Fort Walton Beach — Fiscal Year 2020-21 Adopted_Budget — reading text

Ac tua l B udge t Varianc e FY 20 to FY 21 F Y 2019 FY 2020 FY 2021 $ % Ge ne ra l F und $ 18,419,589 $ 17,300,950 $ 16,294,266 -$ 1,006,684 -5.8% La w Enf. Trus t F und $ 115,980 $ 120,980 $ 130,844 $ 9,864 8.2% La w Enf. Tra ining F und $ 9,089 $ 9,089 $ 9,589 $ 500 5.5% F B C F und $ 548,823 $ 548,823 $ 548,823 $0 0.0% C DB G F und -$ 22,299 $0 $0 $0 0.0% C R A F und $ 1,691,456 $ 1,691,456 $ 428,306 -$ 1,263,150 -74.7% De bt S e rvic e F und -$ 9,027 $0 $0 $0 0.0% B e a l M e m o ria l F und $ 3,120,593 $ 3,101,371 $ 3,082,149 -$ 19,222 -0.6% * Amo unts d ep icted in chart includ e to tal fund b alance Working Capital (proprietary funds) Working capital refers to the difference between current assets and current liabilities reported in a proprietary fund. This measure indicates relative liquidity. Credit rating agencies consider the availability of working capital in their evaluations of a local government’s creditworthiness. Working capital is also important in mitigating unanticipated events and ensuring stable services and fees. The City’s target level of working capital is 90 days of annual operating expenses, and currently exceeds this level for all funds. It is not feasible to project this measure into the future. Working Capital Analysis - in Days Actual FY 2017 FY 2018 FY 2019 Utilities Fund 422 422 466 Sanitation Fund 246 241 279 Stormwater Fund 643 671 917 City of Fort Walton Beach, FL 22 Net Assets (proprietary funds) Net assets refers to the difference between assets and liabilities reported in a proprietary fund, and may be considered a measure of net worth. There are two types of net assets: 1. Restricted – funds committed for identified purposes or legally required to be segregated; not available to liquidate liabilities of the current period (e.g. debt service, impact fees). 2. Unrestricted – funds not required to be on hand and that have not been identified for a particular purpose; available for capital projects or to balance the budget; the measure of financial health for an enterprise fund.  City Council established that unrestricted net assets will be maintained at 33% of operating, debt service, and transfers out per Resolution 2011-13 adopted August 16, 2011. The City currently meets this policy for all funds. Net Assets Analysis Actual Estimate FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 Utilities Fund 89.0% 94.8% 95.9% 96.5% 86.3% Sanitation Fund 56.0% 49.5% 57.1% 56.6% 59.5% Stormwater Fund 141.5% 140.4% 184.5% 152.4% 139.6% Investments Investment Philosophy – Funds shall be invested in a manner that will ensure the safety of principal while meeting daily cash flow needs. Optimization of investment income shall be secondary to the requirements of safety and liquidity. Investment Policy – Ordinance 1921, adopted by City Council in June 2015, governs the investment of funds in excess of those required to meet current expenses, with the exception of pension funds, funds related to the issuance of debt where there are other existing policies or indentures in effect for such funds, and Beal Memorial Cemetery Perpetual Care funds. In a nutshell:  The primary investment objectives, in order of importance, are: safety of principal, liquidity, and investment income.  Cash balances from all funds are consolidated to maximize investment earnings. Investment income is allocated to each fund based on the fund’s respective participation and in accordance with generally accepted accounting principles.  The investment portfolio shall be structured, to the extent possible, to match investment maturities with known cash needs and anticipated cash flow requirements.  Investments will be diversified, to the extent practicable, to control the risk of loss resulting from over-concentration of assets in a specific maturity, issuer, instrument, dealer, or institution. City of Fort Walton Beach, FL 23  Each portfolio’s performance will be reviewed on a quarterly basis, with emphasis placed on results achieved over a rolling time period of three to five years for long-term portfolios. Objectives will be reviewed annually and adjusted as necessary after consultation with the Finance Director, Investment Advisor(s), and Portfolio Manager(s). The City currently maintains two short-to-medium term portfolios, one long term portfolio, and one short term portfolio externally managed through our Investment Manager (PFM Asset Management). Since the City has transitioned from internally managed portfolios, benefits of the enhanced diversification and third-party management have been realized, including increased cash flow and interest earnings. Debt Issuance Debt Limit – The State of Florida does not place a legal limit of debt on municipalities. However, general obligation debts greater than one year require voter referendum approval. Special revenue debt is pledged by a specific revenue source and limited by available revenue; therefore, it is not subject to voter referendum. Any new debt will be carefully evaluated as to its impact on operations. Debt Philosophy – The use of debt financing for long-term capital improvement programs is based upon two types of debt financing: 1) “pay-as-you-go” and 2) “pay-as-you-use”. In practice, the City uses a mix of these two basic methods to finance its Capital Improvements Program, with pay-as-you-go financing used for recurrent capital expenditures and pay-as-you-use financing used for long-term, non-recurrent capital expenditures.  Pay-As-You-Go – A type of financing whereby current revenues, taxes, and/or grants rather than long term debt are used to pay for capital improvements. Example: annual street paving.  Pay-As-You-Use – A type of financing whereby long-term debt is used to pay for capital improvements. Example: debt financing for a new municipal facility. Debt Policy Statement – The following policy statements govern the City’s use of debt to finance long-term, non-recurring capital improvements:  Recurrent capital expenditures for replacement, expansion and/or acquisition of plant, equipment, and/or motor vehicles will be financed on a pay-as-you-go basis from funds available and appropriated in the City’s annual operating budget.  Only long-term, non-recurrent capital expenditures for public improvements having a relatively greater cost and longer useful life, and which require additional funding over and beyond the fiscal capacity of the City’s annual operating budget, will be financed through the issuance or creation of long-term debt. These expenditures will not be debt-financed for periods exceeding the projected useful life of the improvement.  All capital improvements financed through the use of long-term debt will be consistent with the adopted Capital Improvements Program and the current fiscal year’s adopted Budget.  Revenue sources that will be used to pay long-term debt will be conservatively projected to ensure that such debt is adequately and soundly financed.  The City’s total general obligation debt will not exceed 10% of its assessed valuation. The City does not currently have any general obligation debt. City of Fort Walton Beach, FL 24  The City will use special assessment revenue bonds or other self-supporting bonds where possible and appropriate to finance long-term, non-recurrent capital improvements, rather than general obligation bonds.  The City will establish and maintain effective communications with bond rating agencies to keep them informed of its financial condition. Debt Capacity – The debt capacity of both the General Fund and Utilities Fund is contingent upon available resources and existing debt. The current outstanding debt requires a coverage ratio of 1.15-time earnings. The General Fund is at 12.90 and the Utilities Fund is at 2.06. The Sanitation and Stormwater funds are participating in the facilities consolidation, which is the first debt incurred in these funds. Debt Ratio – Indicates the percentage of assets financed via debt, and therefore the financial flexibility of the fund. Debt Ratio Analysis Actual Budget FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 General Fund 39.8% 78.1% 101.5% 51.8% 48.2% Utilities Fund 51.8% 50.1% 47.2% 67.8% 62.0% Sanitation Fund 0.0% 0.0% 0.0% 30.7% 29.8% Stormwater Fund 0.0% 0.0% 0.0% 42.6% 41.3% Debt Rating – The City maintains an AA rating with both Standard and Poor’s and Fitch. Principal Interest Total FY 2020-21 Budget Debt Impact 2,390,323 1,049,239 3,439,562 City of Fort Walton Beach, FL 25  Debt Principal and Interest Payments by Fund General Fund Enterprise Funds Total Fiscal Yr Principal Interest Principal Interest Principal