14 - Financial Statement Audit Results and Related Communication for the Fiscal Year Ended June 30, 2022 — Newport Beach City Council, February 28, 2023 (part 1 of 2)

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CITY OF
s NEWPORT BEACH
`q44:09 City Council Staff Report
February 28, 2023
Agenda Item No. 14
TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL
FROM: Jason AI -Imam, Finance Director/Treasurer —
949-644-3126, [email protected]
PREPARED BY: Trevor Power, Accounting Manager,
[email protected]
PHONE: 949-644-3122
TITLE: Financial Statement Audit Results and Related Communication for the Fiscal Year Ended June 30, 2022
/_1 16"t I:f_Tel 6
The City of Newport Beach (City) is audited annually by an independent auditing firm, presently Davis Farr LLP. The audit process takes several months, beginning after the books are closed (typically in September) and concluding several months later, once the financial statements have been prepared. On February 16, 2023, the Finance Committee met with representatives of Davis Farr LLP and reviewed the results of the audit in detail.

A copy of the City's Annual Comprehensive Financial Report (ACFR) for the fiscal year ended June 30, 2022, is attached to this report. Also attached are the auditors' required communications with the Finance Committee in its capacity as the City's Audit Committee and the auditors' Report on Internal Control Over Financial Reporting and on Compliance and Other Matters.

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.

DISCUSSION:

The auditors' opinion letter can be found within the ACFR (Attachment A), which reflects an unmodified or "clean" audit opinion, meaning that the financial statements are presented fairly, in all material respects, and in conformity with generally accepted accounting principles.

The first letter, included as Attachment B, is intended to communicate to the Finance Committee and the City Council matters of particular significance as required by auditing standards. These include:
14-1

Financial Statement Audit Results and Related Communication for the Fiscal Year Ended June 30, 2022
February 28, 2023

Page 2 ends

• Planned Scope and Timing of the Audit
• Compliance with All Ethics Requirements Regarding Independence • Significant Risks Identified
• Qualitative Aspects of the City's Significant Accounting Practices • Significant Unusual Transactions
• Significant Difficulties Encountered During the Audit • Uncorrected and Corrected Misstatements
• Disagreements with Management
• Representations Requested from Management
• Management Consultations with Other Accountants
• Other Significant Matters Findings, or Issues
• Other Information Included in the Annual Comprehensive Financial Report The auditors reported no significant unusual transactions, no significant difficulties encountered in connection with the performance of the audit, no material corrected and uncorrected misstatements, no disagreements with management, and no other audit findings or issues.

The second letter, included as Attachment C, is intended to communicate information regarding deficiencies in internal control, instances of non-compliance, and other related matters as required by auditing standards. The auditors did not identify any deficiencies in internal control that would need to be communicated to the Committee, nor did they identify any instances of noncompliance or other matters to report.

The Single Audit, a compliance audit of federally assisted grant programs, is still ongoing.

While no audit findings are anticipated as a result of the Single Audit, staff will communicate any findings, should they occur, to the Finance Committee at a future meeting.

FISCAL IMPACT:

There is no fiscal impact related to this item.

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). 14-2

Financial Statement Audit Results and Related Communication for the Fiscal Year Ended June 30, 2022
February 28, 2023

Page 3 ends

ATTACHMENTS:

Attachment A
— Financial Report
Attachment B
— Auditor's Communications
Attachment C
— Auditor's Report
14-3

ATTACHMENT A

ANNUAL COMPREHENSIVE FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2022
Available separately due to bulk at:
https://www.newportbeachca.gov/home/showpublisheddocument/72980/638122345018930000 14-4

ANNUAL

COMPREHENSIVE

FINANCIAL REPORT
FISCAL YEA D DUNE 30, 2022

��F
Annual Comprehensive Financial Report
For the Fiscal Year Ended June 30, 2022
Prepared by the Finance Department
Jason AI -Imam, Finance Director/Treasurer

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The City of Newport Beach was incorporated September 1, 1906 The present City Seal was adopted July 22,1957

INTRODUCTORY SECTION

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CITY OF NEWPORT BEACH
Annual Comprehensive Financial Report
Year Ended June 30, 2022

TABLE OF CONTENTS

INTRODUCTORY SECTION
(Unaudited)
Tableof Contents.......................................................................................................................1 Letterof Transmittal................................................................................................................... 5 GFOA Certificate of Achievement for Excellence in Financial Reporting ................................ 19 Listof City Officials..................................................................................................................20 OrganizationChart...................................................................................................................21

FINANCIAL SECTION
Independent Auditors' Report............................................................................................ 25 Management's Discussion and Analysis..........................................................................31 (Required Supplementary Information)
Basic Financial Statements
Government -wide Financial Statements:

Statement of Net Position............................................................................................... 51 Statementof Activities..................................................................................................... 52 Fund Financial Statements:

Governmental Funds:

BalanceSheet..............................................................................................................58 Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Position....................................................................................... 61 Statement of Revenues, Expenditures and Changes in Fund Balances ......................62 Reconciliation of Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Activities .............. 65 Budgetary Comparison Statements:

GeneralFund.........................................................................................................66 Tide and Submerged Land — Operating Fund ........................................................ 68 Tide and Submerged Land — Harbor Capital Fund................................................69 American Rescue Plan Act Fund........................................................................... 70 Proprietary Funds:

Statementof Net Position............................................................................................. 74 Statement of Revenues, Expenses and Changes in Net Position...............................75 Statement of Cash Flows............................................................................................. 76 Fiduciary Funds:

Statement of Fiduciary Net Position............................................................................. 80 Statement of Changes in Fiduciary Net Position..........................................................81 Notes to the Financial Statements..................................................................................... 84 i

Required Supplementary Information
Defined Benefit Plan For Miscellaneous Employees:

Schedule of Changes in the Net Pension Liability and Related Ratios .........................152
Schedule of Contributions.............................................................................................154 Defined Benefit Plan For Safety Employees:

Schedule of Changes in the Net Pension Liability and Related Ratios .........................156
Schedule of Contributions.............................................................................................158 Post -Employment Health Care Benefits (OPEB):

Schedule of Changes in the Net OPEB Liability and Related Ratios ............................160 Schedule of Contributions.............................................................................................161 Supplementary Schedules
Other Governmental Funds:

Combining Balance Sheet.............................................................................................168 Combining Statement of Revenues, Expenditures and Changes in FundBalances..............................................................................................................175 Budgetary Comparison Schedules:

StateGas Tax Fund......................................................................................................182 SB1 Gas Tax RMRA Fund............................................................................................183 AssetForfeiture Fund...................................................................................................184 OTS DUI Grant Fund....................................................................................................185 Circulation and Transportation Fund.............................................................................186 Building Excise Tax Fund..............................................................................................187 Community Development Block Grant Fund.................................................................188 Air Quality Management District Fund..........................................................................189 Environmental Liability Fund.........................................................................................190 Supplemental Law Enforcement Fund..........................................................................191 ContributionsFund........................................................................................................192 FIINFund......................................................................................................................193 Restricted Programs Fund............................................................................................194 MeasureM Fund...........................................................................................................195 Oceanfront Encroachment Fund...................................................................................196 PEGFees Fund............................................................................................................197 Internal Service Funds:

Combining Statement of Net Position........................................................................... 202
Combining Statement of Revenues, Expenses and Changes in Net Position .............. 203
Combining Statement of Cash Flows............................................................................204 Fiduciary Funds:

Combining Statement of Fiduciary Net Position............................................................207 Combining Statement of Changes in Fiduciary Net Position.........................................208

STATISTICAL SECTION
(Unaudited)
Financial Trends:

Net Position by Component................................................................................................ 212 Changesin Net Position......................................................................................................214 Fund Balances of Governmental Funds..............................................................................216 2 Changes in Fund Balance of Governmental Funds............................................................218 Revenue Capacity:

Assessed Value and Estimated Actual Value of Taxable Property.....................................222 Property Tax Rates, Direct and Overlapping Governments................................................223 PrincipalProperty Taxpayers..............................................................................................224 Property Tax Levies & Collections...................................................................................... 225 Debt Capacity:

Ratios of Outstanding Debt by Type...................................................................................229 Ratios of General Bonded Debt.......................................................................................... 230 Schedule of Direct and Overlapping Debt...........................................................................231 Computation of Legal Debt Margin.....................................................................................232 Demographic and Economic Information:

Demographic and Economic Statistics................................................................................236 PrincipalEmployers............................................................................................................237 Operating Information:

Full -Time City Employees by Function................................................................................241 Operating Indicators by Function........................................................................................242 Capital Asset Statistics by Function.................................................................................... 244
Water Sold by Customer Type............................................................................................ 246
UtilityRates.........................................................................................................................247 Major Water Customers...................................................................................................... 248
I

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CITY OF NEWPORT BEACH
100 Civic Center Drive
Newport Beach, California 92660
949 644-3127 1 949 644-3339 FAX
newportbeachca.gov/finance
February 6, 2023
Honorable Mayor, Members of the City Council,
and Residents of the City of Newport Beach, California
The City Charter and California state law require that the City of Newport Beach ("City") issue a complete set of financial statements annually and that an independent firm of certified public accountants audit this report in conformance with generally accepted auditing standards ("GAAS"). The Annual Comprehensive Financial Report ("ACFR") of the City of Newport Beach for the year ended June 30, 2022 is hereby submitted.

The ACFR was prepared in conformance with generally accepted accounting principles ("GAAP") as promulgated by the Governmental Accounting Standards Board ("GASB").

This report consists of City management's representations concerning the finances of the City of Newport Beach. Responsibility for the accuracy and completeness of the data presented rests with the City. Management of the City is also responsible for establishing and maintaining an internal control structure designed to ensure that the assets of the government are protected from loss, theft, or misuse, and to ensure that adequate accounting data is compiled to allow for the preparation of financial statements in conformity with generally accepted accounting principles. The internal control structure is designed to provide reasonable, but not absolute, assurance that these objectives are met. The concept of reasonable assurance recognizes that: (1) the cost of a control should not exceed the benefits likely to be derived; and (2) the valuation of costs and benefits requires estimates and judgments by management. We believe the information presented in this report is complete and accurate in all material respects, and that it is reported in a manner designed to fairly present the financial position and results of operations of the various activities of the City of Newport Beach.

The City of Newport Beach's financial statements have been audited by DavisFarr LLP, a firm of licensed certified public accountants. The goal of the audit was to provide reasonable assurance that the financial statements of the City of Newport Beach for the fiscal year ("FY") ended June 30, 2022 are free of material misstatement. The independent audit involved examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements; assessing the accounting principles used and significant estimates made by management; and evaluating the overall financial statement presentation. The independent auditor concluded, based on the audit, that there was a reasonable basis for rendering an unmodified opinion that the City of Newport Beach's financial statements for the year ended June 30, 2022, are fairly presented in

conformity with GAAP. The independent auditor's report is presented as the first component of the financial section of this report.

A narrative introduction, overview, and analysis accompany the basic financial statements in the form of the Management's Discussion and Analysis ("MD&A"). The letter of transmittal is designed to complement the MD&A and should be read in conjunction with it. The City of Newport Beach MD&A can be found immediately following the report of the independent auditors and will provide further information regarding the format and content of this report.

PROFILE OF THE CITY
Newport Beach is a community located in the coastal center of Orange County, in the heart of Southern California, with Los Angeles County to the north and San Diego County to the south. There are currently 34 cities within the county. In terms of population, Orange County is the third largest county in California trailing Los Angeles and San Diego.

It is the sixth largest county in the nation.

The general vicinity of Newport Beach and Orange County relative to the counties of Los Angeles, San Bernardino, Riverside, and San Diego is illustrated on the map below:

Los
Angeles f
County San
Bernardino
County
® Riverside
Orange County
®1county

NEWPORT
BEACH
v
San
Diego
County

Newport Beach surrounds Newport Bay, well known for its picturesque islands and one of the greatest recreational harbors in the world, accommodating about 9,000 recreational and sports charter boats docked within its 21-square-mile harbor. The bay and the ten miles of ocean beach offer outstanding fishing, swimming, surfing, and aquatic sports activities. The City has a permanent population of 83,727, which typically grows to well over 100,000 during the summer months, including 20,000 to 100,000 or more tourists daily. There are fine residential areas, modern shopping facilities, and a quality school system. The University of California, Irvine, is located immediately adjacent to the city, and several other colleges are within a 30-mile radius.

The following map illustrates the communities within Newport Beach; the upper bay, the recreational harbor, and beachfront topography; and the city's location relative to the bordering cities of Costa Mesa to the north, Irvine to the east, and Laguna Beach to the south.
' 1 Airport Area
l
—
Costa Mesa
Fi
--
/
41 imne
Eas(bldff�
'+°
\
Mariners
/ We K6Wport
\•
ti
Harbor View
Fashion island
Lido isle
City Hall Spyglass
Newport Pier.

Balboa island
Balboa Pier
Corona.New art Coast
0el l p
The Wedge
Crystal Cove
. Crystal Cove,
S(a(e Park
40 .�� J
Laguna Beach
Newport Beach was incorporated on September 1, 1906. The City Charter was originally adopted in 1954 but has been updated and amended over time. The City is governed by seven Council Members, and operates under a Council -Manager form of government.

Council Members are elected by district but voted on by the population as a whole, and serve four-year staggered terms. The Mayor is selected by the City Council from among its membership and serves a one-year term. The City Council is responsible for, among 7 other things, policy -making, passing local ordinances, adopting the budget, appointing committees, and hiring the City Manager, City Attorney, and City Clerk. The City Manager is responsible for carrying out the policies and ordinances of the City Council, for overseeing the day-to-day operations of the City, and for appointing heads of departments.

The City of Newport Beach is a full service city providing its residents and visitors with the following functional services: general governance, legal, financial, information technology, and administrative management; police, fire, paramedic, lifeguard, and emergency medical transport services; engineering, construction, and maintenance of public facilities, public streets, beaches, and parks; planning, zoning, and economic development services; building inspection, plan check, and code enforcement services; libraries and cultural and arts services; recreation and senior services; and water, wastewater, and street light utility services. The City provides water and wastewater service to most areas within the city limits, but it does not provide gas, cable television, electrical, or other utility services. Public elementary and secondary education is provided by the Newport -Mesa Unified School District and the Laguna Beach Unified School District.

Component Unit: The City's financial statements present the financial activity of the City of Newport Beach (the primary government) and the Newport Beach Public Facilities Corporation (a component unit of the City). The Corporation is blended into the City's financial statements because of its operational and financial relationship with the City.

Even though it is a legally separate organization, City of Newport Beach elected officials are accountable for fiscal matters of the Corporation. Additional information about the Newport Beach Public Facilities Corporation and the reporting entity in general can be found in Note (1 a) of the Notes to the Financial Statements.

DEMOGRAPHICS
Reflective of a mature community, vacant land has become increasingly scarce and the city is relatively built -out. Currently at 83,727, the population has been very stable as indicated by the following chart.

Population
100,000
90,000
80,000
70,000
60,000
50,000
40,000
30,000
20,000
10,000
0 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Fiscal Year
i

The effective buying income and median household income are generally higher in Newport Beach than in other areas of the State and the U.S. overall. As illustrated by the table below, Newport Beach's median household income is nearly twice that of the U.S. median household income.

City of Newport Beach $136,588
Orange County 100,559
California 84,907
USA 69,717
The leading industries here are professional, scientific, health care, finance, insurance, legal, and travel/tourism. Unemployment in the City declined to 2.6% as of November 2022 due to the easing of restrictions associated with the COVID-19 pandemic, and is lower compared to the state's 4.0%, and the county's 3.0%, as illustrated in the following chart.

More detailed information concerning the City's demographics and statistics are contained within the Statistical Section of this report.

LOCAL ECONOMY
Financial results at the end of the fiscal year, along with key economic indicators such as unemployment rates, taxable sales and assessed property values, are indicative of the recent robust improvement to the local economy after emerging from the global pandemic. As COVID-19 related restrictions were significantly reduced around the beginning of the fiscal year, the City experienced a rebound in revenues much quicker than anticipated. As consumer demand increased and services returned to normal, the City ended the fiscal year in a positive financial position with the City's General Fund revenue increasing 11.5% from the prior fiscal year.
i

As briefly noted in the preceding demographics section, after a sharp increase in the unemployment rate due to the pandemic, the unemployment rate has decreased a combined 4.2% over the past two years and is back to pre -pandemic levels. This is further evidence that the local economy is returning to normal levels as more people re-enter the local workforce. As such, consumer spending is expected to continue to improve which, will support additional growth in tax revenues. While recent trends in inflation provide cause for concern in the broader economy, the City is well positioned to overcome these pressures as any short-term increase in inflation would have a corresponding increase in tax revenues.

TOP THREE REVENUE SOURCES
Most General Fund revenue categories performed at or higher than their budgeted levels for the fiscal year due to more favorable economic conditions than anticipated when the budget was developed in April 2021. Actual revenues were $22.1 million or 9.2% higher than final anticipated estimates. As discussed in more detail below, the primary positive variances were in sales tax and transient occupancy taxes.

The top three individual revenue sources, Property Taxes, Sales Taxes and Transient Occupancy Taxes (TOT), represent 75.3% of all General Fund revenues. Tax revenues in total, including business licenses, franchise fees, and other taxes represent 80.4% of all General Fund revenues, while only 19.6% is generated from other revenue sources.

General Fund Revenues
Property Taxes
■ Sales Taxes
5% 47% Transient Occupancy Taxes
Other Taxes
10%
■ All Other Sources
awr
Property Taxes
Unlike many cities, property taxes, not sales taxes, are the number one source of revenue for the City of Newport Beach, representing almost half (47.5%) of all General Fund revenues. Due to the limited supply of scenic coastal property and the unique access to Newport Bay, the Newport Beach community has developed into affluent residential neighborhoods and high -end commercial districts. Consistent and vigorous demand for 10 coastal property has allowed the City to enjoy long-term growth trends with its number one revenue source. Property tax revenues for Fiscal Year 2021-22 came in $2.1 million or 1.7% higher than originally budgeted, which is an indication of timely property tax payments and higher valuations.

Detached single-family residential property values generally trended positively during the fiscal year. The median home sales price of detached single-family residences in Newport Beach was $3.8 million for the quarter ending June 30, 2022, up 3.9% from the prior quarter and 18.7% higher than the quarter ending June 30, 2021. Newport Beach's estimated median detached single-family residence price of $3.8 million far exceeds the countywide estimated median value of $1.2 million. With positive trends in Newport Beach home prices, this category will likely continue to improve, which bodes well for future secured property tax revenues. This positive trend is illustrated in the table below.

OF NEWPORT
BEACH
DetachedCITY
- Family
-..

Home Values
-
Calendar
Home
%
Year
Value
Change
2013
$1,800,000
2014
$1,894,500

5.25%
2015
$1,975,000

4.25%
2016
$2,150,000

8.86%
2017
$2,400,000

11.63%
2018
$2,517,000

4.88%
2019
$2,435,000
-3.26%
2020
$2,587,500

6.26%
2021
$3,200,000

23.67%
2022*
$3,700,000

15.63%
Source: HdL Coren & Cone
*Data through November 2022
After Californians passed Proposition 13 in 1978, assessed property value is reassessed to market value only when the property changes ownership. Otherwise, the assessed value ("AV") grows by no more than two percent per year. This practice creates a constant lag and buffer between assessed and market values, effectively insulating the tax base from more market volatility.

While property tax growth rates fell sharply during the Great Recession, the City has experienced positive AV growth during each of the past 28 years (see chart below with the past 15 years of AV growth demonstrated). This positive growth occurred while many other cities experienced decreases in their AV during 2008 through 2011. Note that while growth slowed, the assessed value never declined throughout the recession.

Total Assessed Property Value Growth

7.1 %
$70,000,000,000

4.5 4.8
$60,000,000,000

6.6 5.g % 6.5
$50,000,000,000

5.7%

5.9% 1.8% 0.2% 1.0% 2.9
$40,000,000,000
$30,000,000,000
$20,000,000,000
$10,000,000,000
S-
O _ N 12 < N N fNV N
O V O

O O N N N
Value changes in Newport Beach show continued appreciation in property values in Fiscal Year 2021-22. Over the past 10 years, assessed valuation increased an average of 5.9% per year and 6.1 % over a twenty-year period. Newport Beach's assessed property values increased 4.5%, with a local assessed value of $66.6 billion for Fiscal Year 2021-22.

Sales Taxes
The second largest funding source for the General Fund is sales tax revenue, making up about 17.6% of General Fund revenues. The City's sales tax base is largely generated from three industry categories — autos and transportation, general consumer goods, and restaurants/hotels. Most of these industries are also heavily impacted by tourism.

Based on the strong growth seen in the third quarter of Fiscal Year 2021-22 and the projections from the City's sales tax consultants, staff estimated the sales tax revenue for Fiscal Year 2021-22 to finish the year at $45.4 million in the third quarter budget update.

Actual sales tax receipts came in at $46.2 million, or $765,000 over staff's most recent estimate.

This increase results from two primary drivers. First, while auto sales have slowed due to inventory shortages, price increases have more than offset this decline and have resulted in strong growth in this category of sales tax revenues of 10.6% over Fiscal Year 2020-21. Second, revenues from brick -and -mortar retail establishments and restaurants & hotels have now surpassed the pre -pandemic high as consumer behavior has largely returned to normal. These revenues grew at rates of 30.3% and 37.0%, respectively, versus Fiscal Year 2020-21. Also factoring into the strong growth is revenue from fuel and service stations, with 46% growth versus the prior year due to higher fuel prices and higher demand.

The City's sales tax base is generated from a relatively diverse business community and is not dependent on any one merchant or industry. The following chart demonstrates the diversity of the City sales tax revenue. The largest segment, "General Retail", accounts I

for 37.0% of total sales taxes. The next largest segments, "Transportation" and "Food Products" account for 36.2% and 19.1 % of total sales taxes, respectively. The next largest sales tax segment, "Business to Business" accounts for 6.8% of total sales.

Sales Tax by Business Segment
1%
7%
■ General Retail
LN 37% ■ Food Products
■ Transportation
■ Construction
■ Business to Business
Transient Occupancy Taxes (TOT)
TOT accrues to the City at a rate of 10% of room charges with 18% of this collection going to the local destination marketing organization (Visit Newport Beach) to promote Newport Beach as a tourist destination. The City distinguishes its transient occupancy taxpayers in two broad property type categories, commercial and residential property. The commercial category is composed of approximately 21 hotels and resorts and accounts for approximately 75 percent of TOT revenues. The residential category is made up of approximately 1,594 vacation rentals representing 25 percent of TOT revenue.

TOT was the City's most severely impacted revenue source as the pandemic unfolded and most major hotels within the City were temporarily closed. The City has seen a steady rebound and comeback for TOT revenues as the effects of the pandemic have receded.

Initially, the TOT budget for the Fiscal Year 2021-22 was developed in anticipation of full recovery of TOT revenues not occurring until the end of Fiscal Year 2022-23. However, staff's revised projection in the second and third quarter budget updates estimated TOT revenues to finish at a record high level. Actual TOT revenues came in at $26.7 million, or $7.6 million over the Fiscal Year 2021-22 adopted budget.

Two factors caused this significant increase in TOT revenues. First, revenue from short- term lodging businesses is at a record high level. Second, many hotel properties are reporting record high TOT receipts and have been doing so for multiple consecutive months. While occupancy levels have not returned to pre -pandemic levels, they are slowly increasing. This lag in occupancy levels has been largely offset by higher daily room rates, resulting in hotel TOT revenues that are projected to approach the pre - pandemic high in Fiscal Year 2022-23. When taken together, the strong growth in residential TOT makes up for the slightly lower hotel TOT revenue and the two in total 13 have resulted in a record year for TOT revenues for the City. The below data provided by Visit Newport Beach illustrates these very positive trends. $284.44
$253.62 48.99
$206.54
$208.76 $205.89
$196.74
$791.99
$198.54 $181.29
$768.74
$151.26
$166.41 $774.69
$147.42
$735.07 $130.46 $134.15
1114.90
$169.0
$122.87
$Y Y 4.63
707.2
702.56
$75.4
$75.8

72.95 $55.35
$79.9a

35.3 JAN

FEB MAR

APR MAY

JUN JUL AUG SEP OCT NOV DEC
-2020 -2021 -2022

LONG TERM FINANCIAL PLANNING
The City continues to be in excellent financial health due to its strong underlying tax base, disciplined fiscal decisions, and stable governance. Conservative budgeting and sound financial policies have resulted in a trend of General Fund operating surpluses and strong reserve levels for several years. This is still no less the case even amid the significant economic downturn the City experienced during the COVID-19 pandemic. The City annually completes a Long -Range Financial Forecast covering the next 20 years pursuant to City Council Policy F-3 — Budget Adoption and Administration. That forecast shows positive General Fund results in each of the next 20 years and does not indicate any long-term financial trends of concern. The City's long-term financial planning has been guided by its strong financial policies, prudent budgeting decisions, and proactive planning in such critical areas as facilities replacement and pensions. These policies are regularly evaluated and updated as conditions and needs change.

Financial Policies
The City Council has adopted prudent fiscal policies concerning its investments, reserves, budget administration, revenue initiatives, competitive contracting, facility replacement planning, and more. The budget surplus utilization policy directs the use of surplus funds resulting from unrestricted General Fund annual revenues exceeding total actual expenditures, encumbrances, and commitments for that year. Roughly fifty percent of the budget surplus is used to address long-term obligations such as pension liabilities, other post -employment benefits, bonded debt, lease obligations, and other long-term needs.

The remaining surplus is used to address one-time infrastructure or neighborhood capital improvements, guided by a philosophy that these expenditures improve the community's safety, aesthetics, transportation, or quality of life. The City's debt policy establishes criteria for the issuance of debt and assures that the amount of any debt is affordable and cost effective. The City's debt policy was recognized by the California Debt and Investment Advisory Commission as one of only 14 counties and cities in California 14 whose policies have 20 or more debt management best practice elements. The City's debt and other financial policies can be found on the City's website in the City Council section under City Government at:
www.newportbeachca.gov/policies
Annual Budget
The annual budget serves as the foundation for the City of Newport Beach's financial planning and control and allows the City Council to prioritize City expenditures so that they are aligned with core community values. Per current policy, appropriations for operating expenditures are balanced in relation to current revenue sources and do not rely on one-time revenue sources or reserves. When significant uncertainty exists concerning revenue volatility or threatening/pending obligations, the City Council and City Manager reserve the right to impose any special fiscal control measures, including personnel hiring freezes, and other spending controls, as was the case in FY 2019-20 and in the development of the FY 2020-21 budget. As a result of early retirement plans, attrition, outsourcing, and lay-offs implemented in the years following the onset of the Great Recession, the full-time work force was reduced by approximately 4% between FY 2012-13 and FY 2016-17 as depicted in the chart below. In the years since, thoughtful additions to the City's workforce have been implemented with a continued focus on fiscal discipline and maintaining balanced budgets.

Full Time Positions Trend
745
741
740
736
H 735
C
0 730 730
a 730 728 727 728
6 726
41- 725 [if
720
715
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Fiscal Year
The City has traditionally taken a conservative approach to forecasting revenues, often assuming only modest growth. This fiscal conservatism has created a stable financial base. As a result, even in a downturn, the City of Newport Beach is able to maintain its services at a high level, while reducing expenses to accommodate reduced revenues.

The City's fiscal discipline has allowed it to prepare balanced budgets and to save, both during prosperous and difficult economic periods. As the economy continues to improve, these trends are likely to continue.
15 The City Council may authorize the use of Contingency reserves during emergency situations as set forth by the Council Reserve Policy. Current policy requires that the Contingency Reserve equal 25 percent of the General Fund annual "Operating Budget." Credit rating agencies consider a high level of available "fund balance" to be a credit strength. In 2021, Moody's rating agency reaffirmed the City's AAA credit rating noting the City's extensive tax base, a very strong wealth and income profile, and a robust financial position. It also noted the City's moderate debt burden and an elevated pension burden in its rationale. The City's has aggressively attacked its unfunded pension liability and has made regular discretionary payments to reduce that liability at a more rapid pace than is required by CaIPERS, as further described in the Pension section below.

Facilities Financial Plan (FFP) Commitment & Major Construction Initiatives The City's FFP is a comprehensive master facilities replacement schedule that projects the timing of construction of facility projects; projects the schedule of any planned debt issuance; includes all relevant revenue sources and expenditures on a yearly, project -by - project basis; and determines the long-term "level funding" annual budget commitment that is required to support the program. The FFP was the winner of the prestigious "Helen Putnam Award — Internal Administration" category from the League of California Cities in 2008.

The City continued its financial commitment to the Facilities Financial Planning Reserve (FFPR) in FY 2021-22 by allocating resources to debt service, a junior lifeguards building and parks and community centers.

Facilities-
- - Fund
Beginning Balance 7/1/21
$ 28,092,597
Sources
Licenses, Permits and Fees
382,118
Donations
863,279
Transfer In from General Fund
19,000,000
Investment Income
348,710
Net increase in fair value of investments
(1,290,437)
Total Sources
19,303,670
Uses
Debt Service'
(8,741,133)
Parks and Community Centers
(4,013,862)
Junior Lifeguards
(469,637)
Total Uses
(13,224,632)
Ending Balance 6/30/22
$ 34,171,635
The transfer is net of the Build America Bonds subsidy, which is recorded in the Debt Service Fund
Overall, the FFPR balance is increasing by $6.1 million from the prior fiscal year. a

Pensions
As of the actuarial valuation date of June 30, 2021, the City had an Unfunded Accrued Liability (UAL) of $223 million. The City has taken a number of actions in recent years to mitigate the impact of rising pension costs including:
• Established lower benefit formulas for new hires.
• Eliminated the Employer Paid Member Contribution (EPMC). • Through negotiated cost sharing, saw employees contribute 59.2% of the Normal Cost of the plan, or $10.7 million in Fiscal Year 2021-22. • Adopted a fixed and shorter amortization period for the unfunded liability. • Made Additional Discretionary Payments (ADPs)
• Contributed no less than Actuarial Determined Contribution (ADC) each and every year.
• Analyzed the schedule of amortization bases annually in an effort to avoid negative amortization.
• Amortized all gains/losses no longer than a 20-year closed period. • Avoided asset smoothing or "rate phase -in" schedules if possible. Otherwise, the City's goal is to not exceed 5 years for any one smoothing cycle. • Established a General Fund Surplus Utilization Policy F-5 to set aside one-half of any annual budget surplus to fund debts such as the pension liability. • Maintained a contingency reserve to protect against economic recessions and to avoid negative impacts of asset smoothing and rate phased -in schedules.

Local governments with pensions have a total pension liability, which is the obligation to pay deferred pension benefits in the future. When the total pension liability is greater than the pension plan's assets there is a net pension liability, also known as unfunded pension liability. As required by GASB 68, the City reports the net pension liability in the government wide financial statements, as well as in the proprietary fund statements, in the ACFR — see Note (10) of Notes to the Financial Statements.

The City implemented GASB 75 in fiscal year 2017-18, which requires local governments offering other post -employment health care benefits ("OPEB") to report net OPEB liability in the government wide financial statements, as well as in the proprietary fund statements, in the ACFR — see Note (11) in the Notes to the Financial Statements. When the total OPEB liability is greater than the OPEB plan's assets there is a net OPEB liability, also known as unfunded OPEB liability.

As with past practice, the City will continue to fund its pension and OPEB obligations at an amount equal to or greater than the minimum employer contribution rate. The City has not and will never intentionally short -fund its pension and OPEB obligations. Annually the City evaluates the cost and benefits of paying down the unfunded pension and OPEB liabilities on a faster schedule. Currently, the City Council has committed to a fixed $40 million per year contribution toward the unfunded pension liability, which is approximately $10 million more than is required by CalPERS. Fiscal year 2021-22 represented three years in a row the City Council appropriated an additional $5 million toward accelerated 17 payment of the unfunded liability from year-end budget surplus funds. Additionally, in fiscal year 2022-23 City Council proactively appropriated an additional $5 million toward accelerated payment of the unfunded liability from expected structural budget surplus.

AWARDS AND ACKNOWLEDGMENTS
The City has prepared an Annual Comprehensive Financial Report for the past 29 years.

The City has received awards for excellence in financial reporting in each of those years.

The Government Finance Officers Association of the United States and Canada ("GFOX) awarded a Certificate of Achievement for Excellence in Financial Reporting to the City of Newport Beach for its Annual Comprehensive Financial Report for the fiscal year ended June 30, 2021. In order to be awarded a Certificate of Achievement, a government unit must publish an easily readable and efficiently organized Annual Comprehensive Financial Report. This report must satisfy both generally accepted accounting principles and applicable legal requirements.

A Certificate of Achievement is valid for a period of one year only. We believe our current Annual Comprehensive Financial Report continues to conform to the Certificate of Achievement program requirements and we are submitting it to GFOA to determine its eligibility for another certificate.

Acknowledgments: Preparation of this report was accomplished through the efficient and dedicated services of everyone in the City's Accounting Division. In addition, the Finance Department staff would like to thank the City Manager, the Mayor, and the City Council for their interest in and support of planning and conducting the financial operations of the City in a responsible and progressive manner. We would also like to thank our auditors, DavisFarr LLP, for their time and assistance in the preparation of the report. This report was completely prepared and published by City employees. goon W-Awm
Grace K. Leung Jason AI -Imam
City Manager Finance Director/Treasurer
18 Government Finance Officers Association
Certificate of
Achievement
for Excellence
in Financial
Reporting
Presented to
City of Newport Beach
California
For its Annual Comprehensive
Financial Report
For the Fiscal Year Ended
June 30, 2021
Executive Director/CEO
19 Brad Avery
Council Member
District 2
Joe Stapleton
Council Member
District 1
City Council Members
J i
Lauren Kleiman
Council Member
District 6
Will O'Neill
Mayor Pro Tern
District 7
City Executive Staff
g
Aaron Harp
Grace K. Leung Leilani Brown
City Attorney
City Manager City Clerk
Tara Finnigan..........................................................................................................................Assistant City Manager
Jason AI-Imam..................................................................................................................Finance Director/Treasurer
Seimone Jurjis......................................................................................................Community Development Director
JeffBoyles.....................................................................................................................................................Fire Chief
PaulBlank.............................................................................................................................................

Harbormaster
Barbara Salvini..................................................................................................................

Human Resources Director
Melissa Hartson....................................................................................................................

Library Services Director
Joseph L. Cartwright......................................................................................................................

Acting Police Chief
DaveWebb...............................................................................................................................

Public Works Director
Sean Levin........................................................................................................

Recreation & Senior Services Director
Mark Vukojevic..................................................................................................................................Utilities Director
20 Board of IRL
ORATE
Harbor Commission
Library Trustees
Building & Fire Parks, Beaches &
Code of AppealsP" ecreation Commission

MAYOR &
City Arts COUNCI Planning
Commission Commission
city
Civil Service Boar EELVM� Committees

CITY CITY CITY

CLERK MANAGER ATTORNEY
Community Library
Development Services
Finance Police
Public
Fire Works
Harbor Recreation &
Senior Services
Human
ResourcesUtilities

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22 23

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24 DavisFarr

CERTIFIED PUBLIC ACCOUNTANTS
Davis Farr LLP
18201 Von Karman Avenue I Suite 1100 1 Irvine, CA 92612 Main: 949.474.2020 1 Fax: 949.263.5520

INDEPENDENT AUDITOR'S REPORT
The Honorable Mayor and
Members of the City Council
City of Newport Beach
Newport Beach, California
Report on the Audit of the Financial Statements
Opinion
We have audited the financial statements of the governmental activities, the business -type activities, each major fund, and the aggregate remaining fund information of the City of Newport Beach (the "City"), as of and for the year June 30, 2022, and the related notes to the financial statements, which collectively comprise the City of Newport Beach's basic financial statements as listed in the table of contents.

In our opinion, the accompanying financial statements present fairly, in all material respects, the respective financial position of the governmental activities, the business -type activities, each major fund, and the aggregate remaining fund information of the City of Newport Beach, as of June 30, 2022, and the respective changes in financial position and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America.

Emphasis of Matter
As described further in note 1 to the financial statements, during the year ended June 30, 2022, the City implemented Governmental Accounting Standards Board (GASB) Statement No. 87. Our opinion is not modified with respect to this matter.

Basis for Opinion
We conducted our audit in accordance with auditing standards generally accepted in the United States of America (GAAS) and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States (Government Auditing Standards). Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the City and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audit.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Responsibilities of Management for the Financial Statements The City's management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant 25 The Honorable Mayor and
Members of the City Council
City of Newport Beach
Newport Beach, California
to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the City's ability to continue as a going concern for twelve months beyond the financial statement date, including any currently known information that may raise substantial doubt shortly thereafter.

Auditor's Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinions. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS and Government Auditing Standards will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.

In performing an audit in accordance with GAAS and Government Auditing Standards, we:
• Exercise professional judgment and maintain professional skepticism throughout the audit.
• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the City's internal control. Accordingly, no such opinion is expressed.
• Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements.
• Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the City's ability to continue as a going concern for a reasonable period of time.

We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control -related matters that we identified during the audit. 26 The Honorable Mayor and
Members of the City Council
City of Newport Beach
Newport Beach, California
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the Management's Discussion and Analysis, Budgetary Comparison Schedules for the General Fund and each major special revenue fund, Schedules of Changes in the Net Pension Liability and Related Ratios, Schedules of Contributions, Schedule of Changes in the Net OPEB Liability and Related Ratios and Schedule of OPEB Contributions be presented to supplement the basic financial statements. Such information is the responsibility of management and, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with GAAS, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.

Supplementary Information
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City's basic financial statements. The Combining and Individual Nonmajor Fund Financial Statements and Budgetary Comparison Schedules are presented for purposes of additional analysis and are not a required part of the basic financial statements.

Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. The information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with GAAS. In our opinion, the Combining and Individual Nonmajor Fund Financial Statements and Budgetary Comparison Schedules are fairly stated, in all material respects, in relation to the basic financial statements as a whole.

Other Information
Management is responsible for the other information included in the Annual Comprehensive Financial Report. The other information comprises the Introductory Section and Statistical Section but does not include the financial statements and our auditor's report thereon. Our opinions on the financial statements do not cover the other information, and we do not express an opinion or any form of assurance thereon.

In connection with our audit of the basic financial statements, our responsibility is to read the other information and consider whether a material inconsistency exists between the other information and the financial statements, or the other information otherwise appears to be materially misstated. If, based on the work performed, we conclude that an uncorrected material misstatement of the other information exists, we are required to describe it in our report.
27 The Honorable Mayor and
Members of the City Council
City of Newport Beach
Newport Beach, California
Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated February 6, 2023, on our consideration of the City's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is solely to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the effectiveness of internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City's internal control over financial reporting and compliance.

Irvine, California
February 6, 2023
28 29

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30 MANAGEMENT'S DISCUSSION AND ANALYSIS
This section of the City of Newport Beach's Annual Comprehensive Financial Report (ACFR) presents management's discussion and analysis of the City's financial performance during the fiscal year that ended on June 30, 2022. This analysis should be read in conjunction with the Transmittal Letter at the front of this report and the accompanying Basic Financial Statements.

OVERVIEW OF THE FINANCIAL STATEMENTS
The financial section of the Annual Comprehensive Financial Report contains the following information: IndependentAuditors' Report, Management's Discussion and Analysis (this section), the Basic Financial Statements, the Required Supplementary Information, and the Supplementary Information section, an optional section that presents combining and budgetary schedules for individual non -major funds. The Basic Financial Statements are comprised of three components:
1) Government -wide Financial Statements, 2) Fund Financial Statements, and 3) Notes to the Financial Statements. Management's Discussion and Analysis is intended to be an introduction to the Basic Financial Statements.

BASIC FINANCIAL STATEMENTS
Government -wide Financial Statements — The Government -wide Financial Statements use the economic resources measurement focus and accrual basis of accounting, which is similar to the accounting standard used by private sector companies. The Government -wide Financial Statements are intended to provide a "Big Picture" view of the City. With the economic resources measurement focus and accrual basis of accounting, changes in net position are recognized as soon as the event occurs regardless of the timing of related cash flows.

The Statement of Net Position includes all of the City's assets (including non -spendable assets like streets, roads, and land rights), deferred outflows of resources, liabilities (including long-term liabilities that may be paid over twenty years), and deferred inflows of resources. All of the current year revenues and expenses are accounted for in the Statement of Activities regardless of when cash is received or paid.

The Government -wide Financial Statements report the City's net position and how they have changed. Net position — the difference between the City's assets, deferred outflows of resources, liabilities and deferred inflows of resources — is one way to measure the City's financial health.

Over time, increases or decreases in the City's net position are an indicator of whether its financial health is improving or deteriorating, respectively. To assess the overall health of the City, one should also consider additional non -financial factors such as changes in the City's property tax base and the condition of its facilities and other major infrastructure.

The Government -wide Financial Statements of the City are divided into two categories:

Governmental Activities — This category depicts the extent to which programs are self- supporting and the net amount provided by property taxes and other general revenues.

Most of the City's basic services are included in this category such as public safety, public works, community development, community services, and general administration. Taxes and other general revenues finance most of these activities. 31 Business -type Activities — The City accounts for its Water and Wastewater utilities as business enterprises. The City charges fees to customers to recover the cost of providing Water and Wastewater services.

Fund Financial Statements — A fund is a grouping of related accounts used to maintain control over resources that have been segregated for specific activities or objectives. The City uses fund accounting to ensure and demonstrate compliance with finance -related legal requirements such as State and Federal law or bond covenants. Other funds are utilized simply to control and manage resources intended for particular purposes. The Fund Financial Statements provide more detailed information about the City's most significant funds (major funds) but not the City as a whole.

Fund Financial Statements have a short-term focus measuring inflows of current, spendable assets. The resulting net difference between current financial assets and deferred outflows of resources, and current financial liabilities and deferred inflows of resources, otherwise known as fund balance (or net working capital in the private sector) is a measure of the City's ability to finance activities in the near term.

The City utilizes three broad categories of funds:

Governmental Funds — Unlike Government -wide Financial Statements, Governmental Fund Financial Statements utilize the financial resources measurement focus and thus concentrate on near -term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Consequently, the Governmental Fund Financial Statements provide a detailed short-term view that helps a reader determine whether there are more or fewer financial resources that can be spent in the near future to finance City programs. Also included in the Governmental Funds are Permanent Funds. These funds are used to report resources that are legally restricted to the extent that only earnings, not principal, may be used for purposes that support City programs.

Proprietary Funds — Business -like services for which the City provides goods or services to the general public are generally reported in Proprietary Funds (Enterprise Funds and Internal Service Funds). Like the Government -wide Financial Statements, these funds provide both long and short-term financial information utilizing the economic resources measurement focus. The City's Enterprise Funds (Water and Wastewater Funds) are individual funds represented in the combined presentation of Business -type Activities in the Government -wide Financial Statements. The individual fund presentation provides more detailed information about each business segment, its operating statements, and statements of cash flow. The City also uses Internal Service Funds that are utilized to report and allocate the cost of certain centrally managed and operated activities (e.g. fleet maintenance and other equipment, risk management, retiree insurance, telecommunications systems, information technology services, etc.). Because the Internal Service Funds primarily serve the government, they are reported with Governmental Activities rather than the Business -type Activities in the Government -wide Financial Statements.

Fiduciary Funds — The City utilizes Fiduciary Funds to account for assets held by the City in a trustee capacity, or as an agent for other governmental entities, private organizations, or individuals. All of the City's fiduciary activities are reported in a separate statement of 32 fiduciary net position, and a statement of changes in fiduciary net position. We exclude these activities from the City's Government -wide Financial Statements because the City cannot use these assets to finance its operations.

Notes to the Financial Statements — The financial statements also include the Notes to the Financial Statements that provide important narrative details about the information contained in the financial statements. Information contained in the Notes to the Financial Statements is critical to a reader's full understanding of the Government -wide and Fund Financial Statements.

Required Supplementary Information — In addition to the Basic Financial Statements, we have included a Required Supplementary Information section, which includes the Schedule of Changes in Net Pension Liability and Related Ratios, the Schedule of Changes in Net Post -Employment Health Care Benefits (OPEB) Liability and Related Ratios, and the related Schedules of Contributions for the Pension and OPEB plans.

Supplementary Information — In addition to the required elements of the Basic Financial Statements, we have also included a Supplementary Information section, which includes budgetary and combining schedules that provide additional details about the City's Other Governmental Funds, Internal Service Funds, and Fiduciary Funds.

ANALYSIS OF GOVERNMENT -WIDE FINANCIAL STATEMENTS
The Government -wide Financial Statements provide long-term and short-term information about the City's overall financial condition. This analysis addresses the financial statements of the City as a whole.

Net Position Discussion
As shown in Figure 1, the City's combined net position for the fiscal year ended June 30, 2022 was $2.5 billion, increasing $76.2 million or 3.2% over the prior year. Net position can serve as an important indicator of whether the City's overall financial condition is improving or deteriorating over time.

Current and other assets increased $274.8 million. This increase is primarily due to lease receivables which are required to be reported starting with the fiscal year ending June 30, 2022 by Governmental Accounting Standards Board Statement 87 ("GASB 87"). A lease receivable is now required to be reported based on a present -value estimate of certain lease payments for leases where the City is the lessor. The remaining $30.3 million increase is attributable to increases in cash and investments, interest receivables, and intergovernmental receivables, offset by decreases in accounts receivable (net of allowance), and prepaid items. Capital assets increased $19.4 million, mostly due to GASB 87, which also requires intangible right to use assets to be reported based on a present -value estimate of certain lease payments for leases where the City is the lessee.

Current liabilities increased $6.6 million primarily due to increases in accounts payable and unearned revenue. The increase in unearned revenue was due to the receipt of federal funds through the American Rescue Plan Act that had not been spent by the end of the fiscal year.

Long-term liabilities decreased $126.2 million. The decrease is primarily due to decreases in the City's net pension liability and net and OPEB liability, offset by an increase in the City's lease liability. GASB 87 requires reporting a lease liability based on a present -value estimate of certain 33 lease payments for leases where the City is the lessee. See Note (10), Note (11), and Note (18) of the Notes to the Financial Statements for more information.

Current and other assets
Capital assets
Total assets
Deferred Outflows of Resources
Current liabilities
Long-term liabilities
Total liabilities
Deferred Inflows of Resources
Net Position
Net investment in capital assets
Restricted
Unrestricted
Total net position
Figure 1
Net Position
(in thousands)
Governmental Activities
Business -Type
Activities
Total
2021
2022
2021
2022
2021
2022
$ 327,609
$ 603,672 $
40,271
$ 38,970
$ 367,880 $
642,642
2,324,346
2,339,355
126,028
130,464
2,450,374
2,469,819
2,651,955
2,943,027
166,299
169,434
2,818,254
3,112,461
70,434
63,987
2,304
2,296
72,738
66,283
35,627
43,924
6,100
4,383
41,727
48,307
463,424
340,714
10,671
7,134
474,095
347,848
499,051
384,638
16,771
11,517
515,822
396,155
878
328,685
17 3,408
895
332,093
2,227,573 2,223,774 124,776
67,189 78,100 -
(72,302) (8,183) 27,039
$ 2,222,460 $ 2,293,691 $ 151,815
128,245 2,352,349 2,352,019
- 67,189 78,100
28,560 (45,263) 20,377
$ 156,805 $ 2,374,275 $ 2,450,496
The largest portion of the City's net position, at $2.4 billion of net position, reflects the net investment in capital assets (e.g., land, right of way, street trees, buildings, infrastructure, equipment, and intangibles) less accumulated depreciation, accumulated amortization, and any related outstanding debt used to acquire those assets. The City uses these capital assets to provide services to residents. Therefore, they do not represent a financial resource to the City and consequently are not readily available for funding current obligations.

Restricted net position totaled $78.1 million of net position, an increase of $10.9 million from the prior fiscal year, primarily due to increased restricted net position related to public works and community services. Public works' increase is mainly from SB1 Gas Tax RMRA revenues not being spent during the fiscal year, while community services' increase is mainly from tidelands property related revenues not being spent during the fiscal year as resources are being accumulated for future large scale capital improvement projects related to the harbor.

As of June 30, 2022, unrestricted net position was $20.4 million, an increase of $65.6 million from the prior fiscal year, primarily due to the receipt of unrestricted revenues such as property taxes and sales taxes that were not spent or restricted by the end of the fiscal year. 34 GOVERNMENTAL ACTIVITIES
Governmental activities are generally financed through taxes, intergovernmental revenues, and other non -exchange revenues. The Statement of Activities is intended to illustrate how the cost of governmental activities is financed and determines the annual change in net position.

Figure 2
Changes in Net Position
(in thousands)
Governmental Activities
Business -Type Activities
Total
2021
2022
2021
2022
2021
2022
Revenues:

Program Revenues:

Charges for services
$ 58,113
$ 67,743
$ 35,358
$ 36,929
$ 93,471
$ 104,672
Operating grants and capital contributions
20,362
16,800
-
117
20,362
16,917
Capital grants and contributions
7,658
8,693
-
-
7,658
8,693
Total program revenues
86,133
93,236
35,358
37,046
121,491
130,282
General Revenues:

Taxes:

Property taxes
119,157
124,336
-
-
119,157
124,336
Sales tax
38,956
46,165
38,956
46,165
Transient occupancy taxes
16,886
26,677
16,886
26,677
Othertaxes
12,852
13,258
-
-
12,852
13,258
Investment related income
518
(4,861)
55 (845)
573
(5,706)
Other
3,355
2,644
-
-
3,355
2,644
Total general revenues
191,724
208,219
55 (845)
191,779
207,374
Total revenues
277,857
301,455
35,413
36,201
313,270
337,656
Expenses:

General government
20,394
19,374
-
-
20,394
19,374
Public safety
119,185
104,767
119,185
104,767
Public works
63,689
65,031
63,689
65,031
Community development
12,157
9,665
12,157
9,665
Community services
28,214
24,509
28,214
24,509
Interest
7,105
6,878
-
-
7,105
6,878
Water
-
-
28,943
27,117
28,943
27,117
Wastewater
-
5,223
4,094
5,223
4,094
Total expenses
250,744
230,224
34,166
31,211
284,910
261,435
Increases in net position
27,113
71,231
1,247
4,990
28,360
76,221
Net position at beginning of year
2,195,347
2,222,460
150,568
151,815
2,345,915
2,374,275
Net position at end of year
$ 2,222,460
$ 2,293,691
$ 151,815
$ 156,805
$ 2,374,275
$ 2,450,496
Revenues Associated with Governmental Activities Discussion Figure 2 illustrates in detail how the $301.4 million in Governmental Activities revenue was derived. Figure 3 summarizes this revenue by major source. As shown on Figures 2 and 3, $67.7 million, or 22.5%, of the revenues were recovered from those who directly benefited from the programs as a charge for service. Another $25.5 million, or 8.4%, of the revenues were generated by contributions and grants received from governmental organizations, developers, and property owners for both capital and operating activities. The remaining $208.2 million, or 69.1 %, represented general revenues of the City including taxes, intergovernmental revenues, and other miscellaneous revenues.
35 Figure 3
Governmental Activities Revenue Sources
Year Ended June 30, 2022
69%
23%
■ Charges for Services
■ Contributions and Grants
■Taxes and Other
As illustrated in Figure 2, program revenues related to Governmental Activities increased $7.1 million from the prior year. This increase was primarily attributable to increases in charges for services from recreation fee -based classes, the Junior Lifeguard program, and construction related plan fees which is indicative of recovery from pandemic related restrictions. Additionally, capital grants and contributions increased due to contributions from property owners related to assessment districts. These increases were offset by a decrease in operating grants and contributions due to a decrease in Covid-19 grant revenue.

The City's general revenues related to Governmental Activities increased about $16.5 million from the prior year primarily due to increases in property taxes, sales taxes, transient occupancy taxes, and other taxes, offset by decreases in investment and other income. Increases in virtually all tax revenue categories is indicative of a broad recovery from pandemic related restrictions. The decrease in investment income is due to fair value decreases in the City's investment portfolio as the United States' Federal Reserve raised the federal funds interest rate range in response to inflation. These fair value decreases are unrealized as the City normally holds investments to maturity and receives the full par value at the time of maturity.

Property tax is the largest revenue source for the City and collections finished the year $5.2 million higher than the previous year. This increase was mostly due to an increase in secured taxes as a robust demand for coastal property continued driving property values higher.

At $46.2 million, sales taxes represent the second largest individual revenue source for the City.

Sales taxes increased $7.2 million from the previous year. This was due to strong consumer spending on luxury automobiles and the easing of pandemic related restrictions which allowed retail establishments, restaurants and hotels to surpass pre -pandemic activity.

Transient occupancy taxes (TOT), the City's third largest revenue source, finished the year at $26.7 million, which is an increase of $9.8 million from the previous fiscal year. Both hotel TOT 36 and residential TOT increased, which was mostly due to higher daily hotel room rates and increased short term residential lodging revenue.

Investment income, comprised of both interest income and unrealized gains/losses, decreased about $5.4 million from the prior fiscal year. The decrease is from a net decrease in the fair value of investments, which is consistent with the fiscal year's generally increasing interest rate environment.

Expenses Associated with Governmental Activities Discussion The City is a full -service city providing residents and visitors with the following functional services:

General Government is comprised of six departments (City Council, City Clerk, City Manager, City Attorney, Human Resources, and Finance) providing general governance, information technology services, executive management, legal services, records management, risk management, finance, and accounting.

Public Safety is comprised of two departments (Police and Fire) providing general law enforcement, fire suppression and prevention services, paramedic and medical transport services, disaster preparedness, and ocean lifeguard services.

Public Works is comprised of two departments (Public Works and Utilities) providing engineering, construction and maintenance of public streets, highways, buildings, beaches, parks, facilities and related infrastructure; as well as traffic engineering and street lighting.

Community Development is comprised of one department (Community Development) that provides planning, building, and zoning services, economic development services, and building plan check and code enforcement services.

Community Services is comprised of three departments (Library Services, Recreation & Senior Services, and Harbor) providing library services, cultural and arts programs, recreation services, senior social and transportation services, and harbor programs and services.

Business Enterprise Operations are overseen by the Utilities Department providing water and wastewater services. These are considered business -type activities and are discussed further in the Business -Type Activities section.

Figure 2 illustrates in detail how the $230.2 million of Governmental Activities expense was derived. The decrease of $20.5 million from the prior year is mostly due to a decrease in public safety related pension liabilities. See Note (10) of the Notes to the Financial Statements for more information.
37 Figure 4 below summarizes the Governmental Activities expenses shared across function.

Figure 4
Governmental Activities Functional Expenses
Year Ended June 30, 2022
3%
4%
8%
■ Public Safety
■ Public Works
11% 1 46% ■Community Services
General Government
Community Development
Interest
28%
Figures 5 and 6 illustrate the net cost of each service. The net cost represents the amount that governmental activities are subsidized by taxes and other general revenues of the City.

General government
Public safety
Public works
Community development
Community services
Interest
Figure 5
Governmental Activities
(in thousands)
2021
Total Cost
Net Cost
of Service
of Service
$ 20,394
$ (16,342)
119,185
(93, 945)
63,689
(38,984)
12,157
(1,205)
28,214
(7,029)
7,105
(7,105)
$ 250,744
$ (164,610)
2022
Total Cost Net Cost
of Service of Service
$ 19,374
$ (14,833)
104,767
(79,083)
65,031
(36, 627)
9,665
1,844
24,509
(1,410)
6,878
(6,878)
$ 230,224 $ (136,987)
38 Figure 6
Program Expenses and Revenues — Governmental Activities Year Ended June 30, 2022
(in millions)
$120.0
$110.0
$100.0
$90.0
$80.0
$70.0
$60.0
$50.0
$40.0
$30.0
$20.0
$10.0
$0.0
EK-=
General Public Safety Public Works Community Community Interest Government Development Services
■Total Expenses ■Program Revenues

BUSINESS -TYPE ACTIVITIES
As noted earlier, the City combines the Water Enterprise Fund and Wastewater Enterprise Fund into Business -type Activities for the presentation of the Government -wide Financial Statements.

Business -type activities are mainly funded by charging fees to customers to recover the cost of providing services.

Revenues Associated with Business -Type Activities Discussion As displayed in Figure 2, total revenues related to Business -type activities totaled $36.2 million.

Program revenues totaled $37.0 million and were offset by $845,000 of negative general revenues related to a net decrease in the fair value of investments. As shown in Figure 7 on the following page, Water activities represents about $32.2 million (87.0%) of program revenues, while Wastewater activities represents $4.8 million (13.0%) of program revenues. 39 Figure 7
Program Expenses and Revenue — Business -type Activities Year Ended June 30, 2022
(in millions)
$35.0 -
$30.0
$25.0
$20.0
$15.0
$10.0
$5.0
$0.0
Water Wastewater
■Total Expenses ■Program Revenues
Expenses Associated with Business -Type Activities Discussion Current year expenses for Business -type Activities totaled $31.2 million, a decrease of about $3.0 million over prior year as shown in Figure 2. This is attributable to a decrease in salaries and benefits, system maintenance, and miscellaneous expenses.

Major Business -type expenses in the current fiscal year included the following:

Water
Of the $27.1 million in water related expenses, $12.3 million (45.3%) is for the purchase of water, $4.4 million (16.3%) covers employee related costs, $5.3 million (19.5%) is for maintenance, supplies, and depreciation of the water system, $2.5 million (9.3%) is for professional services, $1.7 million (6.4%) is for utility payments and the remaining $878,008 (3.2%) is collectively attributable to other miscellaneous expenses.

Wastewater
Of the $4.1 million in wastewater related expenses, $2.2 million (52.7%) is for maintenance, supplies, and depreciation of the wastewater system, $1.2 million (30.4%) is for employee related costs, and the remaining approximately $689,247 (16.9%) is attributable to professional services, utility payments and other miscellaneous expenses.

Figure 7 summarizes Business -type expenses separately for Water and Wastewater activities. 40 FINANCIAL ANALYSIS OF THE CITY'S FUNDS
As noted earlier, the City uses fund accounting to highlight available financial resources and to ensure and demonstrate compliance with finance -related legal requirements.

Governmental Funds
Utilizing the financial resources measurement focus, the City's Governmental Funds provide information on near -term inflows, outflows, and balances of spendable resources. This information is useful in assessing the City's financing requirements and may serve as a useful measure of a government's net resources available for spending at the end of the fiscal year.

Fund Balance — As shown in Figure 8, the City's Governmental Funds reported combined fund balances of $248.0 million, an increase of $25.7 million from the prior year. The increase is the net result of increases in fund balances in the Tide and Submerged Land — Operating Fund, Tide and Submerged Land — Harbor Capital Fund, Facilities Financial Planning Reserve Fund, other special revenue funds, and other capital projects funds in aggregate; offset by decreases in the General Fund, Debt Service Fund, and other permanent funds in aggregate. The General Fund represented $97.1 million or 39.2% of the combined fund balances of the Governmental Funds.

Figure 8
Governmental Funds Fund Balance
(in thousands)
2021
2022
Change
General Fund
$ 105,953
$ 97,139
$ (8,814)
Tide and Submerged Land - Operating
4,313
4,548
235
Tide and Submerged Land - Harbor Capital
23,608
31,534
7,926
Facilities Financial Planning Reserve
28,093
34,172
6,079
Debt Service Fund
2,256
2,199
(57)
Non -major special revenue
21,798
27,844
6,046
Non -major capital projects
29,608
44,044
14,436
Non -major permanent
6,673
6,487
(186)
$ 222,302
$ 247,967
$ 25,665
The following describes the classification of fund balance as of June 30, 2022. Additional information on the City's fund balance can be found in Note (16) of the Notes to the Financial Statements.

Nonspendable Fund Balance — The City has $14.1 million in fund balance classified as nonspendable to indicate that it cannot be readily converted to cash. Of the $14.1 million nonspendable fund balance, $1.0 million is for prepaid items, $286,074 is for inventories, $8.2 million is for long-term loan receivables, and $4.6 million is for permanent endowments.

Restricted Fund Balance — The City has $73.0 million in fund balance classified as restricted to indicate that it has an externally imposed restriction on how the money may be spent. Of the $73.0 million restricted fund balance, $3.7 million is restricted in the Tide and Submerged Land — Operating Fund, of which $2.4 million is restricted for capital projects and maintenance and repairs, and $1.3 million is restricted for the Upper Newport Bay restoration; $31.5 million is restricted in the Tidelands and Submerged Land — Harbor Capital Fund for capital projects related to the harbor; and $2.2 million is restricted for debt service. Of the remaining $35.6 million in 41 restricted fund balance, $27.9 million is restricted for various special revenue funds, $5.1 million is restricted for the Assessment District Fund, $721,413 is restricted for the Fire Station Fund, and $1.9 million of fund balance is restricted for permanent funds.

Committed Fund Balance — The City has $77.7 million in fund balance classified as committed to indicate that the City Council has committed how the money will be spent. Of the $77.7 million committed fund balance, $4.4 million is committed in the General Fund for encumbrances; $800,000 is committed in the Tide and Submerged Land — Operating Fund; $34.2 million is committed in the Facilities Financial Planning Reserve Fund; $23.5 million is committed in the Unrestricted Capital Improvements Fund; $7.7 million is committed in the Parks and Community Center Fund; $2.7 million is committed to the Facilities Maintenance Fund; $1.9 million is committed in the Fire Station Fund; $1.5 million is committed in the Neighborhood Enhancement Fund; $484,163 is committed in the Civic Center and Park Fund; $429,064 is committed in Balboa Village Parking Management District Fund; and $87,734 is committed in the Junior Lifeguards Fund.

Assigned Fund Balance — The City does not have any fund balance classified as assigned.

Assigned fund balance is fund balance which is not restricted or committed and is classified as assigned to indicate the City Manager's intent to be used for specific purposes.

Unassigned Fund Balance — The remaining $83.2 million in fund balance is classified as unassigned to indicate that it is the residual balance not otherwise restricted, committed, or assigned.

Major Governmental Funds results for the year included the following:

General Fund revenues finished $27.1 million or 11.5% higher than prior year mostly due to a combined $22.2 million increase in the City's top three revenues sources — property taxes, sales taxes and transient occupancy taxes — with a $5.2 million increase in property taxes as the City's assessed valuation continued to increase due primarily to the appreciation of home values, a $7.2 million increase in sales taxes as consumer spending increased and pandemic related restrictions eased, and a $9.8 million increase in transient occupancy taxes due to higher daily hotel room rates and short term lodging revenues reaching a record high level. General Fund expenditures finished $6.9 million or 3.4% higher than the prior fiscal year mostly due to increased costs to comply with state mandates related to recycling and providing assistance to the local homeless population, increased costs for contract instructors for fee based recreation classes as Covid-19 restrictions receded, and one-time lump sum payments to employees as part of updating agreements with employee bargaining units. Though revenues exceeded expenditures by more than $51.4 million, there were substantial transfers out of the General Fund totaling $61.5 million mostly for capital improvement projects. In total, fund balance in the General Fund decreased $8.8 million and ended the year at $97.1 million.

Fund balance for the Tide and Submerged Land — Operating Fund increased $235,043 and ended the current year with $4.5 million in fund balance. The increase was due to the City's General Fund subsidizing the operations of the Tide and Submerged Land — Operating Fund.

Fund balance for the Tide and Submerged Land — Harbor Capital Fund increased $7.9 million ending at $31.5 million. This was largely due to a transfer from the General Fund 42 for harbor related capital improvements and net results from operations as the fund accumulates resources for future harbor related uses.
• Fund balance for the Facilities Financial Planning Reserve Fund increased $6.1 million to end the current year at $34.2 million in fund balance. This was mainly due to the revenue from donations and transfer in from the General Fund to ultimately cash fund construction projects related to facilities.

Fund balance for the Debt Service Fund decreased $56,432 ending at $2.2 million. The decrease was due to administrative charges and debt service related to servicing certificates of participation.

Proprietary Funds
The City's Proprietary Funds (Enterprise and Internal Service Funds) presented in the Fund Financial Statements section basically provides the same type of information in the Government - wide Financial Statements, but also include information for individual funds.

Enterprise Fund results for the year included the following:

Net position in the Water Fund increased $4.2 million partly due to the continuing implementation of water service rate increases and reduction in capital improvement expenses for system maintenance. Additionally, salaries and benefits expenses decreased mostly due to reduced pension expenses. See Note (10) of the Notes to the Financial Statements for additional pension information.

Net position in the Wastewater Fund increased $568,619 mainly due to reduced allocations of administrative and other expenses, and reduced system maintenance expenses.

Major Internal Service Fund activity in the current fiscal year included the following:

Total net position in the Internal Service Funds increased $1.0 million in the current fiscal year. This was mostly due to operating income of $3.9 million, which included increases in revenue from charges for services for equipment maintenance. Operating income's contribution to net position was reduced by the net effect of non -operating revenue and net transfers, which combined reduced net position by approximately $2.9 million.

Approximately $1.3 million was transferred to the General Fund following an analysis of certain Internal Service Funds that had excess reserves on hand that could be returned to the General Fund.

GENERAL FUND BUDGETARY HIGHLIGHTS
Changes to Original Budget
Final budgeted revenues for the General Fund increased $5.6 million from the original budget during the year ended June 30, 2022. Factors contributing to this fluctuation are highlighted as follows:
• Property Tax revenue budgets were increased by $1.6 million due to higher prior year total assessed valuation.
43 Final budgeted intergovernmental revenue increased $2.2 million primarily due to adjustments related to Fire Department mutual aid reimbursements and SB-2 Permanent Local Housing Allocation grant funds.
• Charges for services increased from the adopted budget, in the amount of $964,120. This adjustment is related to increased revenue received from recreation fee -based classes and Junior Lifeguard program.
• Miscellaneous revenues, donations, and property income all were adjusted upward from the adopted budget by a total of $804,251. Increases were due to increased percentage - based rent revenues from the Lido House Hotel lease due to the hotel's increased revenues and donations received for various programs.

Final budgeted expenditures for the General Fund decreased $4.7 million from the original budget during the year ended June 30, 2022. The significant factors contributing to the decrease are as follows:
• The addition of $7.9 million to the benefits and salary budget associated with an additional discretionary payment of $5.0 million toward the City's unfunded pension liability and $2.9 million related to approved city contracts with City Employee associations. • Budgeted carryovers from Fiscal Year 2020-21 totaled $3.1 million were added to the adopted budget.
• An amendment in the amount of $637,000 was approved by the City Council to increase the contract instructor budgets for fee based recreation classes. These increases were fully offset by the additional revenue in the Service Fees & Charges category. • The above additions were offset by a $17.6 million decrease for the routine reclassification of General Fund expenditures as Tidelands expenditures. This reclassification occurs at year end once all such eligible expenditures can be properly attributed to Tidelands activity.

Variance with Final Budget
Actual General Fund revenues came in at $22.1 million above final budgeted revenues for the year ended June 30, 2022. Significant factors contributing to this favorable variance are summarized as follows:
• Sales tax revenue came in $5.9 million higher due to strong consumer spending in certain industries such as autos and transportation, brick -and -mortar retail establishments and restaurants & hotels, and fuel and service stations.

Transient occupancy tax was $7.6 million higher due to increased revenue from short- term lodging businesses and many hotel properties reporting record high TOT receipts. • Other Taxes ended the year $2.4 million higher than projected due primarily to strong growth in property transfer taxes related to a very active housing market. 44 • Charges for services came in $2.9 million higher due primarily to receipts for paramedic service fees, plan check fees, as well as revenue received from recreation fee -based classes and the Junior Lifeguard program.
• Property Income ended the year $3.2 million higher mainly due to both parking revenues and percentage -based rent revenues from the Lido House Hotel ending the year higher than projected.

Actual General Fund expenditures of $210.4 million were less than final budgetary estimates of $221.3 million. The $10.9 million favorable variance was due to routine savings in salaries as well as contract services.

CAPITAL ASSET AND DEBT ADMINISTRATION
Capital Assets
The City's capital assets for Governmental and Business -type Activities as of June 30, 2022, amounts to $2.5 billion, net of accumulated depreciation/amortization. This is comprised of a broad range of tangible capital assets including land, buildings, machinery and equipment, park facilities, road improvements, storm drains, piers, oil wells, sound walls, an 800 MHz radio communications system, parking pay stations and meters, and bridges; and, intangible capital assets including the rights to use land and rights of way, structures and equipment. The total capital assets increased $19.4 million over the prior fiscal year, of which $15.6 million was due to a prior period adjustment to record intangible right to use assets in accordance with GASB 87.

Land
Intangible right to use
land and rights of way
Structures
Intangible right to use structures
Equipment
Intangible right to use equipment
Infrastructure
Work in progress
Figure 9
Capital Assets at Year End
(net of depreciation/amortization, in thousands)
Governmental
Business -Type
Activities
Activities
Total
2021
2022
2021
2022
2021
2022
$ 1,897,520
$ 1,899,966
$ 2,219 $
2,219
$ 1,899,739
$ 1,902,185
-
-
-
1,509
-
1,509
186,077
183,197
409
394
186,486
183,591
-
13,021
-
-
-
13,021
18,428
19,017
154
126
18,582
19,143
-
310
-
-
-
310
210,945
211,008
122,831
122,484
333,776
333,492
11,375
12,836
415
3,731
11,790
16,567
Totals $ 2,324,345 $ 2,339,355 $ 126,028 $ 130,463 $ 2,450,373 $ 2,469,818 Major capital asset events during the current fiscal year included the following:
• Capital asset additions totaled $34.0 million in both the Governmental and Business -type Activities in the current year. Of the $34.0 million, $11.6 million represents additions of infrastructure assets mostly related to the road system and water system; $5.5 million is related to equipment and intangible right to use equipment additions; $2.4 million is related 45 to structure additions at parks and a fire station. The remaining $14.5 million is comprised of additions of non-depreciable/non-amortizable assets such as work in progress, $12.1 million, and land and rights of way of $2.4 million.
• Of the $28.1 million of additions in governmental assets in the current year, additions in infrastructure contributed $9.4 million, which was mostly due to upgrades in the road system. The remaining $18.7 million added in the current year as governmental assets, is comprised of $2.4 million of land additions and $2.4 million of structure additions both related to Grant Howald Park upgrades, $8.4 million of work in progress, mostly related to the ongoing construction of a new fire station and upgrades to the road system, and $5.5 million of equipment and intangible right to use equipment additions mostly related to vehicle purchases and the use of communication equipment for lifeguard towers. • The $5.9 million of business -type asset additions in the current year is comprised of $2.2 million in water and sewer system infrastructure additions, and $3.7 million of work in progress additions related to water system improvements.

Additional information on the City's capital assets can be found in Note (5) of the Notes to the Financial Statements.

Long-term Debt
Certificates of participation
Bond premium
CDBG Loan
Totals
Figure 10
Outstanding Debt at Year End
(in thousands)
Governmental
Activities
2021 2022
$ 105,490 $ 101,550
1,291 1,149
403 208
Business -Type
Activities
2021 2022
Total
2021 2022
$ 105,490 $ 101,550
1,291 1,149
403 208
$ 107,184 $ 102,907 $ - $ - $ 107,184 $ 102,907
The City's total debt decreased $4.3 million during the current fiscal year. The decrease is the result of expected debt service payments. Additional information on the City's long-term debt obligation can be found in Note (6) of the Notes to the Financial Statements.

FACTORS AFFECTING NEXT YEAR'S BUDGET
Economy
The local economy is currently supported by a strong labor market with the unemployment rate in Orange County at 3%. However, consumer demand in certain segments of the economy is beginning to cool as the Federal Reserve continues to aggressively raise interest rates to fight inflation. Nonetheless, the economic outlook for the City of Newport Beach is projected to remain positive for the foreseeable future. A slower rate of growth in the upcoming fiscal year is generally anticipated for revenues compared to the level of growth that we have seen in the past few years coming out of the pandemic -induced recession.
46 Local Revenue Trends
Property tax revenue, the City's largest source of revenue, is projected to increase approximately 7% next fiscal year, which is largely related to the inflation adjustment indexed at the 2% cap allowed by Proposition 13 and due to changes in ownership.

Sales tax revenue is the second largest source of General Fund revenue. Approximately 85% of sales tax revenue is generated from autos and transportation, restaurants and hotels, general consumer goods, and the State and County pools. Sales tax revenue is projected to increase approximately 6% next fiscal year due to continued growth across all industry groups, except for fuel and service stations. The growth in sales tax revenue next fiscal year is largely due to the following:

Autos and Transportation — After a surge of growth in the wake of the pandemic, it is expected that the auto industry may face challenges in the years ahead due to a combination of high prices, rapidly escalating costs to finance a vehicle purchase and a slowing economy. Supply chain issues and the chip shortage are abating, which is resulting in lower prices for used cars. We may also see lower prices for new cars if demand is challenged by the factors already mentioned, which are causing growing headwinds for the industry. Therefore, modest growth in sales tax revenue from autos and transportation is projected.
• Restaurants and Hotels — Over the past two years there has been a shift in spending from tangible goods to spending on travel, dining and leisure, and entertainment. Therefore, in light of continued demand and higher menu prices, robust growth in sales tax revenue from restaurants and hotels is projected.
• General Consumer Goods — Modest growth in sales tax revenue from general consumer goods is projected as consumers are expected to continue to shift spending on tangible goods to travel, dining and leisure, and entertainment. It is also expected that high inflation may result in a decrease in consumer spending on discretionary purchases. • State and County Pools — Continued growth in revenue from the pools is projected next year as we expect internet sales to continue to grow at a more rapid pace than traditional brick -and -mortar store sales.

Discretionary Appropriations
The annual budget serves as the foundation for financial planning and control, and allows the City Council to prioritize expenditures in alignment with core community values. The budget as adopted is reflective of strong revenues, healthy reserves, and a sound debt position. This budget reflects a strong local economy that continues to provide stable revenues that support a wide variety of programs and initiatives.

The City Council adopted a Fiscal Year 2022-23 budget that maintains a deliberate resource balance between these important municipal expenses:
• Addressing long-term obligations such as pension liabilities, post -employment health care benefits, and debt service;
47 • Keeping a level of operations that reflects the community's desire for an active, safe, and attractive community; and
• Investing in infrastructure to maintain a high -quality natural and physical environment.

An aspect of the City's balanced approach to fiscal management is managing resources as efficiently as possible, responsibly managing debt, and working collaboratively with employees to recalibrate the compensation structure and share in the costs of pension obligations.

During the adoption of the budget for Fiscal Year 2022-23, the City Council approved funding for the continuation of an aggressive pension paydown strategy, which includes $45 million being paid to CalPERS next fiscal year towards the unfunded liability, which is approximately $15 million more than the amount required to be paid. If the City continues to pay $45 million annually to CalPERS towards the City's unfunded liability, the City projects the pension liability will be eliminated within the next decade assuming CalPERS earn 6.8% on investments on average over the next 10 years.

Overall, the City's total debt burden is low and remains affordable. The economy benefits from the City's mature, robust tax base and strong employment among a diversity of business sectors, as well as retail shopping and tourism activity. Residential and commercial property values are among the highest in the country. Our overall assessed valuation (AV) has been stable despite the economic downturn between 2009 and 2012, with growth in the each of the last 26 years.

A strong financial profile is a particularly important factor considered by rating agencies in their evaluation of the creditworthiness of local government debt. The rating agencies Fitch, Moody's, and Standard & Poor's have all assigned the City the highest quality credit rating of AAA. Moody's reaffirmed their AAA ratings in 2021. Expenditure controls within the past decade have included early retirement incentive plans, increased employee contributions to pension plans, contracting services, and freezing vacant positions when necessary, usually during recessionary periods.

Financial operations produced net surpluses (after transfers) in the last ten years due to conservative budgeting and a stable and growing tax revenue base. The City has used surpluses for important one-time purposes, like paying more towards retirement obligations and investing in IT and communications infrastructure. Financial management policies are robust and have continued to improve in recent years.

CONTACTING THE CITY'S FINANCIAL MANAGEMENT
This financial report is designed to provide our citizens, taxpayers, customers, and investors and creditors with a general overview of the City's finances and to demonstrate the City's accountability for the money it receives. If you have questions about this report or need additional financial information, contact the City's Finance Department, 100 Civic Center Drive, Newport Beach, CA 92660, (949) 644-3146. The City's Budgets, Annual Comprehensive Financial Reports, as well as other City financial information can be found on the City's website at:
www.newportbeachca.gov/financialinfo
48 49

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50 CITY OF NEWPORT BEACH
Statement of Net Position
June 30, 2022
Assets:

Cash and investments (note 4)
Receivables:

Accounts (net of allowance)
Interest
Intergovernmental receivables
Lease receivables
Restricted cash and investments with fiscal agent (note 4) Internal balances
Investment in joint ventures (note 14)
Inventory
Prepaid items
Capital assets (note 5):

Non-depreciable/non-amortizable
Depreciable/amortizable
Accumulated depreciation/amortization
Total assets
Deferred Outflows of Resources:

Deferred amount from pension plans (note 10)
Deferred amount from OPEB (note 11)
Total deferred outflows of resources
Liabilities:

Accounts payable
Accrued payroll
Accrued interest payable
Deposits payable
Unearned revenue
Noncurrent liabilities:

Due within one year:

Lease liability (note 18)
Other (note 6)
Due in more than one year:

Net pension liability (note 10)
Net OPEB liability (note 11)
Lease liability (note 18)
Other (note 6)
Total liabilities
Deferred Inflows of Resources:

Deferred amount from pension plans (note 10)
Deferred amount from OPEB (note 11)
Deferred amount from leases
Total deferred inflows of resources
Net Position:

Net investment in capital assets
Restricted for:

Public safety
Public works
Community services
Community development
Debt service
Permanent funds:

Nonexpendable
Expendable
Unrestricted
Total net position
Governmental
Business -type
Activities
Activities
Total
$ 322,121,389
$ 32,172,940
$ 354,294,329
7,543,346
7,125,135
14,668,481
941,295
94,550
1,035,845
13,555,871
-
13,555,871
244,473,579
-
244,473,579
10,134,793
-
10,134,793
422,817
(422,817)
-
241,967
-
241,967
667,459
-
667,459
3,569,781
-
3,569,781
1,912,801,825
5,950,037
1,918,751,862
712,497,374
200,696,840
913,194,214
(285,944,253)
(76,183,318)
(362,127,571)
2,943,027,243
169,433,367
3,112,460,610
52,341,633
1,656,052
53,997,685
11,645,310
640,408
12,285,718
63,986,943
2,296,460
66,283,403
17,064,425
4,136,502
21,200,927
5,539,582
211,734
5,751,316
3,468,116
-
3,468,116
2,893,545
35,253
2,928,798
14,958,074
-
14,958,074
1,052,350
16,723
1,069,073
14,330,533
-
14,330,533
171,482,270
4,763,767
176,246,037
15,776,760
857,358
16,634,118
12, 268, 690
1,495, 851
13, 764, 541
125,804,238
-
125,804,238
384,638,583
11,517,188
396,155,771
80,797,682
3,174,741
83,972,423
4,237,778
233,341
4,471,119
243,649,149
-
243,649,149
328,684,609
3,408,082
332,092,691
2,223,773,786
128,244,924
2,352,018,710
680,713
-
680,713
27,363,131
-
27,363,131
40,581,786
-
40,581,786
788,229
-
788,229
2,199,363
-
2,199,363
4,629,781
-
4,629,781
1,857,493
-
1,857,493
(8,183,288)
28,559,633
20,376,345
$ 2,293,690,994
$ 156,804,557
$ 2,450,495,551
See accompanying notes to basic financial statements
51 CITY OF NEWPORT BEACH
Statement of Activities
Year Ended June 30, 2022
Program Revenues
Operating
Capital
Total
Charges for
Grants and
Grants and
Program
Expenses
Services
Contributions
Contributions
Revenues
Functions/Programs
Primary government:

Governmental activities:

General government
$ 19,374,179
$ 3,625,809
$ 915,589
$ -
$ 4,541,398
Public safety
104,767,466
23,156,703
2,524,620
2,970
25,684,293
Public works
65,031,715
7,538,103
12,401,245
8,465,329
28,404,677
Community development
9,664,500
11,119,757
374,914
13,372
11,508,043
Community services
24,508,702
22,302,788
583,671
211,758
23,098,217
Interest on long-term debt
6,877,577
-
-
-
-
Total governmental activities
230,224,139
67,743,160
16,800,039
8,693,429
93,236,628
Business -type activities
Water
27,117,471
32,104,202
116,629
32,220,831
Wastewater
4,094,448
4,825,249
-
4,825,249
Total business -type activities
31,211,919
36,929,451
116,629 -
37,046,080
Total primary government
$ 261,436,058
$ 104,672,611 $
16,916,668 $ 8,693,429 $
130,282,708
General revenues:

Taxes:

Property tax
Sales tax
Transient occupancy tax
Business license tax
Franchise tax
Other taxes
Investment income
Net decrease in fair
value of investments
Other
Total general revenues
Change in net position
Net position at beginning of year
Net position at end of year
See accompanying notes to basic financial statements
52 Net (Expense) Revenue and Changes in Net Assets
Primary Government
Governmental Business -type
Activities Activities Total
$ (14,832,781) $
$ (14,832,781)
(79,083,173)
(79, 083,173)
(36,627,038)
(36,627,038)
1,843,543
1,843,543
(1,410,485)
(1,410,485)
(6,877,577)
(6,877,577)
(136,987,511) - (136,987,511)
5,103,360
5,103,360
730,801
730,801
5,834,161
5,834,161
(136,987,511)
5,834,161
(131,153,350)
124,335,985
-
124,335,985
46,164,860
46,164,860
26,677,331
26,677,331
4,363,145
4,363,145
4,561,278
4,561,278
4,333,071
-
4,333,071
1,995,214
345,218
2,340,432
(6,856,640)
(1,190,093)
(8,046,733)
2,644,194
2,644,194
208,218,438
(844,875)
207,373,563
71,230,927
4,989,286
76,220,213
2,222,460,067
151,815,271
2,374,275,338
$ 2,293,690,994 $
156,804,557
$ 2,450,495,551
See accompanying notes to basic financial statements
53 This page left blank intentionally.
54 55

This page left blank intentionally.
56 GOVERNMENTAL FUNDS
Major Funds
The General Fund is used to account for fiscal resources that are dedicated to governmental operations of the City, and not required to be accounted for in another fund.

The Tide and Submerged Land — Operating Fund is a Special Revenue Fund used to account for revenues related to the operation of the City's tidelands, including beaches and marinas, and the related expenditures. Revenue from tideland operations includes, but is not limited to, rents from moorings, piers, and leases, as well as income from parking lots, meters, and the sale of oil.

The Tide and Submerged Land — Harbor Capital Fund is a Special Revenue Fund used to account for incremental increases in revenue from certain property lease, pier, and mooring rentals that exceed Council designated base year revenue amounts, as well as other designated revenues and the related expenditures for capital projects, maintenance, and servicing of loan advances from the General Fund.

The American Rescue Plan Act Fund is used to account for federal funding received through Coronavirus State and Local Fiscal Recovery Funds under the American Rescue Plan Act.

The Facilities Financial Planning Reserve Fund is used to account for the receipt and expenditure of funds for the replacement of facilities. In prior years, this fund was called the Facilities Replacement Fund.

The Debt Service Fund is used to account for debt service transactions related to the Certificates of Participation issued to finance the construction of the Civic Center Complex and the construction of Fire Station No. 2.

Other Governmental Funds
Other governmental funds are those governmental funds that do not meet the criteria of a major fund. For reporting purposes in this section, they are combined as Other Governmental Funds.
57 Assets
Cash and investments (note 4)
Receivables:

Accounts (net of allowance)
Interest
Intergovernmental receivables
Lease receivables
Restricted cash and investments with fiscal agent (note 4) Advance to other funds (note 12)
Due from other funds (note 12)
Prepaid items
Inventory
Total assets
Liabilities, Deferred Inflows of Resources
and Fund Balances
Liabilities:

Accounts payable
Accrued payroll
Deposits payable
Unearned revenue
Advance from other funds (note 12)
Due to other funds (note 12)
Total liabilities
Deferred Inflows of Resources:

Unavailable revenue
Deferred amount from leases
Total deferred inflows of resources
Fund balances (deficits):

Nonspendable:

Prepaid items
Inventories
Long-term loan receivable
Permanent endowment
Restricted:

Upper Newport Bay restoration
Other
Committed:

Oil and gas
Other
Unassigned
Total fund balances
Total liabilities, deferred inflows of
resources and fund balances

CITY OF NEWPORT BEACH
Governmental Funds
Balance Sheet
June 30, 2022

Page 1 of 2 ends

Special Revenue Funds
Tide and
Tide and
Submerged
Submerged
American
General
Land - Operating
Land -Harbor Capital
Rescue Plan Act
$ 87,600,313 $
4,745,087
$ 39,666,573
$
10,271,759
5,337,987
1,972,271
-
-
325,667
50,387
107,649
11,577,642
-
-
67, 674, 877
176, 798, 702
8,176,659
460,259
944,410
286,074
-
-
$ 182,383,888 $
183,566,447
$ 39,774,222
$
10,271,759
$ 7,271,177 $
1,710,218
$ 63,091
$
80,478
5,200,291
38,725
-
-
2,700,956
192,589
-
2,722,111
757,105
-
10,191,281
-
8,176,659
-
17,894,535
2,698,637
8,239,750
10,271,759
20,833
-
-
-
67,329,139
176,320,010
67,349,972
176,320,010
944,410
-
286,074
8,176,659
1,318,126
-
2,429,674
31,534,472
-
800,000
-
4,429,573
-
83,302,665
-
97,139,381
4,547,800
31,534,472
-
$ 182,383,888 $
183,566,447
$ 39,774,222
$
10,271,759
(continued)
See accompanying notes to basic financial statements
58 Assets
Cash and investments (note 4)
Receivables:

Accounts payable
Accrued payroll
Deposits payable
Unearned revenue
Advance from other funds (note 12)
Due to other funds (note 12)
Total liabilities
Deferred Inflows of Resources:

Unavailable revenue
Deferred amount from leases
Total deferred inflows of resources
Fund balances (deficits):

Nonspendable:

Prepaid items
Inventories
Long-term loan receivable
Permanent endowment
Restricted:

Upper Newport Bay restoration
Other
Committed:

Oil and gas
Other
Unassigned
Total fund balances
Total liabilities, deferred inflows of
resources and fund balances

CITY OF NEWPORT BEACH
Governmental Funds
Balance Sheet
June 30, 2022

Page 2 of 2 ends

Capital Project Fund Debt Service Fund
Facilities
Other
Financial Planning Debt Service
Governmental
Reserve
Fund
Funds
Totals
$ 27,784,144 $
$
82,853,560
$
252,921,436
-
215,849
7,526,107
102,239
151,830
737,772
-
1,978,229
13,555,871
-
244,473,579
8,507,568
1,627,225
10,134, 793
-
-
-
8,176,659
6,308,136
-
6,768,395
-
60,649
1,005,059
-
-
-
286,074
$ 34,194,519 $
8,507,568
$
86,887,342
$
545,585,745
$ - $
69 $
5,971,727
$
15,096,760
-
1,513
5,240,529
-
-
2,893,545
22,884
1,264,693
14,958,074
-
8,176,659
6,308,136
107,258
6,415,394
22,884
6,308,205
7,345,191
52,780,961
-
-
1,167,620
1,188,453
-
243,649,149
1,167,620
244,837,602
60,649
1,005,059
-
286,074
-
8,176,659
4,629,781
4,629,781
-
-
1,318,126
2,199,363
35,531,573
71,695,082
-
-
-
800,000
34,171,635
38,271,899
76,873,107
(119,371)
83,183,294
34,171,635
2,199,363
78,374,531
247,967,182
$ 34,194,519 $
8,507,568
$
86,887,342
$
545,585,745
See accompanying notes to basic financial statements
59 This page left blank intentionally.
60 CITY OF NEWPORT BEACH
Governmental Funds
Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Position
June 30, 2022
Fund balances of governmental funds $ 247,967,182
Amounts reported for governmental activities in the statement of net position are different because:

Capital assets net of accumulated depreciation have not been included as financial resources in governmental fund activity. Amount excludes capital assets from internal service funds which are added below. 2,321,566,334 Long-term liabilities applicable to the City's governmental activites are not due and payable in the current period and accordingly are not reported as fund liabilities.

All liabilities (both current and long-term) are reported in the Statement of Net Position.

Amounts exclude long-term debt activity from internal service funds which have been added below:

Certificates of participation payable - Series 2010B
(94,465,000)
Certificates of participation payable - Series 2020A
(7,085,000)
Bond premium - Series 2020A
(1,148,895)
CDBG loan
(208,000)
Lease liability
(13,057,605)
Pension related debt applicable to the governmental activities are not due and payable in the current period and accordingly are not reported as fund liabilities. Deferred outflows of resources and deferred inflows of resources related to pension are only reported in the Statement of Net Position as the changes in these amounts affect only the government -wide statements for governmental activities. Amounts exclude internal service fund activity which has been added below:

Deferred outflows of resources
51,252,394
Deferred inflows of resources
(78,709,554)
Pension liability
(168,348,987)
OPEB related debt applicable to the governmental activities are not due and payable in the current period and accordingly are not reported as fund liabilities. Deferred outflows of resources and deferred inflows of resources related to OPEB are only reported in the Statement of Net Position as the changes in these amounts affect only the government -wide statements for governmental activities. Amounts exclude internal service fund activity which has been added below:

Deferred outflows of resources
11,224,090
Deferred inflows of resources
(4,084,301)
OPEB liability
(15,212,842)
Accrued interest payable for the current portion of interest due on long-term debt has not been reported in the governmental funds.
(3,468,116)
Some of the revenue will be collected after year-end, but is not available soon enough to pay for the current period's expenditures, and therefore is reported as unavailable revenue in the governmental funds.
1,188,453
Internal service funds are used by management to charge the costs of certain activities, such as self-insurance, workers' compensation, compensated absences, retiree insurance, fleet management and information technology, to individual funds.

The assets (including capital assets) and liabilities of the internal service funds must be added to the statement of net position.
45,616,057
Investment in joint ventures is not a current financial resource and therefore not reported in the governmental funds.
241,967
Internal balance created by the consolidation of internal service fund activities related to enterprise funds is not reported in the governmental funds. 422,817
Net position of governmental activities
$ 2,293,690,994
See accompanying notes to basic financial statements
61 CITY OF NEWPORT BEACH
Governmental Funds
Statement of Revenues, Expenditures and Changes in Fund Balances For the Year Ended June 30, 2022

Page 1 of 2 ends

Special Revenue Funds
Tide and
Tide and
Submerged
Submerged
American
General Land - Operating
Land - Harbor Capital
Rescue Plan Act
Revenues:

Taxes and assessments:

Property tax
$ 124,335,985 $
$
$
Sales tax
46,164,860
Transient occupancy tax
26,677,331
Other taxes
13,257,494
-
Intergovernmental
4,450,372
122,543
Licenses, permits and fees
6,058,428 121,046
-
Charges for services
22,867,045 30,430
Fines and forfeitures
4,154,153 37,365
Investment income
1,237,762 127,362
416,225
Net decrease in fair value of investments
(3,853,265) (515,127)
(1,434,907)
Property income
14,377,859 14,249,864
5,143,027
Donations
874,978 -
-
Special assessments
-
Other
1,169,064 -
-
Total revenues
261,772,066 14,050,940
4,124,345
122,543
Expenditures:

Current:

General government
15,693,078 1,582,165
-
122,543
Public safety
114,336,303 12,654,288
-
Public works
41,829,359 5,190,652
Community development
12,804,328 3,543
Community services
24,646,728 1,774,413
-
Capital outlay
- 1,279,777
697,869
Debt service (note 6):

Principal
1,003,250 -
-
Interest and fiscal charges
75,177
Total expenditures
210,388,223 22,484,838
697,869
122,543
Excess (deficiency) of revenues
over expenditures
51,383,843 (8,433,898)
3,426,476
Other financing sources (uses):

Transfers in (note 13)
1,284,630 8,668,941
4,500,000
Transfers out (note 13)
(61,482,490)
Total other financing sources
(uses)
(60,197,860) 8,668,941
4,500,000
Net change in fund balances
(8,814,017) 235,043
7,926,476
Fund balances, beginning
105,953,398 4,312,757
23,607,996
Fund balances, ending
$ 97,139,381 $ 4,547,800
$ 31,534,472
$
(continued)
See accompanying notes to basic financial statements
62 CITY OF NEWPORT BEACH
Governmental Funds
Statement of Revenues, Expenditures and Changes in Fund Balances For the Year Ended June 30, 2022
Page
2 of 2
Capital Project Fund
Debt Service Fund
Facilities
Other
Financial Planning
Debt Service Governmental
Reserve
Fund
Funds
Totals
Revenues:

Taxes and assessments:

Property tax
$
$ $
$
124,335,985
Sales tax
46,164,860
Transient occupancy tax
26,677,331
Other taxes
823,732
14,081,226
Intergovernmental
2,194,366
12,916,026
19,683,307
Licenses, permits and fees
382,118
-
434,108
6,995,700
Charges for services
-
-
22,897,475
Fines and forfeitures
-
-
-
4,191,518
Investment income
348,710
5,088
621,565
2,756,712
Net decrease in fair value of investments
(1,290,437)
-
(1,807,026)
(8,900,762)
Property income
-
33,770,750
Donations
863,279
66,992
1,805,249
Special assessments
-
8,086,594
8,086,594
Other
-
272,749
1,441,813
Total revenues
303,670
2,199,454
21,414,740
303,987,758
Expenditures:

Current:

General government
-
-
-
17,397,786
Public safety
599,895
127,590,486
Public works
7,273,523
54,293,534
Community development
213,691
13,021,562
Community services
-
26,421,141
Capital outlay
-
26,625,747
28,603,393
Debt service (note 6):

Principal
3,940,000
195,000
5,138,250
Interest and fiscal charges
7,057,019
9,068
7,141,264
Total expenditures
10,997,019
34,916,924
279,607,416
Excess (deficiency) of revenues
over expenditures
303,670
(8,797,565)
(13,502,184)
24,380,342
Other financing sources (uses):

Transfers in (note 13)
19,000,000
8,741,133
33,866,860
76,061,564
Transfers out (note 13)
(13,224,632)
(69,812)
(74,776,934)
Total other financing sources
(uses)
5,775,368
8,741,133
33,797,048
1,284,630
Net change in fund balances
6,079,038
(56,432)
20,294,864
25,664,972
Fund balances, beginning
28,092,597
2,255,795
58,079,667
222,302,210
Fund balances, ending
$ 34,171,635
$ 2,199,363 $
78,374,531 $
247,967,182
See accompanying notes to basic financial statements
63 This page left blank intentionally.
64 CITY OF NEWPORT BEACH
Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds
to the Statement of Activities
Year Ended June 30, 2022
Net change in fund balances - total governmental funds
$ 25,664,972
Amounts reported for governmental activities in the statement of activities differ from the amounts reported in governmental funds because:

Governmental funds report capital outlays as expenditures. However, in the statement of activities, the costs of those assets is allocated over their estimated useful lives (678,348)
as depreciation expense. This is the amount by which depreciation exceeded capital outlay in the current period.

The issuance of long-term debt provides current financial resources to governmental funds, while repayment of the principal and issuance costs of long-term debt consumes the current financial resources of the governmental funds. Issuance of bond principal is an other financing source and repayment of bond principal is an expenditure in governmental funds, but the issuance increases long-term liabilities and the repayment reduces long-term liabilities in the Statement of Net Position.

The amounts are the net effect of these differences in the treatment of long-term debt:

Repayment of principal on bonds
4,135,000
Amortization of principal on leases
1,003,250
Premium on bonds is recognized as revenues in the period received; however, in the statement of activities, it is amortized over the life of the bond.

Amortization of bond premium - Series 2020A 142,131
Accrued interest for debt service is the net change in accrued interest for the current period. 122,176 Pension expense reported in the governmental funds includes the employer contributions made.

In the Statement of Activities, pension expense includes the change in the net pension liability and related change in pension amounts for deferred outflows of resources and deferred inflows of resources. 37,868,065
OPEB expense reported in the governmental funds includes the employer contributions made.

In the Statement of Activities, OPEB expense includes the change in the net OPEB liability and related change in OPEB amounts for deferred outflows of resources and deferred inflows of resources. 2,890,389
Some of the revenue will be collected after year-end, but is not available soon enough to pay for the current period's expenditures, and therefore is reported as unavailable revenue in the governmental funds. This is the net change in unavailable revenue for the current period. (722,579)
Internal service funds are used by management to charge the costs of certain activities, such as self-insurance, workers' compensation, compensated absences, retiree insurance and fleet management, to individual funds. The net revenue of the internal service funds is reported in the statement of activities. 1,042,536 Investment in joint ventures creates an explicit, measurable equity interest reported only in the statement of activities. (14,895)
Internal balance created by the consolidation of internal service funds activities related to enterprise funds is reflected as a reduction of revenues in the statement of activities. (221,770) Change in net position of governmental activities $ 71,230,927 See accompanying notes to basic financial statements
65 CITY OF NEWPORT BEACH
Budgetary Comparison Statement
General Fund
For the Year Ended June 30, 2022
Variance with
Final Budget
Budgeted
Amounts
Positive
Original
Final
Actual
(Negative)
Revenues:

Taxes and assessments:

Property
$ 122,229,980
$ 123,833,217
$ 124,335,985
$ 502,768
Sales
40,275,670
40,275,670
46,164,860
5,889,190
Transient occupancy
19,027,493
19,027,493
26,677,331
7,649,838
Othertaxes
10,815,117
10,815,117
13,257,494
2,442,377
Intergovernmental
1,760,934
3,946,667
4,450,372
503,705
Licenses, permits and fees
5,106,646
5,106,646
6,058,428
951,782
Charges for services
19,046,329
20,010,449
22,867,045
2,856,596
Fines and forfeitures
3,292,102
3,292,102
4,154,153
862,051
Investment income
1,112,200
1,112,200
1,237,762
125,562
Net decrease in fair value of investments
-
-
(3,853,265)
(3,853,265)
Property income
10,726,345
11,173,219
14,377,859
3,204,640
Donations
401,550
527,372
874,978
347,606
Other
332,598
564,153
1,169,064
604,911
Total revenues
234,126,964
239,684,305
261,772,066
22,087,761
Expenditures:

General government:

City council
788,911
843,187
585,602
257,585
City clerk
945,367
1,191,456
1,199,672
(8,216)
City attorney
2,425,351
2,506,635
2,368,444
138,191
City manager
4,296,947
4,358,235
2,265,294
2,092,941
Finance
6,675,039
5,998,242
6,347,684
(349,442)
Human resources
3,119,670
3,210,866
2,926,382
284,484
Total general government
18,251,285
18,108,621
15,693,078
2,415,543
Public safety:

Police
67,401,926
67,425,168
64,063,936
3,361,232
Fire
55,861,885
49,890,956
50,272,367
(381,411)
Total public safety
123,263,811
117,316,124
114,336,303
2,979,821
Public works:

Public works - general services
30,230,658
30,792,353
28,338,164
2,454,189
Public works
11,074,579
8,901,520
8,258,881
642,639
Utilities
5,144,631
5,267,693
5,232,314
35,379
Total public works
46,449,868
44,961,566
41,829,359
3,132,207
See accompanying notes to basic financial statements
66 CITY OF NEWPORT BEACH
Budgetary Comparison Statement
General Fund
For the Year Ended June 30, 2022
(continued)
Variance with
Final Budget
Budgeted Amounts
Positive
Original Final
Actual
(Negative)
Community development:

Community development
11,932,324 12,430,747
11,975,531
455,216
Code and water quality enforcement
840,081 865,582
828,797
36,785
Total community development
12,772,405 13,296,329
12,804,328
492,001
Community services
Parking operations
2,210,660
2,686,829
2,025,631
661,198
Library services
9,655,108
10,453,688
9,454,173
999,515
Recreation and senior services
13,360,496
14,447,029
13,166,924
1,280,105
Total community services
25,226,264
27,587,546
24,646,728
2,940,818
Debt service:

Principal
-
-
1,003,250
(1,003,250)
Interest and fiscal charges
75,177
(75,177)
Total Debt Service
-
-
1,078,427
(1,078,427)
Total expenditures
225,963,633
221,270,186
210,388,223
10,881,963
Excess of revenues
over expenditures
8,163,331
18,414,119
51,383,843
32,969,724
Other financing sources (uses):

Transfers in
1,284,630
1,284,630
1,284,630 -
Transfers out
(20,200,000)
(61,482,490)
(61,482,490)
Total other financing
sources (uses)
(18,915,370)
(60,197,860)
(60,197,860) -
Net change in fund balance
(10,752,039)
(41,783,741)
(8,814,017) 32,969,724
Fund balance, beginning
105,953,398
105,953,398
105,953,398 -
Fund balance, ending
$ 95,201,359
$ 64,169,657
$ 97,139,381 $ 32,969,724
See accompanying notes to basic financial statements
67 Revenues:

Licenses, permits and fees
Charges for services
Fines and forfeitures
Investment income
Net decrease in fair value of investments
Property income
Total revenues
Expenditures:

General government
Public safety
Public works
Community development
Community services
Capital outlay
Total expenditures
Excess (deficiency) of revenues
over expenditures
Other financing sources:

Transfers in
Net change in fund balance
Fund balance, beginning
Fund balance, ending

CITY OF NEWPORT BEACH
Budgetary Comparison Statement
Tide and Submerged Land - Operating
For the Year Ended June 30, 2022
Variance with
Final Budget
Budgeted
Amounts
Positive
Original
Final
Actual
(Negative)
$ 59,388
$ 59,388
$ 121,046
$ 61,658
15,940
15,940
30,430
14,490
24,500
24,500
37,365
12,865
192,208
192,208
127,362
(64,846)
-
-
(515,127)
(515,127)
12,045,872
12,045,872
14,249,864
2,203,992
12,337,908
12,337,908
14,050,940
1,713,032
-
1,582,165
1,582,165
-
-
12,654,288
12,654,288
-
1,204,323
4,596,921
5,190,652
(593,731)
-
-
3,543
(3,543)
1,931,915
1,950,160
1,774,413
175,747
-
3,862,955
1,279,777
2,583,178
3,136,238
24,646,489
22,484,838
2,161,651
9,201,670
(12,308,581)
(8,433,898)
3,874,683
-
8,668,941
8,668,941
-
9,201,670
(3,639,640)
235,043
3,874,683
4,312,757
4,312,757
4,312,757
-
$ 13,514,427
$ 673,117
$ 4,547,800
$ 3,874,683
See accompanying notes to basic financial statements
68 CITY OF NEWPORT BEACH
Budgetary Comparison Statement
Tide and Submerged Land - Harbor Capital
For the Year Ended June 30, 2022
Variance with
Final Budget
Budgeted Amounts
Positive
Original Final
Actual
(Negative)
Revenues:

Investment income
$ 436,141 $ 436,141
$ 416,225
$ (19,916)
Net decrease in fair value of investments
- -
(1,434,907)
(1,434,907)
Property income
3,632,368 3,632,368
5,143,027
1,510,659
Total revenues
4,068,509 4,068,509
4,124,345
55,836
Expenditures:

Capital outlay
-
13,209,374
697,869
12,511,505
Excess (deficiency) of revenues
over expenditures
4,068,509
(9,140,865)
3,426,476
12,567,341
Other financing sources:

Transfers in
4,500,000
4,500,000
4,500,000
-
Net change in fund balance
8,568,509
(4,640,865)
7,926,476
12,567,341
Fund balance, beginning
23,607,996
23,607,996
23,607,996
-
Fund balance, ending
$ 32,176,505
$ 18,967,131
$ 31,534,472
$ 12,567,341
See accompanying notes to basic financial statements
69 Revenues:

Intergovernmental
Expenditures:

General government
Net change in fund balance
Fund balance, beginning
Fund balance, ending

CITY OF NEWPORT BEACH
Budgetary Comparison Statement
American Rescue Plan Act
For the Year Ended June 30, 2022
Variance with
Final Budget
Budgeted Amounts Positive
Original Final Actual (Negative)
$ - $ 122,543 $ 122,543 $ -
- 122,543 122,543 -
See accompanying notes to basic financial statements
70 71

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72 PROPRIETARY FUNDS
Business -type Activities
The Water Fund is a Major Fund used to account for the operations of the City's water utility, a self-supporting activity which is entirely financed though user charges.

The Wastewater Fund is a Major Fund used to account for the operations of the City's wastewater system, a self-supporting activity which is entirely financed through user charges.

Governmental Activities
The Internal Service Funds are used to allocate the cost of providing goods and services by one department to other departments on a cost reimbursement basis. 73 CITY OF NEWPORT BEACH
Proprietary Fund
Statement of Net Position
June 30, 2022
Assets and Deferred Outflows of Resources
Current assets:

Cash and investments
Receivables:

Accounts (net of allowance)
Interest
Inventories
Prepaid items
Total current assets
Noncurrent assets:

Capital assets (note 5):

Land
Intangible right to use land
Structures
Equipment
Intangible right to use equipment
Software
Infrastructure
Work in progress
Less accumulated depreciation/amortization
Total capital assets (net of accumulated
depreciation/amortization)
Total assets
Deferred outflows of resources:

Deferred amount from pension plans
Deferred amount from OPEB
Total deferred outflows of resources
Liabilities and Deferred Inflows of Resources
Current liabilities:

Accounts payable
Accrued payroll
Deposits payable
Due to other funds (note 12)
Workers' compensation - current
General liability - current
Compensated absences - current
Lease liability - current
Total current liabilities
Noncurrent liabilities:

Workers' compensation (note 6)
General liability (note 6)
Compensated absences (note 6)
Lease liability (note 18)
Net pension liability (note 10)
Net OPEB liability
Total noncurrent liabilities
Total liabilities
Deferred inflows of resources:

Deferred amount from pension plans
Deferred amount from OPEB
Total deferred inflows of resources
Net Position
Net investment in capital assets
Unrestricted
Total net position
Adjustment to reflect the consolidation of internal
service fund activities related to enterprise funds
Net position of business -type activities
Enterprise Funds
Governmental
Total Activities
Enterprise Internal Service
$ 28,588,747
$ 3,584,193
$ 32,172,940
$ 69,199,953
6,175,271
949,864
7,125,135
17,239
84,033
10,517
94,550
203,523
-
-
-
381,385
-
-
-
2,564,722
34,848,051
4,544,574
39,392,625
72,366,822
2,219,450
-
2,219,450
-
1,529,906
1,529,906
-
688,396
-
688,396
39,581
301,193
35,988
337,181
45,532,018
-
-
-
348,272
-
-
-
3,603,419
149,314,763
48,826,594
198,141,357
-
3,730,587
-
3,730,587
639,243
(55,556,180)
(20,627,138)
(76,183,318)
(32,373,921)
102,228,115
28,235,444
130,463,559
17,788,612
137,076,166
32,780,018
169,856,184
90,155,434
1,196,537
459,515
1,656,052
1,089,239
462,712
177,696
640,408
421,220
1,659,249
637,211
2,296,460
1,510,459
4,026,652
109,850
4,136,502
1,967,665
163,392
48,342
211,734
299,053
35,253
-
35,253
-
-
-
-
353,001
2,930,962
2,865,644
-
-
4,385,927
16,723
16,723
66,721
4,242,020
158,192
4,400,212
12,868,973
-
-
-
12,823,626
5,830,236
-
-
8,391,481
1,495,851
1,495,851
196,714
3,441,952
1,321,815
4,763,767
3,133,283
619,464
237,894
857,358
563,918
5,557,267
1,559,709
7,116,976
30,939,258
9,799,287
1,717,901
11,517,188
43,808,231
2,293,838
880,903
3,174,741
2,088,128
168,596
64,745
233,341
153,477
2,462,434
945,648
3,408,082
2,241,605
100,009,480
28,235,444
128,244,924
19,430,947
26,464,214
2,518,236
28,982,450
26,185,110
$ 126,473,694
$ 30,753,680
157,227,374
$ 45,616,057
(422,817)
$ 156,804,557
See accompanying notes to basic financial statements
74 CITY OF NEWPORT BEACH
Proprietary Fund
Statement of Revenues,
Expenses and Changes in Net Position
For the Year Ended June 30, 2022
Operating revenues:

Charges for sales and services:

Water sales
Charges for services
Sewer service and connection fees
Employee contributions
Other
Total operating revenues
Operating expenses:

Purchase of water
Salaries and benefits
Depreciation/amortization
Professional services
Maintenance and supplies
System maintenance
Utilities
Fleet parts and supplies
Telecommunication
Hardware
Software
Workers' compensation
Claims and judgments
Compensated absences
OPEB ARC - cash subsidy
Other
Total operating expenses
Operating income (loss)
Nonoperating revenues (expenses):

Investment income
Net decrease in fair value of investments
Gain on sale of capital assets
Interest expense
Total nonoperating revenues (expenses)
Income (loss) before transfers
Transfers out (note 13)
Change in net position
Net position, beginning of year
Net position, end of year
Adjustment to reflect the consolidation of internal
service fund activities related to enterprise funds
Change in net position of business -type activities
Enterprise Funds
Governmental
Total
Activities
Enterprise
Internal Service
Water
Wastewater
Funds
Funds
$ 31,906,955
$
$ 31,906,955
$ -
-
-
-
31,336,461
4,779,466
4,779,466
-
-
-
-
40,451
313,876
45,783
359,659
710,943
32,220,831
4,825,249
37,046,080
32,087,855
12,278,115
-
12,278,115
-
4,410,909
1,245,958
5,656,867
2,657,821
1,782,434
643,813
2,426,247
3,694,580
2,518,358
351,738
2,870,096
411,601
2,473,665
927,042
3,400,707
3,314,595
1,027,412
588,388
1,615,800
-
1,740,902
70,661
1,811,563
-
-
-
-
572,898
216,006
336,181
233,186
4,213,387
5,957,756
-
2,058,475
-
-
-
4,499,498
1,029,714
336,912
1,366,626
20,637
27,261,509
4,164,512
31,426,021
28,186,621
4,959,322
660,737
5,620,059
3,901,234
309,968
35,250
345,218
732,235
(1,062,725)
(127,368)
(1,190,093)
(2,596,623)
290,940
(7,668)
(7,668)
(620)
(760,425)
(92,118)
(852,543)
(1,574,068)
4,198,897
568,619
4,767,516
2,327,166
-
-
-
(1,284,630)
4,198,897
568,619
4,767,516
1,042,536
122,274,797
30,185,061
44,573,521
$ 126,473,694
$ 30,753,680
$ 45,616,057
221,770
$ 4,989,286
See accompanying notes to basic financial statements
75 CITY OF NEWPORT BEACH
Proprietary Fund
Statement of Cash Flows
For the Year Ended June 30, 2022
Enterprise Funds
Governmental
Total
Activities
Enterprise
Internal
Service
Water
Wastewater
Funds
Funds
Cash flows from operating activities:

Cash received from customers or user departments
$ 31,558,243
$ 4,771,968
$ 36,330,211
$
32,534,581
Cash payments to employees for services
(5,579,800)
(1,700,199)
(7,279,999)
(9,723,148)
Cash payments to suppliers for goods and services
(21,820,373)
(1,906,156)
(23,726,529)
(13,760,353)
Cash payments for other operating activities
(715,838)
(291,129)
(1,006,967)
-
Cash received for other operating activities
-
-
-
751,394
Net cash provided by operating activities
3,442,232
874,484
4,316,716
9,802,474
Cash flows from noncapital financing activities:

Cash received from other funds
-
-
-
165
Cash paid to other funds
(1,284,630)
Net cash (used) by noncapital financing activities
(1,284,465)
Cash flows from capital and related financing activities:

Acquisition of capital assets
(5,481,615)
(5,481,615)
(5,024,863)
Lease liabilities and related
(25,000)
(25,000)
(33,041)
Proceeds from sale of capital assets
150,165
150,165
290,940
Net cash provided (used) for capital and related financing activities (5,506,615)
150,165
(5,356,450)
(4,766,964)
Cash flows from investing activities:

Investment (loss)
(745,012)
(94,861)
(839,873)
(1,870,669)
Net cash (used) by investing activities
(745,012)
(94,861)
(839,873)
(1,870,669)
Net increase (decrease) in cash and cash equivalents
(2,809,395)
929,788
(1,879,607)
1,880,376
Cash and cash equivalents, beginning
31,398,142
2,654,405
34,052,547
67,319,577
Cash and cash equivalents, ending
$ 28,588,747
$ 3,584,193
$ 32,172,940
$
69,199,953
Reconciliation to the statement of net position:

Cash and investments reported on statement of net position $ 28,588,747
$ 3,584,193
$ 32,172,940
$
69,199,953
Cash and cash equivalents
$ 28,588,747
$ 3,584,193
$ 32,172,940
$
69,199,953
Reconciliation of operating income to net cash
provided by operating activities:

Operating income
$ 4,959,322
$ 660,737
$ 5,620,059
$
3,901,234
Adjustments to reconcile operating income
to net cash provided by operating activities:

Depreciation
1,782,434
643,813
2,426,247
3,694,580
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable
(453,888)
(7,498)
(461,386)
1,198,120
Decrease in intergovernmental receivables
99,863
99,863
-
Decrease in inventories
-
-
66,070
Decrease in prepaid items
-
1,804,417
Increase (decrease) in accounts payable and accrued payroll (1,757,212)
35,811
(1,721,401)
(471,619)
Increase in deposits payable
5,313
-
5,313
-
Increase in workers' compensation
-
-
1,001,588
Increase in general liability
430,245
(Decrease) in compensated absences
(735,599)
(Decrease) in net pension liability and deferred cash flows (1,070,895)
(411,256)
(1,482,151)
(974,860)
(Decrease) in net OPEB liability and deferred cash flows (122,705)
(47,123)
(169,828)
(111,702)
Total adjustments
(1,517,090)
213,747
(1,303,343)
5,901,240
Net cash provided by operating activities
$ 3,442,232
$ 874,484
$ 4,316,716
$
9,802,474
Noncash investing, capital and financing activities:

Net (decrease) in fair value of investments
$ (1,062,725)
$ (127,368)
$ (1,190,093)
$
(2,596,623)
Obtaining an intangible right to use lease asset
(295,856)
Total of noncash activities
$ (1,062,725)
$ (127,368)
$ (1,19Q093)
$
(2,892,479)
See accompanying notes to basic financial statements
76 77

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78 FIDUCIARY FUNDS
Custodial Funds, a type of Fiduciary Funds, are used to account for assets held by the City as an agent for other government entities, private organizations, or individuals.
79 CITY OF NEWPORT BEACH
Fiduciary Funds
Statement of Fiduciary Net Position
June 30, 2022
Assets
Custodial
Funds
Cash and investments (note 4)
$ 675,435
Restricted cash and investments with fiscal agent (note 4) 2,288,581
Receivable:

Interest
537
Intergovernmental receivable
21,046
Total assets
2,985,599
Liabilities
Due to others
383,691
Total liabilities
383,691
Net Position
Restricted for:

Individuals, organizations, and other governments 2,601,908 Total net position $ 2,601,908
See accompanying notes to basic financial statements
80 CITY OF NEWPORT BEACH
Fiduciary Funds
Statement of Changes in Fiduciary Net Position
For the Year Ended June 30, 2022
Additions
Special assessments
Investment earnings
Other
Total additions
Deductions
Debt service
Administrative
Other
Total deductions
Net increase in fiduciary net position
Net position, beginning of year
Net position, end of year
Custodial
Funds
$ 1,664,084
1,020
214,543
1,879,647
1,276,605
66,942
71,759
1,415,306
464,341
2,137,567
$ 2,601,908
See accompanying notes to basic financial statements
81 This page left blank intentionally.

83 CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2022
(1) Summary of Significant Accounting Policies
The basic financial statements of the City of Newport Beach (the "City") have been prepared in conformity with generally accepted accounting principles ("GAAP") as applicable to government units. The Governmental Accounting Standards Board ("GASB") is the accepted standard -setting body for establishing governmental accounting and financial reporting principles.
a. Reporting Entity
The City of Newport Beach was incorporated on September 1, 1906. The current City Charter was adopted in 1954. Since adoption, the Charter has been amended several times. The most recent Charter amendment was approved by the voters on November 2, 2010. The City operates under a Council -Manager form of government and provides the following services: public safety (police, fire, and marine), highway and streets, cultural and recreation, public improvements, planning and zoning, utilities, and general administrative services.

The financial statements present the financial activity of the City of Newport Beach (the primary government) and its component unit. The component unit discussed below is included in the City's reporting entity because of the significance of its operational or financial relationship with the City. This entity is legally separate from the City. However, the City of Newport Beach's elected officials have continuing full or partial accountability for fiscal matters of the component unit. The financial reporting entity consists of: (1) the City, (2) organizations for which the City is financially accountable, and (3) organizations for which the nature and significance of their relationship with the City are such that exclusion would cause the City's financial statements to be misleading or incomplete.

An organization is fiscally dependent on the primary government if it is unable to adopt its budget, levy taxes, set rates or charges, or issue bonded debt without approval by the primary government. In a blended presentation, a component unit's balances and transactions are reported in a manner similar to the balances and transactions of the City. Component units are presented on a blended basis when the component unit's governing body is substantially the same as the City's or the component unit provides services almost entirely to the City.

Blended Component Unit
The financial statements of the City of Newport Beach include the financial activities of the Newport Beach Public Facilities Corporation (the "Corporation").

The Corporation was formed on March 9, 1992, for the purpose of assisting the City of Newport Beach in the financing of public improvements, including the City's Central Library, Civic Center, and most recently the new Fire Station No. 2. The Corporation is governed by a Board of Directors, which is comprised of the seven City Council Members of the City of Newport Beach. The Corporation's financial 84 CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2022
data and transactions are included in the debt service fund. Separate financial statements are not prepared for the Corporation. The debt service fund is used solely to account for the activities of the Corporation and contains no other City debt financing activities.
b. Basis of Accounting and Measurement Focus
The basic financial statements of the City are composed of the following:
• Government -wide financial statements
• Fund financial statements
• Notes to the financial statements
Government -wide Financial Statements
Government -wide financial statements display information about the reporting government as a whole, except for its fiduciary activities. These statements include separate columns for the governmental and business -type activities of the primary government (including its blended component units). The City of Newport Beach has no discretely presented component units. Eliminations have been made in the Statement of Activities so that certain allocated expenses are recorded only once (by the function to which they were allocated). However, general government expenses have not been allocated as indirect expenses to the various functions of the City.

Government -wide financial statements are presented using the economic resources measurement focus and the accrual basis of accounting. Under the economic resources measurement focus, all (both current and long-term) economic resources and obligations of the reporting government are reported in the government -wide financial statements. Basis of accounting refers to when revenues and expenses are recognized in the accounts and reported in the financial statements. Under the accrual basis of accounting, revenues, expenses, gains, losses, assets, and liabilities resulting from exchange and exchange -like transactions are recognized when the exchange takes place.

Program revenues include charges for services, special assessments, and payments made by parties outside of the reporting government's citizenry if that money is restricted to a particular program. Program revenues are netted with program expenses in the statement of activities to present the net cost of each program.

Amounts paid to acquire capital assets are capitalized as assets in the government -wide financial statements, rather than reported as an expenditure.

Proceeds of long-term debt are recorded as a liability in the government -wide financial statements, rather than as an other financing source. Amounts paid to 85 CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2022
reduce long-term indebtedness of the reporting government are reported as a reduction of the related liability, rather than as an expenditure.

Sometimes the City will fund outlays for a particular purpose from both restricted (e.g., restricted bond or grant proceeds) and unrestricted resources. In order to calculate the amounts to report as restricted — net position and unrestricted — net position in the government -wide and proprietary fund financial statements, a flow assumption must be made about the order in which the resources are considered to be applied. It is the City's practice to consider restricted -net position to have been depleted before unrestricted — net position is applied.

Fund Financial Statements
The underlying accounting system of the City is organized and operated on the basis of separate funds, each of which is considered to be a separate accounting entity. The operations of each fund are accounted for with a separate set of self - balancing accounts that comprise its assets, liabilities, deferred inflows/outflows of resources, fund equity, revenues, and expenditures or expenses, as appropriate.

Governmental resources are allocated to and accounted for in individual funds based upon the purposes for which they are to be spent and the means by which spending activities are controlled.

Fund financial statements for the primary government's governmental, proprietary, and fiduciary funds are presented after the government -wide financial statements.

These statements display information about major funds individually and non - major funds in the aggregate for governmental and enterprise funds. Fiduciary funds are excluded from government -wide financial statements. Fiduciary statements include financial information for fiduciary funds. Fiduciary funds of the City primarily represent assets held by the City in a custodial capacity for other individuals or organizations.

Governmental Funds
In the fund financial statements, governmental funds are presented using the modified -accrual basis of accounting. Their revenues are recognized when they become measurable and available as net current assets. Measurable means that the amounts can be estimated, or otherwise determined. Available means that the amounts were collected during the reporting period or soon enough thereafter to be available to finance the expenditures accrued for the reporting period. The City uses an availability period of 60 days for all revenues.

Property taxes, sales taxes, franchise taxes, gas taxes, motor vehicle license fees, transient occupancy taxes, grants, and interest associated with the current fiscal period are all considered to be subject to accrual and so have been recognized as revenues of the current fiscal period to the extent normally collected within the 86 CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2022
availability period. Other revenue items are considered to be measurable and available when cash is received by the City.

Revenue recognition is subject to the measurability and availability criteria for the governmental funds in the fund financial statements. Exchange transactions are recognized as revenues in the period in which they are earned (i.e., the related goods or services are provided). Locally imposed derived tax revenues are recognized as revenues in the period in which the underlying exchange transaction upon which they are based takes place. Imposed non -exchange transactions are recognized as revenues in the period for which they were imposed. If the period of use is not specified, they are recognized as revenues when an enforceable legal claim to the revenues arises or when they are received, whichever occurs first.

Government -mandated and voluntary non -exchange transactions are recognized as revenues when all applicable eligibility requirements have been met.

In the fund financial statements, governmental funds are presented using the current financial resources measurement focus. This means that only current assets and deferred outflows of resources, and current liabilities and deferred inflows of resources are generally included on their balance sheets. The reported fund balance is considered to be a measure of "available spendable resources".

Governmental fund operating statements present increases (revenues and other financing sources) and decreases (expenditures and other financing uses) in fund balance. Accordingly, they are said to present a summary of sources and uses of "available spendable resources" during a period.

Non -current portions of long-term receivables due to governmental funds are reported on their balance sheets in spite of their spending measurement focus.

Because of their spending measurement focus, expenditure recognition for governmental fund types excludes amounts represented by non -current liabilities.

Since they do not affect "available spendable resources", such long-term amounts are not recognized as governmental fund type expenditures or fund liabilities.

Amounts expended to acquire capital assets are recorded as expenditures in the year that resources were expended, rather than as fund assets. The proceeds of long-term debt are recorded as other financing sources rather than as a fund liability. Amounts paid to reduce long-term indebtedness are reported as fund expenditures.

Permanent Funds, also referred to as Endowment Funds, are governmental funds used to report resources that are legally restricted to the extent that only earnings, and not principal, may be used for purposes that support City programs. The amount of net appreciation on investments that is available to support City programs is $1,857,493. The amount of investment earnings available for expenditure is reported as Restricted Fund Balance in the fund level financial statements. The endowment principal is reported as Nonspendable for Permanent 87 CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2022
Endowments in the Balance Sheet. The State law governing the spending of endowment funds investment earnings is California Probate Code Section 18504.

The authority for spending investment earnings for scholarships resides with the City Manager, and the authority for periodic maintenance dredging in the Newport Bay resides with the City Council.

Proprietary & Fiduciary Funds
The City's enterprise and internal service funds are proprietary funds. In the fund financial statements, proprietary and fiduciary funds are presented using the accrual basis of accounting. Revenues are recognized when they are earned and expenses are recognized when the related goods or services are delivered. In the fund financial statements, proprietary funds are presented using the economic resources measurement focus. This means that all assets, deferred outflows of resources, all liabilities and deferred inflows of resources (whether current or non- current) associated with their activity are included on their balance sheets.

Proprietary fund type operating statements present increases (revenues) and decreases (expenses) in total net position.

Proprietary fund operating revenues, such as charges for services, result from exchange transactions associated with principal activity of the fund. Exchange transactions are those in which each party receives and gives up essentially equal values. Non -operating revenues, such as subsidies, taxes, and investment earnings result from non -exchange transactions or ancillary activities. Amounts paid to acquire capital assets are capitalized as assets in the proprietary fund financial statements, rather than reported as expenditures. Proceeds of long-term debt are recorded as a liability in the proprietary fund financial statements, rather than as other financing sources. Amounts paid to reduce long-term indebtedness of the proprietary funds are reported as reductions of the related liabilities, rather than as expenditures.

When both restricted and unrestricted resources are combined in a proprietary fund, expenses are considered to be paid first from restricted resources, and then from unrestricted resources.

Fiduciary funds are also reported using the economic resources measurement focus and the accrual basis of accounting.

C. Fund Classifications
The City utilizes the following broad categories of funds:

Major Funds — Major funds are those funds which are either material or of particular importance.
88 CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2022
Major Governmental Funds — Governmental funds are generally used to account for tax supported activities. The following governmental funds meet the criteria of a major fund:

General Fund
The General Fund is the general operating fund of the City. It is used to account for all activities, except those required to be accounted for in another fund.

Special Revenue Funds
Tide and Submerged Land — Operating
The Tide and Submerged Land — Operating Fund is a special revenue fund used to account for revenues related to the operation of the City's tidelands, including beaches and marinas, and the related expenditures. Revenue from tideland operations includes, but is not limited to, rents from moorings, piers, and leases, as well as income from parking lots, meters, and the sale of oil.

Tide and Submerged Land — Harbor Capital
The Tide and Submerged Land - Harbor Capital Fund is used to account for incremental increases in revenue from certain property lease, pier, and mooring rentals that exceed Council designated base year revenue amounts, as well as other designated revenues and the related expenditures for capital projects, maintenance, and servicing of loan advances from the General Fund.

American Rescue Plan Act Fund
The American Rescue Plan Act Fund
received through Coronavirus State and
American Rescue Plan Act.

Capital Project Funds
is used to account for federal funding
Local Fiscal Recovery Funds under the
Facilities Financial Planning Reserve Fund
The Facilities Financial Planning Reserve Fund is used to account for the receipt and expenditure of funds for the replacement of facilities. In prior years, this fund was called the Facilities Replacement Fund.

Debt Service Fund
The Debt Service Fund is used to account for debt service transactions related to the Certificates of Participation issued to finance the construction of the City's Civic Center Complex and the construction of Fire Station No. 2. 89 CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2022
Major Proprietary Funds — Proprietary funds are used to report an activity for which a fee is charged to external users to recover the cost of operation.

Water Fund
The Water Fund is an enterprise fund used to account for the activities associated with the transmission and distribution of potable water by the City to its users.

Wastewater Fund
The Wastewater Fund is an enterprise fund used to account for the activities associated with providing sewer services by the City to its users.

Other Governmental Funds — Other Governmental Funds are those funds which do not meet the criteria of a major fund. Other Governmental Funds used by the City fall into the following governmental fund types:

Other Special Revenue Funds — Other Special Revenue Funds are used to account for the proceeds of specific revenue sources which are legally restricted to expenditures for specified purposes.

Other Capital Projects Funds — Other Capital Projects Funds are used to account for resources used for the acquisition and construction of capital facilities by the City, except those financed by Enterprise Funds.

Permanent Funds — Permanent Funds are used to report resources that are legally restricted for the extent that only earnings, not principal, may be used for purposes that support the reporting government's programs.

Internal Service Funds — The Internal Service Funds are used to account for the City's self -insured general liability and workers' compensation, compensated absences, and retiree insurance liabilities; the cost of maintaining and replacing the City's rolling stock fleet, parking equipment, coordinated communications systems equipment, certain fire equipment, and recreation equipment; and the cost of maintaining and replacing the City's information technology systems. City departments are the primary users of these services and are charged a fee on a cost reimbursement basis.

Fiduciary Funds — The Custodial Funds, a type of Fiduciary Fund, are used to account for assets held by the City as an agent for property owners with special assessments, local businesses in business improvements districts, and monies held by the police department in a custodial capacity.
90 CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2022
d. New Accounting Pronouncements
Current Year Standards
In fiscal year 2021-22, the City implemented the following Government Accounting Standards Board (GASB) Statements:
• GASB Statement No. 87 — "Leases", effective for periods beginning after June 15, 2021. This statement changed the calculation and presentation of lease related amounts in the City's financial statements.
• GASB Statement No. 92 — "Omnibus 2020", primarily effective for periods beginning after June 15, 2021. The implementation of this statement did not have a material impact on the financial statements.
• GASB Statement No. 93 —"Replacement of Interbank Offered Rates", effective for periods beginning after June 15, 2021 The implementation of this statement did not have a material impact on the financial statements. • GASB Statement No. 97 — "Certain Component Unit Criteria, and Accounting and Financial Reporting for Internal Revenue Code Section 457 Deferred Compensation Plans — an amendment of GASB Statements No. 14 and No. 84, and a supersession of GASB Statement No. 32", effective for fiscal years beginning after June 15, 2021, except for the requirements of paragraphs 4 and 5. The implementation of this statement did not have a material impact on the financial statements.

Pendina Accountina Standards
GASB has issued the following statements, which may impact the City's financial reporting requirements in the future:
• GASB Statement No. 91 — "Conduit Debt Obligations", effective for periods beginning after December 15, 2021. The primary objective of this statement is to provide a single method of reporting conduit debt obligations by issues and eliminate diversity in practice.
• GASB Statement No. 94 — "Public -Private and Public -Public Partnerships and Availability Payment Arrangements", effective for periods beginning after June 15, 2022. The primary objective of this statement is to improve financial reporting by addressing issues related to public -private and public -public partnership arrangements.

GASB Statement No. 96 — "Subscription -Based Information Technology Arrangements", effective for fiscal years beginning after June 15, 2022. This statement provides guidance on the accounting and financial reporting for a

e.
f.

CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2022
subscription -based information technology arrangements (SBITAs) for governments.

Accounts Receivable
Accounts receivable represent all service and capital project billings other than intergovernmental receivables stated below. As of June 30, 2022, accounts receivable deemed to be uncollectible with an outstanding balance over 120 days past due were written off the City's accounting records to ensure that the income statement and balance sheet are fairly stated at the amount expected to be collected in receivables. Receivables with governmental organizations are generally excluded from the write-off as they are more likely to be received due to the governments' creditworthiness.

Cash and Investments
Cash and Cash Eauivalents
Cash and cash equivalents are defined to be cash on hand, demand deposits and highly liquid investments with a maturity of three months or less from the date of purchase.

InvPstmPnts
Investments are generally stated at fair value which is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

Cash and investments are pooled to maximize investment yields. The net change in fair value and interest earned on the investments is allocated to the respective funds based on each fund's average monthly cash and investments balance.

The City's investment in LAIF is $35,655,882 at June 30, 2022. This investment value is based on information provided by the State Treasurer's Office. The carrying value of the City's position in the fund is materially consistent with the fair value of the fund shares. This pool is under the regulatory oversight of the State Treasurer's Office. The LAIF Board consists of five members as designated by Statute. The Chairman is the State Treasurer, or her designated representative.

Two members qualified by training and experience in the field of investment or finance, and two members who are treasurers, finance or fiscal officers, or business managers employed by any county, city or local district, or municipal corporation of this state, are appointed by the State Treasurer. The term of each appointment is two years, or at the pleasure of the appointing authority. 92 CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2022

9. Intergovernmental Receivables
Intergovernmental receivables represent grant reimbursement requests, capital project billings, and pending transfers of taxes and fees collected by other government agencies. As of June 30, 2022, the balance of these accounts totaled $13,555,871.
h. Inventories and Prepaid Items
Inventories are valued at cost, which approximates market, using the first -in, first - out method. The City follows the consumption method for inventory control. The costs of governmental fund and internal service fund inventories are recorded as expenditures when consumed.

Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items. The City follows the consumption method for prepaid items.
i. Capital Assets
Capital assets are tangible and intangible assets, which include land, structures, equipment, and infrastructure assets, are reported in the applicable governmental or business -type activities columns in the Government -wide Financial Statements.

Tangible capital assets are recorded at cost where historical records are available and at an estimated original cost where no historical records exist. Equipment purchased in excess of $5,000 is capitalized if it has an expected useful life in excess of one year. Buildings, infrastructure, and improvements are capitalized if cost is in excess of $30,000 and the expected useful life is in excess of one year.

The cost of normal maintenance and repairs that do not add to the value of the asset's life are not capitalized. The City chose to value and report on infrastructure assets in their entirety (e.g. prior to 1980).

Major capital outlays for tangible capital assets and improvements are capitalized as projects are constructed. Tangible capital assets acquired through lease obligations are valued at the present value of future lease payments at the date acquired. Contributed tangible capital assets are valued at their estimated acquisition value at the date of contribution. Intangible capitals assets are generally an estimated present value of certain future lease payments for the leases in which the City is the lessee.

Capital assets used in operations are depreciated/amortized using the straight-line method in the government -wide financial statements and in the fund financial statements of the proprietary funds. Tangible capital assets are depreciated over their estimated useful lives. Intangible assets are amortized over the shorter of the estimated useful life of the underlying asset or the period of time included in the estimated present value. Depreciation/amortization is charged as an expense 93 k.

CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2022
against operations and accumulated depreciation/amortization is reported on the respective balance sheet. The ranges of useful life for depreciation purposes for each capital asset class are as follows:

Structures 15-75 years
Equipment 3-15 years
Infrastructure 20-75 years
Claims and Judgments
The City accounts for material claims and judgments and associated legal and administrative costs when it is probable that the liability claim has been incurred and the amount of the loss can be reasonably estimated. The City records the estimated loss liabilities in the Internal Service Fund. Included therein are claims incurred but not reported, which consists of (a) known loss events expected to be presented as claims later, (b) unknown loss events that are expected to become claims, and (c) expected future development on claims already reported. This is based upon historical actual results that have established a reliable pattern supplemented by specific information about current matters. Small dollar claims and judgments are recorded as expenditures when paid.

Property Taxes
The assessment, levy, and collection of property taxes are the responsibility of the County of Orange. The City records property taxes as revenue when received from the County, except at year-end, when property taxes received within 60 days are accrued as revenue. Property taxes are assessed and collected each fiscal year according to the following property tax calendar:

Lien date
Jan 1
Levy date
July 1
Due dates
November 1
15t installment
March 1
2nd installment
Collection dates
December 10
1st installment
April 10
2nd installment
Compensated Absences
It is the City's policy to permit employees to accumulate earned but unused vacation and limited amounts of earned but unused sick leave benefits, which will be paid to employees upon separation from City service. Beginning in fiscal year 1990, the City adopted a general leave plan to replace the traditional vacation and sick leave plan. The City uses a general leave plan that permits a maximum of three years' accrual for every employee, above which the excess either stops 94 CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2022
accruing or is paid out as current compensation. All employees hired prior to January 1,1990, were given the option of remaining in the traditional vacation and sick leave plan or enrolling in the general leave plan. All employees hired on or after January 1,1990, are automatically enrolled in the general leave plan.

Compensated absences are accrued in the Compensated Absence Internal Service Fund when employee services have been rendered and when it becomes probable that the City will compensate the employees for benefits through paid time off or cash payments at termination or retirement. Benefits that have been earned but are not yet available for use because employees have not met certain conditions are accrued to the extent it is probable that the employees will meet the conditions for compensation in the future.

M. Deposits Payable
In the government -wide and fund -level financial statements, deposits payable represents monies collected for developer deposits, demolition deposits, planning deposits and others, for services which have not yet been performed. These unspent portions are reported as liabilities on the financial statements. n. Unearned Revenue
Unearned revenues are those where asset recognition has been met, but the revenue recognition criteria have not been met.
o. Deferred Inflows/Outflows of Resources
In addition to assets, the statement of net position and the governmental funds balance sheet will sometimes report a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net assets that applies to future periods and so will not be recognized as an outflow of resources (expense) until that time.

The City has three items that qualify for reporting in this category. The first item is the deferred outflows related to employer pension and OPEB contributions made after the measurement date. The second item is a deferred outflow related to pensions and OPEB resulting from changes in assumptions. This amount is amortized over a closed period equal to the average of expected remaining service lives of all employees that are provided pensions and OPEB through the plans.

The third item is a deferred outflow related to pensions and OPEB resulting from the difference between expected and actual experience. This amount is amortized over a closed period equal to the average of expected remaining service lives of all employees that are provided pensions and OPEB through the plans.

In addition to liabilities, the statement of net position and the governmental funds balance sheet will sometimes report a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net assets that applies to future periods 95 CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2022
and will not be recognized as an inflow of resources (revenue) until that time. The City has six items that qualify for reporting in this category. The first item is unavailable revenues, which is only reported in the governmental funds balance sheet. The governmental funds report unavailable revenues from two sources:
grants receivable and rent collections. These amounts are deferred and recognized as an inflow of resources in the period that the amounts become available. The second item is a deferred inflow related to pensions resulting from the difference between actual and expected experience. This amount is amortized over a closed period equal to the average of the expected remaining service lives of all employees that are provided pensions through the plans. The third item is a deferred inflow related to pensions resulting from the change in assumptions. This amount is amortized over a closed period equal to the average of expected remaining service lives of all employees that are provided pensions through the plans. The fourth item is a deferred inflow resulting from the net difference in projected and actual earnings on investments of the OPEB plan fiduciary net position. This amount is amortized over five years. The fifth item is the net difference in projected and actual earnings on investments of the pension plan's fiduciary net position. This amount is amortized over five years. The sixth item is a deferred inflow for certain leases for which the City is lessor, and relates to a present value estimate of certain future lease payments. This amount generally is amortized over the same time period associated with the related present value estimate.

P. Fund Balance Classifications
The governmental fund balance is made up of different classifications and the following provides explanations as to the nature and purpose of each classification:

Nonspendable fund balance
That portion of fund balance that typically includes amounts that are either (a) not in a spendable form such as inventories and prepaid items, or (b) legally or contractually required to be maintained intact such as endowments.

Restricted fund balance
The portion of fund balance that reflects constraints placed on the use of resources (other than nonspendable items) that are either (a) externally imposed by creditors, grantors, contributors, or laws or regulations of other governments; or (b) imposed by law through constitutional provisions or enabling legislation.

Committed fund balance
That portion of a fund balance that includes amounts that can only be used for specific purposes pursuant to constraints imposed by formal action by the government's highest level of decision making authority, and remain binding unless removed in the same manner. The City Council has authority to establish or modify a fund balance commitment by legislation (Council action) and can only rescind a fund balance commitment by new legislation requiring the same voting

CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2022
consensus. The City considers a resolution to constitute a formal action of the City Council for the purposes of establishing committed fund balance.

Assigned fund balance
That portion of a fund balance that includes amounts that are constrained by the City's intent to be used for specific purposes and do not meet the criteria to be classified as restricted or committed. Constraints imposed on the use of assigned amounts are more easily removed or modified than those imposed on amounts classified as committed. The City's Reserve Policy gives the City Manager the authority to establish, modify, or rescind a fund balance assignment.

Unassigned fund balance
The residual portion of a fund balance that is not otherwise restricted, committed, or assigned. Positive unassigned fund balance is available to be used for any purpose. Only the general fund may report a positive unassigned fund balance.

Funds, except the general fund, may report negative unassigned fund balance in certain circumstances.

In the governmental fund statements, when expenditures are incurred for purposes for which both restricted and unrestricted (committed, assigned, or unassigned) fund balances are available, the City uses the most restrictive funds first. The City uses the appropriate funds in the following order: restricted, committed, assigned, and finally unassigned amounts.
q. Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of certain assets, deferred outflows of resources, liabilities and deferred inflows of resources, disclosure of contingent assets and liabilities, and the related amounts of revenues and expenditures. Actual results could differ from those estimates.

Management believes that the estimates are reasonable.

Pensions
For purposes of measuring the net pension liability and deferred outflows/inflows of resources related to pensions, and pension expense, information about the fiduciary net position of the City of Newport Beach's California Public Employees' Retirement System (CaIPERS) plans (Plans) and additions to/deductions from the Plans' fiduciary net position have been determined on the same basis as they are reported by CaIPERS. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value. 97 S.
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CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2022
GASB 68 requires that the reported results must pertain to liability and asset information within certain defined timeframes. For this report, the following timeframes are used.

Valuation Date (VD)
Measurement Date (MD)
Measurement Period (MP)
June 30, 2020
June 30, 2021
July 1, 2020 to June 30, 2021
Post -Employment Health Care Benefits (OPEB)
For purposes of measuring the net OPEB liability and deferred outflows/inflows of resources related to OPEB and OPEB expense, information about the fiduciary net position of the City of Newport Beach's California Public Employees' Retirement System (CaIPERS) Health Plan and additions to/deductions from the Plans' fiduciary net position have been determined on the same basis as they are reported by CaIPERS. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value.

GASB 75 requires that the reported results must pertain to liability and asset information within certain defined timeframes. For this report, the following timeframes are used.

Valuation Date (VD) June 30, 2021
Measurement Date (MD) June 30, 2021
Measurement Period (MP) July 1, 2020 to June 30, 2021
Lease Liabilities and Receivables
Lease liabilities and receivables are estimated present values of future lease payments. Estimating present values involves various related estimates, including lease terms and interest rates. The estimated lease term is the time period that the lease is noncancelable, plus extension and termination time periods if based on the lease agreement it is reasonable that the extensions will be exercised and the terminations will not be exercised. When a lease's implicit interest rate is not known, estimates are made of either the City's incremental borrowing rate or the rate the City may charge a lessee. Non -lease components of lease agreements have been treated as separate non -lease agreements when practicable, and are excluded from the City's estimated lease liabilities and receivables. Leases that do not meet the Governmental Accounting Standards Board's definition of a lease liability or receivable (e.g. short-term leases, etc.) also are excluded from the City's estimated lease liabilities and receivables.
98 (2)

CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2022
Reconciliation of Government -wide and Fund Financial Statements a. Explanation of Differences Between Governmental Funds Balance Sheet and the Statement of Net Position
The "total fund balances" of the City's governmental funds $247,967,182 differs from "net position" of governmental activities $2,293,690,994 reported in the statement of net position. This difference primarily results from the long-term economic focus of the statement of net position versus the current financial resources focus of the governmental funds balance sheet.

Capital Related Items
When capital assets (property, plant, and equipment) that are to be used in governmental activities are purchased, constructed or leased, the costs of those assets or leases are reported as expenditures in governmental funds. However, the statement of net position includes those capital assets among the assets of the City as a whole.

Cost of capital assets $2,575,136,666
Accumulated depreciation/amortization (253,570,332)
Total capital assets, net* $2,321,566,334
*Amount excludes net capital assets of $17,788,612 from Internal Service funds
-term Debt Transactions
Long-term liabilities applicable to the City's governmental activities are not due and payable in the current period and accordingly are not reported as fund liabilities.

All liabilities (both current and long-term) are reported in the statement of net position. Balances at June 30, 2022 were:

Certificates of participation — Series 2010B $94,465,000 Certificates of participation — Series 2020A 7,085,000
Bond premium — Series 2020A 1,148,895
CDBG loan 208,000
Lease liability 13,057,605
Total $115, 964, 500
99 CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2022
Accrued Interest
Accrued liabilities in the statement of net position differ from the amount reported in governmental funds due to accrued interest on outstanding debt payable (see Note 6).

Accrued interest added
Investment in Joint Venture
$3,468,116
Investment in joint venture is not a current financial resource and hence reported only in the statement of net position.

Net equity in joint venture $241,967
Unavailable Revenue
Some of the revenue will be collected after year-end, but is not available soon enough to pay for the current period's expenditures, and therefore is reported as unavailable revenue in the governmental funds.

Unavailable revenue $1,188,453
Internal Service Funds
Internal service funds are used by management to charge the costs of certain activities (such as equipment management and self-insurance authorities) to individual funds. The assets (including capital assets) and liabilities of the internal service funds are included in governmental activities in the statement of net position because they primarily serve governmental activities of the City.

Internal Service Funds $45,616,057
Deferred Outflows of Resources, Deferred Inflows of Resources and Net Pension Liability — GASB 68
Pension related debt applicable to the governmental activities are not due and payable in the current period and accordingly are not reported as fund liabilities.

Deferred outflows of resources and deferred inflows of resources related to pension are only reported in the Statement of Net Position as the changes in these amounts effects only the government -wide statements for governmental activities.

Internal service funds amounts are excluded.

Deferred Outflows of Resources $51,252,394
Deferred Inflows of Resources (78,709,554)
Pension Liability (168,348,987)
100

CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2022
Deferred Outflows of Resources, Deferred Inflows of Resources and Net Post - Employment Health Care Benefits Liability — GASB 75
Post -employment health care benefits (OPEB) debt applicable to the governmental activities are not due and payable in the current period and accordingly are not reported as fund liabilities. Deferred outflows of resources and deferred inflows of resources related to OPEB are only reported in the Statement of Net Position as the changes in these amounts effects only the government -wide statements for governmental activities. Internal service funds amounts are excluded.

Deferred Outflows of Resources $11,224,090
Deferred Inflows of Resources (4,084,301)
OPEB Liability (15,212,842)
Internal Balance
Internal balances created by the consolidation of internal service fund activities related to enterprise funds are not reported in the governmental funds.

Internal Balance
Reclassifications and Eliminations
422 817
Interfund balances must generally be eliminated in the government -wide statements, except for net residual amounts due between governmental activities.

Amounts involving fiduciary funds should be reported as external transactions. Any allocations must reduce the expenses of the function from which the expenses are being allocated, so that expenses are reported only once in the function in which they are allocated.
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CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2022
Explanation of Differences Between Government Funds
Balance Sheet and the Statement of Net Position
Total Capital Accumulated
Long-term
Governmental Related Depreciation/
Debt
Funds Items Amortization
Transactions
Assets and Deferred Outflows of Resources
Cash and investments
$ 252,921,436 $ $ $
Receivables:

Accounts (net of allowance)
7,526,107
Advances to other funds
8,176,659
Interest
737,772
Intergovernmental receivables
13,555,871
Lease receivables
244,473,579
Restricted cash and investments with fiscal agent
10,134,793
Interfund balances
6,768,395
Investment in joint venture
-
Inventory
286,074
Prepaid items
1,005,059
Capital assets
- 2,575,136,666
Accumulated depreciation/amortization
(253,570,332)
Total assets $ 545,585,745 $ 2,575,136,666 $ (253,570,332) $ Deferred Outflows of Resources:

Deferred amount from pension plans - 51,252,394
Deferred amount from OPEB 11,224,090
Total deferred outflows of resources 62,476,484
Total assets and deferred outflows of resources
$ 545,585,745
$ 2,575,136,666 $ (253,570,332) $ 62,476,484
Liabilities, Deferred Inflows of Resources
and Fund Balances/Net Position
Liabilities:

Accounts payable
$ 15,096,760
$ $ $
Accrued payroll
5,240,529
Accrued interest payable
-
Deposits payable
2,893,545
Claims payable
-
Workers' compensation payable
Compensated absences payable
-
Lease liability
-
985,629
Unearned revenue
14,958,074
-
Due to other funds
6,415,394
Advance from other funds
8,176,659
-
Long-term liabilities
-
298,540,700
Total liabilities
52,780,961
299,526,329
Deferred Inflows of Resources:

Unavailable revenue 1,188,453 -
Deferred amount from pension plans - 78,709,554
Deferred amount from OPEB - 4,084,301
Deferred amount from leases 243,649,149 -
Total deferred inflows of resources 244,837,602 82,793,855 Fund balances / net position 247,967,182 2,575,136,666 (253,570,332) (319,843,700) Total liabilities, deferred inflows of resources
and fund balances / net position $ 545,585,745 $ 2,575,136,666 $ (253,570,332) $ 62,476,484 102

CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2022
Investment
Interest in Joint Unavailable
Payable Venture Revenue
241,967
$ $ 241,967 $
$ $ 241,967 $
Internal
Reclassifications
Service
and
Statement of
Funds
Eliminations
Net Position
$ 69,199,953
$
$ 322,121,389
17,239
7,543,346
-
(8,176,659)
-
203,523
941,295
-
13,555,871
244,473,579
10,134,793
(6,345,578)
422,817
-
241,967
381,385
667,459
2,564,722
3,569,781
50,162,533
2,625,299,199
(32,373,921)
(285,944,253)
$ 90,155,434
$ (14,522,237)
$ 2,943,027,243
1,089,239
52,341,633
421,220
11,645,310
1,510,459
63,986,943
$ 91,665,893
$ (14,522,237)
$ 3,007,014,186
$ $ $ $ 1,967,665 $
$ 17,064,425
299,053
5,539,582
3,468,116 -
3,468,116
- -
2,893,545
2,865,644
2,865,644
2,930,962
2,930,962
4,385,927
4,385,927
66,721
1,052,350
-
14,958,074
353,001
(6,768,395)
-
-
(8,176,659)
-
- 30,939,258
329,479,958
3,468,116 43,808,231
(14,945,054)
384,638,583
- (1,188,453) -
-
2,088,128
80,797,682
153,477
4,237,778
-
243, 649,149
(1,188,453) 2,241,605
328,684,609
(3,468,116) 241,967 1,188,453 45,616,057
422,817
2,293,690,994
$ - $ 241,967 $ - $ 91,665,893 $ (14,522,237) $ 3,007,014,186 103

CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2022
b. Explanation of Differences Between Enterprise Funds and Government -wide Statement of Net Position
The net position of the City's Enterprise Funds of $157,227,374 differs from the net position of the business -type activities of $156,804,557 as reported in the government -wide statement of net position. The difference of $422,817 results from consolidating internal service fund activities related to the enterprise funds.

Explanation of Differences Between Enterprise Funds
and Government -wide Statement of Net Position
Total Internal Government -wide
Enterprise Service Statement of
Funds Funds Net Position
Assets and Deferred Outflows of Resources
Cash and investments
Receivables:

Accounts (net of allowance)
Interest
Interfund balances
Capital assets, net
Total assets
Deferred outflows of resources:

Deferred amount from pension plans
Deferred amount from OPEB
Total deferred outflows of resources
Total assets and deferred outflows of resources
Liabilities and Deferred Inflows of Resources
Liabilities:

Accounts payable
Accrued payroll
Deposits payable
Lease liability
Net pension liability
Net OPEB liability
Total liabilities
Deferred inflows of resources:

Deferred amount from pension plans
Deferred amount from OPEB
Total deferred inflows of resources
Total liabilities and deferred inflows of resources
Net Position
Net investment in capital assets
Unrestricted
Total net position
$ 32,172, 940
$ $ 32,172, 940
7,125,135
7,125,135
94,550
94,550
-
(422,817) (422,817)
130,463,559
130,463,559
169,856,184
(422,817) 169,433,367
1,656,052
1,656,052
$ 172,152,644 $ (422,817) $ 171,729,827
$ 4,136, 502
$
$
4,136, 502
211,734
211,734
35,253
35,253
1,512,574
1,512,574
4,763,767
4,763,767
857,358
857,358
11,517,188
11,517,188
3,174,741
3,174,741
233,341
233,341
3,408,082
3,408,082
$ 14,925,270
$
$
14,925,270
$ 128, 244, 924
$
$
128, 244, 924
28,982,450
(422,817)
28,559,633
$ 157, 227, 374
$ (422, 817)
$
156, 804, 557
104

CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2022
Explanation of Differences Between Governmental Fund Operating Statements and the Statement of Activities
The "net change in fund balances" for governmental funds $25,664,972 differs from the "change in net position" for governmental activities $71,230,927 reported in the statement of activities. The differences arise primarily from the long-term economic focus of the statement of activities versus the current financial resources focus of the governmental funds. The effect of the difference is illustrated below.

Capital Related Items
When capital assets that are to be used in governmental activities (excluding those reported in Internal Service Funds) are purchased or constructed, the resources expended for those assets are reported as expenditures in governmental funds.

However, in the statement of activities, the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense. In governmental funds, significant maintenance projects are reclassified as functional expenses in the statement of net assets. Also, contributed capital is not recorded in governmental funds; therefore, it is added to the statement of net activities.

Capital outlays $ 22,587,504
Transfers out of W IP (6,934,281)
Capital outlays, net 15,653,223
Governmental funds - asset deletions (2,861,140)
Net change in capital related items 12,792,083
Depreciation/amortization expense (14,506,394)
Deletions in governmental funds accumulated
depreciation/amortization 1,035,963
Net change in accumulated depreciation/amortization (13,470,431) Total $ (678,348)
105

CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2022
Long -Term Debt Transactions
Payment of debt service is reported as an expenditure in governmental funds and has the effect of reducing fund balance because current financial resources have been used. Issuance of debt is reported as an other financing source in governmental funds and increases fund balance. For the City as a whole, however, the principal payments reduce the liabilities, and proceeds from long-term debt increase liabilities in the statement of net position.

Certificates of participation — Series 2010B $3,165,000 CDBG loan 195,000
Certificates of participation — Series 2020A 775,000
Amortization of bond premium — Series 2020A 142,131
Amortization of principal on leases 1,003,250
Total debt proceeds $5,280,381
Accrued Interest
Interest accrued on outstanding debt payable is not recorded as an expenditure in governmental funds and has been added to the statement of activities.

Net change in accrued interest
Investment in Joint Venture
122 176
The City's investment in a joint venture creates an explicit, measurable equity interest reported only in the statement of activities.

Net change in investment in joint venture (14 895
Unavailable Revenue
Some of the revenue will be collected after year-end, but is not available soon enough to pay for current -period expenditures. This amount is reported as unavailable revenue in the governmental funds.

Net change in unavailable revenue
106

CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2022
Pension Expense
Pension expense reported in the governmental funds includes the annual required contribution. In the statement of activities, pension expense includes the change in the net pension liability and related change in the pension amounts for deferred outflows of resources and deferred inflows of resources.

Pension expense $37,868,065
Post -Employment Health Care Benefits Expense
Post -employment health care benefits (OPEB) expense reported in the governmental funds includes the annual required contribution. In the statement of activities, OPEB expense includes the change in the net OPEB liability and related change in the OPEB amounts for deferred outflows of resources and deferred inflows of resources.

OPEB expense
Internal Service Funds
$2,890,389
Internal service funds are used by management to charge the costs of certain activities, such as equipment management and self-insurance activities, to individual funds. The adjustments for internal service funds "close" those funds by reimbursing or charging additional amounts to participating departments in individual funds for costs over or under charged for those activities.

Net change in internal service funds $1,042,536
Reclassification and Eliminations
Interfund balances must generally be eliminated in the government -wide financial statements, except for net residual amounts due between governmental and business -type activities. Any allocations must reduce the expenses of the function from which the expenses are being allocated, so that expenses are reported only once — in the function in which they are allocated. Amounts involving fiduciary funds should be reported as external transactions. Reclassifications and eliminations are used by management to consolidate internal service funds into the statement of activities.

Net change in reclassifications and
eliminations to consolidate
internal service funds (221 770
107

CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2022
Explanation of Differences Between Government Funds
Operating Statement
and the Statement of Activities
Total
Capital
Accumulated
Long-term
Governmental
Related
Depreciation/
Debt
Funds
Items
Amortization
Transactions
Revenues:

Taxes and assessments
$ 211,259,402
$
$
$
Intergovernmental
19, 683, 307
Licenses and permits
6,995,700
Charges for services
22,897,475
Fines and forfeitures
4,191,518
Investment income
2,756,712
Net decrease in fair value of investments
(8,900,762)
Property income
33,770,750
Share of joint venture net gain
-
Donations
1,805,249
Special assessments
8,086,594
Gain on sale of capital assets
-
Other
1,441,813
Total revenues
303,987,758
Expenditures:

Current:

General government
17,397,786
3,506,270
(5,105,901)
Public safety
127,590,486
796,783
(23,037,453)
Public works
54,293,534
2,671,908
6,870,139
(5,686,028)
Community development
13,021,562
-
6,188
(3,187,026)
Community services
26,421,141
189,232
2,291,051
(3,742,046)
Capital outlay
28,603,393
(15,653,223)
-
Debt service:

Principal retirement
5,138,250
(5,138,250)
Interest and fiscal charges
7,141,264
Amortization of debt premium
-
-
(142,131)
Total expenses
279,607,416
(12,792,083)
13,470,431
(46,038,835)
Other financing sources (uses):

Transfers in
76,061,564
-
Transfers out
(74,776,934)
Total other financing sources
(uses)
1,284,630
-
-
Net change in fund balances /
net position
25,664,972
12,792,083
(13,470,431)
46,038,835
Fund balances / net position, beginning of year
222,302,210
2,562,344,583
(240,099,901)
(365,882,535)
Fund balances / net position, end of year
$ 247,967,182
$ 2,575,136,666
$ (253,570,332)
$ (319,843,700)
108

CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2022
Investment
Internal
Reclassifications
Interest
in Joint
Unavailable
Service
and
Statement of
Payable
Venture
Revenue
Funds
Eliminations
Activities
$
$
$ -
$
$
$ 211,259,402
(722, 579)
18, 960, 728
6,995,700
(221,770)
22,675,705
4,191,518
732,235
3,488,947
(2,596,623)
(11,497,385)
33, 770, 750
(14,895)
(14,895)
1,805,249
-
8,086,594
290,940
290,940
-
1,441,813
(14,895)
(722,579)
(1,573,448)
(221,770)
301,455,066
(909,237)
4,485,261
19,374,179
(1,289,492)
707,142
104,767,466
(699,343)
7,581,505
65,031,715
(352,486)
176,262
9,664,500
(650,676)
-
24,508,702
(12,950,170)
-
(122,176)
620
7,019,708
-
(142,131)
(122,176)
(3,900,614)
230, 224,139
(76,061,564)
-
(1,284,630)
76,061,564
-
(1,284,630)
-
-
122,176
(14,895)
(722,579)
1,042,536
(221,770)
71,230,927
(3,590,292)
256,862
1,911,032
44,573,521
644,587
2,222,460,067
$ (3,468,116)
$ 241,967
$ 1,188,453
$ 45,616,057
$ 422,817
$ 2,293,690,994
109

CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2022
d. Explanation of Differences Between Enterprise Funds Operating Statement and the Statement of Activities
The change in net position for the City's enterprise funds of $4,767,516 differs from the change in net position of the business -type activities of $4,989,286 as reported in the government -wide statement of activities. The difference of ($221,770), results from consolidating internal service fund activities related to the enterprise funds.

Explanation of Differences Between Enterprise Funds
Operating Statement and the Statement of Activities
Operating revenues:

Charges for sales and services:

Water sales
Sewer service and connection fees
Other
Total operating revenues
Operating expenses:

Purchase of water
Salaries and wages
Depreciation
Professional services
Maintenance and supplies
System maintenance
Utilities
Other
Total operating expenses
Total Internal
Enterprise Service
Funds Fund
$ 31,906,955 $ 4,779,466 359,659 -
37, 046, 080 -
12, 278,115 -
5,656,867 -
2,426,247 -
2,870,096 -
3,400,707 (221,770)
1,615,800 -
1,811,563 1,366,626 -
31,426,021 (221,770)
Operating income
5,620,059
221,770
Nonoperating revenues (expenses):

Investment income
345,218
-
Net decrease in fair value of investments
(1,190,093)
-
Interest expense
(7,668)
Total nonoperating revenues (expenses)
(852,543)
-
Change in net position
4,767,516
221,770
Net position, beginning of year
152,459,858
(644,587)
Net position, end of year $
157,227,374 $
(422,817)
Business -type activities
Statement of
Activities
$ 31,906,955
4,779,466
359,659
37,046,080
12, 278,115
5,656,867
2,426,247
2,870,096
3,178, 937
1,615,800
1,811,563
1,366,626
31,204,251
5,841,829
345,218
(1,190, 093)
(7,668)
(852,543)
4,989,286
151, 815, 271
$ 156,804,557

CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2022
(3) Budgetary Control and Compliance
The City adheres to the following general procedures in establishing the budgetary data reflected in the financial statements:
• During May, the City Manager submits to the City Council a proposed operating budget for the fiscal year commencing the following July 1. The operating budget includes proposed expenditures and the means of financing them. Public hearings are conducted at City Council meetings to obtain citizen comments. Prior to July 1, the budget is legally adopted through passage of an appropriation resolution. • Budgets are adopted on an annual basis consistent with generally accepted accounting principles for General and Special Revenue Funds. • The City of Newport Beach does not present budget information on Capital Projects Funds since the City approves project -length budgets. These project - length budgets authorize total expenditures over the duration of a construction project rather than through year -by -year budgeting.
• The City of Newport Beach does not present budget information on Debt Service and Permanent Funds since the City is not required to and does not adopt an annual budget for these funds.
• The budget is formally integrated into the accounting system and employed as a management control device during the year.
• The legal level of budgetary control is at the fund level. The City Manager is authorized to transfer budgeted amounts between departments within any fund; however, any revisions which alter the total appropriations of any fund must be approved by the City Council.
• At fiscal year-end, budget appropriations lapse. Budget appropriations for incomplete capital projects are re -budgeted in the following fiscal year by City Council action and are included in the revisions noted above. Projects that are not started during the budget year are re-evaluated in the following year. • Encumbrances represent commitments related to unperformed contracts for goods and services. The City utilizes an encumbrance system as a management control technique to assist in controlling expenditures. Under this system, encumbrance accounting for the expenditure of funds is recorded in order to indicate outstanding commitments and is employed in the governmental fund types. Encumbrances outstanding at year-end are reported as committed or restricted fund balances since they do not constitute expenditures or liabilities.

Encumbrances and their related budgets are honored in the subsequent year to fulfill these commitments and are presented in the original adopted budget.

(4)

CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2022
Expenditures exceeded appropriations in the following governmental funds:

Appropriations Expenditures Variance
Supplemental Law Enforcement $ 200,000 $ 211,400 $(11,400) The following funds reported deficit fund balances:

Other Governmental Funds
Community Development Block Grant $ 119,371
Internal Service Funds
Compensated Absences $ 7,703,828
The Community Development Block Grant is a reimbursement grant and the City will receive reimbursement in the following fiscal year which will eliminate the deficit fund balance.

For the Compensated Absences Fund, the City's Reserve Policy sets the maximum cash reserve at 50% of the long-term compensated absences liability and targets a lesser amount that is the median between that amount and a three-year average of the actual payments made for the cash -out of accumulated leave balances. Accordingly, this deficit fund balance is intentional and in compliance with the City Council -approved Reserve Policy.

Cash and Investments
Cash and investments as of June 30, 2022, are classified in the accompanying financial statements as follows:

Statement of net position:

Cash and investments
Restricted cash and investments
with fiscal agent
Fiduciary funds:

Cash and investments
Restricted cash and investments
with fiscal agent
Total cash and investments
$ 354,294,329
10,134,793
675,435
2,288,581
$ 367,393,138
112

CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2022
Cash and investments as of June 30, 2022, consist of the following:

Cash on hand $ 25,981
Deposits with financial institutions 20,499,123
Cash and receivables in investment accounts 5,227
Investments 346,862,807
Total cash and investments
$ 367,393,138
Investments Authorized by the California Government Code and the Entity's Investment Policy
The table below identifies the investment types that are authorized for the City by the California Government Code (or the City's investment policy, where more restrictive). The table also identifies certain provisions of the California Government Code (or the City's investment policy, whichever is more restrictive) that address interest rate risk and concentration of credit risk. This table does not address investments of debt proceeds held by bond trustees that are governed by the provisions of debt agreements of the City, rather than the general provisions of the California Government Code or the City's investment policy.

Maximum
Maximum
Maximum
Percentage
Investment
Authorized Investment Type
Maturity*
of Portfolio*
in One Issuer*
Local Agency Bonds
5 years
30%
5%
U.S. Treasury Obligations
5 years
No Limit
No Limit
U.S. Agency Securities
5 years
No Limit
30%
FHLMC
5 years
No Limit
30%
Banker's Acceptances
180 days
40%
5%
Commercial Paper
270 days
40%
5%
Negotiable Certificates of Deposit
2 years
30%
5%
Repurchase Agreements
30 days
No Limit
5%
Reverse Repurchase Agreements
30 days
10%
5%
Medium -Term Notes
5 years
30%
5%
Mutual Funds
N/A
20%
10%
Money Market Mutual Funds
N/A
20%
20%
Mortgage Pass -Through Securities
5 years
20%
5%
LA County Pooled Investment Funds
N/A
5%
5%
Local Agency Investment Fund (LAIF)
N/A
$75 million
$75 million
Supranationals
5 years
20%
10%
* Excluding amounts held by bond trustee that are not subject to California Government Code restrictions 113

CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2022
Investments Authorized by Debt Agreements
Investments of debt proceeds held by bond trustees (i.e., fiscal agents) are governed by provisions of the debt agreements, rather than the general provisions of the California Government Code or the City's investment policy. The table below identifies the investment types that are authorized for investments held by bond trustees. The table also identifies certain provisions of these debt agreements that address interest rate risk, credit risk, and concentration of credit risk.

Maximum
Maximum
Percentage
Investment
Authorized Investment Type
Maximum Maturity
Allowed
in One Issuer
U.S. Treasury Obligations
6 months — No Limit
No Limit
No Limit
U.S. Agency Securities
6 months — No Limit
No Limit
No Limit
Banker's Acceptances
6 months — 1 Year
0% - No Limit
No Limit
Commercial Paper
180 days — 6
No Limit
10%
months
Money Market Mutual Funds
N/A
No Limit
No Limit
Investment Agreements
6 months — No Limit
No Limit
No Limit
Certificates of Deposit
6 months — No Limit
No Limit
No Limit
Demand Deposits
6 months — No Limit
No Limit
No Limit
Time Deposits
6 months — No Limit
No Limit
No Limit
Local Agency Bonds
6 months — No Limit
No Limit
No Limit
Forward Delivery Agreement
6 months — No Limit
0% - No Limit
No Limit
Forward Purchase Agreement
6 months — No Limit
0% - No Limit
No Limit
Repurchase Agreements
6 months — No Limit
No Limit
No Limit
Local Agency Investment Fund (LAIF)
N/A
No Limit
No Limit
Municipal Obligations
6 months — No Limit
No Limit
No Limit
County Pooled Investment Funds
N/A
0% - No Limit
No Limit
Disclosures Relating to Interest Rate Risk
Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of an investment. Generally, the longer the maturity of an investment, the greater the sensitivity of its fair value to changes in market interest rates. One of the ways that the City manages its exposure to interest rate risk is by purchasing a combination of shorter term and longer term investments and by timing cash flows from maturities so that a portion of the portfolio is maturing or coming close to maturity over time as necessary to provide the cash flow and liquidity needed for operations.

Information about the sensitivity of the fair values of the City's investments (including investments held by bond trustees) to market interest rate fluctuations is provided by the following table that shows the distribution of the City's investments by maturity:
114

CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2022
Investment Maturities (In Years)
Fair Value
Less than 1
1 to 3
3 to 5 More than 5
Total
Investment Type
Money Market Funds
$ 126,550
$ 126,550
$ - $
- $ -
$ 126,550
U.S. Treasuries
97,471,436
26,613,680
53,803,382
17,054,374 -
97,471,436
Certificates of Deposit
2,194,979
2,194,979
-
-
2,194,979
Commercial Papers
8,678,259
8,678,259
-
- -
8,678,259
U.S. Agency Securities
77,867,279
25,846,495
48,802,989
3,217,795 -
77,867,279
FHLMC
9,247,227
-
7,250,090
1,997,137 -
9,247,227
Asset Backed Securities
25,817,455
839,981
12,512,939
12,464,536 -
25,817,455
Corporate Bonds
61,621,183
10,444,480
45,905,731
5,270,971 -
61,621,183
Municipal Bonds
1,963,320
-
1,963,320
- -
1,963,320
LAIF
35,655,882
35,655,882
-
- -
35,655,882
Yankee Bonds
1,882,880
-
1,882,880
- -
1,882,880
Supranationals
11,918,174
-
11,918,174
- -
11,918,174
Investments with Fiscal Agent:

Money Market Funds
10,662,614
10,662,614
-
- -
10,662,614
U.S. Treasury Bills
64,975
64,975
-
- -
64,975
U.S. Treasuries
64,594
64,594
-
- -
64,594
LAIF
1,626,000
1,626,000
-
-
1,626,000
$ 346,862,807
$ 122,818,489
$ 184,039,505 $
40,004,813 $ -
$ 346,862,807
Assuming callable securities (if any) will not be called.

Some of the City's investments may have call features where the investments' principal may be paid down before its maturity. Such investments include asset backed securities, FHLMC's (a.k.a. Freddie K's), investments with make whole call provisions, and investments with call dates.

The City's asset backed securities pay monthly coupons, at which time principal may be paid down. As of June 30, 2022, the City held asset backed securities of $25,817,455.

The City's FHLMC's (a.k.a. Freddie K's) may pay down principal prior to maturity. As of June 30, 2022, the City held FHLMC's of $9,247,227.

Investments with make whole call provisions generally may be called any time, but the terms of the call price generally mitigate the financial impact of a call. As of June 30, 2022, the City held corporate, municipal, and Yankee bonds with make whole call provisions as summarized below:

Maturity
Value
January 2023
$ 996,920
May 2023
995,300
January 2024
1,502,675
February 2024
1,963,320
May 2024
4,504,665
July 2024
1,882,880
February 2025
956,260
$ 12,802,020
115

CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2022
Investments with call dates may be called anytime on or after the call date. As of June 30, 2022, the City held corporate bonds with call dates as summarized below:

Maturity
Value
Call Date
August 2023
$ 989,930
June 2023
February 2024
1,996,880
January 2024
April 2025
1,459,645
March 2025
February 2026
850,347
February 2025
May 2027
2,014,900
April 2027
$ 7,311,702
Investments may have both a make whole call provision and a regular call date. As of June 30, 2022, the City held corporate bonds with both a make whole call provision and a regular call date as summarized below:

Maturity
Value
Call Date
December 2022
$ 1,000,880
October 2022
March 2023
999,950
January 2023
June 2023
2,006,120
May 2023
February 2024
1,304,186
December 2023
March 2024
2,140,376
February 2024
March 2024
1,560,430
March 2023
May 2024
1,081,212
July 2022
June 2024
965,440
June 2023
July 2024
445,142
July 2022
September 2024
969,840
August 2024
March 2025
1,965,640
March 2024
March 2025
2,895,420
February 2025
April 2025
2,898,480
March 2025
June 2025
935,280
June 2024
August 2025
2,405,724
May 2025
$ 23,574,120
About $6.3 million of the investments with either a regular call date or both a make whole call provision and a regular call date, also have interest rate reset dates. If these securities are not called by their call date, then these securities will revert to floating rate securities tied to a benchmark index. Prior to their call date, these securities pay a fixed rate of interest.

Investments with Fair Values Hiahly Sensitive to Interest Rate Fluctuations As of June 30, 2022, the City did not have any investments (including investments held by fiscal agent) whose fair values were highly sensitive to interest rate fluctuations.

Disclosures Relatina to Credit Risk
Generally, credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder of the investment. This is measured by the assignment of a rating by a 116

CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2022
nationally recognized statistical rating organization. Presented in the following schedule is the minimum rating (where applicable) required by the California Government Code, the City's investment policy, or debt agreements, and the actual rating by Standard & Poor's as of the June 30, 2022 for each investment type.

Minimum
Investment Type
Fair Value
Legal Rating
AAA AAAm
Money Market Funds
$ 126,550
AAAm
$ - $ 126,550
U.S. Treasuries
97,471,436
None
- -
Certificates of Deposit
2,194,979
A-1
- -
Commercial Papers
8,678,259
A-1
- -
U.S. Agency Securities
77,867,279
None
- -
FHLMC
9,247,227
None
1,603,581 -
Asset Backed Securities
25,817,455
AAA
16,971,766 -
Corporate Bonds
61,621,183
A-
- -
Municipal Bonds
1,963,320
A-
- -
LAIF
35,655,882
N/A
- -
Yankee Bonds
1,882,880
A-
- -
Supranationals
11,918,174
AA-
11,918,174 -
Investments with Fiscal Agent:

Money Market Funds
10,662,614
AAm
- 10,662,614
U.S. Treasury Bills
64,975
None
- -
U.S. Treasuries
64,594
None
- -
LAIF
1,626,000
N/A
- -
AA, AA AA- A-1+ A+ A A-1 A- Not Rated
97,471,436 - - - - - - - -
- - - 2,194,979 - - - - -
- - - 3,686,806 - - 4,991,453 - -
77,867,279 - - - - - - - -
7,643,646 - - - - - - - -
- - - - - - - - 8,845,689
6,995,017 4,752,201 4,954,631 - 14,926,986 21,804,087 - 8,188,261 - 1,963,320 - - - - - - - -
- - - - - - - - 35,655,882
- - - - - - - 1,882,880 -
64,594
64,975
1,626,000
$ 346,862,807 $ 30,493,521 $ 10,789,164 $192,005,292 $ 4,752,201 $ 4,954,631 $ 5,946,760 $ 14,926,986 $ 21,804,087 $ 4,991,453 $ 10,071,141 $ 46,127,571 Concentration of Credit Risk
The investment policy of the City and the California Government Code limit the amount that can be invested in any one issuer as previously discussed. Investments in any one issuer (excluding U.S. Treasury Bills, U.S. Treasuries, mutual funds, and pooled investments) that represent 5% or more of total City's investments are as follows:

Issuer Investment Type Reported Amount
FFCB U.S. agency securities $26,338,213
FHLMC U.S. agency securities $15,943,501
FHLMC FHLMC $9,247,227
FHLB U.S. agency securities $19,326,065
Custodial Credit Risk
Custodial credit risk for deposits is the risk that, in the event of the failure of a depository financial institution, a government will not be able to recover its deposits or will not be able to recover collateral securities that are in the possession of an outside party. The custodial credit risk for investments is the risk that, in the event of the failure of the counterparty (e.g., broker -dealer) to a transaction, a government will not be able to recover the value of its investment or collateral securities that are in the possession of another party. The California Government Code and the City's investment policy do not contain legal or policy requirements that would limit the exposure to custodial credit risk for deposits or investments, other than the following provision for deposits: The California Government Code requires that a financial institution secure deposits made by state or local governmental units by pledging securities in an undivided collateral pool held by a depository regulated under state law (unless so waived by the governmental unit). The fair value of the pledged securities in the collateral pool must equal at least 110% of the total 117

CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2022
amount deposited by the public agencies. California law also allows financial institutions to secure City deposits by pledging first trust deed mortgage notes having a value of 150% of the secured public deposits. As of June 30, 2022, none of the City's deposits with financial institutions in excess of federal depository amounts were held in uncol lateral ized accounts.

For investments identified herein as restricted cash with fiscal agent, the fiscal agent selects the investment under the terms of the applicable trust agreement, acquires the investment, and holds the investment on behalf of the reporting government.

Investment in State Investment Pool
The City is a voluntary participant in the Local Agency Investment Fund (LAIF) that is regulated by the California Government Code under the oversight of the Treasurer of the State of California. The fair value of the City's investment in this pool is reported in the accompanying financial statements at amounts based upon the City's pro-rata share of the fair value provided by LAIF for the entire LAIF portfolio (in relation to the amortized cost of that portfolio). The balance available for withdrawal is based on the accounting records maintained by LAIF, which are recorded on an amortized cost basis. LAIF is not rated.

Limitations and restrictions apply to the City's investment in LAIF. Up to 15 transactions with LAIF are permitted each month. Balances in LAIF may not exceed $75 million, with the exception of bond accounts. LAIF requests one day prior notice for withdrawals of $10 million or more.

Fair Value Measurements
The City categorizes its fair value measurement within the fair value hierarchy established by generally accepted accounting principles. The hierarchy is based on the valuation inputs used to measure the fair value of the assets. Level 1 inputs are quoted prices in active markets for identical assets. Level 2 inputs are significant other observable inputs.

Level 3 inputs are significant unobservable inputs.

Most of the City's investments are in Level 2 of the fair value hierarchy. Examples of Level 2 valuation inputs include:
a)Quoted prices for similar assets or liabilities in active markets b)Quoted prices for identical or similar assets or liabilities in markets that are not active c) Inputs other than quoted prices that are observable for the asset or liability d)Inputs that are derived principally from or corroborated by observable market data by correlation or other means.
118

CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2022
Following are the City's recurring fair value measurements as of June 30, 2022:

Quoted Prices
Investments
Quoted Prices for Similar
Significant
That Are Not
in Active Markets Assets in Active
Unobservable
Subject to Fair
for Identical Markets
Inputs
Fair Value
Value Hierarchy
Assets (Level 1) (Level 2)
(Level 3)
Money Market Funds
$ 126,550
$ 126,550
$ - $ -
$ -
U.S. Treasuries
97,471,436
-
- 97,471,436
-
Certificates of Deposit
2,194,979
-
- 2,194,979
-
Commercial Papers
8,678,259
-
- 8,678,259
-
U.S. Agency Securities
-
-
- -
-
FHLMC
9,247,227
-
- 9,247,227
-
Asset Backed Securities
25,817,455
-
- 25,817,455
-
Corporate Bonds
61,621,183
-
- 61,621,183
-
Municipal Bonds
1,963,320
-
- 1,963,320
-
LAIF
35,655,882
35,655,882
- -
-
Yankee Bonds
1,882,880
-
- 1,882,880
-
Supranationals
11,918,174
-
- 11,918,174
-
Investments with Fiscal Agent:

Money Market Funds
10,662,614
10,662,614
- -
-
U.S. Treasury Bills
64,975
-
- 64,975
-
U.S. Treasuries
64,594
-
- 64,594
-
LAIF
1,626,000
1,626,000
- -
-
$ 268,995,528
$ 48,071,046
$ - $ 220,924,482
$ -

CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2022
(5) Capital Assets
Capital asset activity for the year ended June 30, 2022, was as follows:

Governmental Activities:

Non-depreciable/non-amortizable:

Land and rights of way
Work in progress
Depreciable/amortizable:

Structures
Intangible right to use structures*
Equipment
Intangible right to use equipment
Infrastructure
Less accumulated
depreciation/amortization for:

Structures
Intangible right to use structures
Equipment
Intangible right to use equipment
Infrastructure
Net Depreciable/amortizable
Net Capital Assets
Beginning
Balance,
Balance
As Restated
Additions
Deletions
June 30, 2022
$ 1, 897, 520, 485
$ 2,445,807
$ -
$ 1, 899, 966, 292
11, 375, 009
8,394,805
(6,934,281)
12, 835, 533
1,908,895,494
10,840,612
(6,934,281)
1,912,801,825
240,472,509
2,362,140
(189,232)
242,645,417
14, 060, 855
-
-
14, 060, 855
55,178, 954
5,176, 448
(1,365,259)
58, 990,143
-
348,272
-
348,272
389, 702, 092
9,422,503
(2,671,908)
396, 452, 687
699,414,410
17,309,363
(4,226,399)
712,497,374
(54,395,192)
(5,194,743)
141,601
(59,448,334)
-
(1,040,019)
-
(1,040,019)
(36,750,833)
(4,345,477)
1,123,506
(39,972,804)
-
(38,584)
-
(38,584)
(178,756,724)
(7,582,151)
894,363
(185,444,512)
(269,902,749)
(18,200,974)
2,159,470
(285,944,253)
429, 511, 661
(891, 611)
(2,066,929)
426, 553,121
$ 2,338,407,155
$ 9,949,001
$ (9,001,210)
$ 2,339,354,946
*The beginning balance amount for intangible right to use structures includes a prior period adjustment of $14,060,855 from implementing GASB 87, w hich requires a capital asset to be reported for certain leases w here the City is lessee based on a present value estimate of certain lease payments. Please see Note (18) for additional details.

Governmental Activities capital assets net of accumulated depreciation/amortization at June 30, 2022 are comprised of the following:

General Capital Assets, net $ 2,321,566,334
Internal Service Fund Capital Assets, net 17,788,612
$ 2,339,354,946
120

CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2022
Business -type Activities:

Beginning
Balance,
Balance
As Restated
Additions
Deletions
June 30, 2022
Non-depreciable/non-amortizable:

Land and rights of way $ 2,219,450
$ - $
-
$ 2,219,450
Work in progress 414,590
3,687,587
(371,590)
3,730,587
2,634,040
3,687,587
(371,590)
5,950,037
Depreciable/amortizable:

Intangible right to use land and
rights of way* 1,529,906
-
-
1,529,906
Structures 688,396
-
-
688,396
Equipment 337,181
-
-
337,181
Infrastructure 196,184,679
2,190,233
(233,555)
198,141,357
198,740,162
2,190,233
(233,555)
200,696,840
Less accumulated
depreciation/amortization for:

Intangible right to use land and
rights of way -
(20,513)
-
(20,513)
Structures (279,498)
(15,357)
-
(294,855)
Equipment (183,000)
(27,838)
-
(210,838)
Infrastructure (73,353,348)
(2,362,539)
58,775
(75,657,112)
(73,815,846)
(2,426,247)
58,775
(76,183,318)
Net Depreciable/amortizable 124,924,316
(236,014)
(174,780)
124,513,522
Net Capital Assets $ 127,558,356
$ 3,451,573 $
(546,370)
$ 130,463,559
* The beginning balance amount for intangible right to use land and rights of way includes a prior period adjustment of $1,529,906
from
implementing GASB 87, w hich requires a capital asset to be reported for certain leases where the City is lessee based on a present value
estimate of certain lease payments. Please see Note (18) for additional details.

Depreciation/amortization expense was
charged in the
following functions in the
Statement of Activities:

Governmental
Business -type
Activities*
Activities
General government
$ 6,229,285
$ -
Public safety
1,577,037
-
Public works
171,553
-
Community development
508,964
-
Community service
9,714,135
-
Water
-
1,782,434
Wastewater
-
643,813
$ 18, 200, 974
$ 2,426,247
*Internal Service Fund depreciation/amortization of $3,694,580 is allocated to governmental functions above.
121

CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2022
(6) Long -Term Liabilities
Changes in Long -Term Liabilities
The long-term liabilities for the year ended June 30, 2022, are as follows:

Governmental activities:

Other debt:

Certificates of participation
payable - Series 2010B
Certificates of participation
payable - Series 2020A
Bond premium - Series 2020A
Direct borrowing:

CDBG loan
Other long-term liabilities:

Workers' compensation
payable
Claims and judgments payable
Compensated absences
Amounts
Beginning
Ending
Due Within
Balance Additions
Deletions
Balance
One Year
$ 97,630,000 $ -
$ (3,165,000)
$ 94,465,000
$ 3,275,000
7,860,000 -
(775,000)
7,085,000
665,000
1,291,026 -
(142,131)
1,148,895
-
403,000 -
(195,000)
208,000
208,000
14,753,000
4,213,387
(3,211,799)
15,754,588
2,930,962
8,265,635
5,957,756
(5,527,511)
8,695,880
2,865,644
13,513,007
2,058,475
(2,794,074)
12,777,408
4,385,927
Total governmental activities $143,715,668 $12,229,618 $ (15,810,515) $140,134,771 $ 14,330,533 Internal service funds predominantly serve the governmental funds. Accordingly, long- term liabilities for them are included as part of the above totals for governmental activities.

Also, liabilities for workers' compensation, claims and judgments, compensated absences, and net OPEB obligation are typically liquidated from the internal service funds through resources collected from individual funds.

Governmental Activities
• 2010 Certificates of Participation
In Fiscal Year 2010-11, the City issued $20,085,000 of Series 2010A (Tax Exempt) and $106,575,000 of Series 2010B (Federally Taxable Direct Pay Build America Bonds) Certificates of Participation. The 2010A Certificates were issued to prepay the $3,990,000 principal outstanding on the 1998 Library Certificates of Participation.

Accordingly, the 1998 Library Certificates have been defeased and are no longer outstanding. The remaining proceeds from the Series 2010A Certificates were used to finance the acquisition, improvement and equipping of the Civic Center Project. The 122

CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2022
Series 2010B Certificates were issued to provide additional financing for the Civic Center Project. The proceeds of the Certificates also were applied to pay certain costs of issuance incurred in connection with the Certificates.

The lease payments made by the City are held by a trustee who makes semi-annual payments on the Certificates of Participation. The lease payments began January 1, 2011, and are in amounts sufficient to cover the payment of principal and interest of the Certificates. Interest on the Certificates is payable semiannually on January 1 and July 1 of each year. The 2010A Certificates have been defeased and are no longer outstanding. The 2010B Certificates interest rates range from 4.45% to 7.17%. The City has designated the Series 2010B Certificates as "Build America Bonds" (BABs) under the provisions of the American Recovery and Reinvestment Act of 2009. Thus, the City receives refundable credits from the United States Treasury on the interest paid on the 2010B Certificates. As of June 30, 2022, the City has received $27,321,950 of BABs Subsidy from the United States Treasury and expects to receive subsidy equal to about 33% on future interest payable on the 2010B Certificates.

Principal payments are payable annually on July 1 of each year. The remaining principal payments for the Series 2010B Certificates, which are payable through July 1, 2040, range from $3,275,000 to $7,245,000. The total outstanding balance at June 30, 2022 amounted to $94,465,000. The use of the following assets has been pledged as security for the outstanding balance: the Central Library and the Civic Center.

The annual amortization requirements of the outstanding Series 2010B Certificates of Participation are as follows:

Year Ending
June 30
Principal
2023
$ 3,275,000
2024
3,390,000
2025
3,510,000
2026
3,675,000
2027
3,850,000
2028-2032
22,050,000
2033-2037
27,615,000
2038-2041
27,100, 000
$ 94,465,000
• 2020 Certificates of Participation
Interest Total
$ 6,556,869
6,365,978
6,142, 971
5,889,360
5,623,515
23,671,645
$ 9,831,869
9,755,978
9,652,971
9,564,360
9,473,515
45,721,645
14,840,806 42,455,806
3,995,444 31,095,444
$ 73,086,588 $ 167,551,588
In Fiscal Year 2020-21, the City issued $7,860,000 of Series 2020A Certificates of Participation. The 2020A Certificates were issued to finance the acquisition, improvement, and equipping of Fire Station No. 2. The proceeds of the Certificates also were applied to pay certain costs of issuance incurred in connection with the Certificates.
123

CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2022
The lease payments made by the City are held by a trustee who makes semi-annual payments on the Certificates of Participation. The lease payments began June 15, 2021, and are in amounts sufficient to cover the payment of principal and interest of the Certificates. Interest on the Certificates is payable semiannually on January 1st and July 1st of each year. The 2020A Certificates' interest rate is 4.00%. Principal payments are payable annually on July 1st of each year. The remaining principal payments of the Series 2020A Certificates, which are payable through July 1, 2030, range from $665,000 to $915,000. The total outstanding balance at June 30, 2022 amounted to $7,085,000. The use of the following assets has been pledged as security for the outstanding balance: Fire Station 5 and Fire Station 7.

The annual amortization requirements of the outstanding Series 2020A Certificates of Participation are as follows:

Year Ending
June 30
Principal
2023
$ 665,000
2024
695,000
2025
725,000
2026
755,000
2027
785,000
Interest Total
270,100 $
242,900
214,500
184,900
154,100
2028-2031 3,460,000 283,400
$ 7,085,000 $ 1,349,900
• CDBG Loan
935,100
937,900
939,500
939,900
939,100
3,743,400
$ 8,434,900
In fiscal year 2003, the City received $2,400,000 in Section 108 loan proceeds to assist with the funding for the Balboa Village Improvement Program. The loan is collateralized by future Community Development Block Grant allocations. The original loan was refinanced in fiscal year 2015 lowering the average interest rate from 6.5% to 1.5%. The future final principal payment is $208,000 through June 30, 2023. The outstanding balance at June 30, 2022, amounted to $208,000.

The annual amortization requirements for the CDBG Loan are as follows:

Year Ending
June 30 Principal
2023 $ 208,000
• Claims and Judgments
Interest Total
$ 2,548 $210,548
The City retains the risk of loss for general liability and workers' compensation claims as described in Note (8). These amounts represent estimates of amounts to be paid for reported general liability and workers' compensation claims including incurred-but- 124

(7)
(8)

CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2022
not -reported claims based upon past experience, modified for current trends and information. While the ultimate amount of losses incurred through June 30, 2022, is dependent on future developments based upon information from the City's attorney, the City's claims administrators, and others involved with the administration of the programs, City management believes the accrual is adequate to cover such losses. The estimated liability at June 30, 2022, for general liability amounted to $8,695,880 and for workers' compensation was $15,754,588. • Compensated Absences
The City's policies relating to compensated absences are described in Note (1). This liability at June 30, 2022, is $12,777,408. Compensated absences are liquidated from the Compensated Absences internal service fund.
• Unused Credit
The City has a letter of credit in the amount of $317,922.

Limited Obligation Bonds
Special Assessment Districts Bonds
The City has issued certain Assessment District and Community Facilities District Bonds.

Although the City collects and disburses funds for these districts, the City has no obligation or duty to pay any delinquency out of any available funds of the City. Neither the faith and credit nor the taxing power of the City is pledged to the payment of the bonds, and therefore the bonded indebtedness is not shown in the financial statements of the City.

The City holds reserve funds on behalf of bondholders, and the assets are recorded in the Special Assessment District Custodialy Fund. Bonds outstanding at June 30, 2022, for each district under the Bond Acts of 1911 and 1915 are as follows:

Bonds Outstanding
Assessment District Original Issue June 30, 2022
Reassessment District 2012
Assessment District No. 117
Assessment District No. 116
Assessment District No. 116B
Assessment District No. 111
Assessment District No. 113
$13,583,436
$1,902,868
$ 2,955,000
$2,510,000
$ 1,575,000
$1,445,000
$ 665,000
$ 610,000
$ 2,412,000
$2,317,000
$ 4,565,000
$4,565,000
Risk Management — General Liability and Workers' Compensation The City is exposed to various risks of loss related to torts, theft of, damage to, and destruction of assets, errors and omissions, injuries to employees, and natural disasters. 125

CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2022
The City carries commercial insurance with independent third parties for loss risks associated with real and personal property, and automotive liability. The City purchases fidelity bonds for employees in key positions. Settled claims from these risks have not exceeded commercial insurance coverage for the past three years.

The City utilizes Public Risk Innovation, Solutions, and Management (PRISM), formerly called California State Association of Counties — Excess Insurance Authority (CSAC-EIA), a joint powers authority, to provide excess insurance for the general liability and workers' compensation programs. PRISM provides coverage under the terms of a joint -powers agreement with the City as follows:

Type of Coverage Self -Insured Retention (SIR) Coverage Limits General Liability $500,000 $25,000,000
Workers' Compensation $500,000 Statutory
PRISM was established for the purpose of creating a risk management pool for all California public entities. PRISM is governed by a Board of Directors consisting of representatives of its member public entities.

The Insurance Reserve fund was established to account for costs associated with general liability and workers' compensation. The Insurance Reserve fund is accounted for as an internal service fund where assets are set aside for risk management, administration, claim settlements and benefit distribution. A premium is charged to each fund that accounts for part-time or full-time employees. The total charge allocated to each of the funds is calculated using trends in actual experience after considering unexpected and unusual claims.

Fund liabilities are reported when it is probable that a loss has occurred and the amount of the loss can be reasonably estimated. Liabilities include an amount for claims that have been incurred but not reported (IBNR). Claims liabilities are calculated considering the effects of inflation, recent claim settlement trends including frequency and amounts of payouts and other economic and social factors. The total liability claims payable was $24,450,468 at June 30, 2022, which represents the discounted present value of all outstanding claims. The claims are discounted using an interest rate of 3%.

Unpaid claims, beginning of fiscal year
Incurred claims (including IBNR)
Claim payments
Unpaid claims, end of fiscal year
General Liability
June 30, 2021 June 30, 2022
$ 7,960,948 $ 8,265,635
5,604,723 5,957,756
(5,300,036) (5,527,511)
$ 8,265,635 $ 8,695,880
Workers' Compensation
June 30, 2021 June 30, 2022
$ 15,521,000 $ 14,753,000
1,917,334 4,213,387
(2,685,334) (3,211,799)
$ 14,753,000 $ 15,754,588
126

CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2022
(9) Deferred Compensation Plan
The City offers its employees a deferred compensation plan created in accordance with Internal Revenue Code Section 457. The plan, available to all City employees, permits them to set aside a portion of their salary and defer taxation on the contributions and any investment earnings until future years.

Section 457 plan assets were placed in trust for the exclusive benefit of all employees and their beneficiaries. Therefore, all employee assets held in Section 457 plans are not the property of the City and are not subject to the claims of the City's general creditors. The assets under the plan, which are not included in the accompanying financial statements, totaled $129,345,376 at June 30, 2022.
(10) Pension Plans
a. General Information about the Pension Plans
Plan Descriptions — All qualified permanent and probationary employees are eligible to participate in the City of Newport Beach's separate Safety (police and fire) and Miscellaneous (all other) Employee Pension Plans, agent multiple -employer defined benefit pension plans administered by the California Public Employees' Retirement System (CaIPERS), which acts as a common investment and administrative agent for its participating member employers. Benefit provisions under the Plans are established by State statute and Local Government resolution. CalPERS issues publicly available reports that include a full description of the pension plans regarding benefit provisions, assumptions and membership information that can be found on the CalPERS website.

Benefits Provided— CalPERS provides service retirement and disability benefits, annual cost of living adjustments and death benefits to plan members, who must be public employees and beneficiaries. Benefits are based on years of credited service, equal to one year of full-time employment. Members with five years of total service are eligible to retire at age 50 to 62 with statutorily reduced benefits. PEPRA miscellaneous members become eligible for service retirement upon attainment of age 52 with at least 5 years of service. All members are eligible for non -duty disability benefits after 5 years of service.

The death benefit is one of the following: the Basic Death Benefit, the 1959 Survivor Benefit, the Optional Settlement 2W Death Benefit, or the 1957 Survivor Benefit. Safety members can receive a special death benefit if the member dies while actively employed and the death is job -related. Fire members may receive the alternate death benefit in lieu of the Basic Death Benefit or the 1957 Survivor Benefit if the member dies while actively employed and has at least 20 years of total CalPERS service. The cost of living adjustments for each plan are applied as specified by the Public Employees' Retirement Law.
127

CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2022
The Plans' provisions and benefits in effect for the measurement period ended June 30, 2021 are summarized as follows:

Hire date
Benefit formula
Benefit vesting schedule
Benefit payments
Retirement age
Monthly benefits, as a % of eligible compensation
Required employee contribution rates
Required employer contribution rates
Hire date
Benefit formula
Benefit vesting schedule
Benefit payments
Retirement age
Monthly benefits, as a % of eligible compensation
Required employee contribution rates
Required employer contribution rates
Prior to
November 24,2012

2.5%@55
5 years service
monthly for life
50 - 55

2.0% to 2.5%

12.35%- 13.0%

31.07% - 31.72%
Prior to
Miscellaneous
On or after
November 24,2012

2.0%@60
5 years service
monthly for life
50 - 63

1.092% to 2.418%

12.35% - 13.0%

27.65% - 28.30%
On or after
On or after
January 1, 2013

2.0%@62
5 years service
monthly for life
52 - 67

1.0% to 2.5%

12.35% - 13.0%

27.15% - 27.80%
On or after
November 24,2012
November 24,2012
January 1, 2013

3.0%@50

2.0%@50; 3.0%@55

2.7%@57
5 years service
5 years service
5 years service
monthly for life
monthly for life
monthly for life
50 - 55
50 - 55
50 - 57

3.0%

2.0% - 2.7%; 2.4% - 3.0%

2.0% to 2.7%

12.0% - 14.6%

66.55% - 68.15%

69.05% - 70.65%
Employees Covered — At the measurement date of June 30, 2021, the following employees were covered by the benefit terms for each Plan:

Inactive employees or beneficiaries
currently receiving benefits
Inactive employees entitled to but
not yet receiving benefits
Active employees
Total
Miscellaneous Safety
719 458
617 90
537 279
1,873 827
Contributions — Section 20814(c) of the California Public Employees' Retirement Law requires that the employer contribution rates for all public employers are determined on an annual basis by the actuary and shall be effective on the July 1 following notice of a change in the rate. The total plan contributions are determined through CaIPERS' annual actuarial valuation process. The actuarially determined rate is the estimated amount necessary to finance the costs of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability. The City is required to 128

CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2022
contribute the difference between the actuarially determined rate and the contribution rate of employees. City contribution rates may change if plan contracts are amended.

Payments made by the employer to satisfy contribution requirements that are identified by the pension plan terms as plan member contributions requirements are classified as plan member contributions.
b. Net Pension Liability
The City's net pension liability for each Plan is measured as the total pension liability, less the pension plan's fiduciary net position. The net pension liability of each of the Plans is measured as of June 30, 2021, using an annual actuarial valuation as of June 30, 2020 rolled forward to June 30, 2021 using standard update procedures. The General Fund, Tidelands Funds, Water Fund, and Wastewater Fund have typically been used in prior years to liquidate the net pension liability. A summary of principal assumptions and methods used to determine the net pension liability is shown below.

Actuarial Assumptions — The total pension liabilities in the June 30, 2020 actuarial valuations were determined using the following actuarial assumptions:

Valuation Date
Measurement Date
Actuarial Cost Method
Actuarial Assumptions:

Discount Rate
Inflation
Payroll growth
Projected salary Increase
Investment Rate of Return
Mortality Rate Table (2)
Post Retirement Benefit Increase
Miscellaneous Safety
June 30, 2020 June 30, 2020
June 30, 2021 June 30, 2021
Entry -Age Normal Cost Method

7.15% 7.15%

2.50% 2.50%

2.75% 2.75%
Varies by Entry Age and Service

7.00% (1 ) 7.00% (1
Derived using CaIPERS' Membership
Data for all Funds
The lessor of contract COLA or 2.50%
until Purchasing Power Protection
Allowance Floor on Purchasing Power
applies, 2.5% thereafter
(1) Net of pension plan investment and administrative expenses, including inflation. (2) The mortality table mas developed based on CalPERS'specific data. The table includes 15 years of mortality improvements using Society of Actuaries Scale 90% of scale MP 2016. For more details on this table, please refer to the December 2017 experience study report (based on Ca1PERS demographic data from 1997 to 2015) that can be found on the CaIPERS mbsite.
129

CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2022
All other actuarial assumptions used in the June 30, 2020 valuation were based on the results of an actuarial experience study for the period from 1997 to 2015, including updates to salary increase, mortality and retirement rates. The Experience Study report can be obtained at the CalPERS website under Forms and Publications.

Discount Rate — The discount rate used to measure the total pension liability was 7.15%.

The projection of cash flows used to determine the discount rate assumed that contributions from plan members will be made at the current member contribution rates and that contributions from employers will be made at statutorily required rates, actuarially determined. Based on those assumptions, the Plan's fiduciary net position was projected to be available to make all projected future benefit payments of current plan members.

Therefore, the long-term expected rate of return on plan investments was applied to all periods of projected benefit payments to determine the total pension liability.

Long-term Expected Rate of Return — The long-term expected rate of return on pension plan investments was determined using a building-block method in which expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class.

In determining the long-term expected rate of return, CalPERS took into account both short-term and long-term market return expectations as well as the expected pension fund cash flows. Using historical returns of all the funds' asset classes, expected compound (geometric) returns were calculated over the short-term (first 10 years) and the long-term (11+ years) using a building-block approach. Using the expected nominal returns for both short-term and long-term, the present value of benefits was calculated for each fund. The expected rate of return was set by calculating the rounded single equivalent expected return that arrived at the same present value for cash flows as the one calculated using both short-term and long-term returns. The expected rate of return was then set equal to the single equivalent rate calculated above and adjusted to account for assumed administrative expenses.

The expected real rates of return by asset class are as follows Assumed
asset
Real return
Real Return
Asset class ��
allocation
Years 1-10 (2)
Years 11+(s)
Global equity

50.00%

4.80%

5.98%
Fixed income

28.00%

1.00%

2.62%
Inflation assets
-

0.77%

1.81%
Private equity

8.00%

6.30%

7.23%
Real assets

13.00%

3.75%

4.93%
Liquidity

1.00%
-
-0.92%
i'l In the CaIPERS'ACFR, Fixed Income is included in Global Debt Securities; Liquidity is included in Short-term Investments; Inflation Assets are included in both Global Equity Securities and Global Debt Securities.
(2) An expected inflation of 2.0% used for this period. (3) An expected inflation of 2.92% used for this period. 130

CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2022
Subsequent Events
On July 12, 2021, CalPERS reported a preliminary 21.3% net return on investments for fiscal year 2020-21. Based on the thresholds specified in CalPERS Funding Risk Mitigation policy, the excess return of 14.3% prescribes a reduction in investment volatility that corresponds to a reduction in the discount rate used for funding purposes of 0.20%, from 7.00% to 6.80%. Since CalPERS was in the final stages of the four-year Asset Liability Management (ALM) cycle, the board elected to defer any changes to the asset allocation until the ALM process concluded, and the board could make its final decision on the asset allocation in November 2021. The 21.3% investment return is reflected in the net pension liability calculation as of the June 30, 2021 measurement date, resulting in a significant decrease in the City's pension liability as of June 30, 2022. In addition, CalPERS reported a negative 7.5% net return on investments for fiscal year 2021-22, which will be reflected in the GASB 68 accounting valuation reports for the June 30, 2022 measurement date, so it is not reflected in the net pension liability calculation as of June 30, 2022.

On November 17, 2021, the board adopted a new strategic asset allocation. The new asset allocation along with the new capital market assumptions, economic assumptions and administrative expense assumption support a discount rate of 6.90% (net of investment expense but without a reduction for administrative expense) for financial reporting purposes. This includes a reduction in the price inflation assumption from 2.50% to 2.30% as recommended in the November 2021 CalPERS Experience Study and Review of Actuarial Assumptions. This study also recommended modifications to retirement rates, termination rates, mortality rates and rates of salary increases that were adopted by the board. These new assumptions will be reflected in the GASB 68 accounting valuation reports for the June 30, 2022, measurement date. 131

CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2022
c. Changes in the Net Pension Liability
The changes in the Net Pension Liability for each Plan for the measurement period follow:

Miscellaneous Plan:

Balance at June 30, 2020
Changes in the year:

Service cost
Interest on the total pension liability
Changes in benefit terms
Changes of assumptions
Differences between expected and
actual experience
Net Plan to Plan Resource Movement
Contribution — employer
Contribution — employee
Net investment income
Benefit payments, including refunds of
employee contributions
Administrative Expense
Other Miscellaneous Income/(Expense)
Net changes
Balance at June 30, 2021
Increase (Decrease)
Total Pension Plan Fiduciary Net Pension
Liability Net Position Liability/(Asset)
$450,976,864 $337,110,215 $ 113,866,649
7,438,050 - 7,438,050
31,805,532 - 31,805,532
1,624,975 - 1,624,975
18,612,457
(18,612,457)
4,057,107
(4,057,107)
76,031,841
(76,031,841)
(22,976,493) (22,976,493) -
- (336,753) 336,753
17,892,064 75,388,159 (57,496,095)
$468,868,928 $412,498,374 $ 56,370,554
132

CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2022
Safety Plan:

Increase (Decrease)
Total Pension
Plan Fiduciary
Net Pension
Liability
Net Position
Liability/(Asset)
Balance at June 30, 2020
$609,831,612
$413,616,550
$ 196,215,062
Changes in the year:

Service cost
9,817,913
-
9,817,913
Interest on the total pension liability
42,760,906
-
42,760,906
Changes in benefit terms
-
-
-
Changes of assumptions
-
-
-
Differences between expected and
actual experience
196,690
-
196,690
Net Plan to Plan Resource Movement
-
-
-
Contribution — employer
-
32,367,091
(32,367,091)
Contribution — employee
-
3,347,740
(3,347,740)
Net investment income
-
93,813,435
(93,813,435)
Benefit payments, including refunds of
employee contributions
(33,765,218)
(33,765,218)
-
Administrative Expense
-
(413,178)
413,178
Other Miscellaneous Income/(Expense)
-
-
-
Net changes
19,010,291
95,349,870
(76,339,579)
Balance at June 30, 2021
$628,841,903
$508,966,420
$ 119,875,483
Sensitivity of the Net Pension Liability to Changes in the Discount Rate — The following presents the net pension liability of the City for each Plan, calculated using the discount rate for each Plan, as well as what the City's net pension liability would be if it were calculated using a discount rate that is 1-percentage point lower or 1-percentage point higher than the current rate:

Miscellaneous Safety
1 % Decrease 6.15% 6.15%
Net Pension Liability $117,539,921 $200,369,905
Current Discount Rate 7.15% 7.15%
Net Pension Liability $56,370,554 $119,875,483
1 % Increase 8.15% 8.15%
Net Pension Liability $5,763,792 $53,146,098
Pension Plan Fiduciary Net Position — Detailed information about each pension plan's fiduciary net position is available in the separately issued CalPERS financial reports. 133

CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2022
d. Pension Expenses and Deferred Outflows/Inflows of Resources Related to Pensions
For the year ended June 30, 2022, the City recognized pension expense of $10,361,740 ($715,516 Miscellaneous Plan and $9,646,224 Safety Plan). At June 30, 2022, the City reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:

Pension contributions subsequent to
measurement date
Differences between expected and
actual experience
Changes in assumptions
Net differences between projected
and actual earnings on plan
investments
Total Miscellaneous Plan
Pension contributions subsequent to
measurement date
Differences between expected and
actual experience
Changes in assumptions
Net differences between projected
and actual earnings on plan
investments
Total Safety Plan
Grand Total
Miscellaneous Plan
Deferred Deferred
Outflows Inflows
of Resources of Resources
$ 18,372,473 $ -
1,223,907 -
- (37,567,303)
$ 19,596,380 $ (37,567,303)
Safety Plan
Deferred Deferred
Outflows Inflows
of Resources of Resources
$ 32,317,538 $ -
2,083,767 -
- (77,621)
- (46,327,499)
$ 34,401,305 $ (46,405,120)
$ 53,997,685 $ (83,972,423)
$50,690,011 reported as deferred outflows of resources related to contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the fiscal year ending June 30, 2023. Other amounts reported as deferred 134

CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2022
outflows of resources and deferred inflows of resources related to pensions will be recognized as pension expense as follows:

Fiscal
Year Ending
Total
June 30
Misc.

Safety
Amount
2023
$ (8,820,828)
$ (10,112,679)
$ (18,933,507)
2024
(8,154,370)
(10,305,390)
(18,459,760)
2025
(8,969,294)
(11,071,865)
(20,041,159)
2026
(10,398,904)
(12,831,419)
(23,230,323)
Thereafter
-
-
-
e. Payable to the Pension Plan
At June 30, 2022, the City had no outstanding amount of contributions to the pension plan required for the year ended June 30, 2022.
f. Plan Description - Defined Contribution Plan
Pursuant to City Council Resolution No. 91-106, the City entered into a defined contribution plan administrated by the private administrator known as Public Agency Retirement System ("PARS") for all of its part-time employees, pursuant to the requirements of Section 11332 of the Social Security Act. The City Council has the authority for establishing and amending the plan's provisions per the Resolution, including establishing and amending contribution requirements. In a defined contribution plan, benefits depend solely on amounts contributed to the plan plus investment earnings. All part-time employees are eligible to participate from the date of employment. Federal legislation requires contributions of at least 7.5% to a retirement plan, and City Council resolved to match the employees' contributions of 3.75%. The City's contributions for each employee (and interest earned by the accounts) are fully vested immediately.

For the year ended June 30, 2022, the City's covered payroll for employees participating in the plan was $3,567,206. Employees made contributions of $133,940 (3.75% of current covered payroll), which was matched by the employer in the same amount. Assets of the plan totaled $2,316,963 at June 30, 2022.
(11) Post -Employment Health Care Benefits (OPEB)
The following description of the City of Newport Beach Retiree Health Savings ("RHS") Plan provides only general information. Participants should refer to the Plan agreement for a more complete description of the Plan's provisions. 135

CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2022
Plan Description
In January 2006, the City and employee associations agreed to major changes in the Post - Employment Health Care Plan. All employees hired after January 1, 2006, and certain employees hired prior to this date, as well as employees who elected to fully convert to a defined contribution formula (hereafter fully converted employees), participate in a program that requires mandatory employee and employer contributions. However, once these contributions have been made to the employee's account, the City has no further funding obligation to the Plan on their behalf, except for the Public Employees' Medical and Hospital Care Act ("PEMHCA") minimum, which is the responsibility of the City. These employees and eligible retirees participate in a Retiree Health Savings ("RHS") Plan sponsored by the City, the single employer of the plan. Plan assets are held in trust and managed by MissionSquare Retirement (Trustee), under IRS Revenue Ruling 2002-41 (June 26, 2002) and IRS Notice 2002-45 (June 26, 2002).

Certain employees hired prior to January 1, 2006, had the option to retain a hybrid of the former defined benefit plan, or to fully convert to the new Plan. Employees electing to retain a hybrid of the former defined benefit formula participate in a program requiring mandatory defined contributions by employees and the City, as well as a defined benefit consisting of an ongoing contribution from the City to the participant's RHS account each month after retirement. Additionally, these employees are eligible to receive health care benefits under the City's group health care plans. In order to receive these benefits, these employees are required to pay the City $100 per month up until their retirement to offset the unfunded portion of post -employment health care benefits existing at the inception of the plan.

For fully converted employees, the City made a one-time contribution into their individual RHS account of $100 per month for every month the employee contributed to the previous defined benefit plan up to a maximum of 15 years. For employees who elected to retain a hybrid plan, the City made a one-time contribution into their individual RHS account of $75 per month for every month the employee contributed to the previous defined plan up to a maximum of 15 years. In order to receive these contributions, the employee must retire from the City. At June 30, 2022, the liability for the conversion part of the RHS Plan was $1,138,350. This amount is not included in the Net OPEB Liability, but is included in the compensated absences liability. See Note (6).

Employees who retired prior to January 1, 2006, continue to receive an ongoing defined benefit consisting of a contribution made by the City to the participant's RHS account each month. The defined benefit portion of the plan is closed to new participants.

The City has elected to participate in the California Employers' Retiree Benefit Trust ("CERBT") Fund to prefund its OPEB liability. CERBT is managed by CalPERS and invests in global equity, global debt securities, inflation assets, commodities, and REITs.

By placing funds in trust to fund future City contributions before those future contributions are due, the City earns investment income that will help pay those future contributions and thereby reduce the City's long-term OPEB budgetary requirements. 136

CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2022
Employees Covered
As of the measurement date June 30, 2021, the following current and former employees were covered by the benefit terms under the plan:

Inactive employees, spouses, or beneficiaries currently receiving benefits 450 Inactive employees or beneficiaries entitled to but not receiving benefits 327 Active employees 821
Total 1,598
Contributions
Contribution requirements are established by City policy and may be amended by the City Council. The annual contribution is based on the actuarially determined contribution. For the year ended June 30, 2022, the City's cash contributions were $4,499,498 to the trust in premium payments and $987,469 for the estimated implicit subsidy, resulting in a total payment of $5,486,967.

Net OPEB Liability
The City's net OPEB liability was measured as of June 30, 2021, and the total OPEB liability used to calculate the net OPEB liability was determined by an actuarial valuation dated June 30, 2021. The General Fund, Tidelands Funds, Water Fund, and Wastewater Fund have typically been used in prior years to liquidate the net OPEB liability. A summary of the principal assumptions and methods used to determine the total OPEB liability is shown below.

Actuarial Assumptions
The total OPEB liability as of June 30, 2021 actuarial valuation was determined using the following actuarial assumptions and applied to all periods included in the measurement, unless otherwise specified:

Valuation Date
Measurement Date
Actuarial Cost Method
Actuarial Assumptions:

Discount Rate
Inflation
Projected Salary Increase
Expected long term investment rate of return
Healthcare Cost Trend Rates
Post Retirement Turnover
Mortality
June 30, 2021
June 30, 2021
Entry -Age Normal Cost Method

6.50%

2.75%

3.00% per annum, in aggregate

6.50%

6.00% HMO/6.00% PPO
Derived from CalPERS pension plan
From Society of Actuaries Pub-2010 Public
Retirement Plans Mortality Tables Report
137

CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2022
The actuarial assumptions used in the June 30, 2021, valuation were based on a standard set of assumptions the actuary has used for similar valuations, modified as appropriate for the City.

The long-term expected rate of return on OPEB plan investment is assumed to be 6.50%.

This was determined using a building-block method in which expected future real rates of return (expected returns, net of OPEB plan investment expense and inflation) are developed for each major asset class. These expected future real rates of return are then combined to produce the long-term expected rate of return by weighting them based on the target asset allocation percentage and adding in expected inflation (2.75%).The asset class percentages are taken from the current composition of the CERBT Fund, and the expected yields by asset class were not available to the actuary:

Long -Term
Target
Expected Real
Asset Class
Allocation
Rate of Return
CERBT
Global Equities

59.00%
N/A
Fixed Income

25.00%
N/A
TIPS

5.00%
N/A
REITs

8.00%
N/A
Commodities

3.00%
N/A
Total
100.00%

6.50%
Discount Rate
The discount rate used to measure the total OPEB liability is 6.50% per annum. This is the expected long-term rate of return on City assets using investment strategy 1 within CERBT. The projection of cash flows used to determine the discount rate assumed that the City contribution will be made at rates equal to the actuarially determined contribution rates. Based on those assumptions, the OPEB plan's fiduciary net position is projected to cover all future OPEB payments. Therefore, the discount rate was set equal to the long- term expected rate of return.
138

CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2022
Changes in the Net OPEB Liability
The changes in the net OPEB liability are as follows:

Balance at June 30, 2020
Changes in the year:

Service cost
Interest on the total OPEB liability
Changes of benefit terms
Changes of assumptions
Differences between expected and
actual experience
Contributions - employer
Contributions - employees
Net investment income
Benefit payments, including refunds of
employee contributions
Administrative expenses
Other expense
Net changes
Balance at June 30, 2021
Change of Assumptions
Increase (Decrease
Total OPEB
Plan Fiduciary
Net OPEB
Liability
Net Position
Liability
(a)
(b)
(a) - (b)
$ 46,093,712
$ 25,796,272
$ 20,297,440
529,600
2,909,400
(302,512)
6,159,865
(3,786,232)
529,600
- 2,909,400
5,785,342
7,184,241
(3,786,232)
(9,908)
(302,512)
6,159,865
(5,785,342)
(7,184,241)
9,908
5,510,121 9,173,443 (3,663,322)
$51,603,833 $34,969,715 $16,634,118
The mortality table has been updated from the 2017 CaIPERS Public Agency Misc.

Mortality to the following tables from the Society of Actuaries (SOA) Pub-2010:
• Employees and retirees: General Headcount Weighted Mortality Table fully generational using Scale MP-2021.
• Surviving Spouses: Continuing Survivor Headcount Weighted Mortality Table Fully generational using Scale MP-2021.
• Disabled retirees: Safety Headcount Weighted Mortality Table fully generational using Scale MP-2021.

Future health care cost trend rates have been reset to an initial rate of 6.50% beginning in fiscal year end 2023 and decreasing by 0.50% annually to an ultimate rate of 4.50%.

Change of Benefit Terms
There was no change of benefit terms.
139

CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2022
Subsequent Events
There were no subsequent events that would materially affect the results presented in this disclosure.

Sensitivity of the Total OPEB Liability to Changes in the Discount Rate The following presents the total OPEB liability of the City, calculated using the discount rate for the Plan, as well as what the City's total OPEB liability would be if it were calculated using a discount rate that is 1-percentage point lower or 1-percentage point higher than the current rate:
1 % Decrease Current Discount Rate 1 % Increase

5.50% 6.50% 7.50%
Net OPEB Liability $ 21,822,821 $ 16,634,118 $12,247,235 Sensitivity of the Net OPEB Liability to Changes in Health -Care Cost Trend Rates The following presents the total OPEB liability of the City, as well as what the City's total OPEB liability would be if it were calculated using healthcare cost trend rates that are 1- percentage point lower (5.0% HMO/5.0% PPO) or 1-percentage point higher (7.0% HMO/7.0% PPO) than current healthcare cost trend rates:
1 % Decrease
(5.0%HMO/5.0%PPO
decreasing to

3.5%HMO/3.5%PPO)
Current Healthcare
Cost Trend Rates
(6.0%HMO/6.0%PPO
decreasing to

4.5%HMO/4.5%PPO)
1 % Increase
(7.0%HMO/7.0%PPO
decreasing to

5.5%HMO/5.5%PPO)
Net OPEB Liability $ 14,440,203 $ 16,634,118 $ 19,707,865 OPEB Expense and Deferred Outflows/Inflows of Resources Related to OPEB For the year ended June 30, 2022, the City recognized OPEB expense of $1,588,845. At June 30, 2022, the City reported deferred outflows of resources and deferred inflows of resources related to OPEB from the following sources:

Description
OPEB contributions subsequent to measurement date
Differences between expected and actual experience
Changes of assumptions
Net difference between projected and actual earnings
on OPEB plan investments
Total
Deferred Outflows Deferred Inflows
of Resources of Resources
$ 5,486,967 $ -
6,741,596 (170,934)
57,155 (268,900)
- (4,031,285)
$ 12,285,718 $ (4,471,119)
140

(12)

CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2022
The differences between expected and actual experience, and changes of assumptions are amortized over a six -year period or a nine-year period, depending on the fiscal year the difference occurred. The net difference between projected and actual earnings on plan investment is amortized over a five-year period.

An amount of $5,486,967, which is reported as deferred outflows of resources related to contributions subsequent to the measurement date, will be recognized as a reduction of the net OPEB liability in the fiscal year ending June 30, 2023.

Amounts reported as deferred outflows of resources and deferred inflows of resources related to OPEB will be recognized in OPEB expense as follows:

Fiscal
Year Ending
June 30
Amount
2023
$ 38,548
2024
104,859
2025
116,588
2026
(462,374)
2027
626,398
Thereafter 1,903,612
Payable to the OPEB Plan
At June 30, 2022, the City had no outstanding amount of contributions to the OPEB plan required for the year ended June 30, 2022.

Interfund Receivables and Pavables
At June 30, 2022, interfund advances receivable and payable were as follows:

General Fund
Tide and Submerged Land - Harbor Capital Fund
Total
Advance from Advance to
$ 8,176,659
8,176,659
$ 8,176,659 $ 8,176,659
The General Fund advance to the Tide and Submerged Land — Harbor Capital Fund was utilized for dredging within the City's Tidelands. Repayment of the advance to the General Fund is funded from incremental revenue increases generated from certain leases, mooring rents, commercial and residential pier rents, and parking meter revenues. 141

CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2022
The annual amortization of the repayment of the advance is as follows:

Harbor Capital Fund Advance - Repayment Terms
(Zero Interest Advance)
Advance #1
Advance #2
Dredging
Marina Park
Fiscal
Projects
Project
Total
Year
Repayment
Repayment
Repayment
2023
$ 750,000
$ 500,000
$ 1,250,000
2024
750,000
500,000
1,250,000
2025
750,000
500,000
1,250,000
2026
750,000
500,000
1,250,000
2027
750,000
500,000
1,250,000
2028
426,659
500,000
926,659
2029
-
500,000
500,000
2030
-
500,000
500,000
Total $ 4,176,659 $ 4,000,000 $ 8,176,659
At June 30, 2022, interfund receivables and payable were as follows:

General Fund
Facilities Financial Planning Reserve Fund
Debt Service Fund
Internal Service Funds
Other Governmental Funds
Total
Due from Due to
6,308,136
6,308,136
353,001
107,258
$6,768,395 $ 6,768,395
The above balances are primarily due to reclassification of negative cash balances in the city-wide cash pool.
142

CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2022
(13) Interfund Transfers
Interfund transfers at June 30, 2022, consisted of the following:

Transfers In
Tide and
Tide and
Facilities
Submerged
Submerged
Financial
Other
Land -
Land - Harbor
Planning
Debt Service Governmental
General Fund Operating
Capital
Reserve
Fund Funds Total
General Fund $ - $ 8,668,941
$ 4,500,000
$19,000,000
$ - $ 29,313,549 $61,482,490
Facilities Financial
Planning Reserve
Internal Service
Funds
Other
Governmental
Funds
Total
- 8,741,133 4,483,499 13,224,632
1,284,630 - - 1,284,630
- - - - - 69,812 69,812
$ 1,284,630 $ 8,668,941 $ 4,500,000 $19,000,000 $ 8,741,133 $ 33,866,860 $76,061,564 The City typically uses transfers to fund ongoing subsidies and to set aside resources for long-term needs such as capital facilities replacement and major maintenance. The General Fund transferred:
• $8,668,941 to subsidize the maintenance and operation of the Tide and Submerged Land — Operating Fund;
• $4,500,000 to the Tide and Submerged Land — Harbor Capital Fund to cash fund Harbor Capital projects;
• $19,000,000 to the Facilities Financial Planning Reserve Fund to cash fund construction projects for General Fund supported facilities; • and $29,313,549 to Other Governmental Funds, which includes $21,301,066 to the Unrestricted Capital Improvements Fund to cash fund General Fund capital improvements, $2,781,571 to establish the PEG Fees Fund, $1,162,791 to establish Oceanfront Encroachment Fund, $1,737,821 to establish the Restricted Programs Funds, $1,500,000 to the Facilities Maintenance Fund for maintenance of facilities, and $830,300 to the Assessment District Fund for preliminary engineering and design work related to assessment districts.

The Facilities Financial Planning Reserve Fund transferred $8,741,133 to the Debt Service Fund for the debt service payments related to the Civic Center Certificates of Participation and the Fire Station No. 2 Certificates of Participation, and $4,483,499 to Other Governmental Funds to cash fund construction projects related to parks and community centers and the Junior Lifeguards building.
143

CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2022
Internal Service Funds transferred $1,284,630 of excess reserve funds on hand to the General Fund. The transfers include $472,403 from the Equipment Maintenance Fund and $812,227 from the Information Technology Fund.

Other Governmental Funds, specifically the General Fund Capital Projects Fund, transferred $69,812 to the AQMD Fund to subsidize excess expenditures on design services related to a fueling study.
(14) Joint Venture Agreements
Bonita Canyon Public Facilities Financing Authority
The Bonita Canyon Public Facilities Financing Authority (Authority) is a joint powers authority comprised of the City of Newport Beach and the Newport -Mesa Unified School District. The Authority's Board is comprised of two members appointed by each of the member agencies. The Authority created Community Facilities District 98-1 to finance public facilities that will benefit the properties within the District's boundaries. In 1998, the Authority issued $45,000,000 of special tax bonds to be repaid by special assessments. $30,577,712 (81.7%) of the proceeds were used to pay for the costs of the City acquiring and constructing public facilities including parks and road improvements. In Fiscal Year 2011-12, the Authority issued $38,330,000 of special tax refunding bonds to refinance the 1998 Series. In Fiscal Year 2017-18, the Authority issued $28,245,000 of special tax refunding bonds to refinance the 2012 series; the City is not obligated in any manner to repay the bonds. As of June 30, 2022, the contributions from property owners have been fully spent and no funds are held in trust by the fiscal agent. The City does not make any annual contributions to the Authority and does not include the Authority as a component unit, as the City is not financially accountable for the Authority's activities and the Authority is not fiscally dependent on the City. The City's equity interest in the Authority is not readily determinable. Complete separate financial statements can be obtained at the Newport Mesa Unified School District, 2985 Bear Street, Suite 8M, Costa Mesa, California.

Metro Cities Fire Authority
The City of Newport Beach is a participant in a joint venture consisting of the cities of Anaheim, Brea, Fountain Valley, Fullerton, Huntington Beach, and Orange for the operation of a communication network utilized by fire suppression, emergency medical assistance, and rescue services. The oversight board consists of one voting member and one alternate appointed by the governing body of each member agency. The City of Newport Beach's costs are based each fiscal year upon the number of recorded incidents attributable to the City divided by the recorded incidents attributable to all members during the year, and are recorded in the General Fund as an expenditure for service. Upon termination of the agreement, the proceeds from the sale of the property and assets of the joint venture will be paid to each member agency pursuant to their fair share percentage.

Annually, the amounts paid by the City to this joint venture are approximately $739,713.

The City's 11.13% interest in the net equity of this joint venture at June 30, 2022, amounts 144

CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2022
to $241,967. Complete separate financial statements can be obtained at the Metro Cities Fire Authority offices at 201 S. Anaheim Boulevard, Suite 302, Anaheim, California.

Integrated Law and Justice Agency of Orange County
The City is a participant in a joint venture with several other public agencies in Orange County for the operation of the Integrated Law and Justice Agency of Orange County (ILJAOC). The ILJAOC was established in fiscal year 2006-07 and consists of 23 member agencies, with an oversight board consisting of 12 members from the participating agencies. Annually, each member agency pays a percentage of the operating and replacement costs for the ILJAOC. The City's annual contribution and interest in the net equity of this joint venture was immaterial as of June 30, 2022. The City of Newport Beach acted as the Treasurer/Controller of the ILJAOC from inception through the end of fiscal year 2010-11. Beginning July 1, 2011, the City of Brea, another member agency, was appointed to serve as Treasurer/Controller, and assumed responsibility for all operating activities of the ILJAOC. Complete separate financial statements can be obtained from the City of Brea, 1 Civic Center Circle, Brea, California 92821. (15) Commitments and Contingencies
Claims and Judaments
Numerous claims and suits have been filed against the City in the normal course of business. The estimated liability under such claims, based upon information received from the City Attorney, contracted attorneys, and the Risk Manager, has been estimated and recorded as accrued claims and judgments payable. (See Notes 6 and 8.) Operating Agreements
The City of Newport Beach first entered into an agreement with Visit Newport Beach Inc. ("VNB"), a legally separate non-profit marketing organization, in 1987. The primary responsibility of VNB is to attract additional visitor business by promoting the City as the premier tourist and business destination in Orange County. VNB is governed by an Executive Committee comprised of seven individuals not appointed by the City Council of the City of Newport Beach. The current agreement was entered into on September 27, 2011, and subsequently amended on January 28, 2014, extending the agreement through December 31, 2024. The City pays VNB 18% of the Total Transient Occupancy Tax collected during the fiscal year. For the Fiscal Year ending June 30, 2022, the City paid VNB $5,830,170.
145

CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2022
Contractual Commitments
Construction and contractual commitments for major construction projects are as follows:

Annual
Project YTD
Unexpended
Budget
Expenditures
Commitments
Jamboree Rd. Pavement Rehab
$ 5,124,131
$ 1,369,953
$ 3,163,432
Utilities Back Up Generators
2,838,509
950,725
1,927,515
Lower Sunset View Park Concept
7,847,401
104,680
1,327,363
Advanced Metering Infrastructure
5,845,939
2,184,823
1,166,848
W C H Hwy Intersection Imp Ped Bridge
1,128,521
-
1,127,104
Bay Crossing Water Main Replc
1,384,466
234,123
988,410
Slurry Seal Program
1,124,050
194,246
851,940
East Coast Hwy Pavement Rehab
4,067,990
3,028,532
848,560
Lido Fire Station 2
6,764,866
5,352,887
779,716
Streetlight Rehabilitation Program
1,050,000
262,599
704,110
Traffic Signal Rehab Program
750,000
411,339
647,918
Balboa Island Drainage Master Plan
2,181,015
167,876
593,069
Alleys Reconstruction
945,103
384,461
530,116
At fiscal year end, the City's encumbrances with contractors were as follows:

Drainage
Streets
Facilities
Miscellaneous and studies
Parks
Contract services
Supplies and materials
Maintenance and repairs
General
Beaches
Equipment
Total encumbrances
Major Governmental Funds
Other Governmental Funds
Tide and
Tide and
Special
Capital
Submerged
Submerged
Revenue
Project
General
Land Operating
Land Harbor Capital
Funds
Funds
Total
$
$
$
$ - $
617,651
$ 617,651
5,752,246
2,815,210
8,567,456
-
1,973,390
1,973,390
133,331
133,331
2,352,276
2,352,276
2,499,009
-
2,499,009
388,800
-
388,800
1,439,989
394,173
1,834,162
101,775
459,147
560,922
-
229,832
626,413
-
-
856,245
6,604
13,312
16,319
36,235
$ 4,429,573 $ 236,436 $ 639,725 $ 5,768,565 $ 8,745,178 $19,819,477 146

CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2022
(16) Fund Balance
Governmental Fund Balance at June 30, 2022, is classified as follows:

Governmental Fund Balance
Other Governmental Funds
Tide and
Tide and American
Facilities
Special
Capital
Submerged
Submerged Rescue Plan
Financial Planning Debt Service Revenue
Project
Permanent
General Land - Operating Land - Harbor Capital Act
Reserve
Fund Funds
Funds
Funds
Totals
Nonspendable:

Prepaid items (legally restricted)
$ 944,410 $
- $
- $ -
$ - $
- $ 49,349 $
- $
- $
993,759
ln%ntorias (legally restricted)
286,074
-
- -
-
- -
-
-
286,074
Long-term loan receivable (form restricted)
8,176,659
-
- -
-
- -
-
-
8,176,659
Permanent endowment (legally restricted)
-
-
- -
-
- -
-
4,629,780
4,629,780
Restricted:

Affordable housing
-
-
- -
-
- 279,747
-
-
279,747
Oceanfront encroachment
-
-
- -
-
- 1,162,791
-
-
1, 162,791
Upper Newport bay restoration
-
1,318,126
- -
-
- -
Cable franchise reserve
-
-
- -
-
- 2,781,571
-
-
2,781,571
Community development
-
-
- -
-
- -
3,217
-
3,217
Streets and highways
-
-
- -
-
- 619,950
-
-
619,950
Public safety
-
-
- -
-
- 533,795
-
-
533,795
Facilities
-
-
- -
-
- -
721,413
-
721,413
Transportation
-
-
- -
-
- 2,820,763
-
-
2,820,763
Air quality improvement
-
-
- -
-
- 1,117,202
-
-
1, 117,202
EnNronmental liability mitigation
-
-
- -
-
- 8,549,720
-
-
8,549,720
Public arts and culture
-
-
- -
-
- 885,250
-
-
885,250
Parking
-
-
- -
-
- 186,930
-
-
186,930
Training
-
-
- -
-
- 385,894
-
-
385,894
Dredging
-
-
21,210,300 -
-
- -
-
1,454,608
22,664,908
Libraries
-
-
- -
-
- -
-
195,320
195,320
Scholarships
-
-
- -
-
- -
-
207,566
207,566
Fiin
-
-
- -
-
- 1,298,845
-
-
1,298,845
Debt seryce
-
-
- -
-
2,199,363 -
-
-
2,199,363
Capital re -appropriations
-
2,193,238
9,684,447 -
-
- 1,522,549
5,047,178
-
18,447,412
Encumbrance reserve:

Beaches
-
229,832
626,413 -
-
- -
-
-
856,245
Streets
-
-
- -
-
- 5,752,246
-
-
5,752,246
Equipment
-
6,604
13,312 -
-
- 16, 319
-
-
36,235
Committed:

Facilities replacement
-
-
- -
34,171,635
- -
-
-
34,171,635
Facilities maintenance
-
-
- -
-
- -
21,018,727
-
21,018,727
Civic center and park
-
-
- -
-
- -
484,163
-
484,163
Oil and gas liabilities
-
800,000
- -
-
- -
-
-
800,000
Parks and community centers
-
-
- -
-
- -
3,044,546
-
3,044,546
Parking management
-
-
- -
-
- -
5,063
-
5,063
Neighborhood enhancement
-
-
- -
-
- -
512,903
-
512,903
Capital re -appropriations
-
-
- -
-
- -
4,461,319
-
4,461,319
Encumbrance reserve:

Drainage
-
-
- -
-
- -
617,651
-
617,651
Streets
-
-
- -
-
- -
2,815,210
-
2,815,210
Facilities
-
-
- -
-
- -
1,973,390
-
1,973,390
Miscellaneous and studies
-
-
- -
-
- -
133,331
-
133,331
Parks
-
-
- -
-
- -
2,352,276
-
2,352,276
Contract seNces
2,499,009
-
- -
-
- -
-
-
2,499,009
Supplies and materials
388,800
-
- -
-
- -
-
-
388,800
Maintenance and repairs
1,439,989
-
- -
-
- -
394,173
-
1,834,162
General
101,775
-
- -
-
- -
459, 147
-
560,922
Unassigned
83,302,665
(119,371)
83,183,294
Total fund balances
$ 97,139,381 $
4,547,800 $
31,534,472 $
$ 34,171,635 $
2,199,363 $ 27,843,550 $ 44,043,707 $
6,487,274 $ 247,967,182
(17) Tax Abatements
The City may enter into sales tax abatement agreements with automobile dealerships under City Council Resolution 99-64. Under that Resolution, the City may rebate sales taxes "for the sole purpose of reimbursing [automobile dealerships] for costs incurred for a project necessary to make the project financially feasible". Automobile dealerships must covenant "to complete the project, to remain and operate the project for a specified period of time... [, and] to maximize the City as the point -of -sale...". Automobile dealership sales 147

CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2022
tax rebates are based on negotiations that require City Council approval. On an accrual basis, for the fiscal year ended June 30, 2022, the City rebated sales taxes to automobile dealerships totaling $549,265 under this program.
(18) Leases
City as Lessee
Lease agreements that meet the requirements of GASB 87 for which the City is lessee are disclosed as lease liabilities on the City's financial statements that are presented on the accrual basis of accounting and with an economic resources measurement focus.

Included in the City's lease liabilities are agreements related to an animal shelter, water well easements, storage, lifeguard communication equipment, and part of a homeless shelter. During the fiscal year there were no variable lease payments that were not previously included in the City's lease liabilities. Additional information about the related lease assets and accumulated amortization are provided in Note 5. Estimates of the future lease payments for the City's lease liability are as follows:

Year Ending
June 30
Principal
Interest
Total
2023
$ 1,069,073
$ 79,270
$ 1,148,344
2024
1,019,436
73,566
1,093,003
2025
1,025,055
67,948
1,093,003
2026
1,025,038
62,298
1,087,336
2027
968,180
56,820
1,025,000
2028-2032
4,921,530
203,470
5,125,000
2033-2037
3,553,490
71,510
3,625,000
2038-2042
91,811
33,189
125,000
2043-2047
94,370
30,630
125,000
2048-2052
97,000
28,000
125,000
2053-2057
99,704
25,296
125,000
2058-2062
102,483
22,516
125,000
2063-2067
105,340
19,660
125,000
2068-2072
108,277
16,723
125,000
2073-2077
111,295
13,705
125,000
2078-2082
114,397
10,603
125,000
2083-2087
117,586
7,414
125,000
2088-2092
120,864
4,136
125,000
2093-2097
88,686
897
89,583
$ 14,833,614
$ 827,650
$ 15,661,265
148

CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2022
City as Lessor
Lease agreements that meet the requirements of GASB 87 for which the City is lessor are disclosed as lease receivables on the City's financial statements. Included in the City's lease receivables are over 900 agreements related to land and structures. GASB 87 excludes certain inflows (e.g. certain variable payments, etc.) from the measurement of lease receivables. For the fiscal year ending June 30, 2022, the City recognized $4,211,431 of variable payments related to the lease receivables that were excluded from the measurement of the lease receivables. Lease inflows, including inflows excluded from GASB 87, are included on the City's financial statements as property income. Lease inflows for interest revenue from amortization of the GASB 87 lease receivables totaled $2,152,689. Lease inflows for lease revenue from amortization of the related GASB 87 deferred inflows of resources from leases was $7,079,686. (19) Subsequent Event
Dove Street Property Purchase
On November 15, 2022, the City Council authorized staff to execute an agreement with AG Dove Owner, L.P. for the purchase of property at 1201 Dove Street for a future police headquarters. The negotiated purchase price for the property is $30.5 million, which will be funded from General Fund reserves, and from available funds in the Facilities Financial Planning Fund and General Fund Capital Improvement Plan Fund. 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.
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151

CITY OF NEWPORT BEACH
an Agent Multiple -Employer Defined Benefit Pension Plan As of June 30, 2022
Last 10 Years *
Defined Benefit Plan for Miscellaneous Employees

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Newport Beach City CouncilFebruary 28, 2023

Newport Beach City Council
February 28, 2023