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HomeMy WebLinkAbout05 - Amending the Selection Process and Various Responsibilities of the Finance CommitteeQ �EwPpRT CITY OF s NEWPORT BEACH `q44:09 City Council Staff Report March 10, 2026 Agenda Item No. 5 TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL FROM: Jason AI -Imam, Adminstrative Services Director/Treasurer - 949- 644-3126, jalimam@newportbeachca.gov PREPARED BY: Jason AI -Imam, Administrative Services Director/Treasurer TITLE: Resolution No. 2026-18 — Amending the Selection Process and Various Responsibilities of the Finance Committee ABSTRACT - The proposed resolution amends the structure, appointment process, qualifications and terms of the City's Finance Committee (Committee) based on recommendations from the Fiscal Transparency Ad Hoc Committee. The amendments are intended to enhance fiscal oversight by adding Committee members with relevant expertise, improve transparency by daylighting all Committee discussion items at City Council meetings, and ensure efficient use of staff time and resources. The Committee would consist of five members, three Councilmembers appointed annually by the Mayor, and two citizen members, appointed by the Mayor and confirmed by the City Council. The resolution establishes enhanced professional qualification requirements for citizen appointees, implements two-year terms beginning July 1, 2026, allows for completion of the current budget cycle and includes transition provisions for current members. 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) Adopt Resolution No. 2026-18, A Resolution of the City Council of the City of Newport Beach, California, Amending the Selection Process and Various Responsibilities of the Finance Committee. DISCUSSION: The Committee was originally established by Resolution No. 94-110 on December 12, 1994. Since its creation, the City Council has periodically amended the Committee's structure and responsibilities to ensure continued fiscal stewardship and alignment with evolving best practices in municipal finance. Periodic evaluation of advisory bodies ensures continued alignment with best practices and evolving governance needs. Resolution No. 2026-18 — Amending the Selection Process and Various Responsibilities of the Finance Committee March 10, 2026 Page 2 On January 27, 2026, the City Council adopted Resolution No. 2026-05 establishing the Fiscal Transparency Ad Hoc Committee, composed of Mayor Lauren Kleiman and Councilmembers Sara Weber and Joe Stapleton. The Ad Hoc Committee was directed to evaluate ways to enhance transparency, accountability and the efficient use of City resources; broaden policy perspectives; increase public engagement in discussions regarding the City's fiscal governance and financial status; and make related recommendations to the full City Council. The proposed amendments to the Committee are based on the input and direction provided by the Fiscal Transparency Ad Hoc Committee and are intended to address each of the directives outlined above. The discussion below explains the policy rationale for the proposed changes in relation to transparency, accountability, efficiency, policy perspective and public engagement. Alianment with Ad Hoc Committee Directives 1. Transaarencv and Public Enaaaement Committee meetings are subject to the Brown Act; however, public attendance at regular Committee meetings has historically been limited. In recent years, average in -person public attendance has generally consisted of approximately three members of the public or fewer, excluding staff and Committee members. While meetings are open and agendas publicly posted, discussion at the Committee level does not always generate the same level of public visibility or engagement as items agendized for full City Council consideration. Over the past two years, the Committee has discussed a number of significant fiscal matters, including but not limited to long-range financial forecasts, quarterly budget updates, capital financing strategies, pension and other post -employment benefit (OPEB) funding strategies, internal audit updates, revenue projections, and investment policy matters. In several instances, these items were reviewed at the Committee level but were not subsequently presented to the full City Council as standalone discussion items, thereby limiting broader public visibility and recorded Council deliberation. Under the proposed structure, the Committee will function more clearly as a technical working group, with key policy recommendations and major fiscal matters presented to the full City Council for discussion and action. This approach is intended to "daylight" significant financial topics at publicly televised Council meetings where a larger audience typically attends or participates remotely, thereby enhancing transparency and public engagement in the City's fiscal governance. 2. Accountability and Efficient Use of City Resources The Committee currently meets approximately nine to 10 times per year. Each meeting requires substantial staff preparation, including agenda development, report drafting, financial analysis, coordination among departments, posting and noticing requirements, and attendance by executive and finance staff. Collectively, these meetings require a Resolution No. 2026-18 — Amending the Selection Process and Various Responsibilities of the Finance Committee March 10, 2026 Page 3 significant number of staff hours annually in preparation and participation. The proposed structure contemplates reducing the number of regular meetings to approximately five to six per year, focused on core fiscal planning milestones and technical review of major financial items. By streamlining the meeting schedule and clarifying the Committee's advisory role, the City can reduce duplicative presentations and better align staff resources with Council -level decision -making. This modification is intended to improve the efficient use of City resources while preserving meaningful fiscal review and oversight. 3. Broadening Policy Perspectives and Enhancing Technical Expertise Under the current structure, the enabling resolution recommends but does not require that citizen appointees possess financial credentials such as a CPA, CFA, business or finance degree, or other relevant designation. In practice, applicants for appointment have been required to submit a formal application for City Council consideration, including disclosure of their educational background, occupational history, civic experience, references and a resume. The City Council has historically reviewed this information when making appointments. While this process has provided transparency regarding applicants' qualifications, the existing resolution does not establish minimum qualification standards specific to finance or municipal fiscal oversight. As a result, the level and type of financial expertise represented on the Committee may vary depending on the applicant pool and the appointing Council's discretion at a given time. The proposed resolution establishes enhanced qualification requirements for citizen appointees. Under the proposed structure, citizen members must possess demonstrated education, professional certification, or significant professional experience in finance, accounting, economics, business administration, public administration, investment management, or a closely related field. Qualifying experience may include service in financial management, business, legal, consulting, or executive leadership roles involving financial oversight, budgeting, investments, fiscal policy, or similar responsibilities. By codifying baseline qualification criteria within the enabling resolution, the proposed amendments are intended to formalize expectations for subject matter expertise and ensure consistent technical capacity on the Committee going forward. Establishing baseline financial qualifications is also intended to broaden policy perspectives by ensuring that fiscal discussions incorporate professional, real -world experience in budgeting, investments, and financial management, thereby enhancing the depth and diversity of policy analysis provided to the City Council. This change is designed to strengthen the Committee's ability to provide informed, experience -based fiscal analysis while preserving the City Council's discretion in evaluating and appointing qualified applicants. Resolution No. 2026-18 — Amending the Selection Process and Various Responsibilities of the Finance Committee March 10, 2026 Page 4 Summary of Proposed Changes The proposed resolution makes several substantive modifications to the Committee's structure and responsibilities, summarized below. 1. Committee Composition and Appointment Process Current Structure ( seven Members): • Three Councilmembers appointed by the Mayor, subject to full Council approval. • Four citizen appointees appointed individually by Councilmembers not serving on the Committee, subject to full Council approval. The enabling resolution recommends, but does not require, that appointees possess financial credentials, and does not establish mandatory minimum qualification standards. Proposed Structure (five Members): • Three Councilmembers appointed annually by the Mayor. • Two citizen members with financial expertise, vetted by a City Council committee, appointed by the Mayor, and confirmed by the full City Council. The proposed structure reduces the Committee from seven to five members and eliminates the practice of individual Councilmembers directly appointing a designated citizen representative. Instead, citizen members will be selected through a City Council — wide appointment process of noticing the vacancies, vetting applications, and interviewing qualified applicants, consistent with Council Policy A-2. 2. Citizen Appointee Qualifications The proposed resolution establishes enhanced qualification requirements for citizen appointees. Under the proposed structure, citizen members must possess demonstrated education, professional certification, or significant professional experience in finance, accounting, economics, business administration, public administration, investment management, or a closely related field. Qualifying experience may include service in financial management, business, legal, consulting, or executive leadership roles involving financial oversight, budgeting, investments, fiscal policy, or similar responsibilities. The City Council will determine whether applicants meet the qualification requirements prior to appointment. These changes are intended to ensure that citizen appointees possess the technical expertise necessary to provide meaningful fiscal input and analysis. 3. Term Modifications and Transition Provisions Resolution No. 2026-18 — Amending the Selection Process and Various Responsibilities of the Finance Committee March 10, 2026 Page 5 The proposed resolution provides: • Current citizen appointees will continue to serve through June 30, 2026. • Effective June 30, 2026, the terms of all current citizen appointees will expire. • Beginning July 1, 2026, new citizen appointees will serve two-year terms and may be reappointed for one additional two-year term. This transition allows for continuity through the end of the fiscal year while implementing the new structure in a clear and orderly manner. 4. Clarification of Purpose and Responsibilities The proposed resolution refines and modernizes the Committee's purpose statement to clarify that the Committee serves in an advisory capacity to the City Council and City Manager on matters related to: • The City's operating budget; • Long-range financial planning and fiscal sustainability; • Pension and other post -employment benefit liabilities; • Capital financing; and • The internal audit program. The responsibilities section has been reorganized to improve clarity and alignment with current financial oversight practices. For reference, a tentative annual work plan and meeting calendar outlining the types of items expected to be reviewed by the Committee under the proposed structure and responsibilities, as well as items to be brought directly to the City Council, is included as Attachment B. The proposed amendments preserve public engagement, as the Committee meetings will continue to comply with the Brown Act, including publicly posted agendas, open meetings, and opportunities for public comment. The City's budget process will remain transparent and subject to public participation. Resolution No. 2026-18 — Amending the Selection Process and Various Responsibilities of the Finance Committee March 10, 2026 Page 6 FISCAL IMPACT: There are no direct fiscal impacts associated with the proposed amendments to the Committee structure. City staff estimates that approximately 485 hours annually are devoted to preparing for and attending Committee meetings, including agenda preparation, development of reports and presentations, internal review and coordination, and meeting attendance. Any modification to the Committee's structure or meeting frequency may result in corresponding adjustments to staff time commitments; however, no additional appropriations are required as a result of this action. 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 — Resolution No. 2026-18 Attachment B — Tentative Finance Committee & Council Review Schedule Attachment A Resolution No. 2026-18 RESOLUTION NO. 2026-18 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF NEWPORT BEACH, CALIFORNIA, AMENDING THE SELECTION PROCESS AND VARIOUS RESPONSIBILITIES OF THE FINANCE COMMITTEE WHEREAS, the City of Newport Beach ("City") is governed, in part, by its Charter, Municipal Code, and adopted City Council Policies; WHEREAS, the City Council has a long and established history of being good guardians and stewards of the public's money; WHEREAS, appropriations, expenditures, and other budgetary matters are a primary concern of the City Council; WHEREAS, on December 12, 1994, the City Council adopted Resolution No. 94- 11 E establishing the Finance Committee, whose duties and responsibilities have been amended throughout the years to further protect and safeguard the public's money; WHEREAS, the Finance Committee is charged with a variety of tasks including, but not limited to, reviewing and monitoring events and issues that may affect the financial status of the City and making recommendations to the City Council regarding amendments to financial policies; WHEREAS, the existing Finance Committee is composed of three City Council Members, appointed by the Mayor subject to City Council approval, and four citizen members, appointed by Council Members not on the Finance Committee, subject to City Council approval; WHEREAS, the City Council desires to preserve the Finance Committee's purpose and bolster its ability to provide qualified oversight of the City's fiscal processes, while increasing public visibility and transparency; and WHEREAS, the City Council desires to amend the Finance Committee selection process and responsibilities, as described in this resolution. NOW, THEREFORE, the City Council of the City of Newport Beach resolves as follows: Section 1: The City Council hereby amends the Finance Committee selection process and responsibilities as described in Attachment'A," which is incorporated herein by reference. Resolution No. 2026- Page 2 of 3 Section 2: The City Council hereby repeals all prior resolutions, or parts thereof, related to the Finance Committee that conflict with this resolution. Section 3: If any section, subsection, sentence, clause or phrase of this resolution is for any reason held to be invalid or unconstitutional, such decision shall not affect the validity or constitutionality of the remaining portions of this resolution. The City Council hereby declares that it would have passed this resolution and each section, subsection, sentence, clause or phrase hereof, irrespective of the fact that any one or more sections, subsections, sentences, clauses or phrases be declared invalid or unconstitutional. Section 4: The recitals provided in this resolution are true and correct and are incorporated into the substantive portion of this resolution. Section 5: The City Council finds the adoption of this resolution and the amendment of the Finance Committee 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, Division 6, Chapter 3, because it has no potential for resulting in physical change to the environment, directly or indirectly. Resolution No. 2026- Page 3 of 3 Section 6: This resolution shall take effect immediately upon its adoption by the City Council, and the City Clerk shall certify the vote adopting this resolution. ADOPTED this 10th day of March, 2026. Lauren Kleiman Mayor ATTEST: Lena Shumway City Clerk APPROVED AS TO FORM: CITY ATTORNEY'S OFFICE Aaron- C. Harp City Attorney Attachment A: Amended Finance Committee Description ATTACHMENT "A" FINANCE COMMITTEE AUTHORIZATION: Established by Resolution No. 94-110 adopted on December 12, 1994. Modified by Resolution No. 96-100 adopted on December 9, 1996. Disbanded by Resolution No. 98-32 adopted on May 11, 1998. Re-established by Resolution No. 2000-103 adopted on December 12, 2000. Duties and membership amended by Resolution No. 2007- 21 adopted on April 10, 2007. Purpose and responsibilities amended by Resolution No. 2013-32 adopted on April 9, 2013. Membership, qualifications and term of members, and purpose and responsibilities amended by Resolution No. 2015-5 adopted on January 13, 2015. Administrative practices amended by Resolution No. 2015-40 adopted on May 26, 2015. Term of citizen appointees amended by Resolution No. 2017-58 adopted on September 12, 2017. Various other changes amended by Resolution No. 2018-70 adopted on September 25, 2018. Term of membership amended by Resolution 2024-91 on December 10, 2024. Selection process and responsibilities amended by Resolution 2026- on March 10, 2026. MEMBERSHIP: Five (5) members total, comprised of the following: Three (3) members of the Newport Beach City Council appointed by the Mayor. Two (2) citizen members appointed by the Mayor and confirmed by the full City Council ("Citizen Appointees"). At the Mayor's discretion, the Mayor may establish an Ad Hoc Committee to provide advice; however, whether such a committee is formed, the Mayor shall make the appointments subject to confirmation by the City Council. Citizen Appointees have equal voting status. The Mayor shall appoint the chairperson and vice -chairperson, subject to confirmation by the full City Council. Staff support will be provided primarily by the City Manager and the Administrative Services Director. Meetings shall be held as required by the business needs of the Finance Committee in the City Council Chambers, or such other locations as allowed by the Ralph M. Brown Act, on weeknights or weekdays (M-Th) at a time that is convenient for the Finance Committee and the public to encourage public participation. TERM OF COUNCIL Council Members shall be appointed annually by the Mayor. MEMBERS: TERM OF CITIZEN A. Transition. All previously appointed Citizen APPOINTEES: Appointees of the Committee shall continue to serve until June 30, 2026, at which time their terms shall end. New Citizen Appointees shall be selected in accordance with Council Policy A-2, as modified herein, and shall begin their terms on July 1, 2026. B. New Citizen Appointee Term of Office. Citizen Appointees shall serve a two-year term, or until their successor is appointed and qualified, unless the City Council takes action to replace a Citizen Appointee. Citizen Appointees may serve a second two-year term if reappointed by the City Council. v QUALIFICATIONS OF A. Must be a resident of the City of Newport Beach. CITIZEN APPOINTEES: B. Must be a registered voter in the City of Newport Beach. L C. Each Citizen Appointee shall possess demonstrated education, professional certification, or significant professional experience in finance, accounting, economics, business administration, public administration, investment management, or a closely related field. Qualifying experience may include service in financial management, business, legal, consulting, or executive leadership role involving financial oversight, budgeting, investments, fiscal policy, or similar responsibilities. The Mayor shall determine whether an applicant meets the qualification requirements prior to appointment. PURPOSE: The Finance Committee shall serve in an advisory capacity to the City Council and City Manager on matters related to the City's operating budget, long-range financial planning, fiscal sustainability, investment performance, pension and other post -employment benefit liabilities, capital financing, and internal financial oversight. RESPONSIBILITIES: A. Review and monitor the City's financial condition and economic outlook, including factors that may materially affect revenues, expenditures, reserves, and long-term fiscal sustainability. B. In accordance with Sections 504 and 1101 of the City Charter, review the City Manager's proposed operating budget and give recommendations to the City Manager. Any changes the Committee recommends to the City Manager's Budget shall be provided in writing to the City Council along with the budget presented by the City Manager. C. Review the final City Manager's operating budget and make recommendations for City Council consideration. D. Review the City's Long -Range Financial Forecast and provide recommendations to promote long- term fiscal sustainability. E. Review major long-term capital and infrastructure financing plans, including but not limited to the Facilities Financing Plan and Harbor and Beaches Master Plan, to assess alignment with the City's budget and financial capacity. F. Review the City's long-term pension and other post -employment benefit obligations, including the CalPERS Pension Liability reports and the OPEB Actuarial Valuation Report, and provide recommendations regarding funding strategies and policies. G. Review the City's Internal Audit Program and receive reports regarding significant audit findings, internal control matters, and management responses. H. When requested by the City Council, make recommendations to the City Council regarding any other matter affecting the financial health and fiscal sustainability of the City. Attachment B Tentative Finance Committee & Council Review Schedule 1921 AIIs] :9111V ZkyjI XTITA Financial Statement Auditor's Communication Economic Development Update General Fund and Tidelands Long Range Financial Forecast Update Facilities Financing Plan and Harbor & Beaches Master Plan Second Quarter Budget Update Departmental Overviews Fee Study Update Overview of Proposed Revenues and Expenditures for Next Year's Budget Committee Recommendation to Council for Next Year's Budget Third Quarter Budget Update Review of Investment Performance Investment Policy Review Year -End Budget Results and Surplus Allocation First Quarter Budget Update Internal Audit Program Update OPEB Actuarial Valuation Report Update CalPERS & Pension Trust Update COMMITTEE CITY COUNCIL CONSIDERATION REVIEW