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CITY OF
s NEWPORT BEACH
`q</Fo'P PUBLIC FACILITIES CORPORATION STAFF REPORT
August 26, 2025
Agenda Item No-3
TO: HONORABLE CHAIRPERSON AND MEMBERS OF THE BOARD
OF DIRECTORS
FROM: Jason AI -Imam, Finance Director/Treasurer - 949-644-3126 [email protected]
PREPARED BY: Trevor Power, Accounting Manager - 949-644-3125 [email protected]
TITLE: Review of Annual Financial Statements
ABSTRACT:
The bylaws of the Newport Beach Public Facilities Corporation (Corporation) call for an annual meeting of its board of directors. The bylaws also specify that the chief financial officer shall maintain adequate financial records concerning the receipts and disbursements of the Corporation and the board of directors is entitled to inspect the associated financial records upon request. The attached financial statements represent the financial position and financial activities of the Corporation for the year ended June 30, 2025.
RECOMMENDATIONS:
a) Determine this action is exempt from the California Environmental Quality Act (CEQA) pursuant to Sections 15060(c)(2) and 15060(c)(3) of the CEQA Guidelines because this action will not result in a physical change to the environment, directly or indirectly; and
b) Receive and file the annual financial statements for the year ended June 30, 2025.
DISCUSSION:
The Corporation was created on March 9, 1992, by the City of Newport Beach under the authority of California law. The purpose of the Corporation is to assist the City in the financing of public improvements. This type of nonprofit corporation is utilized to facilitate the issuance of public financing instruments called Certificates of Participation (COPs).
COPs are a common California public financing instrument utilized for the acquisition or construction of public facilities and/or equipment. They are structured as a type of lease purchase that requires a third party, the Corporation, as a party to the lease transaction along with the City. The Corporation assigns all of the rights, obligations and financial transactions associated with the COPs' issuance to a trustee bank to facilitate the debt issuance.
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Review of Annual Financial Statements
August 26, 2025
The Corporation is governed by a board of directors which has historically been comprised of the seven members of the Newport Beach City Council. Normally, the mayor serves as the board chairperson, with the mayor pro tem serving as vice chairperson.
Under the Corporation's bylaws, the city manager serves the Corporation as president, the city clerk serves as secretary, and the finance director serves as chief financial officer.
In 1992, the City issued $7.5 million of COPs to finance the construction of the Central Library and subsequently refinanced this obligation in 1998. In 2010, the City issued approximately $126.7 million of new COPs. Of this financing, $122.8 million was used for the Civic Center project and $3.9 million was used to refinance the remaining balance of the Central Library COPs. In 2020, the City issued $7.9 million of new COPs to finance the construction of Fire Station No. 2. The Corporation's financial data and transactions are included in the Debt Service Fund in the City's financial statements. The City's Debt Service Fund is used solely to account for the activities of the Corporation and contains no other City debt financing activities. Even though the Corporation is a separate legal entity, it is considered a component unit of the City and is included in the City's Annual Comprehensive Financial Report and its transactions are reviewed as part of the City's annual financial statement audit.
The main sources of revenues of the Corporation are lease payments from the City and Federal Build America Bond (BAB) interest subsidy payments for the Civic Center COPs, both of which are pledged exclusively to pay interest and principal on the outstanding COPs. The Corporation has assigned its rights to receive and collect these payments to a trustee bank who makes the semi-annual debt service payments to the bondholders.
Therefore, the lease and BAB subsidy payments are received directly by the trustee bank.
While the outstanding debt has been issued by the Corporation, ultimately it is an obligation of the City, not the Corporation. The City owns the properties that are encumbered through the COPs' lease transactions. They remain encumbered until such time as the outstanding debt has been repaid in full.
During the year, the trustee bank received lease payments from the City totaling $8.6 million and Federal Build America Bond (BAB) interest subsidy payments totaling $2.0 million. Together with investment earnings and any restricted funds already on hand with the trustee bank, there were sufficient resources available to satisfy the annual debt service payments totaling $10.6 million. The following table illustrates the remaining combined debt service payment schedule and principal balance outstanding on the Civic Center and Fire Station No. 2 COPs:
Year Ending
COP Debt Service
June 30
Principal
Interest
BAB Subsidy
Total
Balance
2026
$ 4,430, 000
$ 6,074,260
$ (1,954,507)
$ 8,549,753
84, 860, 000
2027
4,635,000
5,777,615
(1,856,041)
8,556,574
80, 225, 000
2028
4,840,000
5,467,189
(1,764,147)
8,543,042
75,385,000
2029
5,060,000
5,142, 526
(1,667,983)
8,534,543
70, 325, 000
2030
5,285,000
4,802,926
(1,567,317)
8,520,609
65, 040, 000
2031-2035
26,135, 000
18, 642,474
(6,146, 908)
38, 630, 566
38, 905, 000
2036-2040
31, 660, 000
8,476,519
(2,797,675)
37, 338, 844
7,245,000
2041
7,245,000
259,661
(85, 701)
7,418,960
-
$ 89, 290, 000
$ 54, 643,170
$ (17, 840, 279)
$ 126, 092, 891
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Review of Annual Financial Statements
August 26, 2025
The combined outstanding principal of the obligations was $89.3 million as of June 30, 2025. Of that amount, $84.3 million was related to the 2010 COPs which are payable through 2041, and $5.0 million was related to the 2020 COPs which are payable through 2031. The remaining interest of $54.6 million does not yet reflect the remaining expected BAB subsidy of $17.8 million, so the remaining interest net of the BAB subsidy totals $36.8 million.
FISCAL IMPACT:
There is no fiscal impact related to this item.
ENVIRONMENTAL REVIEW:
Staff recommends the Board of Directors of the Public Facilities Corporation find this action is not subject to the California Environmental Quality Act (CEQA) pursuant to Sections 15060(c)(2) (the activity will not result in a direct or reasonably foreseeable indirect physical change in the environment) and 15060(c)(3) (the activity is not a project as defined in Section 15378) of the CEQA Guidelines, California Code of Regulations, Title 14, Chapter 3, because it has no potential for resulting in physical change to the environment, directly or indirectly.
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The agenda item has been noticed according to the Brown Act (72 hours in advance of the meeting at which the City Council considers the item).
ATTACHMENT:
Attachment A — Financial Statements
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Attachment A
Financial Statements
M
NEWPORT BEACH PUBLIC FACILITIES CORPORATION
Comparative Balance Sheet
June 30, 2025 and 2024
Assets
Cash with fiscal agent
Intergovernmental receivable
Total Assets
Liabilities and Fund Balances
Liabilities:
Accounts payable
Total Liabilities
Fund balances:
Nonspendable
Restricted for:
Debt Service
Committed
Assigned
Unassigned
Total fund balance
Total liabilities and fund balance
2025
2024
$ 7,542,238
1,004,032
$ 7,505,205
1,039,804
$ 8,546,270
$ 8,545,009
8,546,270
8,545,009
8,546,270
8,545,009
$ 8,546,270 $ 8,545,009
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NEWPORT BEACH PUBLIC FACILITIES CORPORATION
Comparative Statement of Revenues,
Expenditures and Changes in Fund Balances
For the Fiscal Years Ending June 30, 2025 and June 30, 2024 2025
2024
Revenues:
Lease revenues
$ 8,550,719
$ 8,550,011
Investment income
45,429
87,785
Federal interest subsidy
2,006,281
2,073,983
Total revenues
10,602,429
10,711,779
Expenditures:
Debt service:
Principal
4,235,000
4,085,000
Interest and fiscal charges
6,366,168
6,615,252
Total expenditures
10,601,168
10,700,252
Excess (deficiency) of revenues
over expenditures
1,261
11,527
Fund balance, beginning
8,545,009
8,533,482
Fund balance, ending
$ 8,546,270
$ 8,545,009
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