city
Council
January 28, 2023
• Update on Financial Status and Budget Development
• FY 2021-22 Results Recap
• FY 2022-23 Current Estimates
• FY 2023-24 Budget Planning and Challenges
• Continuing Initiatives
• General Plan Update
• Addressing Homelessness
• John Wayne Airport
• Legislative Platform
• Capital Improvement Program
• Update on significant projects
• Development of CIP Budget
City of Newport Beach 2
Financial Overview
City of Newport Beach
Revenues $276 million
Expenditures (��48 million) $300
Contingency Reserve Set -Aside ($4 million) $250
Year -End Budget Surplus $24 million
$200
• The $24 million budget surplus was largely due o
to revenues coming in higher than the original $150
budget, the result of a conservative approach to
forecasting COVID-19 impacts on revenues. $100
• On November 15, 2022, the City Council
approved the transfer of the budget surplus to $50
the Police Facility Fund to fund most of the
purchase of the Dove Street property. $0
Revenues
M.
Budget Actual
■ Property Tax Sales Tax TOT
Transfers Other
City of Newport Beach
• On November 15, 2022, the City Council authorized staff to execute an agreement to begin the process of purchasing property at 1201 Dove Street to house a new police headquarters sometime in the next decade.
• The negotiated purchase price of $30.5 million is funded from the FY 2021-22 Budget Surplus of $24 million and s6.7 million from available funds in the Facilities Financing Plan Fund (FFP) and General Fund Capital Improvement Program (CIP) Fund.
It is anticipated that the FFP and General Fund Capital Improvement Plan Fund will be replenished from the
anticipated General Fund surplus for FY 2022-23.
• The property is projected to produce $15 million to $25 million of lease revenue (net of operating expenses and building management costs) over the next 10 to 15 years, respectively.
• The close of escrow is anticipated to be April, 2023.
City of Newport Beach 5
Adopted Budget* $ 284 million $300
Q1 Projection* $ 287 million $250
Current Projection* $ 292 million $200
• Primary variances from adopted budget
• Property Tax + $2 million
• Sales Tax + $2 million
• Transient Occupancy Tax + s1 million
• Other Revenue + $3 million
V)
C
0 $150
7-
$100
$50
$0
Adopted Q1 Current
Budget Projection Projection
■ Property Tax Sales Tax TOT
Transfers Other
io
City of Newport Beach
• The top three revenues
account for 72% of all
General Fund revenue
• Property tax assessed
value growth drove
projection higher
• Record year for sales tax
revenues with strong
growth across the board
• Hotel TOT revenues are
projected to be 0.5% below
the pre -pandemic level, but
offset by strong growth in
I s i d e n t i a l TOT City of Newport Beach
$zoo
Ln
0 $120
$100
$8o
$50
c $45
0 $40
$35
$30
$30
C $25
0 $20
Property Tax Revenue
$133
$1o8 $113 $11g $12LF
FY 2o18-19 FY 2019-2o FY 2020-21 FY 2021-22 FY 2022-23
Actual Actual Actual Actual Projected
Sales Tax Revenue
$46 $49
$39 $36 $39
FY 2o18-19 FY 2019-2o FY 2020-21 FY 2021-22 FY 2022-23
Actual Actual Actual Actual Projected
TOT Revenue
$25
$27 $29
$21
$17
FY 2o18-19 FY 2019-2o FY 2020-21 FY 2021-22 FY 2022-23
Actual Actual Actual Actual Projected
7 • $3 million in expenditure savings from vacancies is currently projected. • On June 14, 2022, the FiscalYear 2022-23 budget was amended to include:
• A s5 million appropriation to increase the amount paid to CalPERS towards the unfunded pension liability (from $40 million to $45 million).
• An appropriation of $2.5 million to transfer funds to the Facilities Financing Plan Fund and General Fund Capital Improvement Program. • Material appropriations to the budget include employee costs associated with adjusting future cost -of -living adjustments (COLAs) & temporarily reducing employee retirement contributions or temporarily increasing monthly City contributions toward the employee Cafeteria Plan. • Revenue growth is anticipated to fully offset the mid -year appropriations.
City of Newport Beach 8
• The Finance Committee will review the Second Quarter Budget Update on Februaryl6t", followed by City Council review on February 28tn
• A sio million budget surplus is currently projected for FY 2022-23, which is based on $292 million in projected operating revenues and $282 million in projected operating expenditures.
• It is anticipated that a portion of the budget surplus will be utilized to set -aside funds for the Contingency Reserve (pursuant to City Council Policy F-2), and to replenish the FFP and General Fund CIP Fund for amounts attributable to the Dove Street Property Purchase.
City of Newport Beach
I
2022-23 Projected $ 292 million $300
2023-24 Projected $ 299 million
$250
• $7 million, or 2.4%, of projected revenue $200
growth, primarily due to:
0 • Property Tax + $4.5 million $15°
• Sales Tax + $0.3 million
$loo
• TOT + so.9 million
$50
• Other Revenue + $1.3 million
$o
2022-23 2023-24
Projected Projected
■ Property Tax ■ Sales Tax TOT
Transfers Other
City of Newport Beach 10
• Property tax revenue is projected to be 46% of General Fund revenues
• Property tax revenues are projected to increase by $4.5 million or 3%, which is largely related to the inflation adjustment indexed at the 2% cap allowed by Proposition 13, and due to changes in ownership, which is partially offset with an anticipated decrease in supplemental property tax revenue as home sales slow due to rising interest rates.
$150
$140 0 +3%
$130 +4% $138
^ $120 �
+5% $133
o +5% $124
$110 $119
$100 $108 $113
$go
$8o
FY 2o18-19 FY 2019-20 FY 2020-21 FY 2021-22 FY 2022-23 FY 2023-24 Actual Actual Actual Actual Projected Projected
City of Newport Beach
11 • The second largest funding source for the General Fund is sales tax revenue, which is largely generated from three main industry categories including autos and transportation, general consumer goods, and restaurants and hotels.
• Sales tax revenue is projected to increase approximately $26o thousand or o.5%due tomodest growth projected in sales tax revenue from restaurants and hotels, and the State & County pools, which is partially offset with projected decreases in general consumer goods and autos & transportation. $50
$45
$40
$39
$35
$30
FY zo18-19
Actual
+I%
+6%
$49 $49
+19% $46
-6% +8% _
$39
$36
FY 2019-20 FY 2020-21
Actual Actual
FY 2021-22 FY 2022-23 FY 2023-24
Actual Projected Projected
City of Newport Beach
12 • Transient occupancy tax revenue is projected to be lo% of General Fund revenues
• Hotel TOT revenues are projected to exceed pre -pandemic levels next fiscal year and residential TOT revenues are at a record high-level and growing. • The Fashion Island Hotel remains closed but is expected to reopen in the Summer of 2023 following a sale and renovation as the Pendry Newport Beach.
However, staff has conservatively not included any revenue from the hotel in the TOT revenue projection.
+3%
$30 +g%
$29 $30
$25
-16% +58% $2
7 Ln $ 25
c
.° $20
$21
$15 $17
$10
FY M18-s9 FY 2019-20 FY 2020-21 FY 2021-22 FY 2022-23 FY 2023-24 Actual Actual Actual Actual Projected Projected
City of Newport Beach
13 Operating Budget
Development
City of Newport Beach 14
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City of Newport Beach 3.5
Sat, Jan 28, 2023
Thurs, March 16, 2023
Tues, March 28, 2023
Thurs, April 13, 2023
Tues, May 9, 2023
Tues, May 23, 2023
Tues, June 13, 2023
Meeting Type
Special Council Meeting
Finance Committee
Council Study Session
Finance Committee
Council Study Session
City Council Planning Session
Overview of Revenue Projections
Early Look at the Capital Improvement Program
Proposed FY 2023-24 Budget Overview
FY 2023-24 1st Budget Review
Joint Council / Finance I FY 2023-24 2nd Budget Review
Committee Study Session
Council Public Hearing Adoption of FY 2023-24 Budget
City of Newport Beach 16
Pension Funding
Update
City of Newport Beach
17 • The pension paydown strategy is revisited each year. • On June 14, 2022, the City Council adopted the budget for Fiscal Year 2022-23, which included a baseline allocation of s4o million to paydown the City's unfunded pension liability.
• On June 14, 2022, the City Council also authorized an additional discretionary contribution at a minimum level of s5 million from General Fund surplus - increasing the amount paid to CalPERS towards the unfunded pension liability from $40 million to $45 million annually.
• The previous forecast projected the City's pension liability being paid off in Fiscal Year 2029-30, which was dependent on CalPERS earning 6.8% over the long-term. The investment loss for Fiscal Year 2021-22 was not known at that time.
City of Newport Beach i 8
• In November 2022, CalPERS announced a 7.5% investment loss for Fiscal Year 2021-22.
• The Actuarial Valuation at June 30, 2022 will not be available until August 2023. However, the CalPERS Pension Outlook tool has been utilized to estimate the City's projected funded status as of June 30, 2022, which reflects the impact associated with the 7.5% investment loss.
Unfunded Liability
$ 333,135,247
$ 326,289,861
$ 333,046,257
Funded Percentage
66.9 %
68.7 %
69.2 Investment Return 8.6 % 6.7 % 4.7 %
* Projected
$ 223, 438, 444
80.5 0/0
21.3 %
$330,881,000
71.1%
-7.5%
City of Newport Beach
19 • Staff recommends continuing with the accelerated payment strategy recommended in 2022, which includes a baseline allocation of $40 million and an additional discretionary contribution at a minimum level of s5 million from General Fund surplus.
• This is approximately$3.5 million more than required byCalPERS. • The FiscalYear 2021-22 investment losses resulted in extending the paydown schedule by two years.
• The current projection shows the pension liability will be eliminated in Fiscal Year 2032-33•
City of Newport Beach
20 Budget Challenges
City of Newport Beach 21
• High inflation over the last year is impacting several areas • CIP Projects —The FiscalYear 2022-23 budget includes
$103 million in CIP. Bids for many projects are coming in well above the engineer's estimate. Requests for
additional funding will need to be evaluated on an as - needed basis.
• Materials & Services Operating Costs — Reviewing the
budget for increases in operating costs (e.g., electricity, gas, chemicals, etc.)
• Water and Sewer Enterprise Funds — Beginning process to evaluate operations and capital projects for rate
adjustments necessary for the health of these funds
• Recruitment and Retention of City employees
City of Newport Beach
22 There are many factors creating recruitment and retention challenges for the City, including:
• Inflation
• Minimum wage increases
• Competition
• Other public sector agencies
• Private Sector
• Relocations / Lifestyle Changes
• Work volume
City of Newport Beach
23 • Proposed adjustments are being reviewed with departments and the highest priorities will be included in the Recommended Budget for City Council review
• Evaluating conversion of part-time to full-time positions based on staff turnover and operational needs
• Full review of Harbor Department staffing
• Additional staffing requests are being reviewed in a few targeted areas where rising demand is impacting service levels City of Newport Beach
24 Continuing Initiatives
City of Newport Beach 25
O �
U
C'911pr)FL P
General Plan Update
City
Council
General Plan
Update Steering
Committee
General Plan
Advisory Committee
LAND USE
Recently Started
NATURAL RESOURCES ARTS & CULTURAL
In Progress
(LIMITED TO HOUSING UNITS)
HISTORICAL RESOURCES SAFETY
HARBOR & BAY
RECREATION
City of Newport Beach
27 Resources
• City Response: Two full-time staff members, Peninsula Enforcement Team, Interdepartmental Homeless Outreach Team, Homeless Solutions Collaborative, Community outreach programs and materials, Good Giving
• City Contracted Services: City Net, Be Well OC Mobile Crisis Unit, Costa Mesa Temporary Bridge Shelter, Trellis International Community Impact Team, Permanent Supportive Housing
• Countywide Coordination within the Orange County Central Service Planning Area (SPA), County Psychiatric Emergency and Response Team Support
• State and Federal Programs: Emergency Housing Vouchers, Project Roomkey, Project Homekey
City of Newport Beach 2
Be Well OC Mobile Crisis Unit
February 14, 2022 — December 31, 2022
Contacts
2,543
(21% housed, 79% unhoused)
Transports
272
Shelter Intakes
46 Crisis Stabilization Unit Intakes
35 Sobering Station Intakes
Zo
Reunifications (Family, Friends)
5 City of Newport Beach
29 City Net
CalendarYear 2022
Contacts
723
Shelter Intakes
20 Permanently Housed
14 Interim Housing Placements
9 Assisted Living Placements
1 New Enrollments
63 Active Cases
31 City of Newport Beach
30 Costa Mesa Bridge Shelter
January s— December 3l, 2022
Permanently Housed
7 Reunifications
2 Total Bed Nights
4367
Newport Beach filled, on average, 18-20 of its 20 beds nightly.
City of Newport Beach
31 Additional Outreach Statistics (2022)
Housing Placements by City Staff - g
Trellis International Work Projects Completed - 111
City of Newport Beach 32
Permanent Supportive Housing
• Selected through Request for Proposals, Jamboree Housing and National Community Renaissance (CORE) continue to look for project sites in Newport Beach
• Challenging to find financially viable sites
• City committed to providing $3 million of City funds
• $1 million allocated in FY 2021-22
• Two Development Agreements include $2.1 million of funding for homelessness and affordable housing that could be utilized for this purpose
City of Newport Beach
33 • 1.985 Settlement Agreement
• Term expires 2030, curfew 2035
• Consultant Support in key areas:
• Addressing noise incidents
• Researching noise abatement strategies
• Government Relations /Advocacy
• Aviation Committee key priorities for 2023
City of Newport Beach 34
• City's legislative platform summarizes its core legislative principles and positions and guides local, state and federal advocacy efforts. • Platform was last updated in 2019
• Tentative City Council review — February 28
• City's government relations and advocacy consultants:
• Federal (Dredging and Aviation) — Carpi & Clay
• $114,600/year
• County and State —Townsend Public Affairs
• $7z, 000
City of Newport Beach
35 Questions?
City of Newport Beach —Finance Department
36