Attachment A - Financial Report — Newport Beach City Council, February 11, 2025 (part 1 of 2)

Attachment A
Annual Comprehensive Financial Report for the Fiscal Year Ended June 30, 2024 11-4

CITY OF NEWPORT BEACH

CALIFORNIA

FISCAL YEAR ENDED
JUNE 30, 2024
ANNUAL

COMPREHENSIVE

FINANCIAL REPORT
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Annual Comprehens
ive Financial Report
For the Fiscal Year Ended June 30, 2024
Prepared by the Finance Department
Jason Al-Imam, Finance Director/Treasurer
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The City of Newport Beach was incorporated September 1, 1906 The present City Seal was adopted July 22,1957
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INTRODUCTORY SECTION
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CITY OF NEWPORT BEACH
Annual Comprehensive Financial Report
Fiscal Year Ended
June 30, 2024

TABLE OF CONTENTS

INTRODUCTORY SECTION
(Unaudited)
Table of Contents ..................................................................................................................... 1 Let
ter of Transmittal ................................................................................................................. 5 GFOA Certificate of Achievement for Excellence in Financial Reporting ................................ 19 List of City Officials ................................................................................................................ 20 Organization Chart ................................................................................................................. 21

FINANCIAL SECTION
Independent Auditor's 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:

Balance Sheet ............................................................................................................ 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 .................................................................................... 80 Required Supplementary Information
Defined Benefit Plan For Miscellaneous Employees:

Schedule of Changes in the Net Pens
ion Liability and Related Ratios ......................... 146 Schedule of Contributions............................................................................................ 148 Defined Benefit Plan For Safety Employees:

Schedule of Changes in the Net Pension Liability and Related Ratios ......................... 150 1 11-11
Schedule of Contributions............................................................................................ 152 Post-Em
ployment Health Care Benefits (OPEB):

Schedule of Changes in the Net OPEB Liability and Related Ratios ............................ 154 Schedule of Contributions............................................................................................ 156 Budgetary Comparison Statements:

General Fund ............................................................................................................. 158 Tide and Submerged Land – Operating Fund .............................................................. 160 Tide and Submerged Land – Harbor Capital Fund ...................................................... 161 Notes to Required Supplementary Information ............................................................... 162 Supplementary Schedules
Other Governmental Funds:

Combining Balance Sheet ........................................................................................... 1 70 Combining Statement of Revenues, Expenditures and Changes in Fund Balances ............................................................................................................ 176 Budgetary Comparison Schedules:

State Gas Tax Fund .................................................................................................... 1 84 SB1 Gas Tax RMRA Fund ........................................................................................... 1 85 Asset Forfeiture Fund ................................................................................................. 186 OTS DUI Grant Fund ................................................................................................... 187 Circulation and Transportation Fund ............................................................................ 188 Building Excise Tax Fund ............................................................................................ 189 Community Development Block Grant Fund ................................................................ 190 Air Quality Management District Fund ......................................................................... 191 Environmental Liability Fund ........................................................................................ 1 92 Supplemental Law Enforcement Services Fund .......................................................... 193 Opioid Remediation Fund ............................................................................................ 194 Contributions Fund ...................................................................................................... 1 95 FIIN Fund .................................................................................................................... 196 Restricted Programs Fund ........................................................................................... 197 Measure M Fund ......................................................................................................... 198 Oceanfront Encroachment Fund .................................................................................. 199 American Rescue Plan Act Fund ................................................................................. 200 Miscellaneous Grants Fund ......................................................................................... 201 PEG Fees Fund ........................................................................................................... 202 Internal Service Funds:

Combining Statement of Net Position .......................................................................... 206 Combining Statement of Revenues, Expenses and Changes in Net Position .............. 207 Combining Statem
ent of Cash Flows ........................................................................... 208 Custodial Funds:

Combining Statement of Fiduciary Net Position ........................................................... 212 Combining Statement of Changes in Fiduciary Net Position ........................................ 213

STATISTICAL SECT
ION
(Unaudited)
Financial Trends:

Net Posit
ion by Component ............................................................................................... 218 2 11-12
Changes in Net Position .................................................................................................... 220 Fund Balanc
es of Governmental Funds ............................................................................ 222 Changes in Fund Balance of Governmental Funds ........................................................... 224 Revenue Capacity:

Assessed Value and Estimated Actual Value of Taxable Property .................................... 228 Property Tax Rates, Direct and Overlapping Governments ............................................... 229 Principal Property Taxpayers ............................................................................................ 230 Property Tax Levies & Collections ..................................................................................... 2 31 Debt Capacity:

Ratios of Outstanding Debt by Type .................................................................................. 2 35 Ratios of General Bonded Debt ......................................................................................... 236 Schedule of Direct and Overlapping Debt .......................................................................... 237 Computation of Legal Debt Margin .................................................................................... 238 Demographic and Economic Information:

Demographic and Economic Statistics .............................................................................. 242 Principal Employers........................................................................................................... 2 43 Operating Information:

Full-Time City Employees by Function .............................................................................. 247 Operating Indicators by Function ....................................................................................... 248 Capital Asset Statistics by Function ................................................................................... 2 50 Water Sold by Customer Type .......................................................................................... 252 Utility Rates ....................................................................................................................... 2 53 Major Water Customers .................................................................................................... 2 54 3 11-13
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Finance Department

CITY OF NEWPORT BEACH
100 Civic Center Drive
Newport Beach, California 92660
949 644-3127 | 949 644-3339 FAX
newportbeachca.gov/finance
December 30, 2024
Honorable Mayor, Members of the City Council,
and Residents of the City of Newport Beach, California
The City C
harter 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, 2024 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 Newpor t 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 th e 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 cost s 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, 2024 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, 2024 are fairly presented in 5 11-15
conformity with GAA
P. The independent auditor’s report is presented as the first component of the financial section of this report.

A narrative introducti
on, 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 communi
ty 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:
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Newport Beach surrounds New
port 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 82,419, 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 illust
rates 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.

Newport Beach was incorporated on September 1, 1906. The City Charter was originally adopted in 1954 but has been updated and amended over time. The City is governed by seven Council Members, and operates under a Council -Manager form of government.

Council Members are elected by district but voted on by the population as a whole, and serve four-year staggered terms. The Mayor is selected by the City Council from among its membership and serves a one- year term. The City Council is responsible for , among 7 11-17
other things, policy -mak
ing, 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 Cit
y’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 m
ature community, vacant land has become increasingly scarce and the city is relatively built -out. Currently at 82,419, the population has been very stable as indicated by the following chart.
0 10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
100,000
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
Fiscal Year
Population
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The effective buyi
ng 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 B each’s median household income is higher than the median household income in the County of Orange and the State of California.

The leading industries here include professional services, scientific services, healthcare, finance, insurance, legal services, and travel and tourism . Unemployment in the C ity increased to 3.6% as of October 2024 which is consistent with the statewide and national trends. Jobs grew at a slower rate than the previous year due to a slowing economy and more workers joining or re-joining the labor force. However, the City’s unemployment rate is still lower compared to the state’s 5.3 %, and the county’s 4.1 %, as illustrated in the following chart.

More detailed information concerning the C ity’s demographics and statistics are contained within the Statistical Section of this report.

LOCAL ECONOMY

The economic outlook in Newport Beach remains strong, largely due to continued growth in property values, which has driven the median price of detached single-family homes to nearly $4 million. Despite elevated interest rates resulting in high borrowing costs and slower home sales, property tax revenue—the City’s largest source of revenue—remains strong and stable.

City of Newport Beach $156,434
Orange County 110,042
California 95,521
USA 77,719
Source: U.S. Census Bureau, 2023
2023 Median Household Income

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024*
Calendar Year
Historical Unemployment Rates
(Rates are not seasonally adjusted)
Newport Beach
Orange County
California
* through October 31, 2024
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Sales tax and trans
ient occupancy tax (TOT) revenue, the City’s second and third largest revenue sources, respectively, are directly influenced by consumer behavior. A significant portion of the City’s tax revenue depends on luxury markets, such as automobile dealerships, fine dining, and luxury hotels, making it sensitive to economic headwinds like high interest rates and shifts in consumer preferences. Nonetheless, growth in sales tax and TOT revenue is projected, though at a slower pace than in previous years.

TOP THREE REVENUE S
OURCES
Most General Fund revenu
e 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 2023. Actual revenues were $8.3 million or 2.9 % higher than final anticipated estimates, and $11. 8 million or 4.1 % higher than previous fiscal year. As discussed in more detail below, the primary positive variances were in property tax and transient occupancy taxes.

The top three individual r
evenue sources, Property Taxes, Sales Taxes and Transient Occupancy Taxes, represent 74.6% of all General Fund revenues. Tax revenues in total, including business licenses, franchise fees , and other taxes represent 78 .1% of all General Fund revenues, while only 21.9% is generated from other revenue sources.

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 ( 49.3%) 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 numb er one revenue source. Property tax revenues for Fiscal Year 2023-24 came in $7.8 million 10 11-20
or 5.6% higher than the pri
or 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 in ownership and price appreciation.

Detached single-family residential property values increased 3.2% in 2024, as illustrated in the following table. Home sales rebounded slightly from the previous year even though interest rates increased slightly. Newport Beach’s estimated median price for a detached single-family residence is currently $4.0 million, which far exceeds the countywide estimated median value of $1.3 million. Higher assessed values are projected to continue due to strong demand, which is expected to support continued growth in future property tax revenues.

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 30 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.

Calendar Median Median %
Year Sales Price Change
2015 1,023 1,975,000$ 5.25%
2016 1,064 2,150,000$ 8.86%
2017 1,114 2,400,000$ 11.63%
2018 952 2,517,000$ 4.88%
2019 949 2,435,000$ -3.26%
2020 1,143 2,595,000$ 6.57%
2021 1,409 3,200,000$ 23.31%
2022 834 3,730,750$ 16.59%
2023 689 3,845,000$ 3.06%
2024* 530 3,968,000$ 3.20%
Source: HdL Coren & Cone
*Data through October 2024

CITY OF NEWPORT BEACH
Detached Single Family Residential Full Value Sales
Median Price
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Value changes in Newport
Beach show continued appreciation in property values in Fiscal Year 2023-24. Over the past 10 years, assessed valuation increased an average of 6.0% per year and 5.7% over a twenty -year period. Newport Beach’s assessed property values increased 6.4%, with a local assessed value of $75.9 billion for Fiscal Year 2023-24.

Sales Tax
The second largest funding s
ource for the General Fund is sales tax revenue, making up about 14.6% of General Fund revenues. The City’s sales tax base is largely generated from three industry categories – autos and transportation, general consumer goods, and restaurants/hotels. Most of these industries are also heavily impacted by tourism. To generate additional sales tax revenue over the long term while encouraging economic development, the City has historically entered into sales tax abatement agreements with local automobile dealerships . These agreements include covenants requiring the dealerships to operate within the City for a specified period of time and to maximize the City as the point-of-sale. During the current fiscal year, the City had one such agreement with a luxury automobile dealership, which expired on June 30, 2024.

Sales tax revenue was down

6.7% during the current fiscal year. Consistent with results across the State of California, sales from all industry groups were down, except for sales from restaurants and hotels, which were up 6.1%. Sales were down in the current year 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 18%, partly due to a decrease in demand for new vehicles, which is largely related to higher interest rates. The decrease in auto sales was also exacerbated by the temporary closure of a luxury automobile dealership, which is currently undergoing a construction renovation project.

5.3%

7.1%

0.2% 1.0% 2.9%

5.2% 5.7%

5.9% 6.5%

6.6%

7.3% 5.3%

6.4%
$-
$10,000,000,000
$20,000,000,000
$30,000,000,000
$40,000,000,000
$50,000,000,000
$60,000,000,000
$70,000,000,000
$80,000,000,000
$90,000,000,000
2010-11
2011-12
2012-13
2013-14
2014-15
2015-16
2016-17
2017-18
2018-19
2019-20
2020-21
2021-22
2022-23
2023-24
2024-25
Total Assessed Property Value Growth

4.5%4.8%
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Sales tax revenue is
projected to increase by 4.1 % next fiscal year, largely due to an increase in demand for general consumer goods and online purchases. In addition, sales from restaurants and hotels are projected to rise by 3.5% next year, which is a lower growth rate than the previous year. This is due to menu price increases that have impacted consumer behavior, as foot traffic to restaurants has been down recently.

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 in two broad property type categories, commercial and residential property. The commercial category is composed of approximately 2 1 hotels and resorts and accounts for approximately 76% of TOT revenues. The residential category is made up of approximately 1,550 vacation rentals representing 24% of TOT revenue. TOT revenue from short-term residential stays has more than doubled over the past five years, while hotel TOT revenue has increased by only 14% over the same five-year period.

In the current fiscal year, TOT revenue from short -term residential stays decreased by 5%, while hotel TOT revenue increased by 9%. The decline in revenue from short -term rentals is due to the cap placed on the number of residential permits. This year, the number of active residential permits dropped below the cap of 1,550 for the first time since the cap was enacted several years ago. The increase in revenue from hotels is partly due to the opening of the Pendry, which opened in September 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 13 11-23
reserve levels. The Ci
ty annually completes a Long- Range Financial Forecast covering the next 20 years pursuant to City Council Policy F -3 – Budget Adoption and Administration. That forecast shows positive General Fund results in each of the next 20 years and does not indicate any long- term financial trends of concern. The City’s long - term financial planning has been guided by its strong financial policies, prudent budgeting decisions, and proactive planning in such critical areas as facilities replacement and pensions. These policies are regularly evaluated and updated as conditions and needs change.

Financial Policies
T
he 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 p olicies can be found on the City’s website in the City Council section under City Government at:
w
ww.newportbeachca.gov/policies
A
nnual Budget
The an
nual 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, th oughtful additions to the City’s workforce have been implemented with a continued focus on fiscal discipline and maintaining balanced budgets.
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The City has tradit
ionally 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 2024, 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 moderat e 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 2033.

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Facilities Finan
cial 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 Pl anning Reserve (FFPR) in FY 2023-24 by allocating resources to a new library lecture hall, to update and modify fueling support facilities and a transfer station, to finalize construction of a new Junior Lifeguard building, and to replace a public restroom.

Overall, the FFPR balance decreased by $4.4 million from the prior fiscal year.

Pensions

As of the actuarial valuation date of June 30, 2023, the City had an Unfunded Accrued Liability (UAL) of $341 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 51.9% of the Normal Cost of the plan, or $11.2 million in Fiscal Year 2023-24.

Beginning Balance 7/1/23 24,800,492$
Sources
Licenses, P
ermits and Fees 68,617
Donations 37,951
Transfer In from General Fund 11,072,033
Inv estment Income 765,875
Net increase in f
air value of investments 516,408
Total Sources 12,460,884
Uses
Library Lecture Hall (10,748,980)
Parks and Community Centers (850,000)
Jr. Guard Capital Project (286,361)
Fueling Facilities and Transfer Station (4,940,281)
Total Uses (16,825,622)
Ending Balance 6/30/24 20,435,754$
Facilities Financial Planning Reserve Fund
16 11-26
• Adopted a fixed and shor
ter 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 prot ect 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 (11) of Notes to the Financial Statements.

T
he 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 (12) 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.

A
s 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 2023-24 represented five years in a row the City Council appropriated additional funding towards an accelerated 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 2033.

Additionally, in fiscal year 2023-24 City Council approved a one- time payment of $5.8 million towards paying down the City’s OPEB liability. As a result, beginning in fiscal year 2024-25, the OPEB liability is fully funded and the City is expec ting to accrue $4 million of annual savings.
17 11-27

AWARDS AND ACKNOWLEDGMENTS
The City has prepared a
n Annual Comprehensive Financial Report for the past 31 years.

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

The Government Finance O
fficers 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, 2023. 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 Ac
hievement 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.

Grace K. Leung
City Manager
Jason Al-Imam
Finance Director/Treasurer
18 11-28
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, 2023
Executive Director/CEO
19 11-29
Newport Beach City Officials
Sara J. Weber
Councilmember
District 7
Lauren Kleiman
Mayor Pro Tem
District 6
Michelle Barto
Councilmember
District 2
Erik Weigand
Councilmember
District 3
Noah Blom
Councilmember
District 5
Robyn Grant
Councilmember
District 4
City Councilmembers
City Executive Staff
Grace Leung
City Manager
Aaron Harp
City Attorney
Leilani Brown
City Clerk
Tara Finnigan .......................................................................................................................... Assistant City Manager Seimone Jurjis ........................................................................................................................ Assistant City Manager Jason Al-Iman ................................................................................................................... Finance Director/Treasurer Jeff Boyles .................................................................................................................................................... Fire Chief Paul Blank ............................................................................................................................................. Harbormaster Barbara Salvini ................................................................................................................. Human Resources Director Melissa Hartson.................................................................................................................... Library Services Director Dave Miner .................................................................................................................................... Acting Police Chief Dave Webb ............................................................................................................................... Public Works Director Sean Levin ....................................................................................................... Recreation & Senior Services Director Mark Vukojevic ................................................................................................................................. Utilities Director Joe Stapleton
Mayor
District 1
20 11-30
Board of
Library Trustees
Building & Fire
Code of Appeals
City Arts
Commission
Civil Service Board
Harbor Commission
Parks, Beaches &
Recreation Commission
Planning
Commission

ELECTORATE
CITY

MANAGER

MAYOR &

COUNCIL
CITY
CLERK
CITY

ATTORNEY
Community
Development
Finance
Fire
Human
Resources
Harbor
Library
Services
Public
Works
Utilities
Police
Recreation &
Senior Services
City
Committees
21 11-31
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22 11-32
23 11-33
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24 11-34

INDEPENDENT AUDITOR’S REPORT

The Honorable Mayor and
Mem
bers 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, 2024, and the related notes to the financial statements, which collectively comprise the City’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, as of June 30, 2024, 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.

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. 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.

Responsibilities of Management for the Financial Statements

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 25 11-35
The Honorable Mayor and
Members
of the City Council
City of Newport Beach
Newport Beach, California
ability to continue as a going conce
rn 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 th e
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 regardin g th
e 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 ov erall
prese
ntation of the financial statements.
 Conclude whether, in our judgment, there are conditions or events, considered in th e aggre
gate, that raise substantial doubt about the City’s ability to continue as a going concern for a reasonable period of time.

We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control–related matters that we identified during the audit.

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 26 11-36
The Honorable Mayor and
Members
of the City Council
City of Newport Beach
Newport Beach, California

financial statements. Such in
formation 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 Combining and Individual Nonmajor Fund Financial Statements and Budgetary Comparison Schedules have 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 S tatistical Section but does not include the financial statements and our auditor’s report thereon. Our opinions on the financial statements do not cover the other information, and we do not express an opinion or any form of assurance thereon. In connection with our audit of the basic financial statements, our responsibility is to read the other information and consider whether a material inconsistency exists between the other information and the financial statements, or the other information otherwise appears to be materially misstated. If, based on the work performed, we conclude that an uncorrected material misstatement of the other information exists, we are required to describe it in our report.

Other Reporting Required by Government Auditing Standards

In accordance with Government
Auditing Standards , we have also issued our report dated December 30, 2024, 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 27 11-37
The Honorable Mayor and
Members of the City Council
City of Newport Beach
Newport Beach, California
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 30, 2024
28 11-38
MANAGEMENT’S DISCUSSION AND ANALYSIS
29 11-39
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30 11-40
MANAGEMENT’S DISCUSSION AND ANALYSIS
Thi
s section of the City of Newport Beach’s Annual Comprehensive Financial Report (AC FR) presents management’s discussion and analysis of the City’s financial performance during the fiscal year that ended on June 30, 2024. This analysis should be read in conjunction with the Transmittal Letter at the front of this report and the accompanying Basic Financial Statements.

VERVIEW OF THE FINANCIAL STATEMENTS
The f
inancial section of the A nnual Comprehensive Financial Report contains the following information: Independent Auditors’ 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 t he Fi
nancial Statements. Management’s Discussion and Analysis is intended to be an introduction to the Basic Financial Statements.

SIC FINANCIAL STATEMENTS
Gover
nment-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 St
atement 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 G
overnment-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 G
overnment-wide Financial Statements of the City are divided into two categories:

G
overnmental 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 11-41

Business-type Activities – The City accounts for its Water and Wastewater uti lities 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 current 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, ris k 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 11-42
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.

N
otes 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.

R
equired 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.

S
upplementary 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.

NALYSIS OF GOVERNMENT-WIDE FINANCIAL STATEMENTS
The Gov
ernment-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.

Ne
t Position Discussion
As shown in Figure 1, the City’s combined net position for the fiscal year ended June 30, 2024 was $2.6 billion, increasing $65.8 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 $60 .6 million. This increase is primarily due to a combined $55.0 million increase in cash and investments and restrict ed cash and investments with fiscal agent mostly related to the receipt of contributions for operating activities and capital improvement projects and the issuance of limited obligation improvement bonds for two assessment districts.

The remaining $5.6 million increase is attributable to an increase in account receivables most of which is related to a future contribution for the construction of a new library lecture hall, offset by decreases in other receivables such as lease receivables, intergovernmental receivables, and a public-private partnership receivable. Capital assets in creased $19.7 million, of which $10.9 million is related to additions to infrastructure and work in progress, and $7.3 million is due to additions to land and structures.

Current liabilities increased $18.3 million primarily due to increases in accounts payable offset by a decrease in unearned revenue.

Long-term liabilities increased $2.5 million. The increase is primarily due to increases in insurance related liabilities and lease liabilities, offset by decreases in outstanding certificates of participation and decreases in the City’s net pension liability and net OPEB liability as investment returns in 33 11-43
both plans finished better than expected. See Note (11) and Note ( 12) of the Notes to the Financial Statements for more information.

Figure 1
Net Position
June 30
(in thousands)
The l
argest portion of the City’s net position, at $ 2.4 billion of net position, reflects the n et 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.

R
estricted net position totaled $123.4 million of net position, an increase of $44.3 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 new limited obligation improvement bond proceeds restricted for use on two assessment districts not being completely spent during the fiscal year, while C ommunity services’ increase is mainly from tidelands property related revenues not being spent during the fiscal year as resources are being accumulated for future large scale capital improvement projects related to the harbor.

As of June 30, 2024, unrestricted net position was $48.2 million, an increase of $1.4 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.

Governmental Activities Business-Type Activities Total
2023 2024 2023 2024 2023 2024
Current and other assets 633,179$ 699,910$ 36,647$ 30,548$ 669,826$ 730,458$ Capital assets 2,372,769 2,391,089 135,267 136,639 2,508,036 2,527,728 Total assets 3,005,948 3,090,999 171,914 167,187 3,177,862 3,258,186 Deferred outflows of resources 141,903 145,027 5,319 5,341 147,222 150,368 Current liabilities 41,327 58,840 4,245 4,986 45,572 63,826 Long-term liabilities 479,521 482,299 15,170 14,928 494,691 497,227 Total liabilities 520,848 541,139 19,415 19,914 540,263 561,053 Deferred inflows of resources 271,428 268,341 101 79 271,529 268,420 Net position
Net investment in capital assets 2,256,306 2,275,100 131,016 132,332 2,387,322 2,407,432 Restricted 79,152 123,445 - - 79,152 123,445 Unrestricted 20,117 28,001 26,701 20,203 46,818 48,204 Total net position, before restatement 2,355,575 2,426,546 157,717 152,535 2,513,292 2,579,081 Restatement - - (1,595) 1 - (1,595) 1 -
Total net position 2,355,575$ 2,426,546$ 156,122$ 152,535$ 2,511,697$ 2,579,081$ 1 Prior year net position w as restated due to unbilled receivables adjustment in Fiscal Year 2022-23. See note (20) of the Notes to the Financial Statements for more information. 34 11-44

GOVERNMENTAL AC

TIVITIES

Governmental activities are generally financed through taxes, intergovernmental revenues, and other non-exchange revenues. The Statement of Activities is intended to illustrate how the cost of governmental activities is financed and determines the annual change in net position.

Figure 2
Changes in Net Position
For the Years Ended June 30
(in thousands)

Revenues Associated with Governmental Activities Discussion

Figure 2 illustrates in detail how the $395.4 million in Governmental Activities revenue was derived. Figure 3 summarizes this revenue by major source. As shown on Figures 2 and 3, $81.5 million, or 20.6%, of the revenues were recovered from those who directly benefited from the programs as a charge for service. Another $70.1 million, or 1 7.7%, 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 $243. 8 million, or

61.7%, represented general revenues of the City including taxes, intergovernmental revenues, and other miscellaneous revenues.

Governmental Activities Business-Type Activities
2023 2024 2023 2024 2023 2024
Revenues:

Program revenues:

Charges for services 74,454$ 81,473$ 36,700$ 39,117$ 111,154$ 120,590$ Operating grants and contributions 20,132 34,498 - 115 20,132 34,613 Capital grants and contributions 5,810 35,647 - - 5,810 35,647 Total program revenues 100,396 151,618 36,700 39,232 137,096 190,850 General revenues:

Taxes:

Property taxes 138,359 146,137 - - 138,359 146,137 Sales tax 46,552 43,445 - - 46,552 43,445 Transient occupancy taxes 30,202 31,737 - - 30,202 31,737 Other taxes 10,080 10,252 - - 10,080 10,252 Investment related income 2,520 9,368 258 1,462 2,778 10,830 Other 5,552 2,855 - - 5,552 2,855 Total general revenues 233,265 243,794 258 1,462 233,523 245,256 Total revenues 333,661 395,412 36,958 40,694 370,619 436,106 Expenses:

General government 26,912 28,392 - - 26,912 28,392 Public safety 121,310 151,626 - - 121,310 151,626 Public works 75,904 88,360 - - 75,904 88,360 Community development 13,048 16,814 - - 13,048 16,814 Community services 27,937 33,034 - - 27,937 33,034 Interest 6,666 6,215 - - 6,666 6,215 Water - - 30,702 37,322 30,702 37,322 Wastewater - - 5,344 6,959 5,344 6,959 Total expenses 271,777 324,441 36,046 44,281 307,823 368,722 Increases
in net position 61,884 70,971 912 (3,587) 62,796 67,384 Net position at beginning of year 2,293,691 2,355,575 156,805 157,717 2,450,496 2,513,292 Restatement - - - (1,595) 1 - (1,595) 1 Net position at beginning of year, as restated 2,293,691 2,355,575 156,805 156,122 2,450,496 2,511,697 Net position at end of year 2,355,575$ 2,426,546$ 157,717$ 152,535$ 2,513,292$ 2,579,081$ 1 Prior year net position w as restated due to unbilled receivables adjustment in Fiscal Year 2022-23. See note (20) of the Notes to the Financial Statements for more information.

Total
35 11-45
Figure 3
Governm
ental Activities Revenue Sources
For the Year Ended June 30, 2024

As illustrated in Figure 2, program revenues related to Governmental Activities in creased $51.2 million from the prior year. This increase was primarily attributable to an increase in capital grants and contributions, most of which was due to the issuance of limited obligation improvement bonds for two assessment districts. Additionally, operating grants and contributions increased mainly due to earning American Rescue Plan Act grant revenue by spending part of the grant money on reimbursing the City for public safety services incurred on fire operations and on the City’s Junior Lifeguard building. The City also received and earned a portion of private contributions from the Newport Beach Public Library Foundation and Junior Guard Foundation for a library lecture hall and the aforementioned Junior Lifeguard program.

The City’s general revenues related to Governmental Activities increased about $10.5 million from the prior year primarily due to increases in property taxes, transient occupancy taxes, other taxes, and investment income, offset by decreases in sales taxes 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 $7.8 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 $43.4 million, sales taxes represent the second largest individual revenue source for the City.

Sales taxes decreased $3.1 million from the previous fiscal year. This decrease in sales tax revenue was due to consumer spending shifting from taxable sales, such as automobiles and transportation, to nontaxable sales , such as entertainment. Additionally, luxury vehicle sales finished significantly lower due in part to the temporary closure of a luxury automobile dealership while undergoing a construction renovation project.

Transient occupancy taxes (TOT), the City’s third largest revenue source, finished the year at $31.7 million, which is an increase of $1.5 million from the previous fiscal year. Hotel TOT revenue 21%
18% 58%
3%
Charges for Services
Contributions and Grants
Taxes
Other
36 11-46
increased due to the opening of the new Pendry hotel and continued robust demand, which offset a slowdown in residential TOT.

Investment income, comprised of both interest income and unrealized gains /losses, increased about $6.8 million from the prior fiscal year. Because the federal funds rate remained constant throughout most of the fiscal year, t he increase in investment income is mostly a result of the availability of elevated interest rates throughout more of the fiscal year than the previous year.

This allowed the City to reinvest earnings throughout the year at higher 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 t hree 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 $324.4 million of Governmental Activities expense was derived. The increase of $52.7 million from the prior year is mostly due to an increase in the government-wide adjustment for internal service fund act ivity as there was a net loss in total in the internal service funds due to an increase in workers’ compensation and general liability expenses. An increase in the government -wide adjustment related to pension expense, and increases in salaries and benefits also contributed to the increase in Governmental Activities expenses.

37 11-47
Figure 4 below summarizes the Governmental Activities expenses shared across functions.

Figure 4
Governmental Activities Functional Expenses
For the Year Ended June 30, 2024

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.

Figure 5
Governmental Activities
For the Years Ended June 30
(in thousands)

47%
27%
10%
9%
5% 2%
Public Safety
Public Works
Community Services
General Government
Community Development
Interest
Total Cost Net (Cost) Total Cost Net (Cost)
of Service of Service of Service of Service
General government 26,912$ (10,988)$ 28,392$ (10,212)$ Public safety 121,310 (92,434) 151,626 (115,049) Public works 75,904 (49,373) 88,360 (22,387) Community development 13,048 (765) 16,814 (5,338) Community services 27,937 (11,155) 33,034 (13,622) Interest 6,666 (6,666) 6,215 (6,215) 271,777$ (171,381)$ 324,441$ (172,823)$
2023 2024
38 11-48
Figure 6
Progr
am Expenses and Revenues – Governmental Activities
For the Year Ended June 30, 2024
(in millions)

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 $40.7 million.

Program revenues totaled $39.2 million and were supplemented by about $1.5 million of general revenues related to investment income . As shown in Figure 7 on the following page, W ater activities represents about $33.9 million (86.5%) of program revenues, while Wastewater activities represents $5.3 million (13.5%) of program revenues.

$0.0
$20.0
$40.0
$60.0
$80.0
$100.0
$120.0
$140.0
$160.0
General
Government
Public Safety Public Works Community
Development
Community
Services
Interest
Total Expenses Program Revenues
39 11-49
Figure 7
Progr
am Expenses and Revenue – Business-type Activities
For the Year Ended June 30, 2024
(in millions)

Expenses Associated with Business-Type Activities Discussion

Current year expenses for Business -type Activities totaled $ 44.3 million, an increase of about $8.2 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 $37.3 million in water related expenses, $12.6 million (33.7%) is for the purchase of water, $6.0 million ( 16.0%) covers employee related costs, $9.9 million ( 26.5%) is for maintenance, supplies, and depreciation of the water system, $2.2 million (5.8%) is for professional services, $2.2 million (5.9%) is for utility payments and the remaining $4.4 million (12.1%) is collectively attributable to other miscellaneous expenses.

Wastewater
Of the $ 7.0 million in wastewater related expenses, $2. 7 million ( 39.5%) is for maintenance, supplies, and depreciation of the wastewater system, $1.9 million (26.6%) is for employee related costs, and the remaining approximately $ 2.4 million (3 3.9%) is attributable to professional services, utility payments and other miscellaneous expenses.

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

$0.0
$5.0
$10.0
$15.0
$20.0
$25.0
$30.0
$35.0
$40.0
Water Wastewater
Total Expenses Program Revenues
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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 current 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 $295.1 million, an increase of $47.1 million from the prior fiscal year. The increase is net result of increases in fund balances in almost every major fund below, including the General Fund, the Tide and Submerged Land – Operating Fund, the Tide and submerged Land – Harbor Capital Fund, Debt Service Fund, other special revenue funds, other capital projects funds, and other permanent funds in aggregate, offset by a decrease in the Facilities Financial Planning Reserve Fund. The General Fund represented $ 96.4 million or 32.7% of the combined fund balances of the Governmental Funds.

Figure 8
Governmental Funds Fund Balance
June 30
(in thousands)

The following describes the classification of fund balance as of June 30, 2024. 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 $11.8 million in fund balance classified as nonspendable to indicate that it cannot be readily converted to cash. Of the $ 11.8 million nonspendable fund balance, $ 1.3 million is for prepaid items, $215,285 is for inventories, $5.7 million is for long-term loan receivables, and $4.6 million is for permanent endowments.

Restricted Fund Balance – The City has $112.8 million in fund balance classified as restricted to indicate that it has externally imposed restrictions on how the money may be spent. Of the $112.8 million restricted fund balance, $7.4 million is restricted in the Tide and Submerged Land – Operating Fund, of which $ 5.7 million is restricted for capital projects and maintenance and repairs, and $1.7 million is restricted for the Upper Newport Bay restoration; $ 43.1 million is 2023 2024 Change
General Fund 91,443$ 96,441$ 4,998$
Tide and Submerged Land - Operating 6,107 8,548 2,441 Tide and Submerged Land - Harbor Capital 30,215 43,107 12,892 Facilities Financial Planning Reserve 24,800 20,436 (4,364) Debt Service Fund 2,184 2,323 139 Non-major special revenue 26,518 32,274 5,756 Non-major capital projects 60,148 85,087 24,939 Non-major permanent 6,543 6,846 303 247,958$ 295,062$ 47,104$
41 11-51
restricted in the Tidelands and Submerged Land – Harbor Capital Fund for capital projects related to the harbor ; and $2.3 million is restricted for debt service. Of the remaining $60.0 million in restricted fund balance, $32.5 million is restricted for various special revenue funds, $25.0 million is restricted for the Assessment District Fund , $292,893 is restricted for the Fire Station Fund, and $2.2 million of fund balance is restricted for permanent funds.

Committed Fund Balance – The City has $88.1 million in fund balance classified as committed to indicate that the City Council has committed how the money will be spent. Of the $88.1 million committed fund balance , $ 6.8 million is committed in the General Fund mostly for contract services and maintenance and repairs; $1.1 million is committed in the Tide and Submerged Land – Operating Fund for oil and gas related uses; $20.4 million is committed in the Facilities Financial Planning Reserve Fund; $3.0 million is committed in the Fire Station Fund; $505,166 is committed in the Civic Center and Park Fund; $16.1 million is committed in the Parks and Community Center Fund; $310,593 is committed in Balboa Village Parking Management District Fund; $4.2 million is committed to the Facilities Maintenance Fund; $11.7 million is committed in the Neighborhood Enhancement Fund; $ 122,146 is committed in the Junior Lifeguards Fund; $ 15.7 million is committed in the Unrestricted Capital Improvements Fund; $ 6.5 million is committed to the Miscellaneous FFP Projects Fund; and $687,908 is committed to the Police Facility Fund; and $1.0 million is committed to the Park Maintenance 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 $82.4 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 $11.8 million or 4.1% higher than the prior year mostly due to a combined $6.2 million net increase in the City’s top three revenues sources – property taxes, sales taxes and transient occupancy taxes – with a $7.8 million increase in property taxes as the City’s assessed valuation continued to increase due primarily to the appreciation of property values; offset with a $3.1 million decrease in sales taxes as consumer spending shifted from taxable sales to nontaxable sales ; and a $1.5 million increase in transient occupancy taxes due to the opening of a new hotel and continued strong hotel occupancy rates. Additionally, property income increased $3.5 million compared to the previous year mostly due to the normal increase in parking rates and the number of travelers returning to more pre-pandemic levels, and there was a full year’s worth of rental income from a property that was acquired late in the previous fiscal year.

General Fund expenditures finished $18.7 million or 7.7% higher than the prior fiscal year mostly due to the expected increase in salaries and benefits related to routine step increases, cost of living adjustments, new positions, increased pension costs and capital outlays. Notably, capital outlays related to leases increased $3.3 million due to the leasing of additional space in a homeless shelter to help individuals experiencing homelessness within the City . Though revenues exceeded expenditures by about $33.9 million, there were substantial transfers activity in the General Fund with transfers in totaling $26. 9 million and transfers out totaling $59.4 million , mostly for funding capital improvement projects. In total, fund balance in the General Fund increased $5.0 million and ended the year at $96.4 million.
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• Fund balance for the Tide and Submerged Land – Operating Fund increased $2.4 million and ended the current year with $8.5 million in fund balance. The increase was mostly due to an increase in property income related to parking revenues and investment earnings.
• Fund balance for the Tide and Submerged Land – Harbor Capital Fund increased $12.9 million ending at $43.1 million. This was largely due to reduction in expenditures as two major harbor dredging capital improvement projects nearing completion. • Fund balance for the Facilities Financial Planning Reserve F und decreased $4.4 million to end the current year at $20.4 million in fund balance. This was mainly due to transfers to other funds to cash fund construction projects related to a new library lecture hall and upgrading a fueling facility and transfer station.
• Fund balance for the Debt Service Fund increased $139,136 ending at $2.3 million. The increase was due to increase in investment income and a decrease in 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 positio n in the Water Fund decreased $683,219 in total mostly due to the City’s highest producing water well being out of service for most of the fiscal year undergoing maintenance and a prior period restatement. The out of service well resulted in increased expenses for the purchase of water and for system maintenance which were offset by increases in water sales revenue related to a rate increase, and an increase in non- operating investment related revenues , resulting in a positive change to net position.

However, the prior period restatement reduced net position, ultimately resulting in an overall decrease to net position in the Water Fund . See note ( 20) in the Notes to the Financial Statements for additional information about the prior period restatement.

• Net position in the Wastewater Fund decreased $854,173. Similarly to the Water Fund, the decrease in net position was mainly due to increased system maintenance expenses and a prior period restatement, offset by an increase in sewer service and connection fees revenue as the City Council previously 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. See note (20) in the Notes to the Financial Statements for additional information about the prior period restatement.

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

• Total net position in the Internal Service Funds decreased $15.0 million in the current fiscal year. This was mostly due to operating loss of $25.1 million, which was mostly due to an increase in expenses related to the City’s self -insured general liability and workers’ compensation programs, offset by increases in nonoperating revenues like investment earnings, gain on sale of capital assets and transfers in. The increase in transfers in was 43 11-53
directly attributable to an additional one-time $5.8 million payment to pay down the City’s OPEB liability.

GENERAL FUND BUDGETARY HIGHLIGHTS

Changes to Original Budget

Final budgeted revenues for the General Fund increased $2.5 million from the original budget during the year ended June 30, 2024. Factors contributing to this fluctuation are highlighted as follows:

• Final budgeted intergovernmental revenue increased $2.4 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 the acceptance of grants.

• Property taxes revenue increased $1.3 million due to the Proposition 13 inflationary adjustment and increases in assessed values related to changes in ownership and new construction.

• Final budgeted sales tax decreased from the adopted budget by $3.3 million. The main factor behind this decline was a decrease in demand for luxury automobiles as well as a temporary closure of a local new car dealership for renovations.

• Charges for services increased from the adopted budget by $396,600. This adjustment is related to increased revenue received for recreation classes and special events.

• Property income revenues increased by $1.3 million mainly due to the grossing up of full revenues related to the Dove Street property management. The adopted budget included the net revenue associated with the property , but the budget was revised to capture the full revenue associated with the property.

• Other revenues increased by $247,849 from the adopted budget due to contributions to the Newport Beach Library Foundation for library materials and programming accounts and the Friends of the Newport Library program to enhance programs such as Summer Reading, Sunday Musicales, National Library Week, and Young Adult Programs.

• Donations were adjusted upward by $113,851 related to donations to the Library Services Department, Police Department, Fire Department, and the Recreation & Senior Services Department.

Final budgeted expenditures for the General Fund increased $16.1 million from the original budget during the year ended June 30, 2024. The significant factors contributing to the increase are as follows:

• The addition of $5.3 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 roughly $300,000 in overtime for police services due to the Police Department’s new Boardwalk and Quality of Life Enforcement program that tackles boardwalk safety and 44 11-54
quality of life issues throughout the City, and acceptance of the Stonegarden Grant which enhances cooperation and coordination amongst various agencies to raise the level of law enforcement presence on the coastline.

• Budgeted carryovers from Fiscal Year 2022-23 totaling $5.5 million were added to the adopted budget.

• The addition of $1.3 million related to grossing up the expenditures related to the Dove Street property management as the adopted budget represented net activity, but the budget was revised to capture the full expenditures associated with the property.

• The addition of $1.8 million related to the Fire Department’s mutual aid reimbursements, purchase of a new outfitted ambulance unit, and purchases of a lifeguard computer-aided design system and software license renewal for the records and management system.

Variance with Final Budget

Actual General Fund revenues came in at $9.1 million above final budgeted revenues for the year ended June 30, 2024. Significant factors contributing to this favorable variance are summarized as follows:

• Property tax revenues came in $3. 4 million higher than the final budget, largely due to supplemental taxes.

• Investment earning revenues were $3.1 million higher than final budgeted revenues due to interest income from bonds and elevated interest rates.

• 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 91,475 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 $1.6 million higher mainly due to overages in Beacon Bay, Balboa Yacht Basin, as well as parking revenue, and GASB 87.

• Intergovernmental revenues came in $333,024 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 $980,168 and were made up largely of the net of bad debt and damage to city property revenues.

Actual General Fund expenditures of $2 62.7 million were less than final budgetary estimates of $275.6 million. The $12.9 million favorable variance was due largely in part to routine savings in salaries and benefits from vacancies as well as contract services. Salary and benefit savings totaled $8.0 million and 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 $3.3 million.
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CAPITAL ASSET AND DEBT ADMINISTRATION

Capital Assets

The City’s capital assets for Governmental and B usiness-type Activities as of June 30, 2024 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 . T otal capital assets in creased $19.7 million over the prior fiscal year.

Figure 9
Capital Assets
June 30
(net of depreciation/amortization, in thousands)

Major capital asset events during the current fiscal year included the following:

• Capital asset additions totaled $60.3 million in both the Governmental and Business-type Activities in the current year. Of the $ 60.3 million, $9.5 million is related to structure additions of a junior lifeguard facility, upgrading a park to synthetic turf with new lighting and a pickleball court; $19.5 million represents additions of infrastructure assets mostly related to the road system and water system ; $4.5 million is related to equipment and intangible right to use equipment, and intangible right to use subscriptions additions; $3.3 million is related to intangible right to use structures . The remaining $ 23.5 million is comprised of additions of n on-depreciable/non-amortizable assets such as work in progress of $19.6 million, and land and rights of way of $3.9 million. • Of the $50.2 million of additions in governmental assets in the current year, additions in infrastructure contributed $11. 3 million, which was mostly due to upgrades in the road system. The remaining $38.9 million added in the current year as governmental assets is comprised of $9.5 million of structure additions and $3.9 million of land additions, both mostly related to the completion of a new junior lifeguard program facility , upgrading a park with a new multipurpose synthetic turf field and adding a pickleball court to a separate park; $17.7 million of work in progress, mostly related to construction of a new lecture hall 2023 2024 2023 2024 2023 2024
Land 1,918,486$ 1,922,330$ 2,219$ 2,219$ 1,920,705$ 1,924,549$ Intangible right to use
land and rights of way - - 3,809 3,755 3,809 3,755 Structures 196,235 199,676 378 363 196,613 200,039 Intangible right to use structures 12,007 14,045 - - 12,007 14,045 Equipment 19,346 19,050 101 126 19,447 19,176 Intangible right to use equipment 236 162 - - 236 162 Intangible right to use subscriptions 2,231 2,145 - - 2,231 2,145 Infrastructure 210,389 211,479 121,062 125,767 331,451 337,246 Work in progress 13,839 22,200 7,697 4,408 21,536 26,608 Totals 2,372,769$ 2,391,087$ 135,266$ 136,638$ 2,508,035$ 2,527,725$ Activities Activities
Governmental Business-Type
Total
46 11-56
at the central library, upgrades to the road system, and a water wheel that will help keep the harbor water s clear of debris; $4.5 million of equipment and subscription additions, mostly related to vehicle purchases and information technology related purchases ; and $3.3 million of intangible right to use structures related to the use of a local shelter for people experiencing homelessness in the City.
• The $10.1 million of business-type asset additions in the current year is comprised of $8.2 million in water system infrastructure additions, mostly related to replacing water lines and updating a water well, and $1.9 million of work in progress additions related to water system improvements, most notably replacing a major water main.

Additional information on the City’s capital assets can be found in Note ( 6) of the Notes to the Financial Statements.

Long-term Debt

Figure 10
Outstanding Debt
June 30
(in thousands)

The City’s total debt decreased $4.2 million during the current fiscal year . The decrease is the result of expected debt service payments. A dditional 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

The City’s assessed property values continue to increase, providing a strong revenue base for the City. However, recent reductions in sales tax revenue have raised concerns about the broader economy. Nonetheless, sales tax revenue is projected to begin rebounding in Fiscal Year 2024-

25. Additionally , transient occupancy tax revenue fr om hotels continues to grow , as tourism remains a strong source of income for the City. Therefore, the local economy in Newport Beach remains strong, with a positive economic outlook for the foreseeable future. This positions the City to withstand the impacts of a potential recession and maintain long-term fiscal sustainability.

Local Revenue Trends

Property tax revenue, the City’s largest source of revenue, is projected to increase approximately

4.2% next fiscal year, which is largely related to the Proposition 13 inflationary adjustment and 2023 2024 2023 2024 2023 2024
Certificates of participation 97,610$ 93,525$ -$ -$ 97,610$ 93,525$ Bond premium 1,007 865 - - 1,007 865 Totals 98,617$ 94,390$ -$ -$ 98,617$ 94,390$ Activities Activities
Governmental Business-Type Total
47 11-57
due to changes in ownership and new construction. Although higher interest rates and elevated mortgage rates have slowed home sales, property tax revenue for Fiscal Year 2024 -25 is projected to be higher largely due to an increase in 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 i s projected to be 4.1% higher next fiscal year, largely due to moderate growth in restaurants and hotels, general consumer goods, and the State and County pools. Revenue from these three industry groups is projected to increase by 5% next fiscal year, which is offset by modest growth in autos and transportation. Revenue from autos and transportation is projected to increase by 0.6%, due in part to the temporary closure of a luxury automobile dealership undergoing a construction renovation project.

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 3% next fiscal year, which is largely due to hotels reporting record high TOT receipts.

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 2024- 25 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.

The budget for Fiscal Year 2024-25 includes $45 million of funding for the continuation of an aggressive pension paydown strategy, which is approximately $15 million more than the amount required to be paid. This aggressive pension paydown strategy of making $45 million payments to CalPERS each year is expected to eliminate the City’s pension liability by 2033.

In Fiscal Year 2023-24, $7.1 million in contributions were made to the OPEB Trust. Additionally, $3.9 million in investment income was recognized in the OPEB Trust, bringing the value of the OPEB Trust Fund assets to $46.2 million as of June 30, 2024. This amount exceeds the value of 48 11-58
the explicit portion of the OPEB liability. Since the OPEB liability is fully funded, contributions to the OPEB Trust are no longer required. Therefore, OPEB Trust assets will be used to fund future benefit payments. Beginning in Fiscal Year 2024 -25, annual savings totaling approximately $4 million are expected from the elimination of the OPEB liability.

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 across diverse 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 each of the last 30 years.

A strong financial profile is a particularly important factor considered by rating agencies when evaluating 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 2024. Expenditure controls over the past decade have included additional employee contributions toward pension costs, 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, such as paying down debt and investing in infrastructure and neighborhood capital improvements. The City’s f inancial management policies are strong and have been further enhanced 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 -3123. 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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Governmental Business-type
Activities Activities Total
Assets:

Cash and investments (note 2) 359,465,817$ 28,972,098$ 388,437,915$
Receivables:

Accounts (net of allowance) 14,089,676 6,102,021 20,191,697 Interest 1,316,897 92,534 1,409,431 Intergovernmental receivables 13,493,376 10,736 13,504,112 Lease receivables (note 3) 268,028,069 - 268,028,069 Public-private partnership receivable (note 18) 714,546 - 714,546 Restricted cash and investments with fiscal agent (note 2) 35,126,167 - 35,126,167 Internal balances 4,629,537 (4,629,537) - Investment in joint ventures (note 13) 270,127 - 270,127 Inventory 679,067 - 679,067 Prepaid items 2,097,926 - 2,097,926 Capital assets (note 6):

Non-depreciable/non-amortizable 1,944,530,634 6,627,893 1,951,158,527 Depreciable/amortizable 760,313,084 210,612,679 970,925,763 Accumulated depreciation/amortization (313,755,179)
(80,601,365) (394,356,544)
Total assets 3,090,999,744 167,187,059 3,258,186,803 Deferred Outflows of Resources:

Deferred amount from pension plans (no
te 11) 124,099,025 4,189,507 128,288,532 Deferred amount from OPEB (note 12) 20,927,518 1,151,419 22,078,937 Total deferred outflows of
resources 145,026,543 5,340,926 150,367,469 Liabilities:

Accounts payable 36,287,807 4,678,774
40,966,581
Accrued payroll 6,686,759 280,733 6,967,492 Accrued interest payable 3,247,902 - 3,247,902 Deposits payable 3,301,637 26,034 3,327,671 Unearned revenue 9,316,215 - 9,316,215 Noncurrent liabilities:

Due within one year:

Lease liability (note 7) 1,272,450 44,364 1,316,814 Subscription liability (note 7) 289,030 - 289,030 Other (note 7) 15,386,741 - 15,386,741 Due in more than one year:

Net pension liability (note 11) 306,754,409 10,224,331 316,978,740 Net OPEB liability (note 12) 17,042,719 927,270 17,969,989 Lease liability (note 7) 13,066,932 3,732,290 16,799,222 Subscription liability (note 7) 1,543,725 - 1,543,725 Other (note 7) 126,942,939 - 126,942,939 Total liabilities 541,139,265 19,913,796 561,053,061 Deferred Inflows of Resources:

Deferred amount from pension plans (no
te 11) 2,246,776 44,187 2,290,963 Deferred amount from OPEB (note 12) 642,920 35,281 678,201 Deferred amount from leases (note 3) 264,667,787 - 264,667,787 Deferred amount from public-private partnerships (note 18) 784,001 - 784,001 Total deferred inflows of
resources 268,341,484 79,468 268,420,952 Net Position:

Net investment in capital assets 2,275,099,514 132,331,781 2,407,431,295
Restricted for:

Public safety 1,002,804 - 1,002,804 Public works 55,096,135 - 55,096,135 Community services 56,839,874 - 56,839,874 Community development 1,336,346 - 1,336,346 Debt service 2,323,115 - 2,323,115 Permanent funds:

Nonexpendable 4,629,781 - 4,629,781 Expendable 2,216,508 - 2,216,508 Unrestricted 28,001,461
20,202,940 48,204,401
Total net position 2,426,545,538$ 152,534,721$ 2,579,080,259$

CITY OF NEWPORT BEACH
Statement of Net Position
June 30, 2024
See accompanying notes to basic financial statements
53 11-63

CITY OF NEWPORT BEACH
Statement of Activities
For the Year Ended June 30, 2024
Operating Capital Total
Charges for Grants and Grants and Program
Expenses Services Contributions Contributions Revenues
Functions/Programs
Primary government:

Governmental activities:

General government 28,392,550$ 15,953,090$ 2,189,588$ 37,954$ 18,180,632$ Public safety 151,625,944 27,903,642 8,672,982 - 36,576,624 Public works 88,359,562 9,397,103 21,543,775 35,031,614 65,972,492 Community development 16,813,900 10,849,048 590,147 36,736 11,475,931 Community services 33,034,132 17,370,410 1,501,469 539,991 19,411,870 Interest on long-term debt 6,215,237 - - - - Total governmental activities 324,441,325 81,473,293 34,497,961 35,646,295 151,617,549 Business-type activities:

Water 37,322,293 33,842,356 97,212 - 33,939,568 Wastewater 6,959,273 5,274,889 18,287 - 5,293,176 Total business-type activities 44,281,566 39,117,245 115,499 - 39,232,744 Total primary government 368,722,891$ 120,590,538$ 34,613,460$ 35,646,295$ 190,850,293$ Taxes:

Property tax
Sales tax
Transient occupancy tax
Business license tax
Franchise tax
Other taxes
Investment income
Net increase in fair value of inv
estments
Other
Total general revenues
Change in net position
Net position, beginning, as previou
sly reported
Restatement for correction of error (note
20)
Net position, beginning, as restate
d
Net position at end of yea
r
Program Revenues
See accompanying notes to basic financial statemen
ts
54 11-64
Governmental Business-type
Activities Activities Total
(10,211,918)$ -$ (10,211,918)$ (115,049,320) - (115,049,320) (22,387,070) - (22,387,070) (5,337,969) - (5,337,969) (13,622,262) - (13,622,262) (6,215,237) - (6,215,237) (172,823,776) - (172,823,776) - (3,382,726) (3,382,726) - (1,666,097) (1,666,097) - (5,048,823) (5,048,823) (172,823,776) (5,048,823) (177,872,599) 146,136,873 - 146,136,873 43,444,542 - 43,444,542 31,736,961 - 31,736,961 4,896,557 - 4,896,557 5,152,384 - 5,152,384 203,135 - 203,135 5,834,247 893,332 6,727,579 3,534,164 568,429 4,102,593 2,855,069 - 2,855,069 243,793,932 1,461,761 245,255,693 70,970,156 (3,587,062) 67,383,094 2,355,575,382 157,717,018 2,513,292,400 - (1,595,235) (1,595,235) 2,355,575,382 156,121,783 2,511,697,165 2,426,545,538$ 152,534,721$ 2,579,080,259$ Net (Expense) Revenue and Changes in Net Asse
ts
Primary Government
See accompanying notes to basic financial sta
tements
55 11-65

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56 11-66

FUND FINANCIAL STATEMENTS

57 11-67

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58 11-68

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 11-69
Tide and Tide and
Submerged Submerged
General Land - Operating Land - Harbor Capital
Assets
Cash and investments (note 2) 85,538,605$ 7,057,434$ 48,689,151$ Receivables:

Accounts (net of allowa
nce) 6,183,059 2,224,279 -
Interest 403,601 39,628 137,249 Intergovernmental receivables 10,533,790 - - Lease receivables (note 3) 78,878,480 189,149,589 - Public-private partnership rece
ivable (note 18) - 714,546 - Restricted cash and investmen
ts with fiscal agent (note 2) - - - Due from other funds (note 4
) 6,816,287 - -
Advance to other fund
s (note 4) 5,676,659 - - Prepaid items 1,160,659 101,646 - Inventory 215,285 - - Total assets 195,406,425$ 199,287,122$ 48,826,400$ Liabilities, Deferred Inflows of Resources
and Fund Balances
Liabilities:

Accounts payable 9,195,144$ 1,305,980$ 42,395$ Accrued payroll 6,117,226 62,414 - Deposits payable 3,041,127 260,510 - Unearned revenue 3,068,326 980,433 - Advance from other fu
nds (note 4) - - 5,676,659 Due to other funds (no
te 4) - - -
Total liabilities 21,421,823 2,609,337 5,719,054 Deferred Inflows of Resources:

Unavailable revenue 285,689 - - Deferred amount from lease
s (note 3) 77,257,725 187,410,062 -
Deferred amount from pub
lic-private partnerships (note 18) - 720,001 - Total deferred infl
ows of resources 77,543,414 188,130,063 - Fund balances:

Nonspendable:

Prepaid items 1,160,659 101,646 - Inventories 215,285 - - Long-term loan receivable 5,676,659 - - Permanent endo
wment - - -
Restricted:

Upper Newport Bay restoratio
n - 1,683,144 -
Other (note 15) - 5,710,272 43,107,346 Committed:

Capital re-appropriations 436,303 - - Oil and gas - 1,052,660 - Other (note 15) 6,350,542 - - Assigned - - - Unassigned 82,601,740 - - Total fund balan
ces 96,441,188 8,547,722 43,107,346
Total liabilities, defe
rred inflows of
resources and fun
d balances 195,406,425$ 199,287,122$ 48,826,400$ Special Revenue Funds

CITY OF NEWPORT BEACH
Governmental Funds
Balance Sheet
June 30, 2
024

Page 1 of 2 ends

See accompanying notes to basic financial statements
60 11-70
Capital Project Fund Debt Service Fund
Facilities Other
Financial Planning Debt Service Governmental
Reserve Fund Funds Totals
Assets
Cash and investments (note 2) 20,371,975$ -$ 111,480,369$ 273,137,534$ Receivables:

Accounts (net of allowa
nce) 4,643,968 - 1,011,297 14,062,603 Interest 63,779 - 395,718 1,039,975 Intergovernmental receivables - 1,039,804 1,919,782 13,493,376 Lease receivables (note 3) - - - 268,028,069 Public-private partnership rece
ivable (note 18) - - - 714,546 Restricted cash and investmen
ts with fiscal agent (note 2) - 7,505,205 27,620,962 35,126,167 Due from other funds (note 4
) - - - 6,816,287 Advance to other fund
s (note 4) - - - 5,676,659 Prepaid items - - 39,723 1,302,028 Inventory - - - 215,285 Total assets 25,079,722$ 8,545,009$ 142,467,851$ 619,612,529$ Liabilities, Deferred Inflows of Resources
and Fund Balances
Liabilities:

Accounts payable -$ 47$ 11,148,502$ 21,692,068$ Accrued payroll - - 3,436 6,183,076 Deposits payable - - - 3,301,637 Unearned revenue - - 5,267,456 9,316,215 Advance from other fu
nds (note 4) - - - 5,676,659 Due to other funds (no
te 4) - 6,221,847 241,439 6,463,286 Total liabilities - 6,221,894 16,660,833 52,632,941 Deferred Inflows of Resources:

Unavailable revenue 4,643,968 - 1,599,312 6,528,969 Deferred amount from lease
s (note 3) - - - 264,667,787 Deferred amount from pub
lic-private partnerships (note 18) - - - 720,001 Total deferred infl
ows of resources 4,643,968 - 1,599,312 271,916,757 Fund balances:

Nonspendable:

Prepaid items - - 39,723 1,302,028 Inventories - - - 215,285 Long-term loan receivable - - - 5,676,659 Permanent endo
wment - - 4,629,781 4,629,781 Restricted:

Upper Newport Bay restoratio
n - - - 1,683,144 Other (note 15) - 2,323,115 59,938,876 111,079,609 Committed:

Capital re-appropriations - - - 436,303 Oil and gas - - - 1,052,660 Other (note 15) 20,435,754 - 59,829,107 86,615,403 Assigned - - - - Unassigned - - (229,781) 82,371,959 Total fund balan
ces 20,435,754 2,323,115 124,207,706 295,062,831 Total liabilities, defe
rred inflows of
resources and fun
d balances 25,079,722$ 8,545,009$ 142,467,851$ 619,612,529$

CITY OF NEWPORT BEACH
Governmental Funds
Balance Sheet
June 30, 2
024

Page 2 of 2 ends

See accompanying notes to basic financial statements
61 11-71

This page left blank intentionally.
62 11-72
Fund balances of governmen
tal funds 295,062,831$
Amounts reported for governmen
tal activities in the statement of net position are
different because:

Capital assets net of accumulate
d depreciation have not been included
as financial resources in gove
rnmental fund activity. Amount excludes
capital assets from internal service
funds which are added below. 2,371,916,763
All liabilities (both curren
t and long-term) are reported in the Statement of Net Position.

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

Certificates of pa
rticipation payable - Series 2010B (87,800,000)
Certificates of pa
rticipation payable - Series 2020A (5,725,000)
Bond premium - Serie
s 2020A (864,633)
Lease liability (14,198,968)
Subscription liability (326,977)
Deferred inflows for im
provements by the operator to the underlying asset of a public-private partne
rship are recognized only in the government-wide statements for governmental activities. (64,000)
Pension related debt ap
plicable 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 defe
rred inflows of resources related to pension are only reported in the Statement of Net Po
sition as the changes in these amounts affect only the
government-wide statements for gove
rnmental activities. Amounts exclude internal
service fund activity wh
ich has been added below:

Deferred ou
tflows of resources 121,343,453
Deferred inflo
ws of resources (2,217,713)
Pension liability (300,029,538)
OPEB related debt app
licable 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 defe
rred inflows of resources related to OPEB are only reported in the Statement of Net Po
sition as the changes in these amounts affect only the
government-wide statements for gove
rnmental activities. Amounts exclude internal
service fund activity wh
ich has been added below:

Deferred ou
tflows of resources 20,170,193
Deferred inflo
ws of resources (619,714)
OPEB liability (16,432,820)
Accrued interest payable for th
e current portion of interest due on long-term debt
has not been reported
in the governmental funds. (3,247,902)
Some of the revenue will
be collected after year-end, but is not available soon
enough to pay f
or the current period's expenditures, and therefore is reported as unavailable revenue in
the governmental funds. 6,528,969
Internal service funds a
re used by management to charge the costs of certain
activities, such as self-insuran
ce, workers' compensation, compensated absences,
retiree insurance, flee
t management and information technology, to individual funds.

The assets (including capital asse
ts) and liabilities of the internal service funds must be added to the statemen
t of net position. 38,150,930
Investment in joint ventures is not a
current financial resource and therefore not reported
in the governmental fun
ds. 270,127
Internal balance created by
the consolidation of internal service fund activities
related to enterprise funds is no
t reported in the governmental funds. 4,629,537
Net position of governmental ac
tivities 2,426,545,538$

CITY OF NEWPORT BEACH
Governmental Funds
Reconciliation of the Balance Shee
t of Governmental Funds
to the Statement of Net Position
June 30, 2024
See accompanying notes to basic financial statements
63 11-73
Tide and Tide and
Submerged Submerged
General Land - Operating Land - Harbor Capital
Revenues:

Taxes and assessments:

Property tax 146,136,871$ -$ -$

Sales tax 43,444,542 -
-

Transient occupancy tax 31,736,961 -
-

Other taxes 10,252,076 -
-

Intergovernmental 4,977,096 6,481 -

Licenses, permits and fees 5,568,126 103,338 -

Charges for services 25,117,366 38,081 -

Fines and forfeitures 4,157,294 37,902 -

Investment income 3,200,616 194,821 1,309,710 Net increase in fair value of investme
nts 1,652,435 77,382 790,072

Property income 18,970,340 15,308,476 6,624,712 Donations 418,774 -
-

Special assessments - -
-

Other 983,010 14,041 -

Total revenues 296,615,507 15,780,522 8,724,494 Expenditures:

Current:

General government 21,368,625 516,156 -

Public safety 139,582,338 -
-

Public works 54,085,488 1,507,721 -

Community development 15,384,163 20,637 -

Community services 27,388,952 2,487,623 -

Capital outlay 3,574,983 726,928 546,959

Debt service:

Principal 1,250,081 -
-

Interest and fiscal charges 83,092 -
-

Total expenditures 262,717,722 5,259,065 546,959

Excess (deficiency
) of revenues
over expenditures 33,897,785 10,521,457 8,177,535 Other financing sources (uses):

Transfers in (note 5) 26,926,241 11,252,355 4,715,000 Transfers out (note 5) (59,400,346) (19,333,407) -

Leases (as lessee) 3,259,414 -
-

Inception of subscription-based IT arrangements 315,569 - -

Total other financing sources (uses) (28,899,122) (8,081,052) 4,715,000 Net change in fund balances 4,998,663 2,440,405 12,892,535 Fund balances, beginning 91,442,525 6,107,317 30,214,811 Fund balances, ending 96,441,188$ 8,547,722$ 43,107,346$ Special Revenue Funds

CITY OF NEWPORT BEACH
Governmental Funds
Statement of Revenues, Expenditures and C
hanges in Fund Balances
For the Year Ended June 30, 2024

Page 1 of 2 ends

See accompanying notes to basic financial statements
64 11-74
Capital Project Fund Debt Service Fund
Facilities Other
Financial Planning Debt Service Governmental
Reserve Fund Funds Totals
Revenues:

Taxes and assessments:

Property tax -$
-$
-$ 146,136,871$
Sales tax -
-
- 43,444,542
Transient occupancy tax -
-
- 31,736,961
Other taxes -
-
963,173 11,215,249
Intergovernmental -
2,073,983 20,657,672 27,715,232 Licenses, permits and fees 68,617
-
948,030 6,688,111
Charges for services -
-
61,917 25,217,364
Fines and forfeitures -
-
- 4,195,196
Investment income 765,875 87,785 3,827,939 9,386,746 Net increase in fair value of investme
nts 516,408 -
1,548,348 4,584,645
Property income -
-
295,230 41,198,758
Donations 37,951
-
5,614,105 6,070,830
Special assessments -
-
26,843,142 26,843,142
Other -
-
178,204 1,175,255
Total revenues 1,388,851 2,161,768 60,937,760 385,608,902 Expenditures:

Current:

General government -
-
122,977 22,007,758
Public safety -
-
550,206 140,132,544
Public works -
-
9,938,981 65,532,190
Community development -
-
329,743 15,734,543
Community services -
-
183,559 30,060,134
Capital outlay -
-
45,927,164 50,776,034
Debt service:

Principal -
4,085,000 - 5,335,081 Interest and fiscal charges -
6,615,252 - 6,698,344 Total expenditures -
10,700,252 57,052,630 336,276,628 Excess (deficiency
) of revenues
over expenditures 1,388,851 (8,538,484) 3,885,130 49,332,274 Other financing sources (uses):

Transfers in (note 5) 11,072,033 8,677,620 34,788,805 97,432,054 Transfers out (note 5) (16,825,622) -
(7,675,179) (103,234,554)
Leases (as lessee) -
-
- 3,259,414
Inception of subscription-based IT arrangements -
-
- 315,569
Total other financing sources (uses) (5,753,589) 8,677,620 27,113,626 (2,227,517) Net change in fund balances (4,364,738) 139,136 30,998,756 47,104,757 Fund balances, beginning 24,800,492 2,183,979 93,208,950 247,958,074 Fund balances, ending 20,435,754$ 2,323,115$ 124,207,706$ 295,062,831$

CITY OF NEWPORT BEACH
Governmental Funds
Statement of Revenues, Expenditures and C
hanges in Fund Balances
For the Year Ended June 30, 2024

Page 2 of 2 ends

See accompanying notes to basic financial statements
65 11-75
47,104,757$
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 capital outlay exceeded depreciation in the current period.

Capital outlay 31,465,934
Depreciation expense (12,726,650)
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 4,085,000
Amortization of principal on leases 1,132,423
Amortization of principal on subscriptions 355,544
Inception of leases (3,259,414)
Inception of subscription-based IT arrangements (315,569) 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. 113,074 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. 1,688,919
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. 7,058,228
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. 5,369,988
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 expense of the internal service funds is reported in the statement of activities. (14,952,609) Investment in joint ventures creates an explicit, measurable equity interest reported only in the statement of activities. 55,496
Internal balance created by the consolidation of internal service funds activities related to enterprise funds is reflected as a reduction of expenses i n the statement of activities. 3,644,904
Change in net position of governmental activiti
es 70,970,156$
Net change in fund balances - total governmental funds

CITY OF NEWPORT BEACH
Reconciliation of the Statement of Revenues, Expenditures, and Chan
ges in Fund Balances of Governmental Funds
to the Statement of Activities
Year Ended June 30, 2024
See accompanying notes to basic financial statements
66 11-76

FUND FINANCIAL STATEMENTS

67 11-77

This page left blank intentionally.
68 11-78

PROPRIETARY FUNDS

Business-type Activities

The Water Fund is a Major Fund used to account fo r 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 11-79
Governmental
Total Activities
Enterprise Internal Service
Water Wastewater Funds Funds
Assets and Deferred Outflows of Resources
Current assets:

Cash and investments (note 2) 25,516,076$ 3,456,022$ 28,972,098$ 86,328,283$ Receivables:

Accounts (net of allowan
ce) 5,288,749 813,272 6,102,021 27,073 Interest 81,485 11,049 92,534 276,922 Intergovernmental receivables 8,747 1,989 10,736 - Inventories - - - 463,782 Prepaid items - - - 795,898 Total current assets 30,895,057 4,282,332 35,177,389 87,891,958 Noncurrent assets:

Capital assets (note 6):

Land 2,219,450 - 2,219,450 - Intangible right to use lan
d 3,883,062 - 3,883,062 - Structures 688,396 - 688,396 39,581 Equipment 344,080 35,988 380,068 48,586,874 Intangible right to use equi
pment - - - 363,725 Software - - - 4,360,625 Intangible right to use sub
scriptions - - - 2,271,273 Infrastructure 156,834,559 48,826,594 205,661,153 - Work in progress 4,393,623 14,820 4,408,443 - Less accumulated depreciation
/amortization (58,686,738) (21,914,627) (80,601,365) (36,450,302) Total capital asset
s (net of accumulated
depreciation
/amortization) 109,676,432 26,962,775 136,639,207 19,171,776 Total assets 140,571,489 31,245,107 171,816,596 107,063,734 Deferred outflows of resources:

Deferred amount from pension plans
(note 11) 3,027,028 1,162,479 4,189,507 2,755,572 Deferred amount from OPEB (note 12) 831,931 319,488 1,151,419 757,325 Total deferred outfl
ows of resources 3,858,959 1,481,967 5,340,926 3,512,897 Liabilities and Deferred Inflows of Resources
Current liabilities:

Accounts payable 4,589,147 89,627 4,678,774 14,595,739 Accrued payroll 213,382 67,351 280,733 503,683 Deposits payable 26,034 - 26,034 - Due to other funds (note 4) - - - 353,001 Workers' compensation - curre
nt - - - 4,035,291 General liability - curre
nt - - - 3,577,058 Compensated absences - current - - - 3,539,392 Lease liability - current 44,364 - 44,364 73,074 Subscription liability
- current - - - 204,832 Total current li
abilities 4,872,927 156,978 5,029,905 26,882,070 Noncurrent liabilities:

Workers' compensation (note 7) - - - 19,415,272 General liability (note 7) - - - 7,264,260 Compensated absences (note 7) - - - 10,108,774 Lease liability (note 7) 3,732,290 - 3,732,290 67,340 Subscription liability (note 7) - - - 1,300,946 Net pension liability (note 11
) 7,387,359 2,836,972 10,224,331 6,724,871 Net OPEB liability (note 12
) 669,977 257,293 927,270 609,899 Total noncurrent liab
ilities 11,789,626 3,094,265 14,883,891 45,491,362 Total liabil
ities 16,662,553 3,251,243 19,913,796 72,373,432 Deferred inflows of resources:

Deferred amount from pension plans
(note 11) 31,926 12,261 44,187 29,063 Deferred amount from OPEB (note 12) 25,493 9,788 35,281 23,206 Total deferred inflo
ws of resources 57,419 22,049 79,468 52,269 Net Position
Net investment in capital
assets 105,369,006 26,962,775 132,331,781 17,445,675 Unrestricted 22,341,470 2,491,007 24,832,477 20,705,255 Total net position 127,710,476$
29,453,782$ 157,164,258 38,150,930$
Adjustment to re
flect the consolidation of internal
service fund acti
vities related to enterprise funds (4,629,537)
Net position of busi
ness-type activities 152,534,721$

CITY OF NEWPORT BEACH
Proprietary Funds
Statement of Net Position
June 30,
2024
Enterprise Funds
See accompanying notes to basic fina
ncial statements
70 11-80
Governmental
Total Activities
Enterprise Internal Service
Water Wastewater Funds Funds
Operating revenues:

Charges for sales and services
:

Water sales 33,543,566$ -$
33,543,566$ -$

Charges f
or services 543
-
543
37,930,386
Sewer serv
ice and connection fees -
5,242,974 5,242,974 -

Employee contributions
-
-
-
24,130

Other 395,459
50,202
445,661
4,335,068

Total operating revenues 33,939,568 5,293,176 39,232,744 42,289,584 Operating expenses:

Purchase of water 12,583,108 -
12,583,108 -

Salaries and benefits 5,956,940 1,854,288 7,811,228 4,092,908 Depreciation/amortization 1,833,639 646,683
2,480,322 4,100,760
Professional services 2,195,023 602,106
2,797,129 858,195

Maintenance and supplies 3,251,231 1,387,887 4,639,118 3,301,916 System maintenance 4,802,920 712,965
5,515,885 -

Utilities 2,177,696 97,518
2,275,214 -

Fleet parts and supplies -
-
-
500,453

System maintenance -
-
-
151,358

Telecommunication -
-
-
194,919

Hardware -
-
-
381,955

Software -
-
-
541,072

Workers' compensation -
-
-
11,588,497
Claims and judgments -
-
-
25,766,286
Compensated absences -
-
-
2,498,119
OPEB ARC - cash subsidy -
-
-
11,002,082
Other 1,733,430 780,325
2,513,755 2,425,284

Total operating expenses 34,533,987 6,081,772 40,615,759 67,403,804

Operating (loss) (594,419) (788,596) (1,383,015) (25,114,220) Nonoperating revenues (expenses):

Investment income 781,623
111,709
893,332
2,535,077
Net increase in fair value of
investments 500,179
68,250
568,429
1,549,091
Gain on sale of capital assets -
-
-
284,927

Interest expense (20,903)
-
(20,903)
(9,984)

Total nonoperating revenues 1,260,899 179,959 1,440,858 4,359,111

Income (loss) before transfers 666,480
(608,637) 57,843
(20,755,109)
Transfers in (note 5) -
-
-
5,802,500

Change in net position 666,480
(608,637) 57,843
(14,952,609)
Net position, beginning of year, as previously reported 128,393,695 30,307,955 53,103,539 Restatement for correction of error (note 20) (1,349,699) (245,536) -

Net position, beginning of year, as restated 127,043,996 30,062,419 53,103,539 Net position, end of year 127,710,476$ 29,453,782$ 38,150,930$ Adjustment to reflect
the consolidation of internal
service fund ac
tivities related to enterprise funds (3,644,904)
Change in net position of busines
s-type activities (3,587,062)$
Enterprise Funds

CITY OF NEWPORT BEAC
H
Proprietary Funds
Statement of R
evenues,
Expenses and Changes in Net Position
For the Year Ended June 30, 2024
See accompanying notes to basic financial statements
71 11-81

CITY OF NEWPORT BEACH
Statement of Cash Flows
For the Year Ended June 30, 2024
Governmental
Total Activities
Enterprise Internal Service
Water Wastewater Funds Funds
Cash flows from operating activities:

Cash received from customers or user departments 33,077,216$ 5,082,806$ 38,160,022$ 37,905,795$ Cash payments to employees for services (6,097,147) (1,907,241) (8,004,388) (10,528,302) Cash payments to suppliers for goods and services (24,109,071) (3,002,739) (27,111,810) (28,950,995) Cash payments for other operating activities (1,337,971) (730,123) (2,068,094) - Cash received for other operating activities - - - 4,359,198 Net cash provided by operating activities 1,533,027 (557,297) 975,730 2,785,696 Cash flows from noncapital financing activities:

Cash received from other funds - - - 5,802,500 Net cash provided by noncapital financing activities - - - 5,802,500 Cash flows from capital and related financing activities:

Acquisition of capital assets (3,837,902) (14,818) (3,852,720) (3,680,695) Lease liabilities and related (65,023) - (65,023) (63,152) Subscription liabilities and related - - - (370,992) Proceeds from sale of capital assets - - - 284,927 Net cash (used) for capital and related financing activities (3,902,925) (14,818) (3,917,743) (3,829,912) Cash flows from investing activities:

Investment income 1,294,554 182,510 1,477,064 4,081,647 Net cash provided by investing activities 1,294,554 182,510 1,477,064 4,081,647 Net increase (decrease) in cash and cash equivalents (1,075,344) (389,605) (1,464,949) 8,839,931 Cash and cash equivalents, beginning 26,591,421 3,845,630 30,437,051 77,488,352 Cash and cash equivalents, ending 25,516,077$ 3,456,025$ 28,972,102$ 86,328,283$ Reconciliation to the statement of net position:

Cash and investments reported on statement of net position 25,516,076$ 3,456,022$ 28,972,098$ 86,328,283$ Cash and cash equivalents 25,516,076$ 3,456,022$ 28,972,098$ 86,328,283$ Reconciliation of operating income to net cash
provided by operating activities:

Operating (loss) (594,419)$ (788,596)$ (1,383,015)$ (25,114,220)$ Adjustments to reconcile operating income
to net cash provided by operating activities:

Depreciation 1,833,639 646,683 2,480,322 4,100,760 Changes in operating assets and liabilities:
(Increase) in accounts receivable (452,722) (159,660) (612,382) (24,591) (Increase) in intergovernmental receivables (8,747) (508) (9,255) - (Increase) in inventories - - - (25,209) Decrease in prepaid items - - - 180,657 Increase (decrease) in accounts payable and accrued payroll 934,249 (188,569) 745,680 13,662,489 (Decrease) in deposits payable (5,424) - (5,424) - Increase in workers' compensation - - - 7,054,410 Increase in general liability - - - 2,152,257 Increase in compensated absences - - - 957,126 Increase in net pension liability and deferred cash flows 117,579 45,156 162,735 107,037 (Decrease) in net OPEB liability and deferred cash flows (291,128) (111,803) (402,931) (265,020) Total adjustments 2,127,446 231,299 2,358,745 27,899,916 Net cash provided (used) by operating activities 1,533,027$ (557,297)$ 975,730$ 2,785,696$ Noncash investing, capital and financing activities:

Net increase in fair value of investments 500,179$ 68,250$ 568,429$ 1,549,091$ Obtaining an intangible right to use lease asset - - - 9,837 Total of noncash activities 500,179$ 68,250$ 568,429$ 1,558,928$ Proprietary Funds
Enterprise Funds
See accompanying notes to basic financial statements
72 11-82

FUND FINANCIAL STATEMENTS

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74 11-84

FIDUCIARY FUNDS

The Custodial Funds are used to account for assets held by the City as an agent for other government entities, private organizations, or individuals.

The Other Post-Employment Benefits (OPEB) Trust F und is used to account for the activities of the City’s trust for the OPEB plan. 75 11-85
Custodial OPEB
Funds Trust
Assets
Cash and investments (note 2) 285,349$
-$
Restricted cash and investments with fiscal agent (note 2) 4,245,553 46,202,050 Receivable:

Interest 86 5,625
Intergovernmental receivable 45,980 -
Total assets 4,576,968 46,207,675
Liabilities
Due to others 13,186 12,338
Total liabilities 13,186 12,338
Net Position
Restricted for:

Individuals, organizations, and oth
er governments 4,563,782 46,195,337
Total net position 4,563,782$ 46,195,337$

CITY OF NEWPORT BEACH
Fiduciary Funds
Statement of Fiduciary Net Position
June 30, 20
24 See accompanying notes to basic financial statements 76 11-86
Custodial OPEB
Funds Trust
Additions
Special assessments 3,277,101$ -$

Investment earnings 152,832 3,964,765
Other 1,165,060 7,130,405
Total additions 4,594,993 11,095,170
Deductions
Debt service 2,007,651 -
Admin
istrative 96,944 55,551
Other 127,861 -
Total deductions 2,232,456 55,551
Net increase in fiduciary net position 2,362,537 11,039,619 Net position, beginning of yea
r, as previously reported 2,226,973 -
Restatement for removal of Flexible Spe
nding Account Fund
(note 20) (25,728) -
Restatement for addition of OPEB Trust F
und (note 20) - 35,155,718
Total restatements (25,728) 35,155,718
Net position, beginning of yea
r, as restated 2,201,245 35,155,718
Net position, end of year 4,563,782$ 46,195,337$

CITY OF NEWPORT BEACH
Fiduciary Funds
Statement of Changes in Fiduciary Net Position
For the Year
Ended June 30, 2024
See accompanying notes to basic financial statements
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79 11-89

CITY OF NEWPORT BEACH
Notes
to Basic Financial Statements
June 30, 2024

(1) Summary of Significant Accounting Policies

The basic financial statements
of the City of Newport Beach (the “City”) have been prepared in conformity with accounting principles generally accepted in the United States of America (“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 was incorporated on September 1, 19

06. 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 (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’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 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. 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 fund is used solely to account for the activities of the Corporation and contains no other City debt financing activities. 80 11-90

CITY OF NEWPORT BEACH
Notes
to Basic Financial Statements
June 30, 2024

(1) Summary of Significant Accounting Policies (Continued)

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 sta
tements 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 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.

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

81 11-91

CITY OF NEWPORT BEACH
Notes
to Basic Financial Statements
June 30, 2024

(1) Summary of Significant Accounting Policies (Continued)

b. Basis of Accounting and Measurement
Focus (Continued)

made about the order in whi
ch 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, govern
mental 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.

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

82 11-92

CITY OF NEWPORT BEACH
Notes
to Basic Financial Statements
June 30, 2024

(1) Summary of Significant Accounting Policies (Continued)

b. Basis of Accounting and Measurement
Focus (Continued)

provided). Locally imposed de
rived 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 $2,216,508. 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.
83 11-93

CITY OF NEWPORT BEACH
Notes
to Basic Financial Statements
June 30, 2024

(1) Summary of Significant Accounting Policies (Continued)

b. Basis of Accounting and Measurement
Focus (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 followin
g broad categories of funds:

Major Funds – Major funds are those funds which are either material or of particular importance.

Major Governmental Fund
s – Governmental funds are generally used to account for tax supported activities. The following governmental funds meet the criteria of a major fund:

84 11-94

CITY OF NEWPORT BEACH
Notes
to Basic Financial Statements
June 30, 2024

(1) Summary of Significant Accounting Policies (Continued)

c. Fund Classifications (Con
tinued)

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

Special Revenue Funds

Tide and Submerged Land – Operating

The Tide and Submerged La
nd – 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 Project Fund

Facilities Financial Planning Reserve Fund

The Facilities Financial Pl
anning 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 en
terprise 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. 85 11-95

CITY OF NEWPORT BEACH
Notes
to Basic Financial Statements
June 30, 2024

(1) Summary of Significant Accounting Policies (Continued)

c. Fund Classifications (Con
tinued)

Other Governmental Funds – Ot
her Governmental Funds are those funds which do not
meet the criteria of a major fund.

Other Governmental Funds used by the City fall into the following governmental fund types:

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

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

Permanent Funds – Permanent Funds are used to report resources that are legally restricted for the extent that on
ly 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 liabil
ity 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 a
s an agent for property owners with special assessments, and local businesses in business improvements districts. The Other Post-Employment Benefit (OPEB) Trust Fund is used to account for the activities of the City's trust for the OPEB plan.

d. New Accounting Pronouncements

Current Year Standards

In fiscal year 2023-24, t
he City implemented the following GASB Statements:

 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.

86 11-96

CITY OF NEWPORT BEACH
Notes
to Basic Financial Statements
June 30, 2024

(1) Summary of Significant Accounting Policies (Continued)

d. New Accounting Pronouncements (Co
ntinued)

Pending Accounting Standards

GASB has issued the follo
wing pronouncements that may impact future financial reporting requirements:

 GASB Statement No. 101, Compensated Absences, effective for periods beginning after December 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.

 GASB Statement No. 102, Certain Risk Disclosures, effective for reporting periods beginning after June 15, 2024. The objective of this Statement is to provide users of government financial statements with essential information about risks related to a government’s vulnerabilities due to certain concentrations or constraints. This Statement requires a government to assess whether a concentration or constraint makes the primary government reporting unit or other reporting units that report a liability for revenue debt vulnerable to the risk of a substantial impact. Additionally, this Statement requires a government to assess whether an event or events associated with a concentration or constraint that could cause the substantial impact have occurred, have begun to occur, or are more likely than not to begin to occur within 12 months of the date the financial statements are issued.

 GASB Statement No. 103, Financial Reporting Model Improvements , Effective for reporting periods beginning after June 15, 2025. The objective of this Statement is to improve key components of the financial reporting model to enhance its effectiveness in providing information that is essential for decision making and assessing a government’s accountability. This Statement also addresses certain application issues.

87 11-97

CITY OF NEWPORT BEACH
Notes
to Basic Financial Statements
June 30, 2024

(1) Summary of Significant Accounting Policies (Continued)

e. Cash and Investments

Cash and cash equivalents are defined
to be cash on hand and demand deposits.

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

Cash and investments are pooled to maximize investment yields. Typically, the City’s funds may deposit or withdraw from the City’s cash and investments pool on demand without penalty. The net change in fair value and interest earned on the pooled cash and investments is allocated to the respective funds based on each fund’s average monthly pooled cash and investments balance. Each fund’s share of the pooled cash and investments balance is treated as cash and cash equivalents on the City’s statements of cash flows. Consistent with GAAP only the City’s proprietary funds report a statement of cash flows.

f. Accounts Receivable

Accounts receivable represen
t all service and capital project billings other than
intergovernmental receivables stated below. As of June 30, 2024, 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 represen
t grant reimbursement requests, capital project
billings, and pending transfers of taxes and fees collected by other government agencies.

As of June 30, 2024, the balance of these accounts totaled $13,504,112.

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.

88 11-98

CITY OF NEWPORT BEACH
Notes
to Basic Financial Statements
June 30, 2024

(1) Summary of Significant Accounting Policies (Continued)

i. 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

89 11-99

CITY OF NEWPORT BEACH
Notes
to Basic Financial Statements
June 30, 2024

(1) Summary of Significant Accounting Policies (Continued)

j. Claims and Judgments

The City accounts for ma
terial 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.

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 1 st installment
March 1 2nd installment
Collection dates December 10 1st installment
April 10 2 nd installment

l. 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.
90 11-100

CITY OF NEWPORT BEACH
Notes
to Basic Financial Statements
June 30, 2024

(1) Summary of Significant Accounting Policies (Continued)

m. Deposits Payable

In the government-wide an
d 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.

o. Deferred Inflows/Outflows of Resources

In addition to assets, the state
ment 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.

91 11-101

CITY OF NEWPORT BEACH
Notes
to Basic Financial Statements
June 30, 2024

(1) Summary of Significant Accounting Policies (Continued)

o. Deferred Inflows/Outflows of R
esources (Continued)

In addition to liabilities, t
he 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.

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 bala
nce 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.

92 11-102

CITY OF NEWPORT BEACH
Notes
to Basic Financial Statements
June 30, 2024

(1) Summary of Significant Accounting Policies (Continued)

p. Fund Balance Classifications (Con
tinued)

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

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

In the governmental fund statements, when expenditures are incurred for purposes for which both restricted and unrestricted (committed, assigned, or unassigned) fund balances are available, the City uses the most restrictive funds first. The City uses the appropriate funds in the following order: restricted, committed, assigned, and finally unassigned amounts.

q. Estimates

The preparation of financial
statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of certain assets, deferred outflows of resources, liabilities and deferred inflows of resources, disclosure of contingent assets and liabilities, and the related amounts of revenues and expenditures.

Actual results could differ from those estimates. Management believes that the estimates are reasonable.

93 11-103

CITY OF NEWPORT BEACH
Notes
to Basic Financial Statements
June 30, 2024

(1) Summary of Significant Accounting Policies (Continued)

r. 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 (CalPERS) plans (Plans) and additions to/deductions from the Plans’ fiduciary net position have been determined on the same basis as they are reported by CalPERS. 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) June 30, 2022
Measurement Date (MD) June 30, 202
3 Measurement Period (MP) July 1, 2022 to June 30, 2023

s. Post-Employment Health Care Ben
efits (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 (CalPERS) Health Plan and additions to/deductions from the Plans’ fiduciary net position have been determined on the same basis as they are reported by CalPERS. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value.

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

Valuation Date (VD) June 30, 2023
Measurement Date (MD) June 30, 202
3 Measurement Period (MP) July 1, 2022 to June 30, 2023

94 11-104

CITY OF NEWPORT BEACH
Notes
to Basic Financial Statements
June 30, 2024

(1) Summary of Significant Accounting Policies (Continued)

t. Lease Liabilities and Receivables

Lease liabilities and recei
vables 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 GASB’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 participan
t in subscription-based IT arrangements as detailed in note 7. 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 GASB’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 11-105

CITY OF NEWPORT BEACH
Notes to B
asic Financial Statements
June 30, 2024
(2) Cash and Investments
Cash and investments as of June
30, 2024, are classified in the accompanying financial
statements as follows:

Cash and investments as of June 30, 2024, consist of the following:

Investments Authorized by the California Government Code and the City’s Investment Policy The table below identifies the inves
tment 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, where more restrictive) that address interest rate risk and concentration of credit risk. Certain investments related to debt proceeds and the City’s OPEB trust are excluded from the table below, because they are governed neither by the California Government Code nor by the City’s investment policy. Debt proceeds held by bond trustees are instead governed by the provisions of debt agreements of the City. Investments in the City’s OPEB trust are governed by the agreement between the City and the trustee.

Statement of net position:
388,437,915$ Cash and investments
Cash and investments
with fiscal agent
Fiduciary funds:

Cash and investments 285,349
Cash and investments with fiscal agent 50,447,603
Total cash and i
nvestments 474,297,034$
35,126,167
Cash on hand 27,60
6$
Deposits with financial institutions 16,631,116
Cash and receivables in investment accounts 1,485,892
Investments 456,152,420
Total cash and i
nvestments 474,297,034$
96 11-106

CITY OF NEWPORT BEACH
Notes
to Basic Financial Statements
June 30, 2024

(2) Cash and Investments (Continued)

*Excluding amounts held by bond tru
stee and by the OPEB trust that are not subject to California Government Code restrictions.

Investments Authorized by Debt Agreements

Investments of debt pr
oceeds 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.

Authorized I
nvestment Type
Maximum
Matu
rity
Maximum
Percen
tage
of Portfolio
Maximum
Inve
stment in
One Issuer

Minimum
Ratin
g
Local Agency
Bonds 5 years 30% 5% A-
U.S. Treasury Obligations 5 years No Limit No Limit None U.S. Agency Securities 5 years No Limit 30% None
FHLMC 5 years No Limit 30% None
Banker's Acceptances 180 days 40% 5% A-1
Commercial Paper 270 days 40% 5% A-1
Negotiable Certificates of Deposit 2 years 30% 5% A-1
Repurchase Agreements 30 days No Limit 5% A-1
Reverse Repurchase Agreements 30 days 10% 5% None
Medium-Term Notes 5 years 30% 5% A-
Mutual Funds N/A 20% 10% AAA
Money Market Mutual Funds N/A 20% 20% AAAm
Mortgage Pass-Through Securities 5 years 20% 5% AAA
California As
set Management Program (CAMP) N/A $75 milli
on $75 million None
Local Agency Investment Fund (LAIF) N/A $75 million $75 million N/A Supranationals 5 years 20% 10% AA-
97 11-107

CITY OF NEWPORT BEACH
Notes
to Basic Financial Statements
June 30, 2024

(2) Cash and Investments (Continued)

Disclosures Relating to Interes
t 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 and by the OPEB trust) to market interest rate fluctuations is provided by the following table that shows the distribution of the City’s investments by maturity:

Maximum Maxim
um
Percentage Investment in
Authorized Investment Type Maximum Matu
rity Allowed 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 98 11-108

CITY OF NEWPORT BEACH
Notes
to Basic Financial Statements
June 30, 2024

(2) Cash and Investments (Continued)

Some of the City’s invest
ments 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, 2024, the City held asset backed securities of about $5.9 million.

The City’s FHLMCs may pay down principal prior to maturity. As of June 30, 2024, the City held FHLMCs of about $12.6 million.

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, 2024, the City held corporate and Yankee bonds with make whole call provisions as summarized below:

Investment Ma
turities (In Years)
Investment Type Fair Value Less than 1 1 to 3 3 to 5 More than 5 Total Money Market Fu
nds 12,329,522$ 12,329,522$ -$ -$ -$ 12,329,522$ U.S. Treasury Bills 77,815,938 77,815,938 - - - 77,815,938 U.S. Treasuries 111,989,778 75,073,780 24,277,195 12,638,803 - 111,989,778 Commercial Papers 4,812,662 4,812,662 - - - 4,812,662 Certificates of Deposit 5,999,433 5,999,433 - - - 5,999,433 U.S. Agency Bonds 15,353,100 8,069,550 3,318,350 3,965,200 - 15,353,100 U.S. Agency Discount Bonds 10,643,320 10,643,320 - - - 10,643,320 FHLMC 12,570,371 5,545,275 7,025,096 - - 12,570,371 Asset Backed Securities 5,871,122 2,440,518 3,430,604 - - 5,871,122 Corporate Bonds 44,625,358 22,953,449 10,077,159 11,594,750 - 44,625,358 CAMP 51,011,428 51,011,428 - - - 51,011,428 LAIF 10,320,499 10,320,499 - - - 10,320,499 Yankee Bonds 1,997,680 1,997,680 - - - 1,997,680 Supranationals 6,381,433 6,381,433 - - - 6,381,433 Investments with Fiscal Agent:

Money Market Funds 17,432,588 17,432,588 - - - 17,432,588 U.S. Treasury Bills 435,789 435,789 - - - 435,789 U.S. Treasuries 17,767,397 9,514,318 8,253,079 - - 17,767,397 U.S. Agency Securities 2,301,100 1,438,373 862,727 - - 2,301,100 LAIF 291,852 291,852 - - - 291,852 Investments with OPEB Trust:

Money Market Funds 1,600,784 1,600,784 - - - 1,600,784 Mutual Funds - Fixed Income 16,834,993 16,834,993 - - - 16,834,993 Mutual Funds - Equity 27,766,273 27,766,273
- -
-
27,766,273

Totals 4
56,152,420$ 370,709,457$
57,244,210$ 28,198,753$
-$
456,152,420$
Assuming call
able securities (if any) will not be called.
99 11-109

CITY OF NEWPORT BEACH
Notes
to Basic Financial Statements
June 30, 2024

(2) Cash and Investments (Continued)

Investments with call dates may be
called anytime on or after the call date. As of June 30, 2024, the City held corporate bonds with call dates as summarized below:

Investments may have both a make whole call provision and a regular call date. As of June 30, 2024, the City held corporate bonds with both a make whole call provision and a regular call date as summarized below:

Maturity Value
July 2024 1,9
97,680$
February 2025 977,990
March 2027 1,921,060
September 2027 1,044,524
January 2029 1,185,972
February 2029 1,200,972
Total 8,328,198
16,656,396$
Maturity Value Call Date
April 2025 1,
450,264$ March 2025
February 2026 878,076 February 2025
May 2027 2,928,870 April 2027
Total 5,257,210$
Maturity Value Call Date
July 2024 469
,098$ July 2024
September 2024 992,830 August 2024
March 2025 2,934,180 February 2025
April 2025 2,927,460 March 2025
August 2025 2,368,813 May 2025
July 2026 1,980,340 July 2025
September 2027 977,340 August 2027
June 2029 1,243,438 May 2029
Total 13,893,499$
100
11-110

CITY OF NEWPORT BEACH
Notes t
o Basic Financial Statements
June 30, 2024
(2) Cash and Investments (Continued)
Approximately $5.7 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 $2.9 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 $2.8 million of the securities with interest rate reset dates are FHLMC's with a potential variable coupon rate.

Investments with Fair Values Highly Sensitive to Interest Rate Fluctuations As of June 30, 2024, 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 June 30, 2024 for each investment type.

Minimum
Legal
Investment Type Fair Value Rating AAA AAAm AA+ AA AA- A-1+ A-1 A+ A A- Not Rated Money Market Funds $
12,329,522 AAAm - $ 12,329,522$ - $ - $ - $ - $ - $ - $ - $ - $ - $ U.S. Treasury Bills 77,815,938 None - - - - - 77,815,938 - - - - - U.S. Treasuries 111,989,778 None - - 111,989,778 - - - - - - - - Commercial Papers 4,812,662 A-1 - - - - - - - - - - 4,812,662 Certificates of Deposit 5,999,433 A-1 - - - - - 2,999,895 2,999,538 - - - - U.S. Agency Bonds 15,353,100 None - - 15,353,100 - - - - - - - - U.S. Agency Discount Bonds 10,643,320 None - - - - - 10,643,320 - - - - - FHLMC 12,570,371 None - - 12,570,371 - - - - - - - - Asset Backed Securities 5,871,122 AAA 4,573,711 - - - - - - - - - 1,297,411 Corporate Bonds 44,625,358 A- - - 9,119,006 977,340 6,031,192 - - 10,300,913 15,238,577 2,958,330 - CAMP 51,011,428 None - 51,011,428 - - - - - - - - - LAIF 10,320,499 None - - - - - - - - - - 10,320,499 Yankee Bonds 1,997,680 A- - - - - - - - - - 1,997,680 - Supranationals 6,381,433 AA- 6,381,433 - - - - - - - - - - Investments with Fiscal Agent:

Money Market Funds 17,432,588 AAm - 17,432,588 - - - - - - - - - U.S. Treasury Bills 435,789 None - - - - - 435,789 - - - - - U.S. Treasuries 17,767,397 None - - 17,767,397 - - - - - - - - U.S. Agency Securities 2,301,100 None - - 2,301,100 - - - - - - - - LAIF 291,852 None - - - - - - - - - - 291,852 Investments with OPEB Trust:

Money Market Funds 1,600,784 None - 1,600,784 - - - - - - - - - Mutual Funds - Fixed Income 16,834,993 None - - - - - - - - - - 16,834,993 Mutual Funds - Equity 27,766,273 None - - - - - - - - - - 27,766,273 Totals 456,152,4
20$ 10,955,144$ 82,374,322$ 169,100,752$ 977,340 $ 6,031,192 $ 91,894,942$ 2,999,538$ 10,300,913$ 15,238,577$ 4,956,010 $ 61,323,690$ 101
11-111

CITY OF NEWPORT BEACH
Notes
to Basic Financial Statements
June 30, 2024

(2) Cash and Investments (Continued)

Concentration of Credit Ris
k

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. There were no investments in any one issuer (excluding U.S. treasury bills, U.S. treasuries, mutual funds, and pooled investments) that represented 5% or more of total City investments.

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, 2024, none of the City’s deposits with financial institutions in excess of federal depository amounts were held in uncollateralized 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 California Asset Management Trust’s Cash Reserve Portfolio (CAMP)

The City voluntarily inves
ts in the Cash Reserve Portfolio (CAMP) of the California Asset Management Trust (CAMT). CAMT is an external investment pool that is both a California joint exercise of powers authority regulated by California Government Code Section 6509.7 and a common law trust regulated by CAMT’s bylaws and declaration of trust. Oversight of CAMT is provided by CAMT’s trustees. Other than CAMT’s initial trustees, CAMT’s board of trustees appoints trustees to indefinite terms, and these appointed trustees are subject to approval by participants in CAMT that have executed CAMT’s declaration of trust. Because the City has not executed CAMT’s declaration of trust, the City has no voting rights with CAMT.

102
11-112

CITY OF NEWPORT BEACH
Notes
to Basic Financial Statements
June 30, 2024

(2) Cash and Investments (Continued)

One of CAMP’s investmen
t objectives is to maintain a stable net asset value of $1.00 per share.

According to CAMT’s audited financial statements for calendar year 2023, “In accordance with GASB Statement No. 79, Cash Reserve Portfolio securities are valued at amortized cost, which approximates fair value.”. CAMP is rated AAAm by S&P Global. Under normal circumstances the City may withdraw from its investment with CAMP “upon proper notice without restrictions”. CAMT may suspend withdrawals in limited circumstances.

Investment in State Investment Pool

The City voluntarily invests in
the Local Agency Investment Fund (LAIF). LAIF is an external investment pool that is regulated by California Government Code Sections 16429.1 – 16429.4.

Oversight of LAIF is provided by the Local Investment Advisory Board (LIAB). LIAB’s chairman is the State Treasurer or his or her designee. The State Treasurer also appoints the remaining four members of LIAB to serve two-year terms or at the State Treasurer’s pleasure. California Government Code Section 16429.2 specifies the required qualifications of the State Treasurer’s appointees to LIAF.

LAIF provides the fair value of the City’s investment in LAIF, which is reported in the accompanying financial statements and is based upon the City’s pro-rata share of the fair value of 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’s credit risk is not rated by a nationally recognized statistical rating organization.

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 transactions of $10 million or more.

103
11-113

CITY OF NEWPORT BEACH
Notes
to Basic Financial Statements
June 30, 2024

(2) Cash and Investments (Continued)

Investments in Other Post-Empl
oyment Benefits (OPEB) Trust

The City established a trust a
ccount with Public Agency Retirement Services (PARS) to hold assets that are legally restricted for use in administering the City’s OPEB plan. The OPEB Trust’s cash and investments are managed by a third-party portfolio manager under guidelines approved by the City. Those guidelines are as follows:

Risk Tolerance Moderate

Risk Management The portfolio is constructed to control risk through diversification of asset classes (cash, fixed income, and equity), investment styles (large cap, small cap, international, etc.), and securities.

Disciplined mutual fund selection and monitoring processes help to drive return potential while reducing portfolio risk.

Investment Objective To provide growth of principal and income. It is expected that dividend and interest income will comprise a significant portion of total return, although growth through capital appreciation is equally important.

Strategic Ranges 0% - 20% Cash
30% - 50% Fixed Income
50% - 70% Equity

Fair Value Measurements

The City categorizes its
fair value measurement within the fair value hierarchy established by generally accepted accounting principles. The hierarchy is based on the valuation inputs used to measure the fair value of the assets. Level 1 inputs are quoted prices in active markets for identical assets. Level 2 inputs are significant other observable inputs. Level 3 inputs are significant unobservable inputs.

Most of the City’s investments are in Level 2 of the fair value hierarchy. Examples of Level 2 valuation inputs include:

 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.

104
11-114

CITY OF NEWPORT BEACH
Notes
to Basic Financial Statements
June 30, 2024

(2) Cash and Investments (Continued)

Following are the City’s r
ecurring fair value measurements as of June 30, 2024:

(3) Lease Receivables

City as Lessor

Lease agreements that meet
the requirements of GASB 87 for which the City is the 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, 2024, the City recognized $4,487,725 of variable payments related to the lease receivables that were excluded from the measurement of the lease receivables. Lease inflows, including inflows excluded from GASB 87, are included on the City’s financial statements as property income. Lease inflows for interest revenue from amortization of the GASB 87 lease

Quoted Prices
In
vestments in Active Quoted Prices
That Are Not Markets for for Similar Significant
Subject to Fair Identical Assets Assets in Active Unobservable Fair Value Value Hierarc
hy (Level 1) Markets (Leve
l 2) Inputs (Level
3)
Money Market
Funds $12,329,522 12,329,522$ -$ -$ -$ U.S. Treasury Bills 77,815,938 - - 77,815,938 - U.S. Treasuries 111,989,778 - - 111,989,778 - Commercial Papers 4,812,662 - - 4,812,662 - Certificates of Deposit 5,999,433 - - 5,999,433 - U.S. Agency Bonds 15,353,100 - - 15,353,100 - U.S. Agency Discount Bonds 10,643,320 - - 10,643,320 - FHLMC 12,570,371 - - 12,570,371 - Asset Backed Securities 5,871,122 - - 5,871,122 - Corporate Bonds 44,625,358 - - 44,625,358 - CAMP 51,011,428 51,011,428 - - - LAIF 10,320,499 10,320,499 - - - Yankee Bonds 1,997,680 - - 1,997,680 - Supranationals 6,381,433 - - 6,381,433 - Investments with Fiscal Agent:

Money Market Funds 17,432,588 17,432,588 - - - U.S. Treasury Bills 435,789 - - 435,789 - U.S. Treasuries 17,767,397 - - 17,767,397 - U.S. Agency Securities 2,301,100 - - 2,301,100 - LAIF 291,852 291,852 - - - Investments with OPEB Trust:

Money Market Funds 1,600,784 1,600,784 - - - Mutual Funds - Fixed Income 16,834,993 - 3,183,119 13,651,874 - Mutual Funds - Equity 27,766,273 -
5,475,356
22,290,917
-

Totals 45
6,152,420$ 92,986,673$
8,658,475$
354,507,272$
-$

105
11-115

CITY OF NEWPORT BEACH
Notes
to Basic Financial Statements
June 30, 2024

(3) Lease Receivables (Continued)

receivables totaled $3,092
,111. Lease inflows for lease revenue from amortization of the related GASB 87 deferred inflows of resources from leases was $10,363,339. Lease receivables at June 30, 2024 were $268,028,069.

Regulated Lease

While not technically a le
ase, 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 $8,182. 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.

(4) Interfund Receivables and Payables

At June 30, 2024, interfund receiv
ables and payable were as follows:

Year Ending Li
cense
June 30, Payments
2025 8,186 $

2026 1,500
2027 1,500
2028 1,500
2029 1,500
2030-2034 7,500
2035-2039 7,000
Total 28,686 $

Due From Due To
General Fund 6,
816,287$ -$
Debt Service Fund - 6,221,847
Internal Service Fund - 353,001
Other Governmental Funds - 241,439
106
11-116

CITY OF NEWPORT BEACH
Notes
to Basic Financial Statements
June 30, 2024

(4) Interfund Receivables and Payables (Continued)

The above balances are
primarily due to reclassification of negative cash balances in the city- wide cash pool.

At June 30, 2024, interfund advances receivable and payable were as follows:

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.

The annual amortization of the repayment of the advance is as follows:

Due From Due To
General Fund 5,
676,659$ -$
Tide and Submerged Land - Harbor Capital Fund - 5,676,659 Advance #1 Ad
vance #2
Dredging Marina Park
Fiscal Projects Project Total
Year Repayment Repayment Repayment
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 2,676,6
59$ 3,000,000$ 5,676,659$
Harbor Capita
l Fund Advance - Repayment Terms
(Zero-Interest Advance)
107
11-117

CITY OF NEWPORT BEACH
Notes
to Basic Financial Statements
June 30, 2024

(5) Interfund Transfers

Interfund transfers at June 30, 2024
, consisted of the following:

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:

 $11,170,010 to the Tide and Submerged Land – Operating Fund to subsidize the maintenance and operation;
 $4,715,000 to the Tide and Submerged Land – Harbor Capital Fund to cash fund Harbor Capital projects;
 $11,072,033 to the Facilities Financial Planning Reserve Fund to cash fund construction projects for General Fund supported facilities;
 $8,677,620 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;  $5,802,500 to the Retiree Insurance Internal Service Fund to fund the OPEB Trust; and  $17,963,183 to Other Governmental Funds, which includes $12,776,641 to the Unrestricted Capital Improvements Fund to cash fund General Fund capital improvements, $15,290 to close Measure M project, $1,665,952 the Neighborhood Enhancement Fund for capital improvements, $1,000,000 to the Park Maintenance Fund for maintenance of parks, $2,500,000 to the Facilities Maintenance Fund for maintenance of facilities, and $5,300 to the Assessment District Fund services.

The Tide and Submerged Land – Operating Fund transferred $19,333,407 to the General Fund to reimburse for tidelands related expenditures.

General Fund
Tide and
Submerg
ed
Land -
Operating
Tide and
Subme
rged
Land - Harbor
Capital
Facilities
Fi
nancial
Planning
Reserve Debt Service
Internal
Service

Funds
Other
Governmental
Funds Total
General Fund
- $ 11,170,010$ 4,715,000$ 11,072,033$ 8,677,620$ 5,802,500 $ 17,963,183$ 59,400,346$ Tide and Submerged Land -
Operating 19,333,407 - - - - - - 19,333,407 Facilities Financial Planning
Reserve - - - - - - 16,825,622 16,825,622 Other Governm
ental Funds 7,592,834 82,345
- - - - - 7,675,179
Totals 26,926
,241$ 11,252,355$ 4,715,000$ 11,072,033$ 8,677,620$ 5,802,500 $ 34,788,805$ 103,234,554$ Transfers In
Transfers Out

108
11-118

CITY OF NEWPORT BEACH
Notes
to Basic Financial Statements
June 30, 2024

(5) Interfund Transfers (Continued)

The Facilities Financial Pl
anning Reserve Fund also transferred $16,825,622 to Other Governmental Funds as follows:

 $6,955,012 to the Parks and Community Centers Fund to fund construction of a new library lecture hall;
 $4,940,281 to the Miscellaneous FFP Projects Fund for CNG fueling support facility and transfer station rehabilitation;
 $4,643,968 to the Contributions Fund to fund the construction of a new library lecture hall; and
 $286,361 to the Junior Lifeguards Fund to cash fund construction projects related to the Junior Lifeguard Building.

Other Governmental Funds transferred $7,675,179 to other funds as follows:

 The Contributions Fund transferred $135,892 to the General Fund and $82,345 to the Tide and Submerged Land - Operating Fund, to reimburse those funds for expenses related to a storm drain dry weather diversion capital project;
 The American Rescue Plan Act Fund transferred $5,226,642 to the General Fund for public safety services incurred on fire operations;
 The Assessment District Fund transferred $1,230,300 to the General Fund as reimbursement for engineering and design work related to Assessment Districts;  The Unrestricted Capital Improvements Fund transferred $1,000,000 to the General Fund for the Travelodge North Homekey project.

109
11-119

CITY OF NEWPORT BEACH
Notes
to Basic Financial Statements
June 30, 2024

(6) Capital Assets

Capital asset activity for the year ende
d June 30, 2024, was as follows:

Governmental Activities:

Governmental Activities capital assets net of accumulated depreciation/amortization at June 30, 2024 are comprised of the following:

General Capit
al Assets, net 2,371,916,763$
Internal Service Fund Capital Assets, net 19,171,776
Total 2,391
,088,539$

Beginning Balanc
e
Balance Additions Deletions June 30, 2024
Non-depreciab
le/non-amortizable:

Land and rights of way 1,918,486,226$ 3,908,965$ (64,792)$ 1,922,330,399$ Work in progress 13,838,976 17,712,529 (9,351,270) 22,200,235

1,932,325,202 21,621,494 (9,416,062)
1,944,530,634

Depreciable/am
ortizable:

Structures 260,708,379 9,509,647 (37,808) 270,180,218 Intangible right to use structures 13,927,685 3,259,414 - 17,187,099 Equipment 60,805,831 3,843,617 (1,129,005) 63,520,443 Intangible right to use equipment 353,888 9,837 - 363,725 Intangible right to use subscriptions 2,634,434 616,790 (584,372) 2,666,852 Infrastructure 400,132,758 11,340,723 (5,078,734) 406,394,747

738,562,975 28,580,028 (6,829,919)
760,313,084

Less accumula
ted depreciation/amortization for:

Structures (64,472,932) (6,031,296) - (70,504,228) Intangible right to use structures (1,921,060) (1,221,283) - (3,142,343) Equipment (41,460,147) (4,088,541) 1,078,403 (44,470,285) Intangible right to use equipment (117,809) (83,595) - (201,404) Intangible right to use subscriptions (403,595) (454,384) 336,407 (521,572) Infrastructure (189,743,313) (7,577,849)
2,405,815
(194,915,347)

(298,118,856)
(19,456,948) 3,820,625
(313,755,179)

Net depr
eciable/amortizable 440,444,119 9,123,080 (3,009,294) 446,557,905

Net capi
tal assets 2,372,769,321$ 30,744,574$ (12,425,356)$ 2,391,088,539$ 110
11-120

CITY OF NEWPORT BEACH
Notes
to Basic Financial Statements
June 30, 2024

(6) Capital Assets (Continued)

Business-type Activities:

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

Governmental
Business-type
Activities Activities
General Govern
ment 6,686,354$ - $
Public Safety 2,299,560 -
Public Works 174,632 -
Community Development 478,587 -
Community Service 9,817,815 -
Water - 1,833,639
Wastewater - 646,683

Totals
19,456,948$ 2,480,322$
Beginning Balan
ce
Balance Additions Deletions June 30, 2024
Non-deprecia
ble/non-amortizable:

Land 2,219,450$ -$ - $ 2,219,450$ Work in progress 7,697,408 1,856,408 (5,145,373) 4,408,443

9,916,858 1,856,408 (5,145,373) 6,627,893

Depreciable/a
mortizable:

Intangible right to use land and right of way 3,883,062 - - 3,883,062 Structures 688,396 - - 688,396 Equipment 337,180 42,888 - 380,068 Infrastructure 198,854,753 8,189,807 (1,383,407) 205,661,153

Total Capita
l Assets 203,763,391 8,232,695 (1,383,407) 210,612,679

Less accumula
ted depreciation/amortization for:

Intangible right to use land and right of way (74,169) (53,656) - (127,825) Structures (310,212) (15,357) - (325,569) Equipment (236,129) (17,935) - (254,064) Infrastructure (77,792,931) (2,393,374)
292,398 (79,893,907)

(78,413,441) (2,480,322)
292,398 (80,601,365)

Net deprec
iable/amortizable 125,349,950 5,752,373 (1,091,009) 130,011,314

Net capi
tal assets 135,266,808$ 7,608,781$ (6,236,382)$ 136,639,207$

111
11-121

CITY OF NEWPORT BEACH
Notes
to Basic Financial Statements
June 30, 2024

(6) Capital Assets (Continued)

Internal Service Fund dep
reciation/amortization of $4,100,760 is allocated to governmental functions above.

(7) Long-Term Liabilities

Changes in Long-Term Liabili
ties

The long-term liabilitie
s for governmental activities for the fiscal year ended June 30, 2024, are as follows:

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 fiscal year ended June 30, 2024, are as follows:

Amounts
Beginn
ing Ending Due Within
Balance Additions Deletions Balance One Year
Governmental acti
vities:

Other debt:

Certificates of participation - Series 2010B 91,190,000$ - $ (3,390,000)$ 87,800,000$ 3,510,000$ Certificates of participation - Series 2020A 6,420,000 - (695,000) 5,725,000 725,000 Bond premium - Series 2020A 1,006,764 - (142,131) 864,633 - Other long-term liabilities:

Workers' compensation payable 16,396,153 11,588,497 (4,534,087) 23,450,563 4,035,291 Claims and judgments payable 8,689,061 25,766,286 (23,614,029) 10,841,318 3,577,058 Compensated absences 12,691,040 2,498,119 (1,540,993) 13,648,166 3,539,392 Lease liability 12,274,149 3,269,251 (1,204,018) 14,339,382 1,272,450 Subscription liability 2,235,133 315,569 (717,947) 1,832,755 289,030 Total governmen
tal activities 150,902,300$ 43,437,722$ (35,838,205)$ 158,501,817$ 16,948,221$ Beginning Ending
Due Within
Balance Additions Deletions Balance One Year
Business-type ac
tivities:

Lease liability 3,820,774 $ - $ (44,120)$ 3,776,654 $ 44,364 $ Total busin
ess-type activities 3,820,774 $ - $ (44,120)$ 3,776,654 $ 44,364 $ 112
11-122

CITY OF NEWPORT BEACH
Notes
to Basic Financial Statements
June 30, 2024

(7) Long-Term Liabilities (Continued)

2010 Certificates of Participation

In fiscal year 2010-11,
the City issued $20,085,000 of Series 2010A (Tax Exempt) and $106,575,000 of Series 2010B (Federally Taxable Direct Pay Build America Bonds) Certificates of Participation. The 2010A Certificates were issued to prepay the $3,990,000 principal outstanding on the 1998 Library Certificates of Participation. Accordingly, the 1998 Library Certificates have been defeased and are no longer outstanding. The remaining proceeds from the Series 2010A Certificates were used to finance the acquisition, improvement and equipping of the Civic Center Project. The 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, 2024, the City has received $31,524,132 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 $3,510,000 to $7,245,000. The total outstanding balance at June 30, 2024 amounted to $87,800,000. The use of the following assets has been pledged as security for the outstanding balance: the Central Library and the Civic Center.

113
11-123

CITY OF NEWPORT BEACH
Notes
to Basic Financial Statements
June 30, 2024

(7) Long-Term Liabilities (Continued)

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

2020 Certificates of Participation

In Fiscal Year 2020-2
1, 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 1 and July 1 of each year. The 2020A Certificates’ interest rate is 4.00%. Principal payments are payable annually on July 1 of each year. The remaining principal payments of the Series 2020A Certificates, which are payable through July 1, 2030, range from $725,000 to $915,000. The total outstanding balance at June 30, 2024 amounted to $5,725,000. The use of the following assets has been pledged as security for the outstanding balance: Fire Station 5 and Fire Station 7.

Year Ending
Jun
e 30, Principal Interest Total
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 4,210,000 5,053,726 9,263,726
2030-2034 24,115,000 20,386,712 44,501,712
2035-2039 30,250,000 10,695,372 40,945,372
2040-2041 14,165,000 1,026,996 15,191,996
Totals 87,800,00
0$ 60,163,741$ 147,963,741$
114
11-124

CITY OF NEWPORT BEACH
Notes
to Basic Financial Statements
June 30, 2024

(7) Long-Term Liabilities (Continued)

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

Claims and Judgments

The City retains the risk of loss
for general liability and workers’ compensation claims as described in Note (9). 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, 2024, 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, 2024, for general liability and workers’ compensation was $10,841,318 and $23,450,563, respectively.

Compensated Absences

The City's policies relating
to compensated absences are described in Note (1). This liability at June 30, 2024, is $13,648,166. Compensated absences are liquidated from the Compensated Absences internal service fund.

Unused Credit

The City has a letter of
credit in the amount of $300,938.

Year Ending
Jun
e 30, Principal Interest Total
2025 725,000$
214,500$ 939,500$
2026 755,000 184,900 939,900
2027 785,000 154,100 939,100
2028 815,000 122,100 937,100
2029 850,000 88,800 938,800
2030-2031 1,795,000 72,500 1,867,500
Totals 5,725,000$
836,900$ 6,561,900$
115
11-125

CITY OF NEWPORT BEACH
Notes
to Basic Financial Statements
June 30, 2024

(7) 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 water well easements, lifeguard communication equipment, and part of a homeless shelter. For lease provisions subject to GASB 87 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
2025 1,272,45
0$ 76,212$ 1,348,662$
2026 1,273,326 69,199 1,342,525
2027 1,212,633 62,367 1,275,000
2028 1,219,317 55,683 1,275,000
2029 1,226,038 48,963 1,275,001
2030-2034 6,232,288 142,712 6,375,000
2035-2038 1,903,330 9,170
1,912,500

Totals 14,339,
382$ 464,306$ 14,803,688$
116
11-126

CITY OF NEWPORT BEACH
Notes
to Basic Financial Statements
June 30, 2024

(7) Long-Term Liabilities (Continued)

Estimates of the future lease pa
yments for the City’s lease liability for business-type activities are as follows:

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 library operations, public communications, recreation classes registrations, website hosting, performance evaluations, public safety, etc. GASB 96 excludes certain outflows (e.g., certain variable payments, etc.) from the measurement of SBITA liabilities.

Fiscal
Year Ending
Ju
ne 30, Principal Interest Total
2025 44,364$
20,660$ 65,024$
2026 44,608 20,415 65,023
2027 44,854 20,169 65,023
2028 45,101 19,922 65,023
2029 45,350 19,673 65,023
2030-2034 230,529 94,588 325,117
2035-2039 236,955 88,162 325,117
2040-2044 243,560 81,557 325,117
2045-2049 250,350 74,767 325,117
2050-2054 257,328 67,789 325,117
2055-2059 264,501 60,616 325,117
2060-2064 271,874 53,243 325,117
2065-2069 279,453 45,664 325,117
2070-2074 287,243 37,874 325,117
2075-2079 295,250 29,868 325,118
2080-2084 303,480 21,637 325,117
2085-2089 311,939 13,178 325,117
2090-2094 280,510 4,584 285,094
2095-2099 39,402 181 39,583
Totals 3,776,651$
774,547$ 4,551,198$
117
11-127

CITY OF NEWPORT BEACH
Notes
to Basic Financial Statements
June 30, 2024

(7) Long-Term Liabilities (Continued)

During the fiscal year, outflow
s 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 ended June 30, 2024, there were approximately $21,907 of software subscription fees in excess of the annual minimum. Part way through the fiscal year, the City’s existing recreation class registration software’s contract ended. The City’s recreation class registration software’s new contract has both transaction fees (e.g., credit card processing, etc.) and a separate fixed software subscription fee. Consequently, the City is not expecting to disclose variable software subscription fees after the fiscal year ended June 30, 2024.

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

(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 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, 2024, for each district under the Bond Acts of 1911 and 1915 are as follows:

Year Ending
Jun
e 30, Principal Interest Total
2025 289,030 $
9,282 $ 298,312 $
2026 243,771 7,872 251,643
2027 234,542 6,559 241,101
2028 235,836 5,266 241,102
2029 215,788 3,980 219,768
2030-2033 613,788 6,067
619,855
Totals 1,832,
755 $ 39,026 $ 1,871,781 $
118
11-128

CITY OF NEWPORT BEACH
Notes
to Basic Financial Statements
June 30, 2024

(8) Limited Obligation Bonds (Continued)

(9) Risk Management – General L
iability 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 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

Bonds Outsta
nding
Assessment District Original Issu
e June 30, 202
4 Reassessment
District 2012 $ 13,583,436 $ 574,037
Assessment District No. 117 2,955,000 2,255,000 Assessment District No. 116 1,575,000 1,300,000 Assessment District No. 116B 665,000 550,000 Assessment District No. 113 4,565,000 4,140,000 Assessment District No. 111 2,412,000 2,097,000 Assessment District No. 120-2 2,505,000 2,505,000 Assessment District No. 124 23,625,000
23,625,000
Totals 51,8
85,436$ 37,046,037$

119
11-129

CITY OF NEWPORT BEACH
Notes
to Basic Financial Statements
June 30, 2024

(9) Risk Management – General Liability and Workers’ Compensation (Continued)

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 $34,291,881 at June 30, 2024, which represents the discounted present value of all outstanding claims. The claims are discounted using an interest rate of 3%.

(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 $157,659,215 at June 30, 2024.

(11) Pension Plans

a. General Information about the Pension Plans

Plan
Descriptions – All qualified permanent and probationary employees are eligible to participate in the City of Newport Beach’s separate Safety (police and fire) and Miscellaneous (all other) Employee Pension Plans, agent multiple-employer defined benefit pension plans administered by the California Public Employees’ Retirement System (CalPERS), which acts as a common investment and administrative agent for its participating member employers.

June 30, 2023 June 30, 2024 June 30, 2023 June 30, 2024 Unpaid claims,
beginning of fiscal year 8,695,880$ 8,689,061$ 15,754,588$ 16,396,153$ Insured claims (including IBNR) 5,618,185 25,766,286 4,903,042 11,588,497 Claim payments (5,625,004) (23,614,029) (4,261,477) (4,534,087) Unpaid claims,
end of fiscal year 8,689,061$ 10,841,318$ 16,396,153$ 23,450,563$ General Liability Workers' Compen
sation
120
11-130

CITY OF NEWPORT BEACH
Notes
to Basic Financial Statements
June 30, 2024

(11) Pension Plans (Continued)

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 five years of service.

All members are eligible for non-duty disability benefits after five 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, 2023 are summarized as follows:

Prior to On or
after On or after
Hire date November 24, 2012 November 24, 2012 January 1, 2013 Benefit formula 2.5%@55 2.
0%@60 2.0%@62
Benefit vesting schedule 5 years of service 5 years of service 5 years of service Benefit payments monthly for life monthly for life monthly for life Retirement age 50-55 50-63 52-67
Monthly benefits, as a % of eligible compensation 2.0% - 2.5% 1.092% - 2.418% 1.0% - 2.5% Required employee contribution rates 11.5% - 13.0% 11.5% - 13.0% 11.5% - 13.0% Required employer contribution rates 30.06% - 31.56% 26.64% - 28.14% 27.14% - 28.64% Prior to On or after On or after
Hire date November 24,2012 November 24, 2012 January 1, 2013 Benefit formula 3.0%@50 2.
0%@50; 3.0%@55 2.7%@57
Benefit vesting schedule 5 years of service 5 years of service 5 years of service Benefit payments monthly for life monthly for life monthly for life Retirement age 50-55 50-55 50-57
Monthly benefits, as a % of eligible compensation 3.0% 2.0% - 2.7%; 2.4% - 3.0% 2.0% - 2.7% Required employee contribution rates 13.5% - 14.6% 13.5% - 14.6% 13.5% - 14.6% Required employer contribution rates 65.11% - 66.21% 65.11% - 66.21% 68.54% - 69.71% Miscellaneous
Safety
121
11-131

CITY OF NEWPORT BEACH
Notes
to Basic Financial Statements
June 30, 2024

(11) Pension Plans (Continued)

Employees Covered – At the
measurement date of June 30, 2023, the following employees were covered by the benefit terms for each Plan:

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 CalPERS’ 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.

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, 2023, using an annual actuarial valuation as of June 30, 2022 rolled forward to June 30, 2023 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.

Miscellaneous Safety
Inactive employee
s or beneficiaries
currently receiving benefits 778 475
Inactive employees entitled to
but not yet receiving benefits 665 110 Active employees 517 276
Totals 1,960
861
122
11-132

CITY OF NEWPORT BEACH
Notes
to Basic Financial Statements
June 30, 2024

(11) Pension Plans (Continued)

Actuarial Assumptions –
The total pension liabilities in the June 30, 2022 actuarial valuations were determined using the following actuarial assumptions:

All other actuarial assumptions used in
the June 30, 2022 valuation were based on the
results of an actuarial experience study for the period from 2000 to 2019, including updates to salary increase, mortality and retirement rates. The Experience Study report can be obtained at the CalPERS website under Forms and Publications.

Discount Rate – The discount rate used to measure the total pension liability was 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.

Miscellaneous Safety
Valuation Date June
30, 2022 June 30, 2022
Measurement Date June 30, 2023 June 30, 2023
Actuarial Cost Method
Actuarial Assumptions:

Discount Rate 6.90% 6.90%
Inflation 2.30% 2.30%
Payroll growth 2.80% 2.80%
Projected salary increases
Investment Rate of Return 6.80%(1) 6.80%(1)
Mortality Rate Tab
le (1)
Post Retirement Benefit Increase
(1) The mortality ta
ble used was developed based on CalPERS-specific data.

The probabilities of mortality are based on the 2021 CalPERS Experience Study and Review of Actuarial Assumptions. Mortality rates include full 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 2021 experience study report from November 2021 that can be found on the CalPERS website.

Derived using CalPERS' membership
Entry-Age Normal Cost Method
Varies by Entry Age and Services
data for all funds
The lesser of contract COLA or 2.30%
until Purchasing Power Protection
Allowance Floor on Purchasing Power
applies, 2.3% thereafter
123
11-133

CITY OF NEWPORT BEACH
Notes
to Basic Financial Statements
June 30, 2024

(11) Pension Plans (Continued)

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

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

In determining the long-term expected rate of return, CalPERS took into account both short- term and long-term market return expectations. 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:

Subsequent Event – During the time period between the valuation date and the publication of this report, price inflation has been higher than the assumed rate of 2.3% per annum.

Since inflation influences cost of living adjustments for retirees and beneficiaries and active member pay increases, higher inflation is likely to put at least some upward pressure on the pension expense and the net pension liability in future valuations. The actual impact of higher inflation on future valuation results will depend on, among other factors, how long

Assumed
Asset R
eal Return
Allocation Years 1-10(1),(2)
Global equit
y - 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%
e(1) An expected i
nflation of 2.30% used for this period.
e(2) Figures are ba
sed on the 2021 Asset Liability Management study.

Asset Class(1)
124
11-134

CITY OF NEWPORT BEACH
Notes
to Basic Financial Statements
June 30, 2024

(11) Pension Plans (Continued)

higher inflation persists. At this
time, we continue to believe the long-term price inflation assumption of 2.3% per annum is appropriate.

c. Changes in the Net Pension Liability

The changes in the Net Pension Liability for each Plan for the measurement period follow:

Miscellaneou
s Plan:

Total Pensio
n Plan Fiduciary Net Pension
Liability Net Position Liability/(A
sset)
Balance at Ju
ne 30, 2022 499,195,502$ 378,772,145$ 120,423,357$
Changes in t
he Year:

Service cost 8,045,390 - 8,045,390 Interest on the total pension liability 34,232,164 - 34,232,164 Changes in benefit terms 474,137 - 474,137 Differences between expected and
actual experience 5,716,564 - 5,716,564 Contribution - employer - 20,800,063 (20,800,063) Contribution - employee - 4,113,185 (4,113,185) Net investment income - 23,270,469 (23,270,469) Benefit payments, including refunds
of employee contributions (26,581,149) (26,581,149) - Administrative expense - (278,531)
278,531

Net Changes 21
,887,106 21,324,037
563,069

Balance at Ju
ne 30, 2023 521,082,608$ 400,096,182$ 120,986,426$
Increase (Decr
ease)
125
11-135

CITY OF NEWPORT BEACH
Notes
to Basic Financial Statements
June 30, 2024

(11) Pension Plans (Continued)

Sensitivity of the Net P
ension 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:

Safety Plan:

Total Pensio
n Plan Fiduciary Net Pension
Liability Net Position Liability/(A
sset)
Balance at Ju
ne 30, 2022 667,148,312$ 470,269,260$ 196,879,052$
Changes in t
he Year:

Service cost 10,727,817 - 10,727,817 Interest on the total pension liability 45,793,334 - 45,793,334 Changes in benefit terms 268,557 - 268,557 Differences between expected and
actual experience 9,833,536 - 9,833,536 Net plan to plan resource movement - - - Contribution - employer - 35,285,332 (35,285,332) Contribution - employee - 3,577,340 (3,577,340) Net investment income - 28,993,124 (28,993,124) Benefit payments, including refunds
of employee contributions (37,885,623) (37,885,623) - Administrative expense - (345,814)
345,814

Net Changes 28
,737,621 29,624,359
(886,738)

Balance at Ju
ne 30, 2023 695,885,933$ 499,893,619$ 195,992,314$
Increase (Decr
ease)
Miscellaneous Safety
1% Decrease 5.90% 5.90%
Net Pension Liability 190,345,838$ 286,451,219$
Current Discount Rate 6.90% 6.90%
Net Pension Liability 120,986,426$ 195,992,314$
1% Increase 7.90% 7.90%
Net Pension Liability 63,892,194$
121,284,207$
126
11-136

CITY OF NEWPORT BEACH
Notes
to Basic Financial Statements
June 30, 2024

(11) Pension Plans (Continued)

Pension Plan Fiduciary Net Pos
ition – 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 fiscal year ended June 30, 2024, the City recognized pension expense of $56,762,175 ($23,469,057 Miscellaneous Plan and $33,293,118 Safety Plan). At June 30, 2024, 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 21,537,720$ -$
Differences between expected and 3,863,463 (522,874)

actual experience
Change in assumptions 5,865,289 -
Net differences between projected and actual
and actual earnings on plan investments 18,308,754 - Total miscellaneous plan 49,575,226 (522,874)
Safety plan:

Pension contributions subsequent to
measurement date 36,635,838 -
Differences between expected and
actual experience 7,514,668 (1,768,089)

Change in assumptions 11,593,442 -
Net differences between projected and actual
and actual earnings on plan investments 22,969,358 - Total safety plan 78,713,306 (1,768,089)
Total all plans 128,288,532$ (2,290,963)$
127
11-137

CITY OF NEWPORT BEACH
Notes
to Basic Financial Statements
June 30, 2024

(11) Pension Plans (Continued)

$58,173,558 reported as defer
red 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, 2025. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized as pension expense as follows:

e. Payable to the Pension Plan

At June 30, 2024, the City had no outstanding contributions to the pension plan required for the year ended June 30, 2024.

f. Plan Description - Defined Co
ntribution Plan

Pursuant to City Counci
l 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 fiscal year ende
d June 30, 2024, the City's covered payroll for employees participating in the plan was $3,730,194. Employees made contributions of $139,896 (3.75% of current covered payroll), which was matched by the employer in the same amount. Assets of the plan totaled $2,443,815 at June 30, 2024.

Fiscal
Year Ending
June 30, Miscellaneous Safety Total
2025 9,779,876$ 11,425,126$ 21,205,002$
2026 4,788,658 9,665,572 14,454,230
2027 12,391,635 18,286,128 30,677,763
2028 554,463 932,553
1,487,016
Thereafter - - -
128
11-138

CITY OF NEWPORT BEACH
Notes
to Basic Financial Statements
June 30, 2024

(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 o
f the following post-retirement medical benefits:

PEMHCA

The CalPERS 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 2024 PEMHCA minimum contribution amount is $157 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

129
11-139

CITY OF NEWPORT BEACH
Notes
to Basic Financial Statements
June 30, 2024

(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, 2024, the liability for the conversion part of the RHS Plan was $893,075. This amount is not included in the net OPEB liability, but is included in the compensated absences liability. See Note (7).

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.

In 2024, the City closed the OPEB Trust with the California Employers’ Retiree Benefit Trust (“CERBT”) Fund and transferred its assets to Public Agency Retirement Services (“PARS”) to prefund its OPEB liability. The assets held by PARS are legally restricted for the City’s OPEB plan under Section 115 of the Internal Revenue Code. The City has made discretionary contributions to the OPEB Trust. Contributions to the OPEB Trust, along with earnings on those contributions, are irrevocable.

The City determines the timing of the distribution of trust assets and whether those assets will be paid directly to the insurance provider or used to reimburse the City for plan benefits and expenses it has paid. The OPEB Trust is reported as a fiduciary fund since it would be misleading to exclude the OPEB Trust Fund from the City’s financial statements. PARS issues a publicly available financial report detailing the fiduciary net position of the OPEB Trust, which is available upon request. The plan itself does not issue a separate financial report. PARS is an agent multiple- employer trust.

130
11-140

CITY OF NEWPORT BEACH
Notes
to Basic Financial Statements
June 30, 2024

(12) Post-Employment Health Care Benefits (OPEB) (Continued)

Employees Covered

As of the measurement date
June 30, 2023, the following current and former employees were covered by the benefit terms under the plan:

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, 2024, the City’s cash contributions were $6,327,150 to the trust in premium payments and $1,309,458 for the estimated implicit subsidy, resulting in a total payment of $7,636,608.

Net OPEB Liability

The City’s net OPEB liability was measured as of June 30, 2023, and the total OPEB liability used to calculate the net OPEB liability was determined by an actuarial valuation dated June 30, 2023.

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, 2023 actuarial valuation was determined using the following actuarial assumptions and applied to all periods included in the measurement, unless otherwise specified:

Inactive emp
loyees, spouses, or beneficiaries currently receiving benefits 460 Inactive employees or beneficiaries entitled to but not receiving benefits 346 Active employees 807
Total 1,613
131
11-141

CITY OF NEWPORT BEACH
Notes
to Basic Financial Statements
June 30, 2024

(12) Post-Employment Health Care Benefits (OPEB) (Continued)

Valuation Da
te June 30, 2023
Measurement Date June 30, 2023
Actuarial Cost Method Entry-Age Normal Cost Method
Actuarial Assumptions:

Discount Rate 6.00%
Inflation 2.75%
Projected Salary Increase 2.80% per annum, in aggregate Expected long term investment rate of return 6.00%
Healthcare Cost Trend Rates Initial rate of 8.00%, decreasing 0.25% annually to an ultimate rate of 4.50% for
Pre-65 and 6.50% decreasing by 0.25%
annually to an ultimate rate of 4.50% for
Post -65.

Post-Retirement Turnover Derived from CalPERS pension plan Mortality
From Society
of Actuaries Pub-2010 Public
Retirement Plan
s Mortality Table Report

The actuarial assumptions used in the June 30,
2023, 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 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:

Assumed Long-T
erm
Asset Expected Real
Allocation Rate of Return
Global Equities 4

9.00% N/A
Fixed Income 23.00% N/A
TIPS 5.00% N/A
Commodities 3.00% N/A
REITs 20.00% N/A
Totals 100.
00% 6.00%
Asset Cla
ss
132
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CITY OF NEWPORT BEACH
Notes
to Basic Financial Statements
June 30, 2024

(12) Post-Employment Health Care Benefits (OPEB) (Continued)

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:

Total Plan Net
OPE
B Fiduciary OPEB
Liability Net Position Liability
Balance at J
une 30, 2022 54,234,204$ 31,569,252$ 22,664,952$
Changes in t
he Year:

Service cost 635,096 - 635,096
Interest on the total OPEB liability 3,150,800 - 3,150,800 Changes of assumptions 292,126 - 292,126 Differences between actual and
expected experience (393,810) - (393,810) Contribution - employer - 6,327,150 (6,327,150) Net investment income - 2,061,410 (2,061,410) Benefit payments, including refunds of
employee contributions (4,781,574) (4,781,574) - Administrative expenses - (9,385)
9,385

Net Changes (1,
097,362) 3,597,601 (4,694,963)
Balance at J
une 30, 2023 53,136,842$ 35,166,853$ 17,969,989$
Increase (Dec
rease)

133
11-143

CITY OF NEWPORT BEACH
Notes
to Basic Financial Statements
June 30, 2024

(12) Post-Employment Health Care Benefits (OPEB) (Continued)

Change of Assumptions

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.

 Future health care cost trend rates have been reset to an initial rate of 8.00%, decreasing

0.25% annually to an ultimate rate of 4.50% for Pre-65 and 6.50% decreasing by 0.25% annually to an ultimate rate of 4.50% for Post-65.

 Salary scale has been updated to 2.80% per year plus merit increased based on the 2021 CalPERS experience study.

 Retirement rates have been updated to be consistent with the 2021 CalPERS experience study.

 Termination rates have been updated to be consistent with the 2021 CalPERS experience study.

Change of Benefit Terms

There was no change of benefit terms.

Su
bsequent Events

There were no subsequent
events that would materially affect the results presented in this disclosure.

134
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CITY OF NEWPORT BEACH
Notes
to Basic Financial Statements
June 30, 2024

(12) Post-Employment Health Care Benefits (OPEB) (Continued)

Sensitivity of the Total OPEB Liab
ility 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:

Sensitivity of the Net OPEB Liability to Changes in Health-Care Cost Trend Rates

The following presents the tot
al 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 (7.00% HMO/7.00% PPO) or 1-percentage point higher (9.00% HMO/9.00% PPO) than current healthcare cost trend rates:

OPEB Expense and Deferred Outflows/Inflows of Resources Related to OPEB

For the year ended June 30, 2024, the City recognized OPEB expense of $3,758,246. At June 30, 2024, the City reported deferred outflows of resources and deferred inflows of resources related to OPEB from the following sources:

1% Decrease Discoun
t Rate 1% Increase
(5.00%) (6.00%) (7.00%)
Net OPEB Liabili
ty 23,442,813$ 17,969,989$ 13,346,226$
1% Decrease Current 1%
Increase
(7.00%HMO/7.00%PPO (8.00%HMO/8.00%PPO (9.00%HMO/9.00%PPO decreasing to decreasing to decreasing to

3.5%HMO/3.5%PPO) 4.50%HMO/4.50%PPO) 5.5%HMO/5.5%PPO)
Net OPEB Liability $
15,261,584 $17,969,989 $21,608,100
Healthcare Cost Trend Rates
Deferred Deferred
O
utflows of Inflows of
Description Resources Resources
OPEB contributi
ons subsequent to measurement date 12,311,540$ - $
Differences between projected and actual experience 5,400,158 (476,525) Change of assumptions 2,205,758 (201,676)
Net difference between projected and actual earnings
on OPEB plan investments 2,161,481 -

Totals 22,0
78,937$ (678,201)$

135
11-145

CITY OF NEWPORT BEACH
Notes
to Basic Financial Statements
June 30, 2024

(12) Post-Employment Health Care Benefits (OPEB) (Continued)

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 $10,162,093, 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, 2025.

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

Payable to the OPEB Plan
At June 30, 2024, the City had no outstanding amount of contributions to the OPEB plan required for the year ended June 30, 2024.

(13) Joint Venture Agreements

Bonita Canyon Public Facilities Fi
nancing Authority

The Bonita Canyon Pub
lic 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, 2024, the contributions from property owners have been fully

Fiscal Year
End
ing
June 30, Amount
2025 1,914,26
5$
2026 1,335,302
2027 2,424,073
2028 991,194
2029 1,015,561
Thereafter 1,408,801
136
11-146

CITY OF NEWPORT BEACH
Notes
to Basic Financial Statements
June 30, 2024

(13) Joint Venture Agreements (Continued)

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 Be
ach 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 $824,888. The City’s 10.80% interest in the net equity of this joint venture at June 30, 2024, amounts to $270,127. 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 participa
nt in a joint venture with several other public agencies in Orange County for the operation of the Integrated Law and Justice Agency of Orange County (ILJAOC). The ILJAOC was established in fiscal year 2006-07 and consists of 23 member agencies, with an oversight board consisting of 12 members from the participating agencies. Annually, each member agency pays a percentage of the operating and replacement costs for the ILJAOC. The City’s annual contribution and interest in the net equity of this joint venture was immaterial as of June 30, 2024.

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.

137
11-147

CITY OF NEWPORT BEACH
Notes
to Basic Financial Statements
June 30, 2024

(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 7)

Operating Agreements

The City of Newport Be
ach 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, 2024, the City paid VNB $6,945,387.

Contractual Commitments

Construction and contractual commit
ments for major construction projects are as follows:

Annual Projec
t YTD Unexpended
Budget Expenditures Commitments
Central Library
Lecture Hall 22,777,582$ 4,282,389$ 18,462,635$ Lower Sunset View Park Concept 9,674,898 7,218,549 2,456,349 Newport Bay Water Wheel 4,781,465 2,787,548 1,993,917 East Coast Highway Pavement Rehab 5,937,437 3,693,199 1,873,289 Balboa Island P-19 Phase 3 3,251,852 1,798,116 1,453,736 Facilities Maintenance Master Plan 2,500,000 173,445 1,266,973 WCH Hwy Intersection Imp Ped Bridge 1,092,827 17,920 1,073,490 Facilities Maintenance Master Plan 2,478,272 1,576,409 901,863 Shorecliffs Comm Water System Imprv 2,750,000 67,967 918,115 Traffic Signal Rehabilitation 1,694,375 833,648 860,727 Park Master Maintenance Plan 1,000,000 90,294 804,091 Advanced Metering Infrastructure 1,011,128 256,280 754,848 Junior Lifeguards Building 3,187,653 2,837,402 350,251 Garde Adjustments - Water Valves 1,572,890 442,873 738,483 Collins Island Bridge Replacement 2,429,168 239,203 725,263 San Miguel Drive Pavement Rehab 680,000 71,025 608,975 Slurry Seal Program 1,689,022 889,418 566,459 Sewer Lift Station Improvements 571,815 13,679 558,136 138
11-148

CITY OF NEWPORT BEACH
Notes
to Basic Financial Statements
June 30, 2024

(14) Commitments and Contingencies (Continued)

At fiscal year end, the City’s encumb
rances with contractors were as follows:

Tide and Tide a
nd Special Capital
Submerged Submerged Debt Service Revenue Project
General Land - Operating Land - Harbor Capital Fund Funds Funds Total Oceanfront encroachment -$ -$ -$ -$ 155,804$ -$ 155,804$ Cable franchise reserve - - - - 7,883 - 7,883 Streets and highways - - - - 9,599,936 3,552,856 13,152,792 Parks and community centers - - - - - 14,594,621 14,594,621 Facilities - - - - - 460,193 460,193 Public arts and culture - - - - 32,500 - 32,500 Fiin - - - - 1,071 - 1,071 Debt service - - - 1,500 - - 1,500 Capital re-appropriations - - - - - 9,274,595 9,274,595 Beaches - 354,000 666,837 - - - 1,020,837 Marinas - 16,835 - - - - 16,835 Dredging - - 21,525 - - - 21,525 Equipment 33,121 239,641 - - 11,000 - 283,762 Facilities Replacement - - - - - 100 100 Drainage - - - - - 423,312 423,312 Miscellaneous and studies - - - - - 113,375 113,375 Contract services 4,044,062 - - - - - 4,044,062 Supplies and materials 152,490 - - - - - 152,490 Maintenance and repairs 1,605,727 - - - - 2,848,368 4,454,095 General 127,541 -
-
-
-
-
127,541

Total encumbr
ances 5,962,941$ 610,476$
688,362$
1,500$
9,808,194$
31,267,420$
48,338,893$

Major Governme
ntal Funds Other Government
al Funds
139
11-149

CITY OF NEWPORT BEACH
Notes
to Basic Financial Statements
June 30, 2024

(15) Fund Balance

Governmental Fund Balance at June 30, 20
24, is classified as follows:

Governmental Fund
Balance
Tide and Tide and Facilities Special Capital
Submerged Submerged Financial Planning Debt Service Rev enue Project Permanent General Land - Operating Land - Harbor Capital Reserv e Fund Funds Funds Funds Totals Nonspendable:

Prepaid items (legally restricted) 1,160,659$ 101,646$ -$ -$ -$ 39,723$ -$ -$ 1,302,028$ Inventories (legally restricted) 215,284 - - - - - - - 215,284 Long-term loan receiv able (form restricted) 5,676,659 - - - - - - - 5,676,659 Permanent endowment (legally restricted) - - - - - - - 4,629,781 4,629,781 Restricted:

Affordable housing - - - - - 484,021 - - 484,021 Oceanfront encroachment - - - - - 212,543 - - 212,543 Upper Newport bay restoration - 1,683,144 - - - - - - 1,683,144 Cable franchise reserve - - - - - 3,550,006 - - 3,550,006 Community development - - - - - - 3,411 - 3,411 Streets and highways - - - - - 9,599,936 - - 9,599,936 Public safety - - - - - 817,396 - - 817,396 Facilities - - - - - - 292,893 - 292,893 Transportation - - - - - 611,470 - - 611,470 Air quality improv ement - - - - - 1,528,948 - - 1,528,948 Environmental liability mitigation - - - - - 8,555,811 - - 8,555,811 Public arts and culture - - - - - 1,154,535 - - 1,154,535 Parking - - - - - 252,714 - - 252,714 Training - - - - - 556,121 - - 556,121 Libraries - - - - - - - 226,570 226,570 Scholarships - - - - - - - 216,581 216,581 Fiin - - - - - 1,094,800 - - 1,094,800 Debt service - - - - 2,323,115 - - - 2,323,115 Capital re-appropriations - 5,099,796 11,622,548 - - 3,971,674 24,961,911 - 45,655,929 Beaches - 354,000 666,837 - - - - - 1,020,837 Marinas - 16,835 - - - - - - 16,835 Dredging - - 30,817,961 - - - - 1,773,357 32,591,318 Equipment - 239,641 - - - 11,000 - - 250,641 General Plan Maintenance - - - - - 63,172 - - 63,172 Committed:

Facilities replacement - - - 20,435,754 - - 687,907 - 21,123,661 Facilities maintenance - - - - - - 1,763,676 - 1,763,676 Civic center and park - - - - - - 505,166 - 505,166 Oil and gas liabilities - 1,052,660 - - - - - - 1,052,660 Parking management - - - - - - 162,449 - 162,449 Neighborhood enhancement - - - - - - 10,811,958 - 10,811,958 Capital re-appropriations 436,303 - - - - - - - 436,303 Drainage - - - - - - 2,836,212 - 2,836,212 Streets and highways - - - - - - 12,367,394 - 12,367,394 Facilities - - - - - - 10,486,563 - 10,486,563 Miscellaneous and studies - - - - - - 113,375 - 113,375 Parks and community centers - - - - - - 17,246,041 - 17,246,041 Contract serv ices 4,194,063 - - - - - - - 4,194,063 Supplies and materials 390,091 - - - - - - - 390,091 Maintenance and repairs 1,605,727 - - - - - 2,848,366 - 4,454,093 Equipment 33,121 - - - - - - - 33,121 General 127,541 - - - - - - - 127,541 Unassigned 82,601,740
-
-
-
-
(229,775)
-
-
82,371,965

To
tal fund balances 96,441,188$ 8,547,722$ 43,107,346$
20,435,754$
2,323,115$
32,274,095$
85,087,322$
6,846,289$
295,062,831$

Other Government
al Funds
140
11-150

CITY OF NEWPORT BEACH
Notes
to Basic Financial Statements
June 30, 2024

(16) Deficit Fund Equity

The following funds repo
rted deficit equity balances:

The OTS DUI Grant Fund is used to account for federal funding for the Selective Traffic Enforcement Program (STEP). These funds are used exclusively for DUI enforcement. The City will receive reimbursement in the following fiscal year, which will eliminate the deficit fund balance.

The Community Development Block Grant Fund is used to account for revenues and expenditures relating to the City's Community Development Block Grant program. These funds are received from the Federal Department of Housing and Urban Development and must be expended exclusively on programs for low- or moderate-income individuals/families. The City will receive reimbursement in the following fiscal year, which will eliminate the deficit fund balance.

The Insurance Reserve Fund is used to account for the City's self-insured general liability and workers' compensation program. The City's intention is to eliminate the deficit fund balance through a future interfund transfer.

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 aba
tement 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, 2024, the City rebated sales taxes to automobile dealerships totaling $369,781 under this program.

Special Revenue Fu
nds:

OTS DUI Grant 159 $
Community Development Block Grant 229,622
Internal Service Funds:

Insurance Reserve 4,399,439
Compensation Absences 6,021,996
141
11-151

CITY OF NEWPORT BEACH
Notes
to Basic Financial Statements
June 30, 2024

(18) Public-Private Partnerships

Agreements that meet the requirements of GAS
B 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, 2024, the City recognized $7,629 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.

(19) Subsequent Events

301 Balboa Boulevard East Property Pu
rchase

On August 27, 2024, the
City Council authorized staff to execute an agreement with Bobby and Linda Hanada for the purchase of property at 301 Balboa Boulevard East for future expansion of public parking access. The negotiated purchase price for the property at 301 Balboa Boulevard East is $2.6 million, which will be funded from General Fund surplus. The close of escrow is anticipated to be December 2024.

Affordable Housing Loan Agreement to American Family Housing for the Travelodge North Homekey Project

On July 11, 2023, the
City Council approved a loan commitment of $3.0 million to American Family Housing, LLC (AFH) to provide local match funds for costs associated with the acquisition, rehabilitation and conversion of the Travelodge North Motel property, located at 1400 Bristol Street into permanent supportive housing. The City’s funding is conditional based upon multiple requirements of the developer securing commitments for the balance of the project cost, approximately $42.4 million. The developer is finalizing negotiations of various loan and funding agreements and approvals. On December 10, 2024, City Council authorized the City Manager to finalize negotiations and execute the Affordable Housing Loan Agreement between the City and AFH. The terms of the agreement is for the City to loan $3.0 million with a 55-year term, at a 3.0% simple interest rate, commencing upon completion of the project. The $3.0 million loan will be disbursed through escrow during construction of the project to cover constructions costs and will be funded by from available funds in the Facilities Financial Planning Reserve Fund.

142
11-152

CITY OF NEWPORT BEACH
Notes
to Basic Financial Statements
June 30, 2024

(20) Prior Period Restatements

Utility Services Revenues

The City restated net position in both the
Water and Wastewater Funds due to a correction of an
error regarding the unbilled receivables for utility services for revenues in the prior year that related to the current fiscal year ending June 30, 2024.

Flexible Spending Account Fund

The City implemented GASB 10
0: Accounting Changes and Error Corrections – an Amendment of GASB Statement No. 62 which requires the City to report any changes in the presentation of the reporting of major funds. The City removed the reporting of the Flexible Spending Account (FSA) Fund from the Fiduciary Fund as it does not meet the requirements of a custodial fund. The FSA fund has been consolidated into the General Fund.

Government-Wi
de
Business Type
D
escription Water Wastewater Activities
Beginning net
position, as previously reported 128,393,695$ 30,307,955$ 157,717,018$ To adjust net position for an overstatement
in unbilled receivables (1,349,699) (245,536)
(1,595,235)

Beginning net
position, as restated 127,043,996$ 30,062,419$ 156,121,783$

Proprietary Fund
s
Fiduciary Funds
D
escription Total Custodial F
unds
Beginning fund
balance, as previously reported 2,226,973$
To adjust net position for the removal
of Flexible Spending Account Fund (25,728)
Beginning net p
osition, as restated 2,201,245$
143
11-153

CITY OF NEWPORT BEACH
Notes
to Basic Financial Statements
June 30, 2024

(20) Prior Period Restatements (Continued)

OPEB Trust Fund

In 2024, the City cl
osed the OPEB Trust with the California Employers’ Retiree Benefit Trust (“CERBT”) Fund and transferred its assets to Public Agency Retirement Services (“PARS”) to prefund its OPEB liability. The assets held by PARS are legally restricted for the City’s OPEB plan under Section 115 of the Internal Revenue Code. The City has made discretionary contributions to the OPEB Trust. Contributions to the OPEB Trust, along with earnings on those contributions, are irrevocable.

Fiduciary Funds
De
scription OPEB Trust Fund
Beginning fund
balance, as previously reported -$
To adjust net position for the addition of the
OPEB Trust Fund 35,155,718
Beginning net p
osition, as restated 35,155,718$
144
11-154

REQUIRED SUPPLEMENTARY INFORMATION

145
11-155
2024 2023 2022 2021 2020
Measurement Period June 30, 2023 June 30, 2022 June 30, 2021 June 30, 2020 June 30, 2019 Total Pension Liability
Service cost 8,045,390$ 8,261,032$ 7,438,050$ 7,347,708$ 7,084,444$ Interest on total pension liability 34,232,164 32,759,522 31,805,532 30,565,919 29,409,624 Differences between expected and actual experience 5,716,564 (1,394,332) 1,624,975 369,351 403,676 Changes in assumptions - 15,640,771 - - - Changes in benefits 474,137 - - - - Benefit payments, including refunds of employee contributions (26,581,149) (24,940,419) (22,976,493) (21,516,515) (20,129,701) Net Change in Total Pension Liability 21,887,106 30,326,574 17,892,064 16,766,463 16,768,043 Total Pension Liability - beginning 499,195,502 468,868,928 450,976,864 434,210,401 417,442,358 Total Pension Liability - ending (a) 521,082,608$ 499,195,502$ 468,868,928$ 450,976,864$ 434,210,401$ Plan Fiduciary Net Position
Contributions - employer 20,800,063$ 18,352,430$ 18,612,457$ 16,346,284$ 15,700,833$ Contributions - employee 4,113,185 3,974,974 4,057,107 4,067,751 3,955,144 Net investment income 23,270,469 (30,856,252) 76,031,841 16,074,793 19,895,019 Administrative expense (278,531) (256,962) (336,753) (454,777) (216,502) Other miscellaneous income/(expense) - - - - 700 Plan to plan resource movement - - - - 1,570 Benefit payments (26,581,149) (24,940,419) (22,976,493) (21,516,515) (20,129,701) Net
change in Plan Fiduciary Net Position 21,324,037 (33,726,229) 75,388,159 14,517,536 19,207,063 Plan Fiduciary Net Position - beginning 378,772,145 412,498,374 337,110,215 322,592,679 303,385,616 Plan Fiduciary Net Position - ending (b) 400,096,182$ 378,772,145$ 412,498,374$ 337,110,215$ 322,592,679$ Net pension liability - ending (a)-(b) 120,986,426$ 120,423,357$ 56,370,554$ 113,866,649$ 111,617,722$ Plan fiduciary net position as a percentage of the total pension liability 76.78% 75.88% 87.98% 74.75% 74.29% Covered payroll 48,099,822$ 45,210,057$ 44,809,856$ 43,902,594$ 42,153,383$ Net pension liability as percentage of covered payroll 251.53% 266.36% 125.80% 259.36% 264.79% Notes to Schedule:

Benefit Changes:

Change in Assumptions:

Page 1 of 2 ends

Newport Beach City CouncilFebruary 11, 2025

Newport Beach City Council
February 11, 2025