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

Landing Rendering The financial reporting entity (the government) includes all the funds and account groups of the City of Fort Walton Beach, Florida, as well as component units. Component units are legally separate entities for which the primary government is financially accountable. Accordingly, the Fort Walton Beach Community Redevelopment Agency is reported as a blended component unit of the City of Fort Walton Beach. The budget process begins in February, which includes Finance staff preparing the new fiscal year's documentation. The City Charter charges the City Manager with the duty of presenting a balanced budget to the City Council. The budget is considered balanced if the total of all available financial resources (either on hand at the beginning of the year or generated during the year) equals or exceeds the total of all financial requirements. In August, the City Manager's proposed budget is presented to City Council for review and discussion. During September, two public hearings to formally adopt the millage (property tax) rate and budget are held per State Statute. The adopted budget is published no later than October 1. In April the City Council, acting as the Legislative Body of the City, holds at least one (1) Strategic Planning Session. The goals set during this meeting are used by staff to formulate the budget that is presented to City Council. In June, the tentative millage rate is set, and staff determines Council’s priorities and position on issues specific to development of the operational and capital budgets for the upcoming fiscal year. City Council’s decisions provide the framework under which the budget is prepared to meet City Council’s programmatic objectives within available fiscal resources. The meeting is open to the public and the public is encouraged to attend and participate. Department Directors are responsible for identifying their staffing needs, operational funding needs within budget development parameters, five-year capital requests, as well as corresponding revenue sources to fund their needs. In addition, they must conduct a comprehensive review of departmental goals, objectives, and metrics. vi  The City Charter charges the City Manager with the duty of presenting a balanced budget to City Council. To accomplish this goal, a Budget Committee is formed comprised of the City Manager, Finance Director, and Budget Analyst. The Committee conducts comprehensive meetings with Department Directors to review their budget requests and a collaborative effort is undertaken to achieve City Council and department goals within fiscal constraints. The Budget Committee enlists assistance for areas of specialized interests, such as the Information Technology Manager for computer issues; the Administrative Services Director for employee benefits, personnel, and risk management issues; and the Fleet Supervisor for vehicle and equipment replacement schedules. Department goals, objectives, and metrics are also evaluated during budget development to determine the effectiveness of program activities and appropriate funding levels. After the departmental meetings, the Budget Committee finalizes the proposed budget given revenue projections, economic conditions, funding requirements, and City Council program priorities and issues previously identified in the budget process. Once a balanced budget is achieved, it is presented to City Council for consideration. The City Council is required by Florida Statutes and the City Charter to hold public hearings on the proposed budget and adopt a final budget no later than September 30 th, the close of the City’s fiscal year. The appropriated budget is prepared by fund, department (e.g., financial services), and division (e.g., purchasing). Department Directors may request transfers of appropriations within a department and between divisions to transfer appropriations between line items, not to increase the total budget or to transfer resources between funds. Transfers of appropriations between funds require the approval of the City Council. The budget may be amended at any time by Resolution of City Council. Budget-to-actual comparisons are provided in the report for each individual governmental fund for which an appropriated annual budget has been adopted. For the General Fund and the Community Redevelopment Agency Fund, this comparison is presented on pages 85 & 86 as required supplementary information (RSI). For governmental funds with appropriated annual budgets, other than those previously mentioned, this comparison is presented with the combining and individual fund statements and schedules, Section D of this report, which starts on page 101. FACTORS AFFECTING FINANCIAL CONDITION The information presented in the financial statements is best understood when it is considered from the broader perspective of the specific environment within which the City of Fort Walton Beach operates. Local Economy The FY 2023-2024 budget of $56,300,597 is $2.8M, or 4.78%, less than the adopted FY 2022-2023 budget. The decrease is primarily due to the completion of some capital projects, long-time staffing retirements, and overall streamlining of operating expenditures. The budget is predicated on a millage rate of 4.6116 mills; as a result, ad valorem revenues will increase by 1.59% in the General Fund. Ad valorem revenues in the CRA Fund City and County Original TIF averaged a 2.32% increase, whereas the City and County Expanded TIF averaged a 20.22% increase. Eglin Air Force Base is the world’s largest Department of Defense installation, spanning 724 square miles. Defense contractor companies are established throughout the Northwest Florida region. It is estimated that local military bases currently represent a $9.2B annual economic impact on the area, with 63.3% of the local economy supported by the military. Being located on the Gulf of Mexico in Northwest Florida, tourism is a large part of the regional economy. Regional accolades continue to enhance the area’s image, promote visibility, and generate additional tourism and sales tax dollars. Local tourism has benefited from the national shift to vacation sites accessible by driving instead of flying. The Fort Walton Beach-Destin area is a popular drive destination in Florida, according to a survey of auto visitors by Visit Florida. vii  Long-Term Financial Planning The City undertakes several processes to assist in future planning, such as:  A five-year Capital Improvement Program (CIP) Plan is developed and approved by City Council each year during the annual budget process.  Five-year replacement plans for capital equipment, including vehicles, equipment, and computer hardware and software, are also developed and approved by management each year during the annual budget process.  Annual Strategic Plan, which focuses on a one-to-three-year time period. Relevant Financial Policies The City has several financial policies that are utilized during daily operations, as well as during the budget and financial planning processes. The City utilizes fund balance reserves only for one-time non-recurring expenditures. In addition, the City maintains its fund balance level in the General Fund at 30% of fund expenditures – this policy helps to ensure that the City has sufficient funding in place for emergency and disaster relief. Major Initiatives These financial policies, as well as other indicators, were considered when adopting the City’s budget for FY 2023-2024. The City’s budget for FY 2023-2024 allocates $32.7M to the General Fund, $19.8M to the enterprise funds, and $3.8M to other funds. For the FY 2023-2024 budget, the ad valorem tax rate decreased to a millage rate of 4.6116 mills. The FY 2023-2024 budget includes Year 5 of the five-year utility rate study, which was adopted by City Council on August 11, 2020. The utility rate study included recommendations on rate structures for water and wastewater, stormwater, and solid waste. The fire assessment fee was eliminated in FY 2023-2024. No other significant changes to the City’s various rates and fees are included in the FY 2023-2024 budget. AWARDS AND ACKNOWLEDGMENTS Awards 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 Fort Walton Beach for its Comprehensive Annual Financial Report for the fiscal year ended September 30, 2022. This was the 20 th consecutive year that the City received this prestigious award. To be awarded a Certificate of Achievement, the City must publish an easily readable and efficiently organized Comprehensive Annual Financial Report, satisfying both GAAP and applicable legal requirements. A Certificate of Achievement is valid for a period of one (1) year only. Staff believes the current report continues to meet the Certificate of Achievement Program requirements and will be submitted to the GFOA to determine its eligibility for recertification. In addition, the City also received the GFOA’s Distinguished Budget Presentation Award for its annual budget dated October 1, 2023. This was the 28th consecutive year that the City received this prestigious award. To qualify for the Distinguished Budget Presentation Award, the City’s budget document was judged proficient in several categories, including as a policy document, a financial plan, an operations guide, and a communications device. viii Acknowledgments The preparation of this report would not have been possible without the efficient and dedicated services of the entire staff of the Finance Department. I would like to express my appreciation to all members of the Department who assisted and contributed to the preparation of this report. I would also like to thank the Mayor and City Council for their unfailing support for maintaining the highest standards of professionalism in the management of the City of Fort Walton Beach’s finances and for their attention in conducting the financial operations of the City in a responsible and progressive manner. Appreciation is also expressed to the accounting firm of Warren Averett, LLC for their continued assistance and professionalism. Respectfully submitted, Jeff Peters Acting City Manager ix Government Finance Officers Association Certificate of Achievement for Excellence in Financial Reporting Presented to City of Fort Walton Beach Florida For its Annual Comprehensive Financial Report For the Fiscal Year Ended September 30, 2022 Executive Director/CEO x  Citizens of Fort Walton Beach City Council City Clerk City Manager City Attorney 2 FTE 4 FTE 0400 0200 Public Works Growth Management Financial Fire Services Human