20 - Fiscal Year 2024-25 Budget Adoption, Public Hearing, Recommendations, and Proposed Budget Revision Items; and City Council Policy F-2 — Newport Beach City Council, June 11, 2024 (part 2 of 2)

Section 2: All prior versions of Council Policy F-2 that conflict with the revisions adopted by this resolution are hereby repealed.

Section 3: The recitals provided in this resolution are true and correct and are incorporated into the operative part of this resolution.

Section 4: If any section, subsection, sentence, clause or phrase of this resolution is, for any reason, held to be invalid or unconstitutional, such decision shall not affect the validity or constitutionality of the remaining portions of this resolution. The City Council hereby declares that it would have passed this resolution, and each section, subsection, sentence, clause or phrase hereof, irrespective of the fact that any one or more sections, subsections, sentences, clauses or phrases be declared invalid or unconstitutional.

Section 5: Except as expressly modified in this resolution, all other City Council policies, sections, subsections, terms, clauses, and phrases set forth in the Council Policy Manual shall remain unchanged and shall be in full force and effect.

Section 6: The City Council finds the adoption of this resolution is not subject to the California Environmental Quality Act ("CEQA") pursuant to Sections 15060(c)(2) (the activity will not result in a direct or reasonably foreseeable indirect physical change in the environment) and 15060(c)(3) (the activity is not a project as defined in Section 15378) of the CEQA Guidelines, California Code of Regulations, Title 14, Division 6, Chapter 3, because it has no potential for resulting in physical change to the environment, directly or indirectly.
20-145

Resolution No. 2024-

Page 3 of 3 ends

Section 7: This resolution shall take effect immediately upon its adoption by the City Council, and the City Clerk shall certify the vote adopting the resolution.

ADOPTED this 11 th day of June, 2024.

Will O'Neill
Mayor
ATTEST:

Leilani I. Brown
City Clerk
APPROVED AS TO FORM:

CITY ATTORNEY'S OFFICE
A ron . HarpU
Ci torney
Attachment: Exhibit A — Council Policy F-2 (Reserve Policy) 20-146

F-2

RESERVE POLICY

PURPOSE
To establish City Council policy for the administration of Reserves defined as fund balances in governmental funds and net working capital in proprietary funds.

BACKGROUND
Prudent financial management dictates that some portion of the funds available to the City be reserved for future use.

As a general budget principle concerning the use of reserves, the City Council decides whether to appropriate funds from Reserve accounts. Even though a project or other expenditure qualifies as a proper use of Reserves, the Council may decide that it is more beneficial to use current year operating revenues or bond proceeds instead, thereby retaining the Reserve funds for future use. Reserve funds will not be spent for any function other than the specific purpose of the Reserve account from which they are drawn without specific direction in the annual budget or by a separate City Council action. Information regarding Annual Budget Adoption and Administration is contained in City Council Policy F-3.

GOVERNMENTAL FUNDS AND FUND BALANCE DEFINED
Governmental Funds including the General Fund, Special Revenue Funds, Capital Projects Funds, Debt Service Funds, and Permanent Funds have a short-term or current flow of financial resources, measurement focus, and basis of accounting, and therefore exclude long-term assets and long-term liabilities. The term Fund Balance, used to describe the resources that accumulate in these funds, is the difference between the fund assets and fund liabilities of these funds. Fund Balance is similar to the measure of net working capital that is used in private sector accounting. By definition, both Fund Balance and Net Working Capital exclude long-term assets and long-term liabilities.

PROPRIETARY FUNDS AND NET WORKING CAPITAL DEFINED
Proprietary Funds including Enterprise Funds and Internal Service Funds have a long- term or economic resources measurement focus and basis of accounting, and therefore include long-term assets and liabilities. This basis of accounting is very similar to that used in private sector. However, instead of Retained Earnings, the term Net Assets is 1 20-147

F-2
used to describe the difference between fund assets and fund liabilities. Since Net Assets include both long-term assets and liabilities, the most comparable measure of proprietary fund financial resources to governmental Fund Balance is Net Working Capital, which is the difference between current assets and current liabilities. Net Working Capital, like Fund Balance, excludes long-term assets and long-term liabilities.

GOVERNMENTAL FUND RESERVES (FUND BALANCE)
For Governmental Funds, the Governmental Accounting Standards Board ("GASB") Statement No. 54 defines five specific classifications of fund balance. The five classifications are intended to identify whether the specific components of fund balance are available for appropriation and are therefore "Spendable." The classifications also are intended to identify the extent to which fund balance is constrained by special restrictions, if any. Applicable only to governmental funds, the five classifications of fund balance are as follows:

CLASSIFICATIONS NATURE OF RESTRICTION
Non -spendable Cannot be readily converted to cash
Restricted Externally imposed restrictions
Committed City Council imposed commitment
Assigned City Manager assigned purpose/intent
Unassigned Residual balance not otherwise
restricted
A. Non -spendable fund balance: That portion of fund balance that includes amounts that are either (a) not in a spendable form, or (b) legally or contractually required to be maintained intact. Examples of Non -spendable fund balance include:

1. Reserve for Inventories: The value of inventories purchased by the City but not yet issued to the operating Departments is reflected in this account.

2. Reserve for Long Term Receivables and Advances: This Reserve is used to identify and segregate that portion of the City's financial assets which are not due to be received for an extended period, so are not available 2 20-148

F-2
for appropriation during the budget year.

3. Reserve for Prepaid Assets: This Reserve represents resources that have been paid to another entity in advance of the accounting period in which the resource is deducted from fund balance. A common example is an insurance premium, which is typically payable in advance of the coverage period.

Although prepaid assets have yet to be deducted from fund balance, they are no longer available for appropriation.

4. Reserve for Permanent Endowment - Bay Dredging: The endowment specifies that the principal amount will not be depleted and represents the asset amounts to be held in the Bay Dredging Fund.

5. Reserve for Permanent Endowment - Ackerman Fund: The endowment specifies that the principal amount will not be depleted and represents the asset amount to be held in the Ackerman Fund.

B. Restricted fund balance: The portion of fund balance that reflects constraints placed on the use of resources (other than non -spendable 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. Examples of restricted fund balance are:

1. Reserve for Debt Service: Funds are placed in this Reserve at the time debt is issued. The provisions governing the Reserve, if established, are in the Bond Indenture and the Reserve itself is typically controlled by the Trustee.

2. Affordable Housing: A principal provision of the Newport Beach Housing Element requires developers to provide housing units for lower income households, the number of which is to be negotiated for each development project. In lieu of constructing affordable housing, developers have paid into this reserve which is used at the City Council's discretion to provide alternate methods for the delivery of affordable housing for lower income households.

3. Park In Lieu: Per Newport Beach Municipal Code (NBMC) Chapter 19.52 3 20-149

F-2
and California Government Code Section 664777 (The 1975 "Quimby Act"), a dedication of land or payment of fees for park or recreational purposes in conjunction with residential development is required. The fees collected can only be used for specific park or recreation purposes as outlined in NBMC Sections 19.52.030 and 19.52.070.

4. Upper Newport Bay Restoration Reserve: This Reserve is the repository for funds mandated by SB573, as well as special fees charged to permit holders as an alternative to meeting certain specified mitigation criteria.

In addition to the mitigation fees, ten percent (10%) of Beacon Bay lease revenue is placedin this Reserve. Funds in the Reserve are restricted for Upper Newport Bay restoration projects.

5. Permanent Endowment for Bay Dred ing: The endowment also specifies that the interest earnings on the principal amount can only be used for dredging projects in the Newport Bay.

6. Permanent Endowment for Ackerman Fund: The endowment also specifies that the interest earnings on the principal amount can only be used for scholarships provided by the City and high-tech library equipment.

7. Oceanfront Encroachment Reserve: In the early 1990's, it was discovered by survey that improvements to several ocean front parcels were encroaching onto the public beach. The encroachment was relatively minor. The negotiated solution was for the property owners to pay a permit fee each year to the City. Revenue thus generated may only be used for ocean front restoration projects and incidental costs of improvements and maintenance to enhance public access and use of ocean beaches as approved by the City Council. This Reserve is the repository for those funds. Appendix C of NBMC Title 21 (Local Coastal Program Implementation Plan) contains additional background and details about the encroachment issue. The external restriction on this balance is imposed by the Local Coastal Program (LCP).

C. 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 considers a resolution to constitute a formal action for the purposes 4 20-150

F-2
of establishing committed fund balance. The action to constrain resources must occur within the fiscal reporting period; however, the amount can be determined subsequently. City Council imposed Commitments are as follows:

1. Facilities Financial Planning_(FFP) Progjam: In conjunction with the Chy's Facilities Financial Plan, a sinking fund has been established to amortize the cost of critical City facilities such as, but not limited to, the Civic Center, Police Department buildings, Fire Stations, Library Branches, and otherFacility Improvement Projects.

The Facilities Financial Planning Program establishes a level charge to the General Fund that will perpetually replenish the cash flows necessary to finance the construction of critical City facilities. This plan will be updated annually as part of the budget process, or as conditions change. Specific requirements for annual funding and minimum reserve balance for the FFP Program can be found in City Council Policy F-28.

The eligible uses of this reserve include the cash funding of public facility improvements or the servicing of related debt.

2. Off Street Parkin: Per NBMC Section 12.44.025 the City Council may direct revenues into the Off -Street Parking Facilities Fund for purposes of the acquisition, development, and improvement of off street parking facilities, and for any expenditures necessary or convenient to accomplish such purposes.

3. In Lieu Parkin: Per NBMC Section 12.44.125 the City requires commercial businesses to provide adequate off-street parking or where this is not possible, businesses are afforded the opportunity to pay an annual fee and use parking spaces in a municipal lot, providing such a lot is located within specified proximity to the business. These funds can only be used to provide additional parking.

4. Neighborhood Enhancement - A: Funds previously accumulated to Neighborhood Enhancement Area "A" pursuant to a prior version of NBMC Section 12.44.027 shall continue to be used only for the purpose of enhancing and supplementing services to the West Newport area. Both the nature of the supplemental services and the definition of the area served are set forth in NBMC Section 12.44.027.
20-151

F-2

5. Neighborhood Enhancement - B: Funds previously accumulated to Neighborhood Enhancement Area "B" pursuant to a prior version of NBMC Section 12.44.027 shall continue to be used only for the purpose of enhancing and supplementing services in the Balboa Peninsula. Both the nature of the supplemental services and the definition of the area served are set forth in NBMC Section 12.44.027.

6. Cable Franchise: Pursuant to the provisions of the Newport Beach Municipal Code, Title 5, Business Licenses & Regulations, Chapter 5.44, in return for the use of the City's streets and public ways for the purpose of installing, operating, maintaining, or reconstructing a cable system to provide cable service, fees are collected by the City from cable providers. Those fees are to be used by the City for support of Public, Education, and Government access programming only.

7. Oil and Gas Reserve: These funds generated by an annual amount being set aside from oil and gas field production revenues are to be used to fund abandonment of wells and facilities as they go out of service.

8. Capital Reappropriation: This Reserve recognizes a portion of fund balance that is not readily available to fund new appropriations because it has been reappropriated through the budget adoption process or amendment process for programs or projects authorized in a prior fiscal year that are not yet complete.

D. 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 but that are not restricted or committed. This policy hereby delegates the authority to the City Manager or designee to modify or create new assignments of fund balance. Constraints imposed on the use of assigned amounts may be changed by the City Manager or his designee.

Appropriations of balances are subject to Council Policy F-3 concerning budget adoption and administration.

E. Unassigned fund balance:

1. Contingency Reserve: The Contingency Reserve shall have a target balance of twenty five percent (25%) of General Fund "Operating Budget" as originally adopted. Operating Budget for this purpose shall include current expenditure appropriations and shall exclude Capital Improvement Projects, Transfers Out, and additional discretionary payments to the City's unfunded pension liability.

C.
20-152

F-2
Appropriation and/ or access to these funds are generally reserved for emergency or unforeseen situations but may be accessed by Council by simple budget appropriation. Examples may include but are not limited to the following:
a. A catastrophic loss of critical infrastructure.
b. A State or Federally declared state of emergency.
c. Any settlement arising from a claim or judgment.
d. Deviation from budgeted revenue projections.
e. Any action by another government that eliminates or shifts revenues from the City.
f. Inability of the City to meet its debt service obligations in any given year.
g. Other circumstances deemed necessary by City Council to meet the claims and obligations of the City.

Should the Contingency Reserve be used, the City Manager shall present a plan to City Council to replenish the reserve within five years.

2. Residual Fund Balance: The residual portion of available fund balance that is not otherwise restricted, committed, or assigned and is above and beyond the Contingency Reserve target reserve balance.
7 20-153

PROPRIETARY FUND RESERVES (NET WORKING CAPITAL)
In the case of Proprietary Funds (Enterprise and Internal Service Funds), Generally Accepted Accounting Principles ("GAAP") do not permit the reporting of reserves on the face of City financial statements. However, this does not preclude the City from setting policies to accumulate financial resources for prudent financial management of its proprietary fund operations. Since proprietary funds may include both long-term capital assets and long-term liabilities, the most comparable measure of liquid financial resources that is similar to fund balance in proprietary funds is net working capital, which is the difference between current assets and current liabilities. For all further references to reserves in Proprietary Funds, Net Working Capital is the intended mearung.

A. Water Enterprise Fund:

The Water Enterprise Fund Reserves are established to cover shortfalls in operating revenues, maintain strong bond ratings, cover day-to-day operating costs, and ease the burden on ratepayers associated with large rate increases. Appropriate reserve levels help the Water Enterprise Fund with liquidity, provide operational flexibility, and demonstrate fiscal responsibility to the rating agencies. The Water Enterprise Fund will maintain the following three reserves:

1. Operating Reserve: The Water Enterprise Fund Operating Reserve represents working capital maintained by the Water Enterprise Fund to cover day-to-day expenses and maintain sufficient funds to cover accounts receivables, periods of lower than expected water sales, or unforeseen cost increases such as the cost of importing additional water if groundwater becomes unavailable. The Water Enterprise Fund Operating Reserve will maintain a minimum balance of 120 days of operating expenses once fully funded. The City Council must approve the use of these funds, based on the City Manager's recommendation. Water Enterprise Funds collected in excess of the Water Enterprise Fund Operating Reserve targets would be available to offset future rate adjustments, while extended reserve shortfalls would be recovered from future rate increases. Should catastrophic losses to the infrastructure system occur, the Water Enterprise Fund Operating Reserve may be called upon to avoid disruption to water distribution.

2. Rate Stabilization Reserve: The Water Enterprise Fund Rate Stabilization Reserve represents funds used to absorb lower than expected revenue due to short-term decreases in water sales. The Rate Stabilization Reserve mitigates wide swings in rates charged to customers over time. The Water Enterprise Fund Rate Stabilization Reserve will maintain a minimum balance of thirty percent (30%) of 8 20-154

F-2
water use reduction once fully funded. The City Council must approve the use of these funds, based on the City Manager's recommendation. Water Enterprise Funds collected in excess of the Rate Stabilization Reserve target would be available to offset future rate adjustments, while extended reserve shortfalls would be recovered from future rate increases. Should catastrophic losses to the infrastructure system occur, the Water Enterprise Fund Rate Stabilization Reserve may be called upon to avoid disruption in water distribution.

B. Wastewater Enterprise Fund:

The Wastewater Enterprise Fund Reserves are established to cover shortfalls in operating revenues, maintain strong bond ratings, cover day-to-day operating costs, and ease the burden on ratepayers associated with large rate increases. Per the reserve level recommendations, the Wastewater Enterprise Fund will maintain the following two reserves:

1. Operating Reserve: The Wastewater Enterprise Fund Operating Reserve represents the working capital the Wastewater Enterprise Fund maintains to cover day-to-day expenses and maintain sufficient funds to cover accounts receivables in the event of supplier issues, lower than expected sewer sales, or unforeseen cost increases. The Wastewater Enterprise Fund Operating Reserve will maintain a minimum balance of 90 days of operating expenses once fully funded. The City Council must approve the use of these funds based on City Manager's recommendation. Wastewater Enterprise Funds collected in excess of the Wastewater Enterprise Fund Operating Reserve targets would be available to offset future rate adjustments, while extended reserve shortfalls would be recovered from future rate increases. Should catastrophic losses to the infrastructure system occur, the Wastewater Enterprise Fund Operating Reserve may be called upon to avoid disruption in water distribution.

2. Capital Reserve: The Capital Reserve represents funds to cover a portion of upcoming annual capital expenditures, smooth out the amount of capital infusion needed each year, and help mitigate unexpected capital costs. The Wastewater Enterprise Fund Capital Reserve will maintain a minimum balance of one hundred percent (100%) of the annual planned CIP once fully funded. 9 20-155

F-2
C. Internal Service Funds Background.

Internal Service Funds are used to centrally manage and account for specific program activity in a centralized cost center. Their revenue generally comes from internal charges to departmental operating budgets rather than external revenue sources. They have several functions.
--They work well in normalizing departmental budgeting for programs that have life - cycles greater than one year, thereby facilitating level budgeting for expenditures that will, by their nature, be erratic from year to year. This also facilitates easier identification of long term trends.
--They act as a strategic savings plan for long-term assets and liabilities. --From an analytical standpoint, they enable appropriate distribution of city-wide costs to individual departments, thereby more readily establishing true costs of various operations.

Since departmental charges to the internal service fund duplicate the ultimate expenditure from the internal service fund, they are eliminated when consolidating entity -wide totals.

The measurement criteria, cash flow patterns, funding horizon and acceptable funding levels are unique to each program being funded. Policy regarding target balance and/ or contribution policy, gain/loss amortization assumptions, source data, and governance for each of the City's Internal Service Funds is set forth as follows:

1. For all Internal Service Funds: The Finance Director may transfer part or all of any unencumbered fund balance between the Internal Service Funds provided that the withdrawal of funds from the transferred fund would not cause insufficient reserve levels or insufficient resources to carry out its intended purpose. This action is appropriate when the decline in cash balance in any fund is precipitated by an off - trend non -recurring event. The Finance Director will make such recommendations as part of the annual budget adoption or through separate Council action.

F-2
a. Equipment Maintenance Fund: The Equipment Maintenance Fund acts solely as a cost allocation center (vs. a pre -funding center) and is funded on a pay-as- you-go basis by departmental maintenance charges by vehicle type and usage requirement. Because of this limited function, the target year-end balance is zero.

Contribution rates (departmental charges) are set to include the direct costs associated with maintaining the City vehicle fleet, including fleet maintenance employee salaries and benefits, operating expenses, and maintenance related capital outlay. Administrative overhead and maintenance facility improvements and replacement costs are to be provided outside of this cost unit. Governance is achieved through annual management adjustment of contribution rates on the basis of maintenance cost by vehicle and distribution of costs based on fleet use by department.
b. Equipment Replacement Fund: Operating Departments are charged annual amounts sufficient to accumulate funds for the replacement of vehicles, communications equipment, parking equipment, and other equipment replacement determined to be appropriate by the Finance Director. The City Manager recommends annual rate adjustments as part of the budget preparation process. These adjustments are based on pricing, future replacement schedules, and other variables.

The age and needs of the equipment inventory vary from year to year. Therefore, the year-end fund balance will fluctuate in direct correlation to accumulated depreciation. In general, it will increase in the years preceding the scheduled replacement of relatively large percentage of the equipment, on a dollar value basis. However, rising equipment costs, dissimilar future needs, replacing equipment faster than their expected life, or maintaining equipment longer than its expected life all contribute to variation from the projected schedule.

Target funding levels shall be determined by the Finance Director after considering the age, expected life, and cash flow anticipated by the replacement equipment being funded. If departmental replacement charges for equipment prove to be excessive or insufficient with regard to this target funding level, new rates established during the next budget cycle will be adjusted with a view toward bringing the balance back to the target level.

3. Insurance Reserve Funds: The Insurance Reserve funds account for the activities of general liability, workers' compensation, property, and other insurance claims. 11 20-157

F-2
General liability and workers' compensation claims are self -insured up to an established amount, with excess insurance policies procured to address larger claims.

Property and other insurance policies are procured with appropriate deductibles, and related claims payments are not funded from the City's self-insurance program.

Background.

The City employs an actuary to estimate the liabilities associated with the general liability and workers compensation activities. The costs typically associated with these programs include claims administration, legal defense, insurance premiums, self -insured retention, and the establishment of appropriate loss reserves including "incurred -but -not reported" (IBNR) claims. In a prescribed measurement methodology, the Actuary estimates the liabilities in conformity with Generally Accepted Accounting Principles (GAAP).

The Actuary refers to this measurement level in their report as the "Expected Level." However, because actuarial estimates are subject to significant uncertainties, actuaries typically recommend that a target funding level be set at an amount in excess of expected liability as a margin to cover contingencies.

A typical target funding level would be set to obtain a specified confidence level (the percent chance that resources set -aside will be sufficient to cover existing claims).

Full funding of the Actuary's "Target Funding Level" establishes a seventy- five percent (75%) confidence there will be sufficient resources (including projected interest) to pay the full amount of existing claims without future contributions. Funding at the "Expected Level" produces a confidence level of only fifty percent to sixty-five percent (50%-65%). Therefore, the target funding of insurance reserves should exceed the "Expected Level" to account for adverse estimate deviation.

Policy & Practice.

The City should target funding of its risk management obligations at not less than the Expected Level, described above; and not more than an amount sufficient to establish an eighty percent (80%) Confidence Level. Actuarial gains and losses should be amortized through rates over an appropriate period of time. As part of the operating budget, each department will be charged a rate equal to its proportionate share of the total "revenue" required 12 20-158

F-2
to fund the Insurance Reserve Fund at this level.

To lessen the impact of short-term annual rate change fluctuation, City management may implement one-time fund transfers (rather than department rate increases) when funding shortfalls appear to be due to unusually sharp and non -recurring factors. Excess reserves in other areas may be transferred to the internal service fund in these instances but such transfers should not exceed the funding necessary to reach an eighty percent (80%) confidence level interval.

4. Compensated Absences Fund:

Background.

The primary purpose of flex leave, vacation leave, and sick leave is to provide compensated time off as appropriate and approved. However, under certain circumstances, typically at separation from service, some employees have the option of receiving cash -out payments for some accumulated leave balances.

The Compensated Absences Fund is utilized primarily as a budget smoothing technique for any such leave bank liquidations. The primary purpose of the Compensated Absences Fund is to maintain a balance sufficient to facilitate this smoothing.

Policy and Practice.

The contribution rate will be set to cover estimated annual cash flows based on a three-year trailing average.

The minimum cash reserve should not fall below that three-year average. The maximum cash reserve should not exceed fifty percent (50%) of the long term liability. The target cash reserve shall be the median difference between the minimum and maximum figures.

Each department will make contributions to the Compensated Absences Fund through its operating budget as a specified percentage of salary. The Finance Director will review and recommend adjustments to the percentage of salary required during the annual budget development process. This percentage will be set so as to maintain the reserve within the parameters established above.

5. Post Retirement Funding Policies:
13 20-159

F-2
a. Pension Funding:
(i) California Public Employees Retirement System (Ca1PERS): The City's principal Defined Benefit Pension program is provided through contract with Ca1PERS. The City's contributions to the plan include an actuarially determined employer contribution that fluctuates each year based on an annual actuarial plan valuation. This variable rate employer contribution includes the normal cost of providing the contracted benefits plus or minus an amortization of plan changes and net actuarial gains and losses since the last valuation period.

It is the City's policy to make contributions to the plan equaling at least one hundred percent (100%) of the actuarially determined contribution.

Any unfunded actuarial liability (UAL) is amortized and paid in accordance with the actuary's funding recommendations. The City will strive to maintain its UAL within a range that is considered acceptable to actuarial standards. The City Council shall consider increasing the annual CalPERS contribution should the UAL status fall below acceptable actuarial standards.
(ii) Laborer's International Union of North America (LIUNA): The City provides a supplemental pension plan for some employee associations through contract with LIUNA. This is funded via employee contributions of a fixed percentage of total compensation on a pay-as- you-go basis. The City is not contractually required to guarantee the level of the ultimate LIUNA benefit to retirees, nor does it do so.

Therefore, the City's liability for this program is fully funded each year. b. Other Post Employment Benefits (OPEB Funding):

Background.

The City's OPEB funding obligations consists of two retiree medical plans.

New Plan. Effective January 2006, the City and its employee associations agreed to major changes to the Post Employment Healthcare Plan. New employees and all current employees participate in a program that requires certain defined employee and employer contributions while the employee is in active service. However, once the contributions have been made to the employee's account, the City has transferred a substantial portion of the 14 20-160

F-2
funding risk to the employee.

Old Plan. Eligible employees who retired prior to the "New Plan" and certain active employees were eligible to continue to receive post -retirement medical benefits (a defined benefit plan). The cost was divided among the City, current employees, and retirees. In the past, this program was largely funded on a pay-as-you-go basis, so there was a significant unfunded liability. Recognizing this problem, the City began contributing to this obligation in 2001. In 2008, these assets were placed in a pre -funding trust.

The City's intention is to amortize the remaining unfunded liability within 20 years.

Policy & Practice.

New Plan. Consistent with agreements between the City and Employee Associations, the new defined contribution plan will be one hundred percent (100%) funded, on an ongoing basis, as part of the annual budget process. Funds to cover this expenditure will be contained within the salary section of each department's annual operating budget.

Old Plan. The City's policy is to pre fund the explicit (cash subsidy) portion of the Actuarial Accrued Liability (AAL) of the remnants of the old plan over a 20-year amortization period, or less. This amount will be based on the Annual Required Contribution (ARC) determined by a biennial actuarial review, subject to review and analysis by the City. The City will strive to maintain a funded status that will be within a range that is considered acceptable to actuarial standards. The City Council shall consider increasing the annual OPEB contribution should the funded status fall below acceptable actuarial standards.

F-2
Amended - September 15, 2008
Amended - November 12, 2008
Amended - May 24, 2011
Amended - September 27, 2011
Amended - May 14, 2013
Amended - June 10, 2014
Amended - May 12, 2015
Amended - September 25, 2018
Amended - June 14, 2022
Amended - June 11, 2024
16 20-162

ATTACHMENT F
F-2

RESERVE POLICY

PURPOSE
To establish City Council policy for the administration of Reserves defined as fund balances in governmental funds and net working capital in proprietary funds.

BACKGROUND
Prudent financial management dictates that some portion of the funds available to the City be reserved for future use.

Iratte]raN11so hIffid18J0190Y.111011100Itosiffie) 01F.11 Bill0IL41a%, Proprietary Funds including Enterprise Funds and Internal Service Funds have a long- term or economic resources measurement focus and basis of accounting, and therefore include long-term assets and liabilities. This basis of accounting is very similar to that used in private sector. However, instead of Retained Earnings, the term Net Assets is 1 20-163

1. Reserve for Inventories: The value of inventories purchased by the City but not yet issued to the operating Departments is reflected in this account.

F-2
for appropriation during the budget year.

3. Reserve for Prepaid Assets: This Rreserve represents resources that have been paid to another entity in advance of the accounting period in which the resource is deducted from fund balance. A common example is an insurance premium, which is typically payable in advance of the coverage period.

Although prepaid assets have yet to be deducted from fund balance, they are no longer available for appropriation.

4. Reserve for Permanent Endowment - Bay Dredging: The endowment specifies that the principal amount will not be depleted and represents the asset amounts to be held in the Bay Dredging Fund.

5. Reserve for Permanent Endowment - Ackerman Fund: The endowment specifies that the principal amount will not be depleted and represents the asset amount to be held in the Ackerman Fund.

3. Park In Lieu: Per Newport Beach Municipal Code (NBMC) Chapter 19.52 3 20-165

4. Upper Newport Bay Restoration Reserve: This Rreserve is the repository for funds mandated by SB573, as well as special fees charged to permit holders as an alternative to meeting certain specified mitigation criteria.

In addition to the mitigation fees, ten percent (10%) of Beacon Bay lease revenue is placed in this Reserve. Funds in the Reserve are restricted for Upper Newport Bay restoration projects.

5. Permanent Endowment for Bay Dredging: The endowment also specifies that the interest earnings on the principal amount can only be used for dredging projects in the Newport Bay.

The City considers a resolution to constitute a formal action for the purposes H
20-166

1. Facilities Financial Planning((FFP) Program: In conjunction with the Ciws Facilities Financial Plan, a sinking fund has been established to amortize the cost of critical City facilities such as, but not limited to, the Civic Center, Police Department buildings, Fire Stations, Library Branches, and otherFacility Improvement Projects.

The eligible uses of this reserve include the cash funding of public facility improvements or the servicing of related debt.

3. In Lieu Parking: Per NBMC Section 12.44.125 the City requires commercial businesses to provide adequate off-street parking or where this is not possible, businesses are afforded the opportunity to pay an annual fee and use parking spaces in a municipal lot, providing such a lot is located within specified proximity to the business. These funds can only be used to provide additional parking.

F-2

8. Capital Reappropriation: This Rreserve recognizes a portion of fund balance that is not readily available to fund new appropriations because it has been reappropriated through the budget adoption process or amendment process for programs or projects authorized in a prior fiscal year that are not yet complete.

Appropriations of balances are subject to Council Policy F-3 concerning budget adoption and administration.

E. Unassigned fund balance:

Should the Contingency Reserve be used, the City Manager shall present a plan to City Council to replenish the reserve within five years.

F-2

A. Water Enterprise Fund:

The Water Enterprise Fund Reserves are established to cover shortfalls in operating revenues, maintain strong bond ratings, cover day--to--day operating costs, and ease the burden on ratepayers associated with large rate increases. Appropriate reserve levels help the Water Enterprise Fund with liquidity, provide operational flexibility, and demonstrate fiscal responsibility to the rating agencies. The Water Enterprise Fund will maintain the following three reserves:

1. Operating Reserve: The Water Enterprise Fund Operating Reserve represents working capital maintained by the Water Enterprise Fund to cover day--to--day expenses and maintain sufficient funds to cover accounts receivables, periods of lower than expected water sales, or unforeseen cost increases such as the cost of importing additional water if groundwater becomes unavailable. The Water Enterprise Fund Operating Reserve will maintain a minimum balance of 120 days of operating expenses once fully funded. The City Council must approve the use of these funds, based on the City Manager's recommendation. Water Enterprise Funds collected in excess of the Water Enterprise Fund Operating Reserve targets would be available to offset future rate adiustments, while extended reserve shortfalls would be recovered from future rate increases. Should catastrophic losses to the infrastructure system occur, the Water Enterprise Fund Operating Reserve may be called upon to avoid disruption to water distribution.

3. Capital Reserve: The Water Enterprise Fund Capital Reserve represents funds to cover a portion of upcoming annual capital expenditures, smooth out the amount of capital infusion needed each year, and mitigate unexpected capital costs. The Water Enterprise Capital Reserve will maintain a minimum balance of seventy five percent (75%) of the annual planned CIP once fully funded. 1 . Stabilization and Contingency T?e..eyye: This Reserve is use to pro,; ate, sufficient funds to support seasonal variations in cash flows, and in more extreme conditions to maintain operations for a reasonable period of so the City may reorganize in an orderly manner or effeetuate a r increase to offset sustained eost increases. The intent of the Reserve is pT-ovide funds to offset eost iner-eases that are pFojeeted to be short liveE thereby partially eliminating the volatility in annual rate adjustments. not intended to offset -ongoing, ee g'tem, .e stFueture-ehanges. The - tar -get level of this - e-erg=esfifty per-Ee 0 %) of the annual r r.- ., a - at; mg budget. This Feser'6=
of 6 months withzero 74 months at a twenty five p nt Mom%\ loss rate. The --y Cou-neil must --rr--
ve the use of these funds, based o
City Manager Feee endation. Funds eolleeted in excess oftke Stabilization reseEve tar -get would be available to offset future fate adjustments, while extended reserve shortfalls would be reeovered fFo futufle rate inereases.Should —eatastre mosses to the infr-astrtfetur-e system oeeur, the Stabilization and Centingeney Reserve may be ealled upon to avoid disruption to water distribution.

M.- 111mi ME
\ I
1 \ I
20-171

F-2
IN MN
Ml

10. B. Wastewater Enterprise Fund:

The Wastewater Enterprise Fund Reserves are established to cover shortfalls in operating revenues, maintain strong bond ratings, cover day--to--day operatingcosts, osts,
and ease the burden on ratepayers associated with large rate increases. Per the reserve level recommendations, the Wastewater Enterprise Fund will maintain the following two reserves:

F-2
\, -
�-
WWI 0.Z.
r
♦ 1 I
- -
- - - -
♦
=
\ I
MOM
1 1 I
_
_
=
1 \ I
sum a sR i� ari s� � �a��a�a� ��>. • i. ��l�i � � •...... �_.i2il� �1 � s�a.1s�� s.�»�• si
C. Internal Service Funds Background.

F-2
--They act as a strategic savings plan for long-term assets and liabilities. --From an analytical standpoint, they enable appropriate distribution of city-wide costs to individual departments, thereby more readily establishing true costs of various operations.

Since departmental charges to the internal service fund duplicate the ultimate expenditure from the internal service fund, they are eliminated when consolidating entity -wide totals.

2. Equipment Maintenance Fund and Equipment Replacement Fund: The Equipment Maintenance and Replacement Funds receive operating money from the Departments to provide equipment maintenance and to fund the regular replacement of major pieces of equipment (mostly vehicles) at their economic obsolescence. a. Equipment Maintenance Fund: The Equipment Maintenance Fund acts solely as a cost allocation center (vs. a pre -funding center) and is funded on a pay-as- you-go basis by departmental maintenance charges by vehicle type and usage requirement. Because of this limited function, the target year-end balance is zero.

F-2
achieved through annual management adjustment of contribution rates on the basis of maintenance cost by vehicle and distribution of costs based on fleet use by department.
b. Equipment Replacement Fund: Operating Departments are charged annual amounts sufficient to accumulate funds for the replacement of vehicles, communications equipment, parking equipment, and other equipment replacement determined to be appropriate by the Finance Director. The City Manager recommends annual rate adjustments as part of the budget preparation process. These adjustments are based on pricing, future replacement schedules, and other variables.

3. Insurance Reserve Funds: The Insurance Reserve funds account for the activities of general liability, workers' compensation, property, and other insurance claims.

General liability and workers' compensation claims are self -insured up to an established amount, with excess insurance policies procured to address larger claims.

Property and other insurance policies are procured with appropriate deductibles, and related claims payments are not funded from the City's self-insurance program.

Background.

F-2
appropriate loss reserves including "incurred -but -not reported" (IBNR) claims. In a prescribed measurement methodology, the Actuary estimates the liabilities in conformity with Generally Accepted Accounting Principles (GAAP) .

A typical target funding level would be set to obtain a specified confidence level (the percent chance that resources set -aside will be sufficient to cover existing claims).

Policy & Practice.

4. Compensated Absences Fund:
14 20-176

F-2
Background.

Policy and Practice.

The contribution rate will be set to cover estimated annual cash flows based on a three-year trailing average.

5. Post Retirement Funding Policies:
a. Pension Funding:
(i) California Public Employees Retirement System (Ca1PERS): The City's principal Defined Benefit Pension program is provided through contract with CalPERS. The City's contributions to the plan include an actuarially determined employer contribution that fluctuates each year based on an annual actuarial plan valuation. This variable rate employer contribution includes the normal cost of providing the contracted benefits plus or minus an amortization of plan changes and net actuarial gains and losses since the last valuation period.

It is the City's policy to make contributions to the plan equaling at least 15 20-177

F-2
one hundred percent (100%) of the actuarially determined contribution.

Any unfunded actuarial liability (UAL) is amortized and paid in accordance with the actuary's funding recommendations. The City will strive to maintain its UAL within a range that is considered acceptable to actuarial standards. The City Council shall consider increasing the annual Ca1PERS contribution should the UAL status fall below acceptable actuarial standards.
(ii) Laborer's International Union of North America (LIUNA): The City provides a supplemental pension plan for some employee associations through contract with LIUNA. This is funded via employee contributions of a fixed percentage of total compensation on a pay-as- you-go basis. The City is not contractually required to guarantee the level of the ultimate LIUNA benefit to retirees, nor does it do so.

Therefore, the City's liability for this program is fully funded each year. b. Other Post Employment Benefits (OPEB Funding,):

Background.

The City's OPEB funding obligations consists of two retiree medical plans.

The City's intention is to amortize the remaining unfunded liability within 20 years.
16 20-178

F-2
Policy & Practice.

Adopted - January 24,1994
Amended - April 10,1995
Amended - February 26,1996
Amended - April 27,1998
Amended - March 14, 2000
Amended - May 8, 2001
Amended - April 23, 2002
Amended - June 10, 2003
Amended - April 13, 2004
Amended - September 13, 2005
Amended - September 15, 2008
Amended - November 12, 2008
Amended - May 24, 2011
Amended - September 27, 2011
Amended - May 14, 2013
Amended - June 10, 2014
Amended - May 12, 2015
Amended - September 25, 2018
Amended - June 14, 2022
Amended - Tune 11, 2024
17 20-179

Attachment G
Performance Metrics
20-180

Department
City Attorney's Office
Summary of Notable Accomplishments During Fiscal Year 2023-24 • Worked with the City Council Municipal Code and Council Policy Review Committee on a comprehensive update of the Municipal Code and City Council Policies. • Worked with the Community Development Department to implement the Housing Element, which allow for the redevelopment of the housing opportunity sites identified therein.
• Worked with City staff and the Newport Beach Public Library Foundation on a plan to fund and build the Library Lecture Hall.

Budget Highlights
• The City Attorney's Office is requesting that the part-time paralegal position be converted from a .5 FTE to a .75 FTE (an increase of .25 FTE).

Departmental Goals/Objectives for Upcoming Fiscal Year 2024-25 • Ensure that our office supports the Housing Element implementation process. • Ensure contracts, resolutions and ordinances are completed in a timely manner. • Ensure that people violating the Municipal Code are deterred from committing future crimes.

Department Performance Measures
Performance Measure
Actual
Estimated
Projected
Target
FY 22-23
FY 23-24
FY 24-25
Percentage (%) of Standard
N/A
N/A
N/A
100%
Contracts completed within 10
business days of complete
submission.

Percentage (%) of Standard
N/A
N/A
N/A
100%
Misdemeanor Citations filed
within 5 business days of the
scheduled arraignment date.

Percentage (%) of resolutions
N/A
N/A
N/A
100%
& ordinances completed by
City Council Staff Report
deadline.
20-181

Department
City Clerk
Summary of Notable Accomplishments During Fiscal Year 2023-24 Worked with Netfile to launch an Ethics Training Seminar to meet A131234 requirements.

Worked with Netfile to create a Lobbyist application for maintaining Lobbyist Registration Forms.
• Hosted Operation Christmas to collect toy donations for military families.

Budget Highlights
• City Clerk's Office goal is to continue staying within budget for FY2024-25.

Departmental Goals/Objectives for Upcoming Fiscal Year 2024-25 Host two Citywide Records Management Workshops to train and inform City staff of best practices.

Continue to promote transparency by uploading City Council documents to the City's website within 3 days of the meeting.

Department Performance Measures
Performance Measure
Actual
Estimated
Projected
Target
FY 22-23
FY 23-24
FY 24-25
Public Records Act Requests assigned to City
100%
100%
100%
100%
Clerk's Office responded to within 10-days
Public Records Act Requests completed by City
90%
95%
85%
100%
Clerk's Office within 10 days
Percentage of regular City Council minutes
100%
100%
100%
100%
prepared within 10 days of meeting
Percentage of Fully Complete Council Packets
100%
100%
100%
100%
(Staff Reports / Ordinances / Resolutions / Etc.)
Uploaded within 5 days of Meeting
20-182

Department
Community Development
Summary of Notable Accomplishments During Fiscal Year 2023-24 • Conducted an Accessory Dwelling Unit (ADU) code update, including guidebook and website for residents.
• Electronic plan review online services were made available to the public. • Department fee update from the FY22-23 Fee Study Update completed. • Customer queueing upgrades were made in the Bay C lobby to improve customer experience.
• Received the Federal Emergency Management Agency (FEMA)'s community rating system recertification.
• Utilized an ATV for code enforcement beach patrol summer of 2024.

Budget Highlights
• To assist with special programs and high volume of code enforcement cases, the following code enforcement operational requests were incorporated:
o Full -Time Code Enforcement Officer I
o Conversion of existing .75 Code Enforcement Trainee to full-time Code Enforcement Officer I
o Reassignment, of two full-time Code Enforcement Officer I positions, from Public Works to the Community Development Department
o Addition of a seasonal contract employee
• Salary and benefits for the addition of a Full -Time Building Inspector 11 were included, reducing related contract staffing funding.

Departmental Goals/Objectives for Upcoming Fiscal Year 24-25 • Continued implementation of the City's General Plan Housing Element • Expand online plan checking and permitting to commercial projects. • Continued refinement on reporting metrics for turnaround times for building, planning and code enforcement operations.
• Reviewing and implementing numerous changes in State law that affect local zoning (density bonus, parking, residential streaming, ADUs, etc.) • Adoption of updated Development Impact Fee Study
• Increase local control, of coastal zone properties, through Section 30613 request (increased Coastal Development Authority (CDP) authority) 20-183

Department Performance Measures
Performance Measure
Actual
Estimated
Projected
Target
FY 22-23
FY 23-24
FY 24-25

BUILDING
Percentage of building inspections provided
91 %
95%
95%
95%
within 1 business day of request
Percentage of 1st plan checks reviewed and
82%
80%
80%
80%
completed over the counter
Percentage of 1st plan checks reviewed
95%
90%
90%
90%
within 10 days of submittal

CODE ENFORCEMENT
Percentage of first enforcement actions
90%
90%
90%
90%
within 3 days of complaint
Percentage of violations resolved in 30
75%
65%
65%
65%
days or less
Percentage of 1st plan checks reviewed and
92%
80%
80%
80%
completed over the counter
Percentage of 1st plan checks reviewed
97%
90%
90%
90%
within 10 days of submittal
20-184

Department
City Manager's Office
Summary of Notable Accomplishments During Fiscal Year 2023-24 Information Technology Division:
• Increased the City's cybersecurity posture by completing a systems and network vulnerability assessment and mitigation.
• Increased the City's cybersecurity posture by implementing Multi -Factor Authentication, Data Loss Protection, Mobile Device Management, and Password Policy Enforcement. • Upgraded the City's data center to maximize resiliency and increase processing capacity. • Completed the Advanced Meter Infrastructure data and billing integration. • Implemented an infrastructure replacement program to better track and account for system, hardware, audiovisual, and security system replacements. • Completed a major upgrade of the City's Enterprise Resource Planning (ERP) system,Tyler Munis, to take advantage of enhancements and new security features. • Kicked off the Fire Station Alerting Modernization Project (scheduled to be completed in August of 2024).
• Implemented source code control and versioning for the City's custom -developed applications.

Outreach Division:
• Housed and reunified 19 people in FY 2023-24.
• Added five additional beds at the Costa Mesa Bridge Shelter to increase the availability to 25 beds.

Budget Highlights
Information Technology Division:
• Allocated dedicated funding for cybersecurity to better track the City's cybersecurity goals and initiatives.

Outreach Division:
• Good Giving Donations have increased year over year.

Departmental Goals/Objectives for Upcoming Fiscal Year 2024-25 Information Technology Division:
• Reduce the City's user cybersecurity phish-prone score by 3%. • Complete the Five -Year IT Strategic Plan.
• Upgrade the Audio/Video (AV) equipment in the Council Chambers. • Develop an Artificial Intelligence (AI) policy, Business Continuity Plan and Update the City's Disaster Recovery Plan.
• Modernize the City's device deployment process with the implementation of Microsoft InTune.
• Update our technology inventory practices to better monitor and track device inventory and retirement.
20-185

Outreach Division:
• Continue to house or reunify individuals experiencing homelessness into permanent living conditions.
• Facilitate street exits to shelters, skilled nursing facilities, or recuperative care facilities.

Department Performance Measures
Performance Measure
Actual Estimated
L
Projected
Target
FY 22-23 FY 23-24
FY 24-25
...

Mobile App Utilization /
32,800
34,000
40,000 100,000
Impressions
Impressions
Impressions
Impressions Impressions
Help Ticket Resolution
N/A
48 Hours
36 Hours
Time
Average
Average
36 Hours
Resolution
Resolution
Cybersecurity Training

9.7% Phish-

11.8% Phish-
9% Phish-

6.1 % Phish-
Effectiveness (phish-
Prone Score
Prone Score
Prone Score
Prone Score
prone score)
System Upgraded &
89% of
92% of
95% of
100% of
Updated
Systems
Systems
Systems
Systems
Upgraded /
Upgraded /
Upgraded /
Updated
Updated
Updated
•
Percentage of filled
95%
96%
96%
n/a
Newport Beach allocated
beds at Costa Mesa
Bridge Shelter
Increase the number of
28 individuals
19 individuals
25 individuals
n/a
individuals housed or
housed /
housed /
housed /
reunified through further
reunified
reunified
reunified
collaboration with City
Contractors
Number of Street Exits
86 Street Exits
104 Street
52 Street Exits
n/a
(Housed, Reunified with
Exits
Family, Placed in
Assisted Living/Skilled
Nursing or Sheltered)
20-186

Department
Finance
Summary of Notable Accomplishments During Fiscal Year 2023-24 • Fitch reaffirmed the City's AAA credit rating (the highest possible rating) in 2023, which was based, in part, on the well -controlled expenditure framework coupled with a very solid level of budget management.
• Provided the Finance Committee and City Council with timely quarterly budget updates. • Updated the City's City Council Policies F-7 and F-14 to clarify policies and procedures, and to provide for administrative efficiencies.
• Effectively managed the City's investment portfolio with a continued goal of maximizing investment returns while safeguarding principal and remaining sufficiently liquid to meet future expenditures.
• Implemented Governmental Accounting Standards Board Statement (GASB) No. 96, Subscription -Based Information Technology Arrangements (SBITAs). • Finalized the City's Annual Comprehensive Financial Report (ACFR) in a timely manner for the most recent fiscal year, which reflected an "unmodified" or clean opinion that the City's financial statements were presented fairly and were free of findings. • Received the Government Finance Officers Association's "Certificate of Achievement for Excellence in Financial Reporting" for the most recent fiscal year, which is the highest form of recognition in governmental accounting and financial reporting. • Acquired recovery costs due to the Elly Oil Spill (P00547) in October 2021. Recovery costs encompassed city employee time, contract services, and supplies and materials dedicated to city response.

Budget Highlights
Finalize the Fiscal Year 2023-24 GASB No. 75 full Valuation Statement Report for Postemployment Benefits other than Pensions. In previous years, a partial valuation was completed. This will be the first year a full valuation will be completed.

Departmental Goals/Objectives for Upcoming Fiscal Year 24-25 • Develop and implement a budget that conforms to the guidelines established by the GFOA for the "Distinguished Budget Presentation Award Program", which must excel as a policy document, financial plan, operations guide, and communication tool. • Effectively manage the City's investment portfolio with a continued goal of maximizing investment returns while safeguarding principal and remaining sufficiently liquid to meet future expenditures.
• Provide the Finance Committee and City Council with timely quarterly budget updates. • Conduct fee study assessments for Library, Recreation, and Senior Services. • Maintain the City's AAA credit rating by continuing to maintain a well -controlled expenditure framework.
• Continue to implement the City's pension paydown strategy with the goal of eliminating the City's pension liability in 2032.
20-187

Department Performance Measures
Performance Measure
Actual
Estimated
Projected
Target
FY 22-23
FY 23-24
FY 24-25
Long-term bond rating
AAA
AAA
AAA
AAA
issued by Fitch Ratings
Rate of return on pooled
City Return:

City Return:

Benchmark or
investments compared

1.28%

4.25%

3.75%
higher
to the benchmark index
Benchmark:

Benchmark:

Benchmark:
-0.03%

3.0%

2.5%
Average wait time on
3 minutes and
2 minutes and
2 minutes and
2 minutes
telephone calls made to
20 seconds
47 seconds
20 seconds
the revenue division
New vendors registered
809 new
830 new
875 new
875 new
in the city's vendor
vendors
vendors
vendors
vendors
registration and bid
+2.60%
+5.42%
+4.00% from
management system
prior year
Average turnaround
2-5 days
2-4 days
1-3 days
Maintain
time from requisitions to
1-3 days
purchase orders
Obtained an unmodified
Unmodified
Unmodified
Unmodified
Unmodified
("clean") audit opinion
("clean") audit
("clean") audit
("clean") audit
("clean") audit
on the city's financial
opinion issued
opinion issued
opinion issued
opinion
statements within six
on 2/6/23'
on 12/31/23
issued
months of year-end
% of Continuing
100%
100%
100%
100%
Disclosures filed in a
timely manner (270
days)
An unmodified ("clean") audit opinion for Fiscal Year 2021-22 was issued on February 6, 2023.

The Fiscal Year 2021-22 audit was delayed due to the implementation of Governmental Accounting Standards Board Statement No. 87 — Leases.
20-188

Department
Fire Department
Summary of Notable Accomplishments During Fiscal Year 2023-24 • Recent designation as a Class 1 Fire Department with Insurance Services Office (ISO), a national rating and analytics organization for the property insurance agency. Under their Public Protection Classification Program (PPC), ISO ranks an agencies' fire and emergency response capabilities based on an evaluation of communications, staffing, water systems, deployment, equipment, response times, training, public education, investigations, and more. Based on this criterion, a department is given a class ranking; with Class 1 being the highest. Newport Beach is now one of 3 departments in Orange County, 45 out of 854 in the State of California, and 498 out of 38,195 ranked agencies in the United States to attain a rank of Class 1. As a result, residents may see more competitive insurance rates, as insurance companies use PPC information to establish fire insurance premiums and may offer lower rates in communities that demonstrate superior fire service capabilities.
• Implementation of a fourth paramedic rescue ambulance out of the Santa Ana Heights station (implementation date Feb. 5, 2024) along with six new paramedic positions. • 40-year anniversary of the Junior Lifeguard program, which coincided with the 100tn anniversary of the of the City's Lifeguard service (1923-2023). Several events were held in 2023 to commemorate these anniversaries, including a Centennial Event Banquet, serving as host to the California Surf Lifesaving Association (CSLSA) regional competition, and the United State Lifesaving Association (USLA) Junior Lifeguard regional competition. • Partnering with UCSD and Cal Fire to utilize Artificial Intelligence (AI) monitoring equipment in our high fire hazard areas and continuing to pursue wildland mitigation measures via legislation and collaborative work with homeowners and businesses to enhance safety for the community.
• Hiring and training over 16 new firefighters/paramedics (13% of our total floor personnel), filling vacancies and increasing our medical effectiveness for our citizens and visitors. • Installation of vehicle exhaust capture system equipment and an updated station alerting system in conjunction with Public Works and Information Technology (IT). • Successful implementation of the first year of the Junior Lifeguard Scholarship program.

The Scholarship program was originally a condition of the California Coastal Commission's approval for the new Junior Lifeguard Building and aims to reduce financial barriers of entry to the Newport Beach Junior Lifeguard Program, providing youth with a lifechanging experience that may not otherwise be accessible. • Received a new, replacement Fire engine from the State of California Office of Emergency Management (Cal-OES).
• Implementation of the Department's Honor Guard. Currently comprised of 7 sworn personnel, this ceremonial guard attends various events (including parades, funerals, 20-189

memorials, and the annual Mayor's Dinner) in representation of the department and serves as a tribute to sworn personnel who have fallen in the line of duty.

Budget Highlights
• Procurement of a replacement Lifeguard Rescue Vessel as part of the FY 2024-25 Vehicle Replacement ISF Schedule; the last vessel replaced was in 2007. The unit to be replaced is a 1985 model that has far exceeded its service life. • Continued conversion of Firefighter positions to Firefighter -Paramedics to keep with the advanced lifesaving capabilities of the Fire Department. • Increase station maintenance budgets to cover needed repairs and improve preventative maintenance efforts.

Departmental Goals/Objectives for Upcoming Fiscal Year 2024-25 • Keep Fire Operations at or above 97% capacity for staffing. • Temporarily relocate Fire Station 1 in preparation for New Library/Fire Station 1 Construction.
• Streamline software platforms and any issues of program redundancy. • Continued implementation of various goals and objectives as identified in the 2022 NBFD Strategic Plan.
o Enhance interdepartmental cooperation in the purchasing process. o Review the current inventory of equipment and supplies. o Identify resources that may be shared with regional partners (training, staffing, equipment).
o Review and improve training delivery methods.
o Evaluate department staffing and determine succession planning needs. 20-190

Department Performance Measures
Performance Measure
Actual
Estimated
Projected
Target
FY 22-23
FY 23-24
FY 24-25
Fire Plan Check review

96.07%
95%
90%
90% of all initial
turnaround time (avg time for
(111 Round) plan
new construction)
check reviews
within 15 working
days or less
Number of medical transports
111
97 30
Under 30
by non-NBFD ambulances
(neighboring agencies provide
assistance when all units are
unavailable)'
Maintain Staffing & Reduce
Vacancies
Vacancies
Vacancies
Within FY Budget
Overtime
9 12
2 OT costs
OT Costs
OT costs
$7M
$6M
$5M
Drowning incidents are below
Yes
Yes
Yes
Drowning
the USLA statistical average
incidents do not
exceed USLA
statistical avers e
1st unit on -scene,
5 minutes
5 Minutes,
5 Minutes
5 Minutes, 90% of
90th percentile response time
33 seconds
34 Seconds
the time
(dispatch to arrival) for medical
aid 3
' Totals based on preceding calendar year—MetroNet Data based on averages 2 US Lifeguarding Association stat is 1 in 18 million beach visits 3 Total based on preceding calendar year —MetroNet Data 4-26-2024 20-191

Department
Harbor
Summary of Notable Accomplishments During Fiscal Year 2023-24 • Implementation and roll -out of the City mooring license program with online applications
• Submission of the application for the C Mooring Field optimization project to the California Coastal Commission including a 3000+ page response to request for additional information
• Significant improvements to the technology used to support operations (calls for service heat map, online permitting, online guest surveys, more mobile -friendly reservation process)
• Improved occupancy in all four categories of our visitor serving berthing options o Slips at Marina Park
o Short-term moorings at Marina Park
o Offshore mooring sub -permits
o Onshore mooring sub -permits
• Exhausted all Surrendered and Abandoned Vessel Exchange (SAVE) grant funding resulting in the destruction of 30 vessels from Newport Harbor to maintain safe and clean waterways.
• Completed the conversion and execution of all mooring permits inherited from the Orange County Sheriffs Harbor Patrol to the approved, new Newport Beach mooring permit format
• Installation of water quality measuring devices in the Harbor • Extend hours of operation and increase personnel funding to better respond to constituent requests and deliver services to the harbor community including:
o attention to early morning noise from the rowing programs o multiple berthing concerns at various commercial marinas o monitoring (and correcting when necessary) proper use of the visitor -serving anchorages
o support for and assistance associated with later arriving guests to the Marina Park facility or onto moorings
o Continue to identify unpermitted commercial operations and monitor noise and other nuisances associated with permitted charter operators. o Collaborate with commercial operators to come into compliance with permitting requirements and associated permit conditions
Budget Highlights
• Increased Marina Park Maintenance and Repair to accommodate extraordinary costs for maintaining the crane
• Reclassified Department Assistant to Administrative Assistant • Increased Capital Accrued for Replacement Patrol Vessel 20-192

Departmental Goals/Objectives for Upcoming Fiscal Year 2024-25 • Implement Latitude/Longitude tracking on Quest requests for service records. Report on service requests by geographic location using a "heatmap" Geographic Information System (GIS) tool. Provide heatmap reporting to Harbor Commission and the public via the GIS dashboard portal
• Upgrade the 2007 patrol boat to ensure it aligns with the city's current standards for vessel maintenance and replacement.
• Improve water quality by ensuring that all first-time sub-permittees, all new licensees and all new mooring permittees are dye -tabbed within 72 hours of arrival • Continue to work with the contractor to ensure water quality device produces quality data for distribution to the public and the Harbor Commission Department Performance Measures
Performance Measure
Actual
Estimated
Projected
Target
FY 22-23
FY 23-24
FY 24-25
Removal of unseaworthy,
22 vessels
15 vessels
10 vessels
15 vessels
unsafe or unsanitary
removed
removed
removed
removed
vessels
Improve Occupancy:
5,084 nights
5,300 nights
5,500 nights
+10% from Prior
Marina Park Slips
+4.25%
+3.78%
Year
Improve Occupancy:
647 nights
700 nights
750 nights
+10% from Prior
Marina Park Moorings
Year
Improve Occupancy:
5,733 nights
6,000 nights
6,300 nights
+10% from Prior
Offshore sub -permits
+4.66%
5%
Year
Improve Occupancy:
6,372 nights
6,500 nights
6,600 nights
+10% from Prior
Onshore sub -permits
+2%
+1.54%
Year
Achieve Occupancy:

N/A
17%
90%
90% Occupancy
Mooring License Program
Community Engagement:
6 events
12 events
12 events
6 events
Public appearances at
which the audience is
educated on the "clean,
safe and well -enjoyed"
mission and progress
toward delivering on that
mission
Removal of hazards,
1,066
1,200
1,200
900 — based on
debris, and trash removal
implementation of
from the harbor
upper bay trash
interceptor
20-193

Department
Human Resources
Summary of Notable Accomplishments During Fiscal Year 2023-24 • Implemented five new benefit providers for City -offered dental, vision, employee assistance program, life, and disability coverages.
• Successfully recruited to fully staff the City's new ambulance. • Transitioned to a joint powers authority for City insurance coverage, resulting in a savings of over $200,000.
• Successfully hired 19 police officers.
• Partnered with the City Council and City labor groups to provide a retention incentive for the City's long-term employees.
• Reviewed and updated City insurance requirements for special event permits and contracts with outside providers.

Budget Highlights
• Research and implement a reference check platform to expedite recruitment and onboarding
Departmental Goals/Objectives for Upcoming Fiscal Year 2024-25 • Transition to paperless PAF processing system
• Compile department videos and photos to increase recruitment efforts on social media • Augment Human Resources Information System (HRIS) auditing protocols Department Performance Measures
Performance Measure
Actual
Estimated
Projected
Target
FY 22-23
FY 23-24
FY 24-25
Recruitment Length
31 days
32 days
32 days
32 days
(Non -Continuous; from opening date to first eligible
list date; measured in business days)
Percentage of employees who positively rate
100%
99%
99%
100%
workshops being valuable.
(Trainings include PowerPoint, Word, Excel, DISC,
presentation skills, etc.)
Percentage of hiring managers who positively
100%
94%
94%
100%
rate their experience with the hiring process.
20-194

Department
Library Services
Summary of Notable Accomplishments During Fiscal Year 2023-24 • There was a 21 % increase in reader participation for the Summer Reading Program in 2023. Audience and program attendance saw a 139% increase over 2022. • A new children's read -a -long collection was introduced in November of 2023. • Working with City IT, a new projector was installed in the Friends Meeting Room. • Construction began on the new Library Lecture Hall at the Central Library in February of 2024. The 299 seat Hall, a private/public partnership between the Newport Beach Public Library Foundation and the City, is expected to be completed in late 2025. • Phase IX of the Sculpture Garden will debut in late June 2024 and feature ten new sculptures.
• The Library hosted four Storytellers Writing Workshops, which were once again at capacity within hours of opening registration. The popular Genealogy Workshop returned after a two-year hiatus.

Budget Highlights
• The Library received additional funding for a Part Time Department Assistant in the Literacy Office.
• The Library anticipates receiving a grant from the California Library Literacy Services division to help fund the program.
• The Library expects to receive additional funding from the Newport Beach Public Library Foundation, Friends of the Library, and the Arts Foundation to help fund programs and materials.

Departmental Goals/Objectives for Upcoming Fiscal Year 2024-25 • Increase awareness of the Library and its services through continued monthly eBlasts, outreach events, and mailing new residents welcome to the library postcards. • Increase use of Library services and materials by promoting library card signups, programs offered, and marketing library materials to encourage a greater number of checkouts.
• Continue to advance digital and traditional literacy skills across all ages by offering public computers; a 24/7 eBranch featuring eBooks and eAudiobooks, streaming movies, digital magazines, and databases; reading challenges, and checkout of materials across all age groups.
• Collaborate with the Finance Department for review of Library fees to assess appropriate fee levels for recovery of costs to Library associated with services provided. 20-195

Department Performance Measures
Performance Measure Actual Estimated
Projected
Target
FY 22-23 FY 23-24
FY 24-25
Door Counts
r641,
rprograms
661,254 3% increase
Average number of
18 programs
3% increase
attendees for Outreach
5,146 programs
with 5,459
programs
attendees = with 5,300
attendees =
322 attendees =
322
attendees at 322
attendees at
each attendees at
each event
each event
Website Visits
809,975 834,274
859,302
3% increase
Mobile app usage
59,203 60,979
62,808
3% increase
New eNews subscribers
N/A 1,596
1,644
3% increase
Number of New Resident
N/A 1,227
N/A
This is dependent
Postcards Mailed
on how many
(3 quarters)
people move into
our service area
Goal:

Library cards issued
81817 97180
9,271
10%/. increase
Checkouts
1,172,951 1,193,517
1,205,452
1 % increase
Average number of
998 1,008
1,020
1% increase
attendees for all programs
programs programs
programs
with 64,764 with 65,412
with 66,066
attendees = attendees =
= 65
65 65
attendees
attendees attendees
per program
per program per program
39,863 40,262
40,665
Computer Use Sessions
1 % increase
Digital Library Use
669,182 675,874
682,633
1% increase
Reading challenge program
2,450 2,475
2,500
1 % increase
active participants
Checkouts
1,172,951 1,193,517
1,205,452
1 % increase
20-196

Department
Police Department
Summary of Notable Accomplishments During Fiscal Year 2023-24 • Volunteers provided 4,700 hours of service hours:
o Conducting vacation checks at residences
o Distributing community/crime information flyers
o Coordinating community programs
o Providing administrative support for department functions • Launched Newport Notified community notification system. • Generated 210 photo and video posts on Instagram, Facebook and X (formerly Twitter). • Organized and managed 97 community outreach events, from home security inspections to the Police Appreciation Breakfast.
• Employees were active in at least 20 community organizations or regional/state/national law enforcement associations.
• Fully replaced legacy in -car video systems with new Axon Fleet 3 systems. • Received $376,000 in Office of Traffic Safety grant funds to impact traffic safety priorities.

Budget Highlights
• Added funding for significant technology systems, Flock Automated License Plate Recognition (ALPR) and Fusus data integration/analysis. • Added funding from donations and Asset Forfeiture funds to purchase new virtual use -of - force simulation training system.
• Utilized $50,000 in Asset Forfeiture funding for technology projects to support a new Crime Information Center (CIC) with real-time crime investigative and proactive crime analysis capabilities.
• Added funding for three Police Civilian Investigator positions to staff the CIC. • Repurposed six existing positions (1 Senior Crime Analyst, 1 Police Sergeant and 4 Police Officers) to fully staff the CIC and a directed enforcement unit.

Departmental Goals/Objectives for Upcoming Fiscal Year 2024-25 • Maintain excellent response times by responding to Priority 1 calls for service within an average of three minutes, 30 seconds and Priority 2 calls for service within six minutes. • Increase community outreach efforts — social media posts and crime alerts by 10%. • Establish the Crime Information Center in the Communications Center. • Complete the transition to Dodge Durango patrol vehicles and evaluate effectiveness/efficiency of the vehicle for ongoing patrol use. 20-197

Department Performance Measures
Performance Measure
Actual
2022
Actual
2023
Projected
2024
Target
Percentage of all 911 calls answered within 15
seconds

99.8%

99.8%
95%
Average response time for Priority 1 calls
3:21
3:00
3:15
3:30
Average response time for Priority 2 calls
5:40
5:57
5:45
6:00
Number of phone calls handled in Dispatch
172,614
169,371
170,000
170,000
Total calls for service (dispatched and field-
initiated)
101,169
101,946
101,000
101,000
Arrests (Workload Indicator)
2,734
2,565
2,600
N/A
Investigative Clearance Rate (percentage of
criminal cases closed)
N/A

45.7%
45%
45%
Social Media posts
154
210
225
231
Crime Alerts issued
90 94
104
103
20-198

Department
Public Works
Summary of Notable Accomplishments During Fiscal Year 2023-24 • San Diego Creek Trash Interceptor: Led innovative design solution for collection of trash and debris within San Diego Creek before entering the Upper Bay. Project was funded through grants and environmental liability funding. ($3,981,000 construction contract.

Started construction October 2023. Scheduled completion summer 2024.) • Surfside/Sunset Stage 13 Beach Nourishment: Engaged and provided leadership in this collaborative local -state -federal funded project to mine and deposit 1.2 million cubic yards of sand which will migrate to renourish Newport Beach. Also included moving 100,000 cubic yards of sand from the Santa Ana River mouth to the City's ocean groin fields. ($23M Federal project. Complete March 2024.)
• Keeping Public Works Efficient Internally: Public Works Administrative staff managed a $137.6M CIP budget, over 200 active contracts, ran 47 procurements, processed over 300 purchase orders, 88 City Council action items, and thousands of payables. • 291" Street Public Pier (Rhine Channel and Lafayette Ave.): Designed and permitted a new public pier to provide vessel tie-up/public access to the commercial district along the Rhine Channel. ($245,000 construction award by City Council January 2024.) • Hurricane Hillary/Tropical Storm Beach Preparation: Provided primary planning and response to exposed ocean beaches and community as the weather event with predicted 20-foot surf approached. Reinforced and maintained the sand beach berms and wind -rows well in advance. Distributed 6,500 filled and 2,000 empty sandbags to residents to protect homes. Although the storm subsided, Newport Beach was prepared.

Budget Highlights
Added additional funding to the following: $1.3M to the Parks Maintenance Master Plan program, $500,000 to the General Fund Capital Improvement Program (CIP) Fund, $1M to the Harbor Capital Fund, and $1 M to the Facilities Financing Plan Fund.

Added one new Engineering Technician to provide additional support to the Traffic and Transportation section of the Engineering Division. The Engineering Technician will complete technical drafting services, perform office and field work, and be a front-line asset providing assistance and information to the public.

Added additional funding to support anticipated maintenance and repair costs for the newly constructed Junior Lifeguard and Animal Shelter buildings. Contracted services would include janitorial cleanings, window/roof cleanings, fire alarm inspections and routine HVAC services. On- going maintenance and repair would include plumbing, electrical, carpentry, and painting services.

Additional funding was also added to support the cost of locking public restrooms nightly. 20-199

Departmental Goals/Objectives for Upcoming Fiscal Year 2024-25 • Continue to oversee the approval and delivery of the City's CIP including design and construction of the large slate of projects and programs identified to be undertaken over this period.
• Review and identify areas within the Public Works Department that could use operational or service delivery improvements. Develop, make plans, and implement and/or make necessary modifications or changes to processes, organization, and/or staffing to effect desired modifications.
• Continue to consolidate City facilities building maintenance under the management of Public Works Department to provide improved response, higher cost efficiency and operational efficiency, while maintaining consistent high -quality service to all facilities. • Work with neighboring cities, state, and federal partners to develop a regional plan for sand resiliency, protecting the public beaches, infrastructure, and our city's residential investments.
• In collaboration with the Utilities Department, identify potential new water well locations, then work with Community Development Department Real Property Program to secure the site and develop designs for the well facilities and infrastructure.

Department Performance Measures
Performance Measure
Actual
Estimated
Projected
Target
FY 22-23
FY 23-24
FY 24-25
Percentage of CIP projects completed
N/A
80%
80%
80%
within 60 days of the Master Schedule
Percentage of CIP projects completed
N/A
80%
80%
80%
within 10% contingency
Percentage of street closure permits
88%
80%
80%
80%
issued within 24 hours
Percentage of PW related Quest (work
N/A
80%
80%
80%
order) tickets completed within 48 hours
Percentage of refuse collected that is
45%
44%
45%
50%
diverted (recycled or composted)
20-200

Department
Recreation & Senior Services Department
Summary of Notable Accomplishments During Fiscal Year 2023-24 • Completed construction on Newport Beach Junior Guard building and community center. • Completed construction on Arroyo Park synthetic turf installation, increasing annual usable hours by 30%.
• Completed construction on the Newport Ridge Pickleball Courts, increasing total number of public courts to 10; expended $231,236 in Prop 68 per capita grant funds. • Finalized agreements with Boys and Girls Club (Lease at Eastbluff Park), Newport Harbor Lawn Bowling Club (Lease at San Joaquin Hills Park) and Newport Aquatic Center (Ground Lease at North Star Beach).
• Received $34,181 in grant funding from the CA Department of Boating and Waterways to purchase adaptive sailing equipment.

Highlights
• Reintroduced part time Assistant Recreation Coordinator position into the organizational structure and flexibility staffed all Recreation Leaders to Senior Recreation Leaders for improved recruitment, staff retention and greater level of service. • Added new revenue and expenditures to operate the Newport Beach Junior Guard building and community center from September to April annually. • Developed year-round league program format for the Newport Coast Pickleball Courts. • Applied for CA Department of Boating and Waterways grants to fund replacement of sailing equipment and program enhancements.

Departmental Goals/Objectives for Upcoming Fiscal Year 2024-25 • Update and improve parks amenities through the Park Maintenance Master Plan fund • Construct a universally accessible playground at San Miguel Park by June 2025 • Increase pickleball programming revenue by 20%
• Develop a volunteer driving program at OASIS to support the transportation program • Implement an Adaptive Sailing Program in partnership with Orange Coast College 20-201

Department Performance Measures
Performance Measure
Actual
Estimated
Projected
Target
FY 22-23
FY 23-24
FY 24-25
Recreational Program
341,516
351,761
362,314
373,183
Attendance/Registrations
+3.00%
+3.00%
+3.00% from
prior year
Senior Transportation Participants
10,048
10,000
10,300
10,609
-0.48%
+3.00%
+3.00% from
prior year
Recreational Classes Offered
3,376
3,382
3,480
3,584
+0.18%
+2.90%
+3.00% from
prior year
Satisfaction with Recreation

4.61 4.65

4.7 4.65
Programs (1-5)
20-202

Department
Utilities Department
Summary of Notable Accomplishments During Fiscal Year 2023-24 • New 5-year financial plan and rate study for the water and sewer enterprise funds. • Conversion of all water meters to new digital metering system (Advanced Meter Infrastructure).
• Implemented a new sewer lateral and cleanout inspection program.

Budget Highlights
• Converting part-time Maintenance Aides to part-time Utilities Specialists will provide additional support for the Department's production objectives and succession planning initiatives.
• Added several new on -call contractors to further reduce the maintenance repair backlog in the water, sewer and storm drain systems.
• Restricted budget increases to only personnel and contractual obligations.

Departmental Goals/Objectives for Upcoming :iscal Year 2024-25 • Plan a recycled water system expansion into Newport Center. • Secure a new water well site to enhance reliability for future groundwater needs. • Fully automate private water leak detections and notifications to residents. • Maximize groundwater production which will reduce our need to purchase more expensive imported water.
• Transition oil field operations from our long-time operator to a new contract operator due to retirement.

Department Performance Measures
Performance Measure
Actual
Estimated
Projected
Target/
FY 22-23
FY 23-24
FY 24-25
Goal
Percentage of groundwater pumped

82.7%
81 %
85%
85%
Percentage Water Fund cash reserves
105%
86%
88%
100%
vs. goal
Percentage of sewer mainlines
60%
70%
75%
75%
cleaned annually
Percentage Sewer Fund cash reserves
64%
34%
8%
100%
vs. goal
Percentage of streets swept on
95%
95%
98%
100%
schedule
Percentage/Number of graffiti incidents
NA / 3,558
95% /
95% /
100% /
removed within 24-hours of notice
4,000
4,000
4,000
Percentage/Number of street lights
NA / 394
95%/350
95% / 350
100% / 350
repaired within 48-hours of notice
20-203

Newport Beach City CouncilJune 11, 2024

Newport Beach City Council
June 11, 2024