4.1%
-19.0%
+58.0%
+5.1%
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GENERAL FUND EXPENDITURES
6
Revised Budget $323.4 million
Projected Actual $313.6 million
Q3 Projected Savings $9.8 million
•Budget savings of $9.8 million are currently projected, which is $2.2 million higher than previously estimated. The increase is primarily due to additional savings from vacant positions and reduced spending on contract services.
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GENERAL FUND SOURCES & USES
7
•A current surplus
projection of $19.2
million is expected
to grow in the fourth
quarter.
•Approximately $2.1
million is needed to
fund the contingency
reserve, leaving
$17.1 million
uncommitted.
26
OTHER MAJOR FUNDS
8
•Tidelands Fund
•+$145,000 increase in Sale of Oil Revenues
•+$145,000 in Other Agency Fees and Maintenance and Repair NOC
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RECOMMENDED ACTION
9
Staff recommends that the Finance Committee:
•Review and discuss this report
•Provide any recommendations for consideration by the City Manager and the City Council
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10
Questions?
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5/29/25
Scheduled Date Agenda Title Report Type Agenda Description
Thursday, September 11, 2025
Overview of Community Development Department Budget Presentation Staff will provide the Committee with a presentation covering the budget for the Community Development Department.
Annual Review of Investment Performance Presentation
The City's investment advisor, Chandler Asset Management, will report on the
performance of the City's investment portfolio for the fiscal year ending June 30, 2025.
Annual Review of Investment Policy Presentation
Staff will provide a presentation regarding any proposed changes to the City's
Investment Policy prior to the Investment Policy being approved by the City Council.
Budget Amendments for Quarter Ending June 30, 2025 Receive and File Staff will report on the budget amendments from the prior quarter.
Work Plan Review Receive and File Staff will report on the upcoming Finance Committee items.
Thursday, October 9, 2025
Overview of Sales Tax Allocations for Automobile Sales Presentation
The City's sales tax consultant, HdL Companies, will provide the Committee
with an overview of how sales tax is allocated for automobile sales, with a
particular focus on non-traditional auto dealerships, such as Tesla, which has adopted a direct-to-consumer sales model.
Overview of Recreation and Senior Services Department Budget Presentation Staff will provide the Committee with a presentation covering the budget for the Recreation and Senior Services Department.
Year-End Budget Results and Surplus Allocation Presentation
Staff will provide a presentation regarding the year-end budget results for Fiscal
Year 2024-25 and recommendations for allocation of any year-end budget surplus.
Budget Amendments for Quarter Ending September 30, 2025 Receive and File Staff will report on the budget amendments from the prior quarter.
Work Plan Review Receive and File Staff will report on the upcoming Finance Committee items.
Thursday, November 13, 2025
First Quarter Budget Update Presentation Staff will provide a presentation regarding the year-to-date and projected Fiscal
Year 2025-26 budget performance.
OPEB Actuarial Valuation Report Update Presentation Staff will provide the Committee with an overview of the Fiscal Year 2024-25
actuarial valuation report prepared by the City's actuary.
CalPERS Update Presentation
Staff will provide the Committee with an overview of the data from the latest
actuarial reports from CalPERS as well as their impact on prior projections of
the paydown of the City's unfunded pension liability.
Internal Audit Program Update Presentation Presentation of internal audit reports, findings, and recommendations from the
Fiscal Year 2024-25 audit program.
Work Plan Review Receive and File Staff will report on the upcoming Finance Committee items.
September 2025
October 2025
November 2025
December 2025 Committee Recess
August 2025 Committee Recess
Newport Beach Finance Committee Work Plan
June 2025
Committee Recess
Committee RecessJuly 2025
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