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

$2,415,585 Property taxes, $7,618,352 Tax increments for redevelopment, $2,668,386 Utility service taxes, Sales taxes, $6,142,151 $4,515,669 9 Current Year Impacts – Business-Type Activities Business-type activities decreased the City’s net position by $845,755 for the fiscal year ended September 30, 2023. Key elements of this change are as follows:  Other revenues increased by $1.3 million, which is primarily attributable to a $1.2 million increase in investment earnings as the result of improved market performance for the City’s investments during the fiscal year. Additional information on the City’s investments can be found in Notes 3 and 4 to the financial statements.  Total expenses for the business-type activities increased by $87,645, or 0.6%, primarily due to an increase in payroll and related employee benefit costs. Chart 3 Program Revenues and Expenses - Business-Type Activities (in millions) $12 $10 $8 $6 $4 $2 $0 Utilities Sanitation Stormwater Revenues Expenses Chart 4 Revenues by Source - Business-Type Activities Charges for services, $17,845,146 Interest and investment earnings , $370,227 Miscellaneous, $52,015 Capital grants and contributions, $122,670 10 FINANCIAL ANALYSIS OF THE CITY’S FUNDS As noted earlier, the City uses fund accounting to ensure and demonstrate compliance with finance- related legal requirements. Governmental Funds The focus of the City’s governmental funds is to provide information on near-term inflows, outflows, and balances of available resources. Such information is useful in assessing the City’s financing requirements. Unassigned fund balance may serve as a useful measure of a government’s net resources available for spending at the end of the fiscal year. As of September 30, 2023, the City’s governmental funds have combined ending fund balances of $45.3 million, an increase of $8.0 million from the prior year. Approximately 66.1% of this amount, or $29.9 million, is restricted, committed, or assigned for specific purposes. Unassigned and assigned fund balance of $14.6 million is available for spending at the discretion of the City Council. Details of the fund balance classifications can be found in Note 17 to the financial statements. The General Fund is the chief operating fund of the City. At the end of the fiscal year, assigned and unassigned fund balance of the General Fund was $14.6 million, while total fund balance reached $33.7 million. As a measure of the General Fund’s liquidity, it may be useful to compare both assigned and unassigned fund balance and total fund balance to total expenditures. Total assigned and unassigned fund balance represents 49.3% of the total General Fund expenditures, while total fund balance represents 114.0% of that same amount. During the fiscal year, the fund balance of the City’s General Fund increased by $6.4 million. This increase is primarily attributable to the sale of surplus real estate totaling $4.7 million and investment earnings of $1.1 million. The CRA’s fund balance increased by $991,665. This is primarily attributable to a special assessment being repaid in full during the fiscal year as well as a decrease in total expenditures. Proprietary Funds The City’s proprietary funds provide the same type of information found in the government-wide financial statements, but in more detail. Unrestricted net position of the proprietary funds totaled $14.4 million on September 30, 2023, of which the Utilities Fund reported $10.6 million, the Sanitation Fund reported $2.5 million, and the Stormwater Utility Fund reported $1.3 million. The factors concerning the finances of these funds have already been addressed in the discussion of the City’s business-type activities. Fiduciary Funds The General Employees’ Retirement Fund’s net position as a percentage of the total pension liability, an indicator of the sustainability of the Plan, was 89.5%, a decrease of 21.3% from the prior year. Employees contribute 5% of pay to the Plan and the City contributed $314,371, which was a decrease of $266,476 compared to the previous fiscal year. The Police Officers’ Retirement Fund’s net position as a percentage of the total pension liability was 72.0%, a decrease of 14.2% from the previous fiscal year. Employees contribute 5% of pay to the Plan and the City and State contributed $1.5 million, an increase of $143,093 compared to the previous fiscal year. 11  The Firefighters’ Pension Trust Fund’s net position as a percentage of the total pension liability was 59.8%, a decrease of 14.7% from the previous fiscal year. Employees contribute 8.0% of pay to the Plan and the City and State contributed $1.7 million, an increase of $59,495 compared to the previous fiscal year. Additional information on the pension plans can be found on pages 51-67 of this report. The General Employees’ Retirement Fund was closed to new entrants in January 2010, and all new hires are required to participate in a defined contribution plan, which is administered by the International City Managers Association Retirement Corporation. Additional information on the defined contribution plan can be found on page 68 of this report. GENERAL FUND BUDGETARY HIGHLIGHTS A schedule showing the original budget, the final budget, the actual results, and the variance from the final budget to the actual results is included for the General Fund on page 85 of the financial statements. The difference between the original budget and the final budget for expenditures was an increase of $7.5 million. Significant information related to this difference is summarized as follows:  Increase of $3.0 million for construction of traffic improvements on Lewis Turner Blvd.  Increase of 1.5 million to establish appropriations for workforce housing initiative fund.  Increase of $757,329 for the purchase of a pumper fire truck.  Increase of $702,832 for construction of the Heritage Park and Cultural Center addition.  Increase of $500,000 for a portion of the City’s share of costs of the Around the Mound PD&E study.  Increase of $500,000 for the purchase of fire vessel awarded through a Port Security grant. Actual results, when compared to the final budget, show a variance of $8.6 million for expenditures. This variance is primarily due to amending the budget for capital project expenditures planned, but not yet commenced or completed. CAPITAL ASSET AND DEBT ADMINISTRATION Capital Assets The City’s investment in capital assets for its governmental and business-type activities, as of September 30, 2023, was $83.9 million (net of accumulated depreciation and related debt). This represents a net increase of $2.9 million, or 3.6%. Highlights are summarized as follows:  Capital assets outdated, unserviceable, and no longer used are systematically disposed of on an annual basis.  The City expended $1.4 million to replace the golf irrigation system.  The kitchen was renovated at Fire Station #6 for a total cost of $58,479.  The replaced 11 Police Department vehicles for a total cost of $368,012. 12  Table 3 below highlights the overall changes in this category. Table 3 Total Capital Assets Net of Accumulated Depreciation Governmental Activities Business-Type Activities Total Activities 2023 2022 2023 2022 2023 2022 Land $11,303,138 $11,131,840 $709,678 $709,678 $12,012,816 $11,841,518 Buildings 20,522,481 21,475,978 69,367 73,487 20,591,848 21,549,465 Improvements other than Buildings 10,606,744 10,593,661 26,322,817 26,274,574 36,929,561 36,868,235 Machinery & Equipment 5,409,346 5,710,368 2,698,562 2,864,717 8,107,908 8,575,085 Easements - - 39,742 39,742 39,742 39,742 Right-of-use assets 182,542 378,049 161,073 188,083 343,615 566,132 Subscription assets 1,834,991 1,281,392 - - 1,834,991 1,281,392 Construction in Progress 2,957,362 231,143 1,053,910 22,113 4,011,272 253,256 $52,816,604 $50,802,431 $31,055,149 $30,172,394 $83,871,753 $79,693,433 Additional information on the capital assets of the City can be found in Note 6 of this report on pages 47-49. Long-Term Debt As shown in the following table, as of September 30, 2023, the City had total outstanding long-term debt of $36.9 million. All the City’s debt represents notes and bonds secured solely by specified revenue sources (i.e., revenue notes), financing contracts, lease obligations, and subscription liabilities. The City has no general obligation or special assessment debt. The State of Florida does not place a legal limit of debt on municipalities. For general obligation debts greater than one year, the City is required to conduct a voter referendum. Table 4 Outstanding Debt Governmental Assets Business-Type