Fort Walton Beach — Annual Comprehensive Financial Report, September 30, 2023 — reading text

Reductions Balance One Year Business-type activities Direct placements: Utility System Revenue Refunding Note, Series 2015 $ 6,167,000 $ - $ (484,000) $ 5,683,000 $ 498,000 Direct borrowings: State Revolving Fund Loan, 2015 10,452,433 - (748,307) 9,704,126 762,594 Lease obligations 190,610 35,644 (60,237) 166,017 63,549 Compensated absences 202,789 259,316 (246,130) 215,975 53,995 Total business-type activities $ 17,012,832 $ 294,960 $ (1,538,674) $ 15,769,118 $ 1,378,138 For the governmental activities, compensated absences are generally liquidated by the General Fund. Description of Long-Term Debt Outstanding Governmental Activities – Direct Placements $4,470,610 City of Fort Walton Beach, Florida, Capital Improvement Refunding Revenue Note, Series 2013, 2.30% interest due semiannually and principal due annually ranging from $187,659 to $299,010 through 2031. Available non ad valorem revenues are pledged for payment of the note. Proceeds were used for refunding Series 2001 revenue bonds for construction of certain capital improvements. $8,500,000 City of Fort Walton Beach, Florida, Capital Improvement Revenue Note, Series 2013A, 2.69% interest due semiannually and principal due annually ranging from $326,969 to $464,334 through 2027 with a balloon payment of $3,000,000 due in 2028. Budgeted and appropriated half cent sales tax is pledged for payment of the note. Proceeds were used to finance the construction of the City's new recreational complex along with the purchase of a bucket truck and a grounds sweeper for City's municipal golf course. $12,520,000 City of Fort Walton Beach, Florida, Capital Improvement Revenue Bonds, Series 2018, bearing interest at 3.83%, due in semiannual payments of principal and interest ranging from $11,583 to $1,019,479 through 2038. Available non ad valorem revenues are pledged for payment of the bond. Proceeds were used to finance the construction of a new field office complex on Hollywood Blvd. In the event of default (non-payment), the lender may declare all outstanding payments of principal and interest on the debt to be immediately due and payable for all of the direct placement issuances discussed above. Furthermore, these direct placement issuances do not contain any subjective acceleration clauses. 74  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2023 14. LONG-TERM DEBT – CONTINUED Description of Long-Term Debt Outstanding Governmental Activities – Direct Borrowings $1,500,000 golf course revenue note payable, 2021, due in monthly installments of $26,013 through October 2026, which includes principal and interest at 1.55%. The note is payable from pledged revenues of the golf course with any shortfalls funded by legally available non-ad valorem revenues. Proceeds are expected to be used for golf course repairs and renovations in fiscal year 2022. In the event of default (non-payment), the lender may declare all outstanding payments of principal and interest on the debt to be immediately due and payable. This note does not contain any subjective acceleration clauses. $75,135 fitness equipment contract payable, 2020, due in monthly installments of $1,430 through March 2025, which includes principal and interest at 6.34%. In the event of default (non-payment), the lender may declare all unpaid principal to be immediately due and payable or repossess the financed fitness equipment. This agreement does not contain any subjective acceleration clauses. $999,320 ladder fire truck contract payable, 2021, due in monthly installments of $28,455 through May 2024, which includes principal and interest at 1.59%. In the event of default (non-payment), the lender may declare all unpaid principal to be immediately due and payable or repossess the financed ladder fire truck. This agreement does not contain any subjective acceleration clauses. The City has acquired the right to use golf carts, utility carts, commercial mowers, and related ancillary equipment through leases with various unrelated parties. Under the provisions of GASB Statement No. 87, the City is a lessee under 10 equipment leases for its governmental activities. The City’s lease liability is measured at the present value of lease payments expected to be remitted during the lease term, including options reasonably certain to be exercised. The lease terms range from 3 to 5 years, and the discount rate used to calculate the present value of the lease payments range from 4.48% to 4.63%. In circumstances in which the rate implicit in the lease cannot be determined, the City uses a discount rate of 4.63%, which is the City’s estimated incremental borrowing rate for vehicles and equipment. The carrying value of the right-of-use assets and the related accumulated amortization can be found in Note 6. In the event of default (non-payment), the lender may declare all unpaid principal to be immediately due and payable or repossess the leased equipment. These agreements do not contain any subjective acceleration clauses. The City has entered into six subscription-based information technology arrangements with various software vendors as the result of implementing GASB Statement No. 96 as of October 1, 2022. The City’s subscription liability is measured using the present value of subscription payments expected to be remitted to the vendors during the subscription terms, including options reasonably certain to be exercised. The agreements require annual base subscription payments ranging from $6,500 to $250,961. The discount rate used to calculate the present value of the subscription payments was 4.63%, which is the City’s estimated incremental borrowing rate for equipment, software, and similar assets. The carrying value of the related subscription assets can be found in Note 6. In the event of default, the lenders may revoke the City’s licenses to use the underlying software. These agreements do not contain any subjective acceleration clauses. 75  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2023 14. LONG-TERM DEBT – CONTINUED Description of Long-Term Debt Outstanding – Continued Business-Type Activities – Direct Placements $8,794,000 Utility System Revenue Refunding Note, Series 2015, due in annual installments of $407,000 to $645,000 beginning July 2017 through July 2033, with interest only semi-annual payments from January 2016 through January 2017; stated interest at 2.92%. Net revenues derived by the City from the utility operations are pledged for the payment of the note. Proceeds used to refinance and refund the Utility System Revenue Bonds, Series 2005, which was for water system and wastewater system improvements. In the event of default (non-payment), the lender may declare all outstanding payments of principal and interest on the debt to be immediately due and payable. This note does not contain any subjective acceleration clauses. Business-Type Activities – Direct Borrowings $15,637,939 State of Florida Department of Environmental Protection Revolving Loan Fund; semiannual payments of $471,683 including interest at 1.90% beginning August 2015, through February 2035. Proceeds used for force main replacement, storage tank construction and pump station upgrades. In the event of default (non-payment), the lender may notify financial market credit rating agencies, file suit for past due amounts, and accelerate repayment of unpaid principal to as much as 1.667 times the financing rate. This loan does not contain any subjective acceleration clauses. The City has acquired the right to use two loaders and two excavators through leases with various unrelated parties. The City is a lessee under four equipment leases for its business-type activities. The City’s lease liability is measured at the present value of lease payments expected to be remitted during the lease term, including options reasonably certain to be exercised. The lease terms range from 3 to 5 years, and the discount rate used to calculate the present value of the lease payments range from 4.48% to 4.63%. In circumstances in which the rate implicit in the lease cannot be determined, the City uses a discount rate of 4.63%, which is the City’s estimated incremental borrowing rate for vehicles and equipment. The carrying value of the right-of-use assets and the related accumulated amortization can be found in Note 6. In the event of default (non-payment), the lender may declare all unpaid principal to be immediately due and payable or repossess the leased equipment. These agreements do not contain any subjective acceleration clauses. 76  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2023 14. LONG-TERM DEBT – CONTINUED Annual Requirements to Amortize Debt Outstanding The annual requirements to amortize all debt outstanding except accrued and annual leave and advances from other funds as of September 30, 2023, were as follows: Governmental Activities: Year Ending Revenue Bonds and Notes Financing Contracts September 30 Principal Interest Principal Interest 2024 $ 1,390,608 $ 610,698 $ 313,797 $ 2,461 2025 1,551,611 573,208 79,877 157 2026 1,597,208 529,610 71,454 - 2027 1,355,392 486,533 71,453 - 2028 3,894,503 439,084 - - 2029-2033 4,737,124 1,335,036 - - 2034-2038 4,347,120 480,880 - - Total $ 18,873,566 $ 4,455,049 $ 536,581 $ 2,618 Year Ending Lease Obligations Subscription Liabilities September 30 Principal Interest Principal Interest 2024 $ 161,945 $ 4,876 $ 495,932 $ 78,790 2025 23,769 802 507,094 55,406 2026 7,333 213 518,953 31,497 2027 - - 192,652 8,327 Total $ 193,047 $ 5,891 $ 1,714,631 $ 174,020 77  CITY OF FORT WALTON BEACH, FLORIDA NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2023 14. LONG-TERM DEBT – CONTINUED Annual Requirements to Amortize Debt Outstanding – Continued Business-Type Activities: Year Ending Revenue Note State Revolving Loan Lease