16 - Financial Statement Audit Results and Related Communication for the Fiscal Year Ended June 30, 2023 — Newport Beach City Council, January 23, 2024 (part 1 of 2)

Q SEW Pp�T

CITY OF
z NEWPORT BEACH
c�<,FORN'P City Council Staff Report
January 23, 2024
Agenda Item No. 16
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 - 949-644-3125, [email protected]
TITLE: Financial Statement Audit Results and Related Communication for the Fiscal Year Ended June 30, 2023
ABSTRACT:

The City of Newport Beach 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 January 11, 2024, 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, 2023, 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.
16-1

Financial Statement Audit Results and Related Communication for the Fiscal Year Ended June 30, 2023
January 23, 2024

Page 2 ends

These include:
• 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. 16-2

Financial Statement Audit Results and Related Communication for the Fiscal Year Ended June 30, 2023
January 23, 2024

Page 3 ends

NOTICING:

The agenda item has been noticed according to the Brown Act (72 hours in advance of the meeting at which the City Council considers the item).

ATTACHMENTS:

Attachment A — Annual Comprehensive Financial Report for the Fiscal Year Ended June 30, 2023
Attachment B — Auditor's Required Communications with the Audit Committee Attachment C — Auditor's Report on Internal Control Over Financial Reporting and on Compliance and Other Matters
16-3

Attachment A
Annual Comprehensive Financial Report for the Fiscal Year Ended June 30, 2023 16-4

CITY OF NEWPORT BEACH

CALIFORNIA

A -A NNUT L
COMPRE
FINANCIAL REP6
F�
L-A-1

FISCAL YEAR ENDED
a J U N E 30,2023

t/F
Annual Comprehensive Financial Report
For the Fiscal Year Ended June 30, 2023
Prepared by the Finance Department
Jason AI -Imam, Finance Director/Treasurer
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7v-.W PO\
The City of Newport Beach was incorporated September 1, 1906 The present City Seal was adopted July 22,1957
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INTRODUCTORY SECTION
Z
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CITY OF NEWPORT BEACH
Annual Comprehensive Financial Report
Year Ended June 30, 2023

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............................................................................................... 53 Statement of Activities..................................................................................................... 54 Fund Financial Statements:

Governmental Funds:

BalanceSheet..............................................................................................................60 Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Position....................................................................................... 63 Statement of Revenues, Expenditures and Changes in Fund Balances ......................64 Reconciliation of Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Activities .............. 66 Proprietary Funds:

Statement of Net Position............................................................................................. 70 Statement of Revenues, Expenses and Changes in Net Position...............................71 Statement of Cash Flows............................................................................................. 72 Fiduciary Funds:

Statement of Fiduciary Net Position............................................................................. 76 Statement of Changes in Fiduciary Net Position.......................................................... 77 Notes to the Financial Statements..................................................................................... 81 Required Supplementary Information
Defined Benefit Plan For Miscellaneous Employees:

Schedule of Changes in the Net Pension Liability and Related Ratios .........................142 Schedule of Contributions.............................................................................................144 Defined Benefit Plan For Safety Employees:

Schedule of Changes in the Net Pension Liability and Related Ratios .........................146 1 16-10

Schedule of Contributions.............................................................................................148 Post -Employment Health Care Benefits (OPEB):

Schedule of Changes in the Net OPEB Liability and Related Ratios ............................ 150 Schedule of Contributions.............................................................................................152 Budgetary Comparison Statements:

GeneralFund...............................................................................................................153 Tide and Submerged Land — Operating Fund...............................................................155 Tide and Submerged Land — Harbor Capital Fund.......................................................156 Notes to Required Supplementary Information................................................................157 Supplementary Schedules
Other Governmental Funds:

Combining Balance Sheet.............................................................................................164 Combining Statement of Revenues, Expenditures and Changes in FundBalances..............................................................................................................171 Budgetary Comparison Schedules:

StateGas Tax Fund......................................................................................................178 SB1 Gas Tax RMRA Fund............................................................................................ 179
AssetForfeiture Fund...................................................................................................180 OTS DUI Grant Fund....................................................................................................181 Circulation and Transportation Fund.............................................................................182 Building Excise Tax Fund..............................................................................................183 Community Development Block Grant Fund.................................................................184 Air Quality Management District Fund..........................................................................185 Environmental Liability Fund.........................................................................................186 Supplemental Law Enforcement Services Fund...........................................................187 Opioid Remediation Fund.............................................................................................188 ContributionsFund........................................................................................................189 FIINFund......................................................................................................................190 Restricted Programs Fund............................................................................................191 MeasureM Fund...........................................................................................................192 Oceanfront Encroachment Fund...................................................................................193 American Rescue Plan Act Fund.................................................................................. 194
PEGFees Fund............................................................................................................195 Internal Service Funds:

Combining Statement of Net Position...........................................................................200 Combining Statement of Revenues, Expenses and Changes in Net Position .............. 201
Combining Statement of Cash Flows............................................................................202 Fiduciary Funds:

Combining Statement of Fiduciary Net Position............................................................206 Combining Statement of Changes in Fiduciary Net Position.........................................207

STATISTICAL SECTION
(Unaudited)
Financial Trends:

Net Position by Component................................................................................................ 212 Changesin Net Position......................................................................................................214 2 16-11

Fund Balances of Governmental Funds..............................................................................216 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 Principal Property 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
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CITY OF NEWpnRT BEACH
100 Civic Center Drive
Newport Beach, California 92660
949 644-3127 1 949 644-3339 FAX
newportbeachca.gov/finance
�. R -IFOO4
December 27, 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, 2023 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, 2023 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, 2023 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:

Las
Angeles
County San
Bernardino
County
® Riverside
Orange County
County

NEWPORT
BEACH
1p
San
Diego
County
16-15

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 83,411, 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.

Airport Area
Costa Mesa
Fi
--
\
4►
Irvine
Eastbluff-
Mariners
/ West,Newport
\•
ti
Harbor View
i
Fashion island
Lido Isle
City Ha!! Spyglass
Newport Pier
Balboa island
l
Balboa
Pier
New ort Coast
Corona.DeIMar l p
y�
The Wedge
�
1 or
Crystal Cove�
ove
Grystark
State Park
f
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 16-16

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 (1a) 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 83,411, the population has been very stable as indicated by the following chart.
100,000
•� Ili
Population
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Fiscal Year
8 16-17

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.
edlan Household-
City of Newport Beach
Orange County
California
USA
$127,353
106,209
91,551
74,755
The leading industries here are professional, scientific, health care, finance, insurance, legal, and travel/tourism. Unemployment in the City increased to 3.4% as of October 2023 which is consistent with the statewide economy as jobs grew at a slower rate than the previous year due to post -pandemic hiring cooling; however, the City's unemployment rate is still lower compared to the state's 4.8%, and the county's 3.7%, as illustrated in the following chart.

Historical Unemployment Rates
(Kates are not seasanadly adjusted
+Newport Beach
+Orange County
+California
Calendar Year * through October 31, 2023
More detailed information concerning the City's demographics and statistics are contained within the Statistical Section of this report.

LOCAL ECONOMY
Despite the Federal Reserve raising the federal funds rate by over five percentage points over the past two years to combat high inflation, the underlying local economy continues to remain strong in Newport Beach. Sales tax revenue was up 6.8% in Newport Beach from July 2022 through December 2022. However, sales tax revenue was down 5.4% from January 2023 through June 2023, which is consistent with sales tax results across the State of California. The decrease in sales tax revenue is largely due to a shift in consumer spending from taxable goods, such as new car sales, to nontaxable items, such as travel, leisure, and entertainment. For example, sales from autos and transportation were down 5.5% over the prior year whereas sales from restaurants and hotels were up 16-18

6.2% over the same period. Overall, sales tax revenue was up 0.8% for Fiscal Year 2022- 23 and is projected to dip slightly in Fiscal Year 2023-24. Nonetheless, the fiscal outlook remains bright largely due to property tax revenue, representing approximately 50% of all General Fund revenues, which continues to remain strong due to continued demand for coastal property.

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 2022. Actual revenues were $14.1 million or 5.2% higher than final anticipated estimates. As discussed in more detail below, the primary positive variances were in property tax and transient occupancy taxes.

The top three individual revenue sources, Property Taxes, Sales Taxes and Transient Occupancy Taxes (TOT), represent 75.5% of all General Fund revenues. Tax revenues in total, including business licenses, franchise fees, and other taxes represent 79.1 % of all General Fund revenues, while only 20.9% is generated from other revenue sources.

General
Fund Revenues
21 %
■ Property Taxes
1111k
■ Sales Taxes
Sales Tax In Lieu
3%
49%
Transient Occupancy Taxes
11 %
Other Taxes
■ All Other Sources
16%
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 (48.6%) 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 coastal property has allowed the City to enjoy long-term growth trends with its number one revenue source. Property tax revenues for Fiscal Year 2022-23 came in $9.9 million or 7.7% higher than the prior year due to an increase in assessed property values related to the annual inflation adjustment that is allowed under Proposition 13 and due to changes 10 16-19

in ownership and new construction, which was partially offset by a $1.9 million decrease in property transfer tax revenue as home sales slowed during the fiscal year due to higher interest rates.

Detached single-family residential property values decreased 1.9% in 2023 as home sales slowed due to higher interest rates, as illustrated in the following table.

Nonetheless, Newport Beach's estimated median price for a detached single-family residence is currently $3.6 million, which far exceeds the countywide estimated median value of $1.2 million. Higher assessed values are projected to continue due to strong demand, which is expected to support continued growth in future property tax revenues.

OF NEWPORT
BEACH
Detached Single
MedianCITY
Family Residential
Full
-
Value Sales
Calendar
Median
Median %
Year
Sales
Price
Change
2014
962
$ 1,894,500

5.25%
2015
1,023
$ 1,975,000

4.25%
2016
1,064
$ 2,150,000

8.86%
2017
1,114
$ 2,400,000
1 1.63 %
2018
952
$ 2,517,000

4.88%
2019
949
$ 2,435,000
-3.26%
2020
1,142
$ 2,587,500

6.26%
2021
1,405
$ 3,200,000

23.67%
2022
827
$ 3,715,000

16.09%
2023*
508
$ 3,645,000
-1.88%
Source: HdL Coren & Cone
*Data through September 2023
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 29 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. 11 16-20

Total Assessed Property Value Growth
$80,000,000,000

6.4 7.1
$70,000,000,000

4.5 4.8 %
$60,000,000,000

6.6%

5.9% 6.5%
$50,000,000,000

5.7 1.8% 0.2% 1.0% 2.9% 5.2%
$40,000,000,000
$30,000,000,000
$20,000,000,000
$10,000,000,000
0 o v o
0 0 0 0 0 0 0 0 0 0 0 0 0
Value changes in Newport Beach show continued appreciation in property values in Fiscal Year 2022-23. Over the past 10 years, assessed valuation increased an average of 6.0% per year and 5.8% over a twenty-year period. Newport Beach's assessed property values increased 7.1 %, with a local assessed value of $71.3 billion for Fiscal Year 2022-23.

Sales Tax
The second largest funding source for the General Fund is sales tax revenue, making up about 16.3% 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.

As previously discussed, sales tax revenue was up 6.8% from July 2022 through December 2022. However, sales tax revenue was down 5.4% from January 2023 through June 2023, which is consistent with sales tax results across the State of California. The decrease in sales tax revenue is largely due to a shift in consumer spending from taxable goods, such as new car sales, to nontaxable items, such as travel, leisure, and entertainment. For example, sales from autos and transportation (the City's largest source of sales tax revenue) were down 5.5% over the prior year and is projected to remain down next year due to a softening of demand for new vehicles, which is largely related to higher interest rates. Conversely, sales from restaurants and hotels were up 6.2% over the prior year and is projected to be higher next year as patrons continue to allocate a significant portion of their household food budget to dining out. Sales tax revenue was up 0.8% for Fiscal Year 2022-23 and is projected to dip slightly in Fiscal Year 2023-24.

Transient Occupancy Tax (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 12 16-21

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 73% of TOT revenues. The residential category is made up of approximately 1,550 vacation rentals representing 27% of TOT revenue. TOT revenue from short-term residential stays has nearly doubled since 2019-20, whereas hotel TOT revenue increased 32% over the same period as reflected in the following chart.

Hotel vs Residential TOT
$23 $20.0 $21-9
$16.6
o $16
$11-8
$8.3
$s $s-7
$4.2 $5.1
$2
FY 19.20 FY 20-21 FY 21-22 FY 22-23
■ HoW • Residential
In calendar year 2019, hotel occupancy rates remained in the eighties during the summer and was generally in the seventies throughout the remainder of the year. The following chart shows that while hotel occupancy rates have not yet fully recovered from pre - pandemic highs there has been significant improvement in hotel occupancy. In addition, increases in average daily room rates have augmented hotel TOT revenues. =...asp
651%
x

66.2v! 63.8% 67.6% 69'3%,64.2%

73.5yo� 7D_1%

68.4%
�52.7%
fi1.096��*62.99662.7%
�660.2%--�71.6°J~fi7.9i6

61.7% 58.1%

59.8%
37,5%

38.6% %

53.5%
z
a
a
u

JAR FEB
MAR APR MAY !UN

JUL AUG SEP

OCT NOV DEC
-0-- 2021 t 2022 —4-- 2023

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. 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 13 16-22

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 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.
14 16-23

Full Time Positions Trend
770 763 765
752
750
741
736
.n 730 730
0 730 728 724 725 72b 727 728
0 4 710
0 690
670
650
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 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.

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 2023, 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 well -controlled expenditure framework coupled with a very solid level of budget management. Additionally, FitchRatings rating agency also reaffirmed the City's AAA credit rating noting the City's consistent tax base and well - controlled expenditure framework coupled with conservative financial management would enable the City to maintain financial stability and solid reserves in a potential moderate economic downturn. The City has also employed an aggressive strategy to paydown its unfunded pension liability. The City has committed to a pension paydown plan that requires $45 million in annual contributions towards its unfunded pension liability, which is $15 million more than the amount required to be paid, as further described in the Pension section below. This paydown strategy is anticipated to result in eliminating the City's pension liability in 2032.
15 16-24

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 2022-23 by allocating resources to debt service, parks and community centers, the purchase of land and building for a future police station and other small scale facility rehabilitation projects.

Beginning Balance 7/1/22
$ 34,171,635
Sources
Licenses, Permits and Fees
34,309
Transfer In from General Fund
12,924,919
Transfer in Misc FFP Projects
41,272
Investment Income
371,710
Net increase in fair value of investments
(161,745)
Total Sources
13,210,465
Uses
Debt Service'
(8,562,344)
Parks and Community Centers
(2,894,345)
Police Facility
(3,324,919)
Fire Stations
(900,000)
Misc FFP Projects
(6,900,000)
Total Uses
(22,581,608)
Ending Balance 6/30/23
$ 24,800,492
The transfer is net of the Build America Bonds subsidy, which is recorded in the Debt Service Fund
Overall, the FFPR balance is decreasing by $9.4 million from the prior fiscal year. 16 16-25

Pensions
As of the actuarial valuation date of June 30, 2022, the City had an Unfunded Accrued Liability (UAL) of $348 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 57.5% of the Normal Cost of the plan, or $10.5 million in Fiscal Year 2022-23. • 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 $45 million per year contribution toward the unfunded pension liability, which is approximately $15 million more than is required by CalPERS. Fiscal year 2022-23 represented four years in a row the City Council appropriated additional funding towards an accelerated 17 16-26

payment of the unfunded liability from year-end budget surplus funds. The $45 million paydown strategy is anticipated to result in eliminating the City's pension liability in 2032.

AWARDS AND ACKNOWLEDGMENTS
The City has prepared an Annual Comprehensive Financial Report for the past 30 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 (GFOA) 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, 2022. 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. l "A*aw
Grace K. Leung Jason AI -Imam
City Manager Finance Director/Treasurer
18 16-27

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, 2022
Executive Director/CEO
19 16-28

City Council Members
District 7
City Executive Staff
Aaron Harp Grace K. Leung Leilani Brown
City Attorney City Manager City Clerk
Tara Finnigan..........................................................................................................................Assistant City Manager Seimone Jurjis................................................................Assistant City Manager/Community Development Director Jason AI-Imam..................................................................................................................Finance Director/Treasurer JeffBoyles.....................................................................................................................................................Fire Chief PaulBlank............................................................................................................................................. Harbormaster Barbara Salvini.................................................................................................................. Human Resources Director Melissa Hartson.................................................................................................................... Library Services Director JosephL. Cartwright.................................................................................................................................Police Chief DaveWebb............................................................................................................................... Public Works Director Sean Levin........................................................................................................ Recreation & Senior Services Director Mark Vukojevic..................................................................................................................................Utilities Director r
IKE
16-29

LECTORATE
Board of
Harbor Commission
Library Trustees 11L
Building & Fire Parks, Beaches &
Code of Appeals ecreation Commission
MAYOR
City Arts COUNCIL Planning
Commission Commission
city
Civil Service Boar Committees

CITY CITY CITY

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

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22 16-31

FINANCIAL SECTION
Z
23 16-32

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24 16-33

*I 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
Opinions
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, 2023, 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, 2023, 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, 2023, the City implemented Governmental Accounting Standards Board (GASB) Statement No. 96 and Governmental Accounting Standards Board (GASB) Statement No. 94. Our opinion is not modified with respect to these matters.

Basis for Opinions
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 opinions.
25 16-34

The Honorable Mayor and
Members of the City Council
City of Newport Beach
Newport Beach, California
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 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.
26 16-35

The Honorable Mayor and
Members of the City Council
City of Newport Beach
Newport Beach, California
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.

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 the purpose 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 27 16-36

The Honorable Mayor and
Members of the City Council
City of Newport Beach
Newport Beach, California
material misstatement of the other information exists, we are required to describe it in our report.

Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated December 27, 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
December 27, 2023
28 16-37

FINANCIAL SECTION
Z
29 16-38

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30 16-39

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, 2023. 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 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 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 net position has 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 16-40

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 that receive significant financial support from user fees and charges 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) provide goods or services mostly to non -government users and are the 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 and other equipment maintenance, risk management, retiree insurance, telecommunications systems, information technology services, etc.). Because the Internal Service Funds primarily serve government users, 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 the City's fiduciary activities are reported in a separate statement of 32 16-41

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 Budgetary Comparison Schedules for the General Fund and two other major funds, 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, 2023 was $2.5 billion, increasing $62.8 million or 2.6% 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 $27.2 million. This increase is primarily due to a $24.2 million increase in the City's lease receivable from Governmental Accounting Standards Board Statement 87 (GASB 87). The remaining $3.0 million increase is attributable to increases in cash and investments, interest receivables, intergovernmental receivables, and a public -private partnership receivable from the implementation of Governmental Standards Board Statement 94 (GASB 94); offset by decreases in accounts receivable, restricted cash and investments with fiscal agents, and prepaid items. Capital assets increased $38.2 million, mostly due to additions to land and rights of way, and structures.

Current liabilities decreased $2.7 million primarily due to decreases in accounts payable.

Long-term liabilities increased $146.8 million. The increase is primarily due to increases in the City's net pension liability and net OPEB liability as investment returns in both plans underperformed. See Note (11), and Note (12) of the Notes to the Financial Statements for more information.
33 16-42

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
June 30
(in thousands)
Governmental Activities Business -Type Activities
2022 2023 2022 2023
Total
2022 2023
$ 603,672
$ 633,179
$ 38,970
$ 36,647
$ 642,642
$ 669,826
2,339,355
2,372,769
130,464
135,267
2,469,819
2,508,036
2,943,027
3,005,948
169,434
171,914
3,112,461
3,177,862
63,987
141,903
2,296
5,319
66,283
147,222
43,924
41,327
4,383
4,245
48,307
45,572
340,714
479,521
7,134
15,170
347,848
494,691
384,638
520,848
11,517
19,415
396,155
540,263
328,685
271,428
3,408
101
332,093
271,529
2,223,774
2,256,306
128,245
131,016
2,352,019
2,387,322
78,100
79,152
-
-
78,100
79,152
(8,183)
20,117
28,560
26,701
20,377
46,818
$ 2,293,691
$ 2,355,575
$ 156,805
$ 157,717
$ 2,450,496
$ 2,513,292
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 $79.2 million of net position, an increase of $1.1 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 State Gas Tax revenues not being completely spent during the fiscal year. Community services' increase is mainly from cable franchise fees for public, education, and government programming not being completely spent during the fiscal year.

As of June 30, 2023, unrestricted net position was $46.8 million, an increase of $26.4 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 16-43

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.

Revenues:

Program revenues:

Charges for services
Operating grants and contributions
Capital grants and contributions
Total program revenues
General revenues:

Taxes:

Property taxes
Sales tax
Transient occupancy taxes
Othertaxes
Investment related income
Other
Total general revenues
Total revenues
Expenses:

General government
Public safety
Public works
Community development
Community services
Interest
Water
Wastewater
Total expenses
Increases in net position
Net position at beginning of year
Net position at end of year
Figure 2
Changes in Net Position
For the Years Ended June 30
(in thousands)
Governmental Activities Business -Type Activities
2022 2023 2022 2023
Total
2022 2023
$ 67,743
$ 74,454
$ 36,929
$ 36,700
$ 104,672
$ 111,154
16,800
20,132
117
-
16,917
20,132
8,693
5,810
-
-
8,693
5,810
93,236
100,396
37,046
36,700
130,282
137,096
128,484
138,359
-
-
128,484
138,359
46,165
46,552
46,165
46,552
26,677
30,202
26,677
30,202
9,110
10,080
-
-
9,110
10,080
(4,861)
2,520
(845)
258
(5,706)
2,778
2,644
5,552
-
-
2,644
5,552
208,219
233,265
(845)
258
207,374
233,523
301,455
333,661
36,201
36,958
337,656
370,619
19,374
26,912
-
-
19,374
26,912
104,767
121,310
104,767
121,310
65,031
75,904
65,031
75,904
9,665
13,048
9,665
13,048
24,509
27,937
24,509
27,937
6,878
6,666
-
-
6,878
6,666
-
-
27,117
30,702
27,117
30,702
-
4,094
5,344
4,094
5,344
230,224
271,777
31,211
36,046
261,435
307,823
71,231
61,884
4,990
912
76,221
62,796
2,222,460
2,293,691
151,815
156,805
2,374,275
2,450,496
$ 2,293,691
$ 2,355,575
$ 156,805
$ 157,717
$ 2,450,496
$ 2,513,292
Revenues Associated with Governmental Activities Discussion Figure 2 illustrates in detail how the $333.7 million in Governmental Activities revenue was derived. Figure 3 summarizes this revenue by major source. As shown on Figures 2 and 3, $74.5 million, or 22.3%, of the revenues were recovered from those who directly benefited from the programs as a charge for service. Another $25.9 million, or 7.8%, 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 $233.3 million, or 69.9%, represented general revenues of the City including taxes, intergovernmental revenues, and other miscellaneous revenues.
35 16-44

Figure 3
Governmental Activities Revenue Sources
For the Year Ended June 30, 2023
68%
8% ■ Charges for Services
■Contributions and Grants
■ Taxes
22% Other
2%
As illustrated in Figure 2, program revenues related to Governmental Activities increased $7.2 million from the prior year. This increase was primarily attributable to increases in charges for services for paramedics, tidelands, the Junior Lifeguard program, rentals, and fewer unrealized investment losses. Additionally, operating grants and contributions increased mainly due to earning American Rescue Plan Act grant revenue by spending part of the grant money on the City's Junior Lifeguard building. These increases were offset by a decrease in capital grants and contributions mostly due to a decrease in assessment district financings.

The City's general revenues related to Governmental Activities increased about $25.0 million from the prior year primarily due to increases in property taxes, sales taxes, transient occupancy taxes, other taxes, investment income, and other general revenues. Revenue increases across various categories illustrates that Newport Beach's underlying local economy continues to remain strong.

Property tax is the largest revenue source for the City and collections finished the year $9.9 million higher than the previous fiscal 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 $46.6 million, sales taxes represent the second largest individual revenue source for the City.

Sales taxes increased about $387,599 from the previous fiscal year. This moderate increase in sales tax revenue was due to consumer spending shifting from taxable sales, such as automobiles and transportation, to nontaxable sales, such as entertainment.

Transient occupancy taxes (TOT), the City's third largest revenue source, finished the year at $30.2 million, which is an increase of $3.5 million from the previous fiscal year. Both residential TOT and hotel TOT increased. Short term lodging businesses had strong demand. Hotel occupancy rates continue to improve from the 2020 coronavirus pandemic lockdowns, and average daily hotel room rates have increased.
36 16-45

Investment income, comprised of both interest income and unrealized gains/losses, increased about $7.4 million from the prior fiscal year. The increase is from interest income from higher interest rates finally exceeding the increases to unrealized losses caused by higher interest rates.

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 one department (Public Works) 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 $271.8 million of Governmental Activities expense was derived. The increase of $41.6 million from the prior year is mostly due to increasing pension liabilities. See Note (11) of the Notes to the Financial Statements for more information. 37 16-46

Figure 4 below summarizes the Governmental Activities expenses shared across function.

Figure 4
Governmental Activities Functional Expenses
For the Year Ended June 30, 2023
2%
5%
10%
10% 45%
iq16V
28%
■ Public Safety
■ Public Works
I Community Services
General Government
Community Development
Interest
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
For the Years Ended June 30
(in thousands)
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)
2023
Total Cost Net (Cost)
of Service of Service
$ 26,912
$ (10,988)
121,310
(92,434)
75,904
(49,373)
13,048
(765)
27,937
(11,155)
6,666
(6,666)
$ 271,777
$ (171,381)
38 16-47

Figure 6
Program Expenses and Revenues — Governmental Activities For the Year Ended June 30, 2023
(in millions)
$130.0
$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
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 $37.0 million.

Program revenues totaled $36.7 million and were supplemented by about $258,000 of general revenues related to investment income. As shown in Figure 7 on the following page, Water activities represents about $32.0 million (87.3%) of program revenues, while Wastewater activities represents $4.7 million (12.7%) of program revenues.
39 16-48

Figure 7
Program Expenses and Revenue — Business -type Activities For the Year Ended June 30, 2023
(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 $36.0 million, an increase of about $4.8 million over prior year as shown in Figure 2. This is attributable to increases in salaries and benefits, maintenance, utilities, and miscellaneous expenses.

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

Water
Of the $30.7 million in water related expenses, $11.4 million (37.0%) is for the purchase of water, $5.4 million (17.4%) covers employee related costs, $7.5 million (24.4%) is for maintenance, supplies, and depreciation of the water system, $2.2 million (7.3%) is for professional services, $2.1 million (7.0%) is for utility payments and the remaining $2.1 million (6.9%) is collectively attributable to other miscellaneous expenses.

Wastewater
Of the $5.3 million in wastewater related expenses, $2.1 million (38.9%) is for maintenance, supplies, and depreciation of the wastewater system, $1.7 million (31.3%) is for employee related costs, and the remaining approximately $1.5 million (29.8%) is attributable to professional services, utility payments and other miscellaneous expenses.

Figure 7 summarizes Business -type expenses separately for Water and Wastewater activities. 40 16-49

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, which is almost unchanged from the prior fiscal year. Increases in fund balances in the Tide and Submerged Land — Operating Fund, other capital projects funds, and other permanent funds in aggregate were almost completely offset by decreases in the General Fund, Tide and Submerged Land — Harbor Capital Fund, Facilities Financial Planning Reserve Fund, Debt Service Fund, and other special revenue funds in aggregate. The General Fund represented $91.4 million or 36.9% of the combined fund balances of the Governmental Funds.

Figure 8
Governmental Funds Fund Balance
June 30
(in thousands)
General Fund
Tide and Submerged Land - Operating
Tide and Submerged Land - Harbor Capital
Facilities Financial Planning Reserve
Debt Service Fund
Non -major special revenue
Non -major capital projects
Non -major permanent
2022
2023
Change
$ 97,139
$ 91,443
$ (5,696)
4,548
6,107
1,559
31,534
30,215
(1,319)
34,172
24,800
(9,372)
2,199
2,184
(15)
27,844
26,518
(1,326)
44,044
60,148
16,104
6,487
6,543
56 $ 247,967
$ 247,958
$ (9)
The following describes the classification of fund balance as of June 30, 2023. Additional information on the City's fund balance can be found in Note (15) of the Notes to the Financial Statements.

Nonspendable Fund Balance — The City has $12.9 million in fund balance classified as nonspendable to indicate that it cannot be readily converted to cash. Of the $12.9 million nonspendable fund balance, $1.1 million is for prepaid items, $188,828 is for inventories, $7.0 million is for long-term loan receivables, and $4.6 million is for permanent endowments.

Restricted Fund Balance — The City has $73.7 million in fund balance classified as restricted to indicate that it has externally imposed restrictions on how the money may be spent. Of the $73.7 million restricted fund balance, $5.3 million is restricted in the Tide and Submerged Land — Operating Fund, of which $3.8 million is restricted for capital projects and maintenance and repairs, and $1.5 million is restricted for the Upper Newport Bay restoration; $30.2 million is 41 16-50

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 $36.0 million in restricted fund balance, $26.5 million is restricted for various special revenue funds, $7.3 million is restricted for the Assessment District Fund, $282,123 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 $83.7 million in fund balance classified as committed to indicate that the City Council has committed how the money will be spent. Of the $83.7 million committed fund balance, $5.5 million is committed in the General Fund mostly for contract services; $840,000 is committed in the Tide and Submerged Land — Operating Fund; $24.8 million is committed in the Facilities Financial Planning Reserve Fund; $3.0 million is committed in the Fire Station Fund; $485,365 is committed in the Civic Center and Park Fund; $14.7 million is committed in the Parks and Community Center Fund; $379,245 is committed in Balboa Village Parking Management District Fund; $4.1 million is committed to the Facilities Maintenance Fund; $15.9 million is committed in the Neighborhood Enhancement Fund; $1,083 is committed in the Junior Lifeguards Fund; $11.5 million is committed in the Unrestricted Capital Improvements Fund; $1.9 million is committed to the Miscellaneous Facilities Financing Fund; and $658,756 is committed to the Police Facility 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 $77.7 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 $23.0 million or 8.8% higher than the prior year mostly due to a combined $17.9 million increase in the City's top three revenues sources — property taxes, sales taxes and transient occupancy taxes — with a $14.0 million increase in property taxes as the City's assessed valuation continued to increase due primarily to the appreciation of property values; a $387,599 increase in sales taxes as consumer spending shifted from taxable sales to nontaxable sales; and a $3.5 million increase in transient occupancy taxes due strong short term lodging businesses and hotel occupancy rates continuing to recover from the 2020 coronavirus pandemic lockdowns and increased average daily hotel room rates. General Fund expenditures finished $33.6 million or 16.0% higher than the prior fiscal year mostly due to changing the presentation of the General Fund's cost allocation expenditures on behalf of the Tide and Submerged Land — Operating Fund. Previously these cost allocation expenditures were a net reduction to General Fund expenditures. In an effort to reduce complexity and improve transparency, Fiscal Year 2022-23 presents the full amount of these cost allocation expenditures in the General Fund which get offset by a corresponding transfer into the General Fund from the Tide and Submerged Land — Operating Fund. Other increases to General Fund expenditures included internal service fund insurance, maintenance and repairs, and residential solid waste disposal. Though revenues exceeded expenditures by about $40.8 million, there were substantial transfers out of the General Fund totaling $65.5 million mostly for capital improvement projects, including purchasing a building and land for a future police station. In total, fund balance in the General Fund decreased $5.7 million and ended the year at $91.4 million.
42 16-51

• Fund balance for the Tide and Submerged Land — Operating Fund increased $1.6 million and ended the current year with $6.1 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 decreased $1.3 million ending at $30.2 million. This was largely due to the commencement of two major harbor dredging capital improvement projects.
• Fund balance for the Facilities Financial Planning Reserve Fund decreased $9.4 million to end the current year at $24.8 million in fund balance. This was mainly due to transfers to other funds for debt service and to ultimately cash fund construction projects related to parks and facilities, and the acquisition of land and a building for a future police station. • Fund balance for the Debt Service Fund decreased $15,384 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 provide 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 $1.9 million mostly due to reduced expenses from imported water purchases. Fiscal Year 2022-23's quantity of water purchased decreased mildly compared to the prior fiscal year. However, almost all the decrease occurred with imported water, which cost significantly more per unit than other sources of water. As a result, the expense of imported water purchases decreased significantly. • Net position in the Wastewater Fund decreased $445,725 mainly due to increased professional services and miscellaneous expenditures. During November 2023, the City Council adopted a resolution to increase sewer rates each January 1st during calendar years 2024 through 2028. Increasing sewer rates should improve the Wastewater Fund's net position in future years.

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

Total net position in the Internal Service Funds increased $7.5 million in the current fiscal year. This was mostly due to operating income of $5.9 million, which included increases in revenue from charges for services for the City's self -insured general liability and workers' compensation programs. Operating income's contribution to net position was supplemented by positive non -operating revenue and transfers in, which increased net position by approximately $1.6 million.
43 16-52

GENERAL FUND BUDGETARY HIGHLIGHTS
Changes to Original Budget
Final budgeted revenues for the General Fund increased $5.7 million from the original budget during the year ended June 30, 2023. Factors contributing to this fluctuation are highlighted as follows:
• Final budgeted intergovernmental revenue increased $1.3 million primarily due to adjustments related to the Newport Beach Fire Department's mutual aid reimbursements, revenue sharing with the County under a Waste Disposal Agreement, and a correction to the budget for the Permanent Local Housing Allocation program grant. • Charges for services increased from the adopted budget by $1.2 million. This adjustment is related to increased revenue received for recreation classes. This was offset slightly by a reduction to the budget for plan check fees for grading that was double budgeted in two accounts.
• Property income revenues increased by $412,400 due to estimates of rental income from the acquisition and operation of the Dove Street property, which was acquired during the fiscal year with the intention of being made into a police station in the future. • Other revenues were adjusted upward from the adopted budget by a total of $2.7 million, primarily due to a settlement that the City received regarding polychlorinated biphenyls (PCBs) contamination, as well as the sale of a City owned property, and a donation received from the Friends of the Library.
• Donations were adjusted upward by $103,260 related to donations to both the Library Services Department and the Recreation & Senior Services Department.

Final budgeted expenditures for the General Fund increased $14.0 million from the original budget during the year ended June 30, 2023. The significant factors contributing to the increase are as follows:
• The addition of $6.2 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 $1.2 million from approved contracts with the majority of the City's employee associations. • Budgeted carryovers from Fiscal Year 2021-22 totaling $4.4 million were added to the adopted budget.

Variance with Final Budget
Actual General Fund revenues came in at $14.1 million above final budgeted revenues for the year ended June 30, 2023. Significant factors contributing to this favorable variance are summarized as follows:
• Property tax revenues came in $3.6 million higher than the final budget, largely due to supplemental taxes.
44 16-53

• Transient occupancy tax revenues were $2.4 million higher due to increased revenue from short-term lodging businesses and many hotel properties reporting record high transient occupancy tax receipts.
• Other taxes ended the year $1.3 million higher than projected due primarily to business license taxes, utility franchise fees, and solid waste franchise fees. • Charges for services came in $2.0 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 $2.9 million higher mainly due to overages in Beacon Bay, Balboa Yacht Basin, and WNCC Pacifica, as well as parking revenue, and GASB 87. • Intergovernmental revenues came in $1.3 million higher than the final budget largely due to payments from the Newport Beach Fire Department to the IGT-GEMT program resulting in additional revenue to the City, as well as reimbursements for mutual aid. • Other revenues exceeded the budgeted amount by $814,813 and were made up largely of the net of bad debt and damage to city property revenues.

Actual General Fund expenditures of $244.0 million were less than final budgetary estimates of $256.5 million. The $12.5 million favorable variance was due largely in part to routine savings in salaries as well as contract services. Salary and benefit savings are spread across multiple departments, with savings in the larger departments (such as the Police Department, the Public Works Department, and the Fire Department) totaling $3.5 million.

CAPITAL ASSET AND DEBT ADMINISTRATION
Capital Assets
The City's capital assets for Governmental and Business -type Activities as of June 30, 2023 amount 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. Total capital assets increased $38.2 million over the prior fiscal year.
45 16-54

Land
Intangible right to use
land and rights of way
Structures
Intangible right to use structures
Equipment
Intangible right to use equipment
Intangible right to use subscriptions
Infrastructure
Work in progress
Totals
Figure 9
Capital Assets
June 30
(net of depreciation/amortization, in thousands)
Governmental
Business -Type
Activities
Activities
Total
2022
2023
2022
2023
2022
2023
$ 1,899,966
$ 1,918,486
$ 2,219 $
2,219
$ 1,902,185
$ 1,920,705
-
-
1,509
3,809
1,509
3,809
183,197
196,235
394
378
183,591
196,613
13,021
12,007
-
-
13,021
12,007
19,017
19,346
126
101
19,143
19,447
310
236
-
-
310
236
-
2,231
-
-
-
2,231
211,008
210,389
122,484
121,062
333,492
331,451
12,836
13,839
3,731
7,697
16,567
21,536
$ 2, 339, 355
$ 2, 372, 769
$ 130,463 $
135,266
$ 2,469, 818
$ 2, 508, 035
Major capital asset events during the current fiscal year included the following:
• Capital asset additions totaled $74.2 million in both the Governmental and Business -type Activities in the current year. Of the $74.2 million, $18.4 million is related to structure additions of a fire station and the purchase of a building for a future police station; $13.7 million represents additions of infrastructure assets mostly related to the road system and water system; $4.8 million is related to equipment and intangible right to use equipment additions; $2.4 million is related to intangible rights to use land and rights of way. The remaining $34.9 million is comprised of additions of non-depreciable/non-amortizable assets such as work in progress of $16.4 million, and land and rights of way of $18.5 million.
• Of the $65.2 million of additions in governmental assets in the current year, additions in infrastructure contributed $11.1 million, which was mostly due to upgrades in the road system. The remaining $54.1 million added in the current year as governmental assets is comprised of $18.5 million of land additions and $18.4 million of structure additions, both related to the completion of a new fire station and the purchase of land and a building for a future police station; $12.4 million of work in progress, mostly related to upgrades to Sunset View park, upgrades to the road system, and a building for the City's junior lifeguard program; and $4.8 million of equipment additions, mostly related to vehicle purchases and information technology related purchases. • The $9.0 million of business -type asset additions in the current year is comprised of $2.6 million in water system infrastructure additions, $2.4 million in intangible rights to use land and right of way related to the water system, and $4.0 million of work in progress additions related to water system improvements.

Additional information on the City's capital assets can be found in Note (6) of the Notes to the Financial Statements.
46 16-55

Long-term Debt
Certificates of participation
Bond premium
CDBG Loan
Figure 10
Outstanding Debt
June 30
(in thousands)
Governmental Business -Type
Activities Activities
2022 2023 2022 2023 2022
$101,550 $ 97,610
1,149 1,007
208 -
- $ $101,550
1,149
- - 208
Total
2023
$ 97,610
1,007
Totals $102,907 $ 98,617 $ - $ - $102,907 $ 98,617
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 (7) of the Notes to the Financial Statements.

FACTORS AFFECTING NEXT YEAR'S BUDGET
Economy
Recent trends in inflation and inverted Treasury yield curves have caused concern in the broader economy and financial markets. Economic growth has slowed compared to the robust improvement experienced the previous year after emerging from the global pandemic, and a slower rate of growth in the upcoming fiscal year is generally anticipated for revenues. However, the local economy in Newport Beach remains strong with a positive economic outlook for the foreseeable future. The City is well positioned to withstand the impacts of a potential recession and is expected to maintain long-term fiscal sustainability.

Local Revenue Trends
Property tax revenue, the City's largest source of revenue, is projected to increase approximately

3.1 % next fiscal year, which is largely related to the Proposition 13 inflationary adjustment and due to changes in ownership and new construction. Although higher interest rates and rising mortgage rates have slowed sales and slightly decreased market values, the taxable value of properties reacts slower than the market value, so decreases in market value do not immediately reduce the City's property tax revenue, which is based on the assessed values. Property tax revenues are expected to continue growing for the foreseeable future.

Sales tax revenue is the second largest source of General Fund revenue. Approximately 84% 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 decrease approximately 2.8% next fiscal year due to decreases in sales from most industry groups except for restaurants and hotels. Consumer spending trends have continued shift from taxable goods, such as new car sales, to nontaxable items, such as travel, leisure, and entertainment. For example, sales from autos and transportation (the City's largest source of sales tax revenue) are projected to be lower due to a softening of demand for new vehicles, which is largely related to 47 16-56

higher interest rates. Sales from restaurants and hotels are expected to remain strong which will offset some of the decrease in revenues related to autos and transportation.

Transient occupancy tax (TOT) revenue, which is the third largest source of revenue in the General Fund, continues to remain strong. This trend is expected to continue with TOT revenues projected to increase approximately 5% next fiscal year, which is largely due to hotels reporting record high TOT receipts and also due to the opening of the Pendry hotel in September 2023.

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 2023-24 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;
• 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 2023-24, 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 pension liability, which is approximately $15 million more than the amount required to be paid. This ongoing aggressive paydown strategy of making $45 million payments to CalPERS each year is expected to eliminate the City's pension liability by 2032.

In October 2023, the City Council approved allocating an additional $5.8 million towards paying down the City's OPEB liability. This additional payment combined with the annual required contributions, is projected to eliminate the OPEB liability within the next year or two (excluding amounts related to the implied rate subsidy), which will provide for $1.5 million in annual budgetary savings.

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 29 years. 48 16-57

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. Both Moody's and Fitch reaffirmed their AAA ratings in 2023. 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 .
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FINANCIAL SECTION
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CITY OF NEWPORT BEACH
Statement of Net Position
June 30, 2023
Assets:

Cash and investments (note 2)
Receivables:

Accounts (net of allowance)
Interest
Intergovernmental receivables
Lease receivables (note 3)
Public -private partnership receivable
Restricted cash and investments with fiscal agent (note 2) Internal balances
Due from agency funds
Investment in joint ventures (note 13)
Inventory
Prepaid items
Capital assets (note 6):

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

Deferred amount from pension plans (note 11)
Deferred amount from OPEB (note 12)
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 7)
Subscription liability (note 7)
Other (note 7)
Due in more than one year:

Net pension liability (note 11)
Net OPEB liability (note 12)
Lease liability (note 7)
Subscription liability (note 7)
Other (note 7)
Total liabilities
Deferred Inflows of Resources:

Deferred amount from pension plans (note 11)
Deferred amount from OPEB (note 12)
Deferred amount from leases
Deferred amount from public -private partnerships
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
$ 329,278,781
$ 30,437,051
$ 359,715,832
6,602,052
7,084,871
13,686,923
1,157, 360
107,837
1,265,197
13,851,769
1,481
13,853,250
268,671,212
-
268,671,212
853,723
853,723
8,815,605
8,815,605
984,632
(984,632)
-
100,000
100,000
214,631
214,631
627,401
627,401
2,021,785
-
2,021,785
1,932,325,202
9,916,858
1,942,242,060
738,562,975
203,763,392
942,326,367
(298,118,856)
(78,413,441)
(376,532,297)
3,005,948,272
171,913,417
3,177,861,689
124,129,251
4,341,481
128,470, 732
17,773,307
978,016
18,751,323
141,902,558
5,319,497
147,222,055
14,053,167
3,980,130
18,033,297
6,272,460
233,697
6,506,157
3,360,976
-
3,360,976
3,171,682
31,459
3,203,141
14,468,527
-
14,468,527
1,004,482
44,120
1,048,602
520,085
-
520,085
14,318,929
14,318,929
307,125,662
10,176,747 317,302,409
21,492,688
1,172,264 22,664,952
11,269,667
3,776,654 15,046,321
1,715,047
- 1,715,047
122,074,089
122,074,089
520, 847,461 19,415,071 540,262, 532
3,487,631 81,010 3,568,641
361,988 19,815 381,803
266,652,645 - 266,652,645
925,723 925,723
271,427,987 100,825 271,528,812
2,256,305,577 131,015,969 2,387,321,546
624,358
624,358
27,879,060
27,879,060
41, 065, 756
41,065, 756
856,713
856,713
2,183, 979
2,183,979
4,629,781 4,629,781
1,912,781 - 1,912,781
20,117,377 26,701,049 46,818,426
$ 2,355,575,382 $ 157,717,018 $ 2,513,292,400
See accompanying notes to basic financial statements
53 16-62

CITY OF NEWPORT BEACH
Statement of Activities
For the Year Ended June 30, 2023
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
26,911,510
12,386,628
3,536,523
15,923,151
Public safety
121,309,057
26,273,944
2,600,981
-
28,874,925
Public works
75,904,138
8,770,525
12,167,252
5,593,573
26,531,350
Community development
13,048,442
11,269,905
993,875
20,261
12,284,041
Community services
27,937,349
15,753,446
832,882
195,728
16,782,056
Interest on long-term debt
6,666,044
-
-
-
-
Total governmental activities
271,776,540
74,454,448
20,131,513
5,809,562
100,395,523
Business -type activities:

Water
30,701,834
32,033,631
32,033,631
Wastewater
5,343,891
4,666,685
4,666,685
Total business -type activities
36,045,725
36,700,316
- 36,700,316
Total primary government
307,822,265
111,154,764 20,131,513
5,809,562 137,095,839
Taxes:

Property tax
Sales tax
Transient occupancy tax
Business license tax
Franchise tax
Othertaxes
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
54 16-63

Net (Expense) Revenue and Changes in Net Assets
Primary Government
Governmental Business -type
Activities Activities Total
(10,988,359)
(10,988,359)
(92,434,132)
(92,434,132)
(49,372,788)
(49,372,788)
(764,401)
(764,401)
(11,155,293)
(11,155,293)
(6,666,044)
(6,666,044)
(171,381,017) (171,381,017)
1,331,797
(677,206)
1,331,797
(677,206)
654,591
654,591
(171,381,017) 654,591
(170,726,426)
138,358,730
138,358,730
46,552,459
46,552,459
30,201,649
30,201,649
4,901,385
4,901,385
4,996,526
4,996,526
181,800
- 181,800
3,208,250
520,736 3,728,986
(687,766)
(262,867) (950,633)
5,552,372
- 5,552,372
233,265,405
257,869 233,523,274
61,884,388 912,460 62,796,848
2,293,690,994 156,804,558 2,450,495,552
$ 2,355,575,382 $ 157,717,018 $ 2,513,292,400
See accompanying notes to basic financial statements
55 16-64

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56 16-65

FINANCIAL SECTION
Z
57 16-66

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58 16-67

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 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.
59 16-68

CITY OF NEWPORT BEACH
Governmental Funds
Balance Sheet
June 30, 2023

Page 1 of 2 ends

Assets
Cash and investments (note 2)
Receivables:

Accounts (net of allowance)
Interest
Intergovernmental receivables
Lease receivables (note 3)
Public -private partnership receivable
Restricted cash and investments with fiscal agent (note 2) Due from other funds (note 4)
Advance to other funds (note 4)
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 4)
Due to other funds (note 4)
Total liabilities
Deferred Inflows of Resources:

Unavailable revenue
Deferred amount from leases
Deferred amount from public -private partnerships
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:

Capital Re -appropriations
Oil and gas
Other
Unassigned
Total fund balances
Total liabilities, deferred inflows of
resources and fund balances
Revenue Funds
Tide and Tide and
Submerged Submerged
General Land - Operating Land - Harbor Capital
$ 83,820,043 $
5,907,076 $ 37,536,116
4,776,670
1,181,864 -
357,342
37,474 114,936
11,015,449
- -
84, 877, 331
183, 793, 881
-
853,723
551,076
7,026,659
1,024,080
188,828
- -
$ 193,637,478 $
191,774,018 $ 37,651,052
$ 6,872,639 $
1,187,543 $
509,582
5,507,736
53,305
-
2,955,915
215,767
2,805,276
757,105
-
-
-
6,926,659
18,141,566
2,213,720
7,436,241
84, 053, 387
182, 599, 258
-
853,723
84, 053, 387
183,452, 981
1,024,080
-
188,828
7,026,659
-
1,479,188
-
-
3,788,129
30,214,811
350,000
-
-
-
840,000
5,115,426
-
77,737,532
91,442,525
6,107,317
30,214,811
$193,637,478 $ 191,774,018 $ 37,651,052
See accompanying notes to basic financial statements
60 16-69

Assets
Cash and investments (note 2)
Receivables:

Accounts (net of allowance)
Interest
Intergovernmental receivables
Lease receivables (note 3)
Public -private partnership receivable
Restricted cash and investments with fiscal agent (note 2) Due from other funds (note 4)
Advance to other funds (note 4)
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 4)
Due to other funds (note 4)
Total liabilities
Deferred Inflows of Resources:

Unavailable revenue
Deferred amount from leases
Deferred amount from public -private partnerships
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:

Capital Re -appropriations
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, 2023

Page 2 of 2 ends

Capital Project Fund Debt Service Fund
Facilities
Financial Planning Debt Service
Reserve Fund
Other
Governmental
Funds Totals
$ 18,382,442 - $ 106,144,752 $251,790,429
- 641,039 6,599,573
68,590 304,617 882,959
- 2,836,320 13,851,769
- 268,671,212
- - 853,723
- 8,533,482 282,123 8,815,605
6,349,460 - - 6,900,536
- - 7,026,659
21,150 1,045,230
- - - 188,828
$ 24,800,492 $ 8,533,482 $ 110,230,001 $ 566,626,523
$ - $ 43 $ 4,755,180 $ 13,324,987
- 2,669 5,563,710
- 3,171,682
10,906,146 14,468,527
- - 6,926,659
6,349,460 198,075 6,547,535
6,349,503 15,862,070 50,003,100
1,158,981 1,158,981
- 266,652,645
853,723
1,158,981 268,665,349
21,150 1,045,230
- 188,828
- 7,026,659
4,629,781 4,629,781
- - 1,479,188
2,183,979 35,991,302 72,178,221
350,000
- - 840,000
24,800,492 52,578,342 82,494,260
- (11,625) 77,725,907
24,800,492 2,183,979 93,208,950 247,958,074
$ 24,800,492 $ 8,533,482 $ 110,230,001 $ 566,626,523
See accompanying notes to basic financial statements
61 16-70

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62 16-71

CITY OF NEWPORT BEACH
Governmental Funds
Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Position
June 30, 2023
Fund balances of governmental funds $ 247,958,074
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. 2,353,177,480 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 (91,190,000) Certificates of participation payable - Series 2020A (6,420,000) Bond premium - Series 2020A (1,006,764)
Lease liability (12,071,977)
Subscription liability (366,952)
Deferred inflows for improvements by the operator to the underlying asset of a public -private partnership are recognized only in the government -wide statements for governmental activities.
(72,000)
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
121,273,720
Deferred inflows of resources
(3,434,348)
Pension liability
(300,432,089)
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
17,130,034
Deferred inflows of resources
(348,955)
OPEB liability
(20,721,648)
Accrued interest payable for the current portion of interest due on long-term debt has not been reported in the governmental funds.
(3,360,976)
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.
1,158,981
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.
53,103,539
Investment in joint ventures is not a current financial resource and therefore not reported in the governmental funds.
214,631
Internal balance created by the consolidation of internal service fund activities related to enterprise funds is not reported in the governmental funds. 984,632
Net position of governmental activities
$ 2,355,575,382
See accompanying notes to basic financial statements
63 16-72

CITY OF NEWPORT BEACH
Governmental Funds
Statement of Revenues, Expenditures and Changes in Fund Balances For the Year Ended June 30, 2023

Page 1 of 2 ends

Revenues:

Taxes and assessments:

Property tax
Sales tax
Transient occupancy tax
Other taxes
Intergovernmental
Licenses, permits and fees
Charges for services
Fines and forfeitures
Investment income
Net decrease in fair value of investments
Property income
Donations
Special assessments
Other
Total revenues
Expenditures:

Current:

General government
Public safety
Public works
Community development
Community services
Capital outlay
Debt service:

Principal
Interest and fiscal charges
Total expenditures
Excess (deficiency) of revenues
over expenditures
Other financing sources (uses):

Transfers in (note 5)
Transfers out (note 5)
Inception of subscription -based IT arrangements
Total other financing sources (uses)
Net change in fund balances
Fund balances, beginning
Fund balances, ending
ial Revenue Funds
Tide and
Tide and
Submerged
Submerged
General
Land - Operating
Land - Harbor Capital
$ 138,358,730
$
$
46,552,459
30,201,649
-
10,079,711
-
-
4,369,009
-
-
5,676,642
85,244
-
25,187,127
27,057
-
3,840,774
52,101
-
1,905,894
108,738
617,424
(215,495)
(78,768)
(249,668)
15,459,206
14,166,264
5,919,115
142,031
-
12,415
3,263,578
1,200
-
284,821,315
14,361,836
6,299,286
20,223,962
432,505
-
131,900,751
-
-
50,927,167
1,889,771
-
14,048,305
12,784
-
25,148,509
2,198,993
-
529,489
1,434,064
12,218,947
1,148,166
-
-
70,683
-
243,997,032
5,968,117
12,218,947
40,824,283
8,393,719
(5,919,661)
18,428,263
11,546,069
4,600,000
(65,478,891)
(18,380,271)
-
529,489
-
(46,521,139)
(6,834,202)
4,600,000
(5,696,856)
1,559,517
(1,319,661)
97,139,381
4,547,800
31,534,472
$ 91,442,525
$ 6,107,317
$ 30,214,811
See accompanying notes to basic financial statements
64 16-73

CITY OF NEWPORT BEACH
Governmental Funds
Statement of Revenues, Expenditures and Changes in Fund Balances For the Year Ended June 30, 2023

Page 2 of 2 ends

Capital Project Fund Debt Service Fund
Facilities Other
Financial Planning Debt Service Governmental
Reserve Fund Funds
Revenues:

Taxes and assessments:

Property tax $
Sales tax
Transient occupancy tax
Other taxes
Intergovernmental
Licenses, permits and fees
Charges for services
Fines and forfeitures
Investment income
Net decrease in fair value of investments
Property income
Donations
Special assessments
Other
Total revenues
Expenditures:

Current:

General government
Public safety
Public works
Community development
Community services
Capital outlay
Debt service:

Principal
Interest and fiscal charges
Total expenditures
Excess (deficiency) of revenues
over expenditures
Other financing sources (uses):

Transfers in (note 5)
Transfers out (note 5)
Inception of subscription -based IT arrangements
Total other financing sources (uses)
Net change in fund balances
Fund balances, beginning
Fund balances, ending
Totals
$
- $ -
$ 138,358,730
- -
46,552,459
- -
30,201,649
-
- 874,747
10,954,458
-
2,133,824 14,577,452
21,080,285
34,309
- 923,774
6,719,969
-
- -
25,214,184
-
- -
3,892,875
371,710
61,136 1,460,438
4,525,340
(161,745)
- 239,803
(465,873)
-
- 285,777
35,830,362
-
- 562,711
717,157
-
- 4,948,430
4,948,430
-
- 147,524
3,412,302
244,274
2,194,960 24,020,656
331,942,327
- 24,411
20,680,878
- 540,281
132,441,032
- 3,229,296
56,046,234
- 674,493
14,735,582
- 211,258
27,558,760
- 54,251,627
68,434,127
3,940,000 208,000
5,296,166
6,832,688 5,322
6,908,693
10,772,688 59,144,688 332,101,472
244,274
(8,577,728)
(35,124,032)
(159,145)
12,966,191
8,562,344
72,396,724
128,499,591
(22,581,608)
-
(22,438,273)
(128,879,043)
-
-
-
529,489
(9,615,417)
8,562,344
49,958,451
150,037
(9,371,143)
(15,384)
14,834,419
(9,108)
34,171,635
2,199,363
78,374,531
247,967,182
$ 24,800,492 $
2,183,979 $
93,208,950
$ 247,958,074
See accompanying notes to basic financial statements
65 16-74

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, 2023
Net change in fund balances - total governmental funds
$ (9,108)
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 as depreciation expense. This is the amount by which depreciation exceeded capital outlay in the current period.
31,531,145
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
4,148,000
Amortization of principal on leases
985,629
Amortization of principal on subscriptions
162,537
Inception of subscription -based IT arrangements
(529,489)
Amortization of deferred inflows for improvements by the operator to the underlying asset of a public -private partnership are recognized only in the government -wide statements for governmental activities.
8,000
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. 107,140 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. 13,213,430
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. 4,132,483
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. (29,472)
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. 7,487,482 Investment in joint ventures creates an explicit, measurable equity interest reported only in the statement of activities. (27,336)
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. 561,816 Change in net position of governmental activities $ 61,884,388 See accompanying notes to basic financial statements
66 16-75

FINANCIAL SECTION
Z
67 16-76

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68 16-77

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. 69 16-78

CITY OF NEWPORT BEACH
Proprietary Funds
Statement of Net Position
June 30, 2023
Assets and Deferred Outflows of Resources
Current assets:

Cash and investments (note 2)
Receivables:

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

Capital assets (note 6):

Land
Intangible right to use land
Structures
Equipment
Intangible right to use equipment
Software
Intangible right to use subscriptions
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 (note 11)
Deferred amount from OPEB (note 12)
Total deferred outflows of resources
Liabilities and Deferred Inflows of Resources
Current liabilities:

Accounts payable
Accrued payroll
Deposits payable
Due to other funds (note 4)
Workers' compensation - current
General liability - current
Compensated absences - current
Lease liability - current
Subscription liability - current
Total current liabilities
Noncurrent liabilities:

Workers' compensation (note 7)
General liability (note 7)
Compensated absences (note 7)
Lease liability (note 7)
Subscription liability (note 7)
Net pension liability (note 11)
Net OPEB liability (note 12)
Total noncurrent liabilities
Total liabilities
Deferred inflows of resources:

Deferred amount from pension plans (note 11)
Deferred amount from OPEB (note 12)
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
Water Wastewater Funds Funds
$ 26,591,421 $ 3,845,630 $ 30,437,051 $ 77,488,352
6,185,726 899,145 7,084,871 2,479
94,237 13,600 107,837 274,401
- 1,481 1,481 -
- - 438,573
- - - 976,555
32,871,384 4,759,856 37,631,240 79,180,360
2,219,450 - 2,219,450 -
3,883,062 - 3,883,062 -
688,396 - 688,396 39,581
301,192 35,989 337,181 46,273,432
- - - 353,888
- 4,360,625
- - - 2,104,945
150,028,159 48,826,594 198,854,753 -
7,697,408 - 7,697,408 -
(57,145,498) (21,267,943) (78,413,441) (33,540,630)
107,672,169 27,594,640 135,266,809 19,591,841
140,543,553 32,354,496 172,898,049 98,772,201
3,136,833 1,204,648 4,341,481 2,855,531
706,643 271,373 978,016 643,273
3,843,476 1,476,021 5,319,497 3,498,804
3,688,240
291,890 3,980,130
728,180
180,040
53,657 233,697
708,750
31,459
- 31,459
-
-
-
353,001
3,072,704
2,938,129
-
-
4,223,096
44,120
- 44,120
68,951
320,052
3,943,859
345,547 4,289,406
12,412,863
13,323,449
- 5,750,932
- 8,467,944
3,776,654 - 3,776,654 133,221
- - - 1,548,128
7,352,979 2,823,768 10,176,747 6,693,573
846,992 325,272 1,172,264 771,040
11,976,625 3,149,040 15,125,665 36,688,287
15,920,484 3,494,587 19,415,071 49,101,150
58,532 22,478 81,010 53,283
14,318 5,497 19,815 13,033
72,850 27,975 100,825 66,316
103,421,329 27,594,640 131,015,969 17,441,583
24,972,366 2,713,315 27,685,681 35,661,956
$ 128,393,695 $ 30,307,955 158,701,650 $ 53,103,539
(984,632)
$ 157,717,018
See accompanying notes to basic financial statements
70 16-79

CITY OF NEWPORT BEACH
Proprietary Funds
Statement of Revenues,
Expenses and Changes in Net Position
For the Year Ended June 30, 2023
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 in (note 5)
Total transfers
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
$ 31,657,910 $ $ 31,657,910 $ -
- - 36,134,126
4,624,572 4,624,572 -
- - - 25,880
375,721 42,113 417,834 3,854,933
32,033,631
4,666,685
36,700,316
40,014,939
11,374,586
-
11,374,586
-
5,355,470
1,673,490
7,028,960
3,458,730
1,837,144
640,804
2,477,948
4,091,842
2,232,734
622,190
2,854,924
1,011,004
2,737,524
1,213,165
3,950,689
3,274,429
2,905,362
225,762
3,131,124
-
2,144,331
84,409
2,228,740
-
-
-
-
517,579
204,977
220,378
322,030
4,903,042
5,618,183
2,007,182
-
-
-
6,187,129
1,710,295
706,576
2,416,871
2,289,379
30,297,446
5,166,396
35,463,842
34,105,884
1,736,185
(499,711)
1,236,474
5,909,055
456,336
64,400
520,736
1,226,922
(252,453)
(10,414)
(262,867)
(376,595)
-
-
355,270
(20,067)
-
(20,067)
(6,622)
183,816
53,986
237,802
1,198,975
1,920,001
(445,725)
1,474,276
7,108,030
379,452
379,452
1,920,001 (445,725) 1,474,276 7,487,482
126,473,694 30,753,680 45,616,057
$ 128,393,695 $ 30,307,955 $ 53,103,539
(561,816)
$ 912,460
See accompanying notes to basic financial statements
71 16-80

Cash flows from operating activities:

Cash received from customers or user departments
Cash payments to employees for services
Cash payments to suppliers for goods and services
Cash payments for other operating activities
Cash received for other operating activities
Net cash provided by operating activities
Cash flows from noncapital financing activities:

Cash received from other funds

CITY OF NEWPORT BEACH
Proprietary Funds
Statement of Cash Flows
For the Year Ended June 30, 2023
Enterprise Funds
Governmental
Total
Activities
Enterprise
Internal Service
Water
Wastewater
Funds
Funds
$ 31,643,661
$ 4,676,773 $
36,320,434
$ 36,148,886
(5,774,078)
(1,835,327)
(7,609,405)
(10,316,828)
(21,732,950)
(1,963,484)
(23,696,434)
(18,843,868)
(1,334,574)
(664,463)
(1,999,037)
-
-
-
-
3,880,813
2,802,059
213,499
3,015,558
10,869,003
Net cash provided by noncapital financing activities
Cash flows from capital and related financing activities:

Acquisition of capital assets (4,928,039)
Lease liabilities and related (65,023)
Subscription liabilities and related
Proceeds from sale of capital assets
Net cash provided (used) for capital and related financing activities (4,993,062) Cash flows from investing activities:

Investment income (loss)
Net cash provided by investing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents, beginning
Cash and cash equivalents, ending
Reconciliation to the statement of net position:

Cash and investments reported on statement of net position Cash and cash equivalents
Reconciliation of operating income to net cash
provided by operating activities:

Operating income (loss)
Adjustments to reconcile operating income
to net cash provided by operating activities:

Depreciation
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable
Decrease in intergovernmental receivables
(Increase) in inventories
Decrease in prepaid items
Increase (decrease) in accounts payable and accrued payroll (Decrease) in deposits payable
Increase in workers' compensation
(Decrease) in general liability
(Decrease) in compensated absences
(Decrease) in net pension liability and deferred cash flows (Decrease) in net OPEB liability and deferred cash flows Total adjustments
Net cash provided by operating activities
Noncash investing, capital and financing activities:
379,449
379,449
(4,928,039) (3,784,710)
(65,023) (67,960)
(242,105)
355,270
(4,993,062) (3,739,505)
193,677
50,903
244,580
779,452
193,677
50,903
244,580
779,452
(1,997,326)
264,402
(1,732,924)
8,288,399
28,588,747
3,584,193
32,172,940
69,199,953
$ 26,591,421 $
3,848,595 $
30,440,016 $
77,488,352
$ 26,591,421 $ 3,845,630 $ 30,437,051 $ 77,488,352
$ 26,591,421 $ 3,845,630 $ 30,437,051 $ 77,488,352
$ 1,736,185 $ (499,711) $ 1,236,474 $ 5,909,055
1,837,144 640,804 2,477,948 4,091,842
(10,455) 50,720 40,265 14,760
1,481 1,481 -
- - (57,187)
- 1,588,166
(321,765) 187,357 (134,408) (829,789)
(3,794) - (3,794) -
641,565
(6,819)
(86,368)
(264,575) (101,605) (366,180) (240,847)
(170,681) (65,547) (236,228) (155,375)
1,065,874 713,210 1,779,084 4,959,948
$ 2,802,059 $ 213,499 $ 3,015,558 $ 10,869,003
Net (decrease) in fair value of investments $ (252,453) $ (10,414) $ (262,867) $ (376,595) Obtaining an intangible right to use lease asset 2,353,156 2,353,156 5,616 Obtaining an intangible right to use subscription asset - - 2,104,945 Total of noncash activities $ 2,100,703 $ (10,414) $ 2,090,289 $ 1,733,966 See accompanying notes to basic financial statements
72 16-81

FINANCIAL SECTION
_ Z
73 16-82

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74 16-83

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.
75 16-84

CITY OF NEWPORT BEACH
Fiduciary Funds
Statement of Fiduciary Net Position
June 30, 2023
Custodial
Funds
Assets
Cash and investments (note 2) $ 1,401,778
Restricted cash and investments with fiscal agent (note 2) 1,318,999 Receivable:

Interest 2,018
Intergovernmental receivable 29,936
Total assets 2.752.731
Liabilities
Advances from other funds (note 4) 100,000
Due to others 425.758
Total liabilities 525,758
Net Position
Restricted for:

Individuals, organizations, and other governments 2,226,973 Total net position $ 2,226,973
See accompanying notes to basic financial statements
76 16-85

CITY OF NEWPORT BEACH
Fiduciary Funds
Statement of Changes in Fiduciary Net Position
For the Year Ended June 30, 2023
Custodial
Funds
Additions
Special assessments $ 1,289,499
Investment earnings 47,553
Other 323,353
Total additions 1,660,405
Deductions
Debt service 1,653,677
Administrative 112,756
Other 268,907
Total deductions 2,035,340
Net increase (decrease) in fiduciary net position (374,935) Net position, beginning of year 2,601,908
Net position, end of year $ 2,226,973
See accompanying notes to basic financial statements
77 16-86

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78 16-87

FINANCIAL SECTION
__Z
79 16-88

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80 16-89

CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2023
(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 data and transactions are included in the debt service fund. Separate financial statements are not prepared for the Corporation. The debt service 81 16-90

CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2023
(1) Summary of Significant Accounting Policies (Continued) 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 reduce long-term indebtedness of the reporting government are reported as a reduction of the related liability, rather than as an expenditure. 82 16-91

CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2023
(1) Summary of Significant Accounting Policies (Continued) 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 availability period. Other revenue items are considered to be measurable and available when cash is received by the City. 83 16-92

CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2023
(1) Summary of Significant Accounting Policies (Continued) 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 $1,912,779. 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 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.
84 16-93

CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2023
(1) Summary of Significant Accounting Policies (Continued) 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 the 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.

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. 85 16-94

CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2023
(1) Summary of Significant Accounting Policies (Continued) 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.

Capital Protect Funds
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.

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:
86 16-95

CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2023
(1) Summary of Significant Accounting Policies (Continued) 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 on behalf of employees for flexible spending accounts.
d. New Accounting Pronouncements
Current Year Standards
In fiscal year 2022-23, the City implemented the following Government Accounting Standards Board (GASB) Statements:

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 issuers 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.
87 16-96

(1)

CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2023
Summary of Significant Accounting Policies (Continued)
GASB Statement No. 96 —
Arrangements", effective for fisca
statement provides guidance on
subscription -based information
governments.

Pending Accounting Standards
"Subscription -Based Information Technology
I years beginning after June 15, 2022. This
the accounting and financial reporting for
technology arrangements (SBITAs) for
GASB has issued the following statements, which may impact the City's financial reporting requirements in the future:

GASB Statement No. 100 — "Accounting Changes and Error Corrections", effective for periods beginning after June 15, 2023. The objective of this statement is to amend GASB Statement No. 62 and clarify the existing definition of accounting changes, and requires enhancements to accounting and financial reporting for accounting changes and error corrections to provide more understandable, reliable, relevant, consistent and comparable information.

GASB Statement No. 101 — "Compensated Absences", effective for periods beginning after June 15, 2023. The objective of this Statement requires that liabilities for compensated absences be recognized for (1) leave that has not been used and (2) leave that has been used but not yet paid in cash or settled through noncash means. A liability should be recognized for leave that has not been used if (a) the leave is attributable to services already rendered, (b) the leave accumulates, and (c) the leave is more likely than not to be used for time off or otherwise paid in cash or settled through noncash means. Leave is attributable to services already rendered when an employee has performed the services required to earn the leave. Leave that accumulates is carried forward from the reporting period in which it is earned to a future reporting period during which it may be used for time off or otherwise paid or settled.
e. 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.

Investments
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.
16-97

CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2023
(1) Summary of Significant Accounting Policies (Continued) 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 $20,381,638 at June 30, 2023. 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 Chairperson 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. f. Accounts Receivable
Accounts receivable represent all service and capital project billings other than intergovernmental receivables stated below. As of June 30, 2023, 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. g. 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, 2023, the balance of these accounts totaled $13,853,250. 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. 89 16-98

CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2023
(1) Summary of Significant Accounting Policies (Continued) Capital Assets
Capital assets are tangible and intangible assets, which include land, structures, equipment, and infrastructure assets, and 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 or software subscription payments for the leases or subscriptions in which the City is the lessee or subscriber.

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 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
j. 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. 90 16-99

(1)

CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2023
Summary of Significant Accounting Policies (Continued)
k. 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 fiscal 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
January 1
Levy date
July 1
Due dates
November 1
15t installment
March 1
2nd installment
Collection dates
December 10
15t installment
April 10
2nd installment
I. 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 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 criteria have been met, but the revenue recognition criteria have not been met.
a
16-100

CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2023
(1) Summary of Significant Accounting Policies (Continued) 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 and will not be recognized as an inflow of resources (revenue) until that time. The City has five 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 and OPEB 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 and OPEB 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 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. The fifth item is a deferred inflow from a certain public -private partnership arrangement where the City is the transferor, and represents the sum of certain improvements by the operator to the underlying public -private partnership asset and a present -value estimate of certain future payments from the operator to the City.

This amount is generally amortized over the same time period associated with the related present value estimate.
92 16-101

CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2023
(1) Summary of Significant Accounting Policies (Continued) 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 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. 93 16-102

(1)

CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2023
Summary of Significant Accounting Policies (Continued)
am
r.

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.

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, 2021
June 30, 2022
July 1, 2021 to June 30, 2022
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)
Measurement Date (MD)
Measurement Period (MP)
June 30, 2021
June 30, 2022
July 1, 2021 to June 30, 2022
94 16-103

CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2023
(1) Summary of Significant Accounting Policies (Continued) t. 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.) are also excluded from the City's estimated lease liabilities and receivables.

U. Subscription -Based Information Technology (IT) Arrangements The City is a participant in subscription -based IT arrangements as detailed in note 8. The City recognizes a subscription liability and intangible right to use subscription assets in the financial statements. At the commencement of the arrangement, the City initially measures the liability at the present value of payments expected to be paid during the arrangement term. Subsequently, the liability is reduced by the principal portion of payments made. The intangible right to use subscription assets are initially measured at the initial amount of the subscription liability. Subsequently, the intangible right to use subscription assets are amortized over the life of the arrangement term.

V. Public -Private Partnerships (PPP)
The City's public -private partnership receivable is an estimated present -value of future payments from the operator to the City. The estimated public -private partnership term is the time period that the operator's right to use the underlying public -private partnership asset is noncancelable, plus extension and termination time periods if based on the public -private partnership arrangement it is reasonable that the extensions will be exercised, and the terminations will not be exercised. When the public -private partnership arrangement's implicit interest rate is not known an estimate is made of the rate the City may charge an operator. Non -public -private partnership components of public -private partnership arrangements have been treated as separate arrangements when practicable and are excluded from the City's estimated receivable. Arrangements that do not meet the Governmental Accounting Standards Board's definition of a public private partnership (e.g., leases that do not require the operator to improve the City's existing assets, etc.) are also excluded from the City's estimated receivable.
95 16-104

CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2023
(2) Cash and Investments
Cash and investments as of June 30, 2023, are classified in the accompanying financial statements as follows:

Statement of net position:

Cash and investments $359,715,832
Restricted cash and investments
with fiscal agent 8,815,605
Fiduciary funds:

Cash and investments 1,401,778
Restricted cash and investments
with fiscal agent 1,318,999
Total cash and investments $371,252,214
Cash and investments as of June 30, 2023, consist of the following:

Cash on hand $ 27,069
Deposits with financial institutions 23,070,618
Cash and receivables in investment accounts 141,822
Investments 348,012,705
Total cash and investments $371,252,214
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.
96 16-105

(2)

CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2023
Cash and Investments (Continued)
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%
Federal Home Loan Mortgage Corp
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.

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.
97 16-106

(2)

CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2023
Cash and Investments (Continued)
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 months
No Limit
10%
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:
16-107

(2)

CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2023
Cash and Investments (Continued)
Investment Maturities (In Years)
Investment Type
Fair Value
Less than 1
1 to 3
3 to 5 More than 5
Total
Money Market Funds $
14,838,878
$ 14,838,878
$
$ $
$ 14,838,878
U.S. Treasury Bills
43,562,123
43,562,123
43,562,123
U.S. Treasuries
90,154,286
13,812,949
46,723,612
29,617,725
90,154,286
Certificates of Deposit
3,797,773
3,797,773
-
-
3,797,773
U.S. Agency Securities
56,305,926
41,342,711
10,977,215
3,986,000
56,305,926
FHLMC
13,941,758
1,471,452
7,415,724
5,054,582
13,941,758
Asset Backed Securities
18,141,982
611,044
11,970,649
5,560,289
18,141,982
Corporate Bonds
61,022,923
19,117,288
28,215,555
13,690,080 -
61,022,923
Municipal Bonds
1,955,920
1,955,920
-
-
1,955,920
LAIF
20,381,638
20,381,638
-
20,381,638
Yankee Bonds
1,899,500
-
1,899,500
1,899,500
Supranationals
11,898,698
5,795,284
6,103,414
11,898,698
Investments with Fiscal Agent:

Money Market Funds
9,775,881
9,775,881
-
9,775,881
U.S. Treasuries
54,287
54,287
54,287
LAIF
281,132
281,132
281,132
Totals $ 348,012,705 $176,798,360 $ 113,305,669 $ 57,908,676 $ - $ 348,012,705 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, FHLMCs, 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, 2023, the City held asset backed securities of $18,141,982.

The City's FHLMCs may pay down principal prior to maturity. As of June 30, 2023, the City held FHLMCs of $13,941,758.

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, 2023, the City held corporate, municipal, and Yankee bonds with make whole call provisions as summarized below:

Maturity
Value
January 2024
$ 1,482,780
February 2024
1,955,920
May 2024
4,544,561
July 2024
1,899,500
February 2025
944,010
March 2027
1,892,940
September 2027
1,037,178
Total $13,756,889
16-108

(2)

CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2023
Cash and Investments (Continued)
Investments with call dates may be called anytime on or after the call date. As of June 30, 2023, the City held corporate bonds with call dates as summarized below:

Maturity
Value
Call Date
August 2023
$ 995,920
July 2023
February 2024
1,970,940
January 2024
April 2025
1,418,227
March 2025
February 2026
843,129
February 2025
May 2027
2,889,570
April 2027
Total $ 8,117,786
Investments may have both a make whole call provision and a regular call date. As of June 30, 2023, the City held corporate bonds with both a make whole call provision and a regular call date as summarized below:

Maturity
Value
Call Date
February 2024
$ 1,295,204
December 2023
March 2024
2,151,326
February 2024
May 2024
1,087,659
July 2023
June 2024
998,500
July 2023
July 2024
447,384
July 2023
September 2024
961,770
August 2024
March 2025
1,960,340
March 2024
March 2025
2,851,050
February 2025
April 2025
2,857,170
March 2025
June 2025
950,560
June 2024
August 2025
2,322,868
May 2025
July 2026
1,962,260
July 2025
September 2027 980,580 August 2027
Total $20,826,671
Approximately $9.6 million of the investments that are FHLMC's or have either a regular call date or both a make whole call provision and a regular call date, also have interest rate reset dates. If $5.7 million of the securities with interest rate reset dates are not called by their call date, then these securities will convert to floating rate securities tied to a benchmark index. Prior to their call date, these securities pay a fixed rate of interest. An additional $2.9 million of the securities with interest rate reset dates are FHLMC's with a potential variable coupon rate. m
16-109

(2)

CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2023
Cash and Investments (Continued)
The remaining $998,500 of the securities with interest rate reset dates converted to floating rate securities before the end of the financial statements' fiscal year.

Investments with Fair Values Highly Sensitive to Interest Rate Fluctuations As of June 30, 2023, the City did not have any investments (including investments held by fiscal agent) whose fair values were highly sensitive to interest rate fluctuations.

Disclosures Relating 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 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, 2023 for each investment type.

Investment Type
Money Market Funds
U.S. Treasury Bills
U.S. Treasuries
Certificates of Deposit
U.S. Agency Securities
FHLMC
Asset Backed Securities
Corporate Bonds
Municipal Bonds
LAIF
Yankee Bonds
Supranationals
Investments with Fiscal Agent:

Money Market Funds
U.S. Treasuries
LAIF
Minimum Legal
Fair Value
Rating
AAA
m
AAAAA+
AA AA- A-1+ A+ A A- Not Rated
14,838,878
AAAm
$ -
$ 14,838,878 $ -
$ - $ - $ - $ - $ - $ - $ -
43,562,123
None
-
- -
- - 43,562,123 - - - -
90,154,286
None
-
- 90,154,286
- - - - - - -
3,797,773
A-1
-
- -
- - 3,797,773 - - - -
56,305,926
None
-
- 56,305,926
- - - - - - -
13,941,758
None
1,471,452
- 12,470,306
- - - - - - -
18,141,982
AAA
12,126,060
- -
- - - - - - 6,015,922
61,022,923
A-
-
- 8,947,361
2,739,776 5,818,607 - 11,765,039 20,995,461 10,756,679 - 1,955,920
A-
-
- 1,955,920
- - - - - - -
20,381,638
NIA
-
- -
- - - - - - 20,381,638
1,899,500
A-
-
- -
- - - - - 1,899,500 -
11,898,698
AA-
11,898,698
- -
- - - - - - -
9,775,881
AAm
-
9,775,881 -
- - - - - - -
54,287
None
-
- 54,287
- - - - - - -
281,132
NIA
281, 132
Totals $348,012,705 $25,496,210 $24,614,759 $169,888,086 $2,739,776 $5,818,607 $47,359,896 $11,765,039 $20,995,461 $12,656, 179 $26,678,692 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 Amount
FHLMC U.S. Agency Securities $16,257,299
FHLMC FHLMC 13,941,758
101
16-110

CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2023
(2) Cash and Investments (Continued)
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 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, 2023, none of the City's deposits with financial institutions in excess of federal depository amounts were held in uncollateral 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 -rats 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.
102 16-111

(2)

CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2023
Cash and Investments (Continued)
Most of the City's investments are in Level 2 of the fair value hierarchy. Examples of Level 2 valuation inputs include:
• Quoted prices for similar assets or liabilities in active markets • Quoted prices for identical or similar assets or liabilities in markets that are not active • Inputs other than quoted prices that are observable for the asset or liability • Inputs that are derived principally from or corroborated by observable market data by correlation or other means.

Following are the City's recurring fair value measurements as of June 30, 2023:

Money Market Funds
U.S. Treasury Bills
U.S. Treasuries
Certificates of Deposit
U.S. Agency Bonds
FHLMC
Asset Backed Securities
Corporate Bonds
Municipal Bonds
LAIF
Yankee Bonds
Supranationals
Investments with Fiscal Agent:

Money Market Funds
U.S. Treasuries
LAIF
Totals
(3) Lease Receivables
City as Lessor
Investments Quoted Prices in Quoted Prices
Fair Value
That Are Not
Subject to Fair
Value Hierarchy
Active Markets for Similar Significant
for Identical Assets in Active Unobservable
Assets (Level 1) Markets (Level 2) Inputs (Level 3)
$ 14,838,878
$ 14,838,878
$ - $ - $ -
43,562,123
-
- 43,562,123 -
90,154,286
-
- 90,154,286 -
3,797,773
-
- 3,797,773 -
56,305,926
-
- 56,305,926 -
13,941,758
-
- 13,941,758 -
18,141,982
-
- 18,141,982 -
61,022,923
-
- 61,022,923 -
1,955,920
-
- 1,955,920 -
20,381,638
20,381,638
- - -
1,899,500
-
- 1,899,500 -
11,898,698
-
- 11,898,698 -
9,775,881
9,775,881
- - -
54,287
-
- 54,287 -
281,132
281,132
- - -
$348,012,705 $ 45,277,529 $ - $ 302,735,176 $ -
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, 2023, the City recognized $4,701,780 of variable payments related 103 16-112

CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2023
(3) Lease Receivables (Continued)
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 $2,622,004. Lease inflows for lease revenue from amortization of the related GASB 87 deferred inflows of resources from leases was $8,042,290. Lease receivables at June 30, 2023 were $268,671,212.

Regulated Lease
While not technically a lease, the City licenses streetlight space for cellphone antennas and related equipment to a cellphone company. Restrictions to the license cause the license to be a GASB 87 regulated lease that is excluded from GASB 87's present value calculations and notes.

Generally, these licensed streetlight spaces are licensed nonexclusively, but some of these licensed spaces may be licensed exclusively. The total revenue recognized during the fiscal year for this license was $8,596. Below are the expected future minimum payments to the City from this license. License payments by the cellphone company to the City do not secure debt issued by the City.

Year Ending
License
June 30,
Payments
2024
$ 4,843
2025
1,500
2026
1,500
2027
1,500
2028
1,500
2029-2033
7,500
2034-2038
7,500
2039
1,000
Total $ 26,843
104 16-113

CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2023
(4) Interfund Receivables and Payables
At June 30, 2023, interfund receivables and payable were as follows:

Due from
Due to
General Fund
$ 551,076
$
-
Facilities Financial Planning Reserve Fund
6,349,460
-
Debt Service Fund
-
6,349,460
Internal Service Fund
-
353,001
Other Governmental Funds
-
198,075
Totals
$ 6,900,536
$
6,900,536
The above balances are primarily due to reclassification of negative cash balances
in the city-
wide cash pool.

At June 30, 2023, interfund advances receivable and payable were as follows:

Advance to
Advance from
General Fund
$ 7,026,659
$
-
Tide and Submerged Land - Harbor Capital Fund
-
6,926,659
Flexible Spending Account Custodial Fund
-
100,000
Totals
$ 7,026,659
$
7,026,659
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. 105 16-114

CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2023
(4) Interfund Receivables and Payables (Continued)
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
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
Totals $ 3,426,659 $ 3,500,000 $ 6,926,659
The General Fund advance to the Flexible Spending Account Fund was to fund the new plan year beginning January 1, 2023, as employees can spend their total elected contribution amount before any employee contributions have been made. Repayment of the advance to the General Fund will be funded from forfeited employee balances.
(5) Interfund Transfers
Interfund transfers at June 30, 2023, consisted of the following:

Transfers In
Tide and
Tide and
Facilities
Submerged
Submerged
Financial
Internal
Other
Land -
Land - Harbor
Planning
Service
Governmental
General Fund Operating
Capital
Reserve Debt Service
Funds
Funds
Total
General Fund
$ - $ 11,546,069
$ 4,600,000
$ 12,924,919 $
$ 379,452
$ 36,028,451 $
65,478,891
O Tide and Submerged Land -
Operating
18,380,271 -
-
-
-
-
18,380,271
Facilities Financial Planning
m Reserve
-
- 8,562,344
14,019,264
22,581,608
Other Governmental Funds
47,992
41,272
22,349,009
22,438,273
Totals $ 18,428,263 $ 11,546,069 $ 4,600,000 $ 12,966,191 $ 8,562,344 $ 379,452 $ 72,396,724 $ 128,879,043 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:
106 16-115

CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2023
(5) Interfund Transfers (Continued)
• $11,546,069 to subsidize the maintenance and operation of the Tide and Submerged Land — Operating Fund;
• $4,600,000 to the Tide and Submerged Land — Harbor Capital Fund to cash fund Harbor Capital projects;
• $12,924,919 to the Facilities Financial Planning Reserve Fund to cash fund construction projects for General Fund supported facilities;
• $379,452 to the Equipment Maintenance Internal Service Fund to fund ongoing Plymovent exhaust extraction system updates; and
• $36,028,451 to Other Governmental Funds, which includes $8,430,000 to the Unrestricted Capital Improvements Fund to cash fund General Fund capital improvements, $5,010 to close Measure M project, $24,093,440 to Police Facility Fund to purchase property for a future police station site, $1,000,000 to the Neighborhood Enhancement Fund for capital improvement projects, $2,500,000 to the Facilities Maintenance Fund for maintenance of facilities.

The Tide and Submerged Land — Operating Fund transferred $18,380,271 to the General Fund to reimburse for tidelands related expenditures.

The Facilities Financial Planning Reserve Fund transferred $8,562,344 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.

The Facilities Financial Planning Reserve Fund also transferred to Other Governmental Funds as follows:
• $6,900,000 to the Miscellaneous FFP Projects Fund for CNG fueling support facility and transfer station rehabilitation;
• $3,324,919 to the Police Facility Fund to purchase property for a future police station; • $900,000 to the Fire Station Fund for design costs related to the replacement of Fire Station No. 1 and Balboa Library; and
• $2,894,345 to the Parks and Community Centers Fund for construction costs related to a pedestrian and bicycle bridge, and a public restroom.

Other Governmental Funds, transferred $22,349,009 to other funds as follows:

The Unrestricted Capital Improvements Fund transferred $1,450,000 and $15,500,000 to the Police Facility Fund and the Neighborhood Enhancement Fund respectively to purchase property for a future police station and for construction costs related to neighborhood enhancement projects;
The Oceanfront Encroachment Fund transferred $500,000 to the Unrestricted Capital Improvements Fund to fund construction costs to beach access; and The Miscellaneous FFP Projects Fund transferred $4,899,009 to the Parks and Community Centers Fund to fund the construction of a new library lecture hall. 107 16-116

CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2023
(6) Capital Assets
Capital asset activity for the year ended June 30, 2023, 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
Intangible right to use subscriptions
Infrastructure
Less accumulated depreciation/amortization for:

Structures
Intangible right to use structures
Equipment
Intangible right to use equipment
Intangible right to use subscriptions
Infrastructure
Net depreciable/amortizable
Net capital assets
Beginning
Balance,
As Restated* Additions
Deletions
Balance
June 30, 2023
$1,899,966,292 $18,519,934 $ - $1,918,486,226
12,835,533 12,360,637 (11,357,194) 13,838,976
1,912,801,825 30,880,571 (11,357,194) 1,932,325,202
242,645,417 18,405,432 (342,470) 260,708,379
14,060,855 - (133,170) 13,927,685
58,990,143 4,814,699 (2,999,011) 60,805,831
348,272 5,616 - 353,888
2,634,434 - - 2,634,434
396,452,687 11,060,030 (7,379,959) 400,132,758
715,131,808 34,285,777 (10,854,610) 738,562,975
(59,448,334) (5,343,834) 319,236 (64,472,932)
(1,040,019) (1,014,212) 133,171 (1,921,060)
(39,972,804) (4,412,477) 2,925,134 (41,460,147)
(38,584) (79,225) - (117,809)
(403,595) - (403,595)
(185,444,512) (7,608,262) 3,309,461 (189,743,313)
(285,944,253) (18,861,605) 6,687,002 (298,118,856)
429,187,555 15,424,172 (4,167,608) 440,444,119
$2,341,989,380 $46,304,743 $(15,524,802) $2,372,769,321 * The beginning balance amount for intangible right to use subscriptions includes prior adjustment of $2,634,434 from implementing GASB 96, which requires a capital asset to be reported for certain subscriptions where the City is the subscriber based on a present value estimate of certain subscription payments. See Note (7) for additional details.

Governmental Activities capital assets net of accumulated depreciation/amortization at June 30, 2023 are comprised of the following:
108 16-117

CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2023
(6) Capital Assets (Continued)
General Capital Assets, net
Internal Service Fund Capital Assets, net
Total
Business -type Activities:

Non-depreciable/non-amortizable:

Land
Work in progress
Depreciable/amortizable:

Intangible right to use land and right of way
Structures
Equipment
Infrastructure
Total Capital Assets
Less accumulated depreciation/amortization for:

Intangible right to use land and right of way
Structures
Equipment
Infrastructure
Net depreciable/amortizable
Net capital assets
Beginning
Balance
$ 2,353,177,480
19,591,841
$ 2,372,769,321
Additions
Deletions
Balance
June 30, 2023
$ 2,219,450 $ - $ - $ 2,219,450
3,730,587 4,042,274 (75,453) 7,697,408
5,950,037 4,042,274 (75,453) 9,916,858
1,529,906 2,353,156 - 3,883,062
688,396 - - 688,396
337,181 - - 337,181
198,141,357 2,600,848 (1,887,452) 198,854,753
200,696,840 4,954,004 (1,887,452) 203,763,392
(20,513) (53,656) - (74,169)
(294,855) (15,357) - (310,212)
(210,838) (25,291) - (236,129)
(75,657,112) (2,383,644) 247,825 (77,792,931)
(76,183,318) (2,477,948) 247,825 (78,413,441)
124,513,522 2,476,056 (1,639,627) 125,349,951
$ 130,463,559 $ 6,518,330 $ (1,715,080) $ 135,266,809
Depreciation/amortization expense was charged in the following functions in the Statement of Activities:
109 16-118

CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2023
(6) Capital Assets (Continued)
Governmental Business -type
Activities Activities
General Government $ 6,671,560 $ -
Public Safety 1,650,615 -
Public Works 178,131 -
Community Development 508,964 -
Community Service 9,852,335 -
Water - 1,837,144
Wastewater - 640,804
Totals $ 18,861,605 $ 2,477,948
Internal Service Fund depreciation/amortization of $4,091,842 is allocated to governmental functions above.
(7) Long -Term Liabilities
Changes in Long -Term Liabilities
The long-term liabilities for governmental activities for the year ended June 30, 2023, are as follows:

Beginning
Amounts
Balance,
Ending
Due Within
As Restated*
Additions
Deletions
Balance
One Year
Governmental activities:

Other debt:

Certificates of participation -Series 2010B
$ 94,465,000
$
$ (3,275,000) $
91,190,000
$ 3,390,000
Certificates of participation - Series 2020A
7,085,000
(665,000)
6,420,000
695,000
Bond premium - Series 2020A
1,148,895
(142,131)
1,006,764
-
Direct borrowing:

CDBG loan
208,000
(208,000)
-
-
Other long-term liabilities:

Workers' compensation payable
15,754,588
4,903,042
(4,261,477)
16,396,153
3,072,704
Claims and judgments payable
8,695,880
5,618,185
(5,625,004)
8,689,061
2,938,129
Compensated absences
12,777,408
2,007,182
(2,093,550)
12,691,040
4,223,096
Lease liability
13,321,041
5,616
(1,052,508)
12,274,149
1,004,482
Subscription liability
2,634,434
-
(399,301)
2,235,133
520,085
Total governmental activities
$ 156,090,246
$ 12,534,025
$ (17,721,971) $
150,902,300
$ 15,843,496
" The beginning balance amount for subscription liability includes a prior adjustment of $2,634,434 from implementing GASB 96, which requires a liability to be reported for certain subscriptions where the City is the subscriber based on a present value estimate of certain subscription payments. See Note (7) for additional details. 110 16-119

(7)

CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2023
Long -Term Liabilities (Continued)
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.

The long-term liabilities for business -type activities for the year ended June 30, 2023, are as follows:

Lease liability
Total business -type activities
2010 Certificates of Participation
Beginning Ending Due Within
Balance Additions Deletions Balance One Year
$1,512,574 $2,353,156 $ (44,956) $3,820,774 $ 44,120
$1,512,574 $2,353,156 $ (44,956) $3,820,774 $ 44,120
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 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, 2023, the City has received $29,455,774 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 $3,390,000 to $7,245,000. The total outstanding balance at June 30, 2023 amounted to $91,190,000. The use of the following 111
16-120

(7)

CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2023
Long -Term Liabilities (Continued)
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
Interest
Total
2024
$ 3,390,000
$ 6,365,978
$ 9,755,978
2025
3,510,000
6,142,971
9,652,971
2026
3,675,000
5,889,360
9,564,360
2027
3,850,000
5,623,515
9,473,515
2028
4,025,000
5,345,089
9,370,089
2029-2033
23,060,000
22,068,073
45,128,073
2034-2038
28,900,000
12,815,308
41,715,308
2039-2041
20,780,000
2,279,425
23,059,425
Totals
$ 91,190,000
$ 66,529,719
$157,719,719
2020 Certificates of Participation
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.

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 1 st of each year. The remaining principal payments of the Series 2020A Certificates, which are payable through July 1, 2030, range from $695,000 to $915,000. The total outstanding balance at June 30, 2023 amounted to $6,420,000. 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:
112
16-121

(7)

CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2023
Long -Term Liabilities (Continued)
Year Ending
June 30 Principal Interest
2024
2025
2026
2027
2028
2029-2031
Totals
CDBG Loan
$ 695,000 $ 242,900 $
725,000
214,500
755,000
184,900
785,000
154,100
815,000
122,100
Total
937,900
939,500
939,900
939,100
937,100
2,645,000 161,300 2,806,300
$ 6,420,000 $ 1,079,800 $ 7,499,800
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%. As of June 30, 2023, the outstanding balance on the loan is $0.

Claims and Judaments
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 -not -reported claims based upon past experience, modified for current trends and information. While the ultimate amount of losses incurred through June 30, 2023, 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, 2023, for general liability amounted to $8,689,061 and for workers' compensation was $16,396,153.

Compensated Absences
The City's policies relating to compensated absences are described in Note (1). This liability at June 30, 2023, is $12,691,040. Compensated absences are liquidated from the Compensated Absences internal service fund.

JnI1SPr1 Crt-dit
The City has a letter of credit in the amount of $300,938. 113
16-122

(7)

CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2023
Long -Term Liabilities (Continued)
Leases
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.

Estimates of the future lease payments for the City's lease liability for governmental activities are as follows:

Year Ending
June 30
Principal
Interest
Total
2024
$ 1,004,483
$ 65,407
$ 1,069,890
2025
1,010,019
59,871
1,069,890
2026
1,009,760
54,304
1,064,064
2027
951,085
48,915
1,000,000
2028
956,327
43,673
1,000,000
2029-2033
4,861,277
138,723
5,000,000
2034-2038
2,481,198
18,802
2,500,000
Totals $ 12,274,149 $ 429,695 $ 12,703,844
Estimates of the future lease payments for the City's lease liability for business -type activities are as follows:

Year Ending
June 30
Principal
Interest
Total
2024
$ 44,120
$ 20,903
$ 65,023
2025
44,364
20,659
65,023
2026
44,608
20,415
65,023
2027
44,854
20,169
65,023
2028
45,101
19,922
65,023
2029-2033
229,266
95,852
325,118
2034-2038
235,656
89,462
325,118
Thereafter
3,132,805
508,067
3,640,872
Totals
$ 3,820,774
$ 795,449
$ 4,616,223
114
16-123

(7)

CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2023
Long -Term Liabilities (Continued)
Subscription -Based Information Technology Arrangements Subscription -based information technology arrangements (SBITAs) that meet the requirements of GASB 96 for which the City is a subscriber are disclosed as SBITA liabilities on the City's financial statements that are presented on the accrual basis of accounting with an economic resources measurement focus. Included in the City's SBITA liabilities are subscriptions related to computer security, training, library operations, public communications, recreation classes registrations, website hosting, word processing, spreadsheets, information backups, performance evaluations, telephone calls, public safety, etc. GASB 96 excludes certain outflows (e.g., certain variable payments, etc.) from the measurement of SBITA liabilities.

During the fiscal year, outflows of resources from the City to one SBITA vendor included variable payments that were not previously included in the City's SBITA liabilities. The city's recreation class registration software vendor charges fees for every class registration. These fees cover both credit card processing and the registration software subscription. The amount of fees paid to the software vendor varies with the number of registrations. However, the fees will not decrease below the vendor's annual minimum fee. Only the estimated annual minimum software subscription fee has been included in the City's GASB 96 subscription liabilities.

For the fiscal year ending June 30, 2023, there were approximately $80,203 of software subscription fees in excess of the annual minimum.

Estimates of the future subscription payments for the City's SBITA liabilities are as follows:

Year Ending
June 30 Principal Interest Total
2024 $ 520,085 $ 10,880 $ 530,965
2025
335,606
8,515
344,121
2026
248,869
6,941
255,810
2027
171,315
5,787
177,102
2028
172,259
4,842
177,101
2029-2033
786,998
9,960
796,958
Totals
$ 2,235,132 $
46,925
$ 2,282,057
(8) Limited Obligation 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 115
16-124

(8)
(9)

CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2023
Limited Obligation Bonds (Continued)
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 Custodial Fund. Bonds outstanding at June 30, 2023, for each district under the Bond Acts of 1911 and 1915 areas follows:

Bonds Outstanding
Assessment District
Original Issue
June 30, 2023
Reassessment District 2012
$13,583,436
$ 1,159,546
Assessment District No. 117
2,955,000
2,375,000
Assessment District No. 116
1,575,000
1,365,000
Assessment District No. 116B
665,000
580,000
Assessment District No. 111
2,412,000
2,196,000
Assessment District No. 113
4,565,000
4,330,000
Totals
$25,7 55,436
$12,0 55,546
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. 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
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 116
16-125

CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2023
(9) Risk Management — General Liability and Workers' Compensation (Continued) 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 claims payable was $25,085,214 at June 30, 2023, which represents the discounted present value of all outstanding claims. The claims are discounted using an interest rate of 3%.

General Liability Workers' Compensation
June 30, 2022 June 30, 2023 June 30, 2022 June 30, 2023 Unpaid claims, beginning of fiscal year $
8,265,635 $
8,695,880 $
14,753,000 $
15,754,588
Insured claims (including IBNR)
5,957,756
5,618,185
4,213,387
4,903,042
Claim payments
(5,527,511)
(5,625,004)
(3,211,799)
(4,261,477)
Unpaid claims, end of fiscal year $
8,695,880 $
8,689,061 $
15,754,588 $
16,396,153
(10) 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 $142,015,238 at June 30, 2023.

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 117 16-126

CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2023
(11) Pension Plans (Continued)
(all other) Employee Pension Plans, agent multiple -employer defined benefit pension plans administered by the California Public Employees' Retirement System (CalPERS), 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.

The Plans' provisions and benefits in effect for the measurement period ended June 30, 2022 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
Prior to
November 24,2012

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

2.0% to 2.5%

12.35% - 13.0%

30.83% - 31.48%
Miscellaneous
On or after
November 24, 2012

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

1.092% to 2.418%

12.35% - 13.0%

27.41 % - 28.06%
On or after
January 1, 2013

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

1.0% to 2.5%

12.35% - 13.0%

26.91 % - 27.56%
118
16-127

CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2023
(11) Pension Plans (Continued)
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
On or after
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 of service
5 years of service
5 years of 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%

13.5% - 14.6%

65.04% - 66.14%

67.54% - 68.64%
Employees Covered — At the measurement date of June 30, 2022, the following employees were covered by the benefit terms for each Plan:

Miscellaneous Safety
Inactive employees or
beneficiaries currently
receiving benefits 748 466
Inactive employees entitled to
but not yet receiving benefits 627 95
Active employees 534 279
Totals 1,909 840
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 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.
119 16-128

CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2023
(11) Pension Plans (Continued)
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, 2022, using an annual actuarial valuation as of June 30, 2021 rolled forward to June 30, 2022 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, 2021 actuarial valuations were determined using the following actuarial assumptions:

Miscellaneous
Safety
Valuation Date
June 30, 2021
June 30, 2021
Measurement Date
June 30, 2022
June 30, 2022
Actuarial Cost Method
Entry -Age Normal Cost Method
Actuarial Assumptions:

Discount Rate

6.90%

6.90%
Inflation

2.30%

2.30%
Payroll growth

2.75%

2.75%
Projected salary increases
Varies by Entry
Age and Services
Investment Rate of Return

7.00%(' )

7.00%('
Mortality Rate Table(2) Derived using CaIPERS' Membership Data for all Funds
Post Retirement Benefit Increase The lesser 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; includes inflation.
(2) The mortality table used was developed based on CalPERS-specific data.

The probabilities of mortality are based on the 2021 Ca1PERS Experience Study for the period from 2001 to 2019. Pre -retirement and Post -retirement mortality rates include generational mortality improvement using 80% of Scale MP-2020 published by the Society of Actuaries. For more details on this table, please refer to the Ca/PERS Experience Study and Reviewof Actuarial Assumptions report from November 2021 that can be found on the Ca1PERS mbsite.
120 16-129

CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2023
(11) Pension Plans (Continued)
All other actuarial assumptions used in the June 30, 2021 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 CaIPERS website under Forms and Publications.

Discount Rate — The discount rate used to measure the total pension liability was 6.90%. 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, CaIPERS took into account both short-term and long-term market return expectations. Using historical returns of all of the funds' asset classes, expected compound (geometric) returns were calculated over the next 20 years using a building-block approach. The expected rate of return was then adjusted to account for assumed administrative expenses of 10 Basis points.

The expected real rates of return by asset class are as follows:

Asset Class(')
Assumed
Asset
Allocation
Real Return
Years 1-10(2)
Global equity - Cap -weighted

30.00%

4.54%
Global equity - Non -Cap -weighted

12.00%

3.84%
Private Equity

13.00%

7.28%
Treasury

5.00%

0.27%
Mortgage -backed Securities

5.00%

0.50%
Investment Grade Corporates

10.00%

1.56%
High Yield

5.00%

2.27%
Emerging Market Debt

5.00%

2.48%
Private Debt

5.00%

3.57%
Real Assets

15.00%

3.21 %
Leverage
-5.00%
-0.59%
(1) An expected inflation of 2.30% used for this period. (2) Figures are based on the 2021 Asset Liability Management study. 121 16-130

CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2023
(11) Pension Plans (Continued)
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.

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. c. Changes in the Net Pension Liability
The changes in the Net Pension Liability for each Plan for the measurement period follow:
122 16-131

CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2023
(11) Pension Plans (Continued)
Miscellaneous Plan:

Balance at June 30, 2021
Changes in the Year:

CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2023
(11) Pension Plans (Continued)
Safety Plan:

Balance at June 30, 2021
Changes in the Year:

Service cost
Interest on the total pension liability
Changes in benefit terms
Changes in 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)/Expen
Net Changes
Balance at June 30, 2022
Increase (Decrease)
Total Pension Plan Fiduciary Net Pension
Liability Net Position Liability/(Asset)
$628,841,903 $508,966,420 $119,875,483
10,918,046
- 10,918,046
43,860,290
- 43,860,290
22,634,816
- 22,634,816
(3,451,985) - (3,451,985)
- 32,394,203 (32,394,203)
3,417,660 (3,417,660)
- (38,537,209) 38,537,209
(35,654,758) (35,654,758) -
- (317,056) 317,056
38,306,409 (38,697,160) 77,003,569
$667,148,312 $470,269,260 $196,879,052
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 5.90% 5.90%
Net Pension Liability $ 187,537,650 $ 284,130,749
Current Discount Rate 6.90% 6.90%
Net Pension Liability $ 120,423,357 $ 196,879,052
1% Increase 7.90% 7.90%
Net Pension Liability $ 65,154,579 $ 124,839,803
124 16-133

CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2023
(11) Pension Plans (Continued)
Pension Plan Fiduciary Net Position — Detailed information about each pension plan's fiduciary net position is available in the separately issued CalPERS financial reports. d. Pension Expenses and Deferred Outflows/Inflows of Resources Related to Pensions For the year ended June 30, 2023, the City recognized pension expense of $42,313,796 ($16,441,280 Miscellaneous Plan and $25,872,516 Safety Plan). At June 30, 2023, the City reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:

Deferred
Deferred
Outflows
Inflows
of Resources
of Resources
Miscellaneous plan:

Pension contributions subsequent to
measurement date
$ 20,794,397
$ -
Differences between expected and
576,605
(958,603)
actual experience
Change in assumptions
10,753,030
Net differences between projected and actual
and actual earnings on plan investments
19,249,525
-
Total miscellaneous plan
51,373,557
(958,603)
Safety plan:

Pension contributions subsequent to
measurement date
35,283,235 -
Differences between expected and
actual experience
476,993 (2,610,038)
Change in assumptions
17,114,129
Net differences between projected and actual
and actual earnings on plan investments
24,222,818 -
Total safety plan
77,097,175 (2,610,038)
Total all plans
$ 128,470,732 $ (3,568,641)
125 16-134

CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2023
(11) Pension Plans (Continued)
$56,077,632 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, 2024. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized as pension expense as follows:

Fiscal
Year Ending
June 30,
Miscellaneous
Safety
Total
2024
$ 8,134,817
$ 9,100,470
$ 17,235,287
2025
7,319,893
8,333,995
15,653,888
2026
2,328,674
6,574,441
8,903,115
2027
11,837,173
15,194,997
27,032,170
Thereafter
-
-
-
e. Payable to the Pension Plan
At June 30, 2023, the City had no outstanding contributions to the pension plan required for the year ended June 30, 2023.
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, 2023, the City's covered payroll for employees participating in the plan was $3,984,887. Employees made contributions of $149,667 (3.75% of current covered payroll), which was matched by the employer in the same amount. Assets of the plan totaled $2,345,796 at June 30, 2023.
126 16-135

CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2023
(12) 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.

Plan Description
The Retiree Health Savings Plan consists of the following post -retirement medical benefits:

PEMHCA
The CaIPERS Public Employees' Medical and Hospital Care Act (PEMHCA) plan under the authority of section 22750 to 22948 of the state of California's government code, is an agent multiple employer plan. The City pays the required PEMHCA minimum contribution for all miscellaneous and safety employees retiring directly from the City who enroll in a CalPERS medical plan. The 2023 PEMHCA minimum contribution amount is $151 per month.

Implicit Subsidy
The City provides healthcare benefits to retirees in the form of an implied rate subsidy, which results from the pooling of non -Medicare retirees and active employees for premium purposes.

Therefore, retirees receive the benefit of a lower premium, which would be higher if the premium for retirees was based on age, health status or claims history. The difference between these amounts is the implicit rate subsidy.

Other Retiree Medical Benefits
The City provides other retiree medical benefits in the form a single -employer defined contribution plan, a single -employer defined benefit plan, and a hybrid of the two. 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 127 16-136

CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2023
(12) Post -Employment Health Care Benefits (OPEB) (Continued) 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, 2023, the liability for the conversion part of the RHS Plan was $994,475. 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. CERBT is an agent multiple -employer trust. The CERBT Trust is not reported in the financial statements since the CERBT Trust does not qualify as a fiduciary fund under the accounting standards. Copies of CalPERS annual financial report may be obtained from their executive office: 400 "P" Street, Sacramento, California 95814.

Employees Covered
As of the measurement date June 30, 2022, 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
128 16-137

CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2023
(12) Post -Employment Health Care Benefits (OPEB) (Continued) 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, 2023, the City's cash contributions were $6,187,129 to the trust in premium payments and $967,136 for the estimated implicit subsidy, resulting in a total payment of $7,154,265.

Net OPEB Liability
The City's net OPEB liability was measured as of June 30, 2022, 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, 2022
Entry -Age Normal Cost Method

6.00%

2.75%

3.00% per annum, in aggregate

6.00%

6.25% HMO/6.25% PPO
Derived from CalPERS pension plan
From Society of Actuaries Pub-2010 Public
Retirement Plans Mortality Table Report
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 6.00%. 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 129 16-138

CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2023
(12) Post -Employment Health Care Benefits (OPEB) (Continued) 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:

Asset Expected Real
Asset Class
Allocation
Rate of Return
Global Equities

49.00%
N/A
Fixed Income

23.00%
N/A
TIPS

5.00%
N/A
REITs

20.00%
N/A
Commodities

3.00%
N/A
Totals
100.00%

6.00%
Discount Rate
The discount rate used to measure the total OPEB liability is 6.00% 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.

Changes in the Net OPEB Liability
The changes in the net OPEB liability are as follows:
130 16-139

CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2023
(12) Post -Employment Health Care Benefits (OPEB) (Continued) Balance at June 30, 2021
Changes in the Year:

Service cost
Interest on the total OPEB liability
Changes of benefit terms
Changes of assumptions
Differences between actual and
expected experience
Contribution - employer
Contribution - employees
Net investment income
Benefit payments, including refunds of
employee contributions
Administrative expenses
Net Changes
Balance at June 30, 2022
Change of Assumptions
Increase (Decrease
Total Plan Net
OPEB Fiduciary OPEB
Liability Net Position Liability
(z R1 Rnq 5244 O� Qd QRQ 71 R 1� 1 R RQd 11 R
530,843
- 530,843
3,237,390
- 3,237,390
2,473,450
- 2,473,450
1,120,534 - 1,120,534
- 6,185,537 (6,185,537)
- (4,845,154) 4,845,154
(4,731,846) (4,731,846) -
- (9,000) 9,000
2,630,371 (3,400,463) 6,030,834
$ 54,234,204 $ 31,569,252 $ 22,664,952
The mortality table has been updated from the 2017 CalPERS 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.
131 16-140

CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2023
(12) Post -Employment Health Care Benefits (OPEB) (Continued) • 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%.

Chanae of Benefit Terms
There was no change of benefit terms.

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 Discount Rate 1 % Increase
(5.00%) (6.00%) (7.00%)
Net OPEB Liability $ 28,302,507 $ 22,664,952 $ 17,915,213 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 (5.25% HMO/5.25% PPO) or 1-percentage point higher (7.25% HMO/7.25% PPO) than current healthcare cost trend rates:

Net OPEB Liability
1 % Decrease
(5.25%HMO/5.25%PPO
decreasing to

3.5%HM0/3.5%PP0)
$ 19,939,264
Current Healthcare
Cost Trend Rates
(6.25%HM0/6.25%PP0
decreasing to

4.5%HM0/4.5%PP0)
$ 22,664,952
1 % Increase
(7.25%HM0/7.25%PP0
decreasing to

5.5%HM0/5.5%PP0)
$ 26,487,570
OPEB Expense and Deferred Outflows/Inflows of Resources Related to OPEB For the year ended June 30, 2023, the City recognized OPEB expense of $3,328,748. At June 30, 2023, the City reported deferred outflows of resources and deferred inflows of resources related to OPEB from the following sources:
132 16-141

CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2023
(12) Post -Employment Health Care Benefits (OPEB) (Continued) Deferred Outflows Deferred Inflows
Description of Resources of Resources
OPEB contriutions subsequent to measurement date $ 7,154,265 $ - Differences between projected and actual experience 6,631,144 (146,515) Change of assumptions 2,236,725 (235,288)
Net difference between projected and actual earnings
on OPEB plan investments 2,729,189 -
Totals
$ 18,751,323 $ (381,803)
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 $7,154,265, 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, 2024.

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
2024
$ 1,937,071
2025
1,948,801
2026
1,369,838
2027
2,458,609
2028
1,025,730
Thereafter
2,475,206
Payable to the OPEB Plan
At June 30, 2023, the City had no outstanding amount of contributions to the OPEB plan required for the year ended June 30, 2023.
133 16-142

CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2023
(13) 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, 2023, 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 $781,180. The City's 11.03% interest in the net equity of this joint venture at June 30, 2023, amounts to $214,631. 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 134 16-143

CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2023
(13) Joint Venture Agreements (Continued)
contribution and interest in the net equity of this joint venture was immaterial as of June 30, 2023.

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. (14) Commitments and Contingencies
Claims and Judgments
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 Note 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, 2023, the City paid VNB $6,532,660.

Contractual Commitments
Construction and contractual commitments for major construction projects are as follows:
135 16-144

CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2023
(14) Commitments and Contingencies (Continued)
Annual Project YTD
Budget Expenditures
Lower Sunset View Park Concept
$13,197,709
$ 3,522,811
Newport Coast Dr Pavement Rehab
6,350,032
3,476,754
Junior Lifeguards Building
6,895,130
3,722,321
West Irvine Terrace Water Main Repl
4,360,100
1,365,308
WCH Hwy Intersection Imp Ped Bridge
1,128,521
35,694
Advanced Metering Infrastructure
3,672,267
2,661,139
Bay Crossing Water Main Replc
1,150,343
170,611
Traffic Signal Rehabilitation
1,695,000
625
Facilities Maintenance Master Plan
1,418,481
684,923
Concrete Replacement Program
1,352,850
698,584
Central Library Lecture Hall
11,623,210
194,608
CNG Fueling System
7,014,403
87,911
Library/Fire Station No. 1 Repl
900,000
102,229
Balboa Island Drainage Master Plan
7,013,139
128,950
At fiscal year end, the City's encumbrances with contractors were as follows:

Streets and highways
Parks and community centers
Facilities
Public arts and culture
Libraries
Fiin
Capital re -appropriations
Beaches
Marinas
Dredging
Equipment
Facilities Replacement
Drainage
Miscellaneous and studies
Contract services
Supplies and materials
Maintenance and repairs
General
Total encumbrances
Major Governmental Funds
Tide and
Tide and
Submerged
Submerged Land -
General
Land - Operating
Harbor Capital
352,335
363,577
3,599
-
-
23,356
295,122
253,689
2,897,741
159,078
1,445,082
301,567
Unexpended
C:nmmitmPntc
9,674,898
2,873,277
3,172,810
2,994,792
1,091,410
1,011,128
817,799
748,122
689,126
654,266
661,499
618,793
595,019
591,010
Other Governmental Funds
Special
Capital
Revenue
Project Permanent
Funds
Funds Funds
Total
$3,794,413
$ 3,740,105 $
$ 7,534,518
8,600,276
8,600,276
317,054
317,054
36,350
-
36,350
-
11,620
11,620
9,910
- -
9,910
-
3,375,771
3,375,771
-
715,912
3,599
23,356
-
548,811
100
100
637,274
637,274
540,048
540,048
-
2,897,741
-
159,078
1,642,666
3,087,748
301,567
$4,803,468 $ 651,056 $ 640,622 $3,840,673 $18,853,294 $ 11,620 $28,800,733 136 16-145

CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2023
(15) Fund Balance
Governmental Fund Balance at June 30, 2023, is classified as follows:

Nonspendable:

Prepaid items (legally restricted)
Inventories (legally restricted)
Long-term loan receivable (form restricted)
Permanent endowment (legally restricted)
Restricted:

Affordable housing
Oceanfront encroachment
Upper Newport bay restoration
Cable franchise reserve
Community development
Streets and highways
Public safety
Parks
Facilities
Transportation
Air quality improvement
Environmental liability mitigation
Public arts and culture
Parking
Training
Libraries
Scholarships
Fiin
Debt service
Capital re -appropriations
Beaches
Marinas
Dredging
Equipment
Committed:

Facilities replacement
Facilities maintenance
Civic center and park
Oil and gas liabilities
Parking management
Neighborhood enhancement
Capital re -appropriations
Drainage
Streets
Facilities
Miscellaneous and studies
Parks and community centers
Contract services
Supplies and materials
Maintenance and repairs
General
Unassigned
Total fund balances
(16) Deficit Fund Equity
Governmental Fund Balance
Other Governmental Funds
Tide and
Tide and
Facilities
Special
Capital
Submerged
Submerged
Financial Planning Debt Service
Re anus
Project
Permanent
General Land - Operating Land -Harbor Capital
Reserve Fund
Fuvnds
Funds
Funds
Totals
$ 1,024,080 $
- $
-
$ - $ -
$ 21,150 $
-
$ -
$ 1,045,230
188,828
-
-
- -
-
-
-
188,828
7,026,659
-
-
- -
-
-
-
7,026,659
-
-
-
- -
-
-
4,629,781
4,629,781
-
-
-
- -
352,412
-
-
352,412
-
-
-
- -
945,623
-
-
945,623
-
1,479,188
-
- -
-
-
-
1,479,188
-
-
-
- -
3,152,537
-
-
3,152,537
-
-
-
- -
-
3,248
-
3,248
-
-
-
- -
6,741,011
-
-
6,741,011
-
-
-
- -
530,365
-
-
530,365
-
-
-
- -
82,673
-
-
82,673
-
-
-
- -
82,673
282,123
-
364,796
-
-
-
- -
308,134
-
-
308,134
-
-
-
- -
1,536,417
-
-
1,536,417
-
-
-
- -
9,235,547
-
-
9,235,547
-
-
-
- -
966,702
-
-
966,702
-
-
-
- -
216,689
-
-
216,689
-
-
-
- -
464,704
-
-
464,704
-
-
-
- -
-
-
205,358
205,358
-
-
-
- -
-
-
203,390
203,390
-
-
-
- -
1,190,056
-
-
1,190,056
-
-
-
- 2,183,979
-
-
-
2,183,979
-
3,137,075
-
- -
703,496
7,284,113
-
11,124,684
-
352,335
363,577
- -
-
-
-
715,912
-
3,599
-
- -
-
-
-
3,599
-
-
29,597,545
- -
-
-
1,504,031
31,101,576
-
295,120
253,689
- -
-
-
-
548,809
-
-
-
24,800,492 -
-
658,756
-
25,459,248
-
-
-
- -
-
3,748,658
-
3,748,658
-
-
-
- -
-
485,365
-
485,365
-
840,000
-
- -
-
-
-
840,000
-
-
-
- -
-
97,537
-
97537
-
-
-
- -
-
2,901,378
-
2,901:378
350,000
-
-
- -
-
26,012,420
-
26,362,420
-
-
-
- -
-
637,274
-
637,274
-
-
-
- -
-
3,740,105
-
3,740,105
-
-
-
- -
-
3,062,759
-
3,062,759
-
-
-
- -
-
540,048
-
540,048
-
-
-
- -
-
9,051,376
-
9,051,376
2,897,741
-
-
- -
-
-
-
2,897,741
471,036
-
-
- -
-
-
-
471,036
1,445,082
-
-
- -
-
1,642,666
-
3,087,748
301,567
-
-
- -
-
-
-
301,567
77,737,532
(11,625)
77,725,907
$91,442,525 $
6,107,317 $
30,214,811
$ 24,800,492 $ 2,183,979
$26,518,564 $60,147,826
$ 6,542,560
$247,958,074
The following funds reported deficit equity balances:

Special Revenue Fund
Contributions
Internal Service Fund
Compensated Absences
$ 11,625
$ 6,859,223
137 16-146

CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2023
(16) Deficit Fund Equity (Continued)
The Contributions Fund accounts for revenues received from other government agencies and developers as reimbursement for projects. 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. (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 tax rebates are based on negotiations that require City Council approval. On an accrual basis, for the fiscal year ended June 30, 2023, the City rebated sales taxes to automobile dealerships totaling $541,290 under this program. (18) Public -Private Partnerships
Agreements that meet the requirements of GASB 94 for which the city is transferor are disclosed as public -private partnerships (PPP) receivables on the City's financial statements. The City's PPP receivable is related to the facilities for the Balboa Island Ferry, Inc. (operator). GASB 94 excludes certain inflows (e.g., certain variable payments, etc.) from the measurement of PPP receivables. Payments from the operator to the City include variable payments, because the operator pays the City the greater of a minimum base amount or a specified percentage of the operator's gross receipts. For the fiscal year ending June 30, 2023, the City recognized $1,815 of payments related to PPP receivables that were excluded from the measurement of the PPP receivables. A discount rate of 1.50% was applied to the measurement of the PPP receivable.

The PPP agreement leases facilities to the operator for the continued operation of a ferry between Balboa Island and Balboa Peninsula. The City retains the right to inspect the property anytime without notice to the operator. Please see the Statement of Net Position for additional information about the nature and amounts of the PPP receivable and PPP deferred inflow. 138 16-147

CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2023
(19) Subsequent Events
Limited Obligation Bond Issue for Assessment District No. 120-2 On August 10, 2023, the City issued $2,505,000 of Assessment District No. 120-2 Limited Obligation Improvement Bonds pursuant to the provisions of the Improvement Bond Act of 1915.

The bonds are issued in serial and term maturities over twenty years ranging from 4.0% to 5.0%.

The bond proceeds will primarily be used to provide financing to underground power, telephone, and cable facilities in the Improvement Area. Bond proceeds will also be used to establish a debt service reserve fund and pay costs of issuance and capitalized interest on the bonds. Although the City will be collecting and disbursing funds for this district, 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.

Limited Obliaation Bond Issue for Assessment District No. 124 On August 10, 2023, the City issued $23,625,000 of Assessment District No. 124 Limited Obligation Improvement Bonds pursuant to the provisions of the Improvement Bond Act of 1915.

The bonds are issued in serial and term maturities over twenty years ranging from 4.0% to 5.0%.

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140 16-149

FINANCIAL SECTION
__ Z
141 16-150

CITY OF NEWPORT BEACH
an Agent Multiple -Employer Defined Benefit Pension Plan As of June 30, 2023
Last 10 Years*
Defined Benefit Plan for Miscellaneous Employees

Page 1 of 2 ends

SCHEDULE OF CHANGES IN THE NET PENSION LIABILITY

AND RELATED RATIOS
Last Ten Fiscal Years*
2023
2022
2021
2020
2019
Measurement period
June 30, 2022
June 30, 2021
June 30, 2020
June 30, 2019
June 30, 2018
Total Pension Liability
Service cost
$ 8,261,032
$ 7,438,050
$ 7,347,708
$ 7,084,444
$ 7,334,861
Interest on total pension liability
32,759,522
31,805,532
30,565,919
29,409,624
28,226,598
Differences between expected and actual experience
15,640,771
1,624,975
369,351
403,676
2,243,854
Changes in assumption
(1,394,332)
-
-
-
(2,522,093)
Changes in benefits
-
-
-
-
-
Benefit payments, including refunds of employee contributions (24,940,419)
(22,976,493)
(21,516,515)
(20,129,701)
(18,458,539)
Net Change in Total Pension Liability
30,326,574
17,892,064
16,766,463
16,768,043
16,824,681
Total Pension Liability - beginning
468,868,928
450,976,864
434,210,401
417,442,358
400,617,677
Total Pension Liability - ending (a)
499,195,502
468,868,928
450,976,864
434,210,401
417,442,358
Plan Fiduciary Net Position
Contributions - employer
18,352,430
18,612,457
16,346,284
15,700,833
15,797,595
Contributions -employee
3,974,974
4,057,107
4,067,751
3,955,144
3,979,337
Net investment income
(30,856,252)
76,031,841
16,074,793
19,895,019
23,855,196
Administrative expense
(256,962)
(336,753)
(454,777)
(216,502)
(435,499)
Other miscellaneous income/(expense)
700
(827,021)
Plan to plan resource movement
1,570
(700)
Benefit payments
(24,940,419)
(22,976,493)
(21,516,515)
(20,129,701)
(18,458,539)
Net change in Plan Fiduciary Net Position
Plan Fiduciary Net Position - beginning
Plan Fiduciary Net Position - ending (b)
Net pension liability - ending (a)-(b)
Plan fiduciary net position as a percentage of the total pension liability Covered payroll
Net pension liability as percentage of covered payroll
Notes to Schedule:
(33,726,229)
75,388,159
14,517,536
19,207,063
23,910,369
412,498,374
337,110,215
322,592,679
303,385,616
279,475,247
378,772,145
412,498,374
337,110,215
322,592,679
303,385,616
$ 120,423,357 $
56,370,554
$ 113,866,649
$ 111,617,722
$ 114,056,742

75.88%

87.98%

74.75%

74.29%

72.68%
$ 45,210,057 $
44,809,856 $
43,902,594 $
42,153,383 $
41,468,634
266.36%
125.80%
259.36%
264.79%
275.04%
* Fiscal year 2015 was the first year of implementation, therefore only nine years are shown.

Benefit Changes:

The figures above generally include any liability impact that may have resulted from voluntary benefit changes that occurred on or before the Measurement Date. However, Offers of Two Years Additional Service Credit (a.k.a. Golden Handshakes) that occurred after the Valuation Date are not included in the figures above, unless the liability impact is deemed to be material by the plan actuary.

Change in Assumption:

Effective with the 2022 measurement date, the discount rate was reduced from 7.15% to 6.90%.. None in 2019 through 2021. In 2018, demographic assumptions and inflation rate were changed in accordance to the CalPERS Experience Study and Review Assumptions December 2017. There were no changes in the discount rate. In 2017, the discount rate was reduced from 7.65% to 7.15%. In 2016, there were no changes. In 2015, amounts reported reflect an adjustment of the discount rate from 7.50% percent (net of administrative expense) to 7.65% (without a reduction for pension plan administrative expense). In 2014, amounts reported were based on the 7.50% discount rate.
142 16-151

CITY OF NEWPORT BEACH
an Agent Multiple -Employer Defined Benefit Pension Plan As of June 30, 2023
Last 10 Years*
Defined Benefit Plan for Miscellaneous Employees

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Measurement period
Total Pension Liability
Service cost
Interest on total pension liability
Differences between expected and actual experience
Changes in assumption
Changes in benefits
Benefit payments, including refunds of employee contributions Net Change in Total Pension Liability
Total Pension Liability - beginning
Total Pension Liability - ending (a)
Plan Fiduciary Net Position
Contributions - employer
Contributions - employee
Net investment income
Administrative expense
Other miscellaneous income/(expense)
Plan to plan resource movement
Benefit payments
Net change in Plan Fiduciary Net Position
Plan Fiduciary Net Position - beginning
Plan Fiduciary Net Position - ending (b)
Net pension liability - ending (a)-(b)
Plan fiduciary net position as a percentage of the total pension liability Covered payroll
Net pension liability as percentage of covered payroll
2018
2017
2016
2015
June 30, 2017
June 30, 2016
June 30, 2015
June 30, 2014
$ 7,151,754
$ 6,303,642
$ 6,087,960
$ 6,523,874
27,069,673
26,375,073
25,427,094
24,624,559
(4,912,853)
(2,686,814)
(4,736,006)
-
22,616,424
(6,309,248)
(17,249,398)
(16,714,022)
(16,374,370)
(15,290,340)
34,675,600
13,277,879
4,095,430
15,858,093
365,942,077
352,664,198
348,568,768
332,710,675
400,617,677
365,942,077
352,664,198
348,568,768
10,509,243
9,904,636
6,615,920
5,793,768
4,134,130
4,206,942
4,321,646
4,319,336
28,349,491
1,241,432
5,687,908
38,237,161
(375,172)
(155,791)
(287,862)
-
(2,387)
26,981
(17,249,398)
(16,714,022)
(16,374,370)
(15,290,340)
25,368,294
(1,519,190)
(9,777)
33,059,925
254,106,953
255,626,143
255,635,920
222,575,995
279,475,247
254,106,953
255,626,143
255,635,920
$ 121,142,430
$ 111,835,124
$ 97,038,055
$ 92,932,848

69.76%

69.44%

72.48%

73.34%
$ 41,727,563 $
40,031,404 $
38,512,011 $
37,775,051
290.32%
279.37%
251.97%
246.02%
143 16-152

CITY OF NEWPORT BEACH
an Agent Multiple -Employer Defined Benefit Pension Plan As of June 30, 2023
Defined Benefit Plan for Miscellaneous Employees

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Newport Beach City CouncilJanuary 23, 2024

Newport Beach City Council
January 23, 2024