Attachment A - Annual Comprehensive Financial Report for the Fiscal Year Ended June 30, 2025 — Newport Beach City Council, March 10, 2026 (part 1 of 2)

Attachment A
Annual Comprehensive Financial Report for the Fiscal Year Ended June 30,2025

ANNUAL

COMPREHENSIVE

FINANCIAL REPORT
FISCAL YEARENDED
JUNE 30, 2025
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Annual Comprehensive Financial Report
For the Fiscal Year Ended June 30, 2025
Prepared by the Administrative Services Department
Jason Al-Imam,
Administrative Services and Finance Director/Treasurer

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

INTRODUCTORY SECTION

INTRODUCTORY SECTION
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CITY OF NEWPORT BEACH
Annual Comprehensive Financial Report
Fiscal Year Ended June 30, 2025

TABLE OF CONTENTS

INTRODUCTORY SECTION
(Unaudited)

Table of Contents ....................................................................................................................... 1 Letter 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 ............................................................................................... 51 Statement of Activities ..................................................................................................... 52 Fund Financial Statements:

Governmental Funds:

Balance Sheet .............................................................................................................. 58 Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Position....................................................................................... 61 Statement of Revenues, Expenditures and Changes in Fund Balances ...................... 62 Reconciliation of Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Activities .............. 64 Proprietary Funds:

Statement of Net Position............................................................................................. 68 Statement of Revenues, Expenses and Changes in Net Position ............................... 69 Statement of Cash Flows ............................................................................................. 70 Fiduciary Funds:

Statement of Fiduciary Net Position ............................................................................. 74 Statement of Changes in Fiduciary Net Position .......................................................... 75 Notes to the Financial Statements ..................................................................................... 79

Required Supplementary Information
Defined Benefit Plan For Miscellaneous Employees:

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

Schedule of Changes in the Net Pension Liability and Related Ratios ......................... 146 1 Schedule of Contributions ............................................................................................. 148 Post-Employment Health Care Benefits (OPEB):

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

General Fund ............................................................................................................... 154 Tide and Submerged Land – Operating Fund ............................................................... 156 Tide and Submerged Land – Harbor Capital Fund ....................................................... 157 Notes to Required Supplementary Information ................................................................ 158

Supplementary Schedules
Other Governmental Funds:

Combining Balance Sheet ............................................................................................. 166 Combining Statement of Revenues, Expenditures and Changes in Fund Balances .............................................................................................................. 173 Budgetary Comparison Schedules:

State Gas Tax Fund ...................................................................................................... 180 SB1 Gas Tax RMRA Fund ............................................................................................ 181 Asset Forfeiture Fund ................................................................................................... 182 OTS DUI Grant Fund .................................................................................................... 183 Circulation and Transportation Fund ............................................................................. 184 Building Excise Tax Fund .............................................................................................. 185 Community Development Block Grant Fund ................................................................. 186 Air Quality Management District Fund .......................................................................... 187 Environmental Liability Fund ......................................................................................... 188 Supplemental Law Enforcement Services Fund ........................................................... 189 Opioid Remediation Fund ............................................................................................. 190 Contributions Fund ........................................................................................................ 191 FIIN Fund ...................................................................................................................... 192 Restricted Programs Fund ............................................................................................ 193 Measure M Fund ........................................................................................................... 194 Oceanfront Encroachment Fund ................................................................................... 195 PEG Fees Fund ............................................................................................................ 196 Park Fees Fund ............................................................................................................. 197 Internal Service Funds:

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

Combining Statement of Fiduciary Net Position ............................................................ 208 Combining Statement of Changes in Fiduciary Net Position......................................... 209

STATISTICAL SECTION
(Unaudited)

Financial Trends:

Net Position by Component ................................................................................................ 21 4 Changes in Net Position ...................................................................................................... 216 2 Fund Balances of Governmental Funds .............................................................................. 218 Changes in Fund Balance of Governmental Funds ............................................................ 220 Revenue
Capacity:

Assessed Value and Estimated Actual Value of Taxable Property ..................................... 224 Property Tax Rates, Direct and Overlapping Governments ................................................ 225 Principal Property Taxpayers .............................................................................................. 2 26 Property Tax Levies & Collections ...................................................................................... 227 Debt Capacity:

Ratios of Outstanding Debt by Type ................................................................................... 230 Ratios of General Bonded Debt .......................................................................................... 232 Schedule of Direct and Overlapping Debt ........................................................................... 233 Computation of Legal Debt Margin ..................................................................................... 234 Demographic and Economic Information:

Demographic and Economic Statistics ................................................................................ 238 Principal Employers ......................................................................................................... ... 239 Operating Information:

Full-Time City Employees by Function ................................................................................ 243 Operating Indicators by Function ........................................................................................ 244 Capital Asset Statistics by Function .................................................................................... 246 Water Sold by Customer Type ............................................................................................ 248 Utility Rates ............................................................................................................... .......... 250 Major Water Customers ...................................................................................................... 251 3 This page left blank intentionally.
4 Administrative Services Department

CITY OF NEWPORT BEACH
100 Civic Center Drive
Newport Beach, California 92660
949 644-3127 | 949 644-3339 FAX
newportbeachca.gov/finance
January 28, 2026
Honorable Mayor, Members of the City Council,
and Residents of the City of Newport Beach, California
The City Charter and California state law requi re that the City of Newport Beach (City) issue a complete set of financial statement s 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, 2025 is hereby submitted.

The ACFR was prepared in conformance with generally accepted accounting principles (GAAP) as promulgated by the Governmental Accounting Standards Board (GASB). This report consists of City management’s representations concerning the finances of the City of Newport Beach. Responsibility for the accuracy and completeness of the data presented rests with the City. Management of the City is also responsible for establishing and maintaining an internal control structure designed to ensure that the assets of the government are protec ted from loss, thef t, or misuse, and to ensure that adequate accounting data is compiled to allow for the preparation of financ ial statements in conformity with generally accepted accounting principles. The internal control structure is designed to provide reasonable, but not abso lute, assurance that these objectives are met. The concept of reasonable assurance re cognizes that: (1) the cost of a control should not exceed the benefits likely to be der ived; and (2) the valuation of costs and benefits requires estimates and judgments by management. We believe the information presented in this report is complete and accurate in all material respects, and that it is reported in a manner designed to fairly present the financia l 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 accountant s. 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, 2025 are free of material misstatement. The independent audit involved examining, on a test bas is, 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 presentatio n. The independent auditor concl uded, 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, 2025 are fairly presented in 5 conformity with GAAP. The independent audito r’s report is presented as the first component of the financial section of this report.

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

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

The general vicinity of Newport Beach and Orange County relative to the counties of Los Angeles, San Bernardino, Riverside, and San Diego is illustrated on the map below:
6 Newport Beach surrounds Newport Bay, well known for its picturesque islands and one of the greatest recreational harbors in the world, accommodating about 4,300 recreational and sports charter boats docked within its 21-square-mile harbor area. The bay area and the ten miles of ocean beach offer outstanding fishing, swimming, surfing, and aquatic sports activities. The City has a permanent population of 82,654, 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 area s, modern shopping facili ties, and a quality school system. The University of California, Irvine, is located immediately adjacent to the city, and several other colleges are within a 30-mile radius.

The following map illustrates the communities within Newport Beach; the upper bay, the recreational harbor, and beachfr ont 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 th e population as a whole, and serve four-year staggered terms. The Mayor is selected by the City Council from among its membership and serves a one-year term. The City Council is responsible for, among 7 other things, policy-making, passing local ordinances, adopting the budget, appointing committees, and hiring the City Manager, City Attorney, and City Clerk. The City Manager is responsible for carrying out the policie s
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 gover nance, legal, financial, information technology, and admin
istrative management; po lice, fire, paramedi c, lifeguard, and emergency medical transport services; engineering, construction, and maintenance of public facilities, public streets, beac hes, and parks; planning, zoning, and economic development services; building inspection, pl an 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 t he city limits, but it does not provide gas, cable television, electricity, or other utility services. Public elementary and secondary education is provided by the Newport-Mesa Unif ied School District and the Laguna Beach Unified School District.

Component Unit: The City’s financial statements present the financial activity of the City of Newport Beach (the primar y government) and the Newpor t 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 re lationship with the City.

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

DEMOGRAPHICS
Reflective of a mature community, vacant land has become increasingly scarce and the city is relatively built-out. Currently at 82,654, 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
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Fiscal Year
Population
8 The effective buying income and median hous ehold income are generally higher in Newport Beach than in other areas of the State and the U.S. overall. As illustrated by the table below, Newport Beach’s median hous ehold 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 trav el and tourism. Unempl oyment in the City increased to 4.1% as of August 2025 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 5.8%, and the county’s 4.6%, as illustrated in the following chart.

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

LOCAL ECONOMY

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 over $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 $132,670
Orange County 115,229
California 100,149
USA 81,604
Source: U.S. Census Bureau, 2024
2024 Median Household Income

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025*
Calendar Year
Historical Unemployment Rates
(Rates are not seasonally adjusted)
Newport Beach
Orange County
California
* through August 31, 2025
9 Sales tax and transient occupancy tax (TOT) revenue, the City’s se cond 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 SOURCES
Most General Fund revenue categories performed at or higher than their budgeted levels for the fiscal year due to more favorable economic conditions than anticipated when the budget was developed in April 2024. Actual re venues were $10.4 million or 3.4% higher than final anticipated estimate s, and $17.1 million or 5.8% 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 revenue sources, Property Taxes, Sale s Taxes and Transient Occupancy Taxes, represent 74.5% of all General Fund revenues. Tax revenues in total, including business licenses, franchise fees, and other taxes represent 77.8% of all General Fund revenues, while only 22.2% 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 (49.2%) 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 comme rcial districts. Consistent and vigorous demand for coastal property has allowed the City to enj oy long-term growth trends with its number one revenue source. Property tax revenues for Fiscal Year 2024-25 came in $8.1 million 10 or 5.5% higher than the prior year due to an increase in assessed property values related to the annual inflation adjustment that is allowed under Proposition 13 and due to changes

in ownership and price appreciation.

Detached single-family residential property values increased 2.4% in 2025, 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 $4.3 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.

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). While property tax growth rates

fell sharply during the Great Recession and m any other cities experienced decreases in their AV during 2008 through 2011, the asse ssed value never declined and has risen steadily since.

Calendar Median Median %
Year Sales Price Change
2016 1,064 2,150,000$ 8.86%
2017 1,113 2,400,000$ 11.63%
2018 952 2,517,000$ 4.88%
2019 949 2,435,000$ -3.26%
2020 1,135 2,595,000$ 6.57%
2021 1,406 3,200,000$ 23.31%
2022 830 3,750,000$ 17.19%
2023 687 3,845,000$ 2.53%
2024 707 4,200,000$ 9.23%
2025* 538 4,300,000$ 2.38%
Source: HdL Coren & Cone
*Data through September 2025

CITY OF NEWPORT BEACH
Detached Single Family Residential Full Value Sales
Median Price
11 Value changes in Newport Beach show cont inued appreciation in property values in Fiscal Year 2024-25. Over the past 10 years, assessed valuation increased an average of 6.0% per year and 5.3% over a twent y-year period. Newport Beach’s assessed property values increased 5.3%, with a local assessed value of $80.0 billion for Fiscal Year 2024-25.

Sales Tax

The second largest funding source for the General Fund is sales tax revenue, making up about 14.7% 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.

Sales tax revenue was up 5.7% during the curr ent fiscal year, diverging from broader regional and statewide patterns in which overall sales tax revenue growth declined across much of the State of California. Consist ent with state results, sales from autos and transportation (the city’s largest source of sales tax revenue) were down in the current year as higher interest rates continued to limit the demand for new vehicles. Additionally, the continued temporary closure of a luxury automobile dealer ship for most of the year while undergoing a construction renovation project had a negative impact on local auto sales. However, a 9.1% increase in sa les from general consumer goods and a 9.4% increase in sales from restaurant/hotels, along with solid contributions from Business & industry, more than made up for the decline in autos and transportation. The positive result despite a downturn in the City’s largest source of sales tax revenue underscores the City’s resilient local economy and strong visitor based spending, distinguishing its performance from the wider regional and statewide downturn

Sales tax revenue is projected to increase by 3.0% next fiscal year, largely due to the expected rebound of automobiles and transportation sector as the aforementioned luxury automobile dealership will be open for the entire fiscal year. In addition, sales from restaurants and hotels are projected to rise by 2.1% next year as restaurants are working

5.3%

7.1%

1.0% 2.9% 5.2%

5.7% 5.9%

6.5%

6.6%

7.3% 5.3%

6.4%
$-
$10
$20
$30
$40
$50
$60
$70
$80
$90
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
2025-26
Billions
Total Assessed Property Value Growth

4.5%4.8%

5.6%
12 hard to limit menu price increases while also promoting deals and value menus to retain

consumers.

Transient Occupancy Tax (TOT)
The City distinguishes its transient occupancy taxpayers in two broad property type categories, commercial (hotel) and residential (short-term lodging) property. Historically, TOT accrues to the City at a rate of 10% of room charges with 18% of the collection from both commercial and residential activity going to the local destination marketing organization (Visit Newport Beach) to prom ote Newport Beach as a tourist destination.

Beginning January 2025, as the result of a new agreement, Visit Newport Beach’s share of hotel TOT increased to 23% while its share of residential TOT was eliminated. The commercial category is composed of approxim ately 21 hotels and resorts and accounts for approximately 76% of TOT revenues. T he residential category is made up of approximately 1,550 vacation rentals represent ing 24% of TOT revenue. TOT revenue from short-term residential stays has more than doubled over the pas t five years, while hotel TOT revenue has increased by only 7% over the same five-year period.

In the current fiscal year, TOT revenue from short-term residential stays increased by 4%, while hotel TOT revenue increas ed by 5%. Growth was stronger in the first part of the fiscal year, but moderated in the final quarter, consistent with broader trends of leveling demand in California’s lodging market. Ongoing hotel renovations and new development projects indicated continued investment in the local lodging se ctor, which is expected to increase capacity and improve guest offerings.

LONG TERM FINANCIAL PLANNING

The City continues to be in excellent financial health due to its strong underlying tax base, disciplined fiscal decisions, and st
able governance. Conservative budgeting and sound
$-
$5
$10
$15
$20
$25
$30
$35
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Millions
Transient Occupancy Tax (TOT) Revenue
Residential (Short-term Rental) TOT Revenue Commercial (Hotel) TOT Revenue 13 financial policies have resulted in a trend of General Fund operating surpluses and strong reserve levels. The City annually completes a Long-Range Financ ial 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 financ ial trends of concer n. The City’s long- term financial planning has been guided by its strong financial policies, prudent budgeting decisions, and proactive planning in such crit ical areas as facilities replacement and pensions. These policies are regularly ev aluated and updated as conditions and needs change.

Financial Policies
The City Council has adopted prudent fiscal policies concerning its investments, reserves, budget administration, revenue initiatives, com petitive contracting, facility replacement planning, and more. The budget surplus utilization policy directs the use of surplus funds resulting from unrestrict ed 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 managem ent best practice elements. The City’s debt and other financial policies can be found on the City’s website in the City Council section under City Government at:
www.newportbeachca.gov/policies
Annual Budget
The annual budget serves as the foundation for the City of Newport Beach’s financial planning and control and allows
the City Council to prioritize City expenditures so that they are aligned with core community values. Per current policy, appropriations for operating expenditures are balanced in relati on to current revenue sources and do not rely on one-time revenue sources or reserv es. When significant uncertainty exists concerning revenue volatility or threatening/pending obligations, the City Council and City Manager reserve the right to impose any s pecial fiscal control measures, including personnel hiring freezes, and other spending cont rols, 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 year s following the onset of the Great Recession, the full-time work forc e was reduced by approx imately 12% between FY 2008-09 and FY 2013-14, reaching a low in FY 2016-17 as depicted in the chart below.

In the years since, thoughtful additions to the City’s workforce have been implemented with a continued focus on fiscal discipline and maintaining balanced budgets. The recent 14 increase in positions has mostly been the result of converting part time positions to full time positions to better support needs of departments.

The City has traditionally taken a conserva tive approach to forecasting revenues, often assuming only modest growth. This fiscal c onservatism has created a stable financi al
base. As a result, even in a downturn, the Ci ty 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. The City maintains an elite credit profile holding the top-tier AAA credit rating from major agencies like FitchRatings, Moody’s and S&P Global. The rating agencies regularly note key aspects such as the City’s robust economy, strong financial reserves, conservative fiscal management, and high wealth levels create a stable outlook affirming the ability to meet financial obligations. 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.

Facilities Financial Plan (FFP) Commitment & Major Construction Initiatives The City’s FFP is a comprehensive master facilities replacement schedule that projects the timing of construction of facility projec ts; projects the schedule of any planned debt 15 issuance; includes all relevant revenue sources and expenditures on a yearly, project-by- project basis; and determines the long-term “l evel funding” annual budget commitment that is required to support the program. The FFP was the winner of the prestigious “Helen Putnam Award – Internal Administration” category from the League of California Cities in 2008.

The City continued its financial commitment to the Facilities Financial Planning Reserve (FFPR) in FY 2024-25 by allocating resources to construct a new library and fire station, construct permanent supportive housing, to finalize construction of a pedestrian bridge and parking lot, and to explore construction of a new aquatic center.

Overall, the FFPR balance increased by $3.1 million from the prior fiscal year.

Pensions
As of the actuarial valuation date of June 30, 2024, the City had an Unfunded Accrued Liability (UAL) of $312.5 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 s haring, saw employees contribute 52.3% of the Normal Cost of the plan, or $11.9 million in Fiscal Year 2024-25.  Adopted a fixed and shorter amortizati on period for the unfunded liability.  Made Additional Discret ionary Payments (ADPs)
 Contributed no less than Actuarial Dete rmined Contribution (ADC) each and every year.

Beginning Balance 7/1/24 20,435,754$
Sources
Donations 1,068,190
Transfer In from General Fund 12,104,412
Investment Income 857,449
Net increase in fair value of investments 186,073
Total Sources 14,216,124
Uses
Fire Station/Library Replacement (6,800,000)
Permanent Supportive Housing (3,000,000)
Jr. Guard Capital Project (5,295)
Aquatic Center Project (500,000)
Superior Ave. Bridge and Parking Lot Project (805,874)
Total Uses (11,111,169)
Ending Balance 6/30/25 23,540,709$
Facilities Financial Plannin g Reserve Fund
16 
Analyzed the schedule of amortization bases annually in an effort to avoid negative amortization.
 Amortized all gains/losses no longer than a 20-year closed period.  Avoided asset smoothing or “rate phase-in” schedules if possible. Otherwise, the City’s goal is to not exceed 5 years for any one smoothing cycle.  Established a General Fund Surplus Utilization Policy F-5 to set aside one-half of any annual budget surplus to fund debts such as the pension liability.  Maintained a contingency reserve to protect against economic recessions and to avoid negative impacts of asset smoothing and rate phased-in schedules.

Local governments with pensions have a total pension liability, which is the obligation to pay deferred pension benefits in the future. When the total pension liability is greater than the pension plan’s assets there is a net pension liability, also known as unfunded pension liability. As required by GASB 68, the City reports the net pension liability in the government-wide financial statement s, as well as in the propr ietary fund statements, in the ACFR – see Note (11) of Notes to the Financial Statements.

The City implemented GASB 75 in fiscal year 2017-18, which requires local governments offering other post-employment health care benefits (“OPEB”) to report net OPEB liability in the government-wide financial statements, as well as in the proprietary fund statements, in the ACFR – see Note (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.

As with past practice, the City will continue to fund its pension and OPEB obligations at an amount equal to or greater than the minimum employer contribution rate. The City has not and will never intentionally short-fund its pension and OPEB obligations. Annually the City evaluates the cost and benefits of paying down the unfunded pension and OPEB liabilities on a faster schedule. Currently, the City Council has co mmitted 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 2024-25 represented six 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. Beginning in fiscal year 2024-25, the OPEB liability is fully funded.

AWARDS AND ACKNOWLEDGMENTS
The City has prepared an Annual Comprehensive Financial Report for the past 32 years.

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

The Government Finance Officers Association of the United States and Canada (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the City of Newport Beach for its Annual Comprehensive Financial Report for the fiscal year ended June 30, 2024. In order to be awarded a Certif icate of Achievement, a government unit must publish an easily readable and effici ently organized Annual Comprehensive 17 Financial Report. This report must satisfy both generally accepted accounting principles and applicable legal requirements.

A Certificate of Achievement is valid for a period of one year only. We believ e our current Annual Comprehensive Financial Report conti nues to conform to the Certificate of Achievement program requirem ents 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 Administrative Services 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.

Seimone Jurjis
City Manager
Jason Al-Imam
Administrative Services and
Finance Director/Treasurer
18 Government Finance Officers Association
Certificate of
Achievement
for Excellence
in Financial
Reporting
Presented to
City of Newport Beach
California
For its Annual Comprehensive
Financial Report
For the Fiscal Year Ended
June 30, 2024
Executive Director/CEO
19 Newport Beach City Officials
Sara J. Weber
Councilmember
District 7
Lauren Kleiman
Mayor
District 6
Michelle Barto
Councilmember
District 2
Erik Weigand
Councilmember
District 3
Noah Blom
Mayor Pro Tem
District 5
Robyn Grant
Councilmember
District 4
City Councilmembers
City Executive Staff
Seimone Jurjis
City Manager
Aaron Harp
City Attorney
Lena Shumway
City Clerk
Tara Finnigan .......................................................................................................................... Assistant City Manager Jason Al-Imam.....................................................................Administrative Services and Finance Director/Treasurer Jeff Boyles .................................................................................................................................................... Fire Chief Paul Blank ............................................................................................................................................. Harbormaster Melissa Hartson.................................................................................................................... Library Services Director Dave Miner ............................................................................................................................................... Police Chief Dave Webb ............................................................................................................................... Public Works Director Sean Levin ....................................................................................................... Recreation & Senior Services Director Mark Vukojevic ................................................................................................................................ . Utilities Director Joe Stapleton
Councilmember
District 1
Vacant.........................................................................................................................Municipal Operations Director 20 Board of Library
Trustees
Building & Fire
Board 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
Administrative
Services
Fire
Municipal
Operations
Harbor
Library
Services
Public
Works
Utilities
Police
Recreation &
Senior Services
City
Committees
21 This page left blank intentionally.
22 23

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24 INDEPENDENT AUDIT
OR’S REPORT

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

Report on the Audit of the Financial Statements

Opinions

We have audited the financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Newport Beach (the “City”), as of and for the year June 30, 2025, 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, 2025, 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.

Emphasis of Matter

As described further in
Notes 1 and 7 to the financial statements, during the year ended June 30, 2025, the City implemented Governmental Accounting Standards Board (GASB) Statement No. 101, Compensated Absences. Our opinions are not modified with respect to this matter.

25 The Honorable Mayor a
nd
Members of the City Council
City of Newport Beach
Newport Beach, California

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 ability to continue as a going concern for twelve months beyond the financial statement date, including any currently known information that may raise substantial doubt shortly thereafter.

Auditor’s Responsibilities for the Audit of the Financial Statements

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

In performing an audit in accordance with GAAS and Government Auditing Standards, we:

 Exercise professional judgment and maintain professional skepticism throughout the audit.

 Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

 Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the City’s internal control. Accordingly, no such opinion is expressed.

 Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements.

 Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the City’s ability to continue as a going concern for a reasonable period of time.

26 The Honorable Mayor a
nd
Members of the City Council
City of Newport Beach
Newport Beach, California

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

Required Supplementary Information

Accounting principles generally accepted in the United States of America require that the Management’s Discussion and Analysis, Budgetary Comparison Schedules for the General Fund and each major special revenue fund, Schedules of Changes in the Net Pension Liability and Related Ratios, Schedules of Contributions, Schedule of Changes in the Net OPEB Liability and Related Ratios and Schedule of OPEB Contributions be presented to supplement the basic financial statements. Such information is the responsibility of management and, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with GAAS, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.

Supplementary Information

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

Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements.

The 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 27 The Honorable Mayor a
nd
Members of the City Council
City of Newport Beach
Newport Beach, California

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 Go
vernment Auditing Standards , we have also issued our report dated January 28, 2026, on our consideration of the City’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is solely to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the effectiveness of internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City’s internal control over financial reporting and compliance.

Irvine, California
January 28, 2026

28 MANAGEMENT’S DISCUSSION AND ANALYSIS
29 This page left blank intentionally.
30 MANAGEMENT’S DISCUSSION AND ANALYSIS

This section of the City of Newport Beach’s Annual Comprehensive Financial Report (ACFR) presents management’s discussion and analysis of the City’s financial performance during the fiscal year that ended on June 30, 2025. This analysis should be read in conjunction with the Transmittal Letter at the front of this report and the accompanying Basic Financial Statements.

OVERVIEW OF THE FINANCIAL STATEMENTS

The financial section of the Annual Comprehensive Financial Report contains the following information: 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 the Financial Statements. Management’s Discussion and Analysis is intended to be an introduction to the Basic Financial Statements.

BASIC FINANCIAL STATEMENTS

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

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

The Government-wide Financial Statements report the City’s net position and how net position has changed. Net position – the difference between the City’s assets, deferred outflows of resources, liabilities, and deferred inflows of resources – is one way to measure the City’s financial health. Over time, increases or decreases in th e City’s net position are an indicator of whether its financial health is improving or deteriorating, respectively. To assess the overall health of the City, one should also consider additional non-financial factors such as changes in the City’s property tax base and the condition of its facilities and other major infrastructure.

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

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

Most of the City’s basic services are included in this category such as public safety, public works, community development, community services, and general administration. Taxes and other general revenues finance most of these activities. 31 Business-type Activities – The City accounts for its Water and Wastewater 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 suc h 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 the balances of spendable resources available at the end of the fiscal year. Consequently, the Governmental Fund Financial Statements provide a detailed short-term view that helps a reader determine whether there are more or fewer financial resources that can be spent in the near future to finance City programs. Also included in the Governmental Funds are Permanent Funds. These funds are used to report resources that are legally restricted to the extent that only earnings, not principal, may be used for purposes that support City programs.

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

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

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

Required Supplementary Information – In addition to the Basic Financial Statements, we have included a Required Supplementary Information section, which includes Budgetary Comparison Schedules for the General Fund and two other major funds, t he Schedule of Changes in Net Pension Liability and Related Ratios, the Schedule of Changes in Net Post-Employment Health Care Benefits (OPEB) L iability and Related Ratios , and the related Schedules of Contributions for the Pension and OPEB plans.

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

ANALYSIS OF GOVERNMENT-WIDE FINANCIAL STATEMENTS

The Government-wide Financial Statements provide long-term and short-term information about the City’s overall financial condition. This analysis addresses the financial statements of the City as a whole.

Net Position Discussion
As shown in Figure 1, the City’s combined net position for the fiscal year ended June 30, 2025 was $2.6 billion, increasing $60.5 million or 2.3% 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 $29.7 million. This increase is primarily due to a $22.4 million increase in cash and investments primarily related to investment performance, a $8.3 million increase in lease receivables primarily related to signing new lease agreements, and a $5.1 million increase in prepaid items primarily related to the purchase of four fire engines, offset by a $7.3 million decrease in restricted cash and investments primarily related to undergrounding utilities. Capital assets increased $11.5 million, of which $ 9.8 million is related to additions to infrastructure and work in progress, and $1.6 million is due to additions to land structures, and equipment.

Current liabilities decreased $17.3 million primarily due to decreases in accounts payable and unearned revenue offset by an increase in accrued payroll.

Long-term liabilities decreased $56.1 million. The decrease is primarily due to decreases in the City’s net pension liability and net OPEB liability as investment returns in both plans finished better than expected. See Note (11 ) and Note (12) of the Notes to the Financial Statements for more information.

33 Figure 1
Net Position
June 30
(in thousands)

The largest portion of the City’s net position, at $2.4 billion of net position, reflects the net investment in capital assets (e.g., land, right of way, street trees, buildings, infrastructure, equipment, and intangibles) less accumulated depreciation, accumulated amortization, and any related outstanding debt used to acquire those assets. The City uses these capital assets to provide services to residents. Therefore, they do not represent a financial resource to the City and consequently are not readily available for funding current obligations.

Restricted net position totaled $131.0 million of net position, an increase of $7.6 million from the prior fiscal year, primarily due to an increase of restricted net position related to community services offset by a decrease of restricted net position related to public works. Community services’ increase is mainly from tidelands property related revenues not being spent during the fiscal year as resources are being accumulated for future large scale capital improvement projects related to the harbor. Public works’ decrease is mainly from the spending of limited obligation improvement bond proceeds for undergrounding utilities.

As of June 30, 2025, unrestricted net position was $80.9 million, an increase of $32.7 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 and the decline of net pension and net OPEB liabilities. As pension and OPEB obligations declined, fewer resources were needed to support long-term benefit costs, strengthening the City’s overall financial position and increasing unrestricted net position.

Gov ernmental Activ ities Business-Type Activ ities Total 2024 2025 2024 2025 2024 2025
Current and other assets 699,910$ 725,870$ 30,548$ 34,266$ 730,458$ 760,136$ Capital assets 2,391,089 2,399,825 136,639 139,424 2,527,728 2,539,249 Total assets 3,090,999 3,125,695 167,187 173,690 3,258,186 3,299,385 Deferred outflows of resources 145,027 99,604 5,341 3,197 150,368 102,801 Current liabilities 58,840 40,164 4,986 6,356 63,826 46,520 Long-term liabilities 482,299 428,268 14,928 12,822 497,227 441,090 Total liabilities 541,139 468,432 19,914 19,178 561,053 487,610 Deferred inflows of resources 268,341 274,905 79 115 268,420 275,020 Net position
Net investment in capital assets 2,275,100 2,292,550 132,332 135,138 2,407,432 2,427,688 Restricted 123,445 131,011 - - 123,445 131,011 Unrestricted 28,001 58,401 20,203 22,456 48,204 80,857 Total net position 2,426,546$ 2,481,962$ 152,535$ 157,594$ 2,579,081$ 2,639,556$ 34 GOVERNMENTAL ACTIVITIES

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

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

Revenues Associated with Governmental Activities Discussion

Figure 2 illustrates in detail how the $364.4 million in Governmental Activities revenue was derived. Figure 3 summarizes this revenue by major source. As shown on Figures 2 and 3, $80.3 million, or 22.0%, of the revenues were recovered from those who directly benefited from the programs as a charge for service. Another $28.0 million, or 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 $256.1 million, or 70.3%, represented general revenues of the City including taxes, intergovernmental revenues, and other miscellaneous revenues.

Governmental Activities Business-Type Activities
2024 2025 2024 2025 2024 2025
Revenues:

Program revenues:

Charges for services 81,473 $ 80,249 $ 39,117 $ 46,445 $ 120,590 $ 126,694 $ Operating grants and contributions 34,498 22,766 115 26 34,613 22,792 Capital grants and contributions 35,647 5,260 - - 35,647 5,260 Total program revenues 151,618 108,275 39,232 46,471 190,850 154,746 General revenues:

Taxes:

Property taxes 146,137 154,183 - - 146,137 154,183 Sales tax 43,445 45,934 - - 43,445 45,934 Transient occupancy taxes 31,737 33,174 - - 31,737 33,174 Other taxes 10,252 10,386 - - 10,252 10,386 Investment related income 9,368 9,093 1,462 1,432 10,830 10,525 Other 2,855 3,333 - - 2,855 3,333 Total general revenues 243,794 256,103 1,462 1,432 245,256 257,535 Total revenues 395,412 364,378 40,694 47,903 436,106 412,281 Expenses:

General government 28,392 20,366 - - 28,392 20,366 Public safety 151,626 143,921 - - 151,626 143,921 Public works 88,360 87,889 - - 88,360 87,889 Community development 16,814 17,105 - - 16,814 17,105 Community services 33,034 33,510 - - 33,034 33,510 Interest 6,215 6,171 - - 6,215 6,171 Water - - 37,322 36,562 37,322 36,562 Wastewater - - 6,959 6,282 6,959 6,282 Total expenses 324,441 308,962 44,281 42,844 368,722 351,806 Increases in net position 70,971 55,416 (3,587) 5,059 67,384 60,475 Net position at beginning of year 2,355,575 2,426,546 157,717 152,535 2,513,292 2,579,081 Restatement - - (1,595) 1 - (1,595) 1 - Net position at beginning of year, as restated 2,355,575 2,426,546 156,122 152,535 2,511,697 2,579,081 Net position at end of year 2,426,546$ 2,481,962$ 152,535$ 157,594$ 2,579,081$ 2,639,556$ 1 Prior year net position w as restated due to unbilled receivables adjustment in Fiscal Year 2022-23.

Total
35 Figure 3
Governmental Activities Revenue Sources
For the Year Ended June 30, 2025
As illustrated in Figure 2, program revenues related to Governmental Activities decreased $43.3 million from the prior fiscal year. This decrease wa s primarily attributable to the prior fiscal year containing several large one-time capital and operating grants and contributions related to the issuance of limited obligations improvement bonds for two assessment districts, and the recognition of private
contributions for
the construction of a Junior Lifeguard building and
library lecture hall.

The City’s general revenues related to Governme
ntal Activitie
s increased about $12.3 million from
the prior year primarily d
ue to increases in property taxes, sales taxes, transient occupancy taxes, other taxes, and other general revenues, offset by decreases in investment related income.

Revenue increases acr
oss various categories illustrate that Newport Beach’s underlying local economy continues to remain strong.

Property tax is the largest revenue source for the City and coll ections finished the year $8.0 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 value s higher and due
to an increase in residual tax revenue from the dissolution of a former redevelopment agency.

At $45.9 million, sales taxes represent the second largest individual rev enue source for the City.

Sales taxes increased $2.5 million from the previous fiscal year. This increase in sales tax revenue was due to strong consumer spending in key industry grou ps, including restaurants and hotels,
general consumer goods, and the sales tax pools offset a modest decline in sales fr om autos and
transportation.

Transient occupancy taxes (TOT), the City’s third largest re venue source, finished the year at
$33.2 million, which is a
n increase of $1.4 million from the previous fiscal year. Both Residential TOT and Hotel TOT revenues experienced modest in creases in the 4% to 5% range indicating robust demand for Newport Beach as a premier tourist destination, which is why hoteliers continue to invest in upgrades and renovations
.
22%
8%
67%
3%
Charges for Services
Contributions and Grants
Taxes
Other
36 Investment income, comprised of both interest income and unrealized gains/losses, decreased about $305,000 from the prior fiscal year. Between the two fiscal years there were less unrealized gains for the current fiscal year. Over time the portfolio’s percentage of bonds with maturities of six months or less increased, which decreased the portfolio’s potential for unrealized gains.

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

General G
overnment 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 S
afety 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 Wor
ks is comprised of one department (Public Works) providing engineering, construction and maintenance of public streets, highways, buildings, beaches, parks, facilities and related infrastructure; as well as traffic engineering and street lighting.

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

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

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

Figure 2 i
llustrates in detail how the $309.0 million of Governmental Activities expense was derived. The decrease of $15.5 million from the prior year is mostly due to a decrease in the government-wide adjustment for internal service fund activity as there was a net gain in total in the internal service funds mostly due to a decrease in workers’ compensation and general liability expenses. A decrease in the government-wide adjustment related to pension expense also contributed to the decrease in Governmental Activities expenses. 37 Figure 4 below summarizes the Governmental Activities expenses shared across functions.

Figure 4
Governmental Activities Functional Expenses
For the Year Ended June 30, 2025

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%
28%
11%
7%
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 28,392$ (10,212)$ 20,366$ (10,522)$ Public safety 151,626 (115,049) 143,921 (108,994) Public works 88,360 (22,387) 87,889 (58,605) Community development 16,814 (5,338) 17,105 (3,717) Community services 33,034 (13,622) 33,510 (12,677) Interest 6,215 (6,215) 6,171 (6,171) 324,441$ (172,823)$ 308,962$ (200,686)$
2024 2025
38 Figure 6
Program Expenses and Revenues – Governmental Activities For the Year Ended June 30, 2025
(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 chargi ng 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 $47.9 million.

Program revenues totaled $46.5 million and were supplemented by about $1.4 million of general revenues related to investment income. As shown in Figure 7 on the following page, Water activities represent about $40.5 million (87.1%) of program revenues, while Wastewater activities represent about $6.0 million (12.9%) 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 Figure 7
Program Expenses and Revenue – Business-type Activities For the Year Ended June 30, 2025
(in millions)

Expenses Associated with Business-Type Activities Discussion

Current-year expenses for Business-type Activities totaled $42.8 million, a decrease of about $1.5 million over prior year as shown in Figure 2. This is attributable to decreases in maintenance.

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

Water
Of the $36.5 million in water related expenses, $14.2 million (39.0%) is for the purchase of water, $6.1 million (16.6%) covers employee related costs, $8.2 million (22.6%) is for maintenance, supplies, and depreciation of the water system, $3.3 million (8.9%) is for professional services, $2.3 million (6.3%) is for utility payments, and the remaining $2.4 million (6.6%) is collectively attributable to other miscellaneous expenses.

Wastewater
Of the $6.3 million in wastewater related expenses, $3.0 million (46.8%) is for maintenance, supplies, and depreciation of the wastewater system, $1.9 million (30.6%) is for employee related costs, and the remaining approximately $1.4 million (22.6%) 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
$45.0
Water Wastewater
Total Expenses Program Revenues
40 FINANCIAL ANALYSIS OF THE CITY’S FUNDS

As noted earlier, the City uses fund accounting to highlight available financial resources and to ensure and demonstrate compliance with finance-related legal requirements.

Governmental Funds

Utilizing the 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 $322.1 million, an increase of $27.0 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, the Facilities Financial Planning Reserve Fund, and other permanent funds in the aggregate, offset by decreases in the Debt Service Fund, other special revenue funds, and other capital projects funds in the aggregate. The General Fund represented about $108.1 million or

33.6% 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, 2025. 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 $10.7 million in fund balance classified as nonspendable to indicate that it cannot be readily converted to cash. Of the $10.7 million nonspendable fund balance, $1.5 million is for prepaid items, $183,978 is for inventories, $4.4 million is for long-term loan receivables, and $4.6 million is for permanent endowments.

Restricted Fund Balance – The City has $120.7 million in fund balance classified as restricted to indicate that it has externally imposed rest rictions on how the money may be spent. Of the $120.7 million restricted fund balance, $10.5 million is restricted in the Tide and Submerged Land – Operating Fund, of which $8.6 million is restricted for capital projects and maintenance and repairs, and $1.9 million is restricted for the Upper Newport Bay restoration; $57.5 million is 2024 2025 Change
General Fund 96,441$ 108,148$ 11,707$
Tide and Submerged Land - Operating 8,548 11,809 3,261 Tide and Submerged Land - Harbor Capital 43,107 57,503 14,396 Facilities Financial Planning Reserve 20,436 23,541 3,105 Debt Service Fund 2,323 2,024 (299) Non-major special revenue 32,274 31,996 (278) Non-major capital projects 85,087 79,891 (5,196) Non-major permanent 6,846 7,185 339 295,062$ 322,097$ 27,035$
41 restricted in the Tide and Submerged Land – Harbor Capital Fund for capital projects related to the harbor ; and $2.0 million is restricted for debt service. Of the remaining $50.7 million in restricted fund balance, $32.0 million is restricted for various special revenue funds, $15.9 million is restricted for the Assessment District Fund , $306,531 is restricted for the Fire Station Fund, and $2.6 million of fund balance is restricted for permanent funds.

Comm
itted Fund Balance – The City has $92.3 million in fund balance classified as committed to indicate that the City Council has committed how the money will be spent. Of the $92.3 million committed fund balance; $3.8 million is committed in the General Fund mostly for drones, contract services, and maintenance and repairs ; $1.3 million is committed in the Tide and Submerged Land – Operating Fund for oil and gas related uses ; $23.5 million is committed in the Facilities Financial Planning Reserve Fund; $9.6 million is committed in the Fire Station Fund; $526,902 is committed in the Civic Center and Park Fund; $13.4 million is committed in the Parks and Community Center Fund; $170,642 is committed in Balboa Village Parking Management District Fund; $3.0 million is committed to the Facilities Maintenance Fund; $8.8 million is committed in the Neighborhood Enhancement Fund; $56,438 is committed in the Junior Lifeguards Fund; $18.5 million is committed in the Unrestricted Capital Improvements Fund; $7.2 million is committed to the Miscellaneous FFP Projects Fund; and $723,235 is committed to the Police Facility Fund; and $1.7 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 B
alance – The remaining $98.4 million in fund balance is classified as unassigned to indicate that it is the residual balance not otherwise restricted, committed , or assigned.

Majo
r Governmental Funds results for the year included the following:
• General
Fund revenues finished $17.1 million or 5.8% higher than the prior year mostly due to a combined $12.0 million net increase in the City’s top three revenue sources – property taxes, sales taxes and transient occupancy taxes – with a $8.0 million increase in property taxes as the City’s assessed valuation continued to increase due primarily to the appreciation of property values and due to an increase in residual tax revenue from the dissolution of a former redevelopment agency ; supplemented with a $2.5 million increase in sales taxes due to strong consumer spending in key industry groups, including restaurants and hotels, general consumer goods, and the sales tax pools ; and a $1. 5 million increase in transient occupancy taxes due to continued strong hotel occupancy rates. Additionally, charges for services increased $1.8 million compared to the previous year mostly due to an increase in building related plan checking fees as there were more projects; an increase in recreation fees as there was more participation in recreation classes; and, an increase in paramedic services fees, which tend to fluctuate from year to year. General Fund expenditures finished $6.6 million or 2.5% 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, and increased pension costs. Though revenues exceeded expenditures by about $44.4 million, there were substantial transfer activity in the General Fund with transfers in totaling $20.3 million and transfers out totaling $53.0 million, mostly for funding capital improvement projects. In total, fund balance in the General Fund increased $11.7 million and ended the year at $108.1 million. 42  Fund balance for the Tide and Submerged Land – Operating Fund increased $3.3 million and ended the current year with $11.8 million in fund balance. The increase was mostly due to an increase in property income related to lease interest income and parking revenues.
 Fund balance for the Tide and Submerged Land – Harbor Capital Fund increased $14.4 million ending at $57.5 million. This increase was similar to the previous year’s increase and was largely due to additional investment earnings and capital improvement projects not commencing in the current year. This fund is accumulating resources to be used for major capital expenditures in the future.
 Fund balance for the Facilities Financial Planning Reserve Fund increased $3.1 million to end the current year at $23.5 million in fund balance. This was mainly due to a transfer in of the Fiscal Year 2023-24 General Fund year-end unrestricted surplus to be used to cash fund future construction projects and the receipt of a contribution related to a development agreement.
 Fund balance for the Debt Service Fund decreased $298,722 ending at $2.0 million. The decrease was due to administrative charges and debt service related to servicing certificates of participation.

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

Enterprise Fund results for the year included the following:

 Net position in the Water Fund increased $2.9 million, mostly due to increases in water sales revenue related to a water rate increase. During November 2023 the City Council adopted a resolution to increase water rates each January 1 st during calendar years 2024
through 2028.

 Net position in the Wastewater Fund decreased $401,834. The decrease in net position was mainly due to increases in expenses for system maintenance and professional services. During November 2023 the City Council adopted a resolution to increase sewer rates each January 1
st during calendar years 2024 through 2028. Increasing sewer rates should improve the Wastewater Fund’s net position in future years.

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

 Total net position in the Internal Service Funds increased $11.2 million in the current fiscal year. This was mostly due to a decrease in expenses related to the City’s self-insured general liability and workers’ compensation programs.

43 GENERAL FUND BUDGETARY HIGHLIGHTS
Changes to Original Budget
Final budgeted revenues for the General Fund increased $7.8 million from the original budget during the
year ended June 30, 2025. Factors contributing to this fluctuation are highlighted as follows:
 Property taxes revenue increased $3.3 million due to increases in assessed values related to changes in ownership and new construction.
 Final budgeted intergovernmental revenue increased $3.1 million primarily due to the City's portion of the ½ cent sales tax revenue paid to the County for public safety, state mandate reimbursements, reimbursement for stri ke teams sent to assist with fires, and revenue sharing with the County of Orange under the Waste Disposal Agreement (WDA).  Miscellaneous revenues increased from the adopted budget by $766,040.  Charges for services increased from the adopted budget by $512,700. This adjustment is related to increased revenue received for recreation classes and special events.  Donations were adjusted upward by $185,780 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 $12.7 million from the original budget during the year ended June 30, 2025. The significant factors contributing to the increase are as follows:
 The addition of $5.9 million to the benefits and salary budget is associated with pre-funding the typical year-end contribution to CalPERS for paying down the unfunded pension liability from the Fiscal Year 2023-24 structural surplus and approved memorandum of understandings (MOUs) for the following bargaining units: League, Newport Beach Police Association (NBPA), Newport Beach Fire Asso ciation (NBFA), Association of Newport Beach Ocean Lifeguards (ANBOL).
 Budgeted carryovers from Fiscal Year 2023-24 totaling $6.8 million were added to the adopted budget.

Variance with Final Budget
Actual General Fund revenues came in at $10.4 million above final bu dgeted revenues for the
year ended June 30, 2025. Significant factors contributing to this favorable variance are summarized as follows:
 Property tax revenues came in $1.6 million higher than the final budget, largely due to supplemental taxes.
 Investment earning revenues were $3 million higher than final budgeted revenues due to interest income from bonds and elevated interest rates. 44 • Property income ended the year $1.9 million higher mainly due to overages in Beacon Bay, Balboa Yacht Basin, as well as parking revenue.

• Charges for services came in $1.2 million higher due primarily to receipts for paramedic service fees, plan check fees, as well as revenue received from renewals of short-term lodging permits.

• Other taxes ended the year $798,179 higher than final budgeted revenues primarily due to business license taxes, utility franchise fees, and solid waste franchise fees.

Actual General Fund expenditures of $269.3 million were less than final budgetary estimates of $284.7 million. The $15.5 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 $6.8 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 $3.7 million.

CAPITAL ASSET AND DEBT ADMINISTRATION

Capital Assets

The City’s capital assets for G overnmental and Business -type Activities as of June 30, 202 5 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, equipment and subscriptions. Total capital assets increased $11.5 million over the prior fiscal year.

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

2024 2025 2024 2025 2024 2025
Land 1,922,330$ 1,923,977$ 2,219$ 2,219$ 1,924,549$ 1,926,196$ Intangible right to use
land and rights of way - - 3,755 3,702 3,755 3,702 Structures 199,676 201,794 363 347 200,039 202,141 Intangible right to use structures 14,045 12,823 - - 14,045 12,823 Equipment 19,050 18,670 126 113 19,176 18,783 Intangible right to use equipment 162 78 - - 162 78 Intangible right to use subscriptions 2,145 1,722 - 117 2,145 1,839 Infrastructure 211,479 225,774 125,767 125,697 337,246 351,471 Work in progress 22,200 14,988 4,408 7,229 26,608 22,217 Totals 2,391,087$ 2,399,826$ 136,638$ 139,424$ 2,527,725$ 2,539,250$ Activities Activities
Governmental Business-Type
Total
45 Major capital asset events during the current fiscal year included the following:

• Capital asset additions totaled $56.5 million in both the Governmental and Business-type Activities in the current year. Of the $56.5 million, $9.1 million is related to structure additions of a trash interceptor system in Newport Bay and upgrading park playground equipment and a separate park parking lot; $ 26.8 million represents additions of infrastructure assets mostly related to the road system and water system ; $4.0 million is related to equipment and intangible right to use equipment, and intangible right to use subscriptions additions; The remaining $16.6 million is comprised of additions of n on- depreciable/non-amortizable assets such as work in progress of $14.9 million, and land and rights of way of $1.7 million.
• Of the $46.8 million of additions in governmental assets in the current year, additions in infrastructure contributed $22.8 million, which was mostly due to upgrades in the road system. The remaining $24.0 million added in the current year as governmental assets is comprised of $9.1 million of structure additions and $1.7 million of land additions, both mostly related to the addition of a trash interceptor system and associated landside improvements, upgrading a park’s playground equipment, and upgrading a parking lot; $9.4 million of work in progress, mostly related to construction of a new lecture hall at the central library, upgrades to the road system, and construction of a new fire station/library; $3.8 million of equipment additions, mostly related to vehicle purchases and parking lot pay station purchases.
• The $9.7 million of business-type asset additions in the current year is comprised of $ 4.0 million in water system infrastructure additions , mostly related to updating pump stations and a water well ; $ 5.5 million of work in progress additions related to water system improvements, including replacing a major water main and updating another pump station and water well The remaining amount of additions was for intangible rights to use a subscription related to water meters.

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)

2024 2025 2024 2025 2024 2025
Certificates of participation 93,525$ 89,290$ -$ -$ 93,525$ 89,290$ Bond premium 865 723 - - 865 723 Totals 94,390$ 90,013$ -$ -$ 94,390$ 90,013$ Activities Activities
Governmental Business-Type Total
46 The City’s total debt decreased $4.4 million during the current fiscal year. The decrease is the result of expected debt service payments. Additional information on the City’s long-term debt obligation can be found in Note (7) of the Notes to the Financial Statements.

FACTORS AFFECTING NEXT YEAR’S BUDGET

Economy

The City continues to benefit from a strong and stable local economy. Assessed property values are increasing and remain a significant driver of revenue growth. Property tax revenues grew 5.5 percent in Fiscal Year 2024–25 and are projected to grow an additional 5.8 percent in Fiscal Year 2025–26 due to continued strength in property sales and rising median home prices. Sales tax revenues grew 5.7 percent in Fiscal Year 2024–25 and are projected to increase by 3.0 percent in Fiscal Year 2025–26, signaling continued resilience in the local retail and tourism sectors.

Transient Occupancy Tax revenue continues to grow, although at a slower pace than the post- pandemic recovery period as international travel and hotel demand moderate.

The City’s diverse revenue base, stable property values, and sound fiscal management support long-term financial sustainability. Newport Beach’s revenue structure continues to position the City to withstand broader economic fluctuations and maintain essential services and capital investments.

Local Revenue Trends

Property tax revenue remains the City’s largest General Fund revenue source and represents approximately half of total General Fund revenues. Strong assessed valuation growth is the primary driver of projected increases. Supplemental property tax revenues were also higher than originally forecasted as final assessed valuation figures exceeded expectations.

Sales tax revenue is the second largest source of General Fund revenue and represents more than 15 percent of the General Fund. Growth is driven largely by activity in autos and transportation, general consumer goods, and restaurants and hotels. Although growth is moderating from the previous year, sales tax revenues are performing above budgeted levels and reflect continued strength in consumer spending and tourism.

Transient Occupancy Tax revenue is the third largest source of General Fund revenue. Following several years of post-pandemic strength, growth has moderated due to softening hotel demand and a reduction in international visitors. Despite this moderation, TOT revenues remain a significant and stable contributor to the City’s revenue structure.

Collectively, General Fund revenues are projected to exceed the budgeted estimates for Fiscal Year 2025–26 due to stronger than anticipated economic conditions. Based on updated revenue projections and expenditure savings identified during the first quarter budget update, a $10.3 million General Fund surplus is currently projected for the year.

Discretionary Appropriations

The annual budget serves as the foundation for financial planning and fiscal control and allows the City Council to prioritize resources consistent with community values. The Fiscal Year 2025– 26 budget reflects continued financial strength supported by growing revenues, healthy reserves, and a conservative debt profile.
47 When the Fiscal Year 2025-26 budget was adopted, the City projected a structural General Fund surplus of $12.2 million. Approximately $10 million of the surplus was committed to fund the first year of three-year labor contracts with the City’s bargaining groups. This reduced the st ructural surplus to approximately $2 million at the time of adoption. Strong revenue performance and expenditure savings since adoption have increased the projected surplus to $10.3 million based on the first quarter budget update.

The City
continues to maintain a balanced approach to fiscal management by addressing long- term obligations, sustaining essential public services, and investing in infrastructure to support high service levels and quality of life. The City continues to execute an aggressive pension paydown strategy and to maintain sufficient reserves to address unforeseen economic or fiscal challenges.

Overal
l, the City’s debt burden remains low and affordable. Newport Beach benefits from a mature and diverse tax base, high residential and commercial property values, and a robust tourism and retail economy. The City’s strong financial profile is an important factor considered by credit rating agencies when evaluating the creditworthiness of municipal debt. Fitch Ratings reaffirmed the City’s AAA credit rating in 2025, and Moody’s reaffirmed its AAA rating in 2024. Standard and Poor’s continues to assign the City its highest long-term credit rating of AAA.

The City
’s financial management policies emphasize prudent budgeting practices, conservative revenue forecasting, and expenditure controls. Over the past decade, the City has employed strategies such as modifying pension cost -sharing arrangements, contracting for services when appropriate, and freezing vacant positions during periods of economic uncertainty. These practices have supported consistent operating surpluses over the past ten years. Surpluses have been used for one- time purposes, including paying down liabilities and investing in capital and neighborhood improvements.

CONTAC
TING THE CITY’S FINANCIAL MANAGEMENT
This fi
nancial 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 Adm inistrative Services 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.
48 49

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50 Governmental Business-type
Activities Activities Total
Assets:

Cash and investments (note 2) 381,192,951$
29,631,436$ 410,824,387$
Receivables:

Accounts (net of allowance) 13,473,448 6,554,867 20,028,315 Interest 1,812,524 145,252 1,957,776 Intergovernmental receivables 14,363,166 451 14,363,617 Lease receivables (note 3) 276,374,011 - 276,374,011 Public-private partnership receivable (note 17) 629,813 - 629,813 Restricted cash and investments with fiscal agent (note 2) 27,782,192 - 27,782,192 Internal balances 2,065,843 (2,065,843) - Investment in joint ventures (note 13) 339,272 - 339,272 Inventory 686,808 - 686,808 Prepaid items 7,150,342 - 7,150,342 Capital assets (note 6):

Non-depreciable/non-amortizable 1,938,964,243 9,447,970 1,948,412,213 Depreciable/amortizable 790,941,765 212,913,481 1,003,855,246 Accumulated depreciation/amortization (330,081,448)
(82,937,363) (413,018,811)
Total assets 3,125
,694,930 173,690,251 3,299,385,181
Deferred Outflows of Resources:

Deferred amount fro
m pension plans (note 11) 91,256,632 2,738,713 93,995,345 Deferred amount from OPEB (note 12) 8,347,130 458,803 8,805,933 Total deferre
d outflows of resources 99,603,762 3,197,516 102,801,278 Liabilities:

Accounts payable 19,990,178
6,006,188 25,996,366
Accrued payroll 7,752,498 320,013 8,072,511 Accrued interest payable 3,109,569 - 3,109,569 Deposits payable 3,658,843 29,784 3,688,627 Unearned revenue 5,652,744 - 5,652,744 Noncurrent liabilities:

Due within one year:

Lease liability (note 7) 1,273,326 44,608 1,317,934 Subscription liability (note 7) 243,771 36,593 280,364 Other (note 7) 20,966,944 - 20,966,944 Due in more than one year:

Net pension liability (note 11) 267,824,528 8,702,213 276,526,741 Net OPEB liability (note 12) 5,237,348 277,324 5,514,672 Lease liability (note 7) 11,793,605 3,687,682 15,481,287 Subscription liability (note 7) 1,299,952 73,790 1,373,742 Other (note 7) 119,628,344 -
119,628,344
Total liabilities 468,431,650
19,178,195 487,609,845
Deferred Inflows of Resources:

Deferred amount fro
m pension plans (note 11) 1,005,922 7,364 1,013,286 Deferred amount from OPEB (note 12) 1,964,658 108,049 2,072,707 Deferred amount from leases (note 3) 271,248,281 - 271,248,281 Deferred amount from public-private partnerships (note 17) 686,001 - 686,001
Total deferre
d inflows of resources 274,904,862 115,413 275,020,275 Net Position:

Net investment in capital assets 2,292
,549,844 135,138,380 2,427,688,224
Restricted for:

Public safety 759,073 - 759,073 Public works 44,563,786 - 44,563,786 Community services 75,003,024 - 75,003,024 Community development 1,475,624 - 1,475,624 Debt service 2,024,393 - 2,024,393 Permanent funds:

Nonexpendable 4,629,781 - 4,629,781 Expendable 2,555,481 - 2,555,481 Unrestricted 58,401,174
22,455,779 80,856,953
Total net position 2,481,962,180$ 157,594,159$ 2,639,556,339$

CITY OF NEWPORT BEACH
Statement of Net Position
June 30, 2025
See accompanying notes to basic finan
cial statements
51 CITY OF NEWPORT BEACH
Statement of Activities
For the Year Ended June 30, 2025
Operating Capital Total
Charges for Grants and Grants and Program
Expenses Services Contributions Contributions Revenues
Functions/Programs
Primary government:

Governmental activities:

General governmen
t 20,365,624$ 8,911,980$ 931,503$ -$ 9,843,483$
Public safety 143,920,632 30,839,794 4,086,656 - 34,926,450
Public works 87,889,339 8,890,609 15,990,133 4,403,307 29,284,049 Commun
ity development 17,104,756 12,723,330 616,730 48,181 13,388,241 Commun
ity services 33,510,164 18,883,733 1,140,761 808,629 20,833,123 Interest on lon
g-term debt 6,171,195 -
-
-
-

Total governm
ental activities 308,961,710 80,249,446 22,765,783 5,260,117 108,275,346 Business-type activities:

Water 36,561,497 40,463,909 15,456 - 40,479,365
Wastewater 6,282,179 5,980,769 10,728 - 5,991,497
Total business-t
ype activities 42,843,676 46,444,678 26,184 - 46,470,862
Total primary gov
ernment 351,805,386$ 126,694,124$ 22,791,967$ 5,260,117$ 154,746,208$ Taxes:

Property tax
Sales tax
Transient occupan
cy tax
Business license tax
Franchise tax
Other taxes
Investment income
Net increase in fair v
alue of investments
Other
Total general revenues
Change in net position
Net position, beginn
ing of year
Net position, end of year
Program Revenues
See accompanying notes to basic financial statem
ents
52 Governmental Business-type
Activities Activities Total
(10,522,141)$ -$
(10,522,141)$
(108,994,182) -
(108,994,182)
(58,605,290) -
(58,605,290)
(3,716,515) -
(3,716,515)
(12,677,041) -
(12,677,041)
(6,171,195) -
(6,171,195)
(200,686,364) -
(200,686,364)
-
3,917,868 3,917,868
-
(290,682) (290,682)
-
3,627,186 3,627,186
(200,686,364) 3,627,186 (197,059,178) 154,182,579 -
154,182,579
45,934,260 -
45,934,260
33,174,268 -
33,174,268
5,086,253 -
5,086,253
5,052,778 -
5,052,778
246,787
-
246,787
6,747,045 1,119,040 7,866,085
2,346,015 313,212 2,659,227 3,333,021 -
3,333,021
256,103,006 1,432,252 257,535,258
55,416,642 5,059,438 60,476,080
2,426,545,538 152,534,721 2,579,080,259 2,481,962,180$ 157,594,159$ 2,639,556,339$
Net (Expense) Revenue and
Changes in Net Position
Primary Government
See accompanying notes to basic financial statem
ents
53 This page left blank intentionally.
54 FUND FINANCIAL STATEMENTS
55 This page left blank intentionally.
56 GOVERNMENTAL FUNDS

Major Funds

The General Fund is used to account for fiscal resources that are dedicated to governmental operations of the City, and not required to be accounted for in another fund.

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

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

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

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

Other Governmental Funds
Other governmental funds are those governmental funds that do not meet the criteria of a major fund. For reporting purposes in this section, they are combined as Other Governmental Funds.

57 Tide and Tide and
Submerged Submerged
General Land - Operating Land - Harbor Capital
Assets
Cash and investments (n
ote 2) 96,363,732$ 9,167,630$ 62,161,008$ Receivables:

Accounts (net o
f allowance) 6,115,707 2,165,513 -

Interest 520,192 66,363 254,095

Intergovernmental receivab
les 11,162,624 -
-

Lease receivables (no
te 3) 79,878,799 193,226,32
8 -

Public-private p
artnership receivable (note 17) - 629,813 -

Restricted cash an
d investments with fiscal agent (note 2) - - -

Due from other fun
ds (note 4) 8,718,563 -
-

Advance to othe
r funds (note 4) 4,426,659 -
-

Prepaid items 1,371,697 63,529 -

Inventory 183,978 -
-

Total assets 208,741,95
1$ 205,319,17
6$ 62,415,103$
Liabilities, Deferred Inflows of Res
ources
and Fund Balances
Liabilities:

Accounts pay
able 9,586,771$ 1,269,942$ 485,298$

Accrued pay
roll 7,162,759 75,542 -

Deposits paya
ble 3,345,409 313,434 -

Unearned reven
ue 2,654,437 980,433 -

Due to other f
unds (note 4) - -
-

Advance from o
ther funds (note 4) - -
4,426,659
Total liabilities 22,749,376 2,639,351 4,911,957 Deferred Inflows of
Resources:

Unavailable reven
ue - -
-

Deferred amoun
t from leases (note 3) 77,845,065 190,240,71 3 -

Deferred amoun
t from public-private partnerships (note 17) - 630,001 -

Total defe
rred inflows of resources 77,845,065 190,870,71 4 -

Fund balances:

Nonspendab
le:

Prepaid items 1,371,697 63,529 -

Inventorie
s 183,978 -
-

Long-term loan
receivable 4,426,659 -
-

Permanen
t endowment - -
-

Restricted:

Upper Newport Ba
y restoration - 1,871,911 -

Other (note 15
) - 8,614,781 57,503,146 Committed:

Capital re-appropri
ations 374,822 -
-

Oil and gas - 1,258,890 -

Other (note 15
) 3,411,044 -
-

Unassigned 98,379,310 -
-

Total fun
d balances 108,147,51
0 11,809,111 57,503,146
Total liabilities
, deferred inflows of
resources an
d fund balances 208,741,95
1$ 205,319,17
6$ 62,415,103$
Special Revenue Funds

CITY OF NEWPORT BEACH
Governmental Funds
Balance Shee
t
June 30, 2025

Page 1 of 2 ends

See accompanying notes to basic financial statements
58 Capital Project Fund Debt Service Fund
Facilities Other
Financial Planning Debt Service Governmental
Reserve Fund Funds Totals
Assets
Cash and investments (n
ote 2) 23,434,039$ -$
108,499,10
5$ 299,625,51
4$
Receivables:

Accounts (net o
f allowance) 4,643,968 -
513,601 13,438,789
Interest 106,670 -
508,239 1,455,559
Intergovernmental receivab
les -
1,004,032 2,001,123 14,167,779 Lease receivables (no
te 3) -
-
3,268,884 276,374,01
1 Public-private p
artnership receivable (note 17) -
-
- 629,813
Restricted cash an
d investments with fiscal agent (note 2) -
7,542,238 20,239,954 27,782,192 Due from other fun
ds (note 4) -
-
- 8,718,563
Advance to othe
r funds (note 4) -
-
- 4,426,659
Prepaid items -
-
17,024 1,452,250
Inventory -
-
- 183,978
Total assets 28,184,677$ 8,546,270$ 135,047,93 0$ 648,255,10
7$
Liabilities, Deferred Inflows of Res
ources
and Fund Balances
Liabilities:

Accounts pay
able -$
4,099$
7,688,301$ 19,034,411$
Accrued pay
roll -
-
4,327 7,242,628
Deposits paya
ble -
-
- 3,658,843
Unearned reven
ue -
-
2,017,874 5,652,744
Due to other f
unds (note 4) -
6,517,778 1,847,784 8,365,562 Advance from o
ther funds (note 4) -
-
- 4,426,659
Total liabilities -
6,521,877 11,558,286 48,380,847 Deferred Inflows of
Resources:

Unavailable reven
ue 4,643,968 -
1,255,134 5,899,102
Deferred amoun
t from leases (note 3) -
-
3,162,503 271,248,28
1 Deferred amoun
t from public-private partnerships (note 17) -
-
- 630,001
Total defe
rred inflows of resources 4,643,968 - 4,417,637 277,777,38
4 Fund balances:

Nonspendab
le:

Prepaid items -
-
17,024 1,452,250
Inventorie
s -
-
- 183,978
Long-term loan
receivable -
-
- 4,426,659
Permanen
t endowment -
-
4,629,781 4,629,781
Restricted:

Upper Newport Ba
y restoration -
-
- 1,871,911
Other (note 15
) -
2,024,393 50,724,688 118,867,00 8 Committed:

Capital re-appropri
ations -
-
- 374,822
Oil and gas -
-
- 1,258,890
Other (note 15
) 23,540,709 -
63,700,525 90,652,278
Unassigned -
-
(11) 98,379,299
Total fun
d balances 23,540,709 2,024,393 119,072,00 7 322,096,87
6 Total liabilities
, deferred inflows of
resources an
d fund balances 28,184,677$ 8,546,270$ 135,047,93 0$ 648,255,10
7$

CITY OF NEWPORT BEACH
Governmental Funds
Balance Shee
t
June 30, 2025

Page 2 of 2 ends

See accompanying notes to basic financial statements
59 This page left blank intentionally.
60 Fund balances of
governmental funds 322,096,87
6$
Amounts reported f
or governmental activities in the statement of net position are different beca
use:

Capital assets net of
accumulated depreciation have not been included
as financial resou
rces in governmental fund activity. Amount excludes
capital assets from inte
rnal service funds which are added below. 2,381,189,9
72 All liabilities (both
current and long-term) are reported in the Statement of Net Position.

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

Certificate
s of participation payable - Series 2010B (84,290,000)
Certificate
s of participation payable - Series 2020A (5,000,000)
Bond
premium - Series 2020A (722,502)
Lease
liability (12,999,592)
Subscriptio
n liability (242,777)
Deferred inflo
ws for improvements by the operator to the underlying asset of a public-priva
te partnership are recognized only in the government-wide statements for governmental ac
tivities. (56,000)
Pension related d
ebt applicable to the governmental activities are not due and payable in the current p
eriod and accordingly are not reported as fund liabilities. Deferred outflows of resources and
deferred inflows of resources related to pension are only reported in the Statement o
f Net Position as the changes in these amounts affect only the government-wide sta
tements for governmental activities. Amounts exclude internal service fund
activity which has been added below:

Deferr
ed outflows of resources 89,455,293
Deferr
ed inflows of resources (1,001,078)
Pension
liability (262,100,803
)
OPEB related de
bt applicable to the governmental activities are not due and payable in the current p
eriod and accordingly are not reported as fund liabilities. Deferred outflows of resources and
deferred inflows of resources related to OPEB are only reported in the Statement o
f Net Position as the changes in these amounts affect only the government-wide sta
tements for governmental activities. Amounts exclude internal service fund
activity which has been added below:

Deferr
ed outflows of resources 8,045,360
Deferr
ed inflows of resources (1,893,588)
OPEB liab
ility (5,054,940)
Accrued interest pa
yable for the current portion of interest due on long-term debt has not bee
n reported in the governmental funds. (3,109,569)
Some of the reven
ue 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 reve
nue in the governmental funds. 5,899,102
Internal service f
unds are used by management to charge the costs of certain activities, such as self
-insurance, workers' compensation, compensated absences, retiree insuran
ce, fleet management and information technology, to individual funds.

The assets (including
capital assets) and liabilities of the internal service funds must be added to th
e statement of net position. 49,341,311
Investment in joint ven
tures is not a current financial resource and therefore not reported in the governmen
tal funds. 339,272
Internal balance crea
ted by the consolidation of internal service fund activities related to ente
rprise funds is not reported in the governmental funds. 2,065,843 Net position of go
vernmental activities 2,481,962,1
80$

CITY OF NEWPORT BEACH
Governmental Funds
Reconciliation of the Ba
lance Sheet of Governmental Funds
to the Statement of Net Position
June 30, 2025
See accompanying notes to basic financial statements
61 Tide and Tide and
Submerged Submerged
General Land - Operating Land - Harbor Capi
tal
Revenues:

Taxes and assessments:

Property tax 154,182,579$ -$ -$ Sales tax 45,934,260 - - Transient occupancy ta
x 33,174,268 - -
Other taxes 10,385,818 - - Intergovernmental 5,670,490 - - Licenses, permits and fee
s 6,350,277 110,943 -
Charges for services 26,966,719 65,341 - Fines and forfeitu
res 4,344,836 37,814 -
Investment income 3,771,565 332,181 2,170,732 Net increase in fair val
ue of investments 1,129,325 52,743 625,833 Property income 19,808,736 16,739,019 6,711,452 Donations 795,959 - - Other 1,202,884 78 - Total reven
ues 313,717,716 17,338,119 9,508,017 Expenditures:

Current:

General governmen
t 21,920,035 576,031 -
Public safety 145,807,405 - - Public works 55,236,683 1,546,690 - Community develo
pment 16,506,628 29,506 - Community services 28,461,405 2,709,858 - Capital outlay - 1,160,516 945,092 Debt service:

Principal 1,283,576 - - Interest and fiscal ch
arges 77,188 - - Total expe
nditures 269,292,920 6,022,601 945,092 Excess (deficien
cy) of revenues
over expen
ditures 44,424,796 11,315,518 8,562,925 Other financing so
urces (uses):

Transfers in (note 5) 20,317,944 12,263,815 5,832,875 Transfers out (no
te 5) (53,036,418) (20,317,944) -
Total oth
er financing sources (uses) (32,718,474) (8,054,129) 5,832,875 Net change in f
und balances 11,706,322 3,261,389 14,395,800 Fund balances, begin
ning 96,441,188 8,547,722 43,107,346 Fund balances, endin
g 108,147,510$ 11,809,111$ 57,503,146$ Special Revenue Funds

CITY OF NEWPORT BEACH
Governmental F
unds
Statement of Revenue
s, Expenditures and Changes in Fund Balances
For the Year Ended Ju
ne 30, 2025

Page 1 of 2 ends

See accompanying notes
to basic financial statements
62 Capital Project Fun
d Debt Service Fund
Facilities Other
Financial Planni
ng Debt Service Governmental
Reserve Fund Funds Totals
Revenues:

Taxes and assessments:

Property tax -$ -$ -$ 154,182,579$ Sales tax - - - 45,934,260 Transient occupancy ta
x - - - 33,174,268 Other taxes - - 1,021,443 11,407,261 Intergovernmental - 2,006,281 10,497,718 18,174,489 Licenses, permits and fee
s - - 851,257 7,312,477 Charges for services - - 92,129 27,124,189 Fines and forfeitu
res - - - 4,382,650 Investment income 857,449 45,430 4,508,461 11,685,818 Net increase in fair val
ue of investments 186,073 - 1,260,300 3,254,274 Property income - - 725,753 43,984,960 Donations 1,068,190 - 3,726,024 5,590,173 Other - - 120,155 1,323,117 Total reven
ues 2,111,712 2,051,711 22,803,240 367,530,515 Expenditures:

Current:

General governmen
t - - 1,610 22,497,676 Public safety - - 777,707 146,585,112 Public works - - 10,739,240 67,522,613 Community develo
pment - - 225,546 16,761,680 Community services - - 231,066 31,402,329 Capital outlay - - 41,637,631 43,743,239 Debt service:

Principal - 4,235,000 - 5,518,576 Interest and fiscal ch
arges - 6,366,168 - 6,443,356 Total expe
nditures - 10,601,168 53,612,800 340,474,581 Excess (deficien
cy) of revenues
over expen
ditures 2,111,712 (8,549,457) (30,809,560) 27,055,934 Other financing so
urces (uses):

Transfers in (note 5) 12,104,412 8,250,735 25,673,861 84,443,642 Transfers out (no
te 5) (11,111,169) - - (84,465,531) Total oth
er financing sources (uses) 993,243 8,250,735 25,673,861 (21,889) Net change in f
und balances 3,104,955 (298,722) (5,135,699) 27,034,045 Fund balances, begin
ning 20,435,754 2,323,115 124,207,706 295,062,831 Fund balances, endin
g 23,540,709$ 2,024,393$ 119,072,007$ 322,096,876$

CITY OF NEWPORT BEACH
Governmental F
unds
Statement of Revenue
s, Expenditures and Changes in Fund Balances
For the Year Ended Ju
ne 30, 2025

Page 2 of 2 ends

See accompanying notes
to basic financial statements
63 27,034,045$
Amounts reported for governm
ental 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 are 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 26,386,385
Depreciation expense (15,910,049)
Other capital related items (1,203,127)
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 4,235,000
Amortization of principal on leases 1,199,376
Amortization of principal on subscriptions 84,200
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. 138,333 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. 7,257,210
OPEB expense reported in the governmental funds includes the employer contributions made.

In the Statement of Activities, OPEB expense includes the change in the net OPEB liability and related change in OPEB amounts for deferred outflows of resources and deferred inflows of resources. (2,020,827)
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. (629,867)
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 change in net position of the internal service funds is reported in the statement of activities. 11,190,381 Investment in joint ventures creates an explicit, measurable equity interest reported only in the statement of activities. 69,145
Internal balance created by the consolidation of internal service funds activities related to enterprise funds is reflected as a reduction of
expenses in the statement of activities. (2,563,694)
Change in net position of gover
nmental activities 55,416,642$
Net change in fund balances - total governmenta
l funds

CITY OF NEWPORT BEACH
Reconciliation of the Statement of Rev
enues, Expenditures,
and Changes in Fund Balances of Governmental Funds
to the Statement of Activities
Year Ended June 30, 2025
See accompanying notes to basic fina
ncial statements
64 FUND FINANCIAL STATEMENTS
65 This page left blank intentionally.
66 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.

67 Governmental
Total Activities
Enterprise Internal Service
Water Wastewater Funds Funds
Assets and Deferred Outflow
s of Resources
Current assets:

Cash and investments
(note 2) 26,580,770$ 3,050,666$ 29,631,436$ 81,567,437$ Receivables:

Accounts (net of
allowance) 5,661,146 893,721 6,554,867 34,659 Interest 131,775 13,477 145,252 356,965 Intergovernmental receivabl
es -
451
451
195,387
Inventories -
-
-
502,830
Prepaid items -
-
-
5,698,092
Total cur
rent assets 32,373,691 3,958,315 36,332,006 88,355,370 Noncurrent assets:

Capital assets (note 6):

Land 2,219,450 -
2,219,450 -

Intangible righ
t to use land 3,883,062 -
3,883,062 -

Structures 688,396 -
688,396 39,581
Equipment 344,080 35,988 380,068 50,392,408 Intangible righ
t to use equipment -
-
-
363,725
Software -
-
-
4,360,625
Intangible righ
t to use subscriptions 146,843 -
146,843 2,099,163
Infrastructur
e 158,988,518 48,826,594 207,815,112 -

Work in progre
ss 6,379,733 848,787 7,228,520 -

Less: accumul
ated depreciation/amortization (60,383,202) (22,554,161) (82,937,363) (38,620,914) Total cap
ital assets (net of accumulated

depreciation/amortization) 112,266,880 27,157,208 139,424,088 18,634,588 Total
assets 144,640,571 31,115,523 175,756,094 106,989,958 Deferred outflows of
resources:

Deferred amount from pensi
on plans (note 11) 1,978,791 759,922 2,738,713 1,801,339 Deferred amount from OP
EB (note 12) 331,497 127,306 458,803 301,770 Total
deferred outflows of resources 2,310,288 887,228 3,197,516 2,103,109 Liabilities and Deferred Inflows of Resource
s
Current liabi
lities:

Accounts payable 5,654,480 351,708 6,006,188 955,767 Accrued payroll 244,519 75,494 320,013 509,870 Deposits payable 29,784 -
29,784 -

Due to other funds (note 4) -
-
-
353,001
Workers' compensati
on - current -
-
-
4,497,885
General liabili
ty - current -
-
-
3,941,299
Compensated absences - curre
nt -
-
-
8,097,760
Lease liability
- current 44,608 -
44,608 67,339
Subscription liabil
ity - current 36,593 -
36,593 170,375
Total cur
rent liabilities 6,009,984 427,202 6,437,186 18,593,296 Noncurrent liabi
lities:

Workers' compensati
on (note 7) -
-
-
20,992,090
General liabili
ty (note 7) -
-
-
6,658,815
Compensated absences (note 7) -
-
-
6,394,937
Lease liability
(note 7) 3,687,682 -
3,687,682 -

Subscription liabil
ity (note 7) 73,790 -
73,790 1,130,571
Net pension liabi
lity (note 11) 6,287,587 2,414,626 8,702,213 5,723,725 Net OPEB liabi
lity (note 12) 200,373 76,951 277,324 182,408 Total noncurre
nt liabilities 10,249,432 2,491,577 12,741,009 41,082,546 Total
liabilities 16,259,416 2,918,779 19,178,195 59,675,842 Deferred inflows of resources
:

Deferred amount from pensi
on plans (note 11) 5,320 2,044 7,364 4,844

Deferred amount from OP
EB (note 12) 78,070 29,979 108,049 71,070 Total
deferred inflows of resources 83,390 32,023 115,413 75,914 Net Position
Net investment i
n capital assets 108,424,207 26,714,173 135,138,380 16,984,653 Unrestricted 22,183,846 2,337,776 24,521,622 32,356,658 Total net po
sition 130,608,053$ 29,051,949$ 159,660,002$ 49,341,311$

Adjustm
ent to reflect the consolidation of internal

service fund activities related to enterprise funds (2,065,843) Net po
sition of business-type activities 157,594,159$

CITY OF NEWPORT BEACH
Proprietary Funds
Statement of
Net Position
June 30, 2025
Enterprise Funds
See accompanying notes to
basic financial statements
68 Governmental
Total Activities
Enterprise Internal Service
Water Wastewater Funds Funds
Operating revenues:

Charges for sales an
d services:

Water sale
s 40,173,666$ -$
40,173,666$ -$

Charges for
services -
-
-
39,112,990
Sewer s
ervice and connection fees -
5,929,991 5,929,991 -

Intergov
ernmental 15,456 10,728 26,184 195,387 Employ
ee contributions -
-
-
22,086
Other 290,243 50,778 341,021 6,396,146 Total
operating revenues 40,479,365 5,991,497 46,470,862 45,726,609 Operating expenses:

Purchase of water 14,258,486 -
14,258,486 -

Salaries and benefit
s 6,057,868 1,923,456 7,981,324 4,654,284 Depreciation/amortization 1,949,684 639,534 2,589,218 4,275,677 Professional servic
es 3,270,486 698,697 3,969,183 996,283 Maintenance and supplies 3,392,569 1,359,247 4,751,816 4,102,840 System maintenance 2,921,079 940,192 3,861,271 27,692 Utilities 2,293,501 102,163 2,395,664 -

Fleet parts and supp
lies -
-
-
545,348
Telecommunication -
-
-
188,617
Hardware -
-
-
534,370
Software -
-
-
369,728
Workers' compensation -
-
-
7,107,333
Claims and judgm
ents -
-
-
10,384,659
Compensated absences -
-
-
2,576,984
OPEB ARC - cash sub
sidy -
-
-
847,328
Other 4,688,299 890,710 5,579,009 2,227,349 Total ope
rating expenses 38,831,972 6,553,999 45,385,971 38,838,492 Oper
ating income (loss) 1,647,393 (562,502) 1,084,891 6,888,117 Nonoperating revenue
s (expenses):

Investment income 995,850 123,190 1,119,040 2,916,412 Net increase in fair va
lue of investments 275,733 37,479 313,212 946,672 Gain on sale of capital ass
ets -
-
-
425,594
Interest expense (21,399) -
(21,399) (8,303)
Total
nonoperating revenues 1,250,184 160,669 1,410,853 4,280,375 I
ncome (loss) before transfers 2,897,577 (401,833) 2,495,744 11,168,492 Transfers in (note 5) -
-
-
21,889
Cha
nge in net position 2,897,577 (401,833) 2,495,744 11,190,381 Net position, beginnin
g of year 127,710,476 29,453,782 38,150,930 Net position, end of year 13
0,608,053$ 29,051,949$ 49,341,311$
Adjustment
to reflect the consolidation of internal
service fund act
ivities related to enterprise funds 2,563,694
Change in net posi
tion of business-type activities 5,059,438$
Enterprise Funds

CITY OF NEWPORT BEACH
Proprietary Funds
Statement of Revenues
,
Expenses and Changes in Net Position
For the Year Ended June 30, 2025
See accompanying notes to basic financial statements
69 CITY OF NEWPORT BEACH
Statement of Cash Flows
For the Year Ended June 30, 2025
Governmental
Total Activities
Enterprise Internal Service
Water Wastewater Funds Funds
39,813,766$ 5,851,080$ 45,664,846$ 39,105,404$ (6,021,465) (1,913,288) (7,934,753) (11,441,209) (22,922,028) (3,281,254) (26,203,282) (39,330,748) (4,688,299) (890,710) (5,579,009) - 305,699 61,506 367,205 6,418,232 6,487,673 (172,666) 6,315,007 (5,248,321) - - - 21,889 - - - 21,889 (6,542,049) (390,931) (6,932,980) (3,456,839) (65,023) - (65,023) (73,663) (37,200) - (37,200) (212,547) - - - 425,594 (6,644,272) (390,931) (7,035,203) (3,317,455) 1,221,293 158,241 1,379,534 3,783,041 1,221,293 158,241 1,379,534 3,783,041 1,064,694 (405,356) 659,338 (4,760,846) 25,516,076 3,456,022 28,972,098 86,328,283 26,580,770$ 3,050,666$ 29,631,436$ 81,567,437$ 26,580,770$ 3,050,666$ 29,631,436$ 81,567,437$ 26,580,770$ 3,050,666$ 29,631,436$ 81,567,437$ 1,647,393$ (562,502)$ 1,084,891$ 6,888,117$ 1,949,684 639,534 2,589,218 4,275,677 (372,396) (80,449) (452,845) (7,586) 8,747 1,538 10,285 (195,387) - - - (39,048) - - - (4,902,194) 1,617,988 - 1,617,988 - 1,627,242 (172,812) 1,454,430 (13,915,435) 3,749 - 3,749 - - - - 2,039,412 - - - (241,204) - - - 844,531 (78,141) (30,006) (108,147) (71,132) 83,407 32,031 115,438 75,928 4,840,280 389,836 5,230,116 (12,136,438) 6,487,673$ (172,666)$ 6,315,007$ (5,248,321)$ -$ 443,036$ 443,036$ -$ 146,843 - 146,843 - Cash flows from operating activities:

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

Cash received from other funds
Net cash provided by noncapital financing activities
Cash flows from capital and related financing activities:

Acquisition of capital assets
Lease liabilities and related
Subscription liabilities and related
Proceeds from sale of capital assets
Net cash (used) for capital and related financing activities Cash flows from investing activities:

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

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

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

Depreciation
Changes in operating assets and liabilities:
(Increase) in accounts receivable
(Increase) decrease in intergovernmental receivables
(Increase) in inventories
(Increase) in prepaid items
Decrease in net infrastructure from capital assets
Increase (decrease) in accounts payable and accrued payroll Increase in deposits payable
Increase in workers' compensation
(Decrease) in general liability
Increase in compensated absences
(Decrease) in net pension liability and deferred cash flows Increase in net OPEB liability and deferred cash flows
Total adjustments
Net cash provided (used) by operating activities
Noncash financing and investing activities:

Capital assets financed by ending accounts payable
Obtaining an intangible right to use subscription asset (Loss) on disposal of capital assets (1,617,988) - (1,617,988) - Total of noncash activities 1,764,831$ 443,036$ 2,207,867$ -$ Proprietary Funds
Enterprise Funds
See accompanying notes to basic financial statements
70 FUND FINANCIAL STATEMENTS
71 This page left blank intentionally.
72 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. 73 Custodial OPEB
Funds Trust
Assets
Cash and investments (no
te 2) 1,582,522$ -$
Restricted cash and investments with fiscal agent (note 2) 2,699,066 48,292,264 Receivable:

Interest 15,167 3,624
Intergovernmental receivable 34,320 -
Total assets 4,331,075 48,295,888
Liabilities
Due to others 35,616 -
Total liabilit
ies 35,616 -
Net Position
Restricted for:

Postemploymen
t benefits other than pensions - 48,295,888 Individuals, organiz
ations, and other governments 4,295,459 -
Total net position 4,295,459$ 48,295,888$

CITY OF NEWPORT BEA
CH
Fiduciary Funds
Statement of Fiduciar
y Net Position
June 30, 2025
See accompanying notes to basic financial statements
74 Custodial OPEB
Funds Trust
Additions
Special assessments 3,022
,899$ -$
Investment earnings 155,193 4,904,074
Other 101,760 -
Total addition
s 3,279,852 4,904,074
Deductions
Debt service 3,317,230 -

Benefit payments for OPEB trust - 2,682,141 Administrative 97,408 121,382
Other 133,537 -
Total deductions 3,548,175 2,803,523
Net increase in fiduciary
net position (268,323) 2,100,551
Net position, beginnin
g of year 4,563,782 46,195,337
Net position, end of y
ear 4,295,459$ 48,295,888$

CITY OF NEWPORT BEA
CH
Fiduciary Funds
Statement of Changes in Fiduciar
y Net Position
For the Year Ended June 30, 2025
See accompanying notes to basic financial statements
75 This page left blank intentionally.
76 77

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78 CITY OF NEWPORT
BEACH
Notes to Basic Financial Statements
June 30, 2025

(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 incorpora
ted on September 1, 1906. The current City Charter was adopted in 1954. Since adoption, the Charter has been amended several times. The most recent Charter amendment was approved by the voters on November 2, 2010. The City operates under a Council-Manager form of government and provides the following services: public safety (police, fire, and marine), highway and streets, cultural and recreation, public improvements, planning and zoning, utilities, and general administrative services.

The financial statements present the financial activity of the City (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 stat
ements 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. 79 CITY OF NEWPORT
BEACH
Notes to Basic Financial Statements
June 30, 2025

(1) Summary of Significant Accounting Policies (Continued)

b. Basis of Accounting an
d Measurement Focus

The basic financial st
atements 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 fina
ncial statements display information about the reporting government as a whole, except for its fiduciary activities. These statements include separate columns for the governmental and business-type activities of the primary government (including its blended component units). The City 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

80 CITY OF NEWPORT
BEACH
Notes to Basic Financial Statements
June 30, 2025

(1) Summary of Significant Accounting Policies (Continued)

b. Basis of Accounting an
d Measurement Focus (Continued)

made about the order
in which the resources are considered to be applied. It is the City’s practice to consider restricted – net position to have been depleted before unrestricted – net position is applied.

Fund Financial Statements

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

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

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

81 CITY OF NEWPORT
BEACH
Notes to Basic Financial Statements
June 30, 2025

(1) Summary of Significant Accounting Policies (Continued)

b. Basis of Accounting an
d Measurement Focus (Continued)

provided). Locally imp
osed derived tax revenues are recognized as revenues in the period in which the underlying exchange transaction upon which they are based takes place.

Imposed non-exchange transactions are recognized as revenues in the period for which they were imposed. If the period of use is not specified, they are recognized as revenues when an enforceable legal claim to the revenues arises or when they are received, whichever occurs first. Government-mandated and voluntary non-exchange transactions are recognized as revenues when all applicable eligibility requirements have been met.

In the fund financial statements, governmental funds are presented using the current financial resources measurement focus. This means that only current assets and deferred outflows of resources, and current liabilities and deferred inflows of resources are generally included on their balance sheets. The reported fund balance is considered to be a measure of “available spendable resources”. Governmental fund operating statements present increases (revenues and other financing sources) and decreases (expenditures and other financing uses) in fund balance. Accordingly, they are said to present a summary of sources and uses of “available spendable resources” during a period.

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

Because of their spending measurement focus, expenditure recognition for governmental fund types excludes amounts represented by non-current liabilities. Since they do not affect “available spendable resources”, such long-term amounts are not recognized as governmental fund type expenditures or fund liabilities.

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

Permanent Funds, also referred to as Endowment Funds, are governmental funds used to report resources that are legally restricted to the extent that only earnings, and not principal, may be used for purposes that support City programs. The amount of net appreciation on investments that is available to support City programs is $2,555,481. 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 §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.
82 CITY OF NEWPORT
BEACH
Notes to Basic Financial Statements
June 30, 2025

(1) Summary of Significant Accounting Policies (Continued)

b. Basis of Accounting an
d Measurement Focus (Continued)

Proprietary & Fiduciary Funds

The City’s ente
rprise 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 f
ollowing broad categories of funds:

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

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

83 CITY OF NEWPORT
BEACH
Notes to Basic Financial Statements
June 30, 2025

(1) Summary of Significant Accounting Policies (Continued)

c. Fund Classification
s (Continued)

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

Special Revenue Funds

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

Tide and Submerged Land – Harbor Capital
The Tide and Su
bmerged 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 Pla
nning Reserve Fund
The Facilities Fina
ncial Planning Reserve Fund is used to account for the receipt and expenditure of funds for the replacement of facilities.

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

Major Proprietary Funds – Proprietary funds are used to report an activity for which a fee is charged to external users to recover the cost of operation.

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

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

84 CITY OF NEWPORT
BEACH
Notes to Basic Financial Statements
June 30, 2025

(1) Summary of Significant Accounting Policies (Continued)

c. Fund Classification
s (Continued)

Other Governmental
Funds – Other Governmental Funds are those funds which do not meet the criteria of a ma
jor 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 speci
fic 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 a
cquisition and construction of capital facilities by the City, except those financed by Enterprise Funds.

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

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

Fiduciary Funds – The Custodial Funds, a type of Fiduciary Fund, are used to account for assets held by the
City as an agent for property owners with special assessments, 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 2024-2
5, the City implemented the following GASB Statements:

 GASB Statement No. 101, Compensated Absences, updates the recognition and measurement guidance for compensated absences under a unified model. The 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,

85 CITY OF NEWPORT BEACH
Notes to Basic Financial Statements
June 30, 2025

(1) Summary of Significant Accounting Policies (Continued)

d. New Accounting Pronouncements (Continued)

(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. As a result of this implementation, the City updated the recognition and measurement guidance for compensated absences to satisfy the criteria set forth above.

 GASB Statement No. 102, Certain Risk Disclosures , requires state and local governments to disclose certain risks that arise from vulnerabilities due to concentrations and constraints that could adversely affect the level of service they provide or their ability to meet obligations as they become due.

Pending Accounting Standards

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

 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.
 GASB Statement No. 104, Disclosure of Certain Capital Assets, Effective for reporting periods beginning after June 15, 2025. The objective of this Statement is to provide users of government financial statement with essential information about certain types of capital assets.
e. Cash and I nvestments
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 86 CITY OF NEWPORT
BEACH
Notes to Basic Financial Statements
June 30, 2025

(1) Summary of Significant Accounting Policies (Continued)

e. Cash and Investments
(Continued)

cash flows. Consi
stent with GAAP only the City’s proprietary funds report a statement of cash flows.

f. Accounts Receivable

Accounts receivable
represent all service and capital project billings other than intergovernmental receivables stated below. As of June 30, 2025, 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 receivab
les represent grant reimbursement requests, capital project billings, and pending transfers of taxes and fees collected by other government agencies.

As of June 30, 2025, the balance of these accounts totaled $14,363,617.

h. Inventories and Prepaid Items

Inventories are value
d at cost, which approximates market, using the first-in, first-out method. The City follows the consumption method for inventory control. The costs of governmental fund and internal service fund inventories are recorded as expenditures when consumed.

Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items. The City follows the consumption method for prepaid items.

i. Capital Assets

Capital assets are tangi
ble 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).

87 CITY OF NEWPORT
BEACH
Notes to Basic Financial Statements
June 30, 2025

(1) Summary of Significant Accounting Policies (Continued)

i. Capital Assets (Co
ntinued)

Major capital outlay
s 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 capital assets are generally an estimated present value of certain future lease or software subscription payments for the leases or subscriptions in which the City is the lessee or subscriber.

Capital assets used in operations are depreciated/amortized using the straight-line method in the government-wide financial statements and in the fund financial statements of the proprietary funds. Tangible capital assets are depreciated over their estimated useful lives.

Intangible assets are amortized over the shorter of the estimated useful life of the underlying asset or the period of time included in the estimated present value. Depreciation/ amortization is charged as an expense against operations and accumulated depreciation/amortization is reported on the respective balance sheet. The ranges of useful life for depreciation purposes for each capital asset class are as follows:

Structures 15-75 years
Equipment 3-
15 years
Infrastructure 20-75 years

j. Claims and Judgments

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

k. Property Taxes

The assessment, le
vy, 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:

88 CITY OF NEWPORT
BEACH
Notes to Basic Financial Statements
June 30, 2025

(1) Summary of Significant Accounting Policies (Continued)

k. Property Taxes
(Continued)

Lien date January 1
Levy date July 1
Due dates November 1 1st installment
March 1 2 nd installment
Collection dates December 10 1st installment
April 10 2 nd installment

l. Compensa
ted 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.

Effective for the current fiscal year, the City implemented GASB Statement No. 101, Compensated Absences, which establishes a unified model for recognizing and measuring liabilities for compensated absences. Under this guidance, compensated absences are recognized as a liability for (1) leave that has not been used when the leave is attributable to services already rendered, accumulates, and is more likely than not to be used for time- off or otherwise paid or settled, and (2) leave that has been used but has not yet been paid or otherwise settled as of the financial statement date. The City measures compensated absences using employees’ pay rates in effect at the financial statement date, or, when applicable, the pay rates expected to be used to settle the obligation, and includes salary‑related amounts that are directly and incrementally associated with payments for such leave. It is assumed that when leave is taken the credits or hours earned first are the ones first utilized or paid.

Compensated absences are accrued in the Compensated Absence Internal Service Fund and in the government ‑wide financial statements when employee services have been rendered and when it becomes more likely than not that the City will compensate the employees for benefits through paid time off or cash or other settlement, including at termination or retirement.

The City accrues compensated absences for benefits that employees have earned but are not yet available for use when it is more likely than not that the employees will meet the required eligibility or service conditions for payment or use, based on the City’s historical

89 CITY OF NEWPORT
BEACH
Notes to Basic Financial Statements
June 30, 2025

(1) Summary of Significant Accounting Policies (Continued)

l. Compensated Absences
(Continued)

experience and cu
rrent policies. Benefits not covered by GASB 101, such as pension, retiree health, or other postemployment benefits (including those administered through CalPERS), are accounted for in accordance with the applicable GASB standards. Leave that does not accumulate or is contingent upon sporadic events, such as jury duty, bereavement, or certain forms of military or parental leave, is not accrued as compensated absences and is recognized as an expense in the period the leave is taken or paid.

m. Deposits Payable

In the government-
wide and fund-level financial statements, deposits payable represents monies collected for developer deposits, demolition deposits, planning deposits and others, for services which have not yet been performed. These unspent portions are reported as liabilities on the financial statements.

n. Unearned Revenue

Unearned revenues a
re 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 statement of net position and the governmental funds balance sheet will sometimes report a separate section for deferred outflows of resources . This separate financial statement element, deferred outflows of resources , represents a consumption of net assets that applies to future periods and so will not be recognized as an outflow of resources (expense) until that time. The City has three items that qualify for reporting in this category. The first item is the deferred outflows related to employer pension and OPEB contributions made after the measurement date. The second item is a deferred outflow related to pensions and OPEB resulting from changes in assumptions. This amount is amortized over a closed period equal to the average of expected remaining service lives of all employees that are provided pensions and OPEB through the plans. The third item is a deferred outflow related to pensions and OPEB resulting from the difference between expected and actual experience. This amount is amortized over a closed period equal to the average of expected remaining service lives of all employees that are provided pensions and OPEB through the plans.

In addition to liabilities, the statement of net position and the governmental funds balance sheet will sometimes report a separate section for deferred inflows of resources . This separate financial statement element, deferred inflows of resources , represents an acquisition of net assets that applies to future periods and will not be recognized as an inflow of resources (revenue) until that time. The City has five items that qualify for reporting in this

90 CITY OF NEWPORT
BEACH
Notes to Basic Financial Statements
June 30, 2025

(1) Summary of Significant Accounting Policies (Continued)

o. Deferred Inflows/Outfl
ows of Resources (Continued)

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

Committed fund balance
That portion of
a fund balance that includes amounts that can only be used for specific purposes pursuant to constraints imposed by formal action by the government’s highest level of decision making authority and remain binding unless removed in the same manner.

The City Council has authority to establish or modify a fund balance commitment by

91 CITY OF NEWPORT
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Notes to Basic Financial Statements
June 30, 2025

(1) Summary of Significant Accounting Policies (Continued)

p. Fund Balance Classific
ations (Continued)

legislation (Counci
l action) and can only rescind a fund balance commitment by new legislation requiring the same voting consensus. The City considers a resolution to constitute a formal action of the City Council for the purposes of establishing committed fund balance.

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

Unassigned fund balance
The residual por
tion 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.

r. Pensions

For purposes of measurin
g 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

92 CITY OF NEWPORT
BEACH
Notes to Basic Financial Statements
June 30, 2025

(1) Summary of Significant Accounting Policies (Continued)

r. Pensions (Continu
ed)

when due and pa
yable 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, 2023
Measurement Date (MD) June 30, 2024
Measurement Period (MP)
July 1, 2023 to June 30, 2024

s. Post-Employment Health Care Benefits (OPEB)

For purposes of
measuring the net OPEB liability and deferred outflows/inflows of resources related to OPEB and OPEB expense, information about the fiduciary net position of the City of Newport Beach’s California Public Employees’ Retirement System (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, 2024
Measurement Period (MP)
July 1, 2023 to June 30, 2024

t. Lease Liabilities and Receivables

Lease liabilities
and receivables are estimated present values of future lease payments.

Estimating present values involves various related estimates, including lease terms and interest rates. The estimated lease term is the time period that the lease is noncancelable, plus extension and termination time periods if based on the lease agreement it is reasonable that the extensions will be exercised, and the terminations will not be exercised. When a lease’s implicit interest rate is not known, estimates are made of either the City’s incremental borrowing rate or the rate the City may charge a lessee. Non-lease components of lease agreements have been treated as separate non-lease agreements when practicable, and are excluded from the City’s estimated lease liabilities and receivables. Leases that do not meet 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.

93 CITY OF NEWPORT
BEACH
Notes to Basic Financial Statements
June 30, 2025

(1) Summary of Significant Accounting Policies (Continued)

u. Subscription-Based
Information Technology (IT) Arrangements

The City is a
participant 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.

(2) Cash and Investments

Cash and invest
ments as of June 30, 2025, are classified in the accompanying financial statements as follows:

Statemen
t of net position:

Cash and investments 410,824,387$
Cash and investments with fiscal agent 27,782,192
Fiduciary funds:

Cash and investments 1,582,522
Cash and investments with fiscal agent 50,991,330
Total ca
sh and investments 491,180,431$
94 CITY OF NEWPORT
BEACH
Notes to Basic Financial Statements
June 30, 2025

(2) Cash and Investments (Continued)

Cash and investments as of
June 30, 2025, consist of the following:

Investments Authorized by the California Government Code and the City’s Investment Policy

The table below
identifies the investment types that are authorized for the City by the California Government Code (or the City’s investment policy, where more restrictive). The table also identifies certain provisions of the California Government Code (or the City’s investment policy, 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.

*Excluding amounts hel
d by bond trustee and by the OPEB trust that are not subject to California Government Code restrictions.

Cash on
hand 24,765$
Deposits with financial institutions 20,223,592
Cash and receivables in investment accounts 52,834
Investments 470,879,240
Total ca
sh and investments 491,180,431$
Maximum Pe
rcentage Investment in Minimum
Authorized Investment Type Maturity* of Portfoli
o* One Issu
er* Rating*
Local Ag
ency Bonds 5 years 30% 5% A-
FHLMC 5 years No Limit 30% None
U.S. Treasury Obligations 5 years No Limit No Limit None U.S. Agency Securities 5 years No Limit 30% None
Commercial Paper 270 days 40% 5% A-1
Negotiable Certificates of Deposit 2 years 30% 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
LA County Pooled Investment Funds N/A 5% 5%
California Asset Management Program (CAMP) N/A $75 million $75 million None Local Agency Investment Fund (LAIF) N/A $75 million $75 million N/A Supranationals 5 years 20% 10% AA-
95 CITY OF NEWPORT
BEACH
Notes to Basic Financial Statements
June 30, 2025

(2) Cash and Investments (Continued)

Investments Authorized by D
ebt Agreements

Investments of de
bt proceeds held by bond trustees (i.e., fiscal agents) are governed by provisions of the debt agreements, rather than the general provisions of the California Government Code or the City’s investment policy. The table below identifies the investment types that are authorized for investments held by bond trustees. The table also identifies certain provisions of these debt agreements that address interest rate risk, credit risk, and concentration of credit risk.

Disclosures Relating to Interest Rate Risk

Interest rate risk is
the risk that changes in market interest rates will adversely affect the fair value of an investment. Generally, the longer the maturity of an investment, the greater the sensitivity of its fair value to changes in market interest rates. One of the ways that the City manages its exposure to interest rate risk is by purchasing a combination of shorter-term and longer-term investments and by timing cash flows from maturities so that a portion of the portfolio is maturing or coming close to maturity over time as necessary to provide the cash flow and liquidity needed for operations.

Maximum M
aximum
Percentage Investment in
Authorized Investment Type Maximum
Maturity Allowed One Issu
er
U.S. Trea
sury 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 96 CITY OF NEWPORT
BEACH
Notes to Basic Financial Statements
June 30, 2025

(2) Cash and Investments (Continued)

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:

Some of the City’s investments may have call features where the investments’ principal may be paid down before its maturity. Such investments include asset backed securities, U.S. Agency Commercial Mortgage Backed Securities (CMBS), 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, 2025, the City held asset backed securities of about $8.8 million.

The City’s U.S. Agency CMBS may pay down principal prior to maturity. As of June 30, 2025, the City held U.S. Agency CMBS of about $19.7 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, 2025, the City held corporate bonds with make whole call provisions as summarized below:

Investmen
t Maturities (In Years)
Investment Type Fair Value Less than
1 1 to 3 3 to 5 More than 5 Total
Money Mark
et Funds 18,497,696$ 18,497,696$ -$ -$ -$ 18,497,696$ U.S. Treasury Bills 44,745,992 44,745,992 - - - 44,745,992 U.S. Treasuries 80,357,245 47,098,495 30,734,922 2,523,828 - 80,357,245 Commercial Papers 34,094,969 34,094,969 - - - 34,094,969 U.S. Agency Bonds 7,522,679 3,478,549 4,044,130 - - 7,522,679 U.S. Agency CMBS 19,696,669 1,530,905 5,151,995 13,013,769 - 19,696,669 Asset Backed Securities 8,832,728 - 1,545,934 7,286,794 - 8,832,728 Corporate Bonds 54,743,652 10,599,683 13,492,745 30,651,224 - 54,743,652 Municipal Bonds 2,167,119 - - 2,167,119 - 2,167,119 CAMP 54,865,897 54,865,897 - - - 54,865,897 LAIF 66,581,074 66,581,074 - - - 66,581,074 Investments with Fiscal Agent:

Money Market Funds 20,924,102 20,924,102 - - - 20,924,102 U.S. Treasuries 8,379,253 8,379,253 - - - 8,379,253 U.S. Agency Bonds 872,453 872,453 - - - 872,453 LAIF 305,448 305,448 - - - 305,448 Investments with OPEB Trust:

Money Market Funds 929,614 929,614 - - - 929,614 Mutual Funds - Fixed Income 19,080,502 19,080,502 - - - 19,080,502 Mutual Funds - Equity 28,282,148 28,282,14
8 -
-
-
28,282,148

Tot
als 470,879,240$ 360,266,7
80$ 54,969,72
6$ 55,642,73
4$ -$
470,879,24
0$
Assuming
callable securities (if any) will not be called.
97 CITY OF NEWPORT
BEACH
Notes to Basic Financial Statements
June 30, 2025

(2) Cash and Investments (Continued)

Investments with call dat
es may be called anytime on or after the call date. As of June 30, 2025, 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, 2025, the City held corporate bonds with both a make whole call provision and a regular call date as summarized below:

Maturity Value
September
2025 4,183,821$
March 2027 1,972,768
January 2029 1,214,226
February 2029 1,227,658
To
tal 8,598,473$
Maturity Value Call Date
May 202
7 2,996,331$ April 2027
April 2029 1,521,192 April 202
8 Total 4,517,523$
Maturity Value Call Date
August
2025 2,418,029$ July 2025
November 2025 1,999,822 September
2025
July 20
26 1,999,691 July 2025
September 2027 1,000,872 August 2027
June 2028 477,855 May 2028
June 2029 1,275,916 May 2029
July 2029 1,744,235 July 2028
August 2029 1,415,038 May 2029
November 2029 1,434,754 August 2029
December 2029 1,502,814 December 2028
February 2030 4,605,710 January 2030
March 2030 1,535,316 February 2030
March 2030 1,446,812 December 2029
May 2030 2,194,517 April 20
30 Total 25,051,381$
98 CITY OF NEWPORT
BEACH
Notes to Basic Financial Statements
June 30, 2025

(2) Cash and Investments (Continued)

Approximately $13.6
million of the investments that are U.S. Agency CMBS 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 $6.7 million of the securities with interest rate reset dates are not called by their call date, then these securities will convert to floating rate securities tied to a benchmark index. Prior to their call date, these securities pay a fixed rate of interest. An additional $6.9 million of the securities with interest rate reset dates are U.S. Agency CMBS with potentially variable coupon rates.

Investments with Fair Values Highly Sensitive to Interest Rate Fluctuations

As of June 30, 20
25, the City did not have any investments (including investments held by fiscal agents) whose fair values were highly sensitive to interest rate fluctuations.

Disclosures Relating to Credit Risk

Generally, credit risk
is the risk that an issuer of an investment will not fulfill its obligation to the holder of the investment. This is measured by the assignment of a rating by a nationally recognized statistical rating organization. Presented in the following schedule is the minimum rating (where applicable) required by the California Government Code, the City’s investment policy, or debt agreements, and the actual rating by Standard & Poor’s as of the June 30, 2025 for each investment type.

Concentration of Credit Risk

The investment poli
cy 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.

Minimum
Le
gal
Investment Type Fair Value Rating AAA AAAm AA+ AA AA- A-1+ A+ A A-1 A- Not Rated Money Ma
rket Funds 18,497,696$ AAAm - $ 18,497,696$ -$ - $ - $ - $ -$ -$ -$ - $ -$ U.S. Treasury Bills 44,745,992 None - - - - - 44,745,992 - - - - - U.S. Treasuries 80,357,245 None - - 80,357,245 - - - - - - - - Commercial Papers 34,094,969 A-1 - - - - - 25,817,304 - - 8,277,665 - - U.S. Agency Bonds 7,522,679 None - - 7,522,679 - - - - - - - - U.S. Agency CMBS 19,696,669 None 1,956,768 - 17,739,901 - - - - - - - - Asset Backed Securities 8,832,728 AAA 6,746,633 - - - - - - - - - 2,086,095 Corporate Bonds 54,743,652 A- 1,535,316 - 9,600,282 2,999,072 8,746,917 - 11,621,788 9,341,895 - 9,364,123 1,534,259 Municipal Bonds 2,167,119 A- - - 756,612 - 1,410,507 - - - - - - CAMP 54,865,897 None - 54,865,897 - - - - - - - - - LAIF 66,581,074 None - - - - - - - - - - 66,581,074 Investments with Fiscal Agent:

Money Market Funds 20,924,102 AAm - 20,924,102 - - - - - - - - - U.S. Treasuries 8,379,253 None - - 8,379,253 - - - - - - - - U.S. Agency Bonds 872,453 None - - 872,453 - - - - - - - - LAIF 305,448 None - - - - - - - - - - 305,448 Investments with OPEB Trust:

Money Market Funds 929,614 None - 929,614 - - - - - - - - - Mutual Funds - Fixed Income 19,080,502 None - - - - - - - - - - 19,080,502 Mutual Funds - Equity 28,282,148 None -
-
-
-
-
-
-
-
-
-
28,282,1
48 Total
s 470,879,240$ 10,238,717$ 95,217,3
09$ 125,228,4
25$ 2,999,072 $ 10,157,424$
70,563,2
96$ 11,621,788$
9,341,895$
8,277,66
5$ 9,364,12
3$ 117,869,52
6$
99 CITY OF NEWPORT
BEACH
Notes to Basic Financial Statements
June 30, 2025

(2) Cash and Investments (Continued)

Custodial Credit Ris
k

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, 2025, 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 and investments with fiscal agent, the fiscal agent and/or financial advisor 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 voluntaril
y invests 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.

One of CAMP’s investment objectives is to maintain a stable net asset value of $1.00 per share.

According to CAMT’s audited financial statements for calendar year 2024, “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.

100

CITY OF NEWPORT
BEACH
Notes to Basic Financial Statements
June 30, 2025

(2) Cash and Investments (Continued)

Investment in State I
nvestment 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 §§16429.1 to 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 or his or her designee also appoints the remaining four members of LIAB to serve two-year terms or at the State Treasurer’s pleasure. California Government Code §16429.2 specifies the required qualifications of the State Treasurer’s appointees to LIAB.

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.

Investments in Other Post-Employment Benefits (OPEB) Trust

The City established
a trust account 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
101

CITY OF NEWPORT
BEACH
Notes to Basic Financial Statements
June 30, 2025

(2) Cash and Investments (Continued)

Fair Value Measurements

The City categorize
s 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.

Following are the City’s recurring fair value measurements as of June 30, 2025:

Quoted Pri
ces
Investments in Active Quoted Prices
That Are Not Markets for for Similar Significant
Subject to Fair Identical Assets Assets in Active Unobservable Fair Value Value Hi
erarchy (Level 1
) Markets
(Level 2) Inputs
(Level 3)
Money Ma
rket Funds 18,497,696$ 18,497,696$ -$ -$ -$ U.S. Treasury Bills 44,745,992 - - 44,745,992 - U.S. Treasuries 80,357,245 - - 80,357,245 - Commercial Papers 34,094,969 - - 34,094,969 - U.S. Agency Bonds 7,522,679 - - 7,522,679 - U.S. Agency CMBS 19,696,669 - - 19,696,669 - Asset Backed Securities 8,832,728 - - 8,832,728 - Corporate Bonds 54,743,652 - - 54,743,652 - Municipal Bonds 2,167,119 - - 2,167,119 - CAMP 54,865,897 54,865,897 - - - LAIF 66,581,074 66,581,074 - - - Investments with Fiscal Agent:

Money Market Funds 20,924,102 20,924,102 - - - U.S. Treasuries 8,379,253 - - 8,379,253 - U.S. Agency Bonds 872,453 - - 872,453 - LAIF 305,448 305,448 - - - Investments with OPEB Trust:

Money Market Funds 929,614 929,614 - - - Mutual Funds - Fixed Income 19,080,502 - 4,675,098 14,405,404 - Mutual Funds - Equity 28,282,148 -
13,325,7
39 14,956,4
09 -

To
tals 470,879,240$ 162,103,
831$ 18,000,8
37$ 290,774,
572$ -$

102

CITY OF NEWP

ORT BEACH
Notes to Basic Financial Statements
June 30, 2025

(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, 2025, the City recognized $3,960,576 of variable payments related to the lease receivables that were excluded from the measurement of the lease receivables. Lease inflows, including inflows excluded from GASB 87, are included on the City’s financial statements as property income. Lease inflows for interest revenue from amortization of the GASB 87 lease receivables totaled $4,519,482. Lease inflows for lease revenue from amortization of the related GASB 87 deferred inflows of resources from leases was $13,227,446. Lease receivables at June 30, 2025, were $276,374,011.

Regulated Lease

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

Generally, these licensed streetlight spaces are licensed nonexclusively, but some of these licensed spaces may be licensed exclusively. The total revenue recognized during the fiscal year for this license was $8,182. 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.

Year End
ing License
June 30, Payment
s
2026 8,1
86 $
2027 1,500
2028 1,500
2029 1,500
2030 1,500
2031-2035 7,500
2036-2040 5,500
Total 27
,186 $
103

CITY OF NEWPORT
BEACH
Notes to Basic Financial Statements
June 30, 2025

(4) Interfund Receivables and Payables

At June 30, 2025, interfu
nd receivables and payables were as follows:

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

At June 30, 2025, 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 Fu
nd 8,718,563$ -$
Debt Service Fund - 6,517,778
Internal Service Fund - 353,001
Other Governmental Funds - 1,847,784 Due From Due To
General F
und 4,426,659$ -$
Tide and Submerged Land - Harbor Capital Fund - 4,426,659 Advance
#1 Advance #2
Dredging Marina Park
Fiscal Projects Project Total
Year Repayment Repayment Repayment
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 1,9
26,659$ 2,500,00
0$ 4,426,65
9$
Harbor Ca
pital Fund Advance - Repayment Terms
(Zero-Interest Advance)
104

CITY OF NEWPORT
BEACH
Notes to Basic Financial Statements
June 30, 2025

(5) Interfund Transfers

Interfund transfers
at June 30, 2025, 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:

 $12,263,815 to the Tide and Submerged Land – Operating Fund to subsidize the maintenance and operation;
 $5,832,875 to the Tide and Submerged Land – Harbor Capital Fund to cash fund Harbor Capital projects;
 $12,104,412 to the Facilities Financial Planning Reserve Fund to cash fund construction projects for General Fund supported facilities;
 $8,250,735 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;  $6,160 to the Equipment Maintenance Fund and $15,729 to the Information Technology Fund to fund additional CalPERS expenses; and
 $14,562,692 to Other Governmental Funds, which includes $9,757,055 to the Unrestricted Capital Improvements Fund to fund the purchase of real property and capital improvements, $148 to the Office of Traffic Safety Fund to offset a variance and to claim a reimbursement, $5,489 to the Contributions Fund to reconcile revenues and expenditures related to the Rubberized Pavement Grant, $2,300,000 to the Park Maintenance Fund for the maintenance of parks, and $2,500,000 to the Facilities Maintenance Fund for the maintenance of facilities.

The Tide and Submerged Land – Operating Fund transferred $20,317,944 to the General Fund to reimburse for tidelands related expenditures.

The Facilities Financial Planning Reserve Fund also transferred $11,111,169 to Other Governmental Funds as follows:

 $3,000,000 to the Unrestricted Capital Improvements Fund to fund a new permanent supportive housing project;
General Fund
Tide and
Submer
ged
Land -
Operating
Tide and
Submer
ged
Land - Harbor
Capital
Facilities
Fi
nancial
Planning
Reserve
Debt Servi
ce
Fund
Internal
Serv
ice
Funds
Other
Governm
ental
Funds Total
General Fund -
$ 12,263,815$ 5,832,875$ 12,104,412$ 8,250,735$ 21,889$ 14,562,692$ 53,036,418$ Tide and Submerged Land -
Operating 20,317,944 - - - - - - 20,317,944 Facilities Financial Planning
Reserve -
- - - - - 11,111,169 11,111,169 Internal Service Funds - - - - - - - - Other Governmental Funds - -
-
-
-
-
-
-

Total 20,317,944$ 12,263,815$ 5,832,875$ 12,104,412$ 8,250,735$ 21,889$ 25,673,861$ 84,465,531$

Transfers I
n
Transfers Out
105

CITY OF NEWPORT
BEACH
Notes to Basic Financial Statements
June 30, 2025

(5) Interfund Transfers (Continued)

 $500,000 to Miscella
neous FFP Projects Fund to fund entitlement process and preliminary studies and outreach on the Lower Castaways Aquatic Center project.  $5,295 to the Junior Lifeguards Fund to fund construction projects related to the Junior Lifeguard building;
 $6,800,000 to the Fire Station Fund to cash fund the construction for replacing Balboa Library/Fire Station No. 1; and
 $805,874 to the Parks and Community Centers Fund to support the Lower Sunset View Park project.

(6) Capital Assets

Capital asset activity fo
r the year ended June 30, 2025, was as follows:

Governmental Activities:

Beginning Ba
lance
Balance Addition
s Deletion
s June 30,
2025
Non-deprec
iable/non-amortizable:

Land and rights of way 1,922,330,399$ 1,646,200$ -$ 1,923,976,599$ Work in progress 22,200,235 9,389,848
(16,602,4
39) 14,987,644

Total
non-depreciable/non-amortizable 1,944,530,634 11,036,048 (16,602,4
39) 1,938,96
4,243
Depreciab
le/amortizable:

Structures 270,180,218 9,090,044 (22,865) 279,247,397 Intangible right to use structures 17,187,099 - - 17,187,099 Equipment 63,520,443 3,867,886 (2,013,301) 65,375,028 Intangible right to use equipment 363,725 - - 363,725 Intangible right to use subscriptions 2,666,852 - (214,474) 2,452,378 Infrastructure 406,394,747 22,784,377
(2,862,98
6) 426,316,1
38 Total
depreciable/amortizable 760,313,084 35,742,307
(5,113,62
6) 790,941,7
65 Less acc
umulated depreciation/amortization for:

Structures (70,504,228) (6,972,478) 22,865 (77,453,841) Intangible right to use structures (3,142,343) (1,221,302) - (4,363,645) Equipment (44,470,285) (4,197,345) 1,962,260 (46,705,370) Intangible right to use equipment (201,404) (84,689) - (286,093) Intangible right to use subscriptions (521,572) (423,693) 214,474 (730,791) Infrastructure (194,915,347) (7,286,22
0) 1,659,85
9 (200,541
,708)
Total
accumulated depreciation (313,755,179) (20,185,72 7) 3,859,45
8 (330,081
,448)
Net d
epreciable/amortizable 446,557,905 15,556,580
(1,254,16
8) 460,860,3
17 Net
capital assets 2,391,088,539$ 26,592,628$
(17,856,6
07)$ 2,399,82
4,560$
106

CITY OF NEWPORT
BEACH
Notes to Basic Financial Statements
June 30, 2025

(6) Capital Assets (Continued)

Governmental Activities capital
assets net of accumulated depreciation/amortization at June 30, 2025 are comprised of the following:

Business-type Activities:

General Ca
pital Assets, net 2,381,189,972$
Internal Service Fund Capital Assets, net 18,634,588
Total 2
,399,824,560$
Beginnin
g Balance
Balance Addition
s Deletions June 30, 2
025
Non-deprec
iable/non-amortizable:

Land 2,219,450$ -$ - $ 2,219,450$ Work in progress 4,408,443 5,540,23
4 (2,720,157
) 7,228,520

Tot
al non-depreciable/non-amortizable 6,627,893 5,540,23 4 (2,720,157
) 9,447,970

Depreciab
le/amortizable:

Intangible right to use land and right of way 3,883,062 - - 3,883,062 Structures 688,396 - - 688,396 Equipment 380,068 - - 380,068 Intangible rights to use subscription - 146,843 - 146,843 Infrastructure 205,661,153 4,025,16
7 (1,871,208
) 207,815,1
12 Tot
al depreciable/amortizable 210,612,679 4,172,01
0 (1,871,208
) 212,913,4
81 Less acc
umulated depreciation/amortization for:

Intangible right to use land and right of way (127,825) (53,656) - (181,481) Structures (325,569) (15,357) - (340,926) Equipment (254,064) (12,569) - (266,633) Intangible rights to use subscription - (29,866) - (29,866) Infrastructure (79,893,907) (2,477,77
0) 253,220
(82,118,45
7)
Tot
al accumulated depreciation (80,601,365) (2,589,21 8) 253,220
(82,937,36
3)
Ne
t depreciable/amortizable 130,011,314 1,582,79
2 (1,617,988
) 129,976,1
18 N
et capital assets 136,639,207$ 7,123,02
6$ (4,338,145
)$ 139,424,0
88$
107

CITY OF NEWPORT
BEACH
Notes to Basic Financial Statements
June 30, 2025

(6) Capital Assets (Continued)

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

Internal Service Fund depreciation/amortization of $4,275,677 was allocated to the governmental functions above.

(7) Long-Term Liabilities

Changes in Long-Term
Liabilities

The long-term
liabilities for governmental activities for the fiscal year ended June 30, 2025, are as follows:

Governmental Business-ty
pe
Activities Activities
General Government 6,735,860$
-$
Public Safety 3,070,878 -
Public Works 144,478 -
Community Development 450,393 -
Community Service 9,784,118 -
Water - 1,949,684
Wastewater - 639,534

T
otals 20,185,727$ 2,589,218$
Amounts
B
eginning Ending Due Within
Balance Additions Deletion
s Balance One Year
Governme
ntal activities:

Other debt:

Certificates
of participation - Series 2010B 87,800,00
0$ - $ (3,510,000)$ 84,290,000$ 3,675,000$ Certificates of participation - Series 2020A 5,725,000 - (725,000) 5,000,000 755,000 Bond premium - Series 2020A 864,633 - (142,131) 722,502 - Other long-term liabilities:

Workers' compensation payable 23,450,563 7,108,865 (5,069,453) 25,489,975 4,497,885 Claims and judgments payable 10,841,318 7,829,776 (8,070,980) 10,600,114 3,941,299 Compensated absences(1) 13,648,16
6 844,531 - 14,492,697 8,097,760 Lease liability 14,339,382 - (1,272,451) 13,066,931 1,273,326 Subscription liability 1,832,755 -
(289,032)
1,543,723
243,771

Total g
overnmental activities 158,501,8
17$ 15,783,17
2$ (19,079,04
7)$ 155,205,9
42$ 22,484,04
1$
(1) The chan
ge in the compensated absences liability is presented as a net change. 108

CITY OF NEWPORT
BEACH
Notes to Basic Financial Statements
June 30, 2025

(7) Long-Term Liabilities (Continued)

Internal service funds
predominantly serve the governmental funds. Accordingly, long-term liabilities for them are included as part of the above totals for governmental activities. Also, liabilities for workers’ compensation, claims and judgments, compensated absences, and net OPEB obligation are typically liquidated from the internal service funds through resources collected from individual funds.

The long-term liabilities for business-type activities for the fiscal year ended June 30, 2025, are as follows:

2010 Certificates of Participation

In fiscal year 20
10-11, 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, 2025, the City has received $33,530,580 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 $3,675,000 to $7,245,000. The total outstanding balance at June 30, 2025, amounted to $84,290,000. The use of the following assets has been pledged as security for the outstanding balance: the Central Library and the Civic Center.

Beginnin
g Ending Due Within
Balance Additions Deletions Balance One Year
Business-t
ype activities:

Lease liability 3,776,654$ - $ (44,364)$ 3,732,290$ 44,608$ Subscription liability - 146,843
(36,460)
110,383
36,593

Total bus
iness-type activities 3,776,654$
146,843$
(80,824)$
3,842,673$
81,201$

109

CITY OF NEWPORT
BEACH
Notes to Basic Financial Statements
June 30, 2025

(7) Long-Term Liabilities (Continued)

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

2020 Certificates of Participation

In Fiscal Year
2020-21, the City issued $7,860,000 of Series 2020A Certificates of Participation.

The 2020A Certificates were issued to finance the acquisition, improvement, and equipping of Fire Station No. 2. The proceeds of the Certificates also were applied to pay certain costs of issuance incurred in connection with the Certificates.

The lease payments made by the City are held by a trustee who makes semi-annual payments on the Certificates of Participation. The lease payments began June 15, 2021, and are in amounts sufficient to cover the payment of principal and interest of the Certificates. Interest on the Certificates is payable semiannually on January 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 $755,000 to $915,000. The total outstanding balance at June 30, 2025, amounted to $5,000,000. The use of the following assets has been pledged as security for the outstanding balance: Fire Station 5 and Fire Station 7.

Year Endi
ng
June 30, Principal Interest Total
2026 3,67
5,000$ 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 4,405,000 4,748,726 9,153,726
2031-2035 25,220,000 18,624,175 43,844,175
2036-2040 31,660,000 8,476,518 40,136,518
2041 7,245,000 259,661
7,504,66
1 Totals 84
,290,000$ 54,020,7
70$ 138,310,
770$
110

CITY OF NEWPORT
BEACH
Notes to Basic Financial Statements
June 30, 2025

(7) Long-Term Liabilities (Continued)

The annual amort
ization 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, 2025, 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, 2025, for general liability and workers’ compensation was $10,600,114 and $25,489,975, respectively.

Compensated Absences

The City's polici
es relating to compensated absences are described in Note (1). This liability at June 30, 2025, is $14,492,697. Compensated absences are liquidated from the Compensated Absences internal service fund.

Unused Credit

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

Year Endi
ng
June 30, Principal Interest Total
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 880,000 54,200 934,200
2031 915,000 18,300
933,300

Totals 5,
000,000$ 622,400$
5,622,40
0$
111

CITY OF NEWPORT
BEACH
Notes to Basic Financial Statements
June 30, 2025

(7) Long-Term Liabilities (Continued)

Leases

Lease agreements th
at 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 Endin
g
June 30 Principal Interest Total
2026 1,27
3,326$ 69,199$ 1,342,525$
2027 1,212,633 62,367 1,275,000
2028 1,219,317 55,683 1,275,000
2029 1,226,036 48,964 1,275,000
2030 1,232,794 42,206 1,275,000
2031-2035 6,266,636 108,364 6,375,000
2036 636,189 1,312
637,501

Totals 13,
066,931$ 388,095$
13,455,0
26$
112

CITY OF NEWPORT
BEACH
Notes to Basic Financial Statements
June 30, 2025

(7) Long-Term Liabilities (Continued)

Estimates of the future
lease payments 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 recreation classes registrations, performance evaluations, public safety, etc. GASB 96 excludes certain outflows (e.g., certain variable payments, etc.) from the measurement of SBITA liabilities.

Year Endi
ng
June 30 Principal Interest Total
2026 44,60
8$ 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 45,600 19,423 65,023
2031-2035 231,800 93,317 325,117
2036-2040 238,262 86,855 325,117
2041-2045 244,904 80,213 325,117
2046-2050 251,730 73,387 325,117
2051-2055 258,747 66,370 325,117
2056-2060 265,960 59,157 325,117
2061-2065 273,374 51,743 325,117
2066-2070 280,993 44,124 325,117
2071-2075 288,827 36,290 325,117
2076-2080 296,877 28,240 325,117
2081-2085 305,153 19,964 325,117
2086-2090 313,660 11,457 325,117
2091-2095 241,933 3,142 245,075
2096 14,557 27
14,584

Totals 3,7
32,290$ 753,888$
4,486,17
8$
113

CITY OF NEWPORT
BEACH
Notes to Basic Financial Statements
June 30, 2025

(7) Long-Term Liabilities (Continued)

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

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

(8) Limited Obligation Bonds

The City has is
sued 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, 2025, for each district under the Bond Acts of 1911 and 1915 are as follows:

Fiscal
Yea
r Ending
June 30, Principal Interest Total
2026 243,
771$ 18,361 $ 262,132$
2027 234,543 6,558 241,101
2028 235,836 5,266 241,102
2029 215,788 3,980 219,768
2030 174,164 2,937 177,101
2031-2033 439,621 3,130
442,751

Totals 1,
543,723$ 40,232 $
1,583,95
5$
Fiscal
Year E
nding
June 30, Principal Interest Total
2026 36,593$
607 $ 37,200$
2027 36,794 406 37,200
2028 36,997 203 37,200

Totals 110
,384$ 1,216 $ 111,600$

114

CITY OF NEWPORT
BEACH
Notes to Basic Financial Statements
June 30, 2025

(8) Limited Obligation Bonds (Continued)

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

The City is e
xposed 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, crime, fiduciary, and automotive liability. The City also purchases fidelity bonds for employees in key positions. Settled claims from these risks have exceeded commercial insurance coverage within the past three years, for the excess layers of the City’s prior insurance program, which had lower limits than the current limits.

The City utilizes California Insurance Pool Authority (CIPA), a joint powers authority, to provide excess insurance for the general liability and workers' compensation programs with the following limits beyond the City’s self-insured retention:

Type of Coverage Self-Insured Retention Coverage Limits General liability $500,000 $40,000,000 excess of
$3,000,000

Workers’ compensation $500,000 Statutory excess of
$2,000,000

CIPA was establishe
d for the purpose of creating a risk management pool for all California cities in order to stabilize and reduce overall insurance costs for members. CIPA is governed by a Board of Directors consisting of representatives from each member city.

Bonds Outstan
ding
Assessment District Original I
ssue June 30, 2
025
Reassessmen
t District 2012 $ 13,583,436 $ 130,813 Assessment District No. 117 2,955,000 2,135,000 Assessment District No. 116 1,575,000 1,230,000 Assessment District No. 116B 665,000 520,000 Assessment District No. 113 4,565,000 3,945,000 Assessment District No. 111 2,412,000 1,984,000 Assessment District No. 120-2 2,505,000 2,385,000 Assessment District No. 124 23,625,000
2 2,795,000
Totals 51,8
85,436$ 35,124,813$

115

CITY OF NEWPORT
BEACH
Notes to Basic Financial Statements
June 30, 2025

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

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

Fund liabilities are reported when it is probable that a loss has occurred and the amount of the loss can be reasonably estimated. Liabilities include an amount for claims that have been incurred but not reported (IBNR). Claims liabilities are calculated considering the effects of inflation, recent claim settlement trends including frequency and amounts of payouts and other economic and social factors. The total claims payable was $36,090,089 at June 30, 2025, 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 offe
rs 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 $166,674,731 at June 30, 2025.

June 30, 202
4 June 30, 202
5 June 30, 2
024 June 30, 20
25 Unpaid claims, b
eginning of fiscal year 8,689,061$ 10,841,318$ 16,396,153$ 23,450,563$ Insured claims (including IBNR) 25,766,286 7,829,776 11,588,497 7,108,865 Claim payments (23,614,029) (8,070,980
) (4,534,087
) (5,069,453
)
Unpaid claims, e
nd of fiscal year 10,841,318$ 10,600,114$
23,450,563$
25,489,975$

General Liab
ility Workers' Com
pensation
116

CITY OF NEWPORT
BEACH
Notes to Basic Financial Statements
June 30, 2025

(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.

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.

117

CITY OF NEWPORT
BEACH
Notes to Basic Financial Statements
June 30, 2025

(11) Pension Plans (Continued)

The Plans’ provisi
ons and benefits in effect for the measurement period ended June 30, 2024 are summarized as follows:

Prior to On o
r after On or after
Hire date November 24, 2012 November
24, 2012 January 1
, 2013
Benefit fo
rmula 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 32.59% - 34.09% 29.17% - 30.67% 29.76% - 31.17% Prior to On or after On or after
Hire date November 24, 2012 November
24, 2012 January 1
, 2013
Benefit fo
rmula 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 69.03% - 70.13% 69.03% - 70.13% 72.53% - 73.63% Miscellaneous
Safety
118

CITY OF NEWPORT
BEACH
Notes to Basic Financial Statements
June 30, 2025

(11) Pension Plans (Continued)

Employees Covered –
At the measurement date of June 30, 2024, 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, 2024, using an annual actuarial valuation as of June 30, 2023 rolled forward to June 30, 2024 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.

Miscella
neous Safety
Inactive
employees or beneficiaries
currently receiving benefits 789 488
Inactive employees entitled to
but not yet receiving benefits 710 115
Active employees 547 275

Totals 2,0
46 878

119

CITY OF NEWPORT
BEACH
Notes to Basic Financial Statements
June 30, 2025

(11) Pension Plans (Continued)

Actuarial Assump
tions – The total pension liabilities in the June 30, 2023, actuarial valuations were determined using the following actuarial assumptions:

All other actuarial a
ssumptions used in the June 30, 2023, 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.

Miscella
neous Safety
Valuatio
n Date June 30, 2023 June 30, 2023
Measurement Date June 30, 2024 June 30, 2024
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% 6.80%
Mortality Rate Table (1)
Post Ret
irement Benefit Increase
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
Derived using CalPERS' membership
Entry-Age Normal Cost Method
Varies by Entry Age and Services
(1) The mortal
ity table 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 incorporate 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.
120

CITY OF NEWPORT
BEACH
Notes to Basic Financial Statements
June 30, 2025

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

Assumed
As
set Real Return
Allocation Years 1-10(1),(2)
Global e
quity - 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 expect
ed inflation of 2.30% used for this period.
e(2) Figures a
re based on the 2021 Asset Liability Management study.

Asset Class(1)
121

CITY OF NEWPORT
BEACH
Notes to Basic Financial Statements
June 30, 2025

(11) Pension Plans (Continued)

c. Changes in the Net
Pension Liability

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

Miscella
neous Plan:

Total Pen
sion Plan Fiduciary Net Pension
Liability Net Positi
on Liability
/(Asset)
Balance a
t June 30, 2023 521,082,608$ 400,096,18
2$ 120,986,
426$
Changes
in the Year:

Service cost 8,448,830 - 8,448,830 Interest on the total pension liability 35,431,016 - 35,431,016 Differences between expected and
actual experience 1,976,265 - 1,976,265 Net plan to plan resource movement - (59) 59 Contribution - employer - 21,544,170 (21,544,170) Contribution - employee - 4,541,457 (4,541,457) Net investment income - 38,107,605 (38,107,605) Benefit payments, including refunds
of employee contributions (27,580,605) (27,580,605) - Administrative expense - (325,559)
325,559

Net Change
s 18,275,506 36,287,009
(18,011,
503)
Balance a
t June 30, 2024 539,358,114$ 436,383,19
1$ 102,974,
923$
Increase (
Decrease)
122

CITY OF NEWPORT
BEACH
Notes to Basic Financial Statements
June 30, 2025

(11) Pension Plans (Continued)

Sensitivity of
the Net Pension Liability to Changes in the Discount Rate – The following presents the net pension liability of the City for each Plan, calculated using the discount rate for each Plan, as well as what the City’s net pension liability would be if it were calculated using a discount rate that is 1-percentage point lower or 1-percentage point higher than the current rate:

Miscella
neous Safety
1% Decrea
se 5.90% 5.90%
Net Pension Liability 174,266,038$ 266,569,562$
Current Discount Rate 6.90% 6.90%
Net Pension Liability 102,974,923$ 173,551,818$
1% Increase 7.90% 7.90%
Net Pension Liability 44,241,390$ 96,648,799$
Safety Pl
an:

Total Pens
ion Plan Fiduciary Net Pension
Liability Net Posi
tion Liabilit
y/(Asset)
Balance
at June 30, 2023 695,885,933$ 499,893,
619$ 195,992,
314$
Changes
in the Year:

Service cost 10,840,966 - 10,840,966 Interest on the total pension liability 47,523,602 - 47,523,602 Differences between expected and
actual experience 7,193,012 - 7,193,012 Net plan to plan resource movement - 59 (59) Contribution - employer - 36,653,740 (36,653,740) Contribution - employee - 3,875,707 (3,875,707) Net investment income - 47,875,335 (47,875,335) Benefit payments, including refunds
of employee contributions (39,503,140) (39,503,140) - Administrative expense - (406,765)
406,765

Net Chan
ges 26,054,440 48,494,9
36 (22,440,4
96)
Balance
at June 30, 2024 721,940,373$ 548,388,
555$ 173,551,
818$
Increase
(Decrease)
123

CITY OF NEWPORT
BEACH
Notes to Basic Financial Statements
June 30, 2025

(11) Pension Plans (Continued)

Pension Plan Fiduciary
Net Position – Detailed information about each pension plan’s fiduciary net position is available in the separately issued CalPERS financial reports.

d. Pension Expenses and Deferred Outflows/Inflows of Resources Related to Pensions

For the fiscal year ended June 30, 2025, the City recognized pension expense of $51,381,790 ($20,439,193 Miscellaneous Plan and $30,942,597 Safety Plan). At June 30, 2025, the City reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:

Deferred De
ferred
Outflows Inflows
of Resources of Resourc
es
Miscella
neous plan:

Pension contributions subsequent to
measurement date 21,712,457$ -$
Differences between expected and
actual experience 3,244,282 (87,145)
Change in assumptions 977,548 -
Net differences between projected and
actual earnings on plan investments 6,473,421 -

Total mi
scellaneous plan 32,407,708 (87,145)

Safety plan:

P
ension contributions subsequent to
measurement date 37,081,470 -
Differences between expected and
actual experience 10,440,815 (926,141)
Change in assumptions 6,072,755 -
Net differences between projected and
actual earnings on plan investments 7,992,597 -

Total sa
fety plan 61,587,637 (926,141)

Total al
l plans 93,995,345$ (1,013,28
6)$
124

CITY OF NEWPORT
BEACH
Notes to Basic Financial Statements
June 30, 2025

(11) Pension Plans (Continued)

$58,793,927 repo
rted as deferred outflows of resources related to contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the fiscal year ending June 30, 2026. 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, 2025, the City had no outstanding contributions to the pension plan required for the year ended June 30, 2025.

f. Plan Description - D
efined Contribution Plan

Pursuant to City
Council Resolution No. 91-106, the City entered into a defined contribution plan administrated by the private administrator known as Public Agency Retirement System ("PARS") for all of its part-time employees, pursuant to the requirements of Section 11332 of the Social Security Act. The City Council has the authority for establishing and amending the plan’s provisions per the Resolution, including establishing and amending contribution requirements. In a defined contribution plan, benefits depend solely on amounts contributed to the plan plus investment earnings. All part-time employees are eligible to participate from the date of employment. Federal legislation requires contributions of at least 7.5% to a retirement plan, and City Council resolved to match the employees' contributions of 3.75%.

The City's contributions for each employee (and interest earned by the accounts) are fully vested immediately.

For the fiscal yea
r ended June 30, 2025, the City's covered payroll for employees participating in the plan was $3,554,314. Employees made contributions of $133,405 (3.75% of current covered payroll), which was matched by the employer in the same amount. Assets of the plan totaled $2,610,514 at June 30, 2025.

Fiscal
Yea
r Ending
June 30, Miscella
neous Safety Total
2026 3,309
,810$ 8,789,078$ 12,098,888$
2027 10,912,787 17,409,634 28,322,421
2028 (1,498,140) 56,059 (1,442,081)
2029 (2,116,351) (2,674,745) (4,791,096)
Thereafter - - -
125

CITY OF NEWPORT
BEACH
Notes to Basic Financial Statements
June 30, 2025

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

The following descrip
tion 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 Pl
an consists of 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 2025 PEMHCA minimum contribution amount is $158 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 of 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

126

CITY OF NEWPORT
BEACH
Notes to Basic Financial Statements
June 30, 2025

(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, 2025, the liability for the conversion part of the RHS Plan was $800,925. 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.

127

CITY OF NEWPORT
BEACH
Notes to Basic Financial Statements
June 30, 2025

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

Employees Covered

As of the measuremen
t date June 30, 2024, the following current and former employees were covered by the benefit terms under the plan:

Contributions

Contribution requireme
nts 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, 2025, the City’s cash contributions were $10,865,147 to the trust in premium payments and $1,406,824 for the estimated implicit subsidy, resulting in a total payment of $12,271,971.

Net OPEB Liability

The City’s net OPEB liability was measured as of June 30, 2024, 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 li
ability 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
employees, spouses, or beneficiaries currently receiving benefits 539 Inactive employees or beneficiaries entitled to but not receiving benefits 365 Active employees 849
Total 1,753
128

CITY OF NEWPORT
BEACH
Notes to Basic Financial Statements
June 30, 2025

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

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 6.40%. The OPEB Plan’s target asset allocation as of June 30, 2025 are summarized in the following table.

The discount rate used when the OPEB plan investments are insufficient to pay for future benefit payments are selected from the range of indices as shown in the table on the following page, where the range is given as the spread between the lowest and highest rate shown.

Valuatio
n Date June 30, 2023
Measurement Date June 30, 2024
Actuarial Cost Method Entry-Age Normal Cost Method
Actuarial Assumptions:

Discount Rate 6.40%
Inflation 2.75%
Projected Salary Increase 2.80% per annum, in aggregate Expected long term investment rate of return 6.40%
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 Soci
ety of Actuaries Pub-2010 Public
Retirement
Plans Mortality Table Report
Assumed L
ong-Term
Asset Expected Real
Allocation Rate of R
eturn
US Equity 3

6.00% N/A
Non-US Equity 18.00% N/A
US Real Estate 3.00% N/A
Listed Infrastructure 3.00% N/A
Fixed Income 38.00% N/A
Cash 2.00% N/A
Totals 100.00% 6.40%
Asset Class
129

CITY OF NEWPORT
BEACH
Notes to Basic Financial Statements
June 30, 2025

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

The City’s funding
policy is to fund the recommended actuarially determined contribution (ADC) to fully fund the benefits over a reasonable period of time. The final equivalent single discount rate used for this year’s valuation is 6.40% with the assumption that the City will eventually pay the pay-go costs out of the OPEB trust when the Trust is expected to be able to pay all future projected benefit payments. This discount rate assumes the City continues to fund for its retiree health benefits through PARS under its investment allocation strategy.

Discount Rate

Under GASB 75, the
discount rate used in valuing OPEB liabilities for funded plans as of the Measurement Date must be based on the long-term expected rate of return on OPEB plan investments that are expected to be used to finance future benefit payments to the extents that (a) they are sufficient to pay for the projected benefit payments and (b) the OPEB plan assets are invested using a strategy that will achieve that return. When the OPEB plan investments are insufficient to cover future benefit payments, a yield for 20-year tax exempt general obligation municipal bonds with an average rating of AA/Aa or higher (or equivalent quality on another rating scale) must be used.

June 30,
June 30,
Yield as of 2023 2024
Bond Buye
r Go 20-Bond
Municipal Bond Index 3.65% 3.93%
S&P Municipal Bond 20-Year
High Grade Rate Index 4.13% 4.21%
Fidelity 20-Year Go Municipal
Bond Index 3.86% 3.97%
Bond Index Range 3.65%-4.13% 3.93%-4.21%
130

CITY OF NEWPORT
BEACH
Notes to Basic Financial Statements
June 30, 2025

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

Changes in the Net OP
EB Liability

The changes in the net OPEB liability are as follows:

Total Plan
Net
OPEB Fiduciary OPEB
Liability Net Posit
ion Liabilit
y
Balance a
t June 30, 2023 53,136,842$ 35,166,8
53$ 17,969,9
89$
Changes
in the Year:

Service cost 800,218 - 800,218
Interest on the total OPEB liability 3,125,813 - 3,125,813 Changes of assumptions (1,705,049) - (1,705,049) Differences between actual and
expected experience 99,265 - 99,265 Contribution - employer - 10,865,147 (10,865,147) Net investment income - 3,933,617 (3,933,617) Benefit payments, including refunds of
employee contributions (3,734,742) (3,734,742) - Administrative expenses - (23,200)
23,200

Net Chan
ges (1,414,495) 11,040,8
22 (12,455,3
17)
Balance a
t June 30, 2024 51,722,347$ 46,207,6
75$ 5,514,67
2$
Increase
(Decrease)
131

CITY OF NEWPORT
BEACH
Notes to Basic Financial Statements
June 30, 2025

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

Change of Assumptions

There have been
no substantive plan provision changes since the last full valuation, which was for the fiscal year ending June 30, 2024. The City has migrated their OPEB assets from the CERBT trust to the PARS trust.

Interim year valuation results have been projected from the prior year’s valuation with adjustments for:

 Updating the discount rate from 6.00% as of June 30, 2023 to 6.40% as of June 30, 2024.

This update led to a decrease in liabilities.

 Updated pre-65 and post-65 healthcare trend rates with initial rates of 8.00% and 6.50%, respectively, decreasing annually by 0.25% to an ultimate rate of 4.50%. This change caused a slight increase in liabilities.

 Claim cost calculations have been updated to account for the 2025 risk scores from the CalPERS Risk Adjustments. This change caused an increase in liabilities.

 PEMHCA minimum required contribution was updated for 2026, resulting in a decrease in liabilities.

 Claim costs and premiums were updated for 2025, resulting in an increase in liabilities.

Change of Benefit Terms

There was no change of bene
fit terms.

Subsequent Events

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

132

CITY OF NEWPORT
BEACH
Notes to Basic Financial Statements
June 30, 2025

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

Sensitivity of the To
tal OPEB Liability to Changes in the Discount Rate

The following present
s 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 total OPEB liability of the City, as well as what the City’s total OPEB liability would be if it were calculated using healthcare cost trend rates that are 1-percentage point lower (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, 2025, the City recognized OPEB expense of $3,019,952. At June 30, 2025, the City reported deferred outflows of resources and deferred inflows of resources related to OPEB from the following sources:

1% Decrea
se Discount Rate 1% Increase
(5.40%) (6.40%) (7.40%)
Net OPEB
Liability 10,634,856$ 5,514,672$ 1,162,929$
1% Decrea
se 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 L
iability $2,689,087 $5,514,672 $9,287,516
Healthcare Cost Trend Rates
Deferred De
ferred
Outflows of Inflows of
Description Resources Resources
OPEB contri
butions subsequent to measurement date 2,254,152$ - $ Differences between projected and actual experience 4,256,028 (412,725) Change of assumptions 1,882,666 (1,659,982)
Net difference between projected and actual earnings
on OPEB plan investments 413,087 -

Total
s 8,805,933$ (2,072,70
7)$
133

CITY OF NEWPORT
BEACH
Notes to Basic Financial Statements
June 30, 2025

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

The differences be
tween expected and actual experience, and changes of assumptions are amortized over a six-year period, eight-year period, nine-year period, or a ten-year period, depending on the fiscal year the difference occurred. The net difference between projected and actual earnings on plan investments is amortized over a five-year period.

An amount of $2,254,152, 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, 2026.

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, 2025, the City had no outstanding amount of contributions to the OPEB plan required for the year ended June 30, 2025.

(13) Joint Venture Agreements

Bonita Canyon Publi
c Facilities Financing Authority

The Bonita Can
yon Public Facilities Financing Authority (Authority) is a joint powers authority comprised of the City of Newport Beach and the Newport-Mesa Unified School District. The Authority’s Board is comprised of two members appointed by each of the member agencies. The Authority created Community Facilities District 98-1 to finance public facilities that will benefit the properties within the District’s boundaries. In 1998, the Authority issued $45,000,000 of special tax bonds to be repaid by special assessments. $30,577,712 (81.7%) of the proceeds were used to pay for the costs of the City acquiring and constructing public facilities including parks and road improvements. In Fiscal Year 2011-12, the Authority issued $38,330,000 of special tax refunding bonds to refinance the 1998 Series. In Fiscal Year 2017-18, the Authority issued $28,245,000 of special tax refunding bonds to refinance the 2012 series; the City is not obligated in any manner to repay the bonds. As of June 30, 2025, the contributions from property owners have been fully

Fiscal Y
ear
Ending
June 30, Amount
2026 811,
880$
2027 1,900,651
2028 467,772
2029 492,139
2030 839,258
Thereafter (32,626)
134

CITY OF NEWPORT
BEACH
Notes to Basic Financial Statements
June 30, 2025

(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 New
port Beach is a participant in a joint venture consisting of the cities of Anaheim, Brea, Fountain Valley, Fullerton, Huntington Beach, and Orange for the operation of a communication network utilized by fire suppression, emergency medical assistance, and rescue services. The oversight board consists of one voting member and one alternate appointed by the governing body of each member agency. The City of Newport Beach’s costs are based each fiscal year upon the number of recorded incidents attributable to the City divided by the recorded incidents attributable to all members during the year and are recorded in the General Fund as an expenditure for service. Upon termination of the agreement, the proceeds from the sale of the property and assets of the joint venture will be paid to each member agency pursuant to their fair share percentage. Annually, the amounts paid by the City to this joint venture are approximately $887,014. The City’s 10.75% interest in the net equity of this joint venture at June 30, 2025, amounts to $339,272. Complete separate financial statements can be obtained at the Metro Cities Fire Authority offices at 201 S. Anaheim Boulevard, Suite 302, Anaheim, California.

Integrated Law and Justice Agency of Orange County

The City is a
participant in a joint venture with several other public agencies in Orange County for the operation of the Integrated Law and Justice Agency of Orange County (ILJAOC). The ILJAOC was established in fiscal year 2006-07 and consists of 23 member agencies, with an oversight board consisting of 12 members from the participating agencies. Annually, each member agency pays a percentage of the operating and replacement costs for the ILJAOC. The City’s annual contribution and interest in the net equity of this joint venture was immaterial as of June 30, 2025.

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.

135

CITY OF NEWPORT
BEACH
Notes to Basic Financial Statements
June 30, 2025

(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 New
port Beach first entered into an agreement with Visit Newport Beach Inc. (“VNB”), a legally separate non-profit marketing organization, in 1987. The primary responsibility of VNB is to attract additional visitor business by promoting the City as the premier tourist and business destination in Orange County. VNB is governed by an Executive Committee comprised of seven individuals not appointed by the City Council of the City of Newport Beach. The previous agreement was entered into on September 27, 2011, subsequently amended on January 28, 2014, and expired on December 31, 2024. Under this agreement, the City paid VNB 18% of the total transient occupancy tax (TOT) collected during the fiscal year. On January 1, 2025, the City entered into a new agreement with VNB increasing their share to 23% of hotel TOT collected during the fiscal year, and eliminating their share of residential TOT. For the Fiscal Year ending June 30, 2025, the City paid VNB a total $7,736,564 between the two agreements.

Contractual Commitments

Construction and cont
ractual commitments for major construction projects are as follows:

Annual Proj
ect YTD Unexpended
Budget Expenditures Commitments
Irvine Terrace, Shorecliffs, Balboa Peninsula Water Line Replc 8,238,406$ 572$ 8,091,473$ CNG Fueling System 8,550,542 1,272,932 6,491,700 Central Library Lecture Hall 10,415,158 3,836,678 6,256,601 Big Canyon Restoration Phase 3 7,365,960 1,057,903 5,534,856 Cathodic Protection Program 4,147,420 54,398 4,092,555 Balboa Yacht Basin Dredging 3,899,344 - 3,898,344 Balboa Peninsula Trolley 4,037,247 604,212 3,325,504 Water Well Rehabilitation Program 2,127,021 97,135 2,028,183 Bristol St N Pavement Rehab 1,613,000 - 1,613,000 Library/ Fire Station No. 1 Replacement 15,991,120 77,241 1,514,712 Facilities Maintenance Master Plan 2,649,950 38,438 1,487,348 Spyglass Hill Rd Pavement Rehab 1,886,188 11,849 1,405,203 Bay Crossing Water Main Replc 3,086,736 155,131 1,163,121 Von Karman Ave Pvmt Rehab 1,722,373 622,874 733,714 Sewer Main Lining and Repairs 1,655,896 531,934 682,107 Collins Island Bridge Replacement 2,693,848 16,985 662,732 Facilities Maintenance Master Plan 2,388,922 1,703,165 642,916 Balboa Yacht Basin Docks 6,830,453 115,604 622,008 Balboa Island/CDM Transit Service 3,636,581 - 616,335 136

CITY OF NEWPORT
BEACH
Notes to Basic Financial Statements
June 30, 2025
(14) Commitments and Contingencies (Continued)
At fiscal year-end, the City’s encumbrances with contractors were as follows:

Tide and T
ide and Special Capital
Submerged Submerged Revenue Project
General Land - Operating Land - Harbor Capital Funds Funds Total Oceanfront encroachment -$ -$ -$ 300,606$ -$ 300,606$ Cable franchise reserve - - - 7,883 - 7,883
Streets and highways - - - 2,973,396 2,647,359 5,620,755 Parks and community centers - - - - 10,199,616 10,199,616 Facilities - - - 1,574,952 1,353,763 2,928,715 Public arts and culture - - - 32,500 - 32,500 Capital re-appropriations - - - - 9,857,318 9,857,318 Beaches - 710,994 1,659,355 - - 2,370,349
Marinas - 12,591 - - - 12,591
Dredging - - 100,625 - - 100,625
Equipment 684,664 188,990 - - - 873,654 Facilities Replacement - - - - 100 100 Drainage - - - - 454,505 454,505
Miscellaneous and studies - - - - 711,927 711,927 Contract services 1,027,561 - - - - 1,027,561 Supplies and materials 71,520 - - - - 71,520 Maintenance and repairs 791,737 - - - 1,934,019 2,725,756 General 59,250 - - - - 59,250
Total encumbrances 2,634,732$ 912,575$ 1,759,980$ 4,889,337$ 27,158,607$ 37,355,231$ Major Governmental Funds Other Gov
ernmental Funds
137

CITY OF NEWPORT
BEACH
Notes to Basic Financial Statements
June 30, 2025

(15) Fund Balance

Governmental Fund Balance at
June 30, 2025, is classified as follows:

Governmen
tal Fund Balance
Tide and Tide and Facilities Special Capital
Submerged Submerged Financial Planning Debt Service Revenue Project Permanent General Land - Operating Land - Harbor Capital Reserve Fund Funds Funds Funds Totals Nonspendable:

Prepaid items (legally restricted) 1,371,697$ 63,529$ -$ -$ -$ 17,024$ -$ -$ 1,452,250$ Inventories (legally restricted) 183,978 - - - - - - - 183,978 Long-term loan receivable (form restricted) 4,426,659 - - - - - - - 4,426,659 Permanent endowment (legally restricted) - - - - - - - 4,629,781 4,629,781 Restricted: -
Affordable housing - - - - - 634,021 - - 634,021 Oceanfront encroachment - - - - - 300,606 - - 300,606 Upper Newport bay restoration - 1,871,911 - - - - - - 1,871,911 Cable franchise reserve - - - - - 4,023,412 - - 4,023,412 Community development - - - - - - 3,586 - 3,586 Streets and highways - - - - - 2,973,396 - - 2,973,396 Public safety - - - - - 646,986 - - 646,986 Facilities - - - - - 1,703,264 306,531 - 2,009,795 Transportation - - - - - 314,333 - - 314,333 Environmental liability mitigation - - - - - 8,917,639 - - 8,917,639 Public arts and culture - - - - - 1,273,162 - - 1,273,162 Parking - - - - - 292,979 - - 292,979 Training - - - - - 634,388 - - 634,388 Libraries - - - - - - - 262,160 262,160 Scholarships - - - - - - - 230,819 230,819 Fiin - - - - - 1,226,580 - - 1,226,580 Debt service - - - - 2,024,393 - - - 2,024,393 Capital re-appropriations - 7,702,206 28,023,307 - - 8,877,643 15,880,007 - 60,483,163 Beaches - 710,994 1,659,355 - - - - - 2,370,349 Marinas - 12,591 - - - - - - 12,591 Dredging - - 27,820,484 - - - - 2,062,502 29,882,986 Equipment - 188,990 - - - - - - 188,990 General Plan Maintenance - 160,674 160,674 Committed:

Facilities replacement - - - 23,540,709 - - 723,235 - 24,263,944 Facilities maintenance - - - - - - 1,225,515 - 1,225,515 Civic center and park - - - - - - 526,902 - 526,902 Oil and gas liabilities - 1,258,890 - - - - - - 1,258,890 Parking management - - - - - - 161,767 - 161,767 Neighborhood enhancement - - - - - - 8,084,238 - 8,084,238 Capital re-appropriations 374,822 - - - - - 7,000 - 381,822 Drainage - - - - - - 2,191,405 - 2,191,405 Streets and highways - - - - - - 13,934,462 - 13,934,462 Facilities - - - - - - 17,718,982 - 17,718,982 Miscellaneous and studies - - - - - - 1,561,927 - 1,561,927 Parks and community centers - - - - - - 15,631,073 - 15,631,073 Contract services 1,613,722 - - - - - - - 1,613,722 Supplies and materials 261,671 - - - - - - - 261,671 Maintenance and repairs 791,737 - - - - - 1,934,019 - 2,725,756 Equipment 684,664 684,664
General 59,250 - - - - - - - 59,250 Unassigned 98,379,310 - - - - (11) - - 98,379,299 Total fund balances 108,147,510$ 11,809,111$ 57,503,146$ 23,540,709$ 2,024,393$ 31,996,096$ 79,890,649$ 7,185,262$ 322,096,876$ Other Gov ernmental Funds
138

CITY OF NEWPORT
BEACH
Notes to Basic Financial Statements
June 30, 2025

(16) Deficit Fund Equity

The following fun
ds reported 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.

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) Public-Private Partnerships

Agreements that meet the requ
irements of GASB 94 for which the city is transferor are disclosed as public-private partnerships (PPP) receivables on the City’s financial statements. The City’s PPP receivable is related to the facilities for the Balboa Island Ferry, Inc. (operator). GASB 94 excludes certain inflows (e.g., certain variable payments, etc.) from the measurement of PPP receivables. Payments from the operator to the City include variable payments, because the operator pays the City the greater of a minimum base amount or a specified percentage of the operator’s gross receipts. For the fiscal year ending June 30, 2025, the City recognized $17,763 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.

Special R
evenue Funds:

OTS DUI Grant 11 $
Internal Service Funds:

Compensated Absences 4,909,926
139

CITY OF NEWPORT
BEACH
Notes to Basic Financial Statements
June 30, 2025

(18) Subsequent Event

On November 6, 2025
, the City entered into a cooperative agreement with the cities of Laguna Beach and Fountain Valley to develop a new municipal groundwater well to enhance regional water supply reliability. Under the agreement, Newport Beach will serve as the lead agency for the planning, design and construction of the project. The City has agreed to provide $20 million towards the $30 million estimated total project cost and is expecting to recover the investment over time through reduced water supply costs, as groundwater is less expensive than imported water. Construction is expected to start in 2026 with the new well being fully operational by 2028. 140

REQUIRED SUPPLEMENTARY INFORMATION
141
2025 2024 2023 2022 2021
Measurement Period June 30, 2024
June 30, 2023 June 30, 2022 June 30, 2021 June 30, 2020 Total Pension Liability
Service cost 8,448,830$ 8,045,390$ 8,261,032$ 7,438,050$ 7,347,708$ Interest on total pension liability 35,431,016 34,232,164 32,759,522 31,805,532 30,565,919 Differences between expected and actual experience 1,976,265 5,716,564 (1,394,332) 1,624,975 369,351 Changes in assumptions - - 15,640,771 - - Changes in benefits - 474,137 - - - Benefit payments, including refunds of employee contributions (27,580,605) (26,581,149) (24,940,419) (22,976,493) (21,516,515) Net Change in Total Pension Liability 18,275,506 21,887,106 30,326,574 17,892,064 16,766,463 Total Pension Liability - beginning 521,082,608 499,195,502 468,868,928 450,976,864 434,210,401 Total Pension Liability - ending (a) 539,358,114$ 521,082,608$ 499,195,502$ 468,868,928$ 450,976,864$ Plan Fiduciary Net Position
Contributions - employer 21,544,170$ 20,800,063$ 18,352,430$ 18,612,457$ 16,346,284$ Contributions - employee 4,541,457 4,113,185 3,974,974 4,057,107 4,067,751 Net investment income 38,107,605 23,270,469 (30,856,252) 76,031,841 16,074,793 Administrative expense (325,559) (278,531) (256,962) (336,753) (454,777) Other miscellaneous income/(expense) - - - - - Plan to plan resource movement (59) - - - - Benefit payments (27,580,605) (26,581,149) (24,940,419) (22,976,493) (21,516,515) Net change in Plan Fiduciary Net Position 36,287,009 21,324,037 (33,726,229) 75,388,159 14,517,536 Plan Fiduciary Net Position - beginning 400,096,182 378,772,145 412,498,374 337,110,215 322,592,679 Plan Fiduciary Net Position - ending (b) 436,383,191$ 400,096,182$ 378,772,145$ 412,498,374$ 337,110,215$ Net pension liability - ending (a)-(b) 102,974,923$ 120,986,426$ 120,423,357$ 56,370,554$ 113,866,649$ Plan fiduciary net position as a percentage of the total pension liability 80.91% 76.78% 75.88% 87.98% 74.75% Covered payroll 50,824,016$ 48,099,822$ 45,210,057$ 44,809,856$ 43,902,594$ Net pension liability as percentage of covered payroll 202.61% 251.53% 266.36% 125.80% 259.36% Notes to Schedule:

Benefit Changes:

Change in Assumptions:

Page 1 of 2 ends

Newport Beach City CouncilMarch 10, 2026

Newport Beach City Council
March 10, 2026