Fort Walton Beach Council agenda — 03-22-11 regular — reading text

controls and compliance with legal requirements, with special emphasis on internal controls and compliance with legal requirements involving the administration of federal awards. These reports are available in the Compliance section of this report. Generally accepted accounting principles require that management provide a narrative introduction, overview, and analysis to accompany the basic financial statements in the form of Management' s Discussion and Analysis ( MD &A). This letter of transmittal is designed to complement MD &A and should be read in conjunction with it. The City of Fort Walton Beach' s MD &A can be found immediately following the report of the independent auditor. GOVERNMENT PROFILE Originally chartered as a municipality under the laws of the State of Florida, actual formation of the City was in 1941 when the Florida legislature officially named it the Town of Fort Walton. In 1953, the Florida Legislature granted the City a new charter at which time the name was changed to Fort Walton Beach. The City of Fort Walton Beach, Florida prides itself on being a small, family- oriented seaside community boasting a downtown area that was home to a significant prehistoric Native American community on the Gulf Coast of Northwest Florida. Situated at the junction of two major highways - US 98 ( Miracle Strip Parkway) and SR 85 ( Eglin Parkway) - Fort Walton Beach enjoys the benefits of its crossroads location along the coastal portion of the Northwest Florida regional transportation network. The City offers a full- service government that utilizes a Council -manager form of government. The City provides police and fire protection; cultural and recreational activities including parks, a library, a museum, and two 18 -hole golf courses; planning public works such as street, sidewalk, right -of w - ay, and cemetery and zoning; maintenance; utilities service including water, sewer, and storm water; and garbage collection to a coastal community of 18, 880 full -time residents. The financial reporting entity (the government) includes all the funds and account groups of the City of Fort Walton Beach, Florida, as well as discretely presented 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 discretely presented component unit of the City of Fort Walton Beach. The annual budget serves as a foundation for the City of Fort Walton Beach' s financial planning and control. The City of Fort Walton Beach prepares a budget designed to meet the highest standards of performance in municipal budgeting.  The budget process begins in February with individual strategic planning meetings held with the Mayor, City Council, City Manager, and Department Directors. A Budget Policy Workshop is held with City Council in May to determine City Council' s priorities and position on issues critical to development of the operational and capital budgets. City Council' s decisions on the issues presented provide the framework under which the upcoming year' s budget is prepared to meet City Council' s programmatic objectives within available fiscal resources. Department Directors, with the assistance of their operational division managers, are responsible for identifying their staffing needs, 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 objectives, accomplishments, and performance measures. The City Charter charges the City Manager with the duty of presenting a balanced budget to 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 order to accomplish this goal, a Budget Committee is formed comprised of the City Manager, Finance Director, and the Budget & Grants Manager. The Committee conducts comprehensive meetings with Department Directors and Division Managers to review their budget requests and a collaborative effort is undertaken to achieve City Council and department goals within fiscal constraints. The City Council is required by Florida State Statute and City Charter to hold public hearings on the proposed budget and adopt a final budget no later than September 30, the close of the City' s fiscal year. The appropriated budget is prepared by fund, department e. g. administrative services), and division ( e. g. information technology). 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, this comparison is presented on page 21 as part of the basic financial statements for the governmental funds. For governmental funds, other than the General Fund, with appropriated annual budgets, this comparison is presented in the combining and individual fund statements and schedules, section D of this report, which starts on page 80. 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 City of Fort Walton Beach currently faces many of the same economic challenges Retail sales that are affecting the global economy due to the recessionary environment. are lower than the previous year and the unemployment rate has risen. Housing affordability has decreased. V1  6< 2. a 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. The Fort Walton Beach area economy is anticipated to see growth in future years due to increases in federal spending for defense and homeland security. Eglin Air Force Base is the world' s largest Department of Defense installation spanning 724 square miles and defense contractor companies are established throughout the Northwest Florida region. It is estimated that local military bases ( Eglin and Hurlburt Air Force Bases and Duke it LL Field) currently represent a $ 6. 6 billion annual economic impact on the area, with Q U approximately 70% of the local economy supported by the military. Additionally, the 0 Department of Defense' s 2005 Base Realignment and Closure ( BRAG) recommendation c, to realign personnel and missions to Eglin Air Force Base will impact our area by an 0 0N estimated $451. 3 million dollars in increased economic activity and the addition of 6,241 LL military and civilian personnel by 2015. 0 C 0 Long -Term Financial Planning a The City undertakes several processes to assist in future planning, such as: dN A 5 -year CIP ( Capital Improvement Program) Plan is developed and approved by IL City Council each year during the annual budget process. T oo 5 -year replacement plans for capital equipment are also developed and approved by Management each year during the annual budget process LL Relevant Financial Policies m The city has several financial policies that are utilized during daily operations, as well as LL during the budget and financial planning processes. The City utilizes fund balance 0 reserves only for one -time non -recurring expenditures. In addition, the City maintains its 0 N fund balance level in the General Fund at 30% of fund expenditures —this policy helps to w C ensure that the City has sufficient funding in place for emergency and disaster relief. d E Major Initiatives The City' s financial policies, as well as other indicators, were taken into account when a adopting the City' s budget for fiscal year 2011. The City' s total budget for fiscal year 2011 totals $ 35. 7 million, which is $ 358, 601 less than the fiscal year 2010 approved budget. Projected declines in interest earnings and prior year budgeted use of reserves account for much of the revenue decline. The 2010 budget allocates $ 17. 6 million, a 5. 2% decline as compared to the fiscal year 2009 budget, to the General fund, $ 13. 9 million to the Enterprise funds, and $ 4. 2 million to other funds. For the fiscal year 2011 budget, the ad valorem rate increased to 4. 5383